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                       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 December 31, 1997 Commission file number 1-5881

                      BROWN & SHARPE MANUFACTURING COMPANY
                      ------------------------------------
             (Exact name of Registrant as specified in its charter)


           DELAWARE                                           050113140
           --------                                           ---------
(State or other jurisdiction of                           (I.R.S. Employer
 incorporation of organization)                          Identification No.)


   PRECISION PARK, 200 FRENCHTOWN ROAD, NORTH KINGSTOWN, RHODE ISLAND 02852
   ------------------------------------------------------------------------
             (Address of principal executive offices and zip code)

         Registrant's telephone number, including area code 401-886-2000

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

                                                 Name of each exchange on
          Title of each class                        which registered
          -------------------                        ----------------
CLASS A COMMON STOCK-PAR VALUE $1.00             NEW YORK STOCK EXCHANGE
PREFERRED STOCK PURCHASE RIGHTS                  NEW YORK STOCK EXCHANGE

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

                    CLASS B COMMON STOCK - PAR VALUE $1.00

                               (Title of Class)

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
                                       ---     ---

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K ((S) 229.405) 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 (as calculated under the rules) of the voting common
stock held by non-affiliates of the Registrant was approximately $136,000,000 as
of March 13, 1998.

There were 12,846,597 Shares of Class A Common Stock and 512,505 Shares of Class
B Common Stock, each having a par value of $1.00 per share, outstanding as of
March 13, 1998.

                      DOCUMENTS INCORPORATED BY REFERENCE

The following documents have been incorporated by reference in the following
parts of the Form 10-K: (1) Definitive Proxy Statement for the May 1, 1998
Annual Meeting incorporated by reference (to the extent specified) in Part III.

Portions of the Annual Report for the year ended December 31, 1997 are
incorporated by reference into Parts I and II.

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                     BROWN & SHARPE MANUFACTURING COMPANY

                                     INDEX

PART I                                                                     Page
                                                                           ----
Item 1    Business...................................................   3 - 13
     General.........................................................        3
     Repositioning Initiatives.......................................    3 - 4
     Business Strategy...............................................    4 - 5
     Metrology Industry..............................................    5 - 7
     MS Group........................................................    7 - 8
     PMI Division....................................................        8
     CM Division.....................................................        8
     Sales and Distribution..........................................        9
     Engineering and Product Development.............................        9
     Foreign Operations..............................................       10
     Raw Materials and Sources of Supply.............................       10
     Patents, Licenses, Trademarks, and Proprietary Information......       10
     Environmental Matters...........................................  10 - 11
     Employees.......................................................  11 - 12
     Competition.....................................................       12
     Backlog.........................................................  12 - 13
     Significant Customers...........................................       13
     Working Capital.................................................       13
     Segment Information.............................................       13
Item 2    Properties.................................................  13 - 14
Item 3    Legal Proceedings..........................................       14
Item 4A   Executive Officers of the Registrant.......................  15 - 16

PART II

Item 5    Market for Registrant's Common Stock and Related Stockholder
          Matters....................................................       16
Item 6    Selected Financial Data....................................       16
Item 7    Management's Discussion and Analysis of Financial Condition
          and Results of Operations..................................       16
Item 8    Financial Statements and Supplementary Data................       16
Item 9    Changes in and Disagreements With Accountants on Accounting
          and Financial Disclosure...................................       16

PART III

Item 10   Directors and Executive Officers of the Registrant.........       17
Item 11   Management Remuneration and Transactions...................       17
Item 12   Security Ownership of Certain Beneficial Owners
          and Management.............................................       17

PART IV

Item 14   Exhibits, Financial Statement Schedules, and Reports
          on Form 8-K................................................  17 - 18
Signatures...........................................................       19
Directors............................................................       20
Officers.............................................................       20
Investor Information.................................................  20 - 21
Financial Statement Schedules........................................       22
Exhibit Index........................................................  23 - 29

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                                    PART I
                                    ------

ITEM 1 - BUSINESS
-----------------

General
-------

The Company, which was founded in 1833, is a leading designer, manufacturer and
marketer of metrology products worldwide under numerous internationally
recognized brand names. Metrology is the science of the physical measurement of
objects using various precision instruments and equipment. The Company's high
precision products measure physical dimensions of, and inspect and verify
conformance to specifications of, components and products and are used in
manufacturing, quality control and product development operations. The Company's
product line ranges from hand tools and instruments to customized
computer-controlled metrology systems which integrate hardware and software and
are augmented by service, training and aftermarket support. The Company markets
its metrology products and services in North America, Europe, Asia, South
America and the Middle East. Important end user markets for the Company's
products include the automotive, aerospace, industrial machinery, electronics
and computer industries, and the Company's customers include Ford Motor Co.,
Daimler Benz, Toyota, Chrysler, BMW, Boeing Co., Eastman Kodak Co. Inc.,
International Business Machines Corp., Hewlett-Packard Co., General Electric
Co., Caterpillar Inc., United Technologies Corp., Motorola Inc., Phillips,
Samsung and Xerox Corp.

The Company's operations are conducted through three management units:
Measuring Systems, Precision Measuring Instruments and Custom Metrology.

       .  The Measuring Systems Group, which accounted for approximately 69% of
          the Company's sales in 1997, manufactures and markets a wide range of
          manual and computer-controlled, high precision CMMs including
          "in-process" measuring systems under the Brown & Sharpe and DEA brand
          names. The Company believes it is the worldwide market leader for CMMs
          as measured by net sales and installed base. The Company believes it
          has an installed base of over 20,000 CMMs worldwide.

      .   The Precision Measuring Instruments Division, which accounted for
          approximately 28% of the Company's sales in 1997, manufactures a wide
          range of mechanical and electronic measuring and inspection tools
          (including height gauges, calipers, dial indicators, micrometers and
          gauge blocks) which are marketed under the Brown & Sharpe, Tesa,
          Etalon, Interapid, Standard Gage, Select Gauge, Mauser, Mercer and
          Roch brand names through more than 450 distributors and catalog houses
          worldwide.

     .    The Custom Metrology Division designs and engineers, under the Tesa
          brand name, specialty products and systems that provide customized
          solutions for unique measurement or inspection problems primarily
          utilizing non-contact technology. Technologies and custom applications
          developed by the CM Division with customer funding have been directly
          applied to the design of standard products or systems distributed by
          the MS Group or the PMI Division.

Repositioning Initiatives
-------------------------

Over the past several years, the Company has undertaken a series of
divestitures, acquisitions and other strategic initiatives which have
repositioned the Company from its historical origins as a machine tool
manufacturer into a leader in the field of metrology. These repositioning
initiatives included:

       .  Divestiture of Non-Core Operations. The divestiture of non-strategic
          operations, including the machine tool, pump and hydraulics
          businesses, and Technicomp, Inc. during 1997, which enabled the
          Company to focus on its core metrology technologies and market
          distribution strengths.

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       .  Strategic Metrology Acquisitions. Strategic acquisitions which enabled
          the Company to increase greatly the breadth of its metrology product
          offering and the strength of its distribution system. These
          acquisitions included the 1994 acquisitions of DEA, Roch and certain
          intellectual property and assets of Metronic Ltd. During 1997, the
          Company acquired the remaining 50% of its equity investee ASI, which
          develops measurement software and provides training and services and
          other aftermarket support to manufacturing industries, and a 50%
          ownership position in Metroptic Technologies Limited, a joint venture
          located in Israel developing non-contact sensor technologies.

      .   Rationalization and Consolidation of Operations. Lowering the
          Company's overhead cost structure by reducing duplicative functions
          and associated headcount and by consolidating and rationalizing the
          Company's manufacturing facilities and operations, which enabled the
          Company to increase productivity and efficiency.

      .   Reorganization Plan. In the fourth quarter of 1997, management
          implemented a Reorganization Plan ("the Plan") which included business
          processing reengineering at certain of its European sites, as well as
          selected product rationalization in preparation for new product
          introductions. In addition, the MSG's marketing and service
          organization was also reorganized. The Plan provided for a workforce
          reduction of approximately 160 persons, primarily in its European
          operations. The Plan also provided for inventory adjustments and the
          write-down of fixed assets and certain intangible assets. (See
          Management's Discussion and Analysis of Financial Condition and
          Results of Operations.)

Business Strategy
-----------------

The Company is implementing its strategy based on the following elements:

       .  Continue Cost Improvements. The Company intends to continue to
          implement measures designed to reduce its product costs through: (i)
          standardizing product designs worldwide; (ii) increasing the
          cost-effectiveness of product designs; (iii) outsourcing components
          and products; (iv) increasing supplier partnering; and (v) focusing on
          core manufacturing processes. The Company also intends to streamline
          its sales, marketing and general and administrative processes in an
          effort to reduce selling, general and administrative expenses as a
          percentage of sales.

      .   Develop New Products and End User Markets. The Company's goal is to
          increase net sales by expanding penetration of served industrial end
          user markets and by capitalizing on high growth end user markets such
          as the electronics, computer and medical industries where metrology
          needs are growing rapidly. To expand in these high growth industries,
          the Company intends to focus on development of software and emerging
          non-contact metrology technologies through continued internal
          development and through strategic acquisitions and technical
          partnerships (such as the acquisition of certain intellectual property
          and assets of Metronic Ltd. the 1997 acquisition of a 50% interest in
          the Metroptic joint venture, and completion of the acquisition of
          ASI). To expand its penetration of served industrial end user markets,
          the Company expects to continue the introduction of new metrology
          systems utilizing both contact and non-contact technologies, and to
          develop sensors and other sophisticated products that can be imbedded
          in a variety of manufacturing processes. The Company plans to form
          technical and commercial alliances with manufacturers of process
          equipment to provide enhanced combined manufacturing systems utilizing
          the Company's sensors and other products.

     .    Enhance Existing and Develop New Software. The Company intends to
          emphasize research and development of software systems and
          applications designed to meet the evolving metrology needs of its end
          users. To that end, the Company intends to leverage off its software
          development team of software and applications engineers and
          technicians (including engineers of ASI) in the following four areas:
          (i) metrology software for inspection and verification of

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          piece-part integrity and conformance to design specifications; (ii)
          process control software designed to detect and correct drifts in part
          tolerances before the manufacturing process produces scrap or
          improperly configured components; (iii) enhanced management
          information systems that report statistical and quality information
          from the manufacturing process; and (iv) new software that will link
          the Company's CMMs and, therefore, the manufacturing process with
          computer-aided engineering and manufacturing systems that will provide
          the means for real-time feedback, analysis and, ultimately, control of
          manufacturing to design specifications. The Company believes that its
          existing library of metrology software, together with newly developed
          software, should enable it to respond to the growing demand in
          manufacturing for on-line inspection and verification. The Company
          also believes that its experience with CMM software and manufacturing
          processes are critical to the successful development of software that
          is linked with computer aided engineering systems. To meet the needs
          of this growth market, the Company formed Brown & Sharpe Information
          Systems, Inc. (BSIS) in 1997. This new subsidiary, with a common
          Corporate vision, combines all the Company's software development
          expertise under one roof. The Company's objective is to develop the
          next generation of open architecture measurement software having more
          power and ease of use than any product on the market. Incorporating
          the most accurate metrology algorithms in the world, this new software
          will work effortlessly with CAD/CAM systems to facilitate the
          inspection process. It will also provide the user with powerful
          analysis tools to ensure overall process control.

       .  Leverage Worldwide Distribution Capability. Through the acquisitions
          of DEA and Roch, Brown & Sharpe has expanded its product lines and
          strengthened its marketing and distribution capabilities in Europe,
          South America, the Middle East, India and China. The Company plans to
          continue to strengthen and expand its worldwide distribution
          capability, principally by continuing to rationalize its existing
          distribution network and by opening new demonstration centers and
          adding direct sales capacity and distributors where cost effective.
          The Company also intends to capitalize on the strength of its global
          distribution network by increasing the number of Company-designed and
          third-party sourced products sold through its distribution channels in
          an effort to increase gross profit without a corresponding increase in
          selling, general and administrative expenses.

       .  Increase Aftermarket Sales and Services. The Company intends to
          increase its focus on higher margin aftermarket sales and services,
          including calibration and rebuilding of CMMs, software upgrades, and
          parts sales. The Company believes that the worldwide installed base of
          CMMs, estimated at over 62,000 (including 20,000 of the Company's
          CMMs), creates a significant demand for such aftermarket services.

The Company believes that the level of customer service it provides, as measured
by third-party surveys of its customers, is superior to that of its principal
competitors, and expects to further strengthen its customer relationships
through enhanced aftermarket support and increased partnering efforts. The
Company's sales attributable to aftermarket sales and service in 1997 were
estimated to be approximately 27% of MS Group net sales for the same period.

Metrology Industry
------------------

General

Metrology products and systems range from hand tools for simple measuring tasks
to complex integrated systems of hardware and software that can measure,
digitize, inspect and verify manufactured parts and components to exacting
specifications. Manufacturers depend upon metrology hardware and software
products to monitor consistent product conformance to their exacting
specifications, thereby improving the reliability, fit and finish of their
products. In addition to these quality and performance benefits, metrology
products help manufacturers lower costs by reducing errors, scrap, rework and
warranty expense, improving the manufacturing process, lowering throughput time,
increasing capacity and reducing work-in-progress inventories. In recent years,
manufacturers have accelerated the integration of

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quality control functions directly into the production process by incorporating
the use of metrology products on the factory floor. In addition, manufacturers
are demanding more precise, capable and flexible metrology systems as their
products become smaller, more complex and/or must meet more stringent quality
and safety standards. Their exacting product specifications often require
measurement to an accuracy of less than one micron (one millionth of a meter or
approximately 1/100th of the thickness of a human hair) or, in some special
cases, measurement of nanometers (one billionth of a meter or the unit of
measurement for the wavelength of light). Increasingly, metrology systems must
incorporate a mix of traditional contact and newer non-contact technologies
because of reduced part sizes and the great diversity of new materials used in
manufactured products. Metrology systems are purchased by customers regardless
of their need for additional production capacity because of ever-increasing
quality requirements and the need to reduce product costs.

Metrology products serve a broad range of measurement requirements. The simplest
metrology products include devices such as calipers, dial gauges, micrometers,
surface plates and height gauges. These are generally inexpensive hand-held
tools that measure in one dimension to within an accuracy of between two (80
millionths of an inch) and 25 microns (1/100th of an inch). Fixed gauges are
often more expensive devices that inspect and verify in one to three dimensions
to within an accuracy of between one and 25 microns and are typically used where
manufacturers need to measure a single, uniform product at a high rate of speed.
Fixed gauges tend to make simple, comparative measurements of products in a
manufacturing process. CMMs are more sophisticated, complex machines that use a
variety of technologies to measure in three dimensions to an accuracy of between
0.5 and 100 microns. These technologies range from advanced probes that
physically "contact" the product being measured to highly sophisticated
non-contact vision, optical, laser and scanning probes that collect precise data
without touching the product being measured. While some CMMs are manually
operated, most are now controlled by software systems that not only compare the
product to a manufacturer's CAD/CAM models, but also provide the manufacturer
with dimensions of the product to be converted into the CAD/CAM model. CMMs are
highly flexible machines that can measure different products for a manufacturer
without re-tooling or other significant changes as opposed to fixed gauges that
may require expensive and time-consuming retooling. The price points of
metrology products range from $100 for a caliper to over $1.5 million for a
sophisticated CMM such as those used to measure car and truck bodies.

Markets

Participants in the metrology industry generally compete in one or more of six
broad product areas: (i) simple and relatively inexpensive tools that measure in
one dimension, such as calipers, dial gauges, micrometers, surface plates and
transfer gauges; (ii) digital electronic height gauges of varying accuracies and
sizes; (iii) sophisticated special purpose metrology systems including fixed
gauges; (iv) general purpose and application-specific CMMs; (v) alternative
technologies such as vision tunnels or surface finish and geometry measurement;
and (vi) customized metrology solutions to specific metrology problems. The
Company competes in all of the foregoing product areas other than fixed gauges
and most of the alternative technologies.

Sales of simple metrology products and less sophisticated height gauges are
driven by price, brand, product innovation, ease of purchase and effectiveness
of distribution. Products in this category are generally hand-held or relatively
small devices that permit a manufacturer to make measurements in one or
occasionally two dimensions. These products are generally inexpensive, providing
a cost-effective solution to simple metrology problems where the industrial
customer does not need the increased capabilities of fixed gauges, CMMs or
certain other sophisticated metrology systems. However, simple metrology
products are generally limited in terms of accuracy, flexibility and/or their
ability to collect data. Further, they are dependent upon skilled operators. The
market for simple metrology products is fragmented, with many regional
suppliers. End user markets for these products include most basic industries,
including the automotive, construction, industrial machinery, appliance and farm
equipment industries.

Sales of fixed gauges have traditionally been driven by manufacturers' needs for
one, two or three dimensional metrology on the factory floor. Products in this
category, typically more expensive than

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simple metrology products, compete directly with CMMs regarding inspection and
verification of manufactured parts. Fixed gauge systems are frequently a more
expensive investment than comparable CMM systems, but for the specific purpose
intended, may be less expensive over the long run. Fixed gauges can range from
simple one dimensional tools to semiand fully-automatic three dimensional
factory floor systems that quickly compare production parts to "master parts."
However, because these gauge systems are "fixed," they are inherently
inflexible. The fixed gauge must be reworked or a new gauge designed and built
every time manufacturers make dimensional changes in the part being measured.
The trend of the industry is away from fixed gauges and toward flexible gauges
because of the need to make costly changes to fixed gauges when the part they
measure changes.

Sales of CMMs and more sophisticated height gauges are driven by manufacturers'
needs for high accuracy, flexibility, speed and information. Products in this
category, while typically more expensive than simple metrology products and some
fixed gauges, are generally more versatile machines that can measure, digitize,
inspect and verify diverse manufactured parts. The accelerating use of more
sophisticated software has played an important role in the evolution of CMMs in
response to the marketplace. Improved software and linkage to CAD/CAM and
network technologies enable CMMs both to compensate automatically for the
position of the piece to be measured, eliminating the need for the time
consuming manual positioning necessary with less advanced metrology products,
such as surface plate gauges, and also to relay information to the
manufacturer's CAD/CAM model to facilitate production process adjustments.
Although CMM-type software can be added to on-machine gauging and a small
percentage of fixed gauges, CMMs are easier to use, more flexible, and generally
provide more analytical information than most products using competing
technologies. Presently, CMMs are installed at sites ranging from highly
controlled laboratory sites to hostile, factory floor industrial settings, and
can measure objects ranging in size from a semiconductor chip to an aircraft
exterior, and can provide accuracies with tolerances of 0.5 to 100 microns. CMMs
can achieve this through contact or non-contact probing methods, depending upon
the manufacturer's needs. The market for CMMs is dominated by five competitors,
including the Company.

Sales of customized metrology products are driven by specific needs in specific
industries and, in Brown & Sharpe's case, tend to focus on emerging metrology
technologies. Generally, custom metrology challenges arise where existing
metrology products and systems cannot adequately address a narrow yet important
manufacturing task. This product category requires research, development and
innovation and often includes the development of new applications for optical,
laser and scanning sensor probes.

MS Group
--------

The MS Group, the largest of Brown & Sharpe's three units, accounted for
approximately 69% of Brown & Sharpe's sales in 1997. The MS Group is
headquartered in North Kingstown, Rhode Island and manufactures and markets
CMMs. MS Group products sold under the Brown & Sharpe name are manufactured at
the Company's North Kingstown facility, and MS Group products sold under the DEA
name are manufactured in Turin, Italy. The primary end user markets for the
Company's CMM products include the automotive (including automotive suppliers),
heavy transport, aerospace, electronics, computer, industrial machinery and
medical industries.

MS Group products range from small, manually operated CMMs to large, high speed,
high precision automatic CMMs. In addition to these standard and
custom-configured CMMs, Brown & Sharpe also produces and sells high-speed
process control systems. The smallest machines can measure in a volume up to
16x14x12 inches and are priced at approximately $10 thousand, while the larger,
high speed, high accuracy CMMs with integrated software systems can cost over
$1.5 million. The MS Group also provides laser scanning and optically based
measuring machinery from microscopes to vision systems.

The Company believes that its "user-friendly" CMM application software gives it
a competitive advantage in the marketplace for CMMs. These proprietary software
products provide the MS Group's customers with an understandable, icon-based
inspection analysis capability, graphical user interfaces and outputs, and the
capability to network with manufacturing systems. The MS Group also provides its

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customers with special software and systems that integrate the MS Group's
products with the customer's host information and communications network. In
addition to sales of CMMs, the MS Group provides aftermarket sales and service,
including calibration and rebuilding of CMMs, software upgrades and parts sales,
for Brown & Sharpe CMMs and competing CMMs. The Company's sales attributable to
aftermarket sales and services in 1997 were estimated to be approximately 27% of
MS Group sales for the same period.

PMI Division
------------

The principal products of Brown & Sharpe's PMI Division are precision measuring
tools and related instruments such as micrometers, dial indicators, calipers,
electronic height gauges and gauge blocks. PMI Division products accounted for
approximately 28% of Brown & Sharpe's sales in 1997. The PMI Division's products
have broader applications and lower unit list prices (with a range of $100 to
approximately $13 thousand) than the prices of the MS Group's products. These
tools and instruments typically measure in one or two dimensions, and are often
used in comparative measuring where an unknown part or dimension is compared to
a previously measured part or dimension. Some PMI Division products also include
systems and application software for measuring and statistical process control.
The Company believes that the primary end user markets for the products of Brown
& Sharpe's PMI Division are the automotive, aerospace, metal processing and
defense industries, although Brown & Sharpe's PMI Division products are used in
virtually all types of industrial settings. Brown & Sharpe's PMI Division is
headquartered in Renens, Switzerland, and its products are manufactured at its
plants in Rolle and Renens, Switzerland; Poughkeepsie, New York; Leicester, St.
Albans, and Plymouth, England; and Luneville, France. The Company also purchases
components and products from third parties located in various countries.

CM Division
-----------

The CM Division is an engineering division headquartered in Telford, England.
The CM Division designs and engineers specialty products primarily utilizing
non-contact technologies and systems to provide customized solutions for unique
customer measurement or inspection problems generally with customer funding.
Recent examples of CM Division products include a system for measuring the
thickness and shape of the metal top of a beverage can and the depth and contour
of the groove scored around the can's pop-up tab, so that the manufacturer could
ensure the consistency with which the can could be opened without rupture by the
end user, and an automatic multi-sensor (laser scanning, laser ranging, optical
and tactile) system to measure, inspect and verify the ceramic substrates on
which semiconductors are placed. The CM Division also manufactures laser
interferometers, measuring sensors and factory networks, contact and optical
measuring machines and fixtures aimed at specific niche markets. In 1997, the
Company formed a joint venture company to develop the next generation of
non-contact sensing technologies and products. This company, Metroptic
Technologies Limited, is headquartered in Israel. Products using the new sensors
will be designed and manufactured initially at the Company's Custom Metrology
facility in Telford, England and sold under the Brown & Sharpe brand name.
Currently, Metroptic is working on sensors designed for inspection of turbine
engine blades and electronic components - two growth markets for measurement and
inspection. This sensor technology is also scaleable for use in the measurement
of complex contours in the aerospace and automotive industries. Prices for CM
Division products range from approximately $20 thousand to $1.0 million.

The primary end user markets for the custom-designed products of the CM Division
are package and can manufacturing, oil drilling, standards laboratories,
semiconductors, aerospace and defense. Sales of these products typically involve
a close, highly technical relationship with the customer. This direct
relationship with the customer is reinforced by strong and continuing efforts to
provide superior customer service through ongoing customer training and
technical support.

The Company believes that the CM Division provides it with cost-effective access
to emerging applications and technologies as the technologies and custom
applications developed by the CM Division with customer funding have been
directly applied to the design of standard products or systems distributed by
the MS Group or the PMI Division.

                                     Page 8
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Sales and Distribution
----------------------

The MS Group distributes its products primarily through a 120-person worldwide
sales force directly to U.S. and European customers, and utilizes a network of
independent agents and distributors to cover the Pacific Rim, South American and
African markets. The typical MS Group sales process involves lengthy, technical,
one-on-one discussions between the salesperson or the distributor/sales agent
and customer and is often part of a competitive bid process. As an important
part of its marketing and distribution strategy, Brown & Sharpe provides
in-depth training to its customers at 31 support and demonstration centers
located throughout the United States, Europe and Asia. The Company's direct
sales force also provides the Company with important opportunities to cross-sell
the products of its PMI and CM Divisions.

In contrast to the MS Group, the PMI Division generally distributes its products
through international import companies, regional distributors and catalog houses
throughout the world. As of December 31, 1997, the PMI Division utilized in
excess of 450 distributors located in over 60 countries to market its products.
The Company believes that the PMI Division's established distribution network
provides it with a competitive advantage and intends to capitalize on this
network to increase sales of internally developed and third-party products.

The CM Division primarily designs and manufactures products and services in
response to specific customer inquiries. The CM Division maintains a staff of
approximately 15 sales/project engineers to respond to customer inquiries, and,
upon receipt of an order, to develop tailored solutions and manage projects to
completion. The CM Division typically targets sales to end user markets with a
small number of participants in which the Company has little or no competition.
As a result, the Company believes that the CM Division benefits from
comparatively lower selling expenses.

The Company has no single customer which accounts for 10% or more of its
consolidated net sales; however, several well recognized major automotive
manufacturers (without regard to their suppliers) account for a significant
portion of the Company's net sales. The loss of a few of these major customers
would have a substantial effect upon the Company.

Engineering and Product Development
-----------------------------------

Brown & Sharpe's commercial success is dependent upon its ability to develop
products, enhancements, and applications that meet changing customer metrology
needs and anticipate and respond to technological changes. Brown & Sharpe
designs, develops and refines its products internally through engineering
departments within its product groups and divisions. When it is more
cost-effective to do so, Brown & Sharpe purchases product designs or portions of
product designs from engineering subcontractors or acquires rights to such
designs through licensing arrangements. Brown & Sharpe also benefits from
research and development efforts which are subsidized by customer funds and, in
certain countries, by government research grants. Brown & Sharpe research,
development and manufacturing engineering activities are conducted in the United
States, Italy, France, Switzerland, Germany, the United Kingdom and Lithuania.

Brown & Sharpe derived substantial sales in 1997 from the sale of products that
it introduced after 1993. Brown & Sharpe has introduced at least one major new
product every year since 1987. The Company's current design and engineering
focus is the continued integration of the DEA and Roch technologies with Brown &
Sharpe's previously existing technologies, software development and non-contact
metrology products. In 1997, Brown & Sharpe invested $15.5 million, or 4.8% of
its net sales during that period in product design and manufacturing
engineering. In 1995 and 1996, Brown & Sharpe expended $15.8 million and $13.9
million, respectively, for product design, development, refinement and
manufacturing engineering.

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Foreign Operations
------------------

Brown & Sharpe manufactures and sells substantial amounts of its metrology
products in foreign countries. As of December 31, 1997, approximately 62.8%
(based on book values) of the Company's assets, 60.1% of the Company's sales
(based on customer location) and 70.3% of its employees were located outside the
United States. The Company's manufacturing operations are located in Italy,
Switzerland, Germany, England and France, as well as in the United States, and
Brown & Sharpe's products are sold in over 60 countries worldwide. The Company's
cost of sales for products manufactured and assembled in certain foreign
locations has been adversely impacted, as compared with some of its competitors,
by the appreciation of the respective local currencies of such locations
relative to the U.S. dollar. Nevertheless, the Company believes that the
geographic diversity of its end user markets helps to mitigate the adverse
effects of the cyclicality of the metrology industry, as an economic downturn in
any of the Company's geographic end user markets may be offset by relatively
healthy conditions in others.

Raw Materials and Sources of Supply
-----------------------------------

Brown & Sharpe purchases raw materials, supplies and other components from a
variety of suppliers, and considers its sources of supply to be adequate. At
times, the Company depends upon various sole sources of supply for certain
components used by the Company (generally of items designed by Brown & Sharpe),
but has not experienced any significant difficulty in meeting delivery
obligations because of its reliance on such a supplier. In addition, the Company
currently purchases substantially all of its externally sourced low to medium
accuracy electronic touch trigger sensor probes and heads from a publicly held
United Kingdom company which is the dominant supplier of such sensor probes to
CMM manufacturers. No alternative supplier for this class of electronic sensor
probes, which are a key component of substantially all of the Company's lower
accuracy CMMs, is currently available and developing an alternative source for
the probes and heads could take more than a year. Brown & Sharpe continues to
explore means of lowering production costs through selective outsourcing in
situations where Brown & Sharpe can achieve its high quality standards via
subcontractors. The Company has established a corporate function to direct its
world-wide efforts to standardize product designs throughout its operations and
coordinate and direct its outsourcing efforts.

Patents, Licenses, Trademarks, and Proprietary Information
----------------------------------------------------------

The Company's business is not significantly affected by or dependent upon the
procurement or maintenance of patents covering the Company's products.
Nevertheless, the Company pursues, where appropriate, patent protection for
inventions, developments and improvements relating to its products both in the
United States and abroad. In addition, the Company relies on a combination of
copyrights, trade secret law and contracts to protect its proprietary
information (principally related to its software and software development).
Despite these precautions, it may be possible to copy or otherwise obtain and
use the Company's proprietary information without authorization. In addition,
effective copyright and trade secret protection may be unavailable or limited in
certain foreign countries.

Brown & Sharpe and its subsidiaries own, or have the right to use, a number of
trademarks which they believe are valuable in promoting the sale of certain of
their principal products. The Company and its subsidiaries have registered, or
have applied to register, the trademarks owned by them in the United States and
in some foreign countries. In addition, the Company uses the Mauser brand name
under royalty-free license agreements entered into in connection with the
Company's acquisition of these product lines. The license expires in 1999. The
Company believes it will be able to negotiate satisfactory extensions of this
license prior to its expiration and/or that the failure to renew this license
would not have a material adverse effect on the Company.

Environmental Matters
---------------------

The Company is not significantly affected by compliance with rules and
regulations promulgated under environmental laws since its manufacturing
processes do not produce, as a by-product, material amounts

                                    Page 10
<PAGE>

of waste, water discharges or air emissions deemed hazardous under such laws.
However, the Company is subject from time to time to environmental claims. See
Note 13, "Contingencies" of Notes to Consolidated Financial Statements in Item 8
of this Annual Report.

Employees
---------

At December 31, 1997, Brown & Sharpe had 2,409 employees, (as compared with
2,383 at December 31, 1996), including approximately 1,693 employees located
outside the United States. Brown & Sharpe considers its relations with its
employees to be good, although there can be no assurance that Brown & Sharpe's
cost-cutting efforts or other factors will not cause a deterioration in these
relations.

Approximately 648 of Brown & Sharpe's employees located at sites in the United
States, Italy, Switzerland, England, and France are covered by collective
bargaining agreements which expire at various times between December 31, 1997
and June 30, 1998. Brown & Sharpe expects that these collective bargaining
agreements will be renegotiated successfully prior to their expiration. However,
there can be no assurance that successor collective bargaining agreements will
be successfully negotiated, that negotiations will not result in work stoppages,
or that a work stoppage would not materially interfere with Brown & Sharpe's
ability to produce the products manufactured at the affected location.

In addition to the collective bargaining agreements that cover workers at
certain of Brown & Sharpe's foreign subsidiaries, it is customary for these
employees to be represented by various works or shop councils. These councils
are governed by applicable labor laws and are comprised of members who are
elected or appointed by the work force. Except for the top level of management,
these councils represent the entire work force at their location in its dealings
with senior management on matters affecting the work force or arising under the
relevant labor contracts in effect at the location.

A collective bargaining agreement with the International Association of
Machinists and Aerospace Workers (the "IAM") relating to certain manufacturing
employees in North Kingstown, Rhode Island expired in October 1981. Brown &
Sharpe and the IAM failed to reach agreement on the terms of a successor
collective bargaining agreement, resulting in a strike by the IAM. See Item 3
"Legal Proceedings" in this Report. No successor collective bargaining agreement
was entered into, although the IAM remains the representative of the bargaining
unit. Brown & Sharpe continues to satisfy its obligation to bargain with respect
to, proposed changes to the terms and conditions of employment, although no
collective bargaining has occurred in recent years, and although the
manufacturing employees represented by the IAM remain technically on strike, no
work stoppage or picket activity has occurred since 1985 and management does not
anticipate that any such activities will occur in the future. Following the
strike in 1981, and the impasse reached in negotiations, Brown & Sharpe hired
new employees to replace striking employees. Since that time, many of the
striking employees have been rehired by Brown & Sharpe, but such employees are
not working under an IAM contract. The continuing strike by the IAM does not
have a material adverse effect on the operations of Brown & Sharpe. See Note 13,
"Contingencies" of Notes to Consolidated Financial Statements in Item 8 of this
Annual Report.

                                    Page 11
<PAGE>

The following table sets forth the location of Brown & Sharpe's employees as of
December 31, 1997:

         Country                                                Employees (1)
         -------                                                -------------
         France ..............................................       207
         Germany .............................................       262
         Italy ...............................................       460
         Japan ...............................................        25
         Spain ...............................................        16
         Switzerland .........................................       317
         United Kingdom ......................................       396
         United States .......................................       716
                                                                  ------
         TOTAL................................................     2,409
                                                                  ======

----------------
(1) Part-time employees are included on a full-time equivalent basis. During
    1997, 71 employees were added as a result of acquiring Automation
    Software, Inc.

Competition
-----------

The Company's MS Group currently has four principal direct domestic and foreign
competitors, some of which are owned by entities that have greater financial and
other resources than the Company. The MS Group also faces indirect competition
from other types of metrology firms such as manufacturers of fixed gauging
systems. The primary industries to which the MS Group sells its products are
characterized by a relatively small number of large participants with
significant purchasing power. In addition, the MS Group generally sells its
products through a competitive bid process in which at least one and frequently
several of the Company's competitors have submitted competing bids. As a result,
the Company experiences severe pricing competition in connection with sales by
its MS Group which can have an adverse impact on the Company's net sales and
margins. During periods when the metrology industry suffers from over capacity,
downward pricing pressure experienced by the MS Group is likely to be more
intense and the Company's margins may be more severely impacted. In addition,
certain of the Company's competitors that have access to greater financial
resources may be able to withstand such pricing pressure more effectively than
the Company. The MS Group competes with Mitutoyo/MTI Corp., a subsidiary of
Mitutoyo Solsakusho Co. Ltd., a Japan-based company, which is the largest
supplier of metrology equipment and products worldwide. In addition to Mitutoyo,
the MS Group's main competitors are Carl Zeiss, Inc., a subsidiary of Carl
Zeiss-Stiftung AG, the Sheffield Measurement Division of Giddings & Lewis, Inc.,
and LK Tool Co. Ltd., a subsidiary of TransTech Ltd.

The market for the PMI Division's products is fragmented and the PMI Division
competes with a large number of competitors, including the market leader in this
area, primarily on the basis of the strength of its third party distribution
network, price and product innovation. New competitors from emerging
industrialized countries with lower cost products than the Company's represent a
significant competitive challenge to the Company. As a result, the PMI
Division's continued success and profitability will be dependent on its ability
to continue to develop cost-effective and innovative products. The primary
competitors of the PMI Division are Mitutoyo, L.S. Starrett Co. and Federal
Products Co. (Inc.), a subsidiary of Esterline Technologies Corporation.

To date, the CM Division has sold its custom solutions to markets in which there
is little or no effective competition in custom metrology systems. However, in
certain niche markets where the Company does not generally sell, Marposs S.p.A.,
an Italian company, provides custom metrology products.

Backlog
-------

The Company's backlog of product orders was approximately $60 million at
year-end 1997, compared to approximately $51 million and $59 million at year-end
1996 and 1995, respectively.

                                    Page 12
<PAGE>

All of the orders included in the Company's year-end 1997 backlog were requested
to be filled and completed within one year and are, subject to possible customer
cancellation, expected to be completed in 1998.

Significant Customers
---------------------

The Company has no single customer which accounts for 10% or more of its
consolidated net sales; however, several well recognized major automotive
manufacturers (without regard to their suppliers) account for a significant
portion of the Company's net sales. The loss of a few of these major customers
would have a substantial effect upon the Company.

Working Capital
---------------

A substantial amount of working capital investment in inventory and accounts
receivable is required to operate the Company's businesses. Working capital was
approximately $113.2 million at year-end 1997 compared to approximately $108.0
million at year-end 1996. See the discussion of working capital in "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in
Item 7 of this Annual Report.

Segment Information
-------------------
(Dollars in thousands)

The Company operates exclusively in the Metrology Business. See Note 1 for a
further description of the Company's business. Sales to unaffiliated customers
from Europe are defined as sales of products that are primarily assembled in a
foreign country. Refer to "Financial Information by Business Segment and
Geographic Area" included on Page F-24 of the Company's 1997 Annual Report,
filed as an exhibit hereto, which is incorporated by reference.

ITEM 2 - PROPERTIES
-------------------

The following table sets forth certain information concerning Brown & Sharpe's
major operating facilities:

<TABLE>
<CAPTION>
                                   Owned/                                                Approximate
        Location                   Leased               Principal Use                   Square Footage
        --------                   ------               -------------                   --------------
<S>                                <C>             <C>                                  <C>
United States
   N. Kingstown, Rhode Island      Owned           Manufacturing, Engineering, Sales,
                                                   and Administration                      348,000 (1)
   Poughkeepsie, New York          Owned           Manufacturing                            58,000
   Wixom, Michigan                 Leased          Sales and Administration                 37,600

Italy
   Grugliasco                      Leased          Assembly                                107,000 (2)
   Moncalleri                      Leased          Manufacturing                            70,000 (2)

Switzerland
   Renens                          Owned           Manufacturing, Engineering, Sales,
                                                   and Administration                      139,000
   Rolle                           Owned           Manufacturing                            51,000

Germany
   Wetzlar                         Owned           Manufacturing, Engineering, Sales,
                                                   and Administration                      280,000
   Ludwigsburg                     Leased          Sales                                    15,000 (2)
</TABLE>

                                    Page 13
<PAGE>

<TABLE>
<CAPTION>

                                   Owned/                                                              Approximate
        Location                   Leased                 Principal Use                               Square Footage
        --------                   ------                 -------------                               --------------
<S>                                <C>                    <C>                                         <C>
United Kingdom
     St. Albans                     Owned                 Manufacturing and Sales                        36,000
     Telford                       Leased                 Manufacturing, Engineering, Sales,
                                                          and Administration                             32,000
     Leicester                      Owned                 Manufacturing                                  14,000
     Torpoint                      Leased                 Manufacturing, Sales, and Administration        5,000 (2)

France
     Luneville                     Leased                 Manufacturing, Engineering, and Sales          77,100 (2)
     Villebon                      Leased                 Sales                                          18,000 (2)

Spain

     Barcelona                     Leased                 Sales                                          16,000 (2)
</TABLE>

-------------------
(1)  Excludes approximately 412,000 square feet leased to unrelated parties.
(2)  The leases in Grugliasco,  Ludwigsburg,  Torpoint,  Luneville, Villebon and
     Barcelona expire on December 31, 2002, September 30, 2003, August 18, 2001,
     March 23, 2003, October 20, 2001, and July 31, 1998, respectively.

In addition, Brown & Sharpe leases smaller sales offices located in the United
States, Europe, and Asia. In the opinion of management, Brown & Sharpe's
properties are in good condition and adequate for Brown & Sharpe's business as
presently conducted.

ITEM 3 - LEGAL PROCEEDINGS
---------------------------

Other Environmental Matters
----------------------------

The nature of the Company's current operations are not significantly affected by
environmental laws, rules and regulations. However, because the Company and its
subsidiaries and predecessors have conducted heavy manufacturing operations in
the past, sometimes at facilities which have been divested or sold and often in
locations at which or adjacent to which, other industrial operations were
conducted, from time to time the Company is subject to environmental claims. As
with any such operations that involve the use, generation, and management of
hazardous materials, it is possible that practices, including practices that
were deemed acceptable by regulatory authorities in the past, may have created
conditions which could give rise to liability under current or future
environmental laws. Because the law in this area is developing rapidly,
including in many European countries, and such environmental laws are subject to
amendment and widely varying degrees of enforcement, the Company may be subject
to, and cannot predict with any certainty the nature and amount of, potential
environmental liability related to these operations or locations that it may
face in the future.

Litigation
-----------

Refer to Note 13 "Contingencies" of Notes to Consolidated Financial Statements
in Item 8 of this Annual Report.

                                    Page 14
<PAGE>

ITEM 4A - EXECUTIVE OFFICERS OF THE REGISTRANT
----------------------------------------------

The following table summarizes information regarding Executive Officers of the
Company as of March 13, 1998:

Name                       Age      Positions Held During the Last Five Years
-----                      ---      -----------------------------------------

Frank T. Curtin            63       President & Chief Executive Officer and a
                                    Director of the Company since May 2, 1995;
                                    from 1992 to May 1995, Vice President,
                                    National Center for Manufacturing Sciences,
                                    a research and development organization, Ann
                                    Arbor, MI; from 1989 to May 1995, President,
                                    Curtin & Associates, a software development
                                    company, Santa Barbara, CA and Ann Arbor,
                                    MI.

Charles A. Junkunc         55       Vice President & Chief Financial Officer
                                    since May 1, 1992; previously self-employed
                                    consultant since November 1990.

Antonio Aparicio           47       Vice President & General Manager - Precision
                                    Measuring Instruments since September 1991;
                                    previously Marketing Director - Precision
                                    Measuring Instruments.

Marcus Burton              39       Vice President & General Manager - Custom
                                    Metrology Division since January 1997;
                                    previously Director of Strategic Planning -
                                    Brown & Sharpe Manufacturing Co. since
                                    July 1995; Managing Director - Thomas
                                    Mercer Ltd. (a subsidiary) since June 1992;
                                    Special Projects Manager - Thomas Mercer
                                    Ltd. since October 1990.

Philip James               56       Group Vice President - Measuring Systems
                                    since September 1997; previously Executive
                                    Vice President - International, Ingersoll
                                    Milling Machine Company since November 1993;
                                    previously Vice President and General
                                    Manager - Production Machinery Division,
                                    Ingersoll Milling Machine Company, since
                                    November 1989.

Edward D. DiLuigi          51       Vice President and General Manager -
                                    Measuring Systems U.S.A. since June 1997;
                                    previously General Manager, UNC Airwork,
                                    Aircraft Engine Services Division since
                                    July 1995; previously Vice President of
                                    Operations, UNC Airwork since August 1992.

Brian Gaunt                59       Vice President and General Manager - Brown &
                                    Sharpe DEA S.p.A. since February 1998;
                                    previously Group Chief Executive, Automotive
                                    Products Group Limited since 1995;
                                    previously Chief Executive -Clutch Division
                                    BBA PLC since 1991.

John Cooke                 61       Vice President & Chief Technical Officer
                                    since January 1997; previously Vice
                                    President & General Manager - Custom
                                    Metrology since 1992.

James W. Cooper            52       Vice President - Procurement since August
                                    1996; previously Vice President -
                                    Purchasing of Delco Remy America, an
                                    automotive supplier, since March 1995.
                                    From 1981 to march 1995, Mr. Cooper was
                                    Vice President - Materials Management of
                                    Simpson Industries, an automotive supplier.

                                    Page 15
<PAGE>

Name                       Age      Positions Held During the Last Five Years
----                       ---      -----------------------------------------

Christopher J.  Garcia     41       Vice President - Software Product
                                    Development since January 1998; previously
                                    Vice President - Marketing since November
                                    1996; previously Vice President Business
                                    Development since January 1991; Vice
                                    President - Research and Development of
                                    Valisys Corporation since June 1994;
                                    previously Vice President - Marketing of
                                    Valisys Corporation since June 1990.

Alfred J. Corso            61       Controller and Principal Accounting Officer
                                    since June 1, 1995; previously Partner with
                                    Ernst & Young LLP.

To the best of the knowledge of the Registrant, none of the Executive Officers
has any family relationships with any of the others. Each Executive Officer
holds office until the first meeting of the Board of Directors following the
next Annual Stockholders' meeting and until his successor is elected or
appointed and qualified, unless he dies, resigns, is removed or replaced.


                                    PART II
                                    -------

ITEM 5 -   MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
-----------------------------------------------------------------------
           MATTERS
           -------

Refer to "Common Stock Market Prices and Dividends" included on Page F-28 of the
Company's 1997 Annual Report, filed as an exhibit hereto, which is incorporated
by reference.

ITEM 6 - SELECTED FINANCIAL DATA
--------------------------------

Refer to "Selected Financial Data" on Page F-2 of the Company's 1997 Annual
Report, filed as an exhibit hereto, which is incorporated herein by reference.

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

Refer to "Management Discussion and Analysis of Financial Condition and Results
of Operations" on Pages F-3 through F-9 of the Company's 1997 Annual Report,
filed as an exhibit hereto, which is incorporated herein by reference.

ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
----------------------------------------------------

Refer to Consolidated Financial Statements and Report of Independent Auditors on
Pages F-10 through F-27 of the Company's 1997 Annual Report, filed as an exhibit
hereto, which are incorporated herein by reference.

Quarterly results of operations on Page F-26 of the Company's 1997 Annual
Report, filed as an exhibit hereto, which is incorporated herein by reference.

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

None.

                                    Page 16
<PAGE>

                                   PART III

ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
------------------------------------------------------------

Refer to "Information With Respect to Nominees and Other Directors Continuing in
Office" on Pages 2 and 3 in the Company's definitive Proxy Statement for the May
1, 1998 Annual Meeting which is incorporated herein by reference.

ITEM 11 - MANAGEMENT REMUNERATION AND TRANSACTIONS
--------------------------------------------------

Refer to "Executive Compensation" on Page 12 in the Company's Definitive Proxy
Statement for the May 1, 1998 Annual Meeting which is incorporated herein by
reference.

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

Refer to "Principal Shareholders" and "Stock Ownership of Directors and
Officers" on Pages 5-8 in the Company's Definitive Proxy Statement for the May
1, 1998 Annual Meeting which are incorporated herein by reference.


                                    PART IV
                                    -------

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

(a) (1) and (2)  List of Financial Statements and Financial Statement Schedules

The following consolidated financial statements of Brown & Sharpe Manufacturing
Co., Inc. and subsidiaries, included in the annual report of the registrant to
its shareholders for the year ended December 31, 1997, are incorporated by
reference in Item 8:

         Consolidated Balance Sheets - December 31, 1997 and 1996

         Consolidated Statements of Operations - December 31, 1997, 1996, and
         1995

         Consolidated Statements of Shareowners' Equity - Year ended December
         31, 1997, 1996, and 1995

         Consolidated Statements of Cash Flows - Year ended December 31, 1997,
         1996, and 1995

         Notes to Consolidated Financial Statements - December 31, 1997

The following consolidated financial statement schedule of Brown & Sharpe
Manufacturing Co., Inc. and subsidiaries is included in Item 14(d):

         Schedule II Valuation and Qualifying Accounts

All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable and therefore have been omitted.

         (3)      The response to this portion of Item 14 is submitted as a
                  separate section of this report.

(b)      No reports on Form 8-K were filed during 1997

                                    Page 17
<PAGE>

(c)      Exhibits - The response to this portion of Item 14 is submitted as a
         separate section of this report.

(d)      Financial Statement Schedules - The response to this portion of Item 14
         is submitted as a separate section of this report.

                                    Page 18
<PAGE>

                                  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.

                                         BROWN & SHARPE MANUFACTURING COMPANY
                                         (Registrant)


Date:    March 30, 1998                  By: /s/ Charles A. Junkunc
         ---------------------------         -----------------------------------
                                             Charles A. Junkunc
                                             Vice President and
                                             Chief Financial Officer

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.


/s/ Frank T. Curtin                    3/30/98   /s/ Howard K. Fuguet    3/30/98
----------------------------------------------   -------------------------------
Frank T. Curtin                           Date   Howard K. Fuguet           Date
President, Chief Executive Officer               Director
(Principal Executive Officer)
Chairman of the Board, and Director


/s/ J. Robert Held                     3/30/98   /s/ John M. Nelson      3/30/98
----------------------------------------------   -------------------------------
J. Robert Held                            Date   John M. Nelson             Date
Director                                         Director


/s/ Paul R. Tregurtha                  3/30/98   /s/ Russell A. Boss     3/30/98
----------------------------------------------   -------------------------------
Paul R. Tregurtha                         Date   Russell A. Boss            Date
Director                                         Director


/s/ Henry D. Sharpe, III               3/30/98   /s/ Roger E. Levien     3/30/98
----------------------------------------------   -------------------------------
Henry D. Sharpe, III                      Date   Roger E. Levien            Date
Director                                         Director


/s/ Harry A. Hammerly                  3/30/98   /s/ Charles A. Junkunc  3/30/98
----------------------------------------------   -------------------------------
Harry A. Hammerly                         Date   Charles A. Junkunc         Date
Director                                         Vice President and Chief
                                                 Financial Officer (Principal
                                                 Financial Officer)


/s/ Alfred J. Corso                    3/30/98
----------------------------------------------
Alfred J. Corso                           Date
Controller
(Principal Accounting Officer)

                                    Page 19
<PAGE>

DIRECTORS
---------

Russell A. Boss, Director and President & Chief Executive Officer, A. T. Cross
Company

Frank T. Curtin, President & Chief Executive Officer, Brown & Sharpe
Manufacturing Company

Howard K. Fuguet, Partner, in the law firm of Ropes & Gray

Harry A. Hammerly, Former Executive Vice President, 3M Company

J. Robert Held, Consultant, Former President and Chief Executive Officer of
Chipcom Corporation

Roger E. Levien, Vice President, Strategy and Innovation, Xerox Corporation

John M. Nelson, Chairman & Chief Executive Officer, Wyman-Gordon Company

Henry D. Sharpe, III, Co-founder & Technical Director, Design Lab, Inc.

Paul R. Tregurtha, Chairman of the Board and Chief Executive Officer, Mormac
Marine Group, Inc.

OFFICERS
--------

Frank T. Curtin, President, Chief Executive Officer, and Chairman of the Board

Charles A. Junkunc, Vice President  & Chief Financial Officer

Antonio Aparicio, Vice President & General Manager - Precision Measuring
Instruments

Marcus Burton, Vice President & General Manager - Custom Metrology

Phil James, Group Vice President - Measuring Systems

Edward D. DiLuigi, Vice President & General Manager, Measuring Systems - U.S.A.

Brian Gaunt, Vice President & Managing Director - Brown & Sharpe - DEA S.p.A.

C. John Cooke, Vice President & Chief Technical Officer

James W. Cooper, Vice President - Procurement

Christopher J. Garcia, Vice President - Software Product Development

James W. Hayes, III, Secretary & Corporate Counsel

Alfred J. Corso, Controller

INVESTOR INFORMATION
--------------------

Annual Meeting:  The Annual Meeting of Stockholders will be held May 1, 1998 at
10:00a.m. at the Corporate Offices

Corporate Offices:  Precision Park, 200 Frenchtown Road, North Kingstown, RI
02852; Telephone (401) 886-2000

Form 10-K Report: A copy of the Company's Annual Report as filed with the
Securities and Exchange Commission is available upon request to the Secretary.

                                    Page 20
<PAGE>

Stock Listing:  New York Stock Exchange; Symbol BNS

Transfer Agent and Registrar Common Stock: Bank of Boston, c/o Boston EquiServe,
L.P., Mail-Stop 45-02-64, P.O. Box 644, Boston, MA 02012-0644. They also can be
reached on the internet at the following address http://www.equiserve.com.

                                    Page 21
<PAGE>

                      BROWN & SHARPE MANUFACTURING COMPANY
                 Schedule II - Valuation and Qualifying Accounts
                 -----------------------------------------------
                             (dollars in thousands)

<TABLE>
<CAPTION>

                                        Balance at     Charged to                        Foreign       Balance at
                                        Beginning       Costs and                        Currency        End of
Year Ended                              of Period       Expenses       Deductions       Translation      Period
----------                              ---------       --------       ----------       -----------      ------
                                                                           (2)              (1)
<S>                                 <C>            <C>             <C>                <C>           <C>
December 31, 1997
-----------------

Allowance for doubtful accounts          $  3,226        $ 1,874         $  1,358           $(286)      $ 3,456


December 31, 1996
-----------------

Allowance for doubtful accounts          $  3,030        $   941         $    761           $  16       $ 3,226


December 31, 1995
-----------------

Allowance for doubtful accounts          $  3,103        $ 2,124         $  2,330           $ 133       $ 3,030

</TABLE>

(1)      Adjustment resulting from translating allowance for doubtful accounts
         of foreign subsidiaries at year-end exchange rates.

(2)      Write-offs of uncollectible accounts.

                                    Page 22
<PAGE>

                                  Exhibit Index
                                  -------------

   Number
   ------

     3.1      Joint Agreement of Merger between Brown & Sharpe Manufacturing
              Company, incorporated in Rhode Island, and Brown & Sharpe
              Manufacturing Company, the surviving corporation incorporated in
              Delaware, filed as the only Exhibit to Form 8-K for the month of
              January, 1969, and such is hereby incorporated by reference.

     3.2      Amendment to Certificate of Incorporation, dated April 26, 1989,
              filed as Exhibit 13 to Form 10-K for the period ending December
              29, 1989, and such is hereby incorporated by reference.

     3.3      Amendment to Certificate of Incorporation, Dated April 25, 1980,
              filed as Exhibit 3.1 to Form 10-Q for the period ending June 28,
              1980, and such is hereby incorporated by reference.

     3.4      Amendment to Certificate of Incorporation dated April 24, 1987.
              Exhibit 3.7 was filed as Exhibit 10.4 to Form 10-Q for the period
              ended June 26, 1987, and such is hereby incorporated by reference.

     3.5      Amendment to Certificate of Incorporation dated May 6, 1988 filed
              as Exhibit 1 to Current Report on Form 8-K filed May 9, 1988 and
              such is hereby incorporated by reference.

     3.6      Certificate of Designation filed as Exhibit A to Exhibit 5 of
              Amendment on Form 8 filed on March 6, 1989, and such is hereby
              incorporated by reference.

     3.7      Amendment to Certificate of Incorporation dated May 2, 1989.
              Exhibit 3.7 was filed as Exhibit 3.7 to the Form 10-K for the year
              ended December 30, 1989 and such is hereby incorporated by
              reference.

     3.8      By-laws of Brown & Sharpe Manufacturing Company, as amended
              through July 29, 1994; previously filed as Exhibit 3.1 to the Form
              10-Q for the quarter ended July 2, 1994 and such is hereby
              incorporated by reference.

     3.9      Amendments to By-laws of Brown & Sharpe Manufacturing Company, as
              of September 28, 1994; previously filed as Exhibit 3 to the Form
              10-Q for the quarter ended October 1, 1994 and such is hereby
              incorporated by reference.

     4.1      (Intentionally omitted)

   +10.1      (Intentionally omitted)

   +10.2      Amended 1983 Stock Option Plan, as amended through March 9, 1988.
              Exhibit 10.2 was filed as Exhibit 10.2 to the Form 10-K for the
              year ended December 31, 1988, and is hereby incorporated herein by
              reference.

   +10.3      Amendment dated December 29, 1990 to the Brown & Sharpe Amended
              1983 Stock Option Plan. Exhibit 10.3 was filed as Exhibit 10.3 to
              the Form 10-K for the year ended December 29, 1990 and such is
              herein incorporated by reference.

   +10.4      Amendment No. 4 of the Restated Brown & Sharpe Employee Stock
              Ownership and Profit Participation Plan and Trust Agreement, as
              amended through December 21, 1990. Exhibit 10.4 was filed as
              Exhibit 10.4 to the Form 10-K for the year ended December 29,
              1990; and is hereby incorporated herein by reference.

    10.5      (Intentionally omitted)

                                     Page 23
<PAGE>

    10.6      (Intentionally omitted)

   +10.7      (Intentionally omitted)

   +10.8      (Intentionally omitted)

   +10.9      The Brown & Sharpe Savings and Retirement Plan for Management
              Employees dated October 7, 1987.

    10.10     The Brown & Sharpe Savings and Retirement Plan dated October 7,
              1987.

   +10.11     Amendment and Restatement of the Brown & Sharpe Employee Stock
              Ownership and Profit Participation Plan and Trust Agreement dated
              October 7, 1987.

              Exhibits 10.9 through 10.11 were filed as Exhibits 10.2 through
              10.4 respectively, to Form 10-Q for the period ended September 26,
              1987 and such are hereby incorporated by reference.

    10.12     Preferred Stock Rights Agreement dated as of March 9, 1988,
              between the Company and The First National Bank of Boston, as
              Rights Agent. Exhibit 10.12 was filed as Exhibits 1-4 to the
              Registration Statement on Form 8-A filed on April 28, 1988, and is
              hereby incorporated herein by reference.

    10.13     Amendment No. 1, dated as of May 2, 1988, to Preferred Stock
              Rights Agreement.  Exhibit 10.13 was filed as Exhibit 5 to
              Amendment No. 1 on Form 8, filed on March 6, 1989, to the
              Registration Statement on Form 8-A filed on April 28, 1988, and is
              hereby incorporated herein by reference.

    10.14     Amendment No. 2, dated as of February 24, 1989, to Preferred Stock
              Rights Agreement. Exhibit 10.14 was filed as Exhibit 6 to
              Amendment No. 1 on Form 8, filed on March 6, 1989, to the
              Registration Statement on Form 8-A filed on April 28, 1988, and is
              hereby incorporated herein by reference.

   +10.15     Amendment dated February 23, 1989 to The Brown & Sharpe Savings
              and Retirement Plan for Management Employees.

   +10.16     Amendment No. 2, dated October 19, 1988, to The Brown & Sharpe
              Management Employees.

   +10.17     Amendment No. 3, dated February 23, 1989, to The Brown & Sharpe
              Savings and Retirement Plan for Management Employees.

    10.18     Amendment dated February 23, 1989 to The Brown & Sharpe Savings
              and Retirement Plan.

    10.19     Amendment No. 2, dated October 19, 1988, to The Brown & Sharpe
              Savings and Retirement Plan.

    10.20     Amendment No. 3, dated February 23, 1989, to The Brown & Sharpe
              Savings and Retirement Plan.

   +10.21     Amendment dated February 23, 1989, to the Restated Brown & Sharpe
              Employee Stock Ownership and Profit Participation Plan and Trust
              Agreement.

   +10.22     Amendment No. 2, dated October 19, 1988 to the Restated Brown &
              Sharpe Employee Stock Ownership and Profit Participation Plan and
              Trust Agreement.

                                    Page 24
<PAGE>

   +10.23     Amendment No. 3, dated February 23, 1989 to the Restated Brown &
              Sharpe Employee Stock Ownership and Profit Participation Plan and
              Trust Agreement.


              Exhibits 10.15 through 10.23 were filed as Exhibits 10.19 through
              10.26, respectively, to the Form 10-K for the year ended December
              31, 1988, and are hereby incorporated herein by reference.

   +10.24     Amended 1989 Equity Incentive Plan as amended through February 21,
              1992. Exhibit 10.24 was filed as Exhibit 10.24 to the Form 10-K
              for the year ended December 28, 1991 and such is hereby
              incorporated by reference.

   +10.25     Deferred Stock Equivalent Unit Contract dated September 3, 1987
              between Brown & Sharpe Manufacturing Company and Paul R.
              Tregurtha.  Exhibit 10.25 was filed as Exhibit 10.24 to the Form
              10-K for the year ended December 30, 1989 and such is herein
              incorporated by reference.

   +10.26     (Intentionally omitted)

   +10.27     Deferred Stock Equivalent Unit Contract dated November 30, 1989
              between Brown & Sharpe Manufacturing Company and Herbert A. Beyer.
              Exhibit 10.26 was filed as Exhibit 10.25 to the Form 10-K for the
              year ended December 30, 1989 and such is hereby incorporated by
              reference.

   +10.28     (Intentionally omitted)

   +10.29     Amendment No. 4, dated October 20, 1989, to Brown & Sharpe Savings
              and Retirement Plan for Management Employees. Exhibit 10.29 was
              filed as Exhibit 10.26 to the Form 10-K for the year ended
              December 30, 1989 and such is hereby incorporated by reference.

    10.30     Amendment No. 4, dated October 30, 1989, to Brown & Sharpe Savings
              and Retirement Plan. Exhibit 10.30 was filed as Exhibit 10.26 to
              the Form 10-K for the year ended December 30, 1989 and such is
              hereby incorporated by reference.

    10.31     Amendment No. 5, dated September 7, 1990, of the Brown & Sharpe
              Savings and Retirement Plan. Exhibit 10.31 was filed as Exhibit
              10.30 to the Form 10-K for the year ended December 29, 1990 and
              such is hereby incorporated by reference.

   +10.32     Amendment No. 5, dated September 7, 1990, of the Brown & Sharpe
              Savings and Retirement Plan for Management Employees.  Exhibit
              10.32 was filed as Exhibit 10.31 to the Form 10-K for the year
              ended December 29, 1990 and such is hereby incorporated by
              reference.

    10.33     (Intentionally omitted)

   +10.34     (Intentionally omitted)

   +10.35     (Intentionally omitted)

   +10.36     (Intentionally omitted)

   +10.37     (Intentionally omitted)

                                    Page 25
<PAGE>

   +10.38     The sales agreement pertaining to the sale of GageTalker
              Corporation to P. Eric Berg by Brown & Sharpe Manufacturing
              Company dated January, 1992. Exhibit 10.38 was filed as Exhibit
              10.38 to the Form 10-K for the year ended December 28, 1991 and is
              hereby incorporated by reference.

   +10.39     (Intentionally omitted)

   +10.40     Amendment No. 5 of the Restated Brown & Sharpe Employee Stock
              Ownership and Profit Participation Plan and Trust Agreement, as
              amended through March 23, 1991.

   +10.41     Employment/Severance Agreement dated April 23, 1992 between Brown
              & Sharpe Manufacturing Company and Charles A. Junkunc.

   +10.42     Amendment dated July 24, 1992 to Employment/Severance Agreement
              dated April 23, 1992 between Brown & Sharpe Manufacturing Company
              and Charles A. Junkunc.

   +10.43     Amendment dated November 11, 1992 to 1989 Equity Incentive Plan as
              amended through November 6, 1992.

              Exhibits 10.38 through 10.43 were filed as Exhibits 10.38 through
              10.43, respectively, to the Form 10-K for the year ended December
              26, 1992, and are hereby incorporated by reference.

    10.44     The Share Purchase and Transfer agreement dated March 24, 1994 by
              and between Diehl GmbH & Co. and Brown & Sharpe Manufacturing
              Company was filed as Exhibit (c) to Form 8-K filed as of May 13,
              1994, and is hereby incorporated by reference.

    10.45     The Acquisition Agreement pertaining to the acquisition of DEA
              dated as of June 10, 1994 between Brown & Sharpe Manufacturing
              Company and Finmeccanica S.p.A.

    10.46     The Form of Shareholders Agreement to be entered into between
              Brown & Sharpe Manufacturing Company and Finmeccanica, S.p.A.

    10.47     Amendment No. 3, dated June 16, 1994, to Rights Agreement, dated
              March 9, 1988 between Brown & Sharpe Manufacturing Company and the
              First National Bank of Boston, as Rights Agent.

              Exhibits 10.45 through 10.47 were filed as Exhibits 1 through 3,
              respectively, to the Form 8-K filed as of June 24, 1994, and are
              hereby incorporated by reference.

    10.48     Definitive acquisition Agreement providing for the combination of
              the DEA metrology business of Finmeccanica (the "DEA Group") with
              the Brown & Sharpe Measuring Systems Division dated as of June 10,
              1994 between Brown & Sharpe Manufacturing Company and Finmeccanica
              S.p.A., was filed as Exhibit 1 to Form 8-K dated June 24, 1994,
              and is hereby incorporated by reference.

    10.49     Amendment No. 1 dated July 31, 1994, to Acquisition Agreement,
              amending certain debt provisions of the agreement was filed as
              Exhibit 10.1.1 to Form 10-Q/A for the quarter ended July 2, 1994
              and is hereby incorporated by reference.

    10.50     Letter Agreement of Henry D. Sharpe, Jr. dated September 28, 1994
              entered into pursuant to the DEA Acquisition Agreement (was filed
              as Exhibit No. 3 to Report on Form 8-K as of September 28, 1994),
              filed October 13, 1994 is hereby incorporated by reference.

    10.51     Amendment No. 6, dated November 10, 1994, to Brown & Sharpe
              Savings and Retirement Plan for Management Employees.

                                    Page 26
<PAGE>

    10.52     Amendment No. 6, dated November 10, 1994, to Brown & Sharpe
              Savings and Retirement Plan.

    10.53     Amended Profit Incentive Plan, as amended through February 14,
              1994.

    10.54     Restated Supplemental Executive Retirement Plan dated January 23,
              1995, filed as Exhibit 10.54 to Form 10-Q for the quarter ended
              March 31, 1995, and is hereby incorporated by reference.

    10.55     Amendment to the Equity Incentive Plan as of February 15, 1995,
              filed as Exhibit 10.55 to Form 10-Q for the quarter ended March
              31, 1995, and is hereby incorporated by reference.

    10.56     Amendment No. 1 dated May 31, 1995 to the Brown & Sharpe Savings
              and Retirement Plan for Management Employees.  (1994 Restatement)

    10.57     Amendment No. 2 dated May 31, 1995 to the Brown & Sharpe Savings
              and Retirement Plan for Management Employees.  (1994 Restatement)

    10.58     Amendment No. 1 dated May 31, 1995 to the Brown & Sharpe Savings
              and Retirement Plan.  (1994 Restatement)

    10.59     (Intentionally omitted)

    10.60     Employment Agreement with Frank T. Curtin dated May 17, 1995.

              Exhibits 10.56 through 10.60 were filed as Exhibits 10.56 through
              10.60, respectively, to the Form 10-Q for the quarter ended June
              30, 1995, and are hereby incorporated by reference.

    10.61     Indemnity Agreement with Frank T. Curtin dated May 3, 1995.

    10.62     Indemnity Agreement with Alfred J. Corso dated May 3, 1995.

    10.63     Indemnity Agreement with Enrico Albareto dated October 28, 1994.

    10.64     Indemnity Agreement with Alberto de Benedictis dated October 28,
              1994.

    10.65     Indemnity Agreement with Vincenzo Cannatelli dated October 28,
              1994.

              Exhibits 10.61 through 10.65 were filed as Exhibits 10.61 through
              10.65, respectively, to the Form 10-Q for the quarter ended
              September 30, 1995, and are hereby incorporated by reference.

    10.66     Indemnity Agreement with Robert D. Batting dated October 5, 1995.

    10.67     Letter Agreement with Finmeccanica dated December 18, 1995
              concerning Purchase Price Adjustment.

    10.68     The Brown & Sharpe Key Employee Long-Term Deferred Cash Incentive
              Plans dated February 23, 1996 effective January 1, 1995.

    10.69     Amendment dated July 28, 1995 to Employment/Severance Agreement
              dated March 14, 1988 between Brown & Sharpe Manufacturing Company
              and Richard F. Paolino.

    10.70     (Intentionally omitted)

    10.71     Employment Agreement with Robert D. Batting dated September 26,
              1995.

                                    Page 27
<PAGE>

    10.72     Employment Agreement with C. John Cooke dated November 26, 1991.

    10.73     Employment Agreement with Antonio Aparicio dated October 17, 1995.

    10.74     (Intentionally omitted)

    10.75     Employment Agreement with James W. Cooper dated July 17, 1996, as
              amended July 24, 1996 and August 1, 1996.

    10.76     Amendment to Employment Agreement with Frank T. Curtin dated as of
              January 1, 1996.

              Exhibits 10.69 through 10.76 were filed as Exhibits 10.69 through
              10.76, respectively, to the Form S-1 dated October 9, 1996, and
              are hereby incorporated by reference.

    10.77     (Intentionally omitted)

    10.78     Indemnity Agreement with James W. Cooper dated August 19, 1996.

    10.79     Indemnity Agreement with Harry A. Hammerly dated October 25, 1996.

    10.80     Indemnity Agreement with John Robert Held dated October 25, 1996.

    10.81     Indemnity Agreement with Roger E. Levien dated October 25, 1996.

    10.82     Indemnity Agreement with Christopher J. Garcia dated January 1,
              1998.

    10.83     Indemnity Agreement with Marcus Burton dated January 1, 1998.

    10.84     Employment Agreement dated May 29, 1997 with Edward D. DiLuigi.

    10.85     Employment Agreement dated August 18, 1997 with Philip James.

              Exhibits 10.84 and 10.85 were filed as Exhibits 10.84 through
              10.85, respectively, to the Form 10-Q for the quarter ended
              September 30, 1997, and are hereby incorporated by reference.

  +*10.86     Indemnity Agreement with Edward D. DiLuigi dated June 16, 1997.

  +*10.87     Indemnity Agreement with Philip James dated September 8, 1997.

  +*10.88     Indemnity Agreement with Brian Gaunt dated February 13, 1998.

  +*10.89     Supplemental Executive Retirement Plan dated February 13, 1998.

    10.90     Rights Agreement dated as of February 13, 1998 ("Rights
              Agreement") between the Company and BankBoston N.A., as Rights
              Agent, filed as Exhibit 1 to Report on Form 8-K dated March 5,
              1998, which is hereby incorporated by reference.

    10.91     Form of Certificate of Designation with respect to the Series B
              Participating Preferred Stock, par value $1.00 per share, of the
              Company (filed as Exhibit A to the Rights Agreement, filed as
              Exhibit A to Report on Form 8-K dated March 5, 1998), which is
              hereby incorporated by reference.

   *11.       Computation of Per Share Data for the Three Years Ended
              December 31, 1997.

                                     Page 28
<PAGE>

   *13.       1997 Annual Report to Shareowners, filed for information of the
              Commission except for those portion thereof which are expressly
              incorporated by reference in this report.

    18.       Letter of Coopers & Lybrand, independent accountants, regarding
              preferability of change in accounting principles to conform
              worldwide use of percent-of-completion basis accounting for
              long-term large machinery construction contracts of the European
              operations, filed as Exhibit 18 to Form 10-Q for the quarter ended
              April 2, 1994, and is hereby incorporated by reference.

   *22.       Subsidiaries of the Registrant.

   *23.       Consent of Independent Auditors - Ernst & Young LLP.

    27.1      Financial Data Schedule for Fiscal Year ended December 31, 1997.

    27.2      Restated Financial Data Schedule for Nine Months ended September
              30, 1997.

    27.3      Restated Financial Data Schedule for Six Months ended June 30,
              1997.

    27.4      Restated Financial Data Schedule for Three Months ended
              March 31, 1997.

    27.5      Restated Financial Data Schedule for Fiscal Year ended
              December 31, 1996.

    27.6      Restated Financial Data Schedule for Nine Months ended September
              30, 1996.

    27.7      Restated Financial Data Schedule for Six Months ended June
              30, 1996.

    27.8      Restated Financial Data Schedule for Three Months ended
              March 31, 1997.

    27.9      Restated Financial Data Schedule for Fiscal Year ended December
              31, 1995.

    27.10     Restated Financial Data Schedule for Fiscal Year ended December
              31, 1994.




* These current year Exhibits are located in Exhibit number sequence beneath the
  attached blue paper.

+ This identifies management contracts or compensatory plans.

                                     Page 29