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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 20-F

/ /         REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                                       OR

/X/              ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 1998

                                       OR
   
/ /         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
    
For the transition period from ______________________ to ______________________
                        Commission file number: 000-29358

                            Denison International plc
--------------------------------------------------------------------------------
             (Exact name of Registrant as specified in its charter)

                                 Not Applicable
--------------------------------------------------------------------------------
                 (Translation of Registrant's name into English)

                                England and Wales
--------------------------------------------------------------------------------
                 (Jurisdiction of incorporation or organization)

                                  Masters House
                              107 Hammersmith Road
                                 London W14 OQH
                                     England
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                    (Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

        Title of each class    Name of each exchange on which registered
        -------------------    -----------------------------------------
               None                               None

Securities registered or to be registered pursuant to Section 12(g) of the Act.

   American Depositary Shares (as evidenced by American Depositary Receipts),
             each representing one Ordinary Share, $0.01 par value
--------------------------------------------------------------------------------
                                (Title of Class)

        Securities for which there is a reporting obligation pursuant to
                           Section 15(d) of the Act.

                                      None
--------------------------------------------------------------------------------
                                (Title of Class)

Indicate the number of outstanding shares of each of the issuer's classes of
capital or common stock as of the close of the period covered by the annual
report.

                   11,097,450 Ordinary Shares, $0.01 par value
                7,015 `A' Ordinary Shares, (pound)8.00 par value

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                               Yes /X/       No / /

Indicate by check mark which financial statement item the registrant has elected
to follow.

                             Item 17 / /    Item 18  /X/
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                                TABLE OF CONTENTS

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PART I

     Item 1.  Description of Business.............................................................................2

     Item 2.  Description of Property............................................................................12

     Item 3.  Legal Proceedings..................................................................................12

     Item 4.  Control of Registrant..............................................................................12

     Item 5.  Nature of Trading Market...........................................................................13

     Item 6.  Exchange Controls and Other Limitations Affecting Security Holders.................................13

     Item 7.  Taxation...........................................................................................14

     Item 8.  Selected Financial Data............................................................................22

     Item 9.  Management's Discussion and Analysis of Financial Condition and Results of Operations..............24

     Item 9A.  Quantitative and Qualitative Disclosures About Market Risk........................................31

     Item 10.  Directors and Officers of Registrant..............................................................32

     Item 11.  Compensation of Directors and Officers............................................................33

     Item 12.  Options to Purchase Securities from Registrant or Subsidiaries....................................33

     Item 13.  Interest of Management in Certain Transactions....................................................34

PART II

     Item 14.  Description of Securities to be Registered........................................................34

PART III

     Item 15.  Defaults Upon Senior Securities...................................................................34

     Item 16.  Changes in Securities, Changes in Security for Registered Securities and Use of Proceeds..........34

PART IV

     Item 17.  Financial Statements..............................................................................34

     Item 18.  Financial Statements..............................................................................34

     Item 19.  Financial Statements and Exhibits.................................................................34
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     As used herein, references to the "Company" and "Denison" refer to Denison
International plc and its subsidiaries, unless the context indicates otherwise.

     References to Shares herein refer to (i) the Ordinary Shares of Denison,
$0.01 par value per Ordinary Share (the "Ordinary Shares") and (ii) Denison's
American Depositary Shares ("ADSs"), each of which represents one Ordinary
Share. The ADSs are evidenced by American Depositary Receipts ("ADRs").

     Denison publishes its financial statements in U.S. dollars. In this Form
20-F, references to "dollars" or "$" are to U.S. dollars and references to
"pounds sterling," "(pound)" or "p" are to U.K. currency. Except as otherwise
stated herein, all monetary amounts in this Form 20-F have been presented in
dollars.

     The Company publishes annual reports containing annual audited consolidated
financial statements and opinions thereon by independent public auditors. Such
financial statements are prepared on the basis of generally accepted accounting
principles in the United States ("US GAAP") expressed in U.S. dollars. The
Company has published quarterly updates and semi-annual reports containing
unaudited financial information prepared on the same basis as its audited US
GAAP consolidated financial statements.

     The discussion below contains certain "forward-looking statements" (as such
term is defined in the rules promulgated pursuant to the Securities Act of 1933,
as amended) that are based on the beliefs of the Company's management, as well
as assumptions made by, and information currently available to, the Company's
management. Such forward-looking statements are subject to the safe harbor
created by the Private Securities Litigation Reform Act of 1995. The Company's
actual results, performance or achievements in future periods could differ
materially from those expressed in, or implied by, any such forward-looking
statements. Factors that could cause or contribute to such material differences
include, but are not limited to, those discussed in Item 1 of this Form 20-F, as
well as those discussed elsewhere in this Form 20-F. The Company undertakes no
obligation to release publicly any updates or revisions to any such
forward-looking statements that may reflect events or circumstances occurring
after the date of this Form 20-F unless otherwise required by law.
<PAGE>
                                     PART I

Item 1.  Description of Business.

                                    BUSINESS

Overview

     Denison designs, manufactures, sells and services highly-engineered
components for use in hydraulic fluid power systems, as well as complete
hydraulic fluid power systems. Hydraulic systems, which are part of larger
pieces of machinery and equipment, provide the force to move and position very
heavy materials and equipment as well as the precision to move and position very
light loads with a high degree of accuracy. The components manufactured by the
Company for these systems include hydraulic pumps, motors, manifolds, and
valves. Many of Denison's products are designed to be used under demanding
conditions, such as elevated pressure, high temperature, variable speed and low
decibel levels. The Company sells its products globally to a diverse group of
end-users for use in a broad array of industrial applications, such as machine
tools and material handling equipment, various mobile applications, such as
construction, agricultural and utility equipment, and in marine applications,
such as military equipment.

     The Company focuses on the specialty segment of the hydraulic power market
and works closely with its customers to meet their specified performance
objectives. Denison's product offerings include a wide variety of piston pumps
and motors; vane pumps and motors; manifold systems; pressure, directional and
proportional valve products; and electronic control products. Denison's products
enjoy excellent brand recognition and significant market share in certain
sectors of the market targeted by the Company. The Company markets and sells its
products primarily through a global network of regional sales and service
subsidiaries, independent fluid power equipment distributors and, to a lesser
extent, directly to end-users. In the United States, the Company relies
primarily on independent fluid power distributors which also distribute other
products that do not generally compete with Denison's. In Europe and Asia,
Denison primarily sells its products directly to OEMs through its regional sales
and service subsidiaries. For certain information concerning the Company's
revenue, operating profit and identifiable assets attributable to each of the
Company's geographical market segments, see Note 15 of Notes to Consolidated
Financial Statements.

     Denison, whose operations date back to the early 1930s, is a pioneer in the
hydraulic products market. The Company's long history of innovation can be
traced back to its first product, the hydraulic-powered car pusher, a
revolutionary development which led to widespread application of hydraulic power
as a solution for numerous industrial and mobile requirements. Denison's
research and development efforts have resulted in its being granted
approximately 600 patents since its inception. The business of the Company was
acquired by its present owners in 1993 from Hagglund & Soner AB. The Company has
conducted business under the "Denison" name since 1932.

     The Company was incorporated in England and Wales as a private company
limited by shares in March 1993 and was re-registered as a public limited
company on July 28, 1997. On August 8, 1997, the Company completed an initial
public offering in which it issued and sold 450,000 Ordinary Shares at $16.00
per share. The net proceeds from the offering were $4,480,000. In December 1998
the Company acquired 100% of the shares of Lokomec Oy, a manufacturer and
distributor of highly engineered manifold systems located in Tampere, Finland.

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     The Company's principal executive offices are located at Masters House, 107
Hammersmith Road, London W14 0QH, England and its telephone number is
011-44-171-603-1515. The Company's U.S. headquarters is located at 14249
Industrial Parkway, Marysville, Ohio 43040.

Industry Overview

     Hydraulics, or fluid power, is a motion control technology that is used to
transfer and control force and power through fluids under pressure. Hydraulic
systems are typically comprised of a pump, valves, manifolds and actuators.
Pumps are used to move fluid from one location to another. Pressure is generated
when the fluid encounters resistance. Valves and manifolds control the flow of
fluids, and actuators, such as cylinders and rotary motors, convert pressure
into mechanical energy.

     Hydraulic systems offer greater flexibility of layout, compact design and
higher performance-to-weight ratio than other forms of motion control, such as
mechanical and electrical systems. Hydraulic systems provide the force to move
and position materials and equipment weighing several tons as well as the
precision to move and position very light loads with a high degree of accuracy.
For example, hydraulics is a tool powerful enough for heavy-duty steel
production in blast furnaces and precise enough for handling of steel ingots in
a stamping mill. As a result, hydraulic systems are integral to a wide variety
of industrial, mobile and marine applications. Although generally not noticed by
most end-product users, virtually every production process uses hydraulic power
as does almost every machine, vehicle and aircraft.

     The hydraulic pump and valve market is a highly-fragmented, multi-billion
dollar worldwide industry. The hydraulics market is divided broadly into two
product segments: specialty and commodity. The specialty segment is comprised of
highly-engineered, high-performance, specialized hydraulic products, which are
generally more complex and used in demanding applications. Specialty products
tend to be less price sensitive, generally have higher margins and are more
likely to utilize servicing and maintenance. The commodity segment is comprised
of lower performance products which are sold for use in price-sensitive
applications.

     Demand and growth in different application sectors of the hydraulics
industry have typically been driven by various external economic factors. The
industrial sector of the hydraulics industry has typically been affected by the
cyclicality of the overall economy. Sales of mobile hydraulic systems and
components have been driven by infrastructure development factors such as
construction and new housing starts. Sales of marine systems have been largely
influenced by military expenditures and, thus, are less affected by cyclical
economic factors. Demand and growth in each of the industrial, mobile and marine
sectors of the hydraulics market are also affected by the replacement cycle of
the hydraulic products.

Products

     The Company designs, manufactures, sells and services a broad range of
components for use in hydraulic fluid power systems, as well as complete
hydraulic fluid power systems, for applications with high reliability,
performance, precision and durability requirements. The Company's primary
products are piston pumps and motors, vane pumps and motors, manifolds, and
valves. In 1998, piston pumps and motors accounted for 29.6% of the Company's
net sales, vane pumps and motors accounted for 31.4% of the Company's net sales
and manifolds and valves accounted for 30.0% of the Company's net sales. In
addition, the Company manufactures electronic control products and certain

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other components and accessories used in hydraulic systems. Other products sales
accounted for 9.0% of the Company's net sales.

     The markets served by the Company are substantial and diversified, with no
single customer accounting for 4% or more of its net sales in 1998. The
Company's products are used in many different industrial, mobile and marine
applications, including mining machinery, drilling equipment, excavators,
cranes, machine tools, die casting and plastics processing machinery.

Pumps and Motors

     Hydraulic pumps include piston pumps and motors, which provide adjustable
flow and variable displacement, and vane pumps and motors, which provide
continuous flow and fixed displacement. Each type of pump or motor is suitable
for particular uses, depending upon variables such as speed, pressure, operating
temperature, noise level, life expectancy and cost. Piston pumps and motors are
used in tractors, tanks, machine tools, sophisticated winches, such as anchors
on a ship or deck cranes on an aircraft carrier, as well as in other products
with complex performance requirements, such as varying or multiple speeds or
pressures. Vane pumps and motors are used in less complex applications generally
requiring low noise levels but little or no variation in flow, such as refuse
trucks, cranes and large presses.

     All hydraulic pumps operate on the displacement principle in which a fluid
(typically petroleum-based oil) is transferred from an inlet (suction port) into
a mechanically-sealed, low-pressure chamber and subsequently, to a high-pressure
chamber having the outlet (pressure port). The transfer of the fluid inside the
pump can be accomplished by the movement of screws, gears, vanes or pistons
which compact the fluid and create pressure.

     Hydraulic motors operate on a principle which is the reverse of the
hydraulic pump process, absorbing hydraulic flow and pressure and converting
them into mechanical energy and rotary motion. This rotary motion can then be
used for various industrial applications, including the rotation of the wheels
of a mobile loader, driving winches on mobile crane systems or turning the
rollers on a conveyer belt.

     Pumps and motors operate in either an open- or closed-loop system. In an
open-loop system, the hydraulic fluid is drawn into one or more pumps to produce
flow and then travels to a number of different actuators performing independent
functions. For example, an industrial conveyor belt system, involving many
unrelated functions, may use an open-loop system. In a closed-loop system, the
pump is dedicated to a single motor or set of motors performing a single
function. Unlike in an open-loop system, in which the hydraulic fluid goes to a
storage "reservoir" after passing through the motor, in a closed-loop system,
the oil returns to the pump before being transferred back to the motor. The
closed-loop system enables the flow direction of the hydraulic fluid to be
reversed while the system is operating. This, in turn, allows for rapid changes
in direction and speed of the motor which is useful in applications such as
rotating the wheels of a front-loader. In general, piston pumps are specifically
manufactured for use in either an open-loop or closed-loop system, while vane
pumps are typically used only in open-loop systems. A motor can generally be
used in either an open- or closed-loop system.

     Piston Pumps and Motors. Piston pumps are distinguished from vane pumps by
their ability to produce variable displacement; the amount of hydraulic fluid
passing through the pump, and thus the pressure generated by the hydraulic
system, can be varied to meet the changing requirements of the

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application. Variable displacement generally reduces the cost of operating the
hydraulic system because the pump can operate at lowered displacement when the
system requirements are lowered, thus saving energy. Piston pumps are also
typically used with high horsepower applications because their design enables
them to operate at greater pressures than vane pumps.

     Denison manufactures a full range of piston pumps which operate at
pressures as high as 7,250 pounds per square inch ("psi") and which vary in size
from 0.9 cubic inches to 38.9 cubic inches, and in displacement from 11 to 303
gallons per minute ("gpm"). Denison is particularly well-known in the hydraulics
industry for its large-size piston pumps, such as the larger piston pumps in the
Company's Gold Cup Series and in the Premier Series. Denison is one of very few
manufacturers that offers very large piston pumps as a standard, rather than a
custom-made, product. Denison's large-size piston pumps are distinguished from
those of its competitors by its proprietary "barrel-bearing" design, which
enables the pump to run in a stable condition at high speed and pressure.
Management believes the "barrel-bearing" design gives the larger Denison piston
pumps a sturdier construction than other piston pump designs, resulting in a
longer life cycle in severe duty applications such as heavy mining equipment and
aircraft carrier steering systems.

     All Denison piston pumps are manufactured at the Company's Marysville, Ohio
facility. During 1998, the Marysville plant produced and shipped in excess of
12,000 units.

     Vane Pumps and Motors. Vane pumps and motors are ideal for applications
which require a fixed displacement in which the pressure produced does not need
to be adjusted during operation. Vane pumps and motors typically produce a low
noise level and are ideal for applications which require low noise output, such
as garbage trucks, injection molding machines and other devices found in
workplaces where OSHA regulations mandate reduced noise levels. In addition, due
to their simpler design, vane pumps and motors are less susceptible than piston
products to contamination from impurities in the hydraulic system, a feature
that makes vane pumps and motors ideal for use in steel production and mining,
which produce many contaminants.

     Denison is the second-largest manufacturer of vane pumps in the world in
terms of net sales. The Company produces a full range of vane pumps and motors
which operate at pressures in excess of 4,500 psi and which vary in size from
0.35 cubic inches to 16 cubic inches, and in displacement from 1 to 250 gpm.
Denison's newest vane pump product is the T7, which is in the prototype stage.
The T7 is designed for use in industrial applications, and offers less noise and
leakage and higher operating pressure than earlier vane pump models.

     Denison's vane pumps are recognized as among the strongest products in the
hydraulics industry and are distinguished from competitors' vane pumps by
Denison's double-lip design, in which the vane is in contact with the cam ring
at two points rather than at one as with the single-lip design. This double-lip
design makes Denison's vane pumps less susceptible to contamination than
single-lip pumps. The Company believes that no other manufacturer currently
offers the double-lip design, a feature of all vane pumps manufactured by
Denison since the 1940s.

     All Denison vane pumps are manufactured at the Company's Vierzon, France
facility. During 1998, the Vierzon plant produced and dispatched in excess of
70,000 units.

Manifolds

     Manifolds are machined steel or aluminum blocks, which act as housing for
surface mounted, or cartridge valves, which control the operation of a wide
variety of hydraulic equipment such as

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presses, bailers, lifting devices, and mobile machinery and equipment. Manifolds
are utilized in conjunction with pumps, motors, cylinders, and valves to form a
complete hydraulic system.

     Systems are a growing trend in the hydraulics industry as customers are
essentially outsourcing the hydraulics engineering expertise and component
integration to a single supplier offering a complete "package". The manufacture
and sale of manifolds offers the Company an avenue to utilize our engineering
expertise to sell additional valves, which are often not competitive if sold as
individual items. Substantially all of Denison's manifolds are manufactured at
the Company's Tampere, Finland facility acquired in December 1998.

Valves

     Valves function by changing the size or direction of the orifice through
which the pressurized fluid passes as it travels from the pump to the piston or
motor. This function provides control over the direction, pressure and flow of
the pressurized fluid depending upon the requirements of the system in which the
valve is operating. Often, electronic controllers are used to control the size
and direction of the valve orifice.

     Denison manufactures four basic types of valves: directional control valves
which alter the path of pressurized fluid through the hydraulic systems;
pressure control valves which regulate the pressure of the hydraulic fluid; flow
control valves which match the hydraulic fluid's flow with the requirements of
the system; and check valves which allow fluid to pass in one direction and not
the other. Denison's valves are used in a variety of commercial settings,
including injection molding, metal and material forming, mobile equipment such
as cranes, and marine systems such as ship-mounted winches.

     Denison is one of the few manufacturers of flange mounted pressure control
valves, a design which enables the valve to be attached directly to another
hydraulic component, such as a pump or a motor. Most competitors' valves must be
connected to the associated component with hydraulic lines, which tend to be
more expensive and are less effective at controlling leaks than flange mounting.

     All Denison valves are manufactured at the Company's Hilden, Germany plant,
with the exception of the proprietary design smaller directional control valves,
which are manufactured for the Company pursuant to an agreement with a Czech
company, a line of pressure control valves, manufactured for Denison by a Swiss
company, and a line of cartridge valves, manufactured for Denison by an English
company. In each case, the manufacturing company produces the valves using
Denison's specification. During 1998, the Hilden factory supplied approximately
210,000 units, of which approximately 120,000 were manufactured at the Hilden
factory.

Electronics

     Denison manufactures electronic controllers to be used with its piston
pumps and motors. Electronic controllers act as an interface between a hydraulic
component and the master controls of the hydraulic system operator and as a
protective device against unusual and potentially damaging signals from the
hydraulic system.

     The Venus Controller is Denison's newest and most sophisticated
microprocessor-based controller. It is programmed and adjusted with a personal
computer or other small computerized device, providing faster response and
greater accuracy than older analog devices. The Venus Controller is
distinguished from many competitors' controllers by its ability to
simultaneously control

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several different hydraulic functions or components. For example, it can control
both open-loop and closed-loop functions, whereas many competitors' products
require different controllers for each of these functions. This simplifies the
control and adjustment of hydraulic systems.

     The Venus Controller is manufactured at the Marysville, Ohio facility. The
other Denison controllers are manufactured at the Marysville, Ohio facility and
the Hilden, Germany facility.

Service

     The Company provides a full array of aftermarket services, consisting
primarily of upgrades and replacement of its own and other manufacturers'
hydraulic related products and systems, and to a lesser extent field service,
repairs and maintenance. The Company provides these aftermarket services through
its own regional sales and service subsidiaries and through its network of
independent fluid power equipment distributors.

     Denison's large installed customer base provides it with significant
aftermarket sales of spare parts and services. In the past, the highest level of
aftermarket service has been piston pumps which tend to be more complex and
require more maintenance than vane pumps. Approximately 110,000 piston pumps and
320,000 vane pumps have been manufactured by Denison and are currently in use
and therefore may be subject to service. In 1998, 11.2% of the Company's net
sales were derived from aftermarket services, primarily the sales of spare and
replacement parts.

Product Development

     Denison has a long history of emphasizing research and development, dating
back to the formation of the Company in 1932. Denison was an early technological
leader within the hydraulics industry and has been granted approximately 600
patents since the Company's inception. Denison has remained strongly committed
to being on the forefront of technological innovation, as evidenced by the
Company's continuing focus on development of new products and enhancements to
existing products.

     As of December 31, 1998, Denison's research and development staff consisted
of a total of 42 employees. Twenty-one of these employees conduct research and
development on piston pumps and motors at Denison's Ohio facility; ten focus on
research and development related to vane pumps and motors at Denison's France
facility; and eleven perform research and development on industrial valves at
Denison's Germany plant. The main activities of the research and development
staff involve modifying and improving existing products and designing variations
of existing products to suit specific customer needs. A smaller portion of their
time is spent on developing new concepts and new product designs. Denison
currently has no plans to significantly change the number of its R&D employees.
Denison incurred research and development costs of $3.1 million, $3.2 million
and $2.6 million in the years ended December 31, 1998, 1997 and 1996,
respectively.

Manufacturing and Suppliers

     The Company's production facilities are located in Marysville, Ohio,
Vierzon, France, Tampere, Finland and Hilden, Germany. The Marysville plant
manufactures piston pumps and motors, the Vierzon plant manufactures vane pumps
and motors, the Tampere plant manufactures manifolds, and the Hilden plant
manufactures valves. The manufacturing plants have undergone significant
upgrading and rationalization in recent years and are now in superior
manufacturing condition. Currently, the facilities are operated in two to three
shifts with the possibility of increasing capacity with existing machinery by
increasing working hours. Approximately 31% of the manufacturing

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workforce is dedicated to the production of piston pumps and motors, 39% to the
production of vane pumps and motors, 8% to the production of manifolds and 22%
to the production of valves. Each facility is equipped with testing equipment to
maintain the Company's high quality control standards. Both the Vierzon and
Hilden facilities are ISO9001 certified and the Marysville facility is working
toward ISO certification.

     The Company manufactures in-house virtually all of the high value-added or
quality critical components such as the rotating groups, body components and
controls used to build its products. The Company has computerized numerically
controlled type flexible machinery and equipment that is organized in a series
of work cells, utilizing just-in-time production scheduling techniques. The
Company has spent $25.0 million on new production equipment in the last four
years. As a result of these investments, significant gains in productivity
efficiency have been realized since 1993. Management believes that the
improvement programs in progress will further add to efficiency and promote cost
reductions, particularly in piston pump and valve production.

     The Company's ability to produce components to high-level standards of
complex design makes it difficult for competitors to offer products of equal
performance for certain demanding applications. Modern and innovative machining
practices are employed to produce a wide array of products, while assuring
process control. The Company also utilizes specialized and precision grinding
methods that allow superior speed, precision and efficiency, and innovative
fabrication and manufacturing processes. All manufacturing processes employed
are well proven and support the Company's efforts to produce products that are
both highly durable and reliable.

     The primary products purchased from suppliers are castings (all products),
solenoids (valves), turned parts (valves), steel bars (vane and piston), steel
and aluminum stock (manifolds), bearings (vane and piston), brass (piston) and
shafts. The Company has implemented an aggressive program of consolidating
suppliers of component parts and raw materials. This program has resulted in an
increased supply of component parts, improved quality, and reduced costs of
production materials. Currently, there are few common suppliers between the
different manufacturing facilities. Management anticipates that the continuation
of this program will yield additional savings in the future.

     The Company's operations involve the handling and use of substances that
are subject to foreign, Federal, state and local environmental laws and
regulations that impose limitations on the discharge of pollutants into the
soil, air, and water and establish standards for their storage and disposal. The
Company is not involved in any pending or threatened proceedings that would
require curtailment of its operations because of such regulations. The Company
believes that it is in material compliance with all of such laws in the United
States, and it continually expends funds to assure that it remains in material
compliance. Recent investigations of the Company's European facilities have
identified areas of contamination and practices which may be in violation of
applicable regulations. Compliance with foreign and domestic environmental laws
has not had, and is not expected to have, any material effect on the Company's
earnings or competitive position.

Sales and Marketing

     Denison has an extensive and well-trained international sales network
comprised of 16 regional sales and service subsidiaries and 193 independent
fluid power equipment distributors in 52 countries. Distributors buy products
from the Company and resell them to end-users. To a small extent, other
manufacturers' products are distributed through the Company's channels, however,
the Company's distributors do not typically carry products which compete with
the Company's products. Denison's

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sales and service subsidiaries are full service offices engaged in the
customized modification, design, manufacture, packaging, sale and servicing of
the Company's hydraulic components and systems. Typically, the sales and service
subsidiaries as well as the distributors are staffed with professional engineers
who are capable of designing hydraulic systems to meet the requirements of
customers' applications. The network is divided into three main geographical
regions: Europe, North America and the Asia-Pacific region.

     The Company has a particularly strong sales and marketing network in the
United States, which is comprised of 44 sales and marketing employees in 10
states, as well as 27 independent distributors. Direct sales to OEMs and the
government account for approximately 46% of total U.S. net sales, with the
balance of U.S. net sales effected through distributors.

     Denison's regional sales and service subsidiaries are located in 16
countries around the world, including Germany, the United Kingdom, France,
Italy, Scandinavia, Spain, Singapore, Hong Kong, Japan and Australia. Denison's
plants supply pumps, manifolds and valves to its regional subsidiaries, which
maintain small inventories of the components and parts with the highest customer
demand. Each of the regional subsidiaries has the capacity to modify or convert
pumps, motors and valves on-site to meet specific needs of customers, thus
allowing the subsidiaries to offer a flexible product line without maintaining
an extensive inventory. The regional subsidiaries also have sophisticated test
rigs to permit on-site diagnosis and repair of Denison products. Together with
the additional 193 distributors throughout the world, the regional subsidiaries
constitute an international sales network providing extensive support in
application engineering, service and repair parts for Denison products
worldwide.

     OEMs and distributors are normally updated with technical developments
through meetings, training sessions and product brochures, while promotion
efforts to other customers are handled by the distributors themselves. The OEMs
prefer to purchase all their required equipment from a single source supplier.
In order to capitalize on this trend, the Company intends to become a full range
supplier within chosen niches in various market sectors. These chosen niches
include metal forming, material forming, capital plant and machine tools in the
industrial sector; earthmoving and construction, special purpose machinery
(including mining) and agriculture in the mobile sector; and a number of
applications in the commercial and military marine sector. These have been
selected not only on the basis of fit with existing products, but also on the
basis of product overlap and management's expectation of above-average growth in
demand for these products in the foreseeable future. Management estimates that
it is possible for Denison to increase its presence as a full range supplier
within these niches through relatively few additions to its existing product
range.

Customers

     Denison's broad base of well-known customers in the hydraulics industry in
the United States, Europe and the Asia-Pacific region attests to the high
reliability and quality of the Company's products. In 1998, Denison's top ten
OEM and direct end-user customers accounted for approximately 12% of net sales,
and the top ten customers overall accounted for approximately 12% of net sales.
The markets served by the Company are substantial and diversified, with no
single customer accounting for more than 4% of the Company's net sales in 1998.

     The Company's products are primarily utilized in industrial, mobile and
marine applications. Industrial applications involve equipment that generally is
stationary in factories or processing plants, such as presses, injection molding
equipment, power units, drilling equipment, test stands, mining machinery,
metal-forming and metal-cutting machinery and machine tools. The requirements of
the

                                       9
<PAGE>

industrial marketplace are more demanding than most mobile applications since
industrial equipment typically operates at significantly higher cycles. The
Company's products are designed to meet these operating imperatives. Denison's
industrial customers include Cincinnati Milacron (machine tools and injection
molding equipment); Ingersoll-Rand and Driltech (rotary drills); General
Electric and Solar Turbines (power generation); Harris Waste Management and
Kershaw Manufacturing (presses and boilers); and Husky (injection molding
equipment).

     Mobile applications involve equipment that generally is not fixed in place,
such as construction, demolition, agricultural, mining, lumber and pulp harvest,
and utility equipment. These industries tend to place a premium on
considerations of space, weight and cost. Mobile customers include Komatsu
(construction equipment); Case and Volvo (wheel loaders); Plasser & Theurer
(railroad repair machinery); and PPM Crane (mobile cranes and excavators).

     Marine applications involve equipment used on sea vessels by both
commercial and military end-users, such as anchors, ship-mounted winches and
deck cranes on aircraft carriers. Marine customers include the U.S. Navy and
Hepburn Engineering.

     End users who purchase the Company's products through distributors include
Bethlehem Steel and Kaiser Aluminum (primary metals); Boeing and Textron
(aerospace); Boise Cascade and Roseberg Forest Products (pulp and paper
industry); and Westinghouse and Stewart & Stevenson (power generation). Other
major customers include large OEMs such as Grove Manufacturing and Tamrock in
the United States; Grange (France), Hagglund & Soner AB (Sweden), Krupp
(Germany) and MIR (Italy), in Europe; and IHI, Kawasaki and Mitsubishi in Japan.

Backlog

     The Company's backlog of unfilled firm orders was $22.2 million at December
31, 1998, compared with $26.6 million at December 31, 1997. The Company
estimates that approximately 98% of the December 31, 1998 backlog will be filled
by December 31, 1999.

Competition

     The hydraulics industry is highly fragmented and intensely competitive. The
Company competes primarily on the basis of the performance, quality and
durability of its products, as well as the availability of aftermarket support
through its regional sales and service subsidiaries and through its network of
independent fluid power equipment distributors.

     The Company competes with divisions of large corporations, such as Rexroth
and Vickers, and divisions of Parker Hannifin and Bosch, as well as companies
with more limited product lines. Some of the Company's competitors are larger
and have greater financial and other resources than the Company and thus can
better withstand adverse economic or market conditions as compared to the
Company. In addition, companies not currently in direct competition with the
Company may introduce competing products in the future.

     The Company has a large number of competitors, some of which are full-line
producers and others that are niche suppliers like the Company. The most
significant competitors market globally. In addition, the Company faces
competition from a number of local companies in regional markets. Full-line
producers have the ability to provide integrated hydraulic systems to customers,
including components functionally similar to those manufactured by the Company.
There has been some consolidation activity in recent years, with large,
full-line producers filling out their product lines with

                                       10
<PAGE>

the acquisition of smaller, privately held producers. The Company's main
competitors by product include Rexroth, Oilgear, Hydrakraft and Parker Hannifin
(piston products); Vickers, Atos and Parker Hannifin (vane products); and
Rexroth, Bosch, Vickers, Atos and Parker Hannifin (valve products). In addition,
various small regional companies compete with the Company's manifold product
lines.

Employees

     As of December 31, 1998, the Company had 983 full-time employees, including
528 employees in manufacturing and operations, 42 employees in product
development, 211 employees in sales and marketing and 202 employees in
management and administration. In addition, the Company utilizes the services of
approximately 70 temporary employees. Of the Company's full-time employees, 250
are working in the United States, 183 in Germany, 276 in France, 52 in Finland
and the remainder in the Company's sales and service facilities. The Company has
not experienced any work stoppage and considers its relations with its employees
to be satisfactory.

     There is a collective bargaining agreement with the International
Association of Machinists and Aerospace Workers Local Lodge 427, which covers
all hourly-paid production and maintenance employees (125 employees overall) at
the U.S. facility and expires in June 1999. Management at the U.S. facility
knows of no grievances which are likely to threaten work stoppage. The French
facility has a collective bargaining agreement, the "Convention Collective de la
Matallurgie," which covers all employees and is mandatory in French companies
which engage in activities such as Denison's. The non-management personnel are
represented by several unions. While the German facility is not directly subject
to collective bargaining agreements, it does adopt certain provisions of
collective bargaining agreements applicable to the metalworking industry in its
employment contracts. Such provisions relate to matters such as working
conditions, wages and year-end bonuses. Management at each of the facilities
believes labor relations to be good.

Environmental Matters

     The Company's operations involve the handling and use of substances that
are subject to foreign, federal, state and local environmental laws and
regulations that impose limitations on the discharge of pollutants into the
soil, air and water and establish standards for their storage and disposal. A
risk of environmental liability is inherent in manufacturing activities.

     Investigations of the Company's European facilities have identified areas
of contamination and some practices which may be in violation of applicable
regulations. The Company is in the process of determining whether any
remediation and/or any changes in current practices are necessary. There can be
no assurance that remediation of these facilities will not be required or that
fines or sanctions will not be imposed on the Company for violations of
environmental law, if any are determined to exist. While management does not
believe that compliance with environmental requirements is likely to have a
material adverse effect on the Company, there can be no assurance that future
additional environmental compliance or remediation obligations will not arise at
one or more of the Company's facilities or that such obligations could not have
a material adverse effect on the Company's financial condition or results of
operations. The Company has an accrual of $1.8 million at December 31, 1998 for
anticipated future costs related to environmental liabilities. See Note 14 of
Notes to Consolidated Financial Statements.

                                       11
<PAGE>

Patents and Trademarks

     The Company believes that the growth of its business is dependent upon the
quality of its products, its ability to produce products that meet the
requirements of its customers and its relationships in the marketplace, rather
than the extent of its patents and trademarks. The Company currently has over
100 patents and has been granted approximately 600 patents since its inception.
The loss of any single patent is not likely to have a material adverse effect on
the Company's business, financial condition and results of operations.

Item 2.  Description of Property.

     Denison has administrative, sales and manufacturing facilities located in
Marysville, Ohio; Vierzon, France; Tampere, Finland; and Hilden, Germany. All
four facilities are owned by the Company and occupy 170,000, 174,100, 120,000
and 146,600 square feet, respectively. The Marysville plant manufactures piston
pumps and motors, the Vierzon plant manufactures vane pumps, and motors, the
Tampere plant manufactures manifolds, and the Hilden plant manufactures valves.
The manufacturing plants have undergone significant upgrading and
rationalization in recent years and are now in superior manufacturing condition.
Currently, the facilities are operated in two to three shifts with the
possibility of increasing capacity with existing machinery by increasing working
hours. Approximately 29% of the manufacturing workforce is dedicated to the
production of piston pumps and motors, 40% to the production of vane pumps and
motors, 8% to the production of manifolds and 23% to the production of valves.
Each facility is equipped with testing equipment to maintain the Company's high
quality control standards. Both the Vierzon and Hilden facilities are ISO9001
certified and the Marysville facility is working toward ISO certification.

     The Company also owns a sales and service facility in Wakefield, England.
In addition, the Company leases or subleases facilities for its regional sales
and service subsidiaries in the following countries: Australia, Belgium, Canada,
Denmark, Finland, France, Germany, Hong Kong, Italy, Japan, Luxembourg, the
Netherlands, Singapore, Spain, Sweden, the United Kingdom and the United States.
The Company believes that its existing facilities are sufficient for its current
needs, and that suitable additional or alternative space will be available in
the future on commercially reasonable terms as needed.

Item 3.  Legal Proceedings.

     The Company is involved in certain legal proceedings incidental to the
normal conduct of its business. The Company does not believe that any
liabilities relating to any of the legal proceedings to which it is a party are
likely to be, individually or in the aggregate, material to its consolidated
financial position or results of operations.

Item 4.  Control of Registrant.

     The table below sets forth certain information with respect to the
beneficial ownership of the Shares by the principal shareholders (each person or
entity known to the Company to own beneficially ten percent or more of the
shares) at March 1, 1999.


                                       12

<PAGE>

<TABLE>
<CAPTION>
Title of Class              Identity of Person or Group                   Amount Owned (1)         Percent of Class
--------------              ---------------------------                   ----------------         ----------------

<S>                         <C>                                               <C>                       <C>  
Ordinary Shares             J. Colin Keith (2)                                1,400,000                 12.6%

Ordinary Shares             Anders C.H. Brag (2)                              1,350,000                 12.2%

Ordinary Shares             E.F. Gittes (2)                                   1,200,000                 10.8%

Ordinary Shares             All directors and executive officers as
                            a group (8 persons) (3)                           4,109,070                 37.0%
</TABLE>

(1) For purposes of this table, ownership is determined in accordance with the
beneficial ownership rules of the Securities Exchange Act of 1934 which deem
shares to be beneficially owned by any person who has, or shares, voting or
investment power with respect to the Ordinary Shares. Unless otherwise
indicated, the Company believes based on information furnished by such persons,
that the persons named in this table have sole voting and sole investment power
with respect to all shares shown as beneficially owned.

(2) Mr. Keith is Chairman of the Board of Directors of the Company; Mr. Brag is
Managing Director of the Company; Mr. Gittes is a Director of the Company.

(3) Includes an aggregate 74,070 Ordinary Shares held for the account of
Christopher Mills, a Director of the Company, and certain members of his family.

Item 5.  Nature of Trading Market.

     The principal trading market for the Company's securities is ADSs listed on
the Nasdaq National Market. The Company's ADSs have traded in the U.S. since
August 8, 1997 under the symbol "DENHY". Each ADS represents one Ordinary Share,
par value $0.01 per Ordinary Share. Each ADS is evidenced by an ADR. Bankers
Trust Company is the Depositary for the ADRs. As of December 31, 1998,
11,097,450 ADSs were held by 16 registered ADR holders. The largest holder, The
Depository Trust Company, holds 5,839,413 ADSs representing 74 participants.

     The following table shows the high and low sales prices of the ADSs on the
Nasdaq National Market for each quarterly period since the offering of the ADSs
to the public in August 1997.

                                                      Price per ADS (US$)
                                                     ----------------------
                     Quarterly Period Ended          High            Low
                     ----------------------          ----            ---
      September 30, 1997 (from August 7, 1997)       19.375          17.250
      December 31, 1997                              21.125          15.875
      March 31, 1998                                 18.50           15.25
      June 30, 1998                                  20.75           17.25
      September 30, 1998                             20.25           12.50
      December 31, 1998                              14.75           11.75

     At March 29, 1999, the last reported price for an ADS on the Nasdaq
National Market was $13.00.

Item 6.  Exchange Controls and Other Limitations Affecting Security Holders.

     Although there are currently no English foreign exchange control
restrictions on the payment of dividends on the Ordinary Shares or the ADSs,
under current English law, dividends may not be paid to the governments of Iraq
or Libya (or persons exercising public functions in such countries) or

                                       13
<PAGE>

to any resident of Iraq or any person treated as so resident (each of the
foregoing, a "Prohibited Person").

     There are no restrictions under the Company's Memorandum and Articles of
Association that limit the right of non-resident or foreign owners to hold the
Company's securities, including the Ordinary Shares and the ADSs. However, under
current English law, Ordinary Shares or ADSs may not be owned by a Prohibited
Person.

Item 7.  Taxation.

     The following is a summary of certain material U.S. federal income and U.K.
tax consequences for holders of Ordinary Shares or ADSs. This summary is based
on the tax laws of the United States (including the Internal Revenue Code of
1986, as amended (the "Code"), its legislative history, final, temporary and
proposed regulations thereunder, published rulings and court decisions) and the
tax law and practice of the United Kingdom, as well as on the Income Tax
Convention between the United States of America and the United Kingdom (the
"Treaty") and the Estate and Gift Tax Convention Between the United States of
America and the United Kingdom (the "Estate Tax Treaty") all as in effect at the
date hereof, all of which are subject to change (or changes in interpretation),
possibly with retroactive effect.

     For purposes of this discussion, a "U.S. Holder" is any beneficial owner of
Ordinary Shares or ADSs that is (i) a citizen or resident of the United States,
(ii) a corporation or partnership organized under the laws of the United States,
(iii) an estate the income of which is subject to U.S. federal income taxation
regardless of the source, or (iv) a trust if a court within the U.S. is able to
exercise primary supervision over the administration of the trust and one or
more U.S. persons have the authority to control substantial decisions of the
trust. The term "United States" means the United States of America (including
the States and the District of Columbia). A "Non-U.S. Holder" is any beneficial
owner of Ordinary Shares or ADSs that is not a U.S. Holder.

     This discussion does not address any aspects of U.S. taxation other than
federal income taxation or any aspects of U.K. taxation other than income and
capital gains taxation, inheritance taxation and stamp duty and stamp duty
reserve tax. The discussion does not address the U.K. tax consequences for a
U.K. resident or ordinarily resident person of owning, acquiring or disposing of
ADRs evidencing ADSs or Ordinary Shares.

     In general, and taking into account the earlier assumptions, for U.S.
federal income and U.K. tax purposes, beneficial holders of ADRs evidencing ADSs
will be treated as the beneficial owners of the Ordinary Shares represented by
those ADRs, and exchanges of Ordinary Shares for ADSs, and ADRs for Ordinary
Shares, will not be subject to U.S. federal income or to U.K. tax apart from
U.K. stamp duty and stamp duty reserve tax.

Taxation of Dividends

     The following is a summary of United Kingdom and United States taxation of
dividends. The Company currently intends to retain all of its earnings to
finance its operations and future growth and does not expect to pay any cash
dividends in the foreseeable future.

                                       14
<PAGE>

 United Kingdom Taxation

     Under U.K. tax law, the Company can pay two kinds of
dividends--conventional dividends and foreign income dividends ("FIDs"). As a
result of changes introduced by the Finance (No. 2) Act 1997, the Company will
not be able to elect to pay a dividend as a FID on or after April 6, 1999, nor
will any dividend paid on or after such date be deemed to be a FID. Any
dividend, or portion thereof, which the Company has not elected to pay as a FID
will normally be treated as a conventional dividend although, in certain
circumstances, a dividend will be deemed to be a FID even though no such
election has been made. The Company, however, does not intend to pay a dividend
in such circumstances nor to make any such election and, therefore, this summary
does not address the tax treatment of FIDs.

     No U.K. income tax is withheld from dividend payments by the Company.
However, the Company is required when paying a dividend to account to the U.K.
Inland Revenue for an advance payment of corporation tax ("ACT"), currently at
the rate of 25%, of the amount of dividends paid to shareholders. ACT paid by
the Company can generally be set against its liability to mainstream corporation
tax, subject to certain limits and restrictions.

     As a result of changes brought in by the Finance (No. 2) Act of 1997, the
Company is no longer required to account to the U.K. Inland Revenue for an ACT
on dividends paid on or after April 6, 1999.

     An individual shareholder who is the beneficial owner of Ordinary Shares or
ADSs and resident in the United Kingdom for U.K. tax purposes is for U.K. income
tax purposes treated as having taxable income equal to the sum of the dividend
paid to him, plus a tax credit equal to 25% of the amount of the dividend
received (or 20% of the combined amount of the dividend and the related ACT).
The tax credit is set against the shareholder's U.K. income tax liability on the
dividend and is treated as satisfying the shareholder's lower or basic tax
liability in respect of the dividend or, if the individual is exempt from or not
liable to U.K. income tax on the dividend, it is refunded to him. Shareholders
liable to higher rate tax may be liable to pay further U.K. income tax on the
dividend received. As a result of changes introduced by the Finance (No. 2) Act
1997, no refund of the tax credit will be made to individual shareholders in
respect of dividends paid on or after April 6, 1999. Furthermore, although no
change to the rate of ACT has been proposed, the rate of tax credits in respect
of dividends paid by the Company on or after April 6, 1999 will be reduced. The
tax credit will be equal to one-ninth of the dividend paid (or 10% of the
aggregate of the dividend and the tax credit).

     Subject to certain exceptions, a U.S. Holder who is a resident of the
United States for purposes of the Treaty will be entitled to a payment from the
United Kingdom of the tax credit to which an individual resident in the United
Kingdom would have been entitled (the "tax credit") subject to a U.K.
withholding tax (the "withholding tax") equal to 15% of the sum of the dividend
paid and the tax credit (the net amount being the "tax credit payment"). For
purposes of the Treaty, a U.S. Holder generally will be considered a resident of
the United States if the U.S. Holder is (i) any person, other than a
corporation, resident in the United States for purposes of U.S. tax; but in the
case of a partnership, estate or trust, only to the extent that the income
derived by such partnership, estate or trust is subject to U.S. tax as the
income of a resident, either in its hands or the hands of its partners or
beneficiaries; and (ii) a U.S. corporation. For example, at current rates, a
dividend of (pound)8.00 to such a U.S. Holder would result in a claim for a tax
credit of (pound)2.00, making a total entitlement of (pound)10.00, but subject
to a withholding tax of (pound)1.50, resulting in a net receipt (before any
applicable U.S. taxes) of (pound)8.50.

                                       15
<PAGE>

     No tax credit payment is available, however, (i) to U.S. Holders whose
holdings are effectively connected with either (a) a permanent establishment in
the United Kingdom through which the U.S. Holder carries on a business in the
United Kingdom or (b) a fixed base in the United Kingdom from which the U.S.
Holder performs independent personal services, or (ii) to U.S. corporations
which are also resident in the United Kingdom, or (iii) under certain
circumstances to U.S. corporations at least 25% of the capital of which is held,
directly or indirectly, by persons that are not individual residents or
nationals of the United States. Further, special rules may apply if the U.S.
holder (i) is a partnership, an estate or trust or (ii) is exempt from taxation
in the United States on dividends paid by the Company. As a result of the
reduction in the tax credit amount introduced by the Finance (No. 2) Act 1997
(discussed above), no tax credit payment will be available to U.S. Holders in
respect of dividends paid on or after April 6, 1999.

 United Kingdom Refund Procedure

     It is anticipated that, if the Company decides to pay dividends and if at
that time it is thought to be beneficial to U.S. Holders to do so, arrangements
will be made by the Depositary of the ADSs so that, subject to certain
exceptions, the tax credit payment (if any) will be made at the same time as and
together with any dividend being paid to a U.S. Holder otherwise entitled to a
tax credit payment (the "H Arrangements"), if where the ADSs are held directly
by the registered U.S. Holder, the registered holder completes the declaration
on the reverse of the dividend check and presents the check for payment within
three months from the date of the issue of the check. If the U.S. Holder holds
the ADSs through an account held by an agent, dealer or broker with the
Depository, a similar declaration on behalf of the U.S. Holder must be made by
the agent, dealer or broker.

     These arrangements are implemented at the discretion of the U.K. Inland
Revenue and may be amended or revoked without notice. They do not apply to
certain shareholders or U.S. Holders, including partnerships, certain investment
or holding companies and bodies exempt from U.S. tax on the dividends received
(apart from certain pension funds), estates or trusts with beneficiaries outside
the United States and persons holding 10% or more of the class of shares in
respect of which a dividend is paid, who must make a direct claim. Such U.S.
Holders must, in order to obtain a refund of a tax credit payment, file in the
manner and at the time described in Revenue Procedure 80-18, 1980-1 C.B. 623 and
Revenue Procedure 81-58, 1981-2 C.B. 678 (summarized below), a claim for a tax
credit payment identifying the dividends with respect to which the tax credit
was paid. Claims for tax credit payments must be made within six years of the
U.K. year of assessment (generally the 12 month period ending April 5 in each
year) in which the related dividend was paid, in accordance with the procedures
set out below.

     The first claim by such U.S. Holder for a refund of a tax credit payment is
made by sending the appropriate U.K. form in duplicate to the Director of the
Internal Revenue Service Center with which the U.S. Holder's last federal income
tax return was filed. Forms may be obtained from the Internal Revenue Service,
Assistant Commissioner (International), 950 L'Enfant Plaza South, S.W.,
Washington, D.C. 20024, Attention: Taxpayers' Service Division. Because a refund
claim is not considered made until the U.K. tax authorities receive the
appropriate form from the Internal Revenue Service (the "Service"), forms should
be sent to the Service well before the end of the applicable limitation period.
Any claim for a refund of a tax credit payment by a U.S. Holder after the first
claim should be filed directly with the U.K. Inland Revenue, Financial
Intermediaries and Claims Office, Fitz Roy House, P.O. Box 46, Nottingham NG2
1BD, England.

                                       16
<PAGE>

     U.S. Holders who are not resident or ordinarily resident in the United
Kingdom and have no other source of U.K. income are not required to file a U.K.
income tax return.

  United States Federal Income Taxation

     U.S. Holders. Except as may be required under the CFC, foreign personal
holding company or passive foreign investment company rules discussed below,
under the U.S. federal income tax laws, U.S. Holders will include in gross
income the gross amount of any dividend paid (before reduction for United
Kingdom withholding taxes) by the Company out of its current or accumulated
earnings and profits (as determined under United States federal income tax
principles) as ordinary income when the dividend is actually or constructively
received by the U.S. Holder, in the case of Ordinary Shares, or by the
Depositary, in the case of ADSs. Distributions in excess of the Company's
earnings and profits will be treated, for U.S. federal income tax purposes,
first as a non-taxable return of capital to the extent of the U.S. Holder's
basis in the ADSs or Ordinary Shares, and then as gain from the sale or exchange
of such ADSs or Ordinary Shares. The dividend will not be eligible for the
dividends-received deduction generally allowed to United States corporations in
respect of dividends received from other United States corporations. The amount
of the dividend distribution includible in the income of a U.S. Holder will be
the dollar value of the pounds sterling payments made, determined at the spot
pounds sterling/dollar rate on the date such dividend distribution is includible
in the income of a U.S. Holder, regardless of whether that payment is in fact
converted into dollars. Generally, any gain or loss resulting from currency
exchange fluctuations during the period from the date the dividend payment is
includible in income to the date such payment is converted into dollars will be
treated as ordinary income or loss. Such gain or loss will generally be income
from sources within the United States for foreign tax credit limitation
purposes.

     Subject to certain limitations, the U.K. tax withheld in accordance with
the Treaty and paid over to the United Kingdom will be treated for U.S. federal
tax purposes as a foreign income tax that may be credited against the U.S.
Holder's federal income tax liability of the U.S. Holders. Under recently
enacted legislation, no foreign tax credit is permitted to U.S. Holders who (i)
have held their shares for less than 16 days during the 30 day period beginning
on the date which is 15 days before the record date for the dividend, or (ii) to
the extent the recipient of the dividend is under an obligation (whether
pursuant to a short sale or otherwise) to make related payments with respect to
positions in substantially similar or related property. To the extent a refund
of the tax withheld is available to a U.S. Holder under the laws of the United
Kingdom or under the Treaty, the amount of tax that is withheld will not be
eligible for credit against the U.S. Holder's U.S. federal income tax liability.
For foreign tax credit limitation purposes, the dividend will be income from
sources without the U.S. and generally will be classified as passive income (or,
in the case of certain holders, financial services income) for purposes of
determining the U.S. foreign tax credit limitation. In general, for tax years
beginning after 1997, individuals with creditable foreign taxes of $300 or less
($600 in the case of a joint return) and who have exclusively passive foreign
income may elect annually to be exempt from the foreign tax credit limitation
rules. In lieu of claiming a U.S. foreign tax credit, the U.S. Holder may elect
to claim a deduction for the U.K. tax withheld against such U.S. Holder's
federal income.

     The rules relating to the determination of and the limitations relating to
the U.S. foreign tax credit are complex and prospective investors should consult
their own tax advisors with respect thereto.

                                       17
<PAGE>


     Distributions of additional Ordinary Shares to U.S. Holders with respect to
their Ordinary Shares or ADSs that are made as part of a pro rata distribution
to all shareholders of the Company generally will not be subject to U.S. federal
income tax.

     Non-U.S. Holders. Dividends paid to a Non-U.S. Holder in respect of
Ordinary Shares or ADSs will not be subject to United States federal income tax
unless such dividends are effectively connected with the conduct of a U.S. trade
or business within the United States by such Non-U.S. Holder (and are
attributable to an office or other fixed place of business in the United States
or a permanent establishment maintained in the United States by such Non-U.S.
Holder, if an applicable income tax treaty so requires as a condition for such
Non-U.S. Holder to be subject to United States taxation on a net income basis in
respect of income from ordinary shares or ADSs), in which case the Non-U.S.
Holder generally will be subject to tax in respect of such dividends in the same
manner as a U.S. Holder. Any such effectively connected dividends received by a
corporate non-U.S. Holder may also, under certain circumstances, be subject to
an additional "branch profits tax" at a 30% rate or such lower rate as may be
specified by an applicable income tax treaty.

Taxation of Capital Gains

  United Kingdom Taxation

     Under the Treaty, each country may in general tax capital gains in
accordance with the provisions of its domestic law. Under the present U.K. law,
a U.S. Holder that is not resident (and, in the case of an individual, not
ordinarily resident) in the U.K. for U.K. tax purposes and who does not carry on
a trade, profession or vocation in the U.K. through a branch or agency to which
the Ordinary Shares or ADSs are attributable will not be liable for U.K.
taxation on capital gains or eligible for relief for allowable losses realized
on the sale or other disposal (including redemption) of such Ordinary Shares or
ADSs.

  United States Federal Income Taxation

     U.S. Holders. Upon a sale or other disposition of Ordinary Shares or ADSs,
a U.S. Holder will recognize gain or loss for United States federal income tax
purposes in an amount equal to the difference between the U.S. dollar value of
the amount realized and the U.S. Holder's adjusted tax basis (determined in U.S.
dollars) in such Ordinary Shares or ADSs. Generally, such gain or loss will be
capital gain or loss. Under recently enacted legislation, the maximum regular
individual U.S. federal income tax rate on capital gains is 20% for assets held
for more than 12 months. Capital gains on the sale of assets held for one year
or less are subject to U.S. federal income tax at ordinary income rates. Certain
limitations exist on the deductibility of capital losses by both corporate and
individual taxpayers. Any tax imposed by the United Kingdom directly on the gain
from such a sale or other disposition would generally be eligible for the U.S.
foreign tax credit; however, because the gain would be U.S. source, the U.S.
Holder might not be able to use the credit otherwise available because of the
foreign tax credit limitation rules.

     Non-U.S. Holders. A Non-U.S. Holder will not be subject to United States
federal income tax in respect of gain recognized on a disposition of Ordinary
Shares or ADSs unless (i) the gain is effectively connected with a trade or
business of the Non-U.S. Holder in the United States or (ii) in the case of a
Non-U.S. Holder who is an individual, such holder is present in the United
States for 183 or more days in the taxable year of the sale and certain other
conditions apply. Effectively connected gains realized by a corporate Non-U.S.
Holder may also, under certain circumstances, be subject to an

                                        18
<PAGE>

additional "branch profits tax" at a 30% rate or lower rate as may be specified
by an applicable income tax treaty.

  Passive Foreign Investment Company Considerations

     Special United States federal income tax rules apply to U.S. Holders owning
shares of a "passive foreign investment company" ("PFIC"). A foreign corporation
will be considered a PFIC for any taxable year in which 75% or more of its gross
income is passive income or in which 50% or more of the average value (or, if a
CFC or if elected, the adjusted tax basis) of its assets are considered "passive
assets" (generally assets that generate passive income). Based on an analysis of
current law and of its financial position, the Company believes that it is not a
PFIC for United States federal income tax purposes and does not anticipate that
it will become a PFIC in the foreseeable future, although no assurances can be
made that the applicable tax law or other relevant circumstances will not change
in a manner which affects the PFIC determination. If the Company were classified
as a PFIC, a U.S. Holder could be subject to increased tax liability (possibly
including an interest charge) upon the sale or other disposition of Ordinary
Shares or ADSs or upon the receipt of "excess distributions", unless such U.S.
Holder elected to be taxed currently on its pro rata portion of the Company's
income (a "QEF Election"), whether or not such income was distributed in the
form of dividends or otherwise. Under recently enacted legislation, for tax
years beginning after 1997, U.S. Holders may elect to mark to market stock in a
marketable PFIC (a "Mark to Market Election"). In general, U.S. Holders making a
Mark to Market Election would be required to recognize each year as ordinary
income or loss the difference between the U.S. Holder's adjusted basis in their
PFIC shares and the fair market value of such shares. The Company intends to
monitor its status under the PFIC rules and, in the event that the Company makes
a determination that it is a PFIC for any taxable year, it will promptly notify
its U.S. Holders of such determination and will provide its U.S. Holders with
the required information necessary to make the QEF Election.

  Controlled Foreign Corporation Discussion

     Under Subpart F of the Code, a CFC is a foreign corporation that on any day
of its taxable year is owned, directly, indirectly, or by attribution, more than
50%, by vote or value, by "U.S. Shareholders." For this purpose, a "U.S.
Shareholder" is a U.S. person (as defined in Section 957(c) of the Code) who
owns directly, indirectly or by attribution at least 10% of the total combined
voting power of all shares entitled to vote of the foreign corporation.

     If a foreign corporation has been a CFC for an uninterrupted period of at
least 30 days during the CFC's taxable year, a U.S. Shareholder who owns stock
in the CFC on the last day in such year must include in income for his taxable
year in which or with which the taxable year of the CFC ends, the total of (i)
his pro rata share of the CFC's Subpart F income for such taxable year, (ii) his
pro rata share of the CFC's previously excluded Subpart F income withdrawn from
investments in less developed countries for such year, (iii) his pro rata share
of the CFC's previously excluded Subpart F income from foreign base company
shipping operations for such year; and (iv) his pro rata share of the CFC's
increase in earnings invested in U.S. property for such year. Amounts
distributed by a CFC to U.S. Shareholders are tax free to the extent that such
amounts have been previously taken into income by such U.S. Shareholders.

     A U.S. person (as defined in Section 957(c)) who owns less than 10% of the
total combined voting power of all classes of voting stock of the Company
directly, indirectly, or by attribution, is not taxed on the undistributed
income of the Company even if the Company is a CFC. Distributions to

                                       19
<PAGE>

shareholders who are not U.S. Shareholders (but are U.S. Holders) will be
taxed under the ordinary rules relating to the taxation of distributions
discussed above. U.S. Holders who own more than 5%, but less than 10% of the
Company's voting stock, may have certain reporting requirements, however.

     Subject to certain limitations, under Section 1248 of the Code, if a U.S.
person sells or exchanges stock in a foreign corporation, or receives a
distribution from a foreign corporation which for U.S. tax purposes is treated
as an exchange of stock, and such person owns, or is considered as owning by
applying certain rules of constructive ownership, 10% or more of the total
combined voting power of all classes of stock entitled to vote of such foreign
corporation at any time during the five-year period ending on the date of sale
or exchange when such foreign corporation was a CFC, then the gain recognized on
the sale or exchange of such stock shall be included in the gross income of such
person as a dividend, to the extent of earnings and profits of the foreign
corporation accumulated during the period or periods the stock sold or exchanged
was held by such person while such foreign corporation was a CFC.

     Management reported that the Company met the requirements to be a CFC for
at least 30 days during the Company's 1997 tax year. As such, the Company was a
CFC for 1997. Following the completion of the initial public offering in August
1997 (the "Offering"), the Company expects that ownership of its shares is such
that it will not meet the requirements to be treated as a CFC, although there
can be no assurance that the Company will not be, or in the future become, a
CFC. The Company's status as a CFC depends on the extent to which its U.S.
Shareholders own, in the aggregate, more than 50% of the Company (by vote or
value) and, therefore, the Company's classification as a CFC is not within the
control of the Company.

     The Company will attempt to monitor its status, particularly the identity
of its U.S. Shareholders, and will, promptly following the end of any taxable
year in which it has determined that it is a CFC, notify all of its U.S.
Shareholders that it is a CFC. If the Company becomes a CFC, it will comply with
all reporting requirements applicable to such classification.

  Foreign Personal Holding Company Discussion

     In general, the Company and any of its non-U.S. subsidiaries may be
classified as a "foreign personal holding company" ("FPHC") if in any taxable
year, five or fewer U.S. Holders own directly, indirectly, or by attribution,
50% (by vote or value) of the Company's stock (the "Ownership Test") and at
least 60% (or, in certain circumstances, at least 50%) of the gross income of
the Company or any non-U.S. subsidiaries of the Company consists of certain
passive income for purposes of the FPHC provisions (the "Income Test").

     If the Company or any of its subsidiaries becomes a FPHC, each U.S. Holder
of ADSs or Ordinary Shares who held such shares on the last day of the taxable
year of the Company or, if earlier, the last day of its taxable year in which
the Ownership Test was met, would be required to include in gross income as a
deemed dividend such U.S. Holder's pro rata portion of the undistributed
"passive" income of the Company, even if no cash dividend were actually paid. In
such a case, a U.S. Holder would generally be entitled to increase its tax basis
in the ADSs or Ordinary Shares of the Company by the amount of the deemed
dividend.

     It is likely that the Company has met the Ownership Test for FPHC purposes
prior to the Offering. However, following the Offering, it has not met the
Ownership Test. In addition, based on an analysis of current law and its
financial position, the Company believes that neither it nor any of its

                                       20

<PAGE>

non-U.S. subsidiaries meets the Income Test. Thus, the Company's U.S. Holders
should not be subject to the FPHC rules. While no assurance can be given that
the Company and its non-U.S. subsidiaries will not be subject to the FPHC rules,
the Company intends to manage its financial affairs to avoid such
classification. If the Company determines that it or any of its non-U.S.
subsidiaries is a FPHC, it will provide appropriate notification to the
Company's U.S. Holders.

United Kingdom Inheritance Tax

     Under the Estate Tax Treaty, Ordinary Shares or ADSs held beneficially by
an individual U.S. Holder who is domiciled for the purpose of such treaty in the
U.S. and is not for purposes of such treaty a national of or domiciled in the
United Kingdom will not, provided any tax chargeable in the U.S. is paid, be
subject to U.K. inheritance tax on the disposal of the Ordinary Shares or ADSs
by way of gift or upon the individual's death unless they are part of the
business property of a permanent establishment of the individual in the United
Kingdom or, in the case of a U.S. Holder who performs independent personal
services, pertain to a fixed base situated in the United Kingdom. Where the ADSs
or Ordinary Shares have been placed in trust by a settler who, at the time of
settlement, was a U.S. Holder, the ADSs or Ordinary Shares will generally not be
subject to U.K. inheritance tax if the settler, at the time of the settlement,
was domiciled in the United States for the purposes of the treaty and was not a
U.K. national and the ADSs or Ordinary Shares are not part of the business
property of a U.K. permanent establishment and do not pertain to a U.K. fixed
base, as more fully summarized above. In the exceptional case where the shares
are subject both to U.K. inheritance tax and to U.S. federal gift or estate tax,
the treaty generally provides for the tax paid in the United Kingdom to be
credited against tax paid in the United States or for tax paid in the United
States to be credited against tax payable in the United Kingdom based on
priority rules set out in that treaty.

United States Federal Gift and Estate Tax

     In general, an individual U.S. Holder will be subject to U.S. gift and
estate taxes with respect to his or her ownership of ADSs or Ordinary Shares in
the same manner and to the same extent as with respect to other types of
personal property. Holders who are not individual citizens or residents of the
United States will generally not be subject to U.S. federal gift and estate tax.

United Kingdom Stamp Duty and Stamp Duty Reserve Tax

     Stamp duty reserve tax at the then-applicable rate arises upon the issue to
the Depositary of the new Ordinary Shares by the Company. The current rate of
stamp duty reserve tax is 1.5% of the market value of the Ordinary Shares. The
stamp duty reserve tax arising on such issue will be paid by the Company.

     Provided that the instrument of transfer is not executed in the United
Kingdom and remains at all subsequent times outside the United Kingdom, no U.K.
stamp duty will be payable on the acquisition or transfer of ADSs representing
Ordinary Shares, evidenced by ADRs, nor will an agreement to transfer such ADSs
evidenced by ADRs give rise to a liability to stamp duty reserve tax.

     A transfer of Ordinary Shares in registered form by the Depositary or its
nominee to the beneficial owners of the relevant ADS or its nominee when the
beneficial owner is not transferring beneficial ownership will give rise to a
fixed charge to U.K. stamp duty of 50p.

     Purchasing Ordinary Shares in registered form, as opposed to ADRs, will
normally give rise to a charge to U.K. stamp duty at the rate of 50p per
(pound)100 (or part thereof) (or stamp duty reserve tax at

                                       21
<PAGE>

the rate of 0.5%) of the price payable for the Ordinary Shares. Stamp duty and
stamp duty reserve tax generally are the responsibilities of the purchaser.
Where such Ordinary Shares are later transferred to the Depositary or
Depositary's nominee or agent, stamp duty or stamp duty reserve tax will
normally be payable at the rate of (in the case of stamp duty) (pound)1.50 per
(pound)100 (or part thereof) of, or (in the case of stamp duty reserve tax) 1.5%
of the consideration for the transfer or, if none, of the value of the Ordinary
Shares at the time of transfer. Such tax is payable by the Depositary but under
the Deposit Agreement, holders of ADRs must pay an amount equal to such tax to
the Depositary.

Backup Withholding and Information Reporting

     In general, information reporting requirements will apply to dividend
payments (or other taxable distributions) in respect of Ordinary Shares or ADSs
made within the United States to a non-corporate U.S. person, and "backup
withholding" at the rate of 31% will apply to such payments (i) if the holder or
beneficial owner fails to provide an accurate taxpayer identification number,
(ii) if there has been notification from the Service of a failure by the holder
or beneficial owner to report all interest or dividends required to be shown on
its U.S. federal income tax returns or (iii) in certain circumstances, if the
holder or beneficial owner fails to comply with applicable certification
requirements. Certain corporations and persons that are not U.S. persons may be
required to establish their exemption from information reporting and backup
withholding by certifying their status on Internal Revenue Service Forms W-8 or
W-9. Moreover, under U.S. Treasury Regulations proposed to be effective for
payments made after 1997, in the case of ADSs or Ordinary Shares held by a
foreign partnership, this certification requirement would generally be applied
to the partners of the partnership, and the partnership would be required to
provide certain information, including a U.S. taxpayer identification number.

     In general, payment of the proceeds from the sale of Ordinary Shares or
ADSs through a U.S. office of a broker is subject to both U.S. backup
withholding and information reporting unless the holder or beneficial owner
certifies its non-U.S. status under penalties of perjury or otherwise
establishes an exemption. U.S. information reporting and backup withholding
generally will not apply to a payment made with respect to a transaction
effected by a foreign office of a foreign broker unless (i) the foreign broker
is a CFC or (ii) 50% or more of the gross income of the foreign broker for the
3-year period ending with the close of its taxable year preceding the payment
was effectively connected with the conduct of a trade or business in the United
States unless the broker has documentary evidence in its files that the holder
or beneficial owner is a non-U.S. person or the holder or beneficial owner
otherwise establishes an exemption.

     Amounts withheld under the backup withholding rules may be credited against
a holder's tax liability, and a holder may obtain a refund of any excess amounts
withheld under the backup withholding rules by filing the appropriate claim for
refund with the Service.

Item 8.  Selected Financial Data.

     The selected consolidated financial data for each of the five years in the
period ended December 31, 1998 are derived from the Consolidated Financial
Statements of the Company. The selected consolidated financial data of the
Company set forth below are qualified by reference to, and should be read in
conjunction with the Consolidated Financial Statements, Related Notes and other
financial information included in this Form 20-F.

                                       22
<PAGE>

Consolidated Statement of Operations Data:
<TABLE>
<CAPTION>
                                                            Year Ended December 31,
                                ------------------------------------------------------------------------------
                                     1998             1997            1996             1995            1994
                                     ----             ----            ----             ----            ----
                                                             (Dollars in thousands)

<S>                             <C>              <C>             <C>              <C>             <C>         
Net sales                       $    145,253     $     148,388   $     148,149    $    139,255    $    115,847
Cost of sales                         90,917            94,008          95,312          91,185          76,738
                                ------------     -------------   -------------    ------------    ------------
Gross profit                          54,336            54,380          52,837          48,070          39,109
Selling, general
  and administrative
  expenses                            33,028            33,618          35,336          35,066          28,066
                                ------------     -------------   -------------    ------------    ------------
Operating income                      21,308            20,762          17,501          13,004          11,043
Other income                               0             2,175           1,829             369             258
Interest income
  (expense), net                         938               218              48            (372)           (581)
                                ------------     -------------   -------------    ------------    ------------
Income before taxes                   22,246            23,155          19,378          13,001          10,720
Provision for income
  taxes                                5,956             3,367           2,437           1,657             858
                                ------------     -------------   -------------    ------------    ------------
Net income                      $     16,290     $      19,788   $      16,941    $     11,344    $      9,862
                                ============     =============   =============    ============    ============
Basic earnings per share        $       1.47     $        1.84   $        1.61    $       1.08    $       0.94
                                ============     =============   =============    ============    ============
Diluted earnings per share
                                $       1.46     $        1.82   $        1.59    $       1.06    $       0.93
                                ============     =============   =============    ============    ============
</TABLE>

Consolidated Balance Sheet Data:
<TABLE>
<CAPTION>
                                                               At December 31,
                                -------------------------------------------------------------------------
                                     1998          1997            1996              1995            1994
                                     ----          ----            ----              ----            ----
                                                          (Dollars in thousands)
<S>                             <C>            <C>             <C>             <C>               <C>         
Cash and cash
  equivalents                   $    35,799    $    30,337     $    19,144     $    16,001       $  11,442
Working capital                      66,432         63,834          51,074          39,782          32,364
Total assets                        143,457        107,493          93,726          86,023          68,450
Total debt(1)                        12,881          2,478           4,177           8,889          10,520
Redeemable preferred stock               --             --           1,141           1,036           1,044
Total shareholders' equity           78,527         59,552          39,120          24,355          11,998
</TABLE>

(1)    Total debt comprises bank notes payable with a maturity of less than one
       year, long-term debt (including current portion) and capital lease
       obligations (including current portion).

Dividends

     The Company has never declared or paid dividends on its Ordinary Shares.
The Company currently intends to retain its earnings to finance the growth and
development of its business and, consequently, does not anticipate paying any
dividends on the Ordinary Shares in the foreseeable future. Under the Companies
Act 1985, as amended, of Great Britain (the "Companies Act"), dividends are
payable on the Ordinary Shares only out of profits available for distribution
determined

                                       23
<PAGE>

in accordance with accounting principles generally accepted in the United
Kingdom, which differ in certain respects from US GAAP. In addition, certain of
the Company's financing agreements restrict the Company's ability to pay
dividends to its shareholders and it is anticipated that future financing
agreements will have similar restrictions. See "Item 9. Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."

Item 9.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations.

     The following should be read in conjunction with "Item 8. Selected
Financial Data" and the Company's Consolidated Financial Statements and the
Notes related thereto appearing elsewhere in this Form 20-F.

     Although the Company reports its financial results in U.S. dollars,
approximately 65% of the Company's revenues and expenses are incurred in foreign
currencies. The fluctuation of the functional currencies earned by the Company
against the U.S. dollar has had the effect of increasing or decreasing (as
applicable) U.S. dollar reported net sales, as well as the cost of goods sold,
gross profit, selling, general and administrative expenses denominated in such
foreign currencies when translated into U.S. dollars as compared to prior
periods.

RESULTS OF OPERATIONS

Year Ended December 31, 1998 Compared with Year Ended December 31, 1997

     The Company's net sales decreased 2.1% to $145.3 million in fiscal 1998
from $148.4 million in fiscal 1997. During the same period, net sales in North
America decreased 7.3% to $53.2 million from $57.4 million; net sales in Europe
increased 11.1% to $75.8 million from $68.2 million; and net sales in
Asia-Pacific region decreased 28.5% to $16.2 million from $22.7 million. The
strengthening US dollar against most of the functional currencies earned by the
Company, combined with a slow-down in the Company's markets supporting the
mining and gas and oil exploration markets were the primarily reasons for the
reduced revenues realized. Partially offsetting these factors was the strong
demand for the Company's vane and piston product lines in Europe.

     Restated (at average exchange rates for fiscal 1997), net sales for fiscal
1998, were $148.2 million, virtually equal to fiscal 1997. The increased sales
revenue for the period attributable to the exchange rate differences was $2.9
million. Restated (at average exchange rates for fiscal 1997), net sales for
fiscal 1998 for the Company's European operations increased 12.5% to $76.8
million from $68.2 million; while net sales for the Asia-Pacific region
decreased 22.2% to $17.7 million from $22.7 million.

     The Company's gross profit decreased slightly to $54.3 million in fiscal
1998 from $54.4 million from fiscal 1997. Gross profit as a percentage of net
sales increased to 37.4% in fiscal 1998 from 36.7% in fiscal 1997. The increased
gross profit was primarily attributable to a favorable mix of the Company's more
profitable product lines, combined with margin enhancements attained from cost
reduction initiatives implemented at the Company's manufacturing facilities.

     Gross profit in North America decreased 13.5% to $15.8 million in fiscal
1998 from $18.3 million in fiscal 1997. Gross profit in Europe increased 18.0%
to $32.9 million in fiscal 1998 from $27.9 million in fiscal 1997, and
Asia-Pacific gross profit decreased 39.6% to $5.0 million in fiscal 1998 from
$8.3 million in fiscal 1997. Restated (at average exchange rates for fiscal
1997), gross profit in Europe was $33.4 million, or a 19.7% increase over fiscal
1997, and gross profit in the Asia-

                                       24
<PAGE>
   
Pacific region was $5.5 million, or a 33.9% decrease over fiscal 1997. The total
gross profit decrease for the period attributable to the changes in exchange
rate was $0.8 million. Restated (at average exchange rates for fiscal 1997),
consolidated gross profit as a percentage of net sales increased to 37.2% for
fiscal 1998 compared to 36.7% for fiscal 1997.
    
     Selling, general and administrative ("SG&A) expenses decreased 1.8% to
$33.0 million for fiscal 1998 from $33.6 million for fiscal 1997. These expenses
as a percentage of net sales were equal to fiscal 1997 performance of 22.7%.
Restated (at average exchange rates for fiscal 1997), SG&A increased 0.8% to
$33.9 million (22.9% of net sales) in fiscal 1998 from $33.6 million (22.7% of
net sales) in fiscal 1997. The restated increase in these expenses for fiscal
1998 as compared to fiscal 1997 is due primarily to costs associated with the
recognition of restructuring charges in the Company's Asian-Pacific and North
American operations. The increase in these expenses as a percentage of net sales
is reflected by currency adjusted flat net sales revenue leveraged from a 0.8%
marginal increase in SG&A expenses.

     Operating income increased 2.6% to $21.3 million in fiscal 1998 from $20.8
million in fiscal 1997. Operating income as a percentage of net sales increased
to 14.7% in fiscal 1998 from 14.0% in fiscal 1997. Restated (at average exchange
rates for fiscal 1997), operating income increased 2.2% to $21.2 million (14.3%
of net sales) in fiscal 1998 from $20.8 million (14.0% of net sales) in fiscal
1997. The changes in exchange rate had the effect of decreasing operating income
for the period by $0.1 million.

     Other income decreased to $0 in fiscal 1998 from $2.2 million (1.5% of net
sales) in fiscal 1997. The decrease of other income was the result of
recognition of a gain on disposal of surplus real estate assets in Germany for
fiscal 1997, with no such transactions completed in fiscal 1998.

     Net interest income was $938,000 in fiscal 1998 compared to $218,000 of net
interest income in fiscal 1997. The increase in interest income was primarily
due to increased interest bearing cash balances held at the subsidiary level,
combined with funds from the Company's initial public offering. These funds were
utilized late in fiscal 1998 to partially fund the acquisition of Lokomec Oy.

     The effective tax rate for fiscal 1998 was 26.8% compared with 14.5% for
fiscal 1997. The provision for taxes increased 77.0% to $6.0 million in fiscal
1998 compared to $3.4 million in fiscal 1997. This provision as a percentage of
net sales increased to 4.1% in fiscal 1998 from 2.3% in fiscal 1997. During
fiscal 1997, the Company recognized a tax credit of $1.9 million to record
deferred tax assets related to its U.S. operations. There were no such tax
credits recognized in fiscal 1998. Excluding the impact of the tax credit, the
effective tax rate for fiscal 1997 was 22.7% compared to 26.8% for fiscal 1998.

Year Ended December 31, 1997 Compared with Year Ended December 31, 1996

     The Company's net sales increased 0.2% to $148.4 million in fiscal 1997
from $148.1 million in fiscal 1996. During the same period, net sales in North
America increased 6.9% to $57.4 million from $53.7 million; net sales in Europe
decreased 4.2% to $68.2 million from $71.2 million; and net sales in the
Asia-Pacific region decreased 2.2% to $22.7 million from $23.2 million. Despite
a strengthening U.S. dollar against most of the functional currencies earned by
the Company, overall net sales revenue increased due to continued strong demand
for the Company's three major product lines in North America, as well as an
improved economy and hydraulics market outlook for the Company's piston and vane
product lines in Europe.

                                       25
<PAGE>

     Restated (at average exchange rate for fiscal 1996), net sales for fiscal
1997, were $157.5 million, a 6.3% increase over fiscal 1996. The changes in
exchange rate had the effect of decreasing sales revenue for the period by $9.1
million. Restated (at average exchange rate for fiscal 1996), net sales for
fiscal 1997 for the Company's European operations increased 6.5% to $75.8
million from $71.2 million, and net sales for the Asia-Pacific operations
increased 5.7% to $24.5 million from $23.2 million.

     The Company's gross profit increased 2.9% to $54.4 million in fiscal 1997
from $52.8 million in fiscal 1996. Gross profit as a percentage of net sales
increased to 36.7% in fiscal 1997 from 35.7% in fiscal 1996. The increase in
gross profit was primarily due to increased sales to North American distributors
during fiscal 1997, and enhanced by continued margin improvement derived from
cost reduction initiatives previously implemented at the Company's production
facilities. Gross profit in North America increased 26.1% to $18.3 million in
fiscal 1997 from $14.5 million in fiscal 1996.

     Gross profit in Europe decreased 8.7% to $27.9 million in fiscal 1997 from
$30.5 million in fiscal 1996, and gross profit in the Asia-Pacific increased
5.7% to $8.3 million in fiscal 1997 from $7.8 million in fiscal 1996. Restated
(at average exchange rate for fiscal 1996), gross profit in Europe was $31.0
million, or a 1.4% increase over fiscal 1996, and gross profit in the
Asia-Pacific was $8.9 million, or a 13.9% increase over fiscal 1996. The changes
in exchange rate had the effect of decreasing gross profit for the period by
$3.8 million. Restated, gross profit as a percentage of net sales increased to
36.9% for fiscal 1997 compared to 35.7% for fiscal 1996.

     Selling, general and administrative ("SG&A") expense decreased 4.9% to
$33.6 million in fiscal 1997 from $35.3 million in fiscal 1996. These expenses
as a percentage of net sales decreased to 22.7% in fiscal 1997 compared to 23.9%
in fiscal 1996. Restated (at the average exchange rate for fiscal 1996), SG&A
expenses increased 2.6% to $36.3 million (23.0% of net sales) in fiscal 1997
from $35.3 million (23.9% of net sales) in fiscal 1996. The restated increase in
these expenses for fiscal 1997 as compared to fiscal 1996 is due primarily to
costs associated with expanding distribution channels in Asia, and the
recognition of restructuring charges in the Company's German and Australian
operations. The decrease in these expenses as a percentage of net sales is
reflected by a currency adjusted 6.3% increase in net sales revenue leveraged
from a 2.6% marginal increase in selling and administrative expense.
   
     Operating income increased 18.6% to $20.8 million in fiscal 1997 from $17.5
million in fiscal 1996. Operating income as a percentage of net sales increased
to 14.0% in fiscal 1997 from 11.8% in fiscal 1996. Restated (at the average
exchange rate for fiscal 1996), operating income increased 25.2% to $21.9
million (13.9% of net sales) in fiscal 1997, from $17.5 million (11.8% of net
sales) in fiscal 1996. The changes in exchange rate had the effect of decreasing
operating income for the period by $1.1 million.
    
     Other income increased $0.4 million to $2.2 million (1.5% of net sales) in
fiscal 1997 from $1.8 million (1.2% of net sales) in fiscal 1996. The increase
in other income was a result of the recognition of a gain on disposal of surplus
real estate assets in Germany during fiscal 1997, exceeding similar disposal
gains arising from U.S. real estate sales in fiscal 1996.

     Net interest income was $218,000 in fiscal 1997 compared to $48,000 of
interest income in fiscal 1996. The increase in interest income was primarily
due to increased profitability, operating cash flows, and asset disposals
resulting in higher interest bearing cash balances held at the subsidiary

                                       26
<PAGE>
               
level. Additionally, funds from the Company's initial public offering increased
interest bearing cash balances held by the Company.

     The effective tax rate for fiscal 1997 was 14.5% compared to 12.6% for
fiscal 1996. The provision for taxes increased 38.2% to $3.4 million for fiscal
1997 compared to $2.4 million for fiscal 1996. This provision as a percentage of
net sales increased to 2.3% in fiscal 1997 from 1.6% in fiscal 1996. During
fiscal 1997, the Company recognized a tax credit of $1.9 million to record
deferred tax assets related to its U.S. operations. Excluding the effect of the
tax credit, the effective tax rate for fiscal 1997 was 22.7% compared to 12.6%
for fiscal 1996. Restated (excluding the $1.9 million tax credit), the provision
for taxes increased to $5.6 million for fiscal 1997, compared to $2.4 million
for fiscal 1996.

LIQUIDITY AND CAPITAL RESOURCES
<TABLE>
<CAPTION>
                                                                         Year Ended and At December 31,
                                                            ---------------------------------------------------------
                                                                  1998               1997                1996
                                                            ---------------------------------------------------------
                                                                             (Dollars in thousands)

<S>                                                               <C>                 <C>                <C>   
Cash & cash equivalents                                           35,799              30,337             19,144
Net cash provided by operating activities                         14,859              16,985             11,578
Net cash used in investing activities                            (20,692)             (5,225)            (2,776)
Net cash provided by (used in) financing activities               10,333               1,899             (5,162)
Effect of exchange rate changes on cash                              962              (2,466)              (497)
</TABLE>


     Historically the Company has funded its cash requirements through cash flow
from operations, although short-term fluctuations in working capital
requirements for some of the Company's subsidiaries have been met through
borrowings under revolving lines of credit obtained locally. The Company's
primary uses of cash have been to fund capital expenditures, acquisitions and to
service and repay debt.

     Net cash provided by operating activities for fiscal 1998 decreased to
$14.9 million from $17.0 million in fiscal 1997. The decrease in the Company's
cash generated from operations reflects primarily a decrease in net income. The
$2.1 million decrease in net cash provided by operating activities for fiscal
1998 compared to fiscal 1997 was attributable to a $3.5 million decrease in net
income, partially offset by a $1.4 million increase in sources of cash from
operating assets and liabilities. The Company anticipates that operating cash
and capital expenditure requirements will continue to be funded by cash flow
from operations, cash on hand and bank borrowings.

     Net cash used in investing activities was $20.7 million for fiscal 1998,
compared to $5.2 million for fiscal 1997. Investing activities consisted largely
of investment in manufacturing equipment for the Company's three production
facilities, and the acquisition of a subsidiary. Purchases of machinery and
equipment were $9.9 million for fiscal 1998 compared to $7.4 million for fiscal
1997. During fiscal 1998, investing activities also reflect the acquisition of
100% of the outstanding shares of Lokomec Oy for $10.9 million, net of cash
acquired. The Company anticipates that it will incur approximately $5.0 million
for capital expenditures for fiscal 1999, excluding any acquisitions of new
businesses.

                                       27

<PAGE>

     Net cash provided by financing activities was $10.3 million for fiscal 1998
compared to $1.9 million for fiscal 1997. The increase of $8.4 million in net
cash provided by financing activities for fiscal 1998 compared to fiscal 1997
was primarily attributable to short term bank borrowings of $12.0 million
utilized to facilitate the Lokomec acquisition.

     The effect of exchange rate changes on cash and cash equivalents was $.9
million and ($2.5 million) for fiscal 1998 and fiscal 1997, respectively. As
approximately two thirds of the Company's business is transacted in currencies
other than the U.S. dollar, foreign currency fluctuations had a significant
impact on dollar reported balances for fiscal 1998 compared to fiscal 1997. The
$3.4 million increase in the exchange rate impact on cash and cash equivalents
was attributable to a late 1998 weakening U.S. dollar against most of the
functional currencies earned by the Company in its European operations. The
average dollar-weighted foreign currency increase for fiscal 1998 for the
Company's European operations was 5.6%.
   
     In December 1998, the Company's U.S. subsidiary entered into an unsecured
time note with a bank that provided $12.0 million for working capital and
acquisitions. Borrowings under the agreement are secured by a guarantee by the
Company. Interest on the line, which is based on LIBOR plus 0.875%, is payable
monthly.
    
     Short-term borrowings outside the United States under available informal
credit facilities are typically a result of overdrafts. At December 31, 1998,
the Company had $500,000 of foreign debt outstanding. The Company also has an
additional $3.6 million of unused foreign credit facilities. The banks may
withdraw these facilities at any time. The weighted average interest rates on
short-term borrowings as of December 31, 1998 and 1997 were 6.0% and 4.1%
respectively.

Impact of Inflation

     The impact of inflation on the operating results of the Company has been
moderate in recent years reflecting generally lower rates of inflation in the
economy and relative stability in the Company's cost structure. Although
inflation has not had, and the Company does not expect that it will have, a
material impact on operating results, there is no assurance that the Company's
business will not be effected by inflation in the future.

Exposure to Currency Fluctuations

     A significant portion of the Company's business is conducted in currencies
other than the dollar, including pounds sterling, French francs, German marks
and Japanese yen. The Company's financial statements are prepared in dollars,
and therefore fluctuations in exchange rates in the pound sterling and other
currencies in which the Company does business relative to the dollar may cause
fluctuations in reported financial information which are not necessarily related
to the Company's operations. In 1998, for example, the Company experienced an
28.5% decrease in net sales in the Asia-Pacific region (denominated in local
currencies); however, the dollar-translated net sales figures

                                        28
<PAGE>

showed a net decrease due to the fluctuation of the dollar against the local
currencies of 22.2%. Due to the volatility of currency exchange rates, the
Company cannot predict the effect of exchange rate fluctuations upon future
operating results. Although the Company currently engages in transactions to
hedge a portion of the risks associated with fluctuations in currency exchange
rates, it may not do so in the future. There can be no assurance that the
Company's business, financial condition and results of operations will not be
materially adversely affected by exchange rate fluctuations or that any hedging
techniques implemented by the Company will be effective.

     The following table illustrates the effect of the currency exchange rates
on certain of the Company's income items in fiscal 1997 and fiscal 1998 which
have been recalculated to show what such amounts would have been applying 1996
average exchange rates to 1997 amounts and 1997 average exchange rates to 1998
amounts.

<TABLE>
<CAPTION>
                                                                Year Ended December 31,
                                                                -----------------------
                                                 1996                      1997                   At 1996
                                                 ----                      ----                   -------
                                                Actual                    Actual              Exchange Rates
                                                ------                    ------              --------------
                                                                 (Dollars in thousands)
<S>                                      <C>                    <C>                         <C>            
Net sales                                $        148,149       $         148,388           $       157,459
Gross profit                                       52,837                  54,380                    58,170
Operating income                                   17,501                  20,762                    21,913
Net income                                         16,941                  19,788                    21,023
Basic earnings per share                             1.61                    1.84                      1.96
Diluted earnings per share                           1.59                    1.82                      1.94
</TABLE>

<TABLE>
<CAPTION>
                                                                Year Ended December 31,
                                                                -----------------------
                                                 1997                      1998                   At 1997
                                                 ----                      ----                   -------
                                                Actual                    Actual              Exchange Rates
                                                ------                    ------              --------------
                                                                 (Dollars in thousands)
<S>                                      <C>                    <C>                         <C>            
Net sales                                $        148,388       $         145,253           $       148,201
Gross profit                                       54,380                  54,336                    55,145
Operating income                                   20,762                  21,308                    21,226
Net income                                         19,788                  16,290                    16,168
Basic earnings per share                             1.84                    1.47                      1.46
Diluted earnings per share                           1.82                    1.46                      1.45
</TABLE>

Year 2000 (Millennium) Issues

     Currently, many computer systems and software products are coded to accept
only two digit entries in the date code field. These date code fields will need
to accept four digit entries to distinguish 21st century dates from 20th century
dates. As a result, many companies' software and computer systems may need to be
upgraded or replaced in order to comply with such "Year 2000" requirements. The
Company and third parties with which the Company does business rely on numerous
computer programs in their day to day operations. The Company is evaluating the
Year 2000 issue, and as it relates to the Company's internal computer systems
and third party computer systems with which the Company interacts. The following
describes the Company's status regarding these issues.

                                        29
<PAGE>

The Company's State of Readiness
--------------------------------

     The Company has been formally addressing its year 2000 Issues over the past
several fiscal years. These efforts involve assessments, conversion plans,
conversion implementations and testing of all internal systems running on a
variety of computer platforms ranging from mainframe computers to programmable
logic controllers.

     All mainframe computer systems have been assessed, action plans have been
established and required conversion or reinstallation of computer programs is
approximately 75% complete. Full conversion and implementation is expected to be
completed by June 1999. In addition, assessment of all non-mainframe
applications has been completed with conversion action plans developed.

     In summary the Company believes that its internal systems will be year 2000
compliant in all material aspects by December 1999. However, the Company's
ability to execute its plan in a timely manner may be adversely affected by a
variety of factors, some of which are beyond the Company's control, including
turnover of key employees, availability and continuity of consultants and the
potential for unforeseen implementation problems.

     In addition to these efforts with respect to internal systems, the Company
has begun the process of assessing the state of readiness of its major
suppliers. These suppliers include raw material, energy and production supply
providers as well as providers of communication and logistics services. While
analysis of the responses received leads the Company to believe that it will not
incur any major problems, there can be no assurance that these suppliers will be
compliant or that the Company will not be adversely affected by their state of
readiness. The Company plans to continue this assessment effort and plans to
have this effort completed by June 1999.

     The Company has a large, diverse world wide customer base. No customer
represents a majority of the Company's sales. While the Company has not begun an
assessment of the state of readiness of its customers, many customers have
requested from the Company information regarding its year 2000 issues. Major
customers will be contacted within the next year to determine if any significant
loss of business would be expected because of their inability to correct their
year 2000 issues on a timely basis.

Costs to Address the Company's Year 2000 Issues
-----------------------------------------------

     The following is a summary of the past and expected future costs to
remediate any of the Company's year 2000 issues:

<TABLE>
<CAPTION>
                                                          1997            1998           Future           Total
                                                     -----------------------------------------------------------
                                                                              (In Millions)

<S>                                                  <C>             <C>             <C>              <C>       
Costs Charged to Income Before Taxes (1)             $     0.2       $     0.3       $     0.3        $      0.8
Capitalized Software And Hardware (2)                      0.3             0.3             0.3               0.9
                                                     ---------       ---------       ---------        ----------
Total Year 2000 Costs                                $     0.5       $     0.6       $     0.6        $      1.7
                                                     ---------       ---------       ---------        ----------
                                                     ---------       ---------       ---------        ----------
</TABLE>

(1)  The majority of these costs are for outside consultants and programmers,
     were in addition to the normal operating budget for information systems,
     and were paid currently. No major systems projects have been deferred to
     future periods.
                                       30
<PAGE>

(2)  Costs to replace non-Year 2000 compliant systems.

Risk of Year 2000 Issues and Contingency Plans
----------------------------------------------

     As previously stated, the Company expects that its systems will be fully
operational and will not cause any material disruptions resulting from
unresolved year 2000 issues. Because of the uncertainties associated with
assessing customers and suppliers, there is a risk of adverse effects on the
Company's future results of operations if the Company's customers and suppliers
are not capable of correcting their year 2000 issues, if any. The Company plans
to continue assessing these risks by reviews with customers and suppliers.
Contingency plans will be developed to deal with any potential year 2000 issues
that may arise as a result of these reviews. Contingency plans relating to
suppliers, if necessary, will be developed by June 1999. Any necessary
contingency plans relating to customers will be developed by September 1999.

Item 9A.  Quantitative and Qualitative Disclosures About Market Risk.

     Market risks relating to the Company's operations result primarily from
changes in exchange rates or interest rates or weak economic conditions in the
markets in which the Company sells its products. The Company does not use
financial instruments for trading purposes and is not a party to any leveraged
derivatives.

     Foreign Currency Risk

     The Company enters into foreign exchange contracts to hedge some of its
foreign currency exposure. The Company uses such contracts to hedge exposure to
foreign currency exchange rates associated with anticipated costs to be incurred
in a foreign currency. The Company seeks to minimize the risk that the expenses
incurred by a subsidiary in a currency other than its functional currency will
be affected by changes in the exchange rates. The Company believes that the
possible financial statement impact of its foreign currency forward contracts is
immaterial for consolidated purposes.

     Interest Rate Risk

     The Company's interest bearing liabilities are most sensitive to changes in
the London InterBank Offered Rate (LIBOR) as substantially all of its short term
investments bear minimal interest rate risk.

     As of December 31, 1998, the Company had approximately $12.0 million
outstanding on its revolving line of credit and short term credit agreements.
The potential loss to the Company over one year that would result from a
hypothetical, instantaneous, and unfavorable change of 100 basis points in the
interest rates of all applicable assets and liabilities would be approximately
be $0.1 million.

                                       31
<PAGE>

Item 10.  Directors and Officers of Registrant.

     The following table sets forth the name and position of the directors and
executive officers of the Registrant.

<TABLE>
<CAPTION>
                                                                                                  Year of Initial
                                                                                                  ---------------
                Name                                         Position                               Appointment
                ----                                         --------                               -----------
<S>                                   <C>                                                         <C>
J. Colin Keith                        Chairman of the Board of Directors                               1993
David L. Weir                         Chief Executive Officer, President and Director                  1997
Anders C.H. Brag                      Managing Director and Director                                   1993
Enrique Foster Gittes                 Director                                                         1993
Christopher H.B. Mills (1)(2)         Director                                                         1993
R.P. James Morton (1)(2)              Director                                                         1998
Bruce A. Smith                        Chief Financial Officer                                          1998
Paul G. Dumond                        Company Secretary                                                1993
</TABLE>

----------
(1)  Member of the Compensation Committee
(2)  Member of the Audit Committee

     Unless otherwise decided by the Company by ordinary resolution, the number
of directors shall be not less than three nor more than twelve. Directors may be
appointed by the Company by ordinary resolution; in addition, the Board of
Directors may appoint directors; any director so appointed retires from office
at the next annual general meeting, but is then eligible for re-appointment.

     At each annual general meeting as nearly as possible (but not exceeding)
one-third of those directors subject to retirement by rotation are obliged to
retire by rotation, based principally upon length of time in office, and are
eligible for re-election. Any director appointed by the Board of Directors since
the previous annual general meeting is not subject to retirement by rotation. A
director may be removed by ordinary resolution of the Company in general meeting
or by all the other directors.

     The directors may from time to time appoint one or more of them to any
executive office on such terms and for such periods as they may (subject to the
provisions of the Companies Act and every other statute for the time being in
force concerning companies and affecting the Company) determine and, without
prejudice to the terms of any contract entered into in any particular case, may
at any time revoke any such appointment.

     The Board of Directors has established Compensation and Audit Committees,
each of which reports to the Board of Directors. The Compensation Committee,
which consists of Messrs. Mills and Morton, establishes compensation for the
Board of Directors and other employees and administers the Option Plan (defined
below). The Audit Committee, which consists of Messrs. Mills and Morton,
establishes standards for review of the Company's compliance with applicable
accounting and regulatory requirements and assists the Board of Directors in
fulfilling its responsibilities in connection with the Company's accounting and
financial reporting policies.

                                       32
<PAGE>

Item 11.  Compensation of Directors and Officers.

     The compensation of the Executive Directors and key personnel of the
Company is determined by the Board of Directors of the Company based on the
recommendations of the Compensation Committee.

     The aggregate amount of compensation of all directors and executive
officers of the Company as a group (8 persons) paid or accrued for services in
all capacities for fiscal 1998 was $0.9 million. Included in this amount is the
Chairman's compensation of approximately $130,000. The aggregate amount set
aside or accrued by the Company in the year ended December 31, 1997, to provide
pension, retirement or similar benefits for such persons was approximately
$38,400.

     All directors of the Company are paid fees for serving on the Board of
Directors. The basic annual fee received by each director is $20,000. The basic
annual fee may be paid, in part, in Ordinary Shares or ADSs. All directors are
also reimbursed for reasonable expenses incurred in attending Board of Directors
and Committee meetings.

     The directors have power to provide benefits whether by payment of
gratuities, pensions or otherwise to (or to any person in respect of) any
director or ex-director and for the purpose of providing any such benefits to
contribute to any scheme or fund or to pay premiums.

     In 1998, Denison Hydraulics, Inc., the Company's U.S. subsidiary, and Mr.
Weir entered into a two-year agreement regarding Mr. Weir's employment with the
U.S. subsidiary. This agreement replaces an agreement effective August 26, 1996,
which expired on May 3, 1998. Pursuant to this agreement, the U.S. subsidiary
agreed to employ Mr. Weir as President for a two-year period ending on May 30,
2000, subject to the right of the U.S. subsidiary to terminate the employment
relationship for cause on prior written notice to Mr. Weir. Mr. Weir has the
right to terminate the agreement upon at least three months' prior written
notice to the U.S. subsidiary. The U.S. subsidiary has the right to terminate
the agreement without cause on written notice to Mr. Weir, provided that the
effective date of the termination is no less than twelve months from the date of
notice. The agreement provides that the U.S. subsidiary pay Mr. Weir an annual
base salary which is subject to annual review effective each January 1 of the
term of the agreement. Mr. Weir is entitled to participate in an incentive bonus
program, which is based on meeting certain performance criteria and strategic
objectives agreed to by Mr. Weir and the board of directors of the U.S.
subsidiary, and is subject to a maximum payment of 60% of his base salary. The
agreement also entitles Mr. Weir to standard health and other insurance benefits
and to the use of a company car. The agreement contains certain non-compete and
confidentiality provisions.

Item 12.  Options to Purchase Securities from Registrant or Subsidiaries.

     In 1994, the Company adopted the Denison International Stock Option Plan
(the "Option Plan") pursuant to which the Board (or a committee thereof) may
grant to certain senior executives of the Company or its subsidiaries options to
acquire Ordinary Shares. The price at which Ordinary Shares may be acquired on
exercise of an option must not be less than the market value of the underlying
shares on the date on which the option is granted.

     On July 24, 1997, the Company's Board of Directors and shareholders
approved an amendment to the Option Plan. Such amendment included an increase in
the number of Ordinary Shares reserved for issuance under the Option Plan to
850,000 Ordinary Shares.

                                       33
<PAGE>

     As of the date hereof, options under the Option Plan for acquisition of
626,000 Ordinary Shares by senior executives of the Company were outstanding.
Exercise prices range from $1.04 to $19.53. All options vest over a period of
four years following the date of the grant and lapse between five and ten years
after the date of the grant. Options lapse on dates from August 7, 2002 through
December 19, 2008. As of the date hereof, options under the Option Plan for the
purchase of 260,000 Ordinary Shares were held by all directors and officers of
the Company as a group.

Item 13.  Interest of Management in Certain Transactions.

     None.

                                     PART II

Item 14.  Description of Securities to be Registered.

     Not applicable.

                                    PART III

Item 15.  Defaults Upon Senior Securities.

     There have been no defaults with respect to any indebtedness of the
Company.

tem 16.  Changes in Securities, Changes in Security for Registered Securities
         and Use of Proceeds

     The net proceeds of the initial public offering held in August 1997 of
approximately $4.5 million were utilized in December 1998 to partially fund the
acquisition of 100% of the shares of Lokomec Oy for approximately $16.0 million.

                                     PART IV

Item 17.  Financial Statements.

     Not applicable. See "Item 18. Financial Statements."

Item 18.  Financial Statements.

     See pages F-1 through F-24.

Item 19.  Financial Statements and Exhibits.

     (a) Financial Statements

             The following financial statements, together with the report of
         Ernst & Young LLP, Independent Auditors, are filed as part of this
         Annual Report.

             Report of Independent Auditors.

             Consolidated Statement of Operations for the Years Ended December
             31, 1998, 1997 and 1996.

                                       34
<PAGE>

             Consolidated Balance Sheets as of December 31, 1998 and 1997.

             Consolidated Statements of Cash Flows for the Years Ended December
             31, 1998, 1997 and 1996.

             Consolidated Statements of Changes in Shareholders' Equity for the
             Years Ended December 31, 1998, 1997 and 1996.

             Notes to Consolidated Financial Statements.

             Financial Statement Schedule for the Years Ended December 31, 1998,
             1997 and 1996: Schedule II--Valuation and Qualifying Accounts.

     (b) Exhibits

             10.01  Agreement dated December 23, 1998 by and among Denison
                    International plc, Merifire OY and other persons named
                    therein.

             10.02  Employment Agreement dated as of June 1, 1998 by and between
                    Mr. David L. Weir and Denison Hydraulics, Inc.
   
             10.03  Unsecured Time Note dated December 16, 1998 between Denison
                    Hydraulics, Inc. and Bank One, NA
    
             23     Consent of Ernst & Young LLP.

                                       35
<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the Registrant certifies that it meets all of the requirements for
filing on Form 20-F and has duly caused this Form 20-F to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                        DENISON INTERNATIONAL PLC
                                                 (Registrant)

                                        By:    /s/  Bruce A. Smith
                                             -------------------------
                                             Bruce A. Smith
                                             Chief Financial Officer

Date:  March 31, 1999

                                       36
<PAGE>

<TABLE>
<CAPTION>

                            DENISON INTERNATIONAL plc

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                                       Page

<S>                                                                                     <C>
Report of Independent Auditors                                                          F-2

Consolidated Balance Sheets as of December 31, 1998 and 1997                            F-3

Consolidated Statements of Operations for the years ended December 31,
  1998, 1997 and 1996                                                                   F-5

Consolidated Statements of Changes in Shareholders' Equity for the years
  ended December 31, 1998, 1997 and 1996                                                F-6

Consolidated Statements of Cash Flows for the years ended December 31,
  1998, 1997 and 1996                                                                   F-7

Notes to Consolidated Financial Statements                                              F-9

Financial Statement Schedule for the years ended December 31, 1998, 1997 and 1996
     Schedule II - Valuation and Qualifying Accounts                                   F-24
</TABLE>

                                      F-1
<PAGE>

                         REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Shareholders
Denison International plc

     We have audited the consolidated balance sheets of Denison International
plc as of December 31, 1998 and 1997, and the related consolidated statements of
operations, changes in shareholders' equity and cash flows for each of the three
years in the period ended December 31, 1998. We have also audited the financial
statement schedule listed in the index at Item 19(a). These financial statements
and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.

     We conducted our audits in accordance with generally accepted auditing
standards which do not differ in any significant respect from United States
generally accepted auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe our audits provide a reasonable
basis for our opinion.

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Denison International plc at December 31, 1998 and 1997, and the consolidated
results of its operations, and its cash flows for each of the three years in the
period ended December 31, 1998, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects, the information set forth therein.

                                          ERNST & YOUNG LLP

Columbus, Ohio
February 8, 1999

                                      F-2
<PAGE>


                            DENISON INTERNATIONAL plc

                           CONSOLIDATED BALANCE SHEETS
                 (U.S. dollars in thousands, except share data)

                                     ASSETS

                                                           December 31,
                                                           ------------
                                                        1998            1997
                                                        ----            ----
Current assets:
     Cash and cash equivalents                        $35,799         $30,337
     Accounts receivable, less allowances of
       $2,395 and $3,087 in 1998
       and 1997, respectively                          29,716          29,212
     Inventories                                       38,236          28,182
     Other current assets                               4,513           3,327
                                                      -------         -------
        Total current assets                          108,264          91,058
Property, plant and equipment, net                     24,726          14,948
Other assets                                            2,013           1,487
Goodwill, net of accumulated amortization of $145       8,454              --
                                                        -----      ----------
           Total assets                              $143,457        $107,493
                                                     ========        ========

                                      F-3
<PAGE>


                      LIABILITIES AND SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                             December 31,
                                                             ------------
                                                         1998            1997
                                                         ----            ----
<S>                                                   <C>              <C>
Current liabilities:
     Notes payable to bank                            $ 12,532         $ 1,472
     Accounts payable                                   10,973           9,413
     Accrued payroll and related expenses                4,349           5,170
     Other accrued liabilities                          12,408           8,601
     Income tax payable                                  1,259           1,906
     Current portion of capital lease obligations          311             662
                                                         -----           -----
        Total current liabilities                       41,832          27,224
Noncurrent liabilities:
     Capital lease obligations, less
       current portion                                      38             344
     Pension accrual                                    10,785           9,482
     Other noncurrent liabilities                        5,921           6,733
     Negative goodwill, net of accumulated
       amortization of $4,823 and $3,406
        in 1998 and 1997, respectively                   6,354           4,158
                                                         -----           -----
                                                        23,098          20,717
Shareholders' equity:
     `A' ordinary shares (pound)8.00 par value;
       7,125 shares authorized, and 7,015
       issued and outstanding in 1998
       and 1997                                             86              86
     Ordinary shares $0.01 par value;
       15,000,000 shares authorized, and
       11,097,450 and 11,057,700 shares issued and
       outstanding in 1998 and 1997, respectively          111             111
     Additional paid-in capital                          5,453           5,411
     Capital redemption reserve                          1,090           1,090
     Retained earnings                                  74,405          58,115
     Accumulated other comprehensive loss               (2,618)         (5,261)
                                                      ---------       ---------
        Total shareholders' equity                      78,527          59,552
                                                       -------         -------
        Total liabilities and shareholders' equity    $143,457        $107,493
                                                      ========        ========
</TABLE>

        The accompanying notes are an integral part of these statements.

                                      F-4
<PAGE>


                            DENISON INTERNATIONAL plc

                      CONSOLIDATED STATEMENTS OF OPERATIONS
               (U.S. dollars in thousands, except per share data)


                                          Year ended December 31,
                                          -----------------------
                                  1998             1997             1996
                                  ----             ----             ----

Net sales                      $   145,253      $   148,388      $   148,149
Cost of sales                       90,917           94,008           95,312
                                 ---------        ---------        ---------
Gross profit                        54,336           54,380           52,837
Selling, general and
  administrative expenses           33,028           33,618           35,336
                                 ---------        ---------        ---------
Operating income                    21,308           20,762           17,501
Other income                            --            2,175            1,829
Interest (expense)
  income, net                          938              218               48
                                  --------       ----------         --------
Income before taxes                 22,246           23,155           19,378
Provision for income taxes           5,956            3,367            2,437
                                  --------        ---------        ---------
Net income                       $  16,290        $  19,788        $  16,941
                                 =========        =========        =========

Basic earnings per share         $    1.47        $    1.84        $    1.61
                                 =========        =========        =========

Diluted earnings per share       $    1.46        $    1.82        $    1.59
                                 =========        =========        =========



        The accompanying notes are an integral part of these statements.

                                      F-5

<PAGE>


                            DENISON INTERNATIONAL plc

           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                 (U.S. dollars in thousands, except share data)

                                Share Capital(i)
                         -----------------------------
<TABLE>
<CAPTION>
                                                                                               Accum-
                                                          Ordin-   Addi-                       ulated
                           A                        A       ary   tional                        Other
                       Ordinary   Ordinary      Ordinary  shares   paid    Capital     Re-     Compre-   Compre-
                       shares of  shares of     shares of   of      in     redem-    tained    hensive   hensive
                     (pound)8.00   $0.01      (pound)8.00 $0.01  capital   tion    earnings   Income    Income
                         each       each          each     each    (ii)    reserve    (iii)    (Loss)    (Loss)     Total
                         ----       ----          ----     ----    ----    -------    -----    ------    ------     -----
                       (number of shares)

<S>                  <C>         <C>          <C>         <C>    <C>       <C>     <C>        <C>        <C>       <C>
Balance at January
  1, 1996                 7,015  10,528,950         86       105     862      --     22,476        826             24,355
   Net income                --          --         --        --      --      --     16,941         --   16,941    16,941
   Pension liability
     adjustment              --          --         --        --      --      --         --         (7)      (7)       (7)
   Translation
     adjustment              --          --         --        --      --      --         --     (2,169)  (2,169)   (2,169)
                                                                                                        -------
   Comprehensive
     Income                                                                                             $14,765
                                                                                                        =======
Balance at December       -----  ----------         --       ---     ---      --     ------    -------             ------
   31, 1996               7,015  10,528,950         86       105     862      --     39,417     (1,350)            39,120
   Issuance of ordinary
      shares in
      connection with
      initial public
      offering               --     450,000         --         5   4,475      --         --         --       --     4,480
   Exercise of stock
      options                --      93,750         --         1      74      --         --         --       --        75
   Ordinary shares
      canceled               --     (15,000)        --        --      --      --         --         --       --        --
   Net income                --          --         --        --      --      --     19,788         --   19,788    19,788
   Pension liability
     adjustment              --          --         --        --      --      --         --        497      497       497
   Translation
     adjustment              --          --         --        --      --      --         --     (4,408)  (4,408)   (4,408)
                                                                                                        -------
   Comprehensive
      Income                                                                                            $15,877
   Transfer on
     redemption of
     redeemable
     preferred stock         --          --         --        --      --   1,090     (1,090)        --                 --
Balance at December       -----  ----------         --       ---     ---      --     ------    -------             ------
    31, 1997              7,015  11,057,700         86       111   5,411   1,090     58,115     (5,261)            59,552
    Exercise of stock
          options            --      39,750         --        --      42      --         --         --       --        42
    Net income               --          --         --        --      --      --     16,290         --   16,290    16,290
    Translation
       adjustment            --          --         --        --      --      --         --      2,643    2,643     2,643
                                                                                                          -----
   Comprehensive
      Income                 --          --         --        --      --      --         --         --  $18,933        --
                                                                                                        =======
Balance at December 31,   ----   ---------         ---      ----  ------  ------    -------     ------            -------
    1998                  7,015  11,097,450        $86      $111  $5,453  $1,090    $74,405    $(2,618)           $78,527
                          =====  ==========        ===      ====  ======  ======    =======   ========            =======
</TABLE>

(i)      The share capital has been retroactively restated to reflect the
         restructuring of the Company's share capital in July 1997, as described
         in Note 1(c) of Notes to the Consolidated Financial Statements.
(ii)     Additional paid in capital is not distributable.
(iii)    Retained earnings available for distribution as dividends by the parent
         company at December 31, 1998 were $48,025,000.

        The accompanying notes are an integral part of these statements.

                                      F-6
<PAGE>


                            DENISON INTERNATIONAL plc

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                           (U.S. dollars in thousands)
<TABLE>
<CAPTION>
                                             Year ended December 31,
                                             -----------------------
                                          1998         1997        1996
                                          ----         ----        ----
<S>                                      <C>          <C>          <C>
CASH FLOWS FROM OPERATING
  ACTIVITIES:

Net income                                $ 16,290      $19,788     $16,941
Adjustments to reconcile
  net income to net cash
  provided by operating
  activities:
   Amortization of goodwill                 (1,417)        (754)       (718)
   Depreciation                              3,703        3,382       2,881
   Deferred income taxes                       210       (1,668)         --
   Gain on sale of assets                      (65)      (2,175)     (1,829)
   Changes in operating assets
     and liabilities:
      Accounts receivable                    2,245       (2,431)     (1,938)
      Inventories                           (7,526)        (568)     (3,056)
      Other current assets                    (768)        (255)        650
      Other assets                              27           26        (156)
      Accounts payable                         (86)         252      (1,170)
      Accrued payroll and
        related expenses                    (1,017)        (538)       (608)
      Income tax payable                      (670)         928         (73)
     Other accrued liabilities               1,359         (379)        312
      Pension accrual                          527          356        (513)
      Other noncurrent
        liabilities                          2,047        1,021         855
                                        ----------   ----------       -----
Net cash provided by
  operating activities                      14,859       16,985      11,578
                                          --------      -------      ------

CASH FLOWS FROM INVESTING
  ACTIVITIES:

Purchase of subsidiary, net of cash
  acquired                                 (10,923)       -----        ----
Purchase of property, plant
  and equipment                             (9,923)      (7,400)     (4,605)
Proceeds from disposal of
  property, plant and
  equipment                                    154        2,175       1,829
                                           -------    ---------     -------
Net cash used in investing
  activities                               (20,692)      (5,225)     (2,776)
                                          --------      -------     -------
</TABLE>                     
                                       F-7
<PAGE>

<TABLE>
<CAPTION>
                                             Year ended December 31,
                                             -----------------------
                                          1998         1997        1996
                                          ----         ----        ----
<S>                                       <C>          <C>         <C>
CASH FLOWS FROM FINANCING
  ACTIVITIES:
Proceeds from borrowings
  under revolving line of credit            12,000           --          --
Net repayment on lines of credit            (1,041)        (528)     (2,880)
Redemption of preferred stock                   --       (1,090)         --
Repayment of long-term debt                     --           --        (950)
Repayment of capital lease
  obligations                                 (668)      (1,038)     (1,332)
Net proceeds from sale of
  ordinary shares                               --        4,480          --
Proceeds from exercise
  of stock options                              42           75          --
                                          --------     --------         ---
Net cash (used in) provided
   by financing activities                  10,333        1,899      (5,162)
                                            ------        -----     -------
EFFECT OF EXCHANGE RATE
  CHANGES ON CASH                              962       (2,466)       (497)
                                           -------    ---------     -------
NET INCREASE IN CASH AND
   CASH EQUIVALENTS                          5,462       11,193       3,143
CASH AND CASH EQUIVALENTS
  AT BEGINNING OF YEAR                      30,337       19,144      16,001
                                            ------       ------      ------
CASH AND CASH EQUIVALENTS
  AT END OF YEAR                           $35,799      $30,337     $19,144
                                           =======      =======     =======
SUPPLEMENTAL DISCLOSURE OF
  CASH FLOW INFORMATION
Interest paid                              $   221      $   330     $   319
Income taxes paid                          $ 6,418      $ 4,107     $ 2,449
SUPPLEMENTAL DISCLOSURE OF
  NON-CASH INVESTING AND
  FINANCING ACTIVITIES
Acquisition of property
  and equipment through
  capital leases                           $    --      $   218     $   466
</TABLE>

        The accompanying notes are an integral part of these statements.

                                      F-8
<PAGE>


                            DENISON INTERNATIONAL plc

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  The Company

(a)  Business of the Company

     Denison International plc (the "Company"), a Company incorporated in
England and Wales, and its subsidiaries manufacture and distribute hydraulic
pumps and valves. The manufacturing plants are located in the United States,
Germany, France, and Finland and there are sales and distribution operations in
the United Kingdom, Canada, Sweden, Denmark, The Netherlands, Spain, Italy,
Japan, Australia, Hong Kong and Singapore.

(b)  Incorporation

     The Company was incorporated on March 10, 1993 as Alnery No. 1278 Limited
and on May 14, 1993 changed its name to Denison International Limited ("DIL")
and re-registered as a public limited company on July 28, 1997.

(c)  Share Restructuring and Initial Public Offering

     Throughout the period from January 1, 1994 to December 31, 1996, the
Company's authorized share capital was (pound)682,500, divided into 500,000 A
Ordinary Shares, (pound)0.01 par value per share, ("A Ordinary Share") and
1,000,000 B Ordinary Shares, (pound)0.01 par value per share ("B Ordinary
Share") and 667,500 cumulative redeemable preference shares, (pound)1.00 par
value per share. Each A Ordinary Share entitled the holder to one vote and each
B Ordinary Share entitled the holder to 1.85 votes.

     On January 23, 1997 the Company redeemed the 667,500 preference shares.

     On July 24, 1997 (i) 667,500 unallocated preference shares, (pound)1.00 par
value per share, were canceled; (ii) the Company's then outstanding A Ordinary
Shares and B Ordinary Shares were redesignated as Ordinary Shares, (pound)0.01
par value per share, ranking pari passu; (iii) the Company made a bonus issue
(stock dividend) of seven Ordinary Shares for every one Ordinary Share then
held; (iv) the then outstanding Ordinary Shares, (pound)0.01 par value per
share, were consolidated into 700,930 Ordinary Shares, (pound)0.08 par value per
share; (v) all of the authorized and outstanding Ordinary Shares, (pound)0.08
par value per share, were redesignated as A Ordinary Shares; (vi) the Company
made a bonus issue (stock dividend) of fifteen Ordinary Shares, $0.01 par value
per share, for each A Ordinary Share; (vii) 570 A Ordinary Shares, (pound)0.08
par value per share, were subscribed; and (viii) the then outstanding A Ordinary
Shares were consolidated into 7,015 A Ordinary Shares, (pound)8 par value per
share.

     As a result, the Company's authorized share capital was 15,000,000 Ordinary
Shares, $0.01 par value per share, and 7,125 A Ordinary Shares, (pound)8 par
value per share. After the reorganization, there were 10,513,950 Ordinary Shares
and 7,015 A Ordinary Shares issued and outstanding.

                                      F-9
<PAGE>

     On August 8, 1997 the Company completed an initial public offering in which
it issued and sold 450,000 Ordinary shares at $16.00 per share (the "Offering").
Net proceeds from the Offering were $4,480,000.

2.  Basis of Financial Statements

  Companies Act 1985

     These consolidated financial statements do not comprise the Company's
statutory accounts within the meaning of section 240 of the Companies Act 1985,
as amended, of Great Britain (the "Companies Act"). The Company's statutory
accounts, which are its primary consolidated financial statements, are prepared
in accordance with accounting principles generally accepted in the United
Kingdom ("U.K. GAAP") in compliance with the Companies Act and are presented in
pounds sterling. Statutory accounts for the years ended December 31, 1996 and
1997 have been, and for the year ended December 31, 1998 will be filed with the
Registrar of Companies for England and Wales. The auditors' reports on those
accounts previously filed were unqualified.

  Principles of Consolidation

     The consolidated financial statements include the accounts of the Company
and its subsidiaries, all of which are wholly owned. Significant intercompany
accounts and transactions have been eliminated on consolidation.

  Use of Estimates

     The preparation of the consolidated financial statements in conformity with
United States generally accepted accounting principles ("U.S. GAAP") requires
management to make estimates and assumptions that affect the amounts reported in
the consolidated financial statements and accompanying notes. Actual results
could differ from these estimates.

3.  Significant Accounting Policies

     These financial statements have been prepared in accordance with U.S. GAAP.
Certain reclassifications have been made to 1996 and 1997 balances to conform
with 1998 presentation. The significant accounting policies applied in their
preparation are as follows:

  Cash and Cash Equivalents

     The Company considers all highly liquid investments having an original
maturity of three months or less to be cash equivalents.

  Inventories

     Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out (FIFO) method. Work-in-progress and finished goods
include the cost of direct materials and labor plus a reasonable proportion of
manufacturing overheads based on normal levels of activity.

                                      F-10
<PAGE>

  Property, Plant and Equipment

     Property, plant and equipment are depreciated using the straight-line
method over their estimated useful lives as follows:

           Buildings owned by the Company                        33 to 38 years
           Long leaseholds                                        Life of lease
           Plant and equipment                                    4 to 10 years

  Goodwill

     Goodwill (including negative goodwill) is amortized using the straight-line
method over periods of ten to fifteen years. Goodwill represents the excess of
the purchase price over the estimated fair value of net assets acquired.
Negative goodwill represents the excess of the estimated fair value of net
assets acquired (after the elimination of the carrying value of all noncurrent
assets) over the purchase price.

  Environmental Remediation

     Environmental liabilities are recorded based on the most probable cost if
known or on the estimated minimum cost, determined on a site by site basis. The
Company's environmental liabilities are not discounted and do not take into
consideration any possible future insurance proceeds or any significant amounts
of claims against other third parties.

  Revenue Recognition

     The Company recognizes revenues from the sale of its products at the time
of shipment to the customer. Provision is made currently for estimated product
returns which may occur.

  Warranty

     The Company generally warrants its products for one year. An estimate of
the amount required to cover warranty expense on products sold is charged
against income at the time of sale. Other liabilities include accrued warranty
costs of $2.2 million and $4.1 million at December 31, 1998 and 1997,
respectively, of which $2.2 million and $2.3 million are classified as
short-term.

  Advertising Expense

     The Company expenses the costs of advertising as incurred. Advertising
expenses include the promotion of specific products and kinds of advertising
include Company and product catalogues, business and industrial publications.
Advertising expense was $0.9 million, $1.3 million and $1.9 million for the
years ended December 31, 1998, 1997 and 1996, respectively.

  Research and Development

     Expenditures for research and development are expensed as incurred.
Research and development expense was $3.1 million, $3.2 million and $2.6 million
for the years ended December 31, 1998, 1997 and 1996, respectively.

                                      F-11

<PAGE>

  Income Taxes

     Full provision is made for taxation using the liability method on all
temporary differences between financial reporting and tax bases of assets and
liabilities, using enacted tax rates and laws.

  Foreign Currency

     The functional currencies of the Company and its subsidiaries are their
local currencies.

     For U.S. reporting purposes, these consolidated financial statements are
translated from local currency into U.S. dollars using year-end rates for the
balance sheets and average rates for statements of operations and cash flows in
accordance with Financial Accounting Standards Board Statement No. 52, "Foreign
Currency Translation." Translation gains and losses are accumulated in the
accumulated other comprehensive income component of shareholders' equity.

     Foreign currency transactions are converted into functional currencies at
the rates of exchange at the transaction date or average rate for the period of
the transaction. Exchange gains and losses arising from transactions in foreign
currencies are recorded in the consolidated statements of operation and are
insignificant for all years presented.

     Forward foreign exchange contracts purchased from time to time to hedge
future purchases are accounted for as hedges of anticipated transactions. The
deferred gain or loss is recognized in earnings when the related transaction
takes place.

  Stock Based Compensation

     As permitted by Financial Accounting Standards Board Statement No. 123,
"Accounting and Disclosure of Stock-Based Compensation" ("FASB 123"), the
Company accounts for employee share option grants using the intrinsic value
method in accordance with Accounting Principle Board Opinion No. 25, "Accounting
for Stock Issued to Employees" ("APB 25"). Under APB 25, because the exercise
price equals the estimated market price on the date of grant, no compensation
expense has been recognized for stock option awards. The effect of applying the
fair value method of FASB 123 to the Company's option grants is presented in
Note 9.

  Earnings per Share

     In accordance with the Financial Accounting Standards Board Statement No.
128, "Earnings per Share", basic earnings per share excludes any dilutive
effects of options, warrants and convertible securities. Diluted earnings per
share includes the dilutive effects of options, warrants and convertible
securities.

  Concentrations of Business and Credit Risk

     Financial instruments which potentially subject the Company to credit risk
consist principally of trade receivables. The Company performs on-going credit
evaluations of its customers and generally does not require collateral. The
Company maintains adequate reserves for potential losses and such losses, which
have historically been minimal, have been within management's estimates.

                                      F-12

<PAGE>

     The Company sells the majority of its products to distributors and original
equipment manufactures throughout North America, Europe and Asia-Pacific.

   Comprehensive Income (Loss)

     In 1998, the Company adopted Financial Accounting Standards Board Statement
No. 130, "Reporting Comprehensive Income" ("FASB 130"). FASB 130 establishes new
rules for reporting and display of comprehensive income and its components;
however, the adoption of FASB 130 had no impact on the Company's net income or
shareholders' equity. FASB 130 requires pension liability adjustments and
foreign currency translation adjustments, which prior to adoption were reported
separately in shareholders' equity, to be included in other comprehensive
income. Prior year financial statements have been restated to conform to the
requirements of FASB 130.

     Accumulated other comprehensive loss on the balance sheet consists of:

<TABLE>
<CAPTION>
                                                                        December 31,
                                                       ---------------------------------------------
                                                              1998                    1997
                                                       ---------------------  ----------------------
                                                                (U.S. dollars in thousands)

<S>                                                    <C>                    <C>
Pension liability adjustment                                    (43)                       (43)
Cumulative translation adjustment                            (2,575)                    (5,218)
                                                       -------------              -------------
Accumulated other comprehensive loss                   $     (2,618)              $     (5,261)
                                                       =============              =============
</TABLE>

    New Accounting Pronouncements

     In June 1998, the Financial Accounting Standards Board issued Statement No.
133, "Accounting for Derivative Instruments and Hedging Activities", which is
required to be adopted in years beginning after June 15, 1999. Because of the
Company's minimal use of derivatives, management does not anticipate that the
adoption of the new Statement will have a significant effect on earnings or the
financial position of the Company.

4.  Inventories

     Inventories consisted of the following:

<TABLE>
<CAPTION>
                                                                        December 31,
                                                       ---------------------------------------------
                                                                 1998                 1997
                                                       ---------------------  ----------------------
                                                                (U.S. dollars in thousands)
 
<S>                                                    <C>                    <C>         
           Finished goods                                   $     22,486        $     16,365
           Work-in-progress                                        3,343               2,861
           Raw materials and supplies                             12,407               8,956
                                                            ------------        ------------
                                                            $     38,236        $     28,182
                                                            ============        ============
</TABLE>

                                      F-13

<PAGE>

5.  Property, Plant and Equipment

     Property, plant and equipment, net, consisted of the following:

                                                     December 31,
                                                     ------------
                                              1998                 1997
                                              ----                 ----
                                             (U.S. dollars in thousands)

Cost:
Land and buildings                           $  2,538            $ 1,378
Machinery and equipment                        32,328             20,096
Motor vehicles                                    975                913
                                                -----             ------
                                               35,841             22,387
Less accumulated depreciation                 (11,115)            (7,439)
                                             --------            --------
Property, plant and equipment, net           $ 24,726            $14,948
                                             ========            =======


6.  Bank Notes Payable

     In December 1998, the Company's U.S. subsidiary entered into an unsecured
time note with a bank that provided $12.0 million for working capital and
acquisitions. Borrowings under the agreement are guaranteed by the Company. At
December 31, 1998, $12.0 million was outstanding under the time note. Interest
on the note accrues at a rate of LIBOR + 0.875% (6.1% at December 31, 1998).
Interest on the loan is payable monthly, and the principal is due April 19,
1999.

     Short-term borrowings outside the United States under available informal
credit facilities are typically a result of overdrafts. At December 31, 1998,
the Company had $0.5 million of foreign debt outstanding. The Company also has
an additional $3.6 million of unused foreign credit facilities. These facilities
may be withdrawn at any time by the banks.

     The weighted average interest rates on short-term borrowings as of December
31, 1998 and 1997 were 6.0% and 4.1%, respectively.

7.  Fair Value of Financial Instruments

     The Company estimates the fair values of financial instruments at the
balance sheet dates using available market information and appropriate valuation
methodologies. These estimates are highly subjective in nature and involve
uncertainties and significant judgment in interpretation of current market data.
The estimated fair values of the Company's financial instruments approximate
their carrying values at December 31, 1998 and 1997.

     The Company conducts its business in various foreign currencies. As a
result, it is subject to the transaction exposures that arise from foreign
exchange rate movements between the dates that foreign currency transactions are
recorded and the date they are consummated. The Company hedges some anticipated
transactions, primarily intercompany purchases, through the use of forward
contracts. Gains and losses on contracts that are designated and effective as
hedges of such transactions are deferred and included in other assets or other
liabilities, respectively. They are recognized in income in the same period as
the hedged transactions. Deferred gains and losses on forward contracts and the

                                      F-14

<PAGE>

related value at risk were not material at December 31, 1998 and 1997. There can
be no assurance that these strategies will be effective.

8.  Acquisitions

     On December 23, 1998 the Company closed its acquisition of Lokomec Oy
effective as of October 1, 1998, for a cash purchase price of $16,038,000
($10,923,000 net of cash acquired). Lokomec is a manufacturer of hydraulic
manifolds located in Tampere, Finland. The acquisition has been accounted for
using the purchase method of accounting, and the operating results of Lokomec
have been included in the consolidated results of the Company from October 1,
1998. An imputed interest charge covering the period from October 1, 1998 to
December 23, 1998 has been reflected in the results of Lokomec included in the
consolidated results of the Company. Goodwill of $8,599,000 is amortized by the
straight-line method over 15 years. Three months of amortization expense is
included in the Company's 1998 consolidated statement of operations.

     The purchase price may be increased dependent upon the achievement of
certain operating objectives, principally based upon earnings before interest
and taxes over the next 3 years.

     The following unaudited pro forma summary presents the Company's combined
results as if the acquisition occurred at January 1, 1997, after giving effect
to certain adjustments including goodwill amortization. These pro forma results
are not necessarily indicative of those that would have occurred had the
acquisition occurred at January 1, 1997:

                                      December 31,               December 31,
                                         1998                       1997
                                         ----                       ----
                                           (U.S. dollars in thousands)

Revenue                                $  153,901                 $ 157,122
                                       ==========                 =========
Net income                             $   17,891                 $  20,995
                                       ==========                 =========
Basic earnings per share               $     1.61                 $    1.96
                                       ==========                 =========
Diluted earnings per share             $     1.61                 $    1.93
                                       ==========                 =========

9.  Stock Options

     The Company's Executive Stock Option Plan authorizes awards to employees in
the form of options to purchase the Company's Ordinary Shares. The aggregate
number of Ordinary Shares for which options may be granted under the plan is
850,000. Options granted under the plan are for periods not to exceed 10 years,
and must be issued at the higher of par value or the fair market value of the
shares on the date of grant. Options vest one year from the date of grant
subject to any additional restrictions which may be imposed by the board of
directors. Pro forma information regarding net income and earnings per share is
required under FASB 123, and has been determined as if the Company has accounted
for its employee stock options under the fair value method of that Statement.
Prior to the Offering, the Company used the minimum value method to estimate the
fair value of options at the grant date, assuming a risk free rate of 6%, no
dividend yield and an expected life of 5 years. After the Offering, the Company
adopted the Black-Scholes method to estimate the fair value of options at the
date of grant with the following assumptions for 1998 and 1997: risk-free
interest rates of 6%, volatility of 42%, no dividend yield and an expected life
of 5 years.

                                      F-15

<PAGE>

     For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information follows:

<TABLE>
<CAPTION>
                                                    1998            1997             1996
                                                    ----            ----             ----
                                              (U.S. dollars in thousands, except per share data)

<S>                                            <C>              <C>             <C>       
  Pro forma net income                         $   15,587       $   19,603      $   16,941
  Pro forma earnings per share:
       Basic                                   $     1.41       $     1.83      $     1.61

         Diluted                               $     1.40       $     1.80      $     1.59
</TABLE>

    The following table summarizes share option activity for Ordinary Shares:

<TABLE>
<CAPTION>
                                           1996                         1997                        1998
                                 -------------------------  -----------------------------  -------------------------
                                                 Weighted                       Weighted                    Weighted
                                                 Average                         Average                     Average
                                                 Exercise                       Exercise                    Exercise
                                    Options         Price      Options             Price     Options           Price
                                 ------------------------   ----------------------------  --------------------------
<S>                                 <C>        <C>             <C>                <C>           <C>           <C>   
Outstanding beginning of year       150,000    $     0.93      150,000            $ 0.93        370,250       $13.98
Granted                                  --                    314,000             16.28        327,500        17.75
Exercised                                --            --      (93,750)             0.80        (39,750)        0.98
Forfeited                                --            --           --                          (32,000)       16.22
                                 =========================  ----------------------------  --------------------------
Outstanding end of year             150,000    $     0.93      370,250          $  13.98        626,000    $   16.66
                                 =========================  ============================  ==========================

Exercisable at end of year           71,250                     15,000                           83,250

Weighted-average fair value
  of options granted during
  the year                           $   --                    $  5.47                        $   8.05
</TABLE>

                                      F-16
<PAGE>


Share options outstanding at December 31, 1997 and 1998 are summarized as
follows:
   
<TABLE>
<CAPTION>
                                              Outstanding                                 Exercisable
                               -------------------------------------------    -----------------------------------
                                                          Weighted-
                                          Weighted        Average                                 Weighted
                                          Average         Remaining                               Average
                                          Exercise        Contractual                             Exercise
                               Number      Price            Life                    Number         Price
                               --------------------------------------------   -----------------------------------
<S>                            <C>       <C>              <C>                    <C>              <C>  
December 31, 1997
Exercise
prices between
$.75 and $1.93                   56,250    $1.14            6.8                   15,000            $1.49

Exercise prices between
$16.00 and                      314,000    16.28            8.5                       --               --
$17.60

December 31, 1998
Exercise prices between
$.75 and $1.93                   16,500    $1.53            6.1                   12,750            $1.41

Exercise prices between
$13.88 and $19.53               609,500    17.07            8.5                   70,500           $16.28

</TABLE>
    
10.      Earnings per Share

     The following table sets forth the computation of basic and diluted
earnings per share:

<TABLE>
<CAPTION>
                                                               1998            1997             1996
                                                         ---------------  --------------    --------------
                                                         (U.S. dollars in thousands, except share and per
                                                                            share data)
<S>                                                       <C>             <C>              <C>           
Numerator:
    Net income                                            $       16,290  $       19,788   $       16,941
                                                          ==============  ==============   ==============
Denominator:
    Denominator for basic earnings per
    share -- weighted-average shares                          11,089,607      10,738,578       10,535,965
    Effect of dilutive stock options                              43,649         125,467          141,319
                                                           -------------   -------------    -------------
    Denominator for diluted earnings
    per share -- adjusted weighted-
    average shares                                            11,133,256      10,864,045       10,677,284
                                                           =============   =============    =============

Basic earnings per share                                  $         1.47  $         1.84   $         1.61
                                                          ==============  ==============   ==============

Diluted earnings per share                                $         1.46  $         1.82   $         1.59
                                                          ==============  ==============   ==============
</TABLE>

11.  Commitments

     The Company has purchase commitments with various vendors for approximately
$2.1 million as of December 31, 1998. These purchase commitments are payable
during 1999.

                                      F-17

<PAGE>

     Future minimum lease payments under capital leases and non-cancelable
operating leases with initial terms of one year or more consisted of the
following at December 31, 1998:

                                                 Capital         Operating
                                                 Leases           Leases
                                                 ------           ------
                                                (U.S. dollars in thousands)

1999                                              $ 318           $ 1,805
2000                                                 38               977
2001                                                 --               749
2002                                                 --               590
2003                                                 --               377
Thereafter                                           --                45
                                                   -----            -----
Total minimum lease payments                        356            $4,543
                                                                   ======
Less amount representing interest                    (7)
                                                  -----
                                                    349
Less current portion                               (311)
                                                  -----
Long-term obligation                              $  38
                                                  =====

     Property, plant and equipment include the following amounts for leases that
have been capitalized at December 31, 1998 and 1997:

                                                        December 31,
                                                        ------------
                                                 1998                 1997
                                                 ----                 ----
                                                (U.S. dollars in thousands)

Machinery and equipment                          $1,794             $1,764
Less accumulated depreciation                      (880)              (510)
                                                 ------             ------
                                                   $914             $1,254
                                                   ====             ======

     Amortization of leased assets is included in depreciation expense. The
interest element of the rental obligations is charged to income over the period
of the lease at the estimated effective interest rate implicit in the lease.

     Rent expense charged to operations for the years ended December 31, 1998,
1997 and 1996 was $1.6 million, $1.8 million and $1.6 million, respectively.

12.  Income Taxes

     The Company's income before income taxes relates to operations in the
United Kingdom and operations other than the United Kingdom (foreign). The
relationship between income before income taxes and the provision for income
taxes varies from period to period because each jurisdiction in which the
Company operates has its own system of taxation (not only with respect to the
statutory rate, but also with respect to the availability of deductions,
credits, and other benefits) and because the amounts earned in and subject to
tax by, each jurisdiction changes from period to period.

     For financial reporting purposes, income before income taxes includes the
following components:

                                      F-18
<PAGE>
                                         

                                                 Year ended December 31,
                                                 -----------------------
                                             1998           1997         1996
                                             ----           ----         ----
                                               (U.S. dollars in thousands)

            Pretax income:
                 United Kingdom          $   2,866        $ 1,775       $ 1,190
                 Foreign                    19,380         21,380        18,188
                                          --------        -------       -------
                                           $22,246        $23,155       $19,378
                                           =======        =======       =======

Significant components of the provision for income tax expense were as follows:

                                                 Year ended December 31,
                                                 -----------------------
                                            1998          1997       1996
                                            ----          ----       ----
                                              (U.S. dollars in thousands)

Current:
   United Kingdom                            $ 335         $   --         $    9
   Foreign                                   5,411          5,035          2,428
                                             -----         ------         ------
        Total Current                       $5,746         $5,035         $2,437
                                            ======         ======         ======
Deferred:
   United Kingdom                               --           --               --
   Foreign                                     210         (1,668)            --
                                                          -------
        Total provision for income taxes    $5,956         $3,367         $2,437
                                            ======       ========         ======

     The effective tax rate on earnings before income taxes varies from the
current U.K. statutory income tax rate as follows:

<TABLE>
<CAPTION>
                                                                          December 31,
                                                                          ------------
                                                                 1998         1997       1996
                                                                 ----         ----       ----

<S>                                                                <C>          <C>        <C>
Provision at statutory rate                                        31%          31%        33%
Foreign operations taxed at rates different from United
  Kingdom Statutory rate                                            7            9          8
Reduction in valuation allowance relating to utilization
  of NOL carry forwards and other deferred tax assets              (6)          (7)       (18)
Release of valuation allowance                                     --           (7)        --
Amortization of negative goodwill                                  (2)          (1)        (1)
Other--net (primarily cost basis differences on property,

  plant and equipment)                                             (3)         (10)        (9)
                                                                  ---         ----        ---
Effective tax rate                                                 27%          15%        13%
                                                                   ==           ==         ==
</TABLE>

     Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts for income tax purposes recorded at the applicable
statutory rates where the Company's operations are located. Significant
components of the Company's deferred tax assets and liabilities are as follows:

<TABLE>
<CAPTION>
                                               December 31
                                  ------------------------------------
                                         1998               1997
                                  -----------------  -----------------
<S>                                 <C>                <C>       
Deferred tax assets:
     Fixed assets                   $      478         $    1,339
     Net operating assets                8,667              9,423
     Other                               3,811              3,313
</TABLE>

                                      F-19

<PAGE>
<TABLE>
<S>                                 <C>                <C>       
Valuation allowance                    (11,148)           (12,187)
                                    ----------         ----------
Deferred tax assets                      1,808              1,888
                                    ----------         ----------
Deferred tax liabilities                   242                220
Net deferred tax assets             $    1,566         $    1,668
                                    ==========         ==========
</TABLE>

     A valuation allowance has been provided against the net deferred tax assets
for financial reporting purposes in respect of temporary differences and net
operating loss carryforwards. These deferred tax assets primarily relate to
existing net operating losses and basis differences that arose as part of the
June 15, 1993 acquisition. Certain of these net operating losses and future tax
deductions are subject to limitations under foreign tax law which are described
further below. When the deferred tax assets from the acquisition are realized,
the Company records a reduction in the current year income tax expense equal to
the valuation reserve which has been realized. In addition, as a result of
continuing profitability in the U.S., the valuation allowance has been reduced
by $1.6 million and $1.9 million at December 31, 1998 and 1997, respectively, to
recognize deferred tax assets expected to be utilized in the next two years.

     At December 31, 1998, the Company had net operating loss carryforwards
("NOLs") of approximately $1.5 million for U.K. tax purposes. There is no
expiration date for these losses. In addition, the Company had approximately
$17.0 million of NOLs for foreign income tax purposes, of which $14.3 million
will be allowable against national taxes and $2.7 million will be allowable
against local trade taxes. The NOL deductions in the U.S. are limited under
Section 382 of the Internal Revenue Code to $0.6 million per year expiring in
2007. The Company and its subsidiaries file for group relief or consolidated tax
returns in the jurisdictions where available.

     The Company has not provided for taxes on undistributed foreign earnings
since the Company intends to reinvest these earnings in the future growth of the
business.

13.   Pension and Other Postretirement Benefits

     The Company operates four defined benefit plans in the United States,
Germany and Japan. The plans are generally funded in advance by contributions
from members at levels set in the rules, and from the Company at rates assessed
by each plan's professionally qualified actuaries. Plan assets consist
principally of corporate and government bonds and common stocks.
   
<TABLE>
<CAPTION>
                                                                Pension Benefits                     Other Benefits
                                                                ----------------                     --------------
                                                            1998                1997             1998              1997         
                                                            ----                ----             ----              ----
                                                                         (U.S. dollars in thousands)
<S>                                                         <C>                 <C>               <C>              <C>  
Change in benefit obligation
Benefit obligation beginning of year                        $14,082             $15,154           $ 911            $ 943
Service cost                                                    493                 340               5                6
Interest cost                                                   884                 868              59               63
Actuarial (gain)/loss                                           506                (230)           (209)             (46)
Benefits paid                                                  (752)               (741)           (120)             (55)
Special termination benefits                                     --                  --             283
Exchange rate changes                                           844              (1,309)             --               --
                                                                 --             -------           -----            -----
Benefit obligation at end of year                           $16,057             $14,082           $ 929            $ 911
                                                            -------             -------           -----            -----

Change in plan assets
</TABLE>
    

                                      F-20
<PAGE>
   
<TABLE>
<CAPTION>
                                                                Pension Benefits                     Other Benefits
                                                                ----------------                     --------------
                                                            1998                1997             1998              1997
                                                            ----                ----             ----              ----
                                                                         (U.S. dollars in thousands)
<S>                                                         <C>                 <C>               <C>              <C>  
Fair value of plan assets at beginning of year              $ 5,189             $ 5,207              --               --
Actual return on plan assets                                    343                 314              --               --
Employer contributions                                          275                  25             120               55
Benefits paid                                                  (501)               (321)           (120)             (55)
Exchange rate changes                                            13                 (36)             --               --
                                                            -------             -------           -----            -----
Fair value of plan assets at end of year                    $ 5,319             $ 5,189              $0               $0
                                                            -------             -------           -----            -----
Reconciliation of funded status
Funded status                                               (10,738)             (8,893)           (929)            (911)
Unrecognized actuarial (gain)/loss                             (190)               (995)            (40)             178
Unrecognized net asset                                          186                 449              --               --
Accumulated other comprehensive income                          (43)                (43)             --               --
                                                            -------             -------           -----            -----
Accrued benefit cost                                       ($10,785)             (9,482)           (969)            (733)
                                                            -------             -------           -----            -----

Additional year-end information for plans with
benefit obligations in excess of plan assets
Benefit obligation                                           15,139              13,139             929              911
Fair value of plan assets                                     4,390               4,225

Additional year-end information for plans with
accumulated benefit obligations in excess of plan
assets
Projected benefit obligation                                 15,139              13,139             929              911
Accumulated benefit obligation                               14,027              12,215             929              911
Fair value of plan assets                                     4,390               4,225

Components of net periodic benefit cost
Service cost                                                    493                 340               5                6
Interest cost                                                   884                 868              59               63
Expected return on plan assets                                 (345)               (333)
Amortization of transitional (asset) or obligation               31                 (37)
Recognized actuarial (gain) or loss                              (2)                (10)              9               15
                                                                 --                 ---             ---              ---
Net periodic benefit cost                                     1,061                 828              73               84
                                                            -------                 ---             ---              ---

Additional (gain) or loss recognized due to:
Special termination benefits                                    --                  --              283               --

Weighted average assumptions as of December 31
Discount rate                                                  5.93%               6.31%           6.75%             7.0%
Rate of increase in compensation levels                        2.40%               2.45%             --               --
Expected long-term rate of return on assets                    6.87%               7.09%             --               --
</TABLE>
    
     In addition to the Company's defined benefit pension plans, the Company's
U.S. subsidiary provides health care and life insurance benefits for certain
retired employees, and life insurance benefits for certain active employees. The
health care and life insurance plans are non-contributory and the health care
plan contains other cost-sharing features such as deductibles and coinsurance.

     The annual assumed health care cost trend is 8% for the year subsequent to
December 31, 1998 and is assumed to decrease to 6% and remain at that level
thereafter. The effect of a 1% annual

                                      F-21

<PAGE>

increase in the assumed health care cost trend rate would increase the
accumulated postretirement benefit obligation and the aggregate of the annual
service and interest costs by approximately 2.7%.

14.  Contingencies

     The Company remains involved in cleanup efforts at other Company owned
site. The Company's estimate at December 31, 1998 of the total anticipated cost
of the cleanup efforts is $3.0 million of which $1.2 million has been spent as
of December 31, 1998. Remaining accrued cleanup costs total $1.8 million of
which $0.5 million and $1.3 million are classified in the consolidated financial
statements as short-term and long-term accrued liabilities, respectively. The
liability was reduced by $.4 million in 1998.

     Because of the uncertainties relating to remediation activities, the future
expenditures to remediate the currently identified sites could be higher than
the accrued liability. Although it is difficult to assess the final outcome
related to environmental exposures, management believes that these liabilities
are fully accrued for in the accompanying consolidated financial statements.

15.  Segment Information

     In 1998, the Company adopted SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information. SFAS No. 131 establishes standards for the
way that companies report information about operating segments, geographic
areas, and major customers.

     The Company operates exclusively in the hydraulics industry. Substantially
all revenues result from the sale of hydraulics products. The Company's
reportable segments are based on geographic area. The accounting policies of the
operating segments are the same as described in Note 3. Sales are determined
based on the country of origin. The Company evaluates the performance of its
operating segments based on operating profit after elimination of profits on
transfers between geographic area.

     A summary of the Company's operations by geographic area follows:

<TABLE>
<CAPTION>
                                                   1998              1997             1996
                                                   ----              ----             ----
<S>                                             <C>               <C>              <C>    
     Sales to unaffiliated companies:

              United Kingdom                      $10,172           $11,248          $10,037
              France                               17,215            15,762           16,361
              Germany                              12,450            11,717           13,631
              Rest of Europe                       35,964            29,496           31,150
                                                ---------         ---------         --------
                       Total Europe                75,801            68,223           71,179

              United States                        45,170            50,097           48,065
              Canada                                8,055             7,342            5,667
                                                ---------         ---------         --------
                       Total N. America            53,225            57,439           53,732

              Asia-Pacific                         16,227            22,726           23,238
                                                ---------         ---------         --------

                       Total consolidated        $145,253          $148,388         $148,149
                                                =========         =========         ========

     Transfers between geographic area:

              United Kingdom                     $    143          $    164         $    180
              France                               27,357            23,193           23,614
              Germany                              17,118            15,329           18,453
              Rest of Europe                          214               250              325
                                                ---------         ---------         --------
                       Total Europe                44,832            38,936           42,572
</TABLE>


                                      F-22
<PAGE>

<TABLE>
<S>                                             <C>               <C>              <C>    
              United States                        11,557            13,647           12,829
              Canada                                    0                 0                0
                                                ---------         ---------         --------
                       Total N. America            11,557            13,647           12,829

              Asia-Pacific                             69               108              255
                                                ---------         ---------         --------

                       Total transfers             56,458            52,691           55,656
                       Eliminations               (56,458)          (52,691)         (55,656)
                                                ---------         ---------         --------

                       Total consolidated       $       0        $        0         $      0
                                                =========        ==========         ========

     Depreciation expense:

              United Kingdom                    $     122        $      154         $    137
              France                                1,480             1,468            1,189
              Germany                                 394               326              213
              Rest of Europe                          342               217              227
                                                ---------         ---------         --------
                       Total Europe                 2,338             2,165            1,766


                                                   1998              1997             1996
                                                   ----              ----             ----

              United States                         1,046               912              854
              Canada                                   18                14                0
                                                ---------         ---------         --------

                       Total N. America             1,064               926              854

              Asia-Pacific                            301               291              261
                                                ---------         ---------         --------

                       Total consolidated       $   3,703         $   3,382         $  2,881
                                                =========         =========         ========

     Operating income:                 
              United Kingdom                    $   2,428         $   2,309         $    559
              France                                7,442             5,475            4,975
              Germany                               2,724             1,049            2,728
              Rest of Europe                        3,071             1,403            1,898
                                                ---------         ---------         --------
                      Total Europe                 15,665            10,236           10,160

              United States                         5,183             7,873            5,139
              Canada                                  961               713              197
                                                ---------         ---------         --------
                      Total N. America              6,144             8,586            5,336

              Asia-Pacific                           (501)            1,940            2,005
                                                ---------         ---------         --------

                      Total consolidated        $  21,308         $  20,762         $ 17,501
                                                =========         =========         ========
 

     Identifiable assets:
              United Kingdom                    $   9,211         $  10,098         $  4,872
              France                               33,035            23,766           20,028
              Germany                              17,615            13,311           10,534
              Rest of Europe                       36,308            14,791           18,634
                                                ---------         ---------         --------
                       Total Europe                96,169            61,966           54,068

              United States                        29,007            27,059           20,900
              Canada                                3,950             3,788            2,861
                                                ---------         ---------         --------
                       Total N. America            32,957            30,847           23,761

              Asia-Pacific                         14,331            14,680           15,897
                                                ---------         ---------         --------
                       Total consolidated       $ 143,457         $ 107,493         $ 93,726
                                                =========         =========         ========
</TABLE>


                                      F-23
<PAGE>


                                   SCHEDULE II

                            DENISON INTERNATIONAL PLC

                        VALUATION AND QUALIFYING ACCOUNTS
   
<TABLE>
<CAPTION>
                                                                  Additions
                                                         -------------------------
                                           Balance at     Charged to     Charged to                    Balance at
                                           beginning of   costs and      other          Deductions     end of
                                           period         expenses       accounts       (write-offs)   period
                                           ------         --------       --------       ------------   ------

Description


<S>                                          <C>             <C>           <C>              <C>            <C>
Allowance for bad and doubtful debts
     Year ended December 31, 1996            2,670             692           12  (a)          (836)        2,538
     Year ended December 31, 1997            2,538           1,291         (210) (a)          (532)        3,087
     Year ended December 31, 1998            3,087             261           62  (a)        (1,015)        2,395
</TABLE>
                                                                   
(a)   Exchange adjustment

                                      F-24