<PAGE>
<TABLE>

ELEVEN YEAR SUMMARY OF FINANCIAL DATA

(In thousands, except percentages and per-share data)
<CAPTION>


                                      PER  SHARE DATA
                              ------------------------------
                                                                          PERCENT
                     COST                 DILUTED     BASIC              RETURN ON                             LONG
           NET       GOODS       NET         NET        NET               AVERAGE    SHAREHOLDERS'  TOTAL      TERM         WORKING
          SALES      SOLD     EARNINGS   EARNINGS   EARNINGS   DIVIDENDS   EQUITY       EQUITY     ASSETS   OBLIGATIONS     CAPITAL
          -----      ----     --------   --------   --------   ---------   ------       ------     ------   -----------     -------
<S>     <C>        <C>         <C>          <C>        <C>        <C>       <C>         <C>        <C>         <C>          <C>
1999    577,319    399,833     43,723       1.19       1.21       0.45      16.5%       266,109    423,941     56,305       183,956
1998    589,406    410,748     44,610       1.17       1.21       0.40      17.6%       264,292    411,926     57,015       177,126
1997    557,940    389,711     40,365       1.09       1.13       0.36      18.2%       243,434    355,889     27,929       141,268
1996    502,875    353,345     35,173       0.97       1.00       0.30      17.1%       200,325    325,486     45,027       146,975
1995    473,103    334,306     32,305       0.84       0.88       0.26      16.3%       211,377    313,462     25,255       145,069
1994    418,152    297,212     26,359       0.69       0.73       0.21      15.3%       184,262    283,155     26,303       118,550
1993    356,595    255,557     19,426       0.52       0.54       0.17      12.7%       160,539    237,950     22,474       108,601
1992    318,930    229,686     15,264       0.42       0.43       0.14      10.9%       145,226    211,941     23,209        97,343
1991    286,495    206,953     11,922       0.33       0.34       0.14       9.3%       133,663    203,277     24,376        84,740
1990    294,030    211,342     14,137       0.40       0.41       0.14      11.9%       123,932    200,694     25,299        75,306
1989    281,462    204,321     13,107       0.38       0.37       0.12      12.0%       114,301    185,474     22,543        69,788
</TABLE>

<PAGE>
Page 16

Management's Discussion and Analysis of Financial

Results of Operations
Summary
In 1999,  Baldor's sales and net earnings  decreased 2% from 1998.  This was the
first  decline  in  eight  years.  One of the  factors  affecting  1999  was the
softening of some of the industries that we serve. Fortunately, these industries
are improving,  ranging from slight  improvements  in agriculture to significant
improvements in the  semiconductor  equipment  industry.  Continuing our efforts
from 1998,  Baldor improved  margins  through  increased  productivity,  reduced
manufacturing  costs and  improved  quality of  products  and  services  for our
customers during the current year.  Record operating and pre-tax margins coupled
with the Company's stock repurchase  program helped to increase diluted earnings
per share to $1.19 from $1.17;  the 8th consecutive  year of increased EPS. Also
during 1999, the Company raised dividends  twice,  from $.10 per share to $0.12.
This was a 20% increase.

Net Sales
Baldor's  1999  sales  were  $577.3  million,  down 2% from 1998 sales of $589.4
million.  Sales in 1997 were $557.9 million. Over the past three years, sales to
distributor  and OEM customers  have remained  consistent at  approximately  50%
each. Baldor serves many industries and geographic regions by selling to a broad
base of distributors  and OEMs both  domestically  and in more than 60 countries
around the world. No single customer  accounted for more than 5% of sales in any
year covered by this report.

During the past two years, we saw growth in a variety of products.
During  1999,  based on  customer  demand  Baldor  developed  more  than 350 new
products for introduction in 2000. Sales for 1999 were generated without a price
increase from 1998.

Net Earnings
Net  earnings  in 1999 were $43.7  million,  which  declined 2% compared to 1998
earnings of $44.6  million.  Net earnings in 1998  exceeded 1997 net earnings of
$40.4 million by 11%. Gross margins,  operating margins and pre-tax margins have
continued to improve over the past three years.

Gross margin improved to 30.7% in 1999 from 30.3% in 1998
and 30.2% in 1997.  Manufacturing costs continued to improve in 1999 compared to
the prior two years.  Selling and administrative  costs as a percent of sales in
1999 was  16.7%  compared  to 16.6% in 1998  and  16.8% in 1997.  The  Company's
concentration on improvements resulted in a record-breaking  operating margin of
14.0% in 1999  compared  to 13.8%  and  13.4%  in 1998 and  1997,  respectively.
Pre-tax  margins were 12.2% for 1999 and 1998 compared to 11.8% in 1997. Our tax
rate remained at 38% for 1999 and 1998 compared to 38.5% in 1997.

International Operations
Sales from international  operations (foreign affiliates and exports) were $80.3
million  in 1999,  down from $90.0  million  in 1998 and $84.2  million in 1997.
Australia, Mexico and the Far East all experienced sales increases for 1999 over
1998. We experienced  decreased  sales in our European  operations due to a weak
economy and the strengthening of the US dollar against the local currency.

Foreign  pre-tax  earnings were $1.8 million in 1999 compared to $2.8 million in
1998 and $0.9 million in 1997. The decrease in 1999 foreign pre-tax  earnings is
also  due  to  a  decrease  in  sales  from  our  European  operations  and  the
deterioration  of  the  local  currency.   Foreign  pre-tax  earnings  increased
significantly in 1998 compared to 1997, due in part to productivity improvements
and cost reductions.

Environmental Remediation
Management believes, based on their internal reviews and other
factors,  that the  future  costs  relating  to  environmental  remediation  and
compliance  will  not  have  a  material  effect  on the  capital  expenditures,
earnings, or competitive position of the Company.  environmental remediation and
compliance  will  not  have  a  material  effect  on the  capital  expenditures,
earnings, or competitive position of the Company.

Year 2000
The Company's comprehensive Year 2000 initiative was
implemented  timely and successfully  with no significant  problems.  We did not
experience any disruptions from our suppliers or financial  institutions nor has
any Baldor  product  been  affected by the 2000 date.  We are ready with our new
Company-wide  information  system to improve  visibility  and  reaction  time to
customer orders,  reduce lead times, support international  operations,  improve
productivity and better manage inventory for the new millennium.

Financial Position

Summary
Baldor's  financial  position  remained  strong  through 1999. We maintained our
financial  strength by continuing  research and development for new and existing
products, by making capital investments in our manufacturing facilities,  and by
continuing to invest in both our employees and customers  through  education and
training.  The Company's 3 million-share  stock repurchase program is two-thirds
complete as of year-end 1999.

Our financial strength is an important competitive  advantage,  which provides a
strong  base  to  better  serve  our   customers   and  finance   future  growth
opportunities. Based upon our financial strength, in 1999 the Board of Directors
approved two separate dividend increases totaling a 20% increase.

<PAGE>

Page 17

Condition and Results of Operations

Investments
Baldor believes the investment in our employees  through  training and education
is a key to continued  success and shareholder  value.  Baldor continues to be a
leader not only in employee education, but also in customer training.

Investments  in  property,  plant  and  equipment  for 1999 were  $14.3  million
compared to $38.2 million in 1998 and $26.9 million in 1997.  These  investments
in property,  plant and equipment were made to centralize  operations,  increase
capacity,  and  improve  quality and  productivity,  all  resulting  in improved
margins.

Baldor's commitment to research and development  continues to help it maintain a
leadership position in the marketplace and to satisfy customers' needs. In 1999,
Baldor  continued its  investments in research and  development of $24.9 million
compared to $25.3 million in 1998 and $22.9 million in 1997. We also continue to
make investments in our existing  products for improved  performance,  increased
energy efficiency, and manufacturability.

Current Liquidity
Baldor's  liquidity  position in 1999 remained  strong  compared to 1998 with an
increase in working  capital of 4% and a current ratio of 3.1.  Working  Capital
was $184.0  million at year-end  1999  compared to $176.1  million at the end of
1998.  Liquidity was also  strengthened  by cash flows from  operations of $52.9
million  in 1999  compared  to $50.5  million  in  1998.  The  Company  also has
available lines of credit to support operations, if needed.

Long-Term Debt and Shareholders' Equity
Long-term  debt was 17.4% in 1999 and 17.7% in 1998 of total  capitalization  at
the end of each year.  During  1999,  Baldor  refinanced  certain bond issues to
lower its cost of debt.  Baldor  repurchased  1,321,000  shares of common  stock
during 1999.  During the first quarter of 2000, the Board of Directors  approved
the  repurchase  of an additional  1.5 million  shares of stock that will expire
December 31, 2001. This brings the total share  authorized for repurchase  since
September  1998 to 4.5  million.  Shareholders'  equity  was  $266.1  million at
year-end 1999 compared to $264.3  million at the end of 1998.  Return on average
shareholders' equity was 16.5% in 1999 compared to 17.6% in 1998.

Dividend Policy
Annual dividends per share for 1999 increased 12% over 1998, which increased 11%
over 1997.  During 1999, the Company  increased the dividend  twice.  There have
been seven dividend  increases in the last five years.  These  increases were in
line with  Baldor's  policy of making  increases  periodically,  as earnings and
financial  strength  warrant,  and  reinvesting  a major  portion of earnings to
finance  growth  opportunities.  The  objective  is for  shareholders  to obtain
dividend  increases  over time  while  also  participating  in the growth of the
Company.

Market Risk
The Company's interest rate risk relates from its available-for-sale  securities
and long-term  debt.  Approximately  60% of the Company's  securities  portfolio
mature within three years.  Due to the  short-term  nature of these  securities,
anticipated interest rate risk is not considered  material.  The Company's fixed
rate debt is 50% of the total debt obligations. An adverse ten percent change in
the  end-of-year  market rates would not materially  affect  earnings in a given
year.

The Company's risk to foreign currency exchange rates has
historically been minimal.  Foreign affiliates comprise less than
10% of total assets.  The Company does not anticipate the use of derivatives for
managing  foreign currency risk, but continues to monitor the effects of foreign
currency exchange rates.

The Company utilizes short-term swaps to hedge against the
fluctuations  in copper  prices.  The  hedges  are for  materials  to be used in
production  and are not  speculative.  A 10%  adverse  movement  in the price of
copper would not result in a material affect on earnings in a given year.

Forward-looking Statements
This annual report and other written  reports and oral statements made from time
to time by the  Company  and its  representatives  may  contain  forward-looking
statements with respect to their
current  views  and  estimates  of  future  economic   circumstances,   industry
conditions,  company  performance and financial results.  These  forward-looking
statements  are  subject to a number of factors  and  uncertainties  which could
cause the Company's actual results and experiences to differ materially from the
anticipated   results  and  expectations   expressed  in  such   forward-looking
statements.  You are cautioned  that actual results and  experiences  may differ
materially  from the  forward-looking  statements  as a result of many  factors,
possibly including changes in economic conditions, competition,  fluctuations in
raw materials, and other unanticipated events and conditions.

<PAGE>

Page 18
<TABLE>
<CAPTION>

Consolidated Balance Sheets

Baldor Electric Company and Affiliates

                                                                        JANUARY 1        JANUARY 2
ASSETS (In thousands, except share data)                                     2000             1999
<S>                                                                 <C>              <C>
CURRENT ASSETS:
         Cash and cash equivalents ..............................   $      12,103    $      24,793
         Marketable securities ..................................          30,805           13,996
         Receivables, less allowances
         of $4,350 for both years ...............................          98,470           90,045
         Inventories:   Finished products .......................          75,351           74,561
                        Work-in-process .........................           9,728           12,939
                        Raw materials ...........................          47,677           42,477
                                                                           ------           ------
                                                                          132,756          129,977
                  LIFO valuation adjustment (deduction) .........         (26,571)         (26,170)
                                                                          -------          -------
                                                                          106,185          103,807
         Other current assets and deferred taxes ................          24,767           23,847
                                                                           ------           ------
         TOTAL CURRENT ASSETS ...................................         272,330          256,488
OTHER ASSETS ....................................................          26,809           32,301
PROPERTY, PLANT         Land and improvements ...................           5,957            6,007
AND EQUIPMENT:          Buildings and improvements ..............          43,644           42,283
                        Machinery and equipment .................         231,437          213,793
                        Allowances for depreciation and
                        amortization (deduction) ................        (156,236)        (138,946)
                                                                         --------         --------
                        Net property, plant and equipment .......         124,802          123,137
                                                                          -------          -------
                                                                    $     423,941    $     411,926
                                                                    =============    =============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT           Accounts payable ..............................   $      26,774    $      18,900
LIABILITIES:      Employee compensation .........................           6,021            5,620
                  Profit sharing ................................           9,417            9,420
                  Anticipated warranty costs ....................           5,925            5,925
                  Accrued insurance obligations .................          15,675           15,960
                  Other accrued expenses ........................          18,205           20,052
                  Income taxes ..................................           5,752            3,505
                  Current maturities of long-term obligations ...             605              980
                                                                              ---              ---
                  TOTAL CURRENT LIABILITIES .....................          88,374           80,362
LONG-TERM OBLIGATIONS ...........................................          56,305           57,015
DEFERRED INCOME TAXES ...........................................          13,153           10,257
SHAREHOLDERS' EQUITY:  Preferred stock, $0.10 par value
                         Authorized shares: 5,000,000
                         Issued and outstanding shares:  None
                       Common stock, $0.10 par value
                       Authorized shares: 150,000,000
                       Issued shares:  1999 - 38,722,508;
                         1998 - 38,409,135 ......................           3,872            3,841
                  Additional capital ............................          34,971           31,495
                  Retained earnings .............................         291,741          264,545
                  Accumulated other comprehensive income ........          (2,676)            (428)
                  Treasury stock at cost (3,130,950 shares in 1999
                  and 1,732,116 shares in 1998) .................         (61,799)         (35,161)
                                                                          -------          -------
                  TOTAL SHAREHOLDERS' EQUITY ....................         266,109          264,292
                                                                          -------          -------
                                                                    $     423,941    $     411,926
                                                                    =============    =============

See notes to consolidated financial statements.
</TABLE>



<PAGE>
Page 19
<TABLE>
<CAPTION>

Consolidated Statements of Earnings
Baldor Electric Company and Affiliates

                                                                              Years ended
                                                              -------------------------------------------
                                                              January 1        January 2        January 3
(In thousands, except share data)                                  2000             1999             1998
                                                                   ----             ----             ----
<S>                                                         <C>              <C>              <C>
Net sales .........................................         $   577,319      $   589,406      $   557,940
Other income, net .................................               1,943            2,019            1,843
                                                                  -----            -----            -----
                                                                579,262          591,425          559,783
Costs and expenses:   Cost of goods sold ..........             399,833          410,747          389,711
                      Selling and administrative ..              96,671           97,566           93,455
                      Profit sharing ..............               9,445            9,439            8,858
                      Interest ....................               2,790            1,721            2,124
                                                                  -----            -----            -----
                                                                508,739          519,473          494,148
Earnings before income taxes ......................              70,523           71,952           65,635
Income taxes ......................................              26,800           27,342           25,270
                                                                 ------           ------           ------
                      NET EARNINGS ................         $    43,723      $    44,610      $    40,365
                                                            ===========      ===========      ===========
Net earnings per share-diluted ....................         $      1.19      $      1.17      $      1.09
                                                            ===========      ===========      ===========
Net earnings per share-basic ......................         $      1.21      $      1.21      $      1.13
                                                            ===========      ===========      ===========
Weighted average shares outstanding-diluted .......          36,787,349       38,067,014       37,062,624
                                                             ==========       ==========       ==========
Weighted average shares outstanding-basic .........          36,077,484       36,911,175       35,691,572
                                                             ==========       ==========       ==========

See notes to consolidated financial statements.
</TABLE>

<TABLE>
<CAPTION>

Summary of Quarterly Results of Operations (unaudited)
Baldor Electric Company and Affiliates

                                                                    Quarter
                                              --------------------------------------------------
(In thousands, except per share data):          First     Second     Third      Fourth      Total
<C>                                          <C>        <C>        <C>        <C>        <C>
1999:    Net sales .......................   $142,133   $152,130   $144,349   $138,707   $577,319
         Gross profit ....................     43,639     46,336     44,238     43,273    177,486
         Net earnings ....................     10,731     11,030     11,043     10,919     43,723
         Net earnings per share-diluted ..       0.29       0.30       0.30       0.30       1.19
         *Net earnings per share-basic ...       0.30       0.30       0.31       0.31       1.21
1998:    Net sales .......................   $154,209   $152,083   $147,358   $135,756   $589,406
         Gross profit ....................     46,583     46,122     44,550     41,404    178,659
         Net earnings ....................     11,580     11,544     11,192     10,294     44,610
         Net earnings per share-diluted ..       0.31       0.30       0.29       0.27       1.17
         Net earnings per share-basic ....       0.32       0.31       0.30       0.28       1.21

*The sum of the  quarter  amounts  does not agree to the total for 1999,  due to
rounding.
</TABLE>




<PAGE>
Page 20
<TABLE>
<CAPTION>

Consolidated Statements of Cash Flow
Baldor Electric Company and Affiliates

                                                                                 Years ended
                                                                   ---------------------------------------
                                                                   January 1       January 2     January 3
(In thousands)                                                          2000            1999          1998
                                                                        ----            ----          ----
<S>                                                                  <C>             <C>           <C>
Operating activities:
          Net earnings ............................................  $43,723         $44,610       $40,365
          Adjustments      Depreciation and amortization ..........   20,767          20,511        19,337
          to reconcile     Deferred income taxes ..................    2,896           2,968         5,316
          net earnings     Changes in   Receivables ...............   (8,425)           (931)       (7,295)
          to net cash      operating    Inventories  ..............   (2,378)         (7,312)       (3,181)
          provided by      assets and   Other current
          operating        liabilities: assets  ...................     (856)         (9,851)         (813)
          activities:                   Accounts
                                        payable ...................    7,874          (1,280)       (1,093)
                                        Accrued
                                        expenses ..................   (1,734)           (617)        7,558
                                        Income taxes ..............    2,247           2,249           447
                                        Other, net ................  (11,172)            191        (2,498)
                                                                     -------             ---        ------
         Net cash from operating activities  ......................   52,942          50,538        58,143
Investing activities:
         Additions to property, plant and equipment ...............  (14,298)        (38,210)      (26,857)
         Marketable securities purchased ..........................  (35,052)        (17,996)      (14,847)
         Marketable securities sold ...............................   18,243          15,900        20,839
         Acquisitions .............................................                      732        (7,597)
                                                                      ------             ---        ------
         Net cash used in investing activities ....................  (31,107)        (39,574)      (28,462)
Financing activities:
         Additional long-term borrowings ..........................    6,000          30,750
         Reduction of long-term obligations .......................   (7,085)         (1,754)      (17,141)
         Unexpended debt proceeds .................................    5,890             466          (367)
         Dividends paid ...........................................  (16,199)        (14,832)      (12,958)
         Stock option plans .......................................    2,001           3,073         2,410
         Common stock repurchased .................................  (25,132)        (13,449)
                                                                     -------         -------       -------
         Net cash from (used in) financing activities .............  (34,525)          4,254       (28,056)
                                                                     -------           -----       -------
Net increase (decrease) in cash and cash equivalents ..............  (12,690)         15,218         1,625
Beginning cash and cash equivalents ...............................   24,793           9,575         7,950
                                                                      ------           -----         -----
Ending cash and cash equivalents ..................................$  12,103       $  24,793     $   9,575
                                                                   =========       =========     =========

See notes to consolidated financial statements.
</TABLE>

<PAGE>
Page 21
<TABLE>
<CAPTION>
Consolidated Statements of Shareholders' Equity
Baldor Electric Company and Affiliates

                                                                                                    Other
                                                                                              Accumulated     Treasury
                                                    Common Stock    Additional     Retained Comprehensive        Stock
(In thousands, except per share amounts)          Shares     Amount    Capital     Earnings        Income     (at cost)       Total
----------------------------------------          ------     ------    -------     --------        ------     ---------       -----
<S>                                               <C>       <C>      <C>          <C>             <C>        <C>          <C>
BALANCE AT DECEMBER 29, 1996 ..................   26,200    $ 2,862  $  37,112    $ 207,029       $   381    $ (47,059)   $ 200,325
Comprehensive income
         Net earnings .........................                                      40,365                                  40,365
         Other comprehensive income
                  Translation adjustments,
net of taxes of $603 ..........................                                                      (963)                     (963)
Total comprehensive income ....................                                                                           $  39,402
Stock option plans (net of shares exchanged) ..      263         33      4,365                                  (1,988)       2,410
Four-for-three common stock split .............    8,999        900                    (900)
Cash dividends at $0.36 per share .............                                     (12,958)                                (12,958)
Contributions to benefit plans ................      115                   647                                   2,242        2,889
Acquisition and other .........................      452                 2,482           66                      8,818       11,366
                                                     ---      -----      -----           --          ----        -----       ------
BALANCE AT JANUARY 3, 1998 ....................   36,029      3,795     44,606      233,602          (582)     (37,987)     243,434
Comprehensive income
         Net earnings .........................                                      44,610                                  44,610
         Other comprehensive income
           Securities valuation adjustment,
           net of taxes of $54 ................                                                        87                        87
           Translation adjustments,
           net of taxes of $41 ................                                                        67                        67
         Total other comprehensive income .....                                                                                 154
Total comprehensive income ....................                                                                           $  48,505
Stock option plans (net of shares exchanged) ..      355         46      5,547                                  (2,520)       3,073
Cash dividends at $0.40 per share .............                                     (14,832)                                (14,832)
Common stock repurchased ......................     (656)                                                      (13,449)     (13,449)
Acquisition and other .........................      949               (18,658)       1,165                     18,795        1,302
                                                     ---      -----    -------        -----         -----       ------        -----
BALANCE AT JANUARY 2, 1999 ....................   36,677      3,841     31,495      264,545          (428)     (35,161)     264,292
Comprehensive income
         Net earnings .........................                                      43,723                                  43,723
         Other comprehensive income
           Securities valuation adjustment,
           net of taxes of $169 ...............                                                      (274)                     (274)
           Translation adjustments,
           net of taxes of $1,209 .............                                                    (1,974)                   (1,974)
         Total other comprehensive income .....                                                                              (2,248)
Total comprehensive income ....................                                                                           $  41,475
Stock option plans (net of shares exchanged) ..      236         31      3,476                                  (1,506)       2,001
Cash dividends at $0.45 per share .............                                     (16,199)                                (16,199)
Common stock repurchased ......................   (1,321)                                                      (25,132)     (25,132)
Other .........................................                                        (328)                                   (328)
                                                  -----      -----     ------          ----       -------      -------         ----
BALANCE AT JANUARY 1, 2000 ....................   35,592    $ 3,872  $  34,971    $ 291,741       $(2,676)   $ (61,799)   $ 266,109
                                                  ======    =======  =========    =========       =======    =========    =========

See notes to consolidated financial statements.
</TABLE>


<PAGE>
Page 22

Notes to Consolidated Financial Statements
Baldor Electric Company and Affiliates - January 1, 2000

NOTE A
SIGNIFICANT ACCOUNTING POLICIES

Line of Business:  The Company  operates in one industry  segment which includes
the  design,  manufacture,  and  sale of  electric  motors  and  drives.

Use of Estimates:  The  preparation of financial  statements in conformity  with
generally accepted  accounting  principles requires management to make estimates
and  assumptions  that  affect  the  amounts  reported  in  the  statements  and
accompanying notes. Actual results may differ from those estimates.

Consolidation: The consolidated financial statements include the accounts of the
Company and all its affiliates. Intercompany accounts and transactions have been
eliminated in consolidation.

Fiscal Year: The Company's  fiscal year ends on the Saturday nearest to December
31 which results in a 52- or 53-week year.  Fiscal year 1999 and 1998  contained
52 weeks,  while  fiscal  year 1997  contained  53 weeks.  In 1998,  the Company
changed the fiscal year end of certain  foreign  affiliates  from November 30 to
December 31. The extra month was recorded as an adjustment to retained earnings.

Cash Equivalents:  Cash equivalents  consist of highly liquid investments having
original  maturities  of three  months  or less  and are  valued  at cost  which
approximates market.

Marketable   Securities:   All   marketable   securities   are   classified   as
available-for-sale  and are available to support  current  operations or to take
advantage of other  investment  opportunities.  Those  securities  are stated at
estimated fair value based upon market quotes.  Unrealized gains and losses, net
of tax, are computed on the basis of specific identification and are included in
Accumulated Other  Comprehensive  Income.  Realized gains,  realized losses, and
declines in value,  judged to be  other-than-  temporary,  are included in Other
Income.  The cost of  securities  sold is based on the  specific  identification
method and interest earned is included in Other Income.

Inventories: The Company values inventories at the lower of cost or market, cost
being determined principally by the last-in, first-out method (LIFO), except for
$12,886,000 in 1999,  $16,718,000  in 1998,  and  $13,882,000 in 1997 at foreign
locations, valued by the first-in, first-out method (FIFO).

Property, Plant and Equipment:  Property, plant and equipment,  including assets
under capital leases,  are stated at cost.  Depreciation  and  amortization  are
computed  principally using the  straight-line  method over the estimated useful
lives of the assets and the remaining term of capital leases, respectively.

Fair Value of Financial Instruments:  The Company's methods and assumptions used
to estimate the fair value of financial instruments include quoted market prices
for marketable  securities and discounted cash flow analysis for fixed long-term
debt.  The Company  estimates  that the fair value of its financial  instruments
approximates carrying value at January 1, 2000 and January 2, 1999.

Long-Lived  Assets:  Impairment  losses are recognized on long-lived assets when
information  indicates the carrying amount of these assets,  intangibles and any
goodwill  related to  long-lived  assets will not be  recovered  through  future
operations or sale.

Benefit  Plans:  The Company has a  profit-sharing  plan covering most employees
with more than two years of service.  Baldor  contributes 12% of earnings before
income taxes of participating  companies to the Plan.

Income  Taxes:  Income  taxes  are  provided  based on the  liability  method of
accounting.  Deferred  income taxes are  provided  for the  expected  future tax
consequences  of  temporary   differences   between  the  basis  of  assets  and
liabilities reported for financial and tax purposes.

Research  and  Engineering:   Costs   associated  with  research,   new  product
development and product cost  improvements are treated as expenses when incurred
and amounted to  approximately  $24,881,000  in 1999,  $25,300,000  in 1998, and
$22,900,000 in 1997.

Financial  Derivatives:  In June 1999, the Financial  Accounting Standards Board
issued SFAS No. 137 to defer the effective date of SFAS No. 133,  Accounting for
Derivative  Instruments  and  Hedging  Activities.  SFAS  No.  133  now  becomes
effective  for Baldor in the first quarter of 2001.  The Statement  will require
companies to recognize all  derivatives on the balance sheet at fair value.  The
Company's use of derivatives is minimal,  and management  continues to study the
effects of adopting the standard and  currently  believes the adoption  will not
have a material effect.

Reclassification: The Company has reclassified the presentation of certain prior
year information to be consistent with the presentation in the current year.

<PAGE>
Page 23
<TABLE>
<CAPTION>

NOTE B
LONG-TERM OBLIGATIONS

Long-term obligations consist of the following:
(In thousands)                                                     1999           1998
                                                                   ----           ----
<S>                                                            <C>            <C>
Industrial Development Bonds:
    due through 2004 at 5.50% fixed rate                       $  3,395       $  3,970
    due through 2004 at 3.62% variable rate                       2,300          2,300
    due through 2004 at 6.0% fixed rate (paid off in 1999)                          15
    due through 2009 at 7.875% fixed rate (paid off in 1999)                     6,495
    due through 2010 at 3.52% variable rate                       3,440          3,440
    due through 2010 at 3.55% variable rate                       2,025          2,025
Notes payable to banks:
    due January 17, 2000 at 7.2% variable rate                    6,000
    due March 1, 2001 at 6.37% variable rate                     14,750         14,750
    due October 23, 2001 at 5.07% fixed rate                     25,000         25,000
                                                                 ------         ------
                                                                 56,910         57,995
Less current maturities                                             605            980
                                                                    ---            ---
                                                               $ 56,305       $ 57,015
                                                               ========       ========
</TABLE>

Certain  long-term  obligations  are  collateralized  by  property,   plant  and
equipment with a net book value of $5,122,000 at January 1, 2000.

Maturities of long-term  obligations during each of the five fiscal years ending
2004 are: 2000 -- $605,000;  2001 --  $46,390,000;  2002 -- $1,760,000;  2003 --
$1,880,000;  2004 and thereafter --  $6,275,000.  Industrial  Development  Bonds
include  capital lease  obligations of $2,025,000 at January 1, 2000.  Aggregate
future  minimum  capital  lease  payments  at  January  1,  2000 are  $3,418,000
including interest of $1,393,000.


Certain  long-term   obligations  require  that  the  Company  maintain  certain
financial  ratios.  These  financial  ratios were all met for 1999 and 1998.  At
January  1,  2000,  the  Company  had  outstanding  letters  of credit  totaling
$8,625,000.

Interest paid was  $3,117,000 in 1999,  $2,233,000  in 1998,  and  $3,577,000 in
1997.

The Company had lines of credit aggregating  $16,500,000 available at January 1,
2000,  with  $6,000,000  borrowed  under these  lines at January 1, 2000.  These
arrangements do not have termination dates but are renewed annually. Interest on
these lines of credit is at rates mutually agreed upon at the time of borrowing.

NOTE C MARKETABLE SECURITIES

Baldor currently invests in only high-quality,  short-term  investments which it
classifies  as  available-for-sale.   Differences  between  amortized  cost  and
estimated  fair value at January 1, 2000,  and January 2, 1999 are not  material
and are included in Other Accumulated  Comprehensive Income. Because investments
are predominantly short-term and are generally allowed to mature, realized gains
and losses for both years have been minimal.

The following  table presents the estimated fair value  breakdown of investments
by category:

(In thousands)                                1999              1998
                                              ----              ----
Municipal debt securities                 $ 18,128          $ 19,759
U.S. corporate debt securities              11,183            12,909
U.S. Treasury & agency securities            8,441             1,500
Other debt securities                        1,219             6,010
                                             -----             -----
                                            38,971            40,178
Less cash equivalents                        8,166            26,182
                                             -----            ------
                                          $ 30,805          $ 13,996
                                          ========          ========

The estimated fair value of marketable debt and equity  securities at January 1,
2000, was $12,088,000  due in one year or less,  $10,388,000 due in one to three
years, and $16,495,000 due after three years.  Because of the short-term  nature
of the investments, expected maturities and contractual maturities are generally
the same.

NOTE D INCOME TAXES
The Company  made income tax payments of  $22,743,000  in 1999,  $23,694,000  in
1998, and $24,101,000 in 1997. Income tax expense consists of the following:

(In thousands)                  1999             1998              1997
                                ----             ----              ----
Current:   Federal           $20,661          $20,820           $22,879
           State               2,690            2,646             2,949
           Foreign               553              908               573
Deferred:                      2,896            2,968            (1,131)
                               -----            -----            ------
                             $26,800          $27,342           $25,270
                             =======          =======           =======

Deferred income taxes reflect the net effects of temporary  differences  between
the carrying amounts of assets and liabilities for financial  reporting purposes
and the amounts used for income tax purposes.  The sources of these  differences
relate primarily to depreciation, certain liabilities, and bad debt expense.

The following table  reconciles the difference  between the Company's  effective
income tax rate and the federal corporate statutory rate:

                                       1999              1998             1997
Statutory federal income tax rate      35.0%             35.0%            35.0%
State taxes, net of federal benefit     2.6               2.8              2.9
Other                                   0.4               0.2              0.6
                                        ---               ---              ---
Effective income tax rate              38.0%             38.0%            38.5%
                                       ====              ====             ====

The principal components of deferred tax assets (liabilities) follow:

                                                     1999             1998
Property, plant, equipment and intangibles       $(17,666)        $(14,163)
Accrued liabilities                                 8,607            8,130
Employee compensation and benefits                  2,164            1,971
                                                    -----            -----
Total deferred tax assets (liabilities)          $ (6,895)        $ (4,062)
                                                 ========         ========

<PAGE>
Page 24
Notes to Consolidated Financial Statements (continued)

NOTE E FINANCIAL  DERIVATIVES
Hedging of Copper and Aluminum  Requirements
The  Company  purchases   significant  amounts  of  copper  and  aluminum,   key
ingredients in its motor production, under short-term firm price contracts which
are  renegotiated  annually.  In order to hedge  itself  from  exposure to price
fluctuations  on these two metals,  the Company  utilizes  options and swaps for
quantities  of metal  estimated to be used in our product in the future.  Option
costs are carried in Other Current Assets,  net of realized gains deferred,  and
are  amortized  to Cost of Goods  Sold over the  period  that the metal is used.
Gains and losses on swaps are recorded in Cost of Goods Sold when the  contracts
are settled.

The off-balance  sheet fair values and net unamortized costs with respect to the
Company's  metal  hedging  programs  were not  material at January 1, 2000,  and
January 2, 1999.

NOTE F SHAREHOLDERS' EQUITY

In 1997,  the Company's  Board of Directors  authorized a  four-for-three  stock
split  effected  in the  form of a 33%  stock  dividend.  This  resulted  in the
issuance  of  8,999,078  additional  shares of common  stock.  All per share and
weighted average share amounts have been restated to reflect this stock split.

The  Company  maintains  a  shareholder  rights  plan  intended  to  encourage a
potential  acquirer  to  negotiate  directly  with the Board of  Directors.  The
purpose  of  the  plan  is  to  ensure  the  best  possible  treatment  for  all
shareholders.  Under the terms of the plan,  one Common Stock  Purchase Right (a
Right)  is  associated  with  each  outstanding  share of  common  stock.  If an
acquiring  person  acquires  20%  or  more  of  the  Baldor  common  stock  then
outstanding, the Rights become exercisable and would cause substantial dilution.
Effectively,  each such Right would entitle its holder (excluding the 20% owner)
to purchase  shares of Baldor  common stock for half of the then current  market
price,  subject to certain  restrictions  under the plan. A Rights holder is not
entitled to any benefits of the Right until it is exercised.  The Rights,  which
expire in May 2008,  may be redeemed by the Company at any time prior to someone
acquiring 20% or more of Baldor's outstanding common stock and in certain events
thereafter.

NOTE G COMMITMENTS AND CONTINGENCIES

Operating Lease Commitments
The Company leases  certain  computers,  buildings,  and other  equipment  under
operating  lease  agreements.  Related rental expense was $4,800,000 in 1999 and
1998,  and  $5,500,000 in 1997.  Future  minimum  payments for operating  leases
having  noncancelable lease terms in excess of one year are: 2000 -- $2,417,000;
2001 -- $2,054,000;  2002 -- $1,980,000;  2003 -- $1,864,000;  2004 -- $267,000;
and decline substantially thereafter.

Legal Proceedings
The  Company  is subject to a number of legal  actions  arising in the  ordinary
course of business.  In management's  opinion,  the ultimate resolution of these
actions will not materially affect the Company's  financial  position or results
of operations.

NOTE H FOREIGN  OPERATIONS

The Company's  foreign  operations  include both export sales and the results of
its foreign affiliates in Europe, Australia,  Singapore and Mexico. Consolidated
sales,  earnings  before income taxes,  and  identifiable  assets consist of the
following:

(In thousands)                          1999            1998           1997
Net Sales:
  United States Companies
         Domestic customers         $497,039        $499,390       $473,702
         Export customers             36,981          41,855         38,762
                                      ------          ------         ------
                                     534,020         541,245        512,464
  Foreign Affiliates                  43,299          48,161         45,476
                                      ------          ------         ------
                                    $577,319        $589,406       $557,940
                                    ========        ========       ========
Earnings Before Income Taxes:
         United States Companies    $ 68,772        $ 69,164       $ 64,710
         Foreign Affiliates            1,751           2,788            925
                                       -----           -----            ---
                                    $ 70,523        $ 71,952       $ 65,635
                                    ========        ========       ========
Assets:
         United States Companies    $394,610        $378,468       $322,245
         Foreign Affiliates           29,331          33,458         33,644
                                      ------          ------         ------
                                    $423,941        $411,926       $355,889
                                    ========        ========       ========

Assets and  liabilities of foreign  affiliates are translated into U. S. dollars
at year-end exchange rates.  Income statement items are generally  translated at
average exchange rates prevailing during the period. Translation adjustments are
recorded in the Accumulated Other Comprehensive Income in Shareholders' Equity.

NOTE I STOCK PLANS

The Company  accounts for stock option grants in accordance with APB Opinion No.
25,  Accounting  for Stock  Issued to  Employees,  and related  interpretations.
Grants can and have included:  (1) incentive stock options to purchase shares at
prices not less than the market value at grant date,  and/or (2) non-  qualified
stock options to purchase shares of restricted  stock equal to and less than the
stock's  market value at grant date.  Grants expire 10 years from the grant date
(except  for grants  made from the 1990 Plan  which  expire six years from grant
date).  The  1981,  1987,  and  1989  Plans  have  expired  except  for  options
outstanding. A summary of the Company's stock plans follows.

<PAGE>
Page 25

1990 Plan -- Only  non-qualified  options can be granted  and  options  vest and
become 50% exercisable at the end of one year and 100% exercisable at the end of
two  years.  There  are no  charges  to  income.

1981,  1987 and 1994 Plans --  Incentive  stock  options  vest and become  fully
exercisable with continued employment of six months for officers and three years
for  non-officers.  Restrictions on  non-qualified  stock options normally lapse
after a period of five years or earlier  under  certain  circumstances.  Related
compensation  expense for the non-qualified  stock options is amortized over the
restriction period.

1996 Plan -- Each non-employee director is granted an annual grant consisting of
non-qualified  stock  options to purchase:  (1) 3,240 shares at a price equal to
the market value at grant date,  and (2) 2,160 shares at a price equal to 50% of
the market value at grant date.  These options become  exercisable in five equal
installments  beginning on the grant's first anniversary.  Related  compensation
expense  on  the  options  granted  at 50%  of  market  is  amortized  over  the
restriction period.
<TABLE>
<CAPTION>

Plan     Type                 Administrator             Recipients                Status
----     ----                 -------------             ----------                ------
<S>      <C>                  <C>                       <C>                       <C>
1981     Non-compensatory     Board of Directors        Employees                 Expired
1987     Compensatory         Stock Option Committee    Employees                 Expired
1989     Compensatory         Executive Committee       Non-employee directors    Expired
1990     Non-compensatory     Stock Option Committee    District Managers         Active
1994     Compensatory         Stock Option Committee    Employees                 Active
1996     Compensatory         Executive Committee       Non-employee directors    Active
</TABLE>

The alternative fair value accounting  provided for under Statement of Financial
Accounting  Standards  No.  123  (SFAS  No.  123),  Accounting  for  Stock-Based
Compensation,  requires the use of an option valuation model. The  Black-Scholes
option  valuation  model was developed  for use in estimating  the fair value of
traded  options and  requires  input of highly  subjective  assumptions.  Traded
options have no vesting  restrictions and are fully transferable.  The Company's
stock options have characteristics  significantly different from those of traded
options  and the  assumptions  can  materially  affect the fair value  estimate.
Therefore,  in  management's  opinion,  the existing  models do not  necessarily
provide a reliable single measure of the fair value of its stock options.

For  purposes  of pro forma  disclosures,  net  income  and  earnings  per share
required by SFAS No. 123 have been  determined  as if the Company had  accounted
for its stock options under SFAS No. 123 using the Black-Scholes model. The fair
value for these options was estimated as of the grant date.  The estimated  fair
value of the option is amortized to expense over the options'  vesting  periods.
The  initial  impact on pro forma net income and net income per share may not be
representative  of the  compensation  expense in future years when the effect of
the  amortization  of  multiple  awards  would  be  reflected  in the pro  forma
disclosure.  A summary of the Company's  weighted average  variables,  pro forma
information,  and stock option  activity for fiscal years 1999,  1998,  and 1997
follows.
<TABLE>
<CAPTION>


                                                        1999                            1998                           1997
                                     -----------------------       -------------------------        -----------------------
Weighted Average Variables
--------------------------
<S>                                  <C>          <C>              <C>            <C>               <C>          <C>
Volatility                                              2.3%                           16.6%                          22.4%
Risk-free interest rates                                5.1%                            5.7%                           6.4%
Dividend yields                                         2.1%                            1.7%                           1.7%
Expected option life                               6.9 years                       7.0 years                      7.0 years
Remaining contractual life                         6.1 years                       6.3 years                      6.4 years
Fair value per share price granted during year
     At market price                                  $ 3.03                          $ 6.24                        $  6.21
     At less than market price                        $ 8.54                          $ 9.31                         $10.26

Pro Forma Information
---------------------
Pro forma net income (in thousands)                  $41,728                         $41,602                        $37,537
Pro forma earnings per share                          $ 1.14                          $ 1.10                          $1.02

Stock Option Activity                               Weighted                        Weighted                      Weighted
                                                     Average                         Average                        Average
                                        Shares   Price/Share           Shares    Price/Share          Shares    Price/Share
                                     -----------------------       -------------------------        -----------------------

Total options outstanding
     Beginning Balance               2,680,603       $ 13.74        2,766,005        $ 11.44       2,804,114        $  9.60
         Granted                       414,250         17.27          497,400          21.67         446,618          17.80
         Exercised                    (313,373)         8.12         (459,768)          7.57        (426,641)          5.56
         Canceled                      (70,663)        20.25         (123,034)         17.12         (58,086)         14.92
                                       -------                       --------                        -------
     Ending Balance                  2,710,817         14.85        2,680,603          13.74       2,766,005          11.44
                                     =========                      =========                      =========
Shares authorized for grant         11,991,600                     11,991,600                      9,991,600
Shares exercisable                   2,029,852                      1,704,866                      1,955,856
Shares reserved for future grants    2,403,253                      2,745,305                      1,133,103

</TABLE>
<PAGE>
Page 26

Notes to Consolidated Financial Statements (continued)

NOTE J EARNINGS PER SHARE
The  Company's  presentation  of  financial  results now  includes  both diluted
earnings per share and basic earnings per share in accordance with SFAS No. 128,
Earnings Per Share.

Basic earnings per share excludes any dilutive effects of options, warrants, and
convertible  securities.  Diluted  earnings per share  includes all common stock
equivalents. The table below details earnings per share for the years indicated:
<TABLE>
<CAPTION>

                                                            1999              1998             1997
                                                            ----              ----             ----
<S>                                                     <C>               <C>              <C>
Numerator Reconciliation:
  The numerator is the same for
diluted and basic EPS:
         Net earnings (in thousands)                    $ 43,723          $ 44,610         $ 40,365
                                                        ========          ========         ========
Denominator Reconciliation:
  The denominator for basic earnings per share:
         Weighted average shares                      36,077,484        36,911,175        35,691,572
         Effect of dilutive securities:
              Stock options                              709,865         1,155,839         1,371,052
                                                         -------         ---------         ---------
  The denominator for diluted
earnings per share:
         Adjusted weighted
         average shares                               36,787,349        38,067,014        37,062,624
                                                      ==========        ==========        ==========
Basic Earnings Per Share                                   $1.21             $1.21             $1.13
Diluted Earnings Per Share                                 $1.19             $1.17             $1.09
</TABLE>

NOTE K ACQUISITIONS

In 1997, the Company acquired Optimised Controls Ltd. for cash and shares of the
Company's  common stock.  The  acquisition has been accounted for as a purchase.
Goodwill  associated  with the acquisition is being amortized on a straight-line
basis over 25 years.

On March 5, 1998,  the Company  issued 951,000 shares of common stock for all of
the outstanding stock of Northern  Magnetics,  Inc., a motor  manufacturer.  The
transaction  was accounted for as a pooling of  interests.  Northern  Magnetics'
results of operations in prior years was not material to the Company's financial
statements. As such, prior year financial statements have not been restated.
<PAGE>
Page 27

Report of Ernst & Young LLP, Independent Auditors

Shareholders and Board of Directors, Baldor Electric Company and Affiliates

     We have  audited the  accompanying  consolidated  balance  sheets of Baldor
Electric  Company and  affiliates as of January 1, 2000 and January 2, 1999, and
the related  consolidated  statements of earnings,  cash flows and shareholders'
equity for each of the three years in the period  ended  January 1, 2000.  These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

     We conducted our audits in accordance  with  auditing  standards  generally
accepted in the United States.  Those standards require that we plan and perform
the audit to obtain reasonable  assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.  An
audit also includes  assessing the accounting  principles  used and  significant
estimates  made by  management,  as well as  evaluating  the  overall  financial
statement  presentation.  We believe that our audits provide a reasonable  basis
for our opinion.

     In our opinion,  the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Baldor Electric
Company  and  affiliates  at  January  1,  2000 and  January  2,  1999,  and the
consolidated  results of their  operations  and their cash flows for each of the
three years in the period ended January 1, 2000, in conformity  with  accounting
principles generally accepted in the United States.


/s/ Ernst & Young LLP
---------------------
Ernst & Young LLP
Little Rock, Arkansas
February 4, 2000




Report of Management on Responsibility for Financial Reporting

     Baldor  management is responsible  for the integrity and objectivity of the
financial   information  contained  in  this  annual  report.  The  accompanying
financial  statements have been prepared in conformity  with generally  accepted
accounting   principles,   applying  informed  judgements  and  estimates  where
appropriate.

     Baldor  maintains a system of internal  accounting  controls  that  provide
reasonable  assurance that assets are safeguarded and  transactions are executed
in accordance with  management's  authorization  and recorded properly to permit
the preparation of financial  statements in accordance  with generally  accepted
accounting principles.

     The Audit Committee of the Board of Directors is composed solely of outside
directors  and is  responsible  for  recommending  to the Board the  independent
accounting  firm to be retained for the coming year. The Audit  Committee  meets
regularly with the independent auditors, with the Director of Audit Services, as
well as  with  Baldor  management,  to  review  accounting,  auditing,  internal
accounting controls and financial reporting matters.  The independent  auditors,
Ernst & Young LLP, and the Director of Audit Services, have direct access to the
Audit  Committee  without the presence of  management  to discuss the results of
their audits.

     Ernst & Young LLP, independent  certified public accountants,  have audited
Baldor's  financial  statements.  Management has made available to Ernst & Young
LLP all of the  Company's  financial  records and related  data,  as well as the
minutes of shareholders' and directors' meetings.

/s/ R. S. Boreham, Jr.         /s/ R. L. Qualls        /s/ John McFarland
----------------------         ----------------        ------------------
R. S. BOREHAM, JR.             R. L. QUALLS            JOHN McFARLAND
Chairman of the Board          Vice Chairman           President and
                                                       Chief Executive Officer

/s/ Lloyd G. Davis             /s/ Ronald E. Tucker
------------------             --------------------
LLOYD G. DAVIS                 RONALD E. TUCKER
Executive Vice President,      Chief Financial Officer,
Chief Operating Officer,       and Treasurer
and Secretary

<PAGE>
Page 28

Board of Directors

Roland S. Boreham, Jr., Chairman
Chairman of the Board since 1981.
Former Chief Executive Officer.
Officer since 1961.
Director since 1961.
Chairman - Executive Committee.
Member - Nominating Committee.

R. L. Qualls, Vice Chairman
Vice Chairman of the Board since 1996.
Former Chief Executive Officer.
Officer since 1986.
Director since 1987.
Member - Executive Committee.
Chairman - Nominating Committee.

John A. McFarland, President
and Chief Executive Officer
Officer since 1990.
Director since 1996.
Member - Executive Committee.
Member - Nominating Committee.

Jefferson W. Asher, Jr.
Independent management consultant.
Director since 1973.
Chairman - Audit Committee.

Fred C. Ballman
Former Chairman.
Former Chief Executive Officer.
Director from 1944 to 1982 and since 1992.

O. A. Baumann
The Company's manufacturer's sales
  representative in St. Louis, Missouri,
  from 1947 to 1987.
Director since 1961.

Richard E. Jaudes
Partner, Thompson Coburn LLP,
         Attorneys at Law
Director since 1999.
Member - Stock Option Committee.

Robert J. Messey
Vice President, Financial Services,
    Sverdrup  Corporation, a wholly
    owned subsidiary of Jacobs
    Engineering Group (NYSE).
Director since 1993.
Chairman - Stock Option Committee.
Member - Audit Committee.

Robert L. Proost
Corporate Vice President,
         Chief Financial Officer, and
         Director of Administration of
         A.G. Edwards & Sons, Inc.
Director since 1988.
Member - Audit Committee.
Member - Stock Option Committee.



Officers
Randy L. Colip
Vice President - Sales
Officer since 1997.

Charles H. Cramer
Vice President - Personnel
Officer since 1984.

Lloyd G. Davis
Executive Vice President,
Chief Operating Officer and Secretary
Officer since 1992.

Gene J. Hagedorn
Vice President - Materials
Officer since 1994.

Eddie L. Holderfield, Sr.
Vice President - Fort Smith
Motor Manufacturing
Officer since 1999.

James R. Kimzey
Executive Vice President - Research
and Reliability
Officer since 1984.

John L. Peeples, III
Vice President - International
Officer since 1998.

Jerry D. Peerbolte
Vice President - Marketing
Officer since 1990.

Ronald E. Tucker
Chief Financial Officer
and Treasurer
Officer since 1997.

Randal G. Waltman
Vice President - Motor Engineering
and Operations
Officer since 1997.

<PAGE>
Page 29

Dividend policy
Baldor's dividend policy is to periodically  increase  dividends as earnings and
financial strength warrant,  but also to reinvest a major portion of earnings to
help finance growth  opportunities.  The objective is for shareholders to obtain
dividend  increases  over time  while  also  participating  in the growth of the
Company.

Dividends paid
Baldor's  dividend  rate  increased  twice in 1999.  There  have been 7 dividend
increases in the last five years, and 14 increases in the last ten years.

                           1999              1998              1997
                           ----              ----              ----
1st quarter               $0.11             $0.10             $0.08
2nd quarter                0.11              0.10              0.09
3rd quarter                0.11              0.10              0.09
4th quarter                0.12              0.10              0.10
                           ----              ----              ----
Year                      $0.45             $0.40             $0.36
                          =====             =====             =====

Common stock price range
                             1999                               1998
                     -----------------------            ---------------------
                     HIGH             LOW               HIGH           LOW
                     ----             ---               ----           ---
1st quarter          20.5             18.875            27.1875        21.0625
2nd quarter          21.6875          18.25             26.8750        23.0000
3rd quarter          20.25            17.25             26.0000        19.6250
4th quarter          20.5             17.00             22.0000        19.0625

Shareholders

At January 1, 2000, there were 5,842  shareholders of record including  employee
shareholders through participation in the benefit plans.



Independent auditors

Ernst & Young LLP
425 West Capitol - Suite 3600
Little Rock, Arkansas 72201

General counsel

Thompson Coburn LLP
1 Mercantile Center
St. Louis, Missouri  63101

Ticker

The  common  stock of  Baldor  Electric  Company  trades  on the New York  Stock
Exchange (NYSE) with the ticker symbol BEZ.

Form 10-K report

Baldor's Form 10-K report is filed with the Securities  and Exchange  Commission
and the NYSE. Shareholders may obtain a copy of the Form 10-K report,  including
the financial statements and financial statement  schedules,  by written request
(without charge) from the Company's Investor Relations Department at the address
under shareholder inquiries.


Shareholder inquiries

To  request  additional  copies of the Annual  Report,  or other  materials  and
information about Baldor Electric Company, please contact us at:

Baldor Electric Company
Attn:  Investor Relations
P. O. Box 2400
Fort Smith, Arkansas 72902
Phone:  (501) 646-4711
Fax:  (501) 648-5752
Internet:  www.baldor.com

Transfer agent and registrar
Continental Stock Transfer & Trust Company
2 Broadway
New York, New York  10004
(800) 509-5586

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