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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

Commission file number 1-5881

BNS Holding, Inc.

(Exact name of Registrant as specified in its charter)

25 Enterprise Center, Suite 103, Middletown, Rhode Island 02842

(Address of principal executive offices and zip code)

Registrant’s telephone number, including area code: 401-848-6300

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

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

CLASS B COMMON STOCK—PAR VALUE $.01

(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 (§ 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.    ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).     Yes  ¨    No  x.

The aggregate market value (as calculated under the rules) of the voting common stock held by non-affiliates of the Registrant was approximately $18,134,664 as of June 30, 2004.

There were 3,019,119 shares of Class A Common Stock and 6,325 shares of Class B Common Stock, each having a par value of $.01 per share, outstanding as of February 28, 2005.

DOCUMENTS INCORPORATED BY REFERENCE

None.

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BNS Holding, Inc.

INDEX

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PART I

ITEM 1— BUSINESS

THE BUSINESS OF THE COMPANY

Effective December 14, 2004, BNS Co. (“BNS Co.”) completed a reorganization (the “Holding Company Reorganization”) in which BNS Holding, Inc. (“BNS Holding”) became the holding company and sole stockholder of BNS Co., which was prior to December 14, 2004 the publicly traded company (and prior to April 2001 named Brown & Sharpe Manufacturing Company). The Holding Company Reorganization was effected by a merger under Section 251(g) of the General Corporation Law of the State of Delaware, which permits the formation of a holding company structure without a vote of the stockholders of the publicly-held company. By virtue of the Holding Company Reorganization, BNS Co. became a direct, wholly-owned subsidiary of BNS Holding. Except for some technical changes, the provisions of the certificate of incorporation of BNS Holding after the effective time of the Holding Company Reorganization and BNS Co. prior to the effective time of the Holding Company Reorganization are identical. The authorized capital stock of BNS Holding after the effective time of the Holding Company Reorganization and the designations, rights, powers and preferences of such capital stock, and its qualifications, limitations and restrictions, are identical to those of BNS Co. prior to the effective time of the Holding Company Reorganization. Stockholders received securities of the same class showing the same proportional interests in BNS Holding, having the same designations, rights, powers and preferences, and having the same qualifications, limitations and restrictions, as those held in BNS Co. BNS Holding is the successor registrant of BNS Co. for the purposes of filings with the Securities and Exchange Commission.

Unless the context otherwise requires, references to the “Company”, “we” or “our” in this Annual Report on Form 10-K refer to BNS Holding. In addition, references to the “1999 Equity Incentive Plan or “1999 EIP” refer to the BNS Co. 1999 Equity Incentive Plan which was adopted by BNS Holding on December 14, 2004 in connection with the Holding Company Reorganization.

General

BNS Holding, which is headquartered in Middletown, Rhode Island, was formed in December 2004 for the purpose of the Holding Company Reorganization and did not have active operations prior to December 14, 2004. BNS Co., a subsidiary of BNS Holding, has been in business since 1833, although the corporate entity itself was established much later. Prior to the sale by BNS Co. of its Metrology Business in 2001, the sale of BNS Co.’s interest in its development stage measuring software subsidiary, Xygent Inc., in 2002, the sale of BNS Co.’s North Kingstown, Rhode Island property which consisted of an industrial and office building along with the adjoining acreage (a total of approximately 169 acres, all in Rhode Island) (the “Rhode Island Property” or “North Kingstown Property”) in 2003, and the sale of BNS Co.’s United Kingdom subsidiary (the “U.K. Subsidiary”) on June 16, 2004, BNS Co. was previously engaged in the Metrology Business and the design, manufacture and sale of precision measuring tools and instruments and manual and computer controlled measuring machines.

The Company at present has no trade or business operations but is searching for a suitable business to acquire. As previously disclosed in its June 11, 2004 press release, after completion of the sale of the U.K. Subsidiary, BNS Co., and then subsequently the Company, began a search for a suitable acquisition candidate. As of the date of this Annual Report on Form 10-K, no candidate has been identified.

Sale of Metrology Business, Xygent, North Kingstown Property and U.K. Subsidiary

On June 16, 2004, pursuant to a Purchase and Sale Agreement dated as of February 5, 2004 between BNS Co., its Cayman Island subsidiary BNS International, Ltd., and Bath Road Holdings, Limited, and after

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stockholder approval on June 11, 2004, BNS Co. sold its real estate holdings in the United Kingdom for 5.5 million British Pounds ($9.77 million as of the date of the closing on June 16, 2004), which constituted the sale of substantially all of BNS Co.’s remaining assets. The purchase price had been determined by arms-length negotiations between representatives of BNS Co. and representatives of Bath Road Holdings, Limited, the purchaser. The transaction was in the form of the sale of the stock of the BNS Co.’s U.K. Subsidiary (BNS Company (Property Holdings) Ltd.) that held title to the property and the sale of BNS Co.’s note receivable from the U.K. Subsidiary.

BNS Co. reported a gain of $9.31 million net of expenses on the sale. Net proceeds received amounted to $9.66 million out of which an escrow account, as part of the Purchase and Sale Agreement, was established. The escrow account balance at December 31, 2004 of .63 million British Pounds ($1.21 million as of December 31, 2004) is held jointly by BNS Co.’s and purchaser’s respective U.K. solicitors for any tax that the U.K. government may claim against the former U.K. Subsidiary for the then U.K. operation and will be held in escrow until such time as any inquiry from the U.K. government as to taxes is closed. This escrow account is included in restricted cash on the consolidated balance sheet. Should any such tax liability arise, the amount of the gain on the sale would be reduced. On July 30, 2004, BNS Co. received a post-closing adjustment in the amount of .031 million British Pounds ($.056 million at the time of the adjustment) representing the net working capital of the U.K. Subsidiary at the time of closing. This amount has been included in the gain presented above.

On March 14, 2005, the Company was informed by the U.K. Inland Revenue Service that the Company is not liable for any corporation tax on capital gains resulting from the 2004 sale of the U.K. Subsidiary. The Company was also informed that the condition giving rise to its contingent liability relating to the sale of the Metrology Business in 2001 has been resolved. Accordingly, a $1.3 million reserve for this contingency, classified as a long term liability on the Company’s Consolidated Balance Sheets, has been reversed and recorded as a gain included in Discontinued Operations for the year ending December 31, 2004.

On August 26, 2003, pursuant to a Purchase and Sale Agreement, dated as of April 28, 2003, as amended, between BNS Co. and Wasserman RE Ventures LLC (“Wasserman”), BNS Co. sold the North Kingstown Property and reported a gain of $15.25 million net of expenses on the sale. BNS Co. received proceeds of $18.68 million net of expenses. Additionally, BNS Co. established an environmental escrow account in the amount of $.331 million to cover certain environmental remediation costs. This escrow account, which had a balance of $.269 million at December 31, 2004, is presented as restricted cash on the consolidated balance sheet except for the interest earned which is presented as part of the unrestricted cash. The utilization of the funds in the escrow have been reported as a component of gain from sale of discontinued operations. The purchase price for the North Kingstown Property was determined by arms-length negotiation between representatives of BNS Co. and representatives of Wasserman. In connection with the sale of the North Kingstown Property, BNS Co. relocated its headquarters to its present business location in Middletown, Rhode Island.

On August 16, 2002, BNS Co. entered into a Securities Purchase Agreement with a subsidiary of Hexagon AB of Stockholm, Sweden (“Hexagon”) for the purchase BNS Co.’s 77% interest in Xygent Inc. (“Xygent”), a development stage measuring software business unit. Hexagon paid $2.25 million in cash on August 20, 2002 for BNS Co.’s interest, and was obligated to pay BNS Co. a deferred purchase price of up to $.75 million subject to possible adjustment relating to an Xygent equity value calculation as of August 16, 2002, as specified in the Securities Purchase Agreement. Hexagon subsequently disputed the equity value calculation. The dispute was submitted to arbitration, as required by the Securities Purchase Agreement, and the arbitration determined a deferred purchase price payment of $.604 million, which was paid on January 22, 2003.

Strategic Alternatives

As previously disclosed, the sale of the North Kingstown Property and the sale of the U.K. Subsidiary are part of BNS Co.’s plan to sell its remaining assets and seek other strategic alternatives. Such plan may now involve the sale of the Company through a merger or other change in control transaction, or the acquisition of an

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operating business with existing or prospective taxable earnings that can be offset by use of the Company’s net operating loss carry-forwards (“NOL’s”). In the past BNS Co. has also considered a liquidation, either through a dissolution, formation of a liquidating trust and liquidation proceedings in the Chancery Court in Delaware, or in a Chapter 11 federal bankruptcy reorganization proceeding, both of which would involve provisions for payments to creditors (including contingent claims) and contemplated distributions to stockholders. However, the Company’s current focus is on the acquisition of an operating business. As of the date of this Annual Report on Form 10-K, no candidate has been identified, and no assurance can be given that the Company will find a suitable candidate and if it does, that it will be able to utilize its existing NOL’s.

Employees

At February 28, 2005 the Company had one full time employee located at its corporate headquarters in Middletown, Rhode Island, plus its President, CEO, and CFO, who is a consultant to the Company. There was one additional part-time employee at December 31, 2004, who left the Company in January 2005. The Company also relies on various outside service providers for legal, accounting and tax support.

Availability of Filings with the SEC

The Company’s public filings with the Securities and Exchange Commission (“SEC”), including its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all exhibits and amendments to these reports, are available on the SEC’s web site, which is www.sec.gov. Copies of these filings may also be obtained free of charge by contacting the Corporate Secretary at BNS Holding, Inc., 25 Enterprise Center, Suite 103, Middletown, Rhode Island 02842, or by telephone at (401) 848-6400.

ITEM 2— PROPERTIES

The following table sets forth certain information concerning the Company’s facility:

The Company’s Middletown, Rhode Island offices are leased for a term of three years commencing on July 1, 2003.

ITEM 3— LEGAL PROCEEDINGS

The Company’s BNS Co. subsidiary is a defendant in a variety of legal claims that arise in the normal course of business.

Environmental Matters

Subsequent to the sale of Xygent to Hexagon in 2002, the nature of each of BNS Co. and, subsequent to its incorporation in December 2004, BNS Holding’s operations have not been affected by environmental laws, rules and regulations relating to these businesses. However, because BNS Co. and its subsidiaries and predecessors, prior to the sale of BNS Co.’s Metrology Business to Hexagon on April 27, 2001 (and prior to sales of other divisions made in prior years) conducted manufacturing operations in locations at which, or adjacent to which, other industrial operations were conducted from time to time by BNS Co., BNS Co. is subject to environmental claims. As with any such operations that involved the use, generation, and management of hazardous materials, it is possible that prior 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 these areas is developing rapidly, and because environmental laws are subject to amendment

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and widely varying degrees of enforcement, the BNS Co. subsidiary may be subject to, and the Company cannot predict with any certainty, the nature and amount of environmental claims related to these operations or locations, including the Rhode Island Property owned by the BNS Co. subsidiary, which property was sold on August 26, 2003 (but with certain environmental liabilities retained) that may arise in the future.

A Phase II environmental investigation on BNS Co.’s former Rhode Island Property, completed in June 2002, indicated certain environmental problems on the property. The results of the study showed that certain contaminants in the soil under the property and minor groundwater issues exceeded environmental standards set by the Rhode Island Department of Environmental Management (“RIDEM”). After extensive testing, the BNS Co. subsidiary submitted a Remedial Action Work Plan (“RAWP”) to RIDEM, and on November 7, 2002, RIDEM issued a letter approving the RAWP. In April of 2003, BNS Co. awarded a contract for the remediation work and engaged an environmental engineering firm to supervise the remediation work and perform ongoing monitoring of the affected areas. The remediation work was substantially complete as of December 2003, and in connection with the August 26, 2003 sale of the Rhode Island Property, BNS Co. established an escrow account in the amount of $.331 million to cover any additional remediation costs that may arise. At December 31, 2004, the balance of the escrow account was $.269 million. The BNS Co. subsidiary has obtained insurance against additional known and unknown environmental liabilities at the Rhode Island Property. However, there is no assurance that BNS Co. will not incur additional costs for remediation above the escrowed amount and insurance limits, and that ongoing monitoring of contaminants will not indicate further environmental problems.

In addition, the BNS Co. subsidiary has obtained contaminated land insurance coverage to insure against unknown environmental issues relating to the former U.K. property, which was owned by the U.K. Subsidiary. In addition, BNS Co. received a report dated October 2000, which was updated in July 2003, from an independent environmental consulting firm indicating no evidence of environmental issues relating to that property. However, there is no assurance that such issues will not be identified in the future, whether such issues are identified through the actions of the land fill operator operating on the property or the buyer of BNS Co.’s former U.K. Subsidiary or as the result of other factors, as the buyer continues to operate the property as a land fill. With the sale by BNS Co. of the U.K. Subsidiary on June 16, 2004, there is no assurance that there will be no retained liabilities relating to the U.K. Property, although BNS Co. has made no environmental representations or indemnifications under the applicable Purchase and Sale Agreement for the U.K. Subsidiary.

Product Liability and Other Matters

The Company’s BNS Co. subsidiary receives claims from time to time for toxic tort injuries related to the alleged use of asbestos material in pumps sold by its former pump division, and other product liability claims relating to the use of machine tools sold by divisions of BNS Co. which were sold many years ago. Most of these suits are toxic tort claims resulting primarily from the use of small internal seals that allegedly contained asbestos and were used in small fluid pumps manufactured by BNS Co.’s former pump division, which was sold in 1992. The Company expects that its BNS Co. subsidiary will continue to be subject to additional toxic tort claims in the future.

The Company is unable to identify the number and location of fluid pumps manufactured by BNS Co. and, therefore, is unable to estimate the aggregate number of unasserted claims which might be filed in the future, which is necessary in order to reliably estimate any financial exposure. This product line was introduced in the late 1800’s. The materials alleged to contain asbestos were used for an undetermined period of time ending in the late 1960’s. The claims relate to exposure to this asbestos material. BNS Co. (then named Brown & Sharpe Manufacturing Company) sold its pump division in 1992 but remains subject to claims related to products manufactured prior to that date.

Since 1994 the Company’s BNS Co. subsidiary has been named as a defendant in a total of 538 known claims (as of February 28, 2005) relating to these pumps. In many cases these claims involve more than 100 other defendants. Fifty-four of those claims were filed prior to December 31, 2001. In 2002 BNS Co. was named

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in 98 additional claims; in 2003 there were a total of 193 new claims filed; and BNS Co. has received notice of another 178 claims in 2004. As of February 28, 2005, BNS Co. has received notice of another 15 claims. In 2002, 42 claims were settled for an aggregate of approximately $30,000 exclusive of attorney’s fees. In March 2004 a plaintiff’s attorney settled one claim for $500 and filed for dismissal in another 67 claims. In September 2004 another five claims were dismissed. During the fourth quarter of 2004, 64 claims were dismissed and another seven claims were settled for $500 each. Another 12 claims have been dismissed or closed on various dates. There were 340 known claims open and active as of February 28, 2005. However, under certain circumstances, some of the settled claims may be reopened.

The Company believes BNS Co. has significant defenses to any liability for toxic tort claims on the merits. It should be noted that, to date, none of these toxic tort claims have gone to trial and therefore there can be no assurance that these defenses will prevail. Settlement and defense costs to date have been insignificant.

In the late 1980’s, insurance companies began issuing policies with specific exclusions for claims relating to asbestos. BNS Co. has identified continuous insurance coverage (on an “occurrence” basis) from 1974 through 1988 that does not include such exclusions, with estimated aggregate coverage limits of approximately $158 million for these policy years. The Company estimates that the aggregate remaining self insured retention (deductible) relating to these policy years is approximately $3.3 million. Additionally, the Company has identified secondary evidence (such as past billings), indicating that BNS Co. had additional insurance coverage from 1970 through 1973 that does not include such exclusions. The Company is currently in the process of confirming that these policies were in place and the amount of the remaining self insured retention (deductible) relating to these years. There is no assurance that the insurer will recognize this secondary information as evidence that the policies were in place. Although there are no indications that the aforementioned insurance coverage has eroded from past claims, there is no assurance of this due to incomplete Company insurance records. Policies issued for BNS Co. beginning in 1989 contained exclusions relating to asbestos. BNS Co.’s insurance records for the periods prior to 1970 are incomplete and do not indicate what insurance coverage is available to BNS Co. for asbestos and other product liability claims arising prior to that time. The estimated aggregate coverage limits noted above relate to a number of insurance carriers. In general, these carriers have acknowledged the evidence of coverage but have declined to verify the coverage or limits until such time as the limits apply. There can be no assurance that, even if BNS Co. has insurance coverage for asbestos and other product liability claims under its policies, it will be able to recover from its insurers in the event that such insurance companies are no longer solvent, have ceased operations, or choose to dispute the coverage or limits of the policies identified by the Company.

BNS Co. annually receives retroactive billings or credits from its insurance carriers for any increase or decrease in claims reserves as claims are filed, settled or dismissed, or as estimates of the ultimate settlement and defense costs for the then-existing claims are revised. In addition, the Company has recorded a liability of $349,000 on the consolidated balance sheet relating to the open and active claims against BNS Co. as of December 31, 2004. This liability represents an estimate of the likely costs to defend against or settle these claims by BNS Co. beyond the amounts reserved by the insurance carriers and previously funded, through the retroactive billings, by BNS Co. However, there can be no assurance that the Company will not need to take additional charges against BNS Co. in connection with the defense, settlement or judgment of these existing claims. Projecting the costs of future claims is subject to variables that are extremely difficult to predict, and there can be no assurance that the number of future claims and the related costs of defense, settlements or judgments will be consistent with the experience to date relating to existing claims.

As of February 28, 2005, no toxic tort or asbestos claims have been filed against BNS Holding, which came into existence in December 2004 and has never conducted any active business operations. There can be no assurance, however, that monies received by BNS Holding from its wholly-owned subsidiary by way of reimbursement for “public company reporting costs” that were formerly the responsibility of BNS Co. or by way of dividends or otherwise might not under some circumstances be subject to claims against BNS Co.

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It has become apparent that the uncertain prospect of additional toxic tort claims being asserted in the future, and the impact of this uncertainty on the valuation of BNS Co., and hence on the Company, has had and may continue to have, at least for the short term, some adverse effects on the Company’s ability to determine any prospective distributions to shareholders or to negotiate a satisfactory sale, merger or other change in control transaction with a third party. These claims would also affect the ability of the Company, or its BNS Co. subsidiary, to carry out a fairly rapid liquidation proceeding, either through a dissolution, formation of a liquidating trust and liquidation proceedings in the Chancery Court in Delaware, or in a Chapter 11 federal bankruptcy reorganization proceeding, both of which would involve provisions for payments to creditors and contemplated distributions to stockholders.

There have also been a few miscellaneous claims against the BNS Co. subsidiary relating to employment activities, environmental issues, sales tax audits and personal injury claims.

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

Not applicable.

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PART II

ITEM 5—MARKET FOR REGISTRANT’S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

The Company’s Class A Common Stock is listed on the Boston Stock Exchange under the symbol “BNC” and is traded on the NASD Over-the-Counter (OTC) Bulletin Board, where market makers and other dealers provide bid and ask quotations. Since December 15, 2004, the Company’s Class A Common Stock has traded on the OTC Bulletin Board under the symbol “BNSIA” and prior to the Holding Company Reorganization on December 14, 2004, the stock of BNS Co. traded on the OTC Bulletin Board under the symbol “BNSXA”. The Company’s Class B Common Stock is generally nontransferable, except to lineal descendants, and thus has no established trading market, but it can be converted into Class A Common Stock at any time. Set forth below are the quarterly high and low closing prices for the Class A Common Stock of the Company (and of BNS Co. prior to the Holding Company Reorganization on December 14, 2004) on the OTC Bulletin Board during the last two fiscal years.

In May of 2001 BNS Co. made a cash distribution to shareholders following the sale of the Metrology Business to Hexagon. Since 1990, no other dividends or distributions have been paid by BNS Co. (through December 13, 2004) or by the Company (after December 13, 2004). See “Liquidity and Capital Resources” and “Risk Factors: Environmental and Product Liability Risks” sections of “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of this Annual Report. At the present time, the Company does not intend to pay a dividend or make a distribution to stockholders in the near future.

At February 28, 2005, the Company had approximately 1,355 shareholders of record of its Class A Common Stock and 559 shareholders of record of its Class B Common Stock.

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ITEM 6— SELECTED FINANCIAL DATA

The following selected data, prepared on a consolidated basis, should be reviewed in conjunction with Part II, Item 7—“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Consolidated Financial Statements and Notes thereto in Item 8 of this Annual Report.

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ITEM 7—MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

The Company at present has no active trade or business operations but is searching for a suitable business to acquire. As previously disclosed in its June 11, 2004 press release, after completion of the sale of the U.K. Subsidiary, BNS Co. (and then after December 14, 2004, the Company) began a search for a suitable acquisition candidate. As of the date of this Annual Report on Form 10-K, no candidate has been identified.

As previously discussed in Item 1 of this Annual Report, effective December 14, 2004, BNS Co. completed a reorganization in which BNS Holding became the holding company and sole stockholder of BNS Co., which was prior to December 14, 2004 the publicly traded company. By virtue of this reorganization, BNS Co. became a direct, wholly-owned subsidiary of BNS Holding. BNS Holding was formed in December 2004 for the purpose of this reorganization and did not have active operations prior to December 14, 2004. Unless the context otherwise requires, references to the “Company” below refer to BNS Holding. The consolidated financial statements of BNS Holding include the accounts of BNS Co.

On November 16, 2000 BNS Co. entered into an Acquisition Agreement with Hexagon for the sale of the Metrology Business assets, including the assumption of most related liabilities, which closed on April 27, 2001. On August 16, 2002, BNS Co. entered into a Securities Purchase Agreement with a subsidiary of Hexagon for the sale of BNS Co.’s interest in Xygent, a development stage measuring software business. On August 26, 2003, pursuant to a Purchase and Sale Agreement, dated as of April 28, 2003, as amended, between BNS Co. and Wasserman, BNS Co. sold its North Kingstown Property which consisted of an industrial and office building along with the adjoining acreage (a total of approximately 169 acres, all in Rhode Island). On June 16, 2004, pursuant to a Purchase and Sale Agreement dated as of February 5, 2004 between BNS Co., its Cayman Island subsidiary BNS International, Ltd., and Bath Road Holdings, Limited, and after stockholder approval on June 11, 2004, BNS Co. sold its U.K. Subsidiary.

The accompanying financial statements present the U.K. Subsidiary, the North Kingstown Property, Xygent, and the Metrology Business as discontinued operations. The financial statements for prior periods have been restated. The discussions below relate only to the continuing operations of the Company on a consolidated basis, unless otherwise noted.

Forward-Looking Statements

This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” as well as other portions of this Report contain forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve a number of assumptions, risks, and uncertainties that could cause the actual results of the Company to differ materially from those matters expressed in or implied by such forward-looking statements. They involve known and unknown risks, uncertainties, and other factors, which are in some cases beyond the control of the Company. Additional information regarding these risk factors and uncertainties is described more fully in the Company’s SEC filings. A copy of all filings may be obtained from the SEC’s web site, www.sec.gov, or by contacting the Corporate Secretary at the Company’s headquarters or by telephone at (401) 848-6400. The Company does not maintain a web site. This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” should be read in conjunction with the Company’s Consolidated Financial Statements and the Notes thereto included elsewhere in this Annual Report.

Critical Accounting Policies

Management’s discussion and analysis of financial condition and results of operations are based upon the consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The accounting policies used in reporting the financial results are

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reviewed on a regular basis. The preparation of these financial statements requires the use of estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis, estimates, including those related to accounts receivable, product liability, taxes, and legal contingencies are evaluated. The estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Results may differ from these estimates due to actual outcomes being different from those on which we based our assumptions. These estimates are reviewed by management on an on-going basis. The following critical accounting policies affect the more significant judgments and estimates used in the preparation of the consolidated financial statements.

Allowance for Doubtful Accounts

Allowances for doubtful accounts are maintained for estimated losses resulting from the inability of customers to make required payments. If the financial condition of customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

Contingencies

The Company periodically records the estimated impacts of various conditions, situations or circumstances involving uncertain outcomes. These events are called “contingencies,” and the Company’s accounting for such events is prescribed by SFAS 5, “Accounting for Contingencies.” SFAS 5 defines a contingency as “an existing condition, situation, or set of circumstances involving uncertainty as to possible gain or loss to an enterprise that will ultimately be resolved when one or more future events occur or fail to occur.”

SFAS 5 does not permit the accrual of gain contingencies under any circumstances. For loss contingencies, the loss must be accrued if (1) information is available that indicates it is probable that the loss has been incurred, given the likelihood of the uncertain future events; and (2) that the amount of the loss can be reasonably estimated.

The accrual of a contingency involves considerable judgment on the part of management. The Company uses its internal expertise, and outside experts (such as lawyers, tax specialists, insurance specialists and engineers), as necessary, to help estimate the probability that a loss has been incurred and the amount (or range) of the loss.

The Company’s BNS Co. subsidiary is currently involved in certain legal disputes and environmental proceedings, including toxic tort claims, other product liability claims and claims relating to other former business activities. See “Litigation” in Item 3 of this Annual Report. An estimate of the probable costs for the resolution of these claims has been accrued. This estimate has been developed in consultation with outside counsel and other experts and is based upon an analysis of potential results, including a combination of litigation and settlement strategies. It is believed that these proceedings will not have a material adverse effect on our consolidated results of operations or financial condition. It is possible, however, that future results of operations for any particular quarterly or annual period could be materially affected by changes in our assumptions, or the effectiveness of our strategies, related to these proceedings. It is also possible that future results of operations for any particular quarterly or annual period could be materially affected by additional claims against BNS Co. or claims against BNS Holding, Inc. arising from new legal disputes, including future toxic tort claims, and environmental proceedings.

Recent Accounting Pronouncements

In December 2004, the FASB issued SFAS No. 123 (revised 2004) “Share-Based Payment” (“Statement 123(R)”). Statement 123(R) replaces SFAS No. 123 “Accounting for Stock-Based Compensation”, supersedes

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APB Opinion No. 25 “Accounting for Stock Issued to Employees”, and amends SFAS No. 95 “Statement of Cash Flows”. Statement 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. Per APB Opinion No. 25, compensation expense was recognized only to the extent the fair value of the common stock exceeded the stock option exercise price at the measurement date. In addition, SFAS No. 123 allowed pro forma disclosure as an alternative to financial statement recognition. Statement 123(R) is effective for public companies at the beginning of the first interim or annual period beginning June 15, 2005. We expect to adopt Statement 123(R) in the fourth quarter of fiscal 2005.

Results of Operations

2004 Compared to 2003

The Company on a consolidated basis recorded net income of $8.8 million and $12.9 million in 2004 and 2003, respectively. The 2004 and 2003 results include the following:

The loss from continuing operations in 2004 is less than 2003 by $1.3 million. The Company has continued to reduce corporate level administration expenses over the last year. Both periods include legal and professional costs incurred in connection with the sale of assets and exploration of strategic alternatives. Included in the operating loss for 2004 was an additional insurance expense amounting to $.3 million resulting from a change in an insurance policy prepaid in 2003. This prepaid policy was originally estimated to provide BNS Co. with a three-year run off insurance coverage in the event that the Company decided to liquidate after the sale of its U.K. Subsidiary in 2004. As BNS Co. did not liquidate, the policy was revised in the third quarter of 2004. The insurer applied a portion of the 2003 prepaid balance to the revised policy. The remaining $.3 million of the initial prepaid policy was expensed during the third quarter ended September 30, 2004. The operating loss in 2003 included $.5 million pertaining to the accrual for sales and use tax examination liabilities. This additional accrual was the result of additional sales and use tax liabilities which became known during the quarter ended June 30, 2003.

No Interest expense was incurred in 2004, compared with interest expense of $.1 million in 2003. The interest in 2003 represents interest owed on an outstanding liability to a former CEO of BNS Co. The decrease in the amount of interest expense is attributable to the fact that this liability was paid in 2003.

Other income, net amounted to $.3 million in 2004 compared with $.1 million in 2003. Other income, net in 2004 consists primarily of interest income. Other income, net in 2003 consisted of interest income and income related to the cancellation of insurance on executives no longer with the Company. Interest income increased primarily as a result of higher cash balances in 2004.

No income taxes are provided for the U.S. operation as the Company (consolidated) has substantial net operating losses from prior years that are available to offset otherwise taxable current earnings.

Discontinued operations amounted to income of $10.8 million in 2004 compared with income of $16.2 million in 2003. The income reported in discontinued operations in 2004 contains primarily the gain on sale of the Company’s U.K. Subsidiary of $9.3 million, and a gain of $1.3 million resulting from the resolution of a contingent liability relating to the sale of the Metrology Business in 2001. The income reported in 2003 related to the gain on the sale of the North Kingstown Property ($15.2 million) and the operations of the North Kingstown Property and the U.K. Subsidiary ($1.0 million), before the later sale of each property.

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2003 Compared to 2002

BNS Co. recorded net income of $12.9 million in 2003 and a net loss of $5.9 million in 2002. The 2003 and 2002 results include the following:

The loss from continuing operations in 2003 and 2002 includes BNS Co.’s corporate headquarters activities. Although BNS Co. decreased recurring general and administrative expenses in 2003, general and administrative expenses during 2003 were slightly higher than in 2002. In 2003 this increase was predominantly due to expenses of $.4 million for advisory services and commission related to the ongoing marketing of the U.K. Subsidiary and the ongoing development of strategic alternatives for the Company.

Interest expense amounted to $.1 million in 2003 compared with $.1 million in 2002. As a result of the rental operations of the North Kingstown Property being reclassified to discontinued operations, interest expense consists substantially of interest owed on an outstanding pension benefit liability owed to a former CEO of BNS Co. and the settlement of a state sales and use tax examination. Interest expense attributable to the declining balance owed to the former CEO and the fact that BNS Co. paid the entire balance due to the former CEO in the third quarter of 2003 resulted in a decrease of interest expense. However, this was offset by the interest paid related to the state sales and use tax examination.

Other income, net amounted to $.1 million in 2003. This is compared with $.2 million in 2002. Other income, net, consists predominantly of interest income. During 2002, other income, net contained a gain of $.1 million related to the receipt of shares received as a result of the demutualization of an insurance company.

No income taxes are provided for in the continuing U.S. operation as the Company has net operating losses available to offset otherwise taxable net income.

Discontinued operations amounted to income of $16.2 million for the year 2003. This is compared with losses of $2.7 million in 2002. The loss reported in 2002 contains the loss from the Xygent operations along with the income from rental operations of the North Kingstown facility and the net operating income generated by the U.K. Subsidiary in 2002. The gain from the sale of the North Kingstown Property recorded in the third quarter of 2003 is $15.3 million. This gain has been recorded net of an income tax expense of $.2 million. Although the Company (consolidated) has sufficient net operating losses, this tax is attributable to the federal alternative minimum tax.

Liquidity and Capital Resources

The Company had unrestricted cash of approximately $20.9 million at December 31, 2004 after the completion of the sale of the U.K. Subsidiary. This represents a significant increase from the cash balance at December 31, 2003 of $14.1 million. The increase is principally the result of the receipt of the net proceeds from the sale of the U.K. Subsidiary of $9.7 million, of which $1.2 million has been placed in escrow and is presented as restricted cash. The unrestricted cash is further reduced by the net cash outflow from operations of approximately $1.8 million.

There is no assurance that the future months’ expenses of the Company will not be greater than anticipated, or that its expected cash flow will not be less than anticipated, and that a liquidity problem may not arise as a result of poor economic conditions, lower investment returns, environmental problems, expenses and liabilities

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associated with product liability claims or expenses of maintaining the Company as a “public” reporting company (see “Risk Factors: Liquidity Risk; There may not be adequate resources for funding the operation of the Company”).

The Company’s ability to continue as a going-concern relies on its ability to achieve positive cash flow from investment earnings on its undistributed cash and the earnings of any acquired business. The Company currently has no active trade or business (see “Risk Factors: ‘Going Concern’ Qualification in Audit Report”). As previously disclosed, having sold its remaining assets, it is the Company’s intention to seek other strategic alternatives, including searching for a suitable acquisition candidate.

Cash Flow

Net cash used in operations in 2004 was $3.0 million compared with $6.9 million in 2003 and $5.3 million in 2002. In the calculation of net cash used in operations for the year ended December 31, 2004, the net income of $7.4 million was reduced by the gain on sale of the U.K. Subsidiary of $9.3 million, and a gain of $1.3 million resulting from the resolution of a contingent liability relating to the sale of the Metrology Business in 2001. In the calculation of net cash used in operations for the year ended December 31, 2003, the net income of $13 million was reduced by gain on sale of the North Kingstown Property of $15.3 million, by the establishment of environmental escrow of $.3 million, by the payment of $1.7 million settlement of a compensation dispute to its former CEO and $1.9 million plus interest to another former CEO of BNS Co. representing pension benefits. In the calculation of net cash used in operations for the year ended December 31, 2002, the net loss of $5.9 million was increased by the loss on the sale of Xygent of $.9 million, by the loss from the discontinued operations of $1.8 million and decreased by the payment of pension obligations of $.7 million.

Net cash provided by investing transactions for 2004 was $9.7 million which pertains to the proceeds from the sale of the U.K. Subsidiary. Net cash provided by investing transactions for 2003 was $19.5 million which included $.6 million as the final settlement received by BNS Co. from Hexagon related to the sale of Xygent, $18.7 million from proceeds of the sale of the North Kingstown Property, $.4 million as the final settlement received by BNS Co. related to the disposal of BNS Co.’s Electronics Division in 2002 and $.1 million from the disposal of the available for sale securities.

Cash used in financing activities in 2003 was $2.4 million which pertains to the payment of the entire outstanding mortgage liability. Cash used in financing activities in 2002 was $.1 million. Financing transactions during 2002 consisted of $.9 million repayment on the mortgage offset by the April 2002 purchase of a net minority interest in Xygent by Hexagon of $1 million. There were no cash flows associated with financing activities in 2004.

Cash provided by (used in) the discontinued operations amounted to $.1 million, $0.7 million and ($1.5) million in 2004, 2003 and 2002, respectively.

Working Capital

Excluding the assets related to discontinued operations, the Company had working capital related to the continuing operations of $20.5 million at December 31, 2004 and $13.9 million at December 31, 2003. This increase in working capital is primarily the result of the sale of the North Kingstown Property and the U.K. Subsidiary, which held the U.K. property.

The Company’s sole source of cash following the sale of BNS Co.’s U.K. Subsidiary in June 2004 is from interest earned on its cash deposits.

Off-Balance Sheet Arrangements

The Company on a consolidated basis had no “off balance sheet arrangements” (as defined in the applicable SEC rule) during fiscal 2004.

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Contractual Obligations

The following table summarizes our contractual obligations (as defined in the applicable SEC rule) as of December 31, 2004 and the anticipated effect of these obligations on our liquidity in future years (in thousands):

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RISK FACTORS

After completing the sale of its Metrology Business to Hexagon on April 27, 2001, after completing the sale on August 20, 2002 to Hexagon Holdings, Inc. of its interest in its Xygent development stage measuring software business, in which BNS Co. had then held a 77% equity interest (with Hexagon holding the balance), after completing the sale of the North Kingstown Property to Wasserman on August 26, 2003, and after the sale of the U.K. Property to Bath Road Holdings, Limited on June 16, 2004, BNS Co. did not have an active trade or business, and following the Holding Company Reorganization, the Company does not have an active trade or business but is in the process of searching for a suitable acquisition candidate. As of the date of this Annual Report on Form 10-K, no candidate has been identified, and no assurance can be given that the Company will find a suitable acquisition candidate.

In addition to the foregoing, the risks remaining with respect to BNS Co.’s sale of its former Metrology Business, the former development stage Xygent measuring software business, and the North Kingstown Property are that BNS Co. might have to make an indemnification payment to the respective buyers with respect to BNS Co.’s representations and warranties concerning the businesses respectively sold or a payment to a third party with respect to a retained liability.

Environmental and Product Liability Risks

As discussed above, effective December 14, 2004, BNS Co. completed a reorganization in which BNS Holding became the holding company and sole stockholder of BNS Co. By virtue of this reorganization, BNS Co. became a direct, wholly-owned subsidiary of BNS Holding. BNS Holding was formed for the purpose of this reorganization and did not have any active operations prior to December 14, 2004.

Subsequent to the sale of Xygent to Hexagon in 2002 as discussed above, the nature of each of BNS Co. and, subsequent to its incorporation in December 2004, BNS Holding’s operations have not been affected by environmental laws, rules and regulations relating to these businesses. However, because BNS Co. and its subsidiaries and predecessors, prior to the sale of the BNS Co. Metrology Business to Hexagon on April 27, 2001 (and prior to sales of other divisions made in prior years) conducted manufacturing operations in locations at which, or adjacent to which, other industrial operations were conducted from time to time by BNS Co., BNS Co. is subject to environmental claims. As with any such operations that involved the use, generation, and management of hazardous materials, it is possible that prior 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 these areas is developing rapidly, and because environmental laws are subject to amendment and widely varying degrees of enforcement, the BNS Co. subsidiary may be subject to, and the Company cannot predict with any certainty, the nature and amount of environmental claims related to these operations or locations, including the Rhode Island Property owned by the BNS Co. subsidiary, which property was sold on August 26, 2003 (but with certain environmental liabilities retained) that may arise in the future.

A Phase II environmental investigation on BNS Co.’s former Rhode Island Property, completed in June 2002, indicated certain environmental problems on the property. The results of the study showed that certain contaminants in the soil under the property and minor groundwater issues exceeded environmental standards set by the Rhode Island Department of Environmental Management (“RIDEM”). After extensive testing, the BNS Co. subsidiary submitted a Remedial Action Work Plan (“RAWP”) to RIDEM, and on November 7, 2002, RIDEM issued a letter approving the RAWP. In April of 2003, BNS Co. awarded a contract for the remediation work and engaged an environmental engineering firm to supervise the remediation work and perform ongoing monitoring of the affected areas. The remediation work was substantially complete as of December 2003, and in connection with the August 26, 2003 sale of the Rhode Island Property, BNS Co. established an escrow account in the amount of $.331 million to cover any additional remediation costs that may arise. At December 31, 2004, the balance of the escrow account was $.269 million. The BNS Co. subsidiary has obtained insurance against

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additional known and unknown environmental liabilities at the Rhode Island Property. However, there is no assurance that BNS Co. will not incur additional costs for remediation above the escrowed amount and insurance limits, and that ongoing monitoring of contaminants will not indicate further environmental problems.

The BNS Co. subsidiary has obtained contaminated land insurance coverage to insure against unknown environmental issues relating to the property which was owned by the U.K. Subsidiary. In addition, BNS Co. received a report dated October 2000, which was updated in July 2003, from an independent environmental consulting firm indicating no evidence of environmental issues relating to that property. However, there is no assurance that such issues will not be identified in the future, whether such issues are identified through the actions of the land fill operator operating on the property or the buyer of BNS Co.’s former U.K. Subsidiary or as the result of other factors, as the buyer continues to operate the property as a land fill. With the sale by BNS Co. of the U.K. Subsidiary on June 16, 2004, there is no assurance that there will be no retained liabilities relating to the U.K. Subsidiary, although BNS Co. has made no environmental representations or indemnifications under the applicable Purchase and Sale Agreement for the U.K. Subsidiary.

In addition, as previously disclosed, the Company’s BNS Co. subsidiary receives claims from time to time for toxic tort injuries related to the alleged use of asbestos material in pumps sold by its former pump division, and other product liability claims relating to the use of machine tools sold by divisions of BNS Co. which were sold many years ago. Most of these suits are toxic tort claims resulting primarily from the use of small internal seals that allegedly contained asbestos and were used in small fluid pumps manufactured by BNS Co.’s former pump division, which was sold in 1992. The Company expects that its BNS Co. subsidiary will continue to be subject to additional toxic tort claims in the future. As a matter of Delaware law the directors of BNS Co. and the directors of BNS Holding, Inc. are each required to take the probability of future claims into its consideration of various matters.

The Company is unable to identify the number and location of fluid pumps manufactured by BNS Co. and, therefore, is unable to estimate the aggregate number of unasserted claims which might be filed in the future, which is necessary in order to reliably estimate any financial exposure. This product line was introduced in the late 1800’s. The materials alleged to contain asbestos were used for an undetermined period of time ending in the late 1960’s. The claims relate to exposure to this asbestos material. BNS Co. (then named Brown & Sharpe Manufacturing Company) sold its pump division in 1992 but remains subject to claims related to products manufactured prior to that date.

Since 1994 the Company’s BNS Co. subsidiary has been named as a defendant in a total of 538 known claims (as of February 28, 2005) relating to these pumps. In many cases these claims involve more than 100 other defendants. Fifty-four of those claims were filed prior to December 31, 2001. In 2002 BNS Co. was named in 98 additional claims; in 2003 there were a total of 193 new claims filed; and BNS Co. has received notice of another 178 claims in 2004. As of February 28, 2005 BNS Co has received notice of another 15 claims. In 2002, 42 claims were settled for an aggregate of approximately $30,000 exclusive of attorney’s fees. In March 2004 a plaintiff’s attorney settled one claim for $500 and filed for dismissal in another 67 claims. In September 2004 another five claims were dismissed. During the fourth quarter of 2004, 64 claims were dismissed and another seven claims were settled for $500 each. Another 12 claims have been dismissed or closed on various dates. There were 340 known claims open and active as of February 28, 2005. However, under certain circumstances, some of the settled claims may be reopened.

The Company believes BNS Co. has significant defenses to any liability for toxic tort claims on the merits. It should be noted that, to date, none of these toxic tort claims have gone to trial and therefore there can be no assurance that these defenses will prevail. Settlement and defense costs to date have been insignificant.

In the late 1980’s, insurance companies began issuing policies with specific exclusions for claims relating to asbestos. BNS Co. has identified continuous insurance coverage (on an “occurrence” basis) from 1974 through 1988 that does not include such exclusions, with estimated aggregate coverage limits of approximately $158

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million for these policy years. The Company estimates that the aggregate remaining self insured retention (deductible) relating to these policy years is approximately $3.3 million. Additionally, the Company has identified secondary evidence (such as past billings), indicating that BNS Co. had additional insurance coverage from 1970 through 1973 that does not include such exclusions. The Company is currently in the process of confirming that these policies were in place and the amount of the remaining self insured retention (deductible) relating to these years. There is no assurance that the insurer will recognize this secondary information as evidence that the policies were in place. Although there are no indications that the aforementioned insurance coverage has eroded from past claims, there is no assurance of this due to incomplete Company insurance records. Policies issued for BNS Co. beginning in 1989 contained exclusions relating to asbestos. BNS Co.’s insurance records for the periods prior to 1970 are incomplete and do not indicate what insurance coverage is available to BNS Co. for asbestos and other product liability claims arising prior to that time. The estimated aggregate coverage limits noted above relate to a number of insurance carriers. In general, these carriers have acknowledged the evidence of coverage but have declined to verify the coverage or limits until such time as the limits apply. There can be no assurance that, even if BNS Co. has insurance coverage for asbestos and other product liability claims under its policies, it will be able to recover from its insurers in the event that such insurance companies are no longer solvent, have ceased operations, or choose to dispute the coverage or limits of the policies identified by the Company.

BNS Co. annually receives retroactive billings or credits from its insurance carriers for any increase or decrease in claims reserves as claims are filed, settled or dismissed, or as estimates of the ultimate settlement and defense costs for the then-existing claims are revised. In addition, the Company has recorded a liability of $349,000 on the consolidated balance sheet relating to the open and active claims against BNS Co. as of December 31, 2004. This liability represents an estimate of the likely costs to defend against or settle these claims by BNS Co. beyond the amounts reserved by the insurance carriers and previously funded, through the retroactive billings, by BNS Co. However, there can be no assurance that the Company will not need to take additional charges in connection with the defense, settlement or judgment of these existing claims. Projecting the costs of future claims is subject to variables that are extremely difficult to predict, and there can be no assurance that the number of future claims and the related costs of defense, settlements or judgments will be consistent with the experience to date relating to existing claims.

As of February 28, 2005, no toxic tort or asbestos claims have been filed against BNS Holding, which came into existence in December 2004 and has never conducted any active business operations. There can be no assurance, however, that monies received by BNS Holding for its wholly-owned subsidiary by way of reimbursement for “public company reporting costs” that were formerly the responsibility of BNS Co. or by way of dividends or otherwise might not under some circumstances be subject to claims against BNS Co.

It has become apparent that the uncertain prospect of additional toxic tort claims being asserted in the future, and the impact of this uncertainty on the valuation of BNS Co., and hence on the Company, has had and may continue to have, at least for the short term, some adverse effects on the Company’s ability to determine any prospective distributions to shareholders or to negotiate a satisfactory sale, merger or other change in control transaction with a third party. These claims would also affect the ability of the Company, or its BNS Co. subsidiary, to carry out a fairly rapid liquidation proceeding, either through a dissolution, formation of a liquidating trust and liquidation proceedings in the Chancery Court in Delaware, or in a Chapter 11 federal bankruptcy reorganization proceeding, both of which would involve provisions for payments to creditors and contemplated distributions to stockholders.

The U.S. Senate has in the past considered a bill that would establish an asbestos trust fund. This fund would have been financed by affected companies and insurers, and would have provided compensation to claimants. The current administration has recently expressed interest in reviving consideration of legislation relating to asbestos claims. However, no legislative action is currently under consideration, and there can be no assurance that any such legislation will be passed or as to the impact on the Company of any such legislation as might become effective.

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Trading of the Company’s Class A Common Stock on the OTC Bulletin Board

BNS Co.’s Class A Common Stock ceased trading on the New York Stock Exchange on Friday, February 8, 2002 and commenced trading on the OTC Bulletin Board under the symbol “BNSXA” (“BNSIA” after the December 14, 2004 Holding Company Reorganization) and was listed on the Boston Stock Exchange on Monday, February 11, 2002. There is no assurance that there will continue to be a sufficient number of securities firms prepared to make an active trading market in our stock, and the public perception of the value of the Class A Common Stock could be materially adversely affected.

The market price of the Company’s Class A Common Stock could decline as a result of sales of shares by the Company’s existing shareowners, as a result of the Company’s possible failure to meet the listing standards of the Boston Stock Exchange.

The Company’s cumulative net operating losses (“NOL’s”) may become significantly limited

The Company had NOL’s of approximately $52.2 million at December 31, 2004, which were available to offset taxable earnings in the future. In the event of a “change of ownership” within the meaning of Section 382 of the Internal Revenue Code, the ability of the Company to use these NOL’s to offset future taxable earnings becomes significantly limited. While the Company’s management and tax advisors believe the Company has not, as of February 11, 2005, experienced such a “change of ownership,” based on their examination of public shareholder documents filed with the SEC, it appears that the Company is close to the threshold for such a change.

In addition, if the company were to acquire an operating business in the future, there can be no assurance that the Company will be able to utilize its NOL’s.

“Going Concern” Qualifications in Audit Opinion

The Company received a report from its independent auditors for the year ended December 31, 2004, containing an explanatory paragraph stating that the Company’s lack of current trade or business operations and its recurring operating losses from continuing operations raise substantial doubt about the Company’s ability to continue as a going concern.

Liquidity Risk: There may not be Adequate Resources for Funding the Operations of the Company

There is no assurance that the future expenses of the Company (including the expenses of maintaining the Company as a “public” reporting Company under SEC regulations and the expenses and liabilities associated with toxic tort asbestos claims against the Company, as discussed above) will not be greater than anticipated and investment earnings (which are, as a practical matter, limited by the Company’s inability to make investments that would require it to register as an “investment company” under the Investment Company Act of 1940) will not be less than anticipated and that, as a result, a liquidity problem may not arise.

Potential Acquisition Candidate

The Company is currently searching for a suitable acquisition candidate. There is no assurance that the Company will identify such a candidate or consummate an acquisition, if it identifies such an acquisition candidate. In addition, if the Company were to consummate any such acquisition, there can be no assurance that the Company will be able to successfully manage or operate such business.

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ITEM 7A— QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

The Company has no derivative financial instruments or derivative commodity instruments. Since August 2003, the Company (including BNS Co.) has had no long-term debt (the mortgage on the North Kingstown Property was repaid when that property was sold on August 26, 2003).

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ITEM 8—FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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Report of Independent Registered Public Accounting Firm

To the Shareholders and Directors

of BNS Holding, Inc.

We have audited the accompanying consolidated balance sheets of BNS Holding, Inc. as of December 31, 2004 and 2003, and the related consolidated statements of operations, shareowners’ equity, and cash flows for each of the three years in the period ended December 31, 2004. 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 the standards of the Public Company Accounting Oversight Board (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 consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and 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 BNS Holding, Inc. at December 31, 2004 and 2003, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2004, in conformity with accounting principles generally accepted in the United States.

The accompanying financial statements have been prepared assuming that BNS Holding, Inc. will continue as a going concern. As more fully described in Note 2, the Company has no active trade or business operations and has recurring operating losses from continuing operations. This condition raises substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments to reflect the possible future effects of the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

/s/ ERNST & YOUNG LLP

Providence, Rhode Island

February 18, 2005, except as to Note 16 as to which the date is March 14, 2005

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PART I. FINANCIAL INFORMATION

BNS Holding, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Years Ended December 31, 2004, 2003 and 2002

(dollars in thousands, except per share data)

* The accompanying notes are an integral part of the financial statements

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BNS Holding, Inc.

CONSOLIDATED BALANCE SHEETS

December 31, 2004 and 2003

(dollars in thousands, except share data)

* The accompanying notes are an integral part of the financial statements

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BNS Holding, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended December 31, 2004, 2003 and 2002

(dollars in thousands)

The accompanying notes are an integral part of the financial statements

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BNS Holding, Inc.

CONSOLIDATED STATEMENTS OF SHAREOWNERS’ EQUITY

For the Years Ended December 31, 2004, 2003 and 2002

(in thousands)