DYNAMICS CORP OF AMERICA, 10-K, 1994-03-30

DYNAMICS CORP OF AMERICA
10-K, 1994-03-30
ELECTRIC HOUSEWARES & FANS

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SECURITIES and EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K

(X) ANNUAL REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)

For the fiscal year ended December 31, 1993

Commission file number 0-7304

DYNAMICS CORPORATION OF AMERICA
-------------------------------
(Exact name of registrant as specified in its charter)

NEW YORK 13-0579260
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

475 Steamboat Road, Greenwich, Connecticut 06830-7197
- ------------------------------------------ ----------
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: 203-869-3211
------------

SECURITIES REGISTERED PURSUANT TO SECTION 12 (b) OF THE ACT:

Title of Each Class Name of Each Exchange
------------------- ---------------------
on which Registered
-------------------
Common Stock (Voting)
$.10 Par Value New York Stock Exchange

SECURITIES REGISTERED PURSUANT TO SECTION 12 (g) OF THE ACT: NONE
----

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. X
-----
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of March 18, 1994:

Common Stock, $.10 Par Value--$58,131,000

The number of shares outstanding of each of the registrant's classes of common
stock, as of March 18, 1994:

Common Stock, par value $.10 per share Shares
Voting 3,870,587
Non-Voting 4,812

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the annual report to security holders for the year ended December
31, 1993 are incorporated by reference into Parts I and II of this Form 10-K.
Portions of the definitive proxy statement for the Annual Meeting of
Shareholders to be held on May 6, 1994 are incorporated by reference into Part
III of this Form 10-K.

Exhibits Index - Pages 19 and 20

<PAGE>

Part I

Item l. Business
--------

A description of Dynamics Corporation of America ("DCA" or
"Company") and financial information about industry segments on pages 22 and
23 of the annual report to security holders for the year ended December 31,
1993, and the classification of the Company's manufacturing divisions and
subsidiary for industry segments, including a description of each, on page 24
of the annual report to security holders for the year ended December 31, 1993
are incorporated herein by reference.

Unless otherwise noted, the additional information required
pursuant to this item which follows pertains to continuing operations of the
Company.

Sources and Availability of Raw Materials
- -----------------------------------------

DCA is a user of steel, aluminum, copper, plastics and
electronic components. Generally, these materials are available from many
sources, domestic and offshore. Prices paid are competitive. Supplies are
normally plentiful except during national emergencies, unusually prolonged
basic industry strikes, or periods of accelerated demand for products
exceeding industry capacity.

Patents and Trademarks
- ----------------------

Although DCA owns or is licensed under a number of domestic
and foreign patents and patent applications, management believes that no
single patent or group of patents is material to the business as a whole. The
trademarks Waring , Blendor , NuBlend , Acme Juicerator , Qualheim ,
Anemostat , Multi-Vent , Anemotrak , Envirotrak , and Environ are well
recognized in their trading areas and signify desirable quality and value.
These trademarks should be available for Company use as long as it desires.

Backlog
- -------

The backlog of unfilled orders was approximately $26,200,000
at December 31, 1993 as compared with approximately $23,500,000 at December
31, 1992. Approximately 82% is represented by orders expected to be completed
in 1994. The Power and Controlled Environmental Systems segment accounts for
approximately 60% of the unfilled orders at December 31, 1993, and backlog
continues to be significant when projecting future financial results of this
segment of the Company's business.

Customers
- ---------

In general, the businesses engaged in by the Company are not
dependent upon one or a few customers. The Power and Controlled Environmental
Systems segment of the Company, in addition to its commercial activities, acts
as both a subcontractor and prime contractor for the production of air
conditioning equipment, liquid cooling equipment and trailers and shelters for
electronic equipment of which the U.S. Government is the end-user. The
Company derived approximately 18% of its sales from U.S. Government-related
business in 1993. The Company derived approximately 12% of its sales in 1993,

<PAGE>

primarily in the Power and Controlled Environmental Systems segment, from a
single contractor to the U.S. Government. However, the Company and the Power
and Controlled Environmental Systems segment are not dependent on this
customer. The remaining segments of the Company serve a broad base of
customers and are predominantly commercial in nature.

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

DCA normally experiences varying degrees of competition with
respect to each of its segments and with respect to particular products within
each segment.

The electrical appliances produced by the Company's Waring
Products Division experience keen competition in the consumer and commercial
segments of the market. The Company's Waring Blendor , NuBlend , Acme
Juicerator and Qualheim are recognized names in their field.

The Reeves-Hoffman Division encounters strong competition for
the crystal products, oscillators and hermetic seal packages it sells due in
large part to the multiplicity of suppliers in the industry. The same is true
with respect to the heat dissipating devices sold by the Company's
International Electronic Research Corporation subsidiary.

Anemostat's air distribution, systems and door products
compete in a well supplied market with regard to quality, price and delivery.
The Company's Anemostat air diffusers and vision frames and louvers for fire-
rated doors are recognized names in the industry. Sales of these products tend
to follow the expansion and contraction of the commercial construction
industry.

As a supplier of specialized equipment for government,
industry and power plant use, the Ellis & Watts Division is generally required
to submit competitive bids. The mobile medical van segment of the market
which it serves has become more competitive in recent years.

Distribution
- ------------

The methods of distribution and marketing utilized by the
Company vary from division to division. In general, sales for all the
Company's segments combine some direct selling in certain market areas with
appropriate manufacturers' representatives, wholesalers, distributors and/or
dealers.

Research and Development
- ------------------------
DCA engages in a variety of research and development programs
throughout its divisions, the primary purposes of which are to improve
existing products and processes, modify current products to extend their
market life and expand markets by developing new products. Expenditures for
Company sponsored research and development amounted to $1,252,000 in 1993,
$1,203,000 in 1992 and $1,041,000 in 1991.

<PAGE>

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

The Company has been notified by the U.S. Environmental
Protection Agency ("EPA") that it is a Potentially Responsible Party ("PRP")
regarding hazardous waste cleanup at a non-Company site in Connecticut and at
a Company site in California. Certain of the PRPs at the Connecticut site
have agreed with the EPA to fund a feasibility study at the site and have sued
the Company and other PRPs who have not agreed to share the costs. A property
owner adjacent to the California site has sued the Company and others for
allegedly causing contamination of their property. The Company incurred costs
of $273,000 in 1993 to fund engineering studies and conduct investigations of
the California site and to pay related expenses. The Company also has
received notice from a state environmental agency that it is a PRP with
respect to a non-Company site in Pennsylvania, and is a defendant in two
lawsuits seeking contribution for Superfund cleanup costs relating to two
other non-Company sites in that state.

The amount of future environmental-related expenditures and
the extent of insurance coverage is not determinable at this time. Based upon
its knowledge of the extent of the Company's exposure and current statutes,
rules and regulations, management believes that the anticipated costs
resulting from claims and proceedings with respect to the above mentioned
sites, including possible remediation, the extent of which is presently
unknown, will not materially affect the financial position of the Company.
However, it is possible, but unanticipated at this time, that future results
of operations or cash flows could be materially affected by an unfavorable
resolution of these matters.

In 1993 the Company expended $426,000, including the $273,000
at the California site, to manage hazardous substances, to monitor pollutants,
to test for contaminants and to provide for required clean-up activities, a
48% increase in such expenditures over the prior year.

Number of Employees
- -------------------

DCA employed 1,062 persons at December 31, 1993.

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

The Company does not engage in material operations in foreign
countries. However, some revenue accrues from direct sales abroad which
represented approximately 9% of sales in 1993. In addition, the Company
receives revenue from licenses and technology transfers which amounted to
$1,207,000 in 1993, $244,000 in 1992 and $226,000 in 1991. In 1993 the
Company recorded income from an initial royalty of $1,000,000 under a
technology transfer agreement with a customer in the Power and Controlled
Environmental Systems segment; future royalty amounts from that customer are
dependent upon future contract awards received by the customer.

<PAGE>

Discontinued Operations
- -----------------------

The Company determined to discontinue operations at its
Fermont division, a manufacturer of electrical power systems for government
and commercial markets, effective as of September 30, 1991, and to put the
division's assets and business up for sale. The Company will fulfill all
contract obligations of Fermont, including its obligations under the contract
with the U.S. Government to supply 3KW engine generator sets, currently
scheduled to be completed in 1996, unless a buyer for the business assumes
performance of its contracts. (Notes 3, 6, 7 and 15 on pages 12, 14 and 18 of
the annual report to security holders for the year ended December 31, 1993 are
incorporated herein by reference.)

In December, 1992 the Company sold its 33.3% interest in
Farmhand Inc. for $1,700,000 in cash and a $500,000 note, at six percent
interest per annum, payable quarterly through 2009.

Investment in CTS Corporation
- -----------------------------
At December 31, 1993, the Company's holdings of the common
stock of CTS Corporation ("CTS") aggregated 1,920,900 shares. The Company's
equity ownership in CTS represents 37.3% of the outstanding stock of CTS.

The current CTS Board of Directors is comprised of five
individuals including two directors who also are officers and directors of
DCA. The Company's investment in CTS is accounted for under the equity
method. CTS, whose shares are listed on the New York Stock Exchange, designs,
manufactures and sells electronic and electromagnetic components and
subsystems for the automotive, communications equipment, data processing,
defense and aerospace, instruments and controls, and consumer electronic
markets. CTS is headquartered in Elkhart, Indiana and operates manufacturing
plants in the U.S. and abroad, primarily in a single business segment,
electronic components and subsystems, in worldwide markets. (Note 5 on page
13 of the Company's annual report to security holders for the year ended
December 31, 1993 is incorporated herein by reference.)

<PAGE>

Item 2. Properties
-----------

The following is a summary by industry segment of the properties occupied by
the Company.

Square
Division Location Feet Type Occupancy
- -------- -------- ------ -------- ---------
<S> <S> <C> <C> <C>
Executive 475 Steamboat Road 7,704 Part of Lease expiring
Greenwich, CT modern 12/31/2000
office bldg.

Electrical Appliances and Electronic Devices:
- --------------------------------------------

Waring New Hartford, CT 212,000 Modern 1 Fee ownership
Products story
McConnellsburg, PA 74,000 Modern 1 Fee ownership
story

Winsted, CT 55,000 Multi-story Fee ownership

I.E.R.C. Burbank, CA 37,000 2 Modern Lease expiring
bldgs; 4 1/31/95
stories &
1 story

Burbank, CA 21,000 3 Modern Fee ownership
bldgs; one
2 stories &
two 1 story

Reeves- Carlisle, PA 94,000 Modern 1 Lease expiring
Hoffman story 2/28/99

Fabricated Metal Products and Equipment:
- ---------------------------------------

Anemostat Scranton, PA 270,000 Modern 1 Fee ownership
Products story
Carson, CA 76,000 Modern 1 Lease expiring
story 10/31/95

<PAGE>

Square
Division Location Feet Type Occupancy
- -------- -------- ------ -------- ---------

Power and Controlled Environmental Systems:
- ------------------------------------------
Ellis & Cincinnati, OH 145,000 1 Modern Fee ownership
Watts bldg; 1
story mfg.
& 2 stories
offices

Cincinnati, OH 2,900 Modern 1 Fee ownership
story

</TABLE>

All plants are of adequate capacity and are utilized generally on a one-shift
basis. The Winsted, CT facility of the Waring Products Division is utilized
as a records storage facility and is also available for sale. Approximately
66,000 square feet of the Scranton, PA facility of the Anemostat Products
Division has been leased on a short-term basis. Approximately 40,000 square
feet of the New Hartford, CT facility of the Waring Products Division is
available for lease.

Discontinued Operations:
- ------------------------

The following property, previously operated by the Company, is being held for
sale or disposition by the Company:

<TABLE>
<S> <C> <C> <C>
Yazoo City, MS 80,000 Modern 1 Lease expiring
story 3/4/98
</TABLE>

The above property is currently subleased on a short-term basis.

The following property, which continues to be occupied and operated by the
Fermont Division, a discontinued operation, is held for sale in connection
with the sale of the business.

<TABLE>
<S> <C> <C> <C>
Bridgeport, CT 97,000 2 Modern Fee Ownership
bldgs; 2
stories &
1 story
</TABLE>

<PAGE>

Item 3. Legal Proceedings
-----------------

With respect to claims and actions against the Company,
including environmental matters, it is the opinion of Management that they
will have no material effect on the financial position of the Company.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------

Not applicable

Executive Officers of the Registrant
- ------------------------------------

Name Age Office
---- --- --------------------------
<S> <C> <C>
Andrew Lozyniak 62 Chairman of the Board and
President

Edward J. Mooney 80 Vice Chairman of the Board,
Vice President and Secretary

Henry V. Kensing 60 Vice President and General
Counsel

Patrick J. Dorme 58 Vice President-Finance and
Chief Financial Officer

Richard E. Smith 45 Treasurer
</TABLE>

The officers named above were elected to hold the offices set opposite their
respective names until the meeting of directors following the next annual
meeting of shareholders. Edward J. Mooney terminated his employment on
December 31, 1993, retired under the Company's pension plan and became a
consultant to the Company until his death on February 7, 1994. Henry V.
Kensing was elected Secretary of the Corporation by the Board of Directors on
February 23, 1994.

Except as above stated, the officers named above have served in their
respective capacities for the past five years.

There are no family relationships between any directors or executive officers
of the Company.

<PAGE>

Part II

Item 5. Market for the Registrant's Common Stock and Related
----------------------------------------------------
Security Holder Matters
-----------------------

Range of Stock Prices and Dividend Information on page 23 of
the annual report to security holders for the year ended December 31, 1993 is
incorporated herein by reference.

Item 6. Selected Financial Data
-----------------------

Selected Financial Data on page 21 of the annual report to
security holders for the year ended December 31, 1993 is incorporated herein
by reference.

Item 7. Management's Discussion and Analysis of Financial
-------------------------------------------------
Condition and Results of Operations
-----------------------------------

Management's Discussion and Analysis of Results of Operations
and Financial Condition on pages 4 through 6 of the annual report to security
holders for the year ended December 31, 1993 is incorporated herein by
reference.

Item 8. Financial Statements and Supplementary Data
-------------------------------------------

The following consolidated financial statements of the
registrant and its subsidiaries are included in the annual report to security
holders for the year ended December 31, 1993 and are incorporated herein by
reference.

<TABLE>
<CAPTION>
Page(s) in the
Annual Report
--------------
<S> <C>
Consolidated Balance Sheets--As of
December 31, 1993 and 1992 7

Consolidated Statements of Operations--For
the Years Ended December 31, 1993, 1992
and 1991 8

Consolidated Statements of Stockholders'
Equity--For the Years Ended December 31,
1993, 1992 and 1991 9

Consolidated Statements of Cash Flows--For
the Years Ended December 31, 1993, 1992
and 1991 10

Notes to Consolidated Financial Statements 11-19
</TABLE>

Item 9. Changes In and Disagreements with Accountants
---------------------------------------------
on Accounting and Financial Disclosure
--------------------------------------

Not applicable

<PAGE>

Part III

Item 10. Directors and Executive Officers of the Registrant
--------------------------------------------------

Identification of directors of the registrant and information
related thereto is included in the definitive proxy statement for the Annual
Meeting of Shareholders to be held on May 6, 1994, under caption "Election of
Directors", and said information is incorporated herein by reference.

Identification of executive officers of the registrant and
information related thereto is included in Part I of this Form 10-K.

Item 11. Executive Compensation
----------------------

Remuneration of directors and officers and information
related thereto is included in the definitive proxy statement for the Annual
Meeting of Shareholders to be held on May 6, 1994, under the captions
"Election of Directors", including information on the Stock Retirement Plan
for Outside Directors, "Executive Compensation", "Pension Benefits", "Savings
and Investment Plan" and "1980 Restricted Stock and Cash Bonus Plan", and said
information is incorporated herein by reference.

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

Security ownership of management and of certain beneficial
owners and information related thereto is included in the definitive proxy
statement for the Annual Meeting of Shareholders to be held May 6, 1994, under
the captions "Election of Directors" and "Security Ownership of Certain
Beneficial Owners", and said information is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
----------------------------------------------

Not applicable.

<PAGE>

Part IV

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

(a)(1) The report of independent auditors and the following
consolidated financial statements of the registrant and its
subsidiaries included in the annual report to security
holders for the year ended December 31, 1993 are incorporated
by reference in Item 8 above:

Consolidated Balance Sheets--
As of December 31, 1993 and 1992

Consolidated Statements of Operations--
For the Years Ended December 31, 1993, 1992 and 1991

Consolidated Statements of Stockholders' Equity--
For the Years Ended December 31, 1993, 1992 and 1991

Consolidated Statements of Cash Flows--
For the Years Ended December 31, 1993, 1992 and 1991

Notes to Consolidated Financial Statements

(a)(2)
and(d) The following consolidated financial statement schedules of
the registrant and its subsidiaries are included in this Form
10-K.
Page(s)
-------

Schedule VIII--Valuation and Qualifying
Accounts--For the Years
Ended December 31, 1993,
1992 and 1991 15-17

Schedule X--Supplementary Income
Statement Information--
For the Years Ended
December 31, 1993,
1992 and 1991 18

<PAGE>

The consolidated financial statements of CTS Corporation, the
registrant's investment in which is accounted for by the equity method, are
subject to the Rules and Regulations of the Securities and Exchange Commission
and have been examined by Price Waterhouse, independent accountants for CTS
Corporation. The following consolidated financial statement information and
schedules concerning CTS Corporation, which are included in CTS Corporation's
annual report on Form 10-K for the year ended December 31, 1993, certain
consolidated financial statement schedules included in said Form 10-K and CTS
Corporation's annual report to stockholders for 1993 attached to said Form
10-K as Exhibit 13 thereto (all of which are included as Exhibit 28 to this
Form 10-K), are incorporated by reference herein.

<TABLE>
<CAPTION>
Page(s) in CTS
Corporation's annual report
to stockholders for 1993

-----------------------------
<S> <C>
Consolidated Statements of Earnings --
years ended December 31, 1993,
1992 and 1991 12

Consolidated Statements of Stockholders'
Equity -- years ended December 31,
1993, 1992 and 1991 13

Consolidated Balance Sheets --
December 31, 1993 and 1992 14

Consolidated Statements of Cash Flows--
years ended December 31, 1993,
1992 and 1991 15
Notes to Consolidated Financial Statements 16-23

Report of independent accountants 24

</TABLE>

Page(s) in CTS Corporation
annual report on Form 10-K
for the year ended
December 31, 1993

---------------------------
<S> <C>
Report of independent accountants
on financial statement schedules S-2

Schedule V - Property, plant and
equipment S-3

Schedule VI - Accumulated depreciation
of property, plant and equipment S-4

Schedule VIII - Valuation and qualifying
accounts S-5
</TABLE>

<PAGE>

The above financial statement information and schedules
concerning CTS Corporation incorporated herein by reference were furnished to
the registrant by CTS Corporation and were used by the registrant as the basis
of recording registrant's net income (loss) from its equity investment in CTS
Corporation, and the amounts of income (loss) included in registrant's
financial statements are based solely on the aforesaid CTS Corporation
financial statement information and schedules and report of Price Waterhouse,
independent accountants for CTS Corporation.

All other schedules for which provision is made in the
applicable accounting regulations of the Securities and Exchange Commission
are not required under the related instructions or are not applicable, and
therefore have been omitted, or the information is included in the
consolidated financial statements, or notes thereto, of registrant or of CTS
Corporation incorporated by reference herein.

(a) (3)
and (c) Exhibits
--------

The response to this portion of Item 14 appears on the
Exhibits Index in a separate section of this Form 10-K on
pages 19 and 20.

(b) Reports on Form 8-K
-------------------

There were no reports on Form 8-K filed for the three months
ended December 31, 1993.

<PAGE>

SIGNATURES
----------

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

/S/ Patrick J. Dorme March 30, 1994
- -------------------------------------------
(Signature)
Patrick J. Dorme - Vice President-
Finance and Chief Financial Officer

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

/S/ Andrew Lozyniak March 30, 1994
- ---------------------------------------
Andrew Lozyniak - Chairman of the Board
and President

/S/ Henry V. Kensing March 30, 1994
- ---------------------------------------
Henry V. Kensing - Director, Vice President,
General Counsel and Secretary

/S/ Patrick J. Dorme March 30, 1994
- ---------------------------------------
Patrick J. Dorme - Director, Vice President-
Finance and Chief Financial Officer

/S/ Harold Cohan March 30, 1994
- ---------------------------------------
Harold Cohan - Director

/S/ Frank A. Gunther March 30, 1994
- ---------------------------------------
Frank A. Gunther - Director

/S/ Russell H. Knisel March 30, 1994
- ---------------------------------------
Russell H. Knisel - Director

/S/ Saul Sperber March 30, 1994
- ---------------------------------------
Saul Sperber - Director

/S/ M. Gregory Bohnsack March 30, 1994
- ---------------------------------------
M. Gregory Bohnsack - Corporate Controller
and Principal Accounting Officer

<PAGE>

CONSENT OF INDEPENDENT AUDITORS
-------------------------------

To the Board of Directors and Stockholders
Dynamics Corporation of America

We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Dynamics Corporation of America of our report dated February 22, 1994,
included in the 1993 Annual Report to Stockholders of Dynamics Corporation of
America.

Our audits also included the financial statement schedules of Dynamics
Corporation of America listed in Item 14(a). These schedules are the
responsibility of the Company's management. Our responsibility is to express
an opinion based on our audits. In our opinion, the financial statement
schedules referred to above, when considered in relation to the basic
financial statements taken as a whole, present fairly in all material respects
the information set forth therein.

ERNST & YOUNG

Stamford, Connecticut
February 22, 1994

<PAGE>

DYNAMICS CORPORATION OF AMERICA AND SUBSIDIARIES

<TABLE>

SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS

For the Year Ended December 31, 1993
(in thousands)

<CAPTION>
Column A Column B Column C Column D Column E
- -------- -------- -------- -------- --------

Additions
---------
Balance At Charged To Balance
Beginning Costs And At End
Description Of Period Expenses Deductions Of Period
- ----------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Valuation accounts
deducted from assets
to which they apply:

Allowance for net
unrealized losses
on marketable
equity securities $1,607 $ -0- $ 179(a) $1,428
------ ------ ------ ------

Allowance for
doubtful accounts $ 571 $ 113 $ 179(b) $ 505
------ ------ ------ ------

Allowance for cash
discounts $ 29 $ 94 $ 97(c) $ 26
------ ------ ------ ------

Reserves not shown
elsewhere:

Reserve for
warranties $1,672 $ 918 $1,408(d) $1,182
------ ------ ------ ------
<FN>

Notes:

(a)-- Market recoveries, net of changes to portfolio holdings.

(b)-- Bad debts, net of recoveries, written off against allowance
provided therefor.

(c)-- Discounts charged against allowance provided therefor.

(d)-- Warranty costs incurred and charged against reserve provided
therefor.
</TABLE>

<PAGE>

DYNAMICS CORPORATION OF AMERICA AND SUBSIDIARIES

<TABLE>

SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS

For the Year Ended December 31, 1992
(in thousands)

Column A Column B Column C Column D Column E
- -------- -------- -------- -------- --------

Allowance for net
unrealized losses
on marketable
equity securities $1,561 $ 46 $ -0- $1,607
------ ------ ------ ------

Allowance for
doubtful accounts $ 560 $ 255 $ 244(a) $ 571
------ ------ ------ ------

Allowance for cash
discounts $ 46 $ 139 $ 156(b) $ 29
------ ------ ------ ------

Reserves not shown
elsewhere:

Reserve for
warranties $1,233 $1,701 $1,262(c) $1,672
------ ------ ------ ------

<FN>
Notes:

(a)-- Bad debts, net of recoveries, written off against allowance
provided therefor.

(b)-- Discounts charged against allowance provided therefor.

(c)-- Warranty costs incurred and charged against reserve provided
therefor.
</TABLE>

<PAGE>

DYNAMICS CORPORATION OF AMERICA AND SUBSIDIARIES

<TABLE>

SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS

For the Year Ended December 31, 1991
(in thousands)

<CAPTION>
Column A Column B Column C Column D Column E
- -------- -------- -------- -------- --------

Allowance for net
unrealized losses
on marketable
equity securities $1,292 $1,561 $1,292(a) $1,561
------ ------ ------ ------

Allowance for
doubtful accounts $ 582 $ 347 $ 369(b) $ 560
------ ------ ------ ------

Allowance for cash
discounts $ 56 $ 127 $ 137(c) $ 46
------ ------ ------ ------

Reserves not shown
elsewhere:

Reserve for
warranties $1,585 $ 983 $1,335(d) $1,233
------ ------ ------ ------

<FN>
Notes:

(a)-- Changes to portfolio holdings and market recoveries.

(b)-- Bad debts, net of recoveries, written off against allowance
provided therefor.

(c)-- Discounts charged against allowance provided therefor.

(d)-- Warranty costs incurred and charged against reserve provided
therefor.

</TABLE>

<PAGE>

DYNAMICS CORPORATION OF AMERICA AND SUBSIDIARIES

SCHEDULE X--SUPPLEMENTARY INCOME STATEMENT INFORMATION

For The Years Ended December 31, 1993, 1992 and 1991
(in thousands)

Column A Column B
-------- --------

Charged to Costs
Item
and Expenses
---- ------------------------

1993 1992 1991
---- ---- ----

Maintenance and repairs $1,186 $1,244 $1,381
------ ------ ------

Advertising costs $3,130 $3,249 $2,257
------ ------ ------

The above information pertains to the continuing operations of the Company.

All other items required by this schedule were omitted as amounts constitute
less than one percent of net sales or are disclosed elsewhere in this Annual
Report on Form 10-K.

<PAGE>

Exhibits Index
--------------

Item 14. (a) (3) and (c)

Pursuant to Regulation S-K, Item 601, following is a list of Exhibits:
(A) Exhibits incorporated by reference.

Exhibit 4 - Instruments defining the rights of security holders:
1. The rights of common stockholders and preferred stockholders
(currently unissued) are defined in the Articles of
Incorporation referred to in Exhibit 3 and in the Form 8A for
registration of certain classes of securities (Rights and
Preferred Stock), Rights Agreement dated as of January 30,
1986, Summary of Rights, letter to stockholders, press
release and Listing Application to the New York Stock
Exchange with respect to the Rights, all of which were
included in the Exhibits of the registrant's Form 10-Q
Quarterly Report for the period ended March 31, 1986.
Exhibit 10 - Material contracts:
Management Compensatory Plans, Contracts and Arrangements
---------------------------------------------------------
1. 1980 Restricted Stock and Cash Bonus Plan, as amended, was
included in the registrant's definitive proxy statement for
the Annual Meeting of Shareholders on
May 6, 1988.
2. Employment contracts dated February 1, 1991 with:
Andrew Lozyniak - Chairman of the Board and President; Edward
J. Mooney - Vice Chairman of the Board, Vice President and
Secretary; Patrick J. Dorme - Vice President-Finance and
Chief Financial Officer and Henry V. Kensing - Vice President
and General Counsel were included in the Exhibits of the
registrant's Form 10-K Annual Report for the year ended
December 31, 1990.
3. Stock Retirement Plan for Outside Directors, as amended, was
included in the registrant's definitive proxy statement for
the Annual Meeting of Shareholders on
May 1, 1992.
4. Incentive Performance Plan was included in the Exhibits of
the Registrant's Form 10-K Annual Report for the year ended
December 31, 1992
5. Executive Life Insurance Policies was included in the
Exhibits of the Registrant's Form 10-K Annual Report for the
year ended December 31, 1992
6. Prescription Drug Plan for Outside Directors was included in
the Exhibits of the Registrant's Form 10-K Annual Report for
the year ended December 31, 1992

Other
-----
Agreement dated October 9, 1990 between Dynamics Corporation
of America and Gabelli Funds, Inc. and GAMCO Investors, Inc.
was included in the Exhibits of the registrant's Form 10-K
Annual Report for the year ended December 31, 1990.

<PAGE>

Exhibit 22 - Subsidiaries of the registrant were included in the Exhibits of
the registrant's Form 10-K Annual Report for the year ended
December 31, 1984.

(B) Exhibits filed in or as a separate section of this report.

Page
----

Exhibit 3 - Articles of incorporation and bylaws:
1. Bylaws, as amended. (a)

Exhibit 13 - Annual report to security holders for the
year ended December 31, 1993. (b)

Exhibit 24 - Consent of Independent Auditors 14

Exhibit 28 - CTS Corporation annual report on Form 10-K for
the year ended December 31, 1993, (without
Exhibits except as noted), the Report of
Independent Accountants and the Financial
Statement Schedules V, VI and VIII included
in said Form 10-K, and CTS Corporation's
annual report to stockholders for 1993
included in said Form 10-K as Exhibit 13
thereto. (c)

(a) Filed herewith.
(b) Unnumbered and immediately following the final numbered page of
this report.
(c) Unnumbered and following the registrant's annual report to security
holders for the year ended December 31, 1993.

BY-LAWS

DYNAMICS CORPORATION OF AMERICA

ARTICLE I

MEETING OF STOCKHOLDERS

SECTION 1. Place of Meetings. Every meeting of the stockholders of
Dynamics Corporation of America (hereinafter called the Corporation) shall be
held at the principal office of the Corporation in the State of Connecticut
or at such other place as shall be specified in the notice or waiver of
notice thereof.

SECTION 2. Annual Meetings. Each Annual Meeting of the Stockholders of
the Corporation for the election of directors and for the transaction of such
other business as may properly come before the meeting shall be held on the
first Friday in May in each year (or, if that day shall be a legal holiday,
then on the next succeeding business day) at such hour as may be specified in
the notice thereof.

SECTION 3. Special Meetings. Special meetings of the stockholders,
unless otherwise provided by law, may be called by the Chairman of the Board
of Directors, the President or by a majority of the Board of Directors of the
Corporation (hereinafter called the Board) and shall be called by the
Chairman of the Board or the President on the written request of the holders
of record of at least twenty-five percent (25%) of the shares of stock of the
Corporation issued and outstanding and entitled to vote thereat. Such
request in writing shall state the purpose or purposes of such meeting.

SECTION 4. Notice of Meetings. Notice of every meeting of the
stockholders shall be in writing and signed by the Chairman or Vice Chairman
or the President or a Vice President or the Secretary or an Assistant
Secretary of the Corporation. Such notice shall state the purpose or
purposes for which the meeting is called and the time when and the place
where it is to be held, and a copy thereof shall be served, either personally
or by mail, upon each stockholder of record entitled to vote at such meeting,
not less than ten nor more than fifty days before the meeting. If mailed,
such copy shall be directed to each stockholder at his address as it appears
on the stock book unless he shall have filed with the Secretary of the
Corporation a written request that notices intended for him be mailed to some
other address designated in such request. Such notice shall not be required
to be given to any stockholder who shall attend such meeting in person or by
proxy, or who shall waive notice thereof as hereinafter provided. Notice of
any adjourned meeting need not be given, except when expressly required by
law.

SECTION 5. Quorum. Unless otherwise provided by law or in the
Certificate of Incorporation or other certificate filed pursuant to law, at
each meeting of the stockholders, the holders of a majority of the shares of
Common Stock of the Corporation issued and outstanding and entitled to vote
at such meeting, present in person or represented by proxy, shall constitute
a quorum for the transaction of business; provided, however, that at any
meeting of the stockholders at which the holders of shares of Preferred Stock
shall have the right, pursuant to the provisions of the Certificate of
Incorporation of the Corporation, or Board action thereunder, to vote for
Directors, the terms and conditions of the shares of Preferred Stock issued
and outstanding and entitled to vote in such election shall be given effect
for the purpose of constituting a quorum for the conduct of such election.
In the absence of a quorum at any such meeting or any adjournment or

As amended through May 7, 1993. 1

<PAGE>

adjournments thereof, a majority in voting interest of those present in
person or represented by proxy, or in the absence therefrom of all the
stockholders any officer entitled to preside at, or to act as Secretary of,
such meeting, may adjourn such meeting from time to time until a quorum is
present thereat. At any such adjourned meeting at which a quorum is present,
any business may be transacted which might have been transacted at the
meeting as originally called.

SECTION 6. Organization. At each meeting of the stockholders, the
Chairman of the Board or the Vice Chairman or the President, in that order,
or, in their absence, a designee of the Chairman or in the absence of said
designee, a Chairman chosen by a majority vote of the stockholders present in
person or represented by proxy and entitled to vote thereat, shall act as
Chairman of the meeting. The Secretary shall act as Secretary at each
meeting of stockholders, or in his absence the Chairman of the meeting may
appoint any person present to act as Secretary of the meeting.

SECTION 7. Order of Business. The order of business at all meetings of
the stockholders shall be as determined by the Chairman of the meeting, but
the order of business to be followed at any meeting at which a quorum shall
be present may be changed by the holders of a majority in number of the
shares of stock present in person or represented by proxy and entitled to
vote thereon.

SECTION 8. Voting. Unless otherwise provided by law or in the
Certificate of Incorporation, other certificate filed pursuant to law, or the
terms and conditions of any Preferred Stock issued and outstanding, each
holder of record of shares of Common Stock of the Corporation shall be
entitled at each meeting of the stockholders to one vote for every share of
said stock of the Corporation standing in his name on the stock book of the
Corporation, and may vote either in person or by proxy. At all meetings of
stockholders, a quorum being present, all matters, except those the manner of
deciding upon which is otherwise provided by law or in the Certificate of
Incorporation or other certificate filed pursuant to law or these By-laws,
shall be decided by the affirmative vote of the holders of a majority in
number of the shares of stock present in person or represented by proxy and
entitled to vote thereon. Unless demanded by a stockholder present in person
or represented by proxy at any meeting of the stockholders and entitled to
vote thereat or so directed by the Chairman of the meeting, the vote thereat
need not be by ballot, except in the case of a vote for the election of
directors. Upon a demand by any such stockholder for a vote by ballot or any
question or at the direction of such Chairman that a vote by ballot be taken
on any question, such vote shall be so taken. On a vote by ballot each
ballot shall be signed by the stockholder voting, or by his proxy as such if
there be such proxy, and it shall show the number and class of shares voted
by such stockholder or proxy. Except as otherwise provided by law or by
these By-laws, all voting may be viva voce. The provisions of this Section
8 are subject to any superseding provision contained in any duly issued and
outstanding Preferred Stock.

SECTION 9. Inspectors of Election. At each meeting of the stockholders
the Chairman of the meeting shall appoint two inspectors of election to act
thereat. No director or candidate for the office of director shall be
appointed such inspector. Each inspector of election so appointed, before
entering upon the discharge of his duties, shall be sworn faithfully to
execute the duties of inspector at such meeting with strict impartiality and
according to the best of his ability, and the oath so taken shall be
subscribed by such inspectors. Such inspectors of election shall take charge
of the polls and after the voting on any question shall make a certificate of
the result of the vote taken. Inspectors need not be stockholders.

ARTICLE II

DIRECTORS

SECTION 1. Number, Election, Term. The property, business and affairs
of the Corporation shall be managed by the Board as from time to time
constituted. The Board shall consist of not less than seven (7) nor more
than twenty-one (21) directors. The Board shall by resolution determine the

As amended through May 7, 1993. 2

<PAGE>

number to be chosen within said limits. All directors shall be of full age
and at least one of them shall be a citizen of the United States and a
resident of the State of New York. At all meetings of the stockholders for
the election of directors, a quorum being present, the persons receiving a
plurality of the votes cast shall be directors. The term of office of each
director shall be as set out in the Proxy Statement of the year of such
director's election and qualification for a term from the time of his
election and qualification and until his successor shall have been duly
elected and shall have qualified, or until his death, or until he shall
resign, or until he shall have been removed in the manner hereinafter
provided. Directors need not be stockholders. The provisions of this
Section 1 are subject to any superseding provision contained in any duly
issued and outstanding Preferred Stock.

SECTION 2. First Meeting. After each annual election of directors, on
the same day and at the conclusion of the meeting of stockholders at which
such election shall be held, and at the place where such election is held,
the newly elected Board may meet for the purpose of organization, the
appointment of officers and the transaction of other business. Notice of
such meeting need not be given. Such meeting may be held at any other time
or place which shall be specified in a notice given as hereinafter provided
for special meetings of the Board, or in a waiver of notice thereof, signed
by all the directors.

SECTION 3. Regular Meetings. Regular meetings of the Board may be held
at such times and places as the Board by resolution may determine. If any
day fixed for a regular meeting shall be a legal holiday at the place where
the meeting is to be held, then the meeting which would otherwise be held on
that day shall be held at the same hour on the next succeeding business day
at said place. Except as provided by law or these By-laws, notice of regular
meetings need not be given.

SECTION 4. Special Meetings. Special meetings of the Board shall be
held whenever called by the Chairman of the Board, the President, or by the
Secretary at the request of any two directors. Notice of each such special
meeting shall be mailed to each director, addressed to him at his residence
or usual place of business, at least two days before the day on which such
meeting is to be held, or shall be sent addressed to him at such place by
telegraph, cable or wireless, or be delivered personally or by telephone, not
later than the day before the day on which such meeting is to be held. Such
notice need not, however, be given to any director, if waived by him as
hereinafter provided, or if he shall be present at such meeting. Except as
otherwise specifically provided by law or by these By-laws, such notice or
waiver of notice need not contain any statement of the purposes of the
meeting or any specification of the business to be transacted thereat.

SECTION 5. Quorum. At each meeting of the Board, the presence of a
majority of the whole Board shall be necessary to constitute a quorum for the
transaction of business. In the absence of a quorum at any such meeting, a
majority of the directors present thereat may adjourn such meeting from time
to time until a quorum shall be present. Notice of any adjourned meeting
need not be given. At any adjourned meeting at which a quorum is present,
any business may be transacted which might have been transacted at the
meeting as originally called.

Participation by Telephone. Any one or more members of the Board
of Directors or any Committee thereof may participate in a meeting of the
Board of Directors or such Committee by means of a conference telephone or
similar communications equipment allowing all persons participating in the
meeting to hear each other at the same time. Participation by such means
shall constitute presence in person at a meeting.

SECTION 6. Voting. At all meetings of the Board, a quorum being
present, all matters, except those the manner of deciding upon which is
otherwise provided by law or in the Certificate of Incorporation or other
certificate filed pursuant to law or in these By-laws, shall be decided by
the affirmative vote of a majority of the directors present. The directors
shall act only as a board and the individual directors shall have no power as
such.

As amended through May 7, 1993. 3

<PAGE>

SECTION 7. Organization. At each meeting of the Board, the Chairman, or
in the absence of the Chairman, the Vice Chairman, or in his absence, a
director chosen by a majority of the directors present, shall act as Chairman
of the meeting. The Secretary, or in his absence any person appointed by the
Chairman of the meeting, shall act as Secretary of the meeting. Any meeting
of the Board may be adjourned by the vote of a majority of the directors
present at such meeting.

SECTION 8. Removal of Directors. Any director may be removed, either
with or without cause, at any time, by the affirmative vote of the holders of
record of a majority of the shares of Common Stock of the Corporation then
outstanding and entitled to vote, in person or by proxy, at a special meeting
of stockholders called for the purpose. The provisions of this Section 8 are
subject to any superseding provision contained in any duly issued and
outstanding Preferred Stock.

SECTION 9. Vacancies. Any vacancy in the Board caused by death,
resignation, an increase in the number of directors or any other cause
(except the removal of a director) may be filled by the Board at any regular
or special meeting thereof or by the stockholders of the Corporation at a
special meeting of stockholders called for the purpose. Any vacancy in the
Board caused by the removal of a director in the manner hereinabove provided
shall be filled by the stockholders at the special meeting of stockholders at
which such director shall have been removed or at any subsequent meeting
called for the purpose. The provisions of this Section 9 are subject to any
superseding provision contained in any duly issued and outstanding Preferred
Stock.

SECTION 10. Place of Meeting. The Board may hold its meetings at such
place or places within or without the State of New York as it may from time
to time by resolution determine or as shall be specified or fixed in the
respective notices or waivers of notice thereof.

SECTION 11. Compensation. Directors who are also full time employees
of the Corporation and who are compensated as employees, shall receive no
additional compensation for their services. Other directors shall receive a
salary of $9,000 per annum for their services as such directors and, in
addition, shall be paid $800.00 as a fee for attendance at any meeting of the
Board; provided, however, that nothing herein contained shall be construed so
as to preclude any employee of the Corporation and who is compensated as
such, from serving the Corporation, or any subsidiary or affiliated
corporation, in any other capacity and receiving proper compensation
therefor.

In addition to the cash compensation payable to outside directors, the
Corporation shall, in accordance with the Stock Retirement Plan for Outside
Directors effective as of May 2, 1986, credit 100 Common Stock Units per
calendar year to a Deferred Stock Account maintained by the Corporation in
the name of each outside director and be paid to each such director as and
when provided by said Plan.

ARTICLE III

OFFICERS

SECTION 1. Number. The executive officers of the Corporation shall be
a Chairman of the Board, a Vice Chairman and a President, each of whom shall
be a member of the Board, one or more Vice Presidents, a Secretary and a
Treasurer; and there may be, in addition, such assistants, agents and
employees as shall be appointed in accordance with the provisions of these
By-laws. One person may hold any two or more offices except those of
Chairman and Vice Chairman or President and Vice President.

SECTION 2. Appointment, Term of Office. The executive officers of the
Corporation shall be chosen by the Board as soon as practicable after each
annual election of directors, each such executive officer to hold office
until his successor shall have been duly chosen and shall have qualified, or
until his death, or until he shall resign, or until he shall have been
removed in the manner hereinafter provided.

As amended through May 7, 1993. 4

<PAGE>

SECTION 3. Subordinate Officers. The Board may appoint such
assistants, agents or employees as the Board may deem necessary or advisable,
including one or more Assistant Treasurers and one or more Assistant
Secretaries; and in the event there shall be established one or more
operating divisions of the Corporation, the Board may appoint a President,
Vice President, a Treasurer, Assistant Treasurer, a Secretary, Assistant
Secretary and a Comptroller of each such division as it deems necessary or
convenient. Each of the foregoing assistants, agents, employees and
divisional officers shall hold office for such period, have such authority
and perform such duties as the Board may from time to time determine. The
Board may delegate to any executive officer the power to appoint and remove
any such assistants, agents, employees and divisional officers.

SECTION 4. Removal. Any officer of the Corporation may be removed,
either with or without cause, at any time, by resolution adopted by a
majority of the whole Board at a special meeting thereof called for that
purpose. The removal of an officer shall be without prejudice to the
contract rights, if any, of the officer so removed.

SECTION 5. The Chairman of the Board. The Chairman of the Board shall
be the chief executive officer of the Corporation and shall have primary
responsibility for the general management, supervision and control of the
business of the Corporation, subject to the direction and control of the
Board. He shall, if present, preside at all meetings of the shareholders and
the Board and shall be ex-officio a member of all committees of the Board.
He shall see that all orders and resolutions of the Board are carried into
effect and, in general, shall perform all duties incident to the office of
Chairman of the Board and such other duties as may be assigned to him by the
Board or by these By-laws. He may, with the Secretary or an Assistant
Secretary sign certificates for shares of stock of the Corporation; he may
execute and deliver in the name of the Corporation all deeds, bonds,
mortgages, contracts or other instruments authorized by the Board, except in
cases where the execution or delivery thereof shall be expressly delegated by
the Board or these By-laws to some other officer or agent of the Corporation,
and except any instruments required by law otherwise to be executed or
delivered; he may affix the seal of the Corporation to any instrument
requiring the same.

SECTION 6. Vice Chairman of the Board. The Vice Chairman of the Board
shall have such powers and perform such duties as the Board may from time to
time prescribe. He may sign with the Secretary or an Assistant Secretary,
certificates for shares of stock of the Corporation. Except as otherwise
provided by law, he shall possess the same powers as the Chairman to execute
and deliver all deeds, bonds, mortgages, contracts or other instruments
authorized by the Board. At the request of the Chairman, or in case of his
absence or inability to act, the Vice Chairman shall perform duties of
Chairman and when so acting shall have all of the powers and be subject to
all of the restrictions upon the Chairman.

SECTION 7. President. The President shall be the chief operating
officer of the Corporation and shall have direct responsibility and authority
for the day to day business activities and affairs of the Corporation,
subject to the supervision of the Chairman of the Board and to the control of
the Board. In the absence of the Chairman and Vice Chairman of the Board, he
shall preside at all meetings of the shareholders and the Board and, unless
or until the Board shall otherwise determine, be vested with all of the
powers of the Chairman of the Board. He may sign, with the Secretary or an
Assistant Secretary, certificates for shares of stock of the Corporation; he
may execute and deliver in the name of the Corporation all deeds, bonds,
mortgages, contracts, or other instruments authorized by the Board, except in
cases where the execution or delivery thereof shall be expressly delegated by
the Board or these By-laws to some other officer or agent of the Corporation,
and except any instruments required by law otherwise to be executed or
delivered; and he may affix the seal of the Corporation to any instrument
requiring the same. He shall be a member ex-officio of any committee
appointed by the Board. The President shall see that all orders of the
Chairman of the Board are carried into effect, shall perform such other
duties as may be assigned to him by the Board or by these By-laws and, in
general, shall perform all duties incident to the office of President.

As amended through May 7, 1993. 5

<PAGE>

SECTION 8. Vice President. Each Vice President shall have such powers
and perform such duties as the Board may from time to time prescribe. Any
Vice President may sign, with the Secretary or an Assistant Secretary,
certificates for shares of stock of the Corporation. Except as otherwise
provided by law, each of the Vice Presidents shall possess the same power as
the President to execute and deliver all deeds, bonds, mortgages, contracts,
or other instruments authorized by the Board.

SECTION 9. The Treasurer. The Treasurer shall have the care and
custody of, and be responsible for, all of the funds and securities of the
Corporation and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit all
moneys and other valuable effects in the name of and to the credit of the
Corporation in such banks or other depositories as may be designated by the
Board; he shall disburse the funds of the Corporation as may be ordered by
the Board, taking proper vouchers for such disbursements, and shall render to
the Chairman of the Board, the President or to the Board, whenever the
Chairman, the President or the Board may require him so to do, a statement of
all his transactions as Treasurer and an account of the financial condition
of the Corporation; and, in general, he shall perform all the duties incident
to the office of Treasurer and such other duties as may from time to time be
assigned to him by the President or the Board.

SECTION 10. The Secretary. The Secretary shall act as secretary of,
and keep the minutes of, all meetings of the Board and of the stockholders;
he shall cause to be given such notice of all meetings of the stockholders
and directors as may be required; he shall be custodian of the seal of the
Corporation and shall affix the seal or cause it to be affixed to all
certificates for shares of stock of the Corporation and to all documents the
execution of which on behalf of the Corporation under its seal shall have
been specifically or generally authorized by the Board; he shall have charge
of the stock book and also of the other books, records and papers of the
Corporation relating to its organization as a corporation, and shall see that
the reports, statements and other documents required by law are properly kept
or filed; and he shall in general perform all the duties incident to the
office of Secretary. He may sign, with any other authorized officer,
certificates for shares of stock of the Corporation. He shall have such
other powers and perform such other duties as the Chairman of the Board, the
President or the Board shall from time to time prescribe.

SECTION 11. Salaries. The salaries of the officers of the Corporation,
if any, shall be fixed, from time to time by the Board, and none of such
officers shall be prevented from receiving a salary by reasons of the fact
that he is also a member of the Board.

SECTION 12. Vacancies. Any vacancy in the office of any officer,
caused by death, resignation, removal or any other cause, may be filled by
the Board for the unexpired portion of the term.

ARTICLE IV

EXECUTIVE COMMITTEE AND OTHER COMMITTEES

SECTION 1. Executive Committee - Designations, Vacancies. The Board
may, by resolution or resolutions adopted by a majority of the whole Board,
designate two or more of their number to constitute an Executive Committee.
The Board shall designate one of the members of the Executive Committee to
act as Chairman of the Executive Committee. The Chairman of the Executive
Committee shall preside at its meetings and shall perform such other duties
as may from time to time be assigned to him by the Executive Committee. The
Secretary of the Corporation, or such other person as the Executive Committee
shall from time to time determine, shall act as secretary of the Executive
Committee. The Board, by action of a majority of the whole Board, shall have
power to remove members of and to fill vacancies in the Executive Committee.

As amended through May 7, 1993. 6

<PAGE>

SECTION 2. Executive Committee - Powers. The Executive Committee shall
have and may exercise all the powers of the Board in the management of the
property, business and affairs of the Corporation, during the intervals
between meetings of the Board.

SECTION 3. Executive Committee - Procedure. The Executive Committee
shall fix its own rules of procedure and may hold its meetings at any place
which it may find convenient. The Executive Committee shall keep a record of
its proceedings and report them to the Board at the next meeting thereof
after such proceedings shall have been taken. All action taken by the
Executive Committee shall be subject to ratification or alteration by the
Board. The members of the Executive Committee shall act only as a committee
and the individual members shall have no power as such.

SECTION 4. Other Committees. The Board of Directors, by resolution
passed by a majority of the whole Board, may designate members of the Board
to constitute other committees, which shall in each case consist of such
number of directors and shall have and may exercise, except as otherwise
prescribed by statute, such powers as the Board may determine and specify in
the respective resolutions appointing them. A majority of all of the members
of such committee may determine its action and fix the time and place of its
meeting, unless the Board shall otherwise provide. The Board shall have
power at any time to change the members of any such committee to fill
vacancies and to discharge any such committee, either with or without cause.

ARTICLE V

RESIGNATIONS

SECTION 1. Resignations. Any director or officer may resign his office
at any time by giving written notice of his resignation to the Chairman of
the Board, the President or the Secretary of the Corporation. Such
resignation shall take effect at the time specified therein or, if no time be
specified therein, at the time of the receipt thereof, and the acceptance
thereof shall not be necessary to make it effective.

ARTICLE VI

CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.

SECTION 1. Execution of Contracts. Except as otherwise provided by law
or in these By-laws, the Board may authorize any officer or officers, agent
or agents, in the name of and on behalf of the Corporation, to enter into any
contract or to execute and deliver any instrument, and such authority may be
general or confined to specific instances. Unless so authorized by the Board
or expressly authorized by these By-laws, no officer or agent or employee
shall have any power or authority to bind the Corporation by any contract or
engagement or to pledge its credit or to render it pecuniarily liable for any
purpose or to any amount.

SECTION 2. Indebtedness. No loans shall be contracted on behalf of the
Corporation and no negotiable paper shall be issued in its name unless
authorized by the Board. When authorized by the Board so to do, any officer
or agent of the Corporation thereunto authorized may effect loans and
advances at any time for the Corporation from any bank, trust company or
other institution, or from any firm, corporation or individual, and for such
loans and advances may make, execute and deliver promissory notes, bonds, or
other certificates or evidences of indebtedness of the Corporation and, when
authorized so to do, may pledge, hypothecate or transfer any securities or
other property of the Corporation as security for any such loans or advances.
Such authority may be general or confined to specific instances.

As amended through May 7, 1993. 7

<PAGE>

SECTION 3. Checks, Drafts, etc. All checks, drafts, and other orders
for the payment of moneys out of the funds of the Corporation and all notes
or other evidences of indebtedness of the Corporation shall be signed on
behalf of the Corporation in such manner as shall from time to time be
determined by the Board.

SECTION 4. Deposits. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the
Corporation in such banks, trust companies or other depositories as the Board
may select or as may be selected by any officer or officers, agent or agents
of the Corporation to whom such power may from time to time be delegated.

SECTION 5. Proxies. Unless otherwise provided by the Board, the
Chairman of the Board, the Vice Chairman, the President or any Vice President
may from time to time appoint an attorney or attorneys or agent or agents of
the Corporation, in the name and on behalf of the Corporation, to cast the
votes which the Corporation may be entitled to cast as the holder of stock or
other securities in any other corporation, or to consent in writing, in the
name of the Corporation as such holder, to any action by such other
corporation, and may instruct the person or persons so appointed as to the
manner of casting such votes or giving such consent, and may execute or cause
to be executed in the name and on behalf of the Corporation, and under its
corporate seal, or otherwise, all such written proxies or other instruments
as he may deem necessary or proper in the premises.

ARTICLE VII

SHARES AND CERTIFICATES

SECTION 1. Certificates. Each holder of record of shares of stock of
the Corporation shall be entitled to a certificate or certificates in such
form as shall be approved by the Board, signed by the Chairman of the Board,
the Vice Chairman, the President or a Vice President and the Secretary or an
Assistant Secretary, and sealed with the seal of the Corporation, which seal
may be an engraved or printed facsimile, certifying the number of shares
owned by him in the Corporation. If any such certificate is signed by a
transfer agent or transfer clerk and by a registrar, the signatures of any of
the officers specified above may be engraved or printed facsimiles. In case
any such officer who shall have signed or whose facsimile signature shall
have been placed upon such certificate shall have ceased to be such before
such certificate is issued, it may be issued by the Corporation with the same
effect as if such officer had not ceased to be such at the date of its issue.

SECTION 2. Transfers. Shares of stock of the Corporation shall be
transferable on the stock book of the Corporation by the holder thereof in
person or by his attorney thereunto authorized by power of attorney duly
executed and filed with the Secretary or the transfer agent. Except as
hereinafter provided in the case of loss, destruction or mutilation of
certificates, no transfer of stock shall be entered until the previous
certificate given for the same shall have been duly endorsed, surrendered and
canceled. The Board may also make such additional rules and regulations as
it may deem expedient concerning the issue and transfer of certificates
representing shares of stock of the Corporation. No transfer of shares shall
be valid as against the Corporation or its shareholders for any purpose until
it shall have been entered in the share records of the Corporation by an
entry showing from and to whom transferred.

SECTION 3. Closing of Transfer Books, Record Date. The Board may
prescribe a period, not exceeding fifty (50) days prior to any meeting of
stockholders or prior to the last day on which the consent or dissent of
stockholders may be effectively expressed for any purpose without a meeting,
during which no transfer of stock on the books of the Corporation may be
made; or, in lieu of prohibiting the transfer of stock, may fix a day and
hour not more than fifty (50) days prior to the day and hour then fixed for
the holding of any meeting of stockholders or prior to the last day on which

As amended through May 7, 1993. 8

<PAGE>

the consent or dissent of stockholders may be effectively expressed for any
purpose without a meeting as the time as of which stockholders entitled to
notice of and to vote at such meeting or whose consent or dissent is required
or may be expressed for any purpose, as the case may be, shall be determined,
and all persons who were holders of record of voting stock at such time and
no others shall be entitled to notice of and to vote at such meeting or to
express their consent or dissent, as the case may be. The Board may fix a
day and hour not exceeding fifty (50) days preceding the date fixed for the
payment of any dividend or the making of any distribution, or for the
delivery of evidences of rights or evidences of interest arising out of any
change, conversion or exchange of capital stock, as a record time for the
determination of the stockholders entitled to receive any such dividend,
distribution, rights or interests, and in such case only stockholders of
record at the time so fixed shall be entitled to receive such dividend,
distribution, rights or interests. The Board at its option, in lieu of so
fixing a record time, may prescribe a period not exceeding fifty (50) days
prior to the date fixed for the payment of such dividend, distribution or
delivery during which no transfer of stock on the books of the Corporation
may be made.

SECTION 4. Lost, Destroyed or Mutilated Certificates. In case of loss,
destruction or mutilation of any certificate of stock, another may be issued
in its place upon proof of such loss, destruction or mutilation and upon the
giving of a bond of indemnity to the Corporation in such form and in such sum
as the Board may prescribe; provided, however, that a new certificate may be
issued without requiring any bond when, in the judgment of the Board, it is
proper to do so.

ARTICLE VIII

OFFICES AND BOOKS

SECTION 1. Offices. The principal office of the Corporation shall be at
475 Steamboat Road, Greenwich, CT. The Board may from time to time and at
any time establish other offices of the Corporation or branches of its
business at whatever place or places seem to it expedient.

SECTION 2. Books. There shall be kept at the principal office of the
Corporation correct books of account of all the business and transactions of
the Corporation and, either at said office of the Corporation or at the
office of the transfer agent of the Corporation, the stock book of the
Corporation, which shall contain the names, alphabetically arranged, of all
persons who are stockholders of the Corporation, showing their respective
places of residence, the number of shares of stock held by them respectively,
and the time when they respectively became the owners thereof.

ARTICLE IX

SEAL

SECTION 1. The seal of the Corporation shall be circular in form and
contain the name of the Corporation and the words and figures "Corporate Seal
1924 New York".

ARTICLE X

WAIVER OF NOTICE

SECTION 1. Whenever any notice whatever is required by these By-laws or
the Certificate of Incorporation or by law, the person entitled thereto may,
in person, or, in the case of a stockholder, by his duly authorized attorney,
waive such notice in writing (which shall include the use of telegraph,
cable, radio or wireless), whether before or after the meeting or other
matter or event in respect of which such notice is to be given.

As amended through May 7, 1993. 9

<PAGE>

ARTICLE XI

FISCAL YEAR

SECTION 1. The fiscal year of the Corporation shall end on the 31st day
of December in each year.

ARTICLE XII

INDEMNIFICATION

SECTION 1. Right of Indemnification. Each person who was or is made a
party or is threatened to be made a party to or is involved in any action,
suit or proceeding, whether civil, criminal, administrative or investigative
("proceeding"), by reason of the fact that he or she or a person for whom he
or she is the legal representative is or was a director or officer, employee
or agent of the Corporation or is or was serving at the request of the
Corporation as a director or officer, employee or agent of another
corporation including subsidiaries of the Corporation, or of a partnership,
joint venture, trust or other enterprise, including service with respect to
employee benefit plans, whether the basis of such proceeding is alleged
action in an official capacity as a director, officer, employee or agent or
in any other capacity while serving as so requested as a director, officer,
employee or agent, shall be indemnified and held harmless by the Corporation
to the fullest extent permitted by the New York Business Corporation Law, as
the same exists or may hereafter be amended (but, in the case of any such
amendment, only to the extent such amendment permits the Corporation to
provide broader indemnification rights then said law permitted the
Corporation to provide prior to such amendment) against all expenses,
liability and loss (including attorneys' fees, judgment, fines, ERISA excise
taxes or penalties and amounts paid or to be paid in settlement) reasonably
incurred or suffered by such person in connection therewith. Such right
shall be a contract right and shall include the right to be paid by the
Corporation expenses incurred in defending any such proceeding in advance of
its final disposition; provided, however, that the payment of such expenses
incurred by a director or officer of the Corporation in his or her capacity
as a director or officer (and not in any other capacity in which service was
or is rendered by such person while a director or officer, including, without
limitation, service to an employee benefit plan) in advance of the final
disposition of such proceeding, shall be made only upon delivery to the
Corporation of an undertaking, by or on behalf of such director or officer,
to repay all amounts so advanced if it should be determined ultimately that
such director or officer is not entitled to be indemnified under this section
or otherwise.

SECTION 2. Right of Claimant to Bring Suit. If a claim under Section 1
is not paid in full by the Corporation within 90 days after a written claim
has been received by the Corporation, the claimant may at any time thereafter
bring suit against the Corporation to recover the unpaid amount of the claim,
and if successful in whole or in part, the claimant shall be entitled to be
paid also the expense of prosecuting such claim. It shall be a defense to
any such action (other than an action brought to enforce a claim for expenses
incurred in defending any proceeding in advance of its final disposition
where the required undertaking has been tendered to the Corporation) that the
claimant has not met the standards of conduct which make it permissible under
the New York Business Corporation Law for the Corporation to indemnify the
claimant for the amount claimed, but the burden of proving such defense shall
be on the Corporation. The failure of the Corporation (including its Board
of Directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such action that indemnification
of the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the New York Business Corporation
Law, shall not be a defense to the action nor shall an actual determination
by the Corporation (including its Board of Directors, independent legal
counsel, or its stockholders) that the claimant had not met such applicable
standard of conduct, create a presumption that claimant had not met the
applicable standard of conduct.

As amended through May 7, 1993. 10

<PAGE>

SECTION 3. Non-Exclusivity of Rights. The rights conferred by Sections
1 and 2 shall not be exclusive of any other right which such person may have
or hereafter acquire under any statute, provision of the Articles of
Incorporation, By-laws, agreement, vote of stockholders or disinterested
directors or otherwise.

SECTION 4. Insurance. The Corporation may maintain insurance, at its
expense, to protect itself and any such director, officer, employee or agent
of the Corporation or another corporation, partnership, joint venture, trust
or other enterprise against any such expense, liability or loss, whether or
not the Corporation would have the power to indemnify such person against
such expense, liability or loss under the New York Business Corporation Law.

ARTICLE XIII

AMENDMENTS

SECTION 1. These By-laws or any of them may be altered, amended or
repealed, or new By-laws may be adopted, by the vote of a majority of the
whole Board at any regular or special meeting thereof, or by the vote of the
holders of a majority in number of the issued and outstanding shares of stock
of the Corporation given at any annual or special meeting of stockholders,
provided that notice thereof shall have been given in the notice of such
meeting of stockholders. The power of the Board to make, alter, amend and
rescind the By-laws of the Corporation shall be subject to such restrictions
and regulations, if any, as may be contained in any By-laws made and adopted
at any time by the stockholders. Any By-law adopted, amended and repealed by
the Board which regulates an impending election of directors shall be set
forth in the notice of the next meeting of stockholders for the election of
directors, together with a concise statement of the changes made.

As amended through May 7, 1993. 11

<PAGE>

BY-LAWS

DYNAMICS CORPORATION OF AMERICA

ARTICLE I - MEETING OF STOCKHOLDERS

SECTION 1. Place of Meetings . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2. Annual Meetings.. . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 3. Special Meetings. . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 4. Notice of Meetings. . . . . . . . . . . . . . . . . . . . . . 1
SECTION 5. Quorum. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 6. Organization. . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 7. Order of Business.. . . . . . . . . . . . . . . . . . . . . . 2
SECTION 8. Voting. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 9. Inspectors of Election. . . . . . . . . . . . . . . . . . . . 2

ARTICLE II - DIRECTORS

SECTION 1. Number, Election, Term. . . . . . . . . . . . . . . . . . . . 2
SECTION 2. First Meeting . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 3. Regular Meetings. . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 4. Special Meetings. . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 5. Quorum. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 6. Voting. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 7. Organization. . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 8. Removal of Directors. . . . . . . . . . . . . . . . . . . . . 4
SECTION 9. Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 10. Place of Meeting. . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 11. Compensation. . . . . . . . . . . . . . . . . . . . . . . . . 4

ARTICLE III - OFFICERS

SECTION 1. Number. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2. Appointment, Term of Office.. . . . . . . . . . . . . . . . . 4
SECTION 3. Subordinate Officers. . . . . . . . . . . . . . . . . . . . . 5
SECTION 4. Removal.. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 5. The Chairman of the Board.. . . . . . . . . . . . . . . . . . 5
SECTION 6. Vice Chairman of the Board. . . . . . . . . . . . . . . . . . 5
SECTION 7. President.. . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 8. Vice President. . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 9. The Treasurer . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 10. The Secretary . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 11. Salaries. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 12. Vacancies.. . . . . . . . . . . . . . . . . . . . . . . . . . 6

As amended through May 7, 1993.

<PAGE>

ARTICLE IV - EXECUTIVE COMMITTEE AND OTHER COMMITTEES

SECTION 1. Executive Committee - Designations, Vacancies. . . . . . . . 6
SECTION 2. Executive Committee - Powers. . . . . . . . . . . . . . . . . 7
SECTION 3. Executive Committee - Procedure.. . . . . . . . . . . . . . . 7
SECTION 4. Other Committees. . . . . . . . . . . . . . . . . . . . . . . 7

ARTICLE V - RESIGNATIONS

SECTION 1. Resignations. . . . . . . . . . . . . . . . . . . . . . . . . 7

ARTICLE VI - CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.

SECTION 1. Execution of Contracts. . . . . . . . . . . . . . . . . . . . 7
SECTION 2. Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 3. Checks, Drafts, etc . . . . . . . . . . . . . . . . . . . . . 8
SECTION 4. Deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 5. Proxies.. . . . . . . . . . . . . . . . . . . . . . . . . . . 8

ARTICLE VII - SHARES AND CERTIFICATES

SECTION 1. Certificates. . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 2. Transfers.. . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 3. Closing of Transfer Books, Record Date. . . . . . . . . . . . 8
SECTION 4. Lost, Destroyed or Mutilated Certificates.. . . . . . . . . . 9

ARTICLE VIII - OFFICES AND BOOKS

SECTION 1. Offices.. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 2. Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

ARTICLE IX - SEAL

SECTION 1.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

ARTICLE X - WAIVER OF NOTICE

SECTION 1.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

ARTICLE XI - FISCAL YEAR

SECTION 1.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10

As amended through May 7, 1993.

<PAGE>

ARTICLE XII - INDEMNIFICATION

SECTION 1. Right of Indemnification . . . . . . . . . . . . . . . . . . .10
SECTION 2. Right of Claimant to Bring Suit. . . . . . . . . . . . . . . .10
SECTION 3. Non-Exclusivity of Rights. . . . . . . . . . . . . . . . . . .11
SECTION 4. Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . .11

ARTICLE XIII - AMENDMENTS

SECTION 1.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11

As amended through May 7, 1993.

DYNAMICS
CORPORATION
OF AMERICA
1993 Annual Report

<PAGE>

Shareholders' Meeting:
The annual meeting of shareholders will be held on May 6, 1994 at 10:30 A.M.
in the Cole Auditorium of the Greenwich Library, West Putnam Avenue at
Dearfield Drive, Greenwich, Connecticut.

Stock Listing:
New York Stock Exchange
Ticker Symbol: DYA
NYSE-Composite Transactions
Symbol: DynaAmer

Additional Information:
A copy of the Company's annual report on Form 10-K filed with the Securities
and Exchange Commission will be furnished, without charge, on the written
request of a shareholder. Requests should be forwarded to the Company,
attention of the Secretary,
475 Steamboat Road, Greenwich, Connecticut 06830-7197

Executive Offices:
475 Steamboat Road
Greenwich, Connecticut
06830-7197
Tel. 203-869-3211

Transfer Agent and Registrar:
THE FIRST NATIONAL
BANK OF BOSTON
P.O. Box 644
Mail Stop 45-02-09
Boston, Massachusetts
02102-0644
Tel. 617-575-2900

Independent Auditors:
ERNST & YOUNG
1111 Summer Street
Stamford, Connecticut
06905-5571
Tel. 203-326-8200

<PAGE>

DYNAMICS CORPORATION OF AMERICA

Contents
Page
President's Message ........................................ 2
Management's Discussion and
Analysis .................................................. 4
Consolidated Balance Sheets ............................... 7
Consolidated Statements of
Operations ................................................ 8
Consolidated Statements of Stockholders'
Equity ................................................... 9
Consolidated Statements of
Cash Flows ................................................ 10
Notes to Consolidated Financial
Statements ................................................ 11
Report of Independent Auditors ............................ 20
Selected Financial Data .................................... 21
Segments of Business ....................................... 22
Range of Stock Prices and Dividend
Information ............................................... 23
Divisions and Subsidiary .................................. 24
Directors and Officers ...................... Inside Back Cover

Dynamics Corporation of America is a diversified manufacturer of commercial
and industrial products founded in 1924 and incorporated in New York. Its
corporate headquarters are in Greenwich, Connecticut and its shares are
listed on the New York Stock Exchange (trading symbol: DYA). The Company's
seven plants are located in California, Connecticut, Ohio and Pennsylvania.
Its five separate business units manufacture electronic components such as
Zero Insertion Force (ZIF(tm)) printed circuit board retainers and heat
dissipators; frequency control components and oscillators; commercial and
consumer appliances sold under the Waring(R), Acme Juicerator(R),
Qualheim(tm), Blendor(R) and NuBlend(R) tradenames; air distribution systems
sold under the Anemostat(R), Anemotrak(R) and Envirotrak(R) tradenames;
vision frames and louvers for fire rated doors; and air conditioning, related
equipment for power plant and other applications, mobile vans and
transportable shelters (including the Environ(R)) for specialized electronic
and medical diagnostic equipment such as CT and MRI scanners. The Company
also invests from time to time in shares of other businesses. The Company
currently holds a 37.3% stake in CTS Corporation ("CTS"), an Indiana
corporation headquartered in Elkhart whose shares are listed on the New York
Stock Exchange (trading symbol: CTS). CTS is a manufacturer of electronic and
electromechanical components and subsystems for the automotive,
communications equipment, data processing, defense and aerospace, instruments
and controls and consumer electronic markets.

1
<PAGE>

PRESIDENT'S MESSAGE
TO SHAREHOLDERS

1993--What a challenging year it was!

Managing the performance of Dynamics Corporation of America during the past
few years while meeting the challenges of a depressed economy, low consumer
confidence, major personnel layoffs, and the continuing uncertainty of the
promised but elusive recovery has, at times, required the patience of Job and
the wisdom of Solomon to survive and prosper. However, by perseverance and in
spite of the many setbacks, DCA's continuing operations have managed to
remain profitable, although not to the degree that management had planned or
worked so hard to achieve.

For the year ended December 31, 1993, Dynamics Corporation of America
reported income from continuing operations of $2,677,000, or $.68 per share,
on sales of $101,329,000. This compared with income from continuing
operations of $3,333,000, or $.85 per share, on sales of $110,243,000 for the
year ended December 31, 1992. Income in 1992 was increased by a resolution of
prior years tax matters of $780,000, or $.20 per share.

Included in income from continuing operations, before accounting changes, is
the Company's proportionate share of the results of the CTS Corporation, in
which DCA presently has a 37.3% ownership, for the year ended December 31,
1993, in accordance with the equity method of accounting required for that
investment, which was income of $1,619,000, or $.41 per share, compared to a
loss of $442,000, or $.11 per share, for last year.

The Company reported net income for the year ended December 31, 1993 of
$961,000, or $.24 per share, compared with net income of $2,123,000, or $.54
per share, in 1992.

Net income for the year ended December 31, 1993 included DCA's proportionate
share of CTS' net charge for onetime accounting changes, related to post
retirement benefits other than pensions and accounting for income taxes,
amounting to $1,716,000, or $.44 per share.

The Company fell considerably short of its planned sales and profit goals for
the year. The largest contributors to the 1993 shortfall were the Anemostat
Products Division and the Waring Products Division. These two divisions
experienced more than $13 million in lower sales than in 1992 and recorded
losses of approximately $400,000 as compared to earnings of approximately
$4,300,000 (pretax) in the 1992 period. Unfortunately, as we begin 1994,
market conditions for these operations have not materially improved although
we expect the benefits gained from their restructuring in 1993 will allow
both to be more competitive.

At our annual meeting held on May 7, 1993, I reported to you on the progress
being made by our wholly owned subsidiary International Electronic Research
Corporation. Through that date, this operation had recorded bookings of
$1,650,000 for its newly developed thermal products for various
microprocessors being introduced into the computer marketplace. These strong
bookings continued throughout the year resulting in sales at IERC of
$8,348,000--a 57% increase over the prior year. Operating income increased
fivefold. This outstanding performance continues into 1994 with bookings in
January and February for these same products already exceeding $2.7 million.
There is no guarantee that this order rate will continue but it is a great
start.

As in 1992, DCA did not borrow any funds during the year under the Revolving
Credit Agreement with its banks and the Company again demonstrated its
continuing ability to generate positive cash flow as its cash and cash
equivalents at year end increased to $8,969,000 as compared to $6,095,000 in
1992.

2
<PAGE>

In 1993, the management of the CTS Corporation began to realize the benefits
of its restructuring of operations, aggressive new product development and a
very strong automotive market for its products. These actions resulted in CTS
achieving net sales of $236,979,000, an increase of $9,588,000 or 4.2% over
1992, and operating earnings of $11,021,000, which increased significantly
from $4,098,000 in 1992. Before the Financial Accounting Standards Board
mandated accounting changes, earnings per share were $1.27 compared to $.37
in 1992. Operating cash flow at CTS was also positive and increased by $4.7
million over 1992 reflecting the company's continued emphasis on balance
sheet management.

On a personal note, it is with profound regret and sadness that I inform you
that Edward J. Mooney, our valued director, officer and colleague, who
celebrated his 40th year with DCA prior to his retirement in December, died
on February 7, 1994. On the occasion of his 25th year with the Company in
1978, the Board of Directors adopted the following resolution:

"RESOLVED, that we, his fellow Directors, record our utmost respect and
admiration and express our appreciation and gratitude to Edward J. Mooney for
his many years of devotion to duty, abundant talent, uncompromising
integrity, fortitude, keenness of mind and sound counsel. He has been a
champion of right, philosopher, teacher and pillar of strength, all of which
have left an indelible mark on those who have come in contact with him and
have contributed immeasurably to the survival, growth and success of this
Corporation."

Our admiration, so well expressed 15 years ago, only grew in the ensuing
years. His abundant talent, friendship, wise counsel and wit will be missed
by all his fellow employees and the many and significant contributions that
he made are a lasting legacy for DCA. We hereby extend to his family our
heartfelt sympathy in their great loss.

The challenges of 1993 have been many; the disappointments confronted; the
successes gratefully accepted. As we prepare to confront new challenges, we
feel confident that a financially sound, debt free DCA is in a position to
capitalize on the opportunities afforded to it to grow and prosper.

We sincerely thank those employees who responded to the challenges this past
year with their hard work, dedication and ingenuity. We also thank our
shareholders for their continued support and encouragement.

(SIGNATURE OF ANDREW LOZYNIAK)
Andrew Lozyniak
Chairman of the Board
and President

March 11, 1994

3
<PAGE>

MANAGEMENT'S DISCUSSION
AND ANALYSIS OF
RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
The following discussion, unless otherwise noted, pertains to continuing
operations.

Results of Operations
(1993 compared to 1992)

Sales decreased $8,914,000 or 8.1%. Sales in the Electrical Appliances and
Electronic Devices segment decreased $8,452,000 as sales of electrical
appliances decreased $10,364,000 with lower sales of juicer products and
blenders partially offset by increased sales of specialty consumer products.
Sales of electronic devices increased $1,912,000 as sales of new heat
dissipating devices for computer microprocessors more than doubled while
sales of frequency control devices decreased. Sales in the Fabricated Metal
Products and Equipment segment decreased $2,894,000 as air, door and systems
product sales declined due to the weak market for new industrial and
commercial construction and renovation, as well as competitive pricing. Sales
in the Power and Controlled Environmental Systems segment increased
$2,432,000 due principally to increased shipments under a multi-unit,
defense-related custom mobile order to a Government prime contractor, which
were partially offset by sales declines in power plant products.

Gross profit decreased $5,664,000 to 24.5% from 27.6% of sales. Gross profit
in the Electrical Appliances and Electronic Devices segment decreased
significantly due to lower sales of electrical appliances and lower sales and
manufacturing yields in the frequency control and hermetic seal product
lines, offset in part by the effect of increased sales of higher margined
heat dissipating devices. In the Fabricated Metal Products and Equipment
segment, gross profit decreased due to lower sales, especially of higher
margined systems products and services, and price competition. Gross profit
in the Power and Controlled Environmental Systems segment decreased due to
price competition for reduced defense procurements and a declining medical
products market for mobile vans and transportable shelters.

Selling, general and administrative expenses decreased $2,099,000 due to
lower commission, freight and sales promotion expenses in all segments of the
Company. The decrease was primarily volume related.

Other income increased $301,000. Royalty income increased $963,000 from the
initial royalty under a technology transfer agreement with a customer in the
Power and Controlled Environmental Systems segment. Staff restructurings
resulted in charges of $470,000, principally for severance, in the current
year. In 1992, the sale of excess property and plant resulted in a gain of
$554,000.

Income taxes amounted to $617,000, a decline of $547,000 principally because
of lower income before taxes. The year to year comparison of income taxes was
also affected by the favorable resolution of certain tax matters in 1992
amounting to $780,000. The 1993 effective tax rate is higher than the
applicable 34% Federal statutory rate primarily because of state income taxes
which were offset in part by non-taxable income and foreign tax credits.

The cumulative effect to January 1, 1992 of the Company's adoption of
Financial Accounting Standards Board ("FASB") Statement No. 109, "Accounting
for Income Taxes," resulted in a charge of $942,000 to 1992 earnings.

Equity in CTS Corporation

Equity in the earnings of CTS Corporation before accounting changes by CTS
increased $2,061,000 primarily as a result of CTS' increase in such earnings
of $4,669,000.

During the quarter ended March 31, 1993, the Company recorded its
proportionate share of CTS' net charge from its adoption of FASB Statement
No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions," a charge of $1,896,000, or $.49 per share, and FASB Statement No.
109, "Accounting for Income Taxes," a credit of $180,000, or $.05 per share.
These onetime, non-cash accounting changes were adopted by CTS as cumulative
effects to January 1, 1993.

The Company's equity ownership in CTS was 37.3% at year end compared to 37.2%
at the end of the previous year. The change in the equity ownership
percentage is attributable to purchases of CTS stock by the Company.

Liquidity and Financial Resources

In 1993, the Company increased cash and cash equivalents $2,874,000 by
generating $5,166,000 from operating activities while using $882,000 and
$1,410,000 in investing and financing activities, respectively, as disclosed
in the statement of cash flows. The discontinued Fermont division required
cash of $370,000 for operating activities. Cash and marketable securities,
other than shares of CTS, amounted to $9,656,000 at December 31, 1993. The
Company did not borrow dur-

4
<PAGE>

ing the year under its $27,000,000 Revolving Credit Agreement or the
$10,000,000 uncommitted line with its banks. The entire amount of the credit
facilities is available for use by the Company.

Liquidity and financial resources are considered adequate to fund planned
Company operations, including capital expenditures and payment of dividends.
The Company intends to continue its stated policy of reviewing potential
acquisitions which it believes could enhance its growth and profitability.

Management anticipates that the Company's deferred tax assets will be
realized based upon its expectation of future taxable income. The Company's
income from continuing operations before income taxes aggregated $9,089,000
for the three years ended December 31, 1993. Sustaining this income level
would be sufficient to realize deferred tax assets over the tax recovery
period. Although they are not expected to be required, the Company has
available various tax planning strategies, including property sale and
leaseback strategies, to supplement taxable income from operations in order
to realize deferred tax assets. The Company will require taxable income of
$15,396,000 ($14,742,000 of ordinary income and $654,000 of capital gain
income) to realize its net deferred tax assets of $5,999,000 at December 31,
1993. Under applicable carryback provisions of the current Internal Revenue
Code, $5,858,000 of the prior years' taxable income could be utilized to
realize temporary differences, including all capital related items. The
Company in large measure controls the reversal of $5,501,000 of temporary
differences and a significant portion of the remaining differences is
expected to reverse during the next five years.

The effect on the Company's income taxes of the Omnibus Budget Reconciliation
Act of 1993 was not significant in 1993 and is not expected to be significant
in the foreseeable future.

The Company continues to test its prototype units toward the goal of securing
first article approval from the U.S. Government of the 3KW generator sets
designed and manufactured by the discontinued Fermont division. Management
believes the reserve for this discontinued operation is adequate, although
the additional time for testing has extended the projected contract
completion date into 1996. (See Note 3 to the Consolidated Financial
Statements.)

Staff restructuring costs of $470,000 in 1993, principally for severance,
will result in cash outflows of approximately $369,000 and reduced salary
costs of approximately $1,500,000 in 1994.

The Company has been notified by the U.S. Environmental Protection Agency
("EPA") that it is a Potentially Responsible Party ("PRP") regarding
hazardous waste cleanup at a non-Company site in Connecticut and at a Company
site in California. Certain of the PRPs at the Connecticut site have agreed
with the EPA to fund a feasibility study at the site and have sued the
Company and other PRPs who have not agreed to share the costs. A property
owner adjacent to the California site has sued the Company and others for
allegedly causing contamination of their property. The Company incurred costs
of $273,000 in 1993 to fund engineering studies and conduct investigations of
the California site and to pay related expenses. The Company also has
received notice from a state environmental agency that it is a PRP with
respect to a non-Company site in Pennsylvania, and is a defendant in two
lawsuits seeking contribution for Superfund cleanup costs relating to two
other non-Company sites in that state.

The amount of future environmental-related expenditures and the extent of
insurance coverage is not determinable at this time. Based upon its knowledge
of the extent of the Company's exposure and current statutes, rules and
regulations, management believes that the anticipated costs resulting from
claims and proceedings with respect to the above mentioned sites, including
possible remediation, the extent of which is presently unknown, will not
materially affect the financial position of the Company. However, it is
possible, but unanticipated at this time, that future results of operations
or cash flows could be materially affected by an unfavorable resolution of
these matters.

In 1993 the Company expended $426,000, including the $273,000 at the
California site, to manage hazardous substances, to monitor pollutants, to
test for contaminants and to provide for required clean-up activities, a 48%
increase in such expenditures over the prior year.

In complying with federal, state and local environmental protection statutes
and regulations, the Company has altered or modified certain manufacturing
processes and expects to do so in the future. Such modifications to date have
not significantly increased capital expenditures or affected earnings or the
competitiveness of the Company.

During 1993, the Company adopted FASB Statement No. 112, "Employers'
Accounting for Postemployment Benefits" and FASB Statement No. 115,
"Accounting for Certain Investments in Debt and Equity Securities," the
impact of which was not significant.

The impact of inflation on the operations of the Company was not material.

5
<PAGE>

Results of Operations
(1992 compared to 1991)

Sales decreased $1,719,000 or 1.5%. Sales in the Electrical Appliances and
Electronic Devices segment increased overall by $2,249,000 or 3.7%. Sales of
electrical appliances, driven primarily by consumer demand for juicer and
other specialty products, increased $7,887,000 or 19.7%. Sales of electronic
components declined $5,638,000 as procurement for defense-related product
applications declined and manufacturing difficulties resulted in lost
business in the communication and data processing industries. Recently
developed electronic heat dissipating devices began to generate significant
sales toward the end of 1992 which offset in part the decline in
defense-related products. Sales in the Power and Controlled Environmental
Systems segment decreased $5,792,000. Sales of power plant products were
lower because a majority of the shipments on a major foreign order occurred
in 1991. Sales of mobile and transportable medical products declined
substantially due to delays in the release by Magnetic Resonance Imaging
(MRI) manufacturers of the next generation product for mobile applications
and in part to a maturing market for the existing models of MRI products for
mobile applications. Sales in the Fabricated Metal Products and Equipment
segment increased $1,824,000 primarily on the strength of laboratory,
isolation and clean room systems and door products. Sales of air products for
commercial and industrial applications declined in line with lower levels of
commercial building construction.

Gross profit increased $2,577,000 to 27.6% from 24.9% of sales. Gross profit
in the Electrical Appliances and Electronic Devices segment increased in the
aggregate and as a percentage of sales, because increased sales of electrical
appliances offset the effects of lower sales and production levels of
electronic components. Gross profit in the Power and Controlled Environmental
Systems segment increased in the aggregate and as a percentage of sales,
contributing significantly to overall improved Company gross profit.
Aggressive cost controls and improved gross margins on power plant and
medical product shipments contributed to the current year's improvement.
Gross profit in the Fabricated Metal Products and Equipment segment improved
primarily because of increased sales of more profitable systems products.
Other air products continued to experience a decline in gross profit
percentage as a result of reduced volume and competitive pressures on
pricing. Door products also experienced increased price competition.

Selling, general and administrative expenses increased $184,000. Advertising
for electrical appliances increased approximately $1,000,000, primarily for
the NuBlend(tm) blender, and legal and incentive plan expenses declined
approximately $850,000.

Other income increased $71,000. Income from marketable securities activity
declined $422,000 following the planned liquidation at a net gain in 1991 of
substantially all of the Company's current marketable securities portfolio,
and the resultant elimination of dividend income from such securities. The
sale of surplus property and plant resulted in a gain of $554,000 in 1992.
Income from a non-refundable escrow deposit of $254,000 was recorded in the
prior year.

Income taxes amounted to $1,164,000 and reflected a $780,000 favorable
resolution of prior year tax matters. Accordingly, the effective tax rate
differs substantially from the statutory rate of 34%. The Company adopted
FASB Statement No. 109, "Accounting for Income Taxes." The effect of the
adoption of FASB Statement No. 109 on the current year's income tax provision
was not significant. However, the cumulative effect of this change to January
1, 1992, resulted in a $942,000 charge to the current year's earnings.

Equity in CTS Corporation
Losses from the equity investment in CTS Corporation amounted to $442,000
which compared unfavorably to income of $650,000 which the Company reported
in 1991. The $1,092,000 year to year decrease, equivalent to $.28 per share,
in the Company's proportionate share of CTS' operating results was due
primarily to CTS' $2,313,000 decline in net income. The Company's equity
ownership was 37.2% at year end compared to 37.4% at the end of the previous
year. The .2% decline is attributable to common stock issued by CTS in
conformity with employee plans.

Discontinued Unconsolidated Affiliate
Equity in the loss of a discontinued unconsolidated affiliate (Farmhand,
Inc.) amounted to $20,000 through the date of disposition compared to a loss
of $492,000 in the prior year. The loss on disposition of the Company's
equity interest in Farmhand amounted to $248,000, or $.06 per share.

6
<PAGE>

Dynamics Corporation of America
Consolidated Balance Sheets
(dollar amounts in thousands)

<TABLE>
<CAPTION>
As of December 31, 1993 1992
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 8,969 $ 6,095
Accounts receivable, less allowances of $531 and $600 16,287 19,691
Inventories--Note 2 18,092 21,175
Other current assets--Note 6 1,897 1,126
Current assets of discontinued operation--Note 3 1,408 2,450
Deferred income taxes 4,542 4,425
---- -------
Total Current Assets 51,195 54,962
Property, Plant and Equipment, at cost, less accumulated depreciation and
amortization--Notes 4 and 8 3,906 4,187
Equity Investment in CTS Corporation--Note 5 57,037 57,795
Other Assets--Note 6 1,769 1,469
Deferred Income Taxes 1,457 1,875
---- -------
Total Assets $115,364 $120,288
==== =======
Liabilities
Current Liabilities:
Current installments of long-term debt $ 400 $ 411
Accounts payable 3,617 5,782
Accrued expenses and sundry liabilities--Notes 3 and 7 12,602 14,087
Federal income taxes payable 2,354 2,353
---- -------
Total Current Liabilities 18,973 22,633
Long-term Debt--Note 8 623 1,023
Other Liabilities--Note 9 2,954 3,916
---- -------
Total Liabilities 22,550 27,572

Contingencies--Note 15
Stockholders' Equity--Notes 10 and 11
Preferred Stock, par value $1 per share--authorized 894,000 shares--none
issued
Series A Participating Preferred Stock, par value $1 per share--authorized
106,000 shares--none issued
Common Stock, par value $.10 per share--authorized 10,600,000; outstanding
3,889,751 and 3,903,035 shares 389 390
Paid-in Additional Capital 11,451 11,573
Retained Earnings 81,125 81,015
Deferred Compensation (151) (262)
---- -------
Total Stockholders' Equity 92,814 92,716
----- -------
Total Liabilities and Stockholders' Equity $115,364 $120,288
======= =======
</TABLE>
The accompanying notes are an integral part of these statements.

7
<PAGE>

Dynamics Corporation of America
Consolidated Statements of Operations
(dollar amounts in thousands, except per share data)

<TABLE>
<CAPTION>
For the Years ended December 31, 1993 1992 1991
<S> <C> <C> <C>
Net sales $101,329 $110,243 $111,962
Cost of sales 76,526 79,776 84,072
------ ------ -------
Gross profit 24,803 30,467 27,890
Selling, general and administrative expenses 24,071 26,170 25,986
------ ------ -------
732 4,297 1,904
Other income, net--Note 12 943 642 571
------ ------ -------
Income from continuing operations before items shown below 1,675 4,939 2,475
Income tax charge (benefit)--Note 13 617 1,164 (105)
------ ------ -------
Income from continuing operations before equity in CTS
Corporation 1,058 3,775 2,580
Income (loss) from equity investment in CTS Corporation, net of
income tax charges of $52, $87 and $99 1,619 (442) 650
------ ------ -------
Income from continuing operations 2,677 3,333 3,230
------ -------
Discontinued operations:

Equity in loss of discontinued unconsolidated affiliate,
net of income tax benefits of $13 and $309 (20) (492)
Loss on disposition of unconsolidated affiliate, net of
income tax benefit of $169--Note 6 (248)
Operating losses of discontinued division, net of income tax
benefit of $739--Note 3 (1,393)
Provision for disposition of discontinued division, net of
income tax benefit of $1,322--Note 3 (2,678)
------ -------
Loss from discontinued operations (268) (4,563)
------ ------ -------
Income (loss) before changes in accounting methods 2,677 3,065 (1,333)
Equity in CTS' cumulative effect to January 1, 1993 of changes
in accounting methods--Note 5 (1,716)
Cumulative effect to January 1, 1992 of change in accounting for
income taxes--Note 13 (942)
------ ------ -------
Net income (loss) $ 961 $ 2,123 ($ 1,333)
====== ======= =======
Income (loss) per common share:
Continuing operations $.68 $.85 $.83
Discontinued operations (.07) (1.17)
Equity in CTS' cumulative effect to January 1, 1993
of changes in accounting methods (.44)
Cumulative effect to January 1, 1992 of change in accounting
for income taxes (.24)
---- ---- -----
Net income (loss) $.24 $.54 ($.34)
==== ==== =====
</TABLE>
The accompanying notes are an integral part of these statements.

8
<PAGE>

Dynamics Corporation of America
Consolidated Statements of Stockholders' Equity
(dollar amounts in thousands)
For the Years ended December 31, 1993, 1992 and 1991

<TABLE>
<CAPTION>
Common Paid-in Total
shares Par additional Retained Deferred stockholders'
outstanding* value capital earnings compensation equity
---------- ------- -------- ------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1990 3,879,666 $388 $11,313 $81,881 ($415) $93,167
Shares issued and issuable from treasury
pursuant to benefit plans and other 44,861 4 559 (328) 235
Shares acquired for treasury (43) (1) (1)
Amortization of deferred compensation and
related tax charges (55) 317 262
Net loss (1,333) (1,333)
Cash dividends ($.20 per share) (781) (781)
--------- --- ------ ------ ------ -------
Balance at December 31, 1991 3,924,484 392 11,817 79,766 (426) 91,549
Shares issued and issuable from treasury
pursuant to benefit plans 2,303 17 17
Shares acquired for treasury and pursuant
to stock plans (23,752) (2) (207) (91) 19 (281)
Amortization of deferred compensation and
related tax charges (54) 145 91
Net income 2,123 2,123
Cash dividends ($.20 per share) (783) (783)
--------- --- ------ ------ ------ -------
Balance at December 31, 1992 3,903,035 390 11,573 81,015 (262) 92,716
Shares issued and issuable from treasury
pursuant to benefit plans and other 3,727 1 65 (32) 34
Shares acquired for treasury and pursuant
to stock plans (17,011) (2) (183) (70) 58 (197)
Amortization of deferred compensation and
related tax charges (4) 85 81
Net income 961 961
Cash dividends ($.20 per share) (781) (781)
--------- ---- ------ ------ ------ ----
Balance at December 31, 1993 3,889,751 $389 $11,451 $81,125 ($151) $92,814
========= ==== ====== ====== ====== ========
<FN>
*Net of shares held in treasury--3,285,410, 3,272,126, and 3,250,677 voting
shares at December 31, 1993, 1992 and 1991, respectively. The cumulative cost
of treasury shares at December 31, 1993 amounted to approximately $34,400.
Includes non-voting shares outstanding of 4,810 at December 31, 1993.
</TABLE>
The accompanying notes are an integral part of these statements.

9
<PAGE>

Dynamics Corporation of America
Consolidated Statements of Cash Flows
(dollar amounts in thousands)

<TABLE>
<CAPTION>
For the Years ended December 31, 1993 1992 1991
<S> <C> <C> <C>
Operating activities:
Net income (loss) $ 961 $ 2,123 ($1,333)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 1,227 1,190 1,179
Deferred income taxes 301 1,141 (2,921)
Increase (decrease) in allowance for net unrealized losses
on marketable securities (180) 46 269
Net realized losses on current marketable securities 121
Purchases of marketable securities, net (534)
Loss from equity investments in unconsolidated
affiliates before income taxes 45 388 52
Loss on disposition of unconsolidated affiliate
before income tax benefit 417
Dividends from CTS 767 1,271 1,439
Gain on sale of property (554)
Issuance of Company Common Stock 34 17 235
Increase (decrease) in other liabilities (962) 952 2,439
Decrease (increase) in other assets (347) 82 209
Other, net 85 91 262
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable 3,404 (2,442) 2,265
Decrease (increase) in inventories 3,083 (670) 3,205
Decrease (increase) in other current assets (178) 129 592
Decrease in accounts payable, accrued expenses and
sundry liabilities (3,704) (3,156) (2,274)
Increase (decrease) in Federal income taxes payable 1 (439) (231)
Decrease (increase) in current assets of discontinued
operation 1,042 (1,277) 2,226
------ ------ ------
Net cash provided by (used in) operating activities 5,166 (691) 7,613
------ ------ ------
Investing activities:
Sales of marketable securities, net 1,801
Purchases of property, plant and equipment (929) (973) (994)
Purchases of property, plant and equipment for discontinued
operation (54)
Proceeds from sale of property 966
Proceeds from disposition of unconsolidated affiliate 1,700
Proceeds from note receivable 47 2
------ ----- -----
Net cash provided by (used in) investing activities (882) 1,695 753
------ ----- -----
Financing activities:
Principal payments under lines of credit, capital lease
obligations and mortgages (432) (406) (3,576)
Borrowings under lines of credit 1,200
Purchases of treasury stock (197) (281) (1)
Dividends paid (781) (783) (781)
------ ------ ------
Net cash used in financing activities (1,410) (1,470) (3,158)
------ ------ ------
Increase (decrease) in cash and cash equivalents 2,874 (466) 5,208
Cash and cash equivalents at beginning of year 6,095 6,561 1,353
------ ------ ------
Cash and cash equivalents at end of year $ 8,969 $ 6,095 $ 6,561
====== ======= =======
</TABLE>
The accompanying notes are an integral part of these statements.

10
<PAGE>

Dynamics Corporation of America
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1: Significant Accounting Policies

(a) The accompanying consolidated financial statements include the accounts
of the Company and its subsidiaries, all of which are wholly owned.
Investments in unconsolidated affiliates are accounted for by the equity
method of accounting. All material intercompany transactions and accounts
have been eliminated in consolidation.

(b) Revenues are reported on contracts, principally government related, based
on the proportion of units completed to units contracted. Costs related to
such revenues are based on estimated average costs for units contracted.

(c) Inventories are stated at the lower of cost or market. Inventory costs
have been determined by the last-in, first-out (LIFO) method for
approximately 42% (1993) and 40% (1992) of inventories, excluding inventories
subject to progress billings under contracts. Costs for other inventories
have been determined principally by the first-in, first-out (FIFO) method.

(d) Depreciation is computed on the straight-line and declining balance
methods over the estimated useful lives of assets.

(e) Realized gain or loss on the sale of marketable securities is determined
using specific cost identification. In 1993, the Company adopted Financial
Accounting Standards Board ("FASB") Statement No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," the impact of which was
not significant. The Company's current marketable securities are considered
trading securities.

(f) Research and development costs are expensed as incurred and amounted to
$1,252,000 (1993), $1,203,000 (1992) and $1,041,000 (1991).

(g) Per share data is based upon the weighted average number of common and
common equivalent shares outstanding during the periods.

(h) For purposes of the Consolidated Statements of Cash Flows, the Company
considers all investment instruments with a maturity of three months or less
at the time of purchase to be cash equivalents.

(i) In 1993, the Company adopted FASB Statement No. 112, "Employers'
Accounting for Postemployment Benefits," the impact of which was not
significant.

Note 2: Inventories

<TABLE>
<CAPTION>
1993 1992
(in thousands)
<S> <C> <C>
Raw materials and supplies $ 7,251 $ 7,019
Work in process 6,426 7,966
Finished goods 4,076 4,585
------ -------
17,753 19,570
------ -------
Inventories subject to
progress billings 1,189 2,603
Progress billings (850) (998)
------ -------
339 1,605
------ -------
$18,092 $21,175
====== =======
</TABLE>

The excess of current replacement cost over LIFO cost of inventories amounted
to $950,000 (1993) and $863,000 (1992).

The United States Government has liens on substantially all inventories
subject to progress billings.

11
<PAGE>

Notes to Consolidated
Financial Statements (continued)

Note 3: Discontinued Operation--
Fermont Division
The Company determined to discontinue operations at its Fermont Division, a
manufacturer of electrical power systems for government and commercial
markets, effective as of September 30, 1991, and put the assets and business
up for sale. In conjunction with the discontinuance, the Company recorded a
provision for disposition of $5,600,000 for costs estimated to be incurred
prior to Fermont's disposition, including $3,629,000 for operating losses
during the phaseout period. The provision for disposition in the Consolidated
Statement of Operations in 1991 was reduced by $1,600,000 before taxes for
the favorable settlement of a court action involving a contract for the sale
of 60 KW engine generator sets to the Government. Fermont's sales for the
years ended December 31, 1993, 1992 and 1991 were $5,248,000, $14,655,000,
and $5,257,000, respectively.

The Company will fulfill all contractual obligations of Fermont, including
its obligations under its contract with the U.S. Government to supply 3 KW
engine generator sets, currently projected to be completed in 1996, unless a
buyer for the business assumes performance of its contracts. The Company has
submitted a proposed change order to the Government seeking several million
dollars in equitable compensation for delay damages and added costs of
obtaining first article approval of the prototype 3KW generator sets and for
related matters (see Note 15).

Current assets of the discontinued operation consist primarily of accounts
receivable and inventories. Accounts payable and accrued expenses and sundry
liabilities include $822,000 and $944,000 at December 31, 1993 and 1992,
respectively, related to the division's operations.

Note 4: Property, Plant and Equipment (in thousands)

<TABLE>
<CAPTION>
1993 1992
------- -------
Fixed Capital Fixed Capital
Classification Assets Leases Total Assets Leases Total
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------- ------ ------ ------ ------ ------ ------
Land and improvements $ 983 $ 983 $ 983 $ 983
Buildings and improvements 8,979 $2,270 11,249 8,987 $2,270 11,257
Machinery, equipment, furniture
and fixtures 21,768 651 22,419 21,070 739 21,809
Leasehold improvements 507 507 474 474
------ ------ ------ ------ ------ ------
32,237 2,921 35,158 31,514 3,009 34,523
Less accumulated depreciation and
amortization 28,802 2,450 31,252 27,951 2,385 30,336
------ ------ ------ ------ ------ ------
$ 3,435 $ 471 $ 3,906 $ 3,563 $ 624 $ 4,187
====== ====== ====== ====== ====== ======

</TABLE>

12
<PAGE>

Note 5: Equity Investment in CTS Corporation

The Company's holdings aggregated 1,920,900 shares of CTS Corporation ("CTS")
common stock at December 31, 1993 and 1,918,100 shares at December 31, 1992
and 1991. The Company's equity ownership in CTS was 37.3%, 37.2% and 37.4% at
December 31, 1993, 1992 and 1991, respectively. Included in Accounts Payable
at December 31, 1993 was $54,000 for purchases of CTS common stock.

The market value of the Company's investment in CTS amounted to $37,938,000
and $33,567,000 at December 31, 1993 and 1992, respectively. The market value
of the Company's investment in CTS on February 22, 1994 amounted to
$42,780,000, on holdings of 1,922,700 shares. Under the Control Share
Acquisitions Chapter of the Indiana Business Corporation Law, 1,020,000 of
the Company's shares of CTS stock presently have no voting rights.

The excess of the carrying amount of the Company's investment over the
underlying equity in the net assets of CTS, net of accumulated amortization
of $6,690,000, amounted to $13,879,000 at December 31, 1993 and is being
amortized over twenty-five years using the straight-line method ($772,000 in
1993). At December 31, 1993, dividends paid by CTS to the Company exceeded
the Company's aggregate share of CTS' net income by $1,563,000.

CTS operates primarily in one business segment, electronic and
electromechanical components and subsystems, in worldwide markets. Summarized
financial information derived from CTS' 1993 Annual Report to Stockholders
follows:

<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------
1993 1992 1991
------ ------ -------
(in thousands)
<S> <C> <C> <C>
Net sales $236,979 $227,391 $229,536
======= ======= =======
Gross earnings $ 47,344 $ 41,101 $ 40,418
======= ======= =======
Earnings before
cumulative effect
of changes in
accounting
principles $ 6,570 $ 1,901 $ 4,214
Cumulative effect of
accounting
change--postretirement
benefits (5,096)
Cumulative effect of
accounting
change--income
taxes 482
------ ------ -------
Net earnings $ 1,956 $ 1,901 $ 4,214
====== ====== =======
Current assets $ 97,266 $ 87,376 $ 91,493
====== ====== =======
Noncurrent assets $ 87,798 $ 83,397 $ 84,868
====== ====== =======
Current liabilities $ 49,888 $ 37,262 $ 39,569
====== ====== =======
Noncurrent
liabilities $ 15,973 $ 14,139 $ 14,307
====== ====== =======
Stockholders' equity $119,203 $119,372 $122,485
====== ====== =======
</TABLE>

The Company recognized its proportionate share, in accordance with the equity
method of accounting, of CTS' net charge from its adoption of FASB Statement
No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions," a charge of $1,896,000, or $.49 per share, and FASB Statement No.
109, "Accounting for Income Taxes," a credit of $180,000, or $.05 per share.
These onetime, non-cash accounting changes were adopted by CTS in the first
quarter of 1993 as cumulative effects to January 1, 1993.

CTS is required to file annual and other reports, including audited annual
financial statements, with the Securities and Exchange Commission and such
reports and statements are available for review at the offices of the
Securities and Exchange Commission in Washington, D.C. The Company has relied
on CTS' financial information to compile its financial statements.

13
<PAGE>
Notes to Consolidated
Financial Statements (continued)

Note 6: Other Assets

Other Current Assets
Other current assets include marketable equity securities at market of
$687,000 (1993) and $95,000 (1992), with a cost basis of $2,115,000 (1993)
and $1,702,000 (1992).
<TABLE>
<CAPTION>
1993 1992
(in thousands)
<S> <C> <C>
Other Assets
Note receivable from sale of
investment in Farmhand $ 404 $ 451
Property, plant and
equipment--
discontinued division 208 328
Cash surrender value of life
insurance 1,157 690
------ ------
$1,769 $1,469
====== ======
</TABLE>
The Company's investment in Farmhand, a privately held farm and other
equipment manufacturer, was sold in December, 1992, in exchange for
$1,700,000 in cash and a $500,000 note, at six percent interest per annum,
payable quarterly through 2009. The current portion of the note is included
in Other Current Assets.

Note 7: Accrued Expenses and Sundry Liabilities

<TABLE>
<CAPTION>
1993 1992
(in thousands)
<S> <C> <C>
Salaries, wages, commissions
and employee benefits $ 2,680 $ 3,569
Taxes, other than Federal
income taxes 1,183 1,330
Advertising 495 700
Insurance 616 880
Customer contract claims,
including price adjustments
and refunds 2,800 2,800
Advances from customers 448 478
Warranties 1,182 1,672
Discontinued division 1,350 1,334
Other 1,848 1,324
------ ------
$12,602 $14,087
====== ======
</TABLE>

Note 8: Long term Debt and Credit Facilities

Long-term Debt
<TABLE>
<CAPTION>
1993 1992
(in thousands)
<S> <C> <C>
Industrial revenue bonds, 7.35%
payable through 1994 $ 108 $ 215
Mortgage notes, 9% payable
through 1996 171 239
Obligations under capital
leases 744 980
------ ------
1,023 1,434
Less current portion 400 411
------ ------
$ 623 $1,023
====== ======
</TABLE>

The industrial revenue bonds and mortgages are collateralized by land,
buildings and improvements having a net book value of $339,000 at December
31, 1993.

Capital leases generally provide that the Company pay property taxes and
operating costs. Certain capital leases contain renewal and/or purchase
options.

Minimum lease payments under capital leases total $1,074,000, including
$330,000 representing interest. Minimum lease payments in each year for the
next five years are: $277,000, $166,000, $80,000, $50,000 and $45,000. The
present value of the current portion of such payments is $218,000 at December
31, 1993.

The aggregate principal payments of long-term debt (excluding capital leases)
for the next three years are: $182,000, $82,000 and $15,000.

The Company leases real estate and equipment under operating leases. Certain
of the leases contain renewal options and escalation clauses relating to
taxes and maintenance. Rental expense amounted to $676,000, $711,000 and
$773,000 for the years ended December 31, 1993, 1992 and 1991, respectively.

Minimum lease payments under operating leases total $1,947,000. Minimum lease
payments in each year for the next five years are: $477,000, $321,000,
$272,000, $224,000 and $185,000.

Interest payments amounted to $118,000, $148,000 and $181,000 for the years
ended December 31, 1993, 1992 and 1991, respectively.

14
<PAGE>

Notes to Consolidated
Financial Statements (continued)

Credit Facilities
The Company has a Revolving Credit Agreement with banks which provides a line
of credit of up to $27,000,000 through September 30, 1994 at the lower of the
prime rate or other rate options available at the time of borrowing. The
Company pays a commitment fee of 3/8% based on the unused portion of the
line. The Agreement provides that, at the option of the Company, the
principal outstanding at September 30, 1994 may be converted to a four year
term loan, with interest at the lower of 1/4% over the prime rate or other
rate options, payable in equal semi-annual principal installments. The
Agreement contains restrictions which, among other things, require the
Company to have income from continuing operations before equity in the
operating results of unconsolidated affiliates for the year and in at least
one of any two consecutive fiscal quarters. The Agreement requires
maintenance of certain financial ratios and contains other restrictive
covenants, including a restriction on dividends.

The Company also has an uncommitted line of credit with a bank amounting to
$10,000,000. The Company does not pay any fee for the uncommitted line and
therefore the availability of the line is at the discretion of the bank.

Outstanding letters of credit, principally related to imports and bid and
performance bond obligations, amounted to $6,039,000 at December 31, 1993.

Note 9: Other Liabilities

<TABLE>
<CAPTION>
1993 1992
(in thousands)
<S> <C> <C>
Accrued pension cost $2,145 $1,680
Discontinued division 809 2,236
------ -----
$2,954 $3,916
====== =====
</TABLE>

Note 10: Stockholders' Equity

1980 Restricted Stock and Cash Bonus Plan
The Plan, prior to amendment, provided for the discretionary award or sale of
up to 400,000 shares of common stock to key executives. The shares awarded or
sold are subject to restrictions against transfer as well as repurchase
rights of the Company which, in effect, provide for the lapse of restrictions
at the rate of 20% per year beginning one year from the award or sale. In
addition, the Plan provides for a cash bonus to the participant equal to the
fair market value of the shares on the date said restrictions lapse in the
case of an award, or the excess of the fair market value thereof as of such
date over the original purchase price if the shares were purchased, with a
limit upon the total bonuses paid to any participant during the 5-year period
of twice the fair market value of the shares on the date of award or sale.
The Plan was amended in 1988 to make additional shares available for issuance
to replenish the Plan for shares awarded since its inception. At December 31,
1993, 1992, and 1991, 370,500, 368,700 and 367,900 shares, respectively, were
available for award or sale under the Plan.

In addition to the shares issued and amortization of deferred compensation
included in the Consolidated Statements of Stockholders' Equity, the Company
accrued bonuses of $58,000 (1993), $146,000 (1992) and $178,000 (1991) and
reacquired (at no cost) through forfeitures 3,800 (1993) and 800 (1992)
previously issued restricted shares pursuant to the Plan.

1986 Stock Plan for Outside Directors
The Plan provides for a portion of outside directors' compensation to be
deferred and to be paid in shares of the Company's common stock upon a
director's retirement, disability or death. Under the Plan, common stock
units (payable in shares of the Company's common stock on a one-for-one
basis) are credited to the directors based on their service as outside
directors each year. Common stock units of 449 (1993), 351 (1992) and 462
(1991) were credited to the outside directors. In 1992, 1,251 shares were
distributed under the Plan to a deceased director's estate. The total number
of units in the Plan is 4,027 at December 31, 1993.

Note 11: Preferred Stock Purchase Rights
In 1986 the Company declared a distribution to shareholders of record on
February 14, 1986 of one preferred stock purchase right for each outstanding
share of the Company's voting and non-voting common stock. Under certain
conditions, each right may be exercised to purchase one one-hundredth of a
share of a newly created series of participating preferred stock at an
exercise price of $80. The rights become exercisable ten days after a public
announcement that a party or group has acquired or obtained the right to
acquire 20% or more of the Company's common stock in a transaction not
previously approved by the Board of Directors of the Company, or after
commencement or public announcement of a tender offer for 25% or more of the
Company's common stock. The rights, which are non-voting, expire on February
14, 1996 unless

15
<PAGE>

Notes to Consolidated
Financial Statements (continued)

extended and may be redeemed by the Company at a price of $.05 per right at
any time prior to their expiration or prior to the acquisition by a party or
group of 20% of the Company's common stock, unless approved by the Board of
Directors. The participating preferred stock to be purchased upon exercise of
the rights will be nonredeemable.

In the event the Company is acquired in a merger or other business
combination transaction after the rights become exercisable, provision shall
be made so that each holder of a right shall have the right to receive, upon
exercise thereof and payment of the then current exercise price, that number
of shares of common stock of the surviving company which at the time of such
transaction would have a market value of two times the exercise price of the
right. If the Company is the surviving company, each holder would have the
right to receive for the then current exercise price preferred stock of the
Company with a market value of two times the exercise price.

Note 12: Other Income, Net

<TABLE>
<CAPTION>
1993 1992 1991
(in thousands)
<S> <C> <C> <C>
Income (Expense):
Interest:
Income $ 181 $ 123 $ 108
Expense (118) (148) (180)
------ ----- -----
63 (25) (72)
Dividend income 27 72
Net gains (losses) on
current marketable
securities:
Realized on sales (121) 573
Change in unrealized
loss 180 (46) (269)
Royalty income 1,207 244 226
Gain on sale of property 554
Division sale
termination fee 254
Restructuring costs,
principally severance (470)
Other, net 57 (85) (213)
------ ----- -----
$ 943 $ 642 $ 571
====== ===== =====
</TABLE>

Note 13: Income Taxes
Income tax charge (benefit) from continuing operations consists of:
<TABLE>
<CAPTION>
1993 1992 1991
(in thousands)
<S> <C> <C> <C>
Current income taxes:
Federal $211 $ 199 $ 302
State 77 276 319
---- ----- -----
288 475 621
---- ----- -----
Deferred income tax
charges (credits):
Federal 204 563 (618)
State 125 126 (108)
---- ------ -----
329 689 (726)
---- ------ -----
$617 $1,164 ($105)
==== ====== =====
</TABLE>

Deferred income tax charges (credits) result from the following:
<TABLE>
<CAPTION>
1993 1992 1991
(in thousands)
<S> <C> <C> <C>
Inventory ($572) ($167) $ 304
Employee benefits (94) (167) (392)
Discontinued operations,
restructuring and
customer contract
adjustments 438 632 (468)
Warranties 152 (176) 148
Patent infringement
judgment 471 (159)
Deferred income 372
Other, net 33 96 (159)
---- ---- -----
$329 $689 ($726)
==== ==== ====
</TABLE>

A reconciliation of the Federal statutory rate to the Company's consolidated
effective tax rate for continuing operations follows:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Statutory rate 34.0% 34.0% 34.0%
State income taxes, net
of Federal income tax
benefit 8.0 5.4 2.2
Resolution of prior
years tax matters (15.8) (41.0)
Employee benefits (3.9)
Foreign tax credits (3.4)
Other, net 2.1 .6
---- ---- -----
36.8% 23.6% (4.2%)
==== ==== =====

</TABLE>

16
<PAGE>

Significant components of the Company's deferred tax assets and liabilities
at December 31 are as follows:
<TABLE>
<CAPTION>
1993 1992
(in thousands)
<S> <C> <C>
Deferred tax assets:
Warranty reserve $ 504 $ 655
Bad debt allowance 195 210
Uniform cost capitalization
and inventory valuation
allowances 1,820 1,247
Employee benefit plans 1,690 1,452
Investments 470 469
Reserve for discontinued
division 875 1,453
Reserve for customer
contract claims 624 630
Depreciation 375 420
Other, net 272 190
----- -----
6,825 6,726
Valuation allowance for
deferred tax assets (335) (314)
----- -----
Total deferred tax assets 6,490 6,412
----- -----
Deferred tax liabilities:
Deferred income (372)
Other, net (119) (112)
----- -----
Total deferred tax
liabilities (491) (112)
----- -----
Net deferred tax assets $5,999 $6,300
===== =====
</TABLE>
Effective January 1, 1992, the Company changed its method of accounting for
income taxes from the deferred method to the liability method required by
FASB Statement No. 109, "Accounting for Income Taxes." The effect of the
adoption of FASB Statement No. 109 on the 1992 income tax provision was not
significant. However, the cumulative effect of this change to January 1, 1992
resulted in a $942,000 charge to 1992 earnings.

Income tax payments, net of refunds, amounted to $302,000, $1,329,000 and
$187,000 for the years ended December 31, 1993, 1992 and 1991, respectively.

Note 14: Employee Benefit Plans
The Company has a noncontributory defined benefit retirement plan covering
substantially all of its employees. The benefits are based on the employee's
years of service and career average compensation. Pension costs are generally
funded to the extent of tax deductible amounts. Contributions are intended to
provide not only for benefits attributed to service to date but also for
those expected to be earned in the forthcoming year. The Company also
contributes to a multi-employer plan, which provides defined benefits, as
required by collective bargaining agreements.

A summary of the components of net periodic pension cost of the defined
benefit plan and the total contributions charged to pension expense for the
multi-employer plan follows:
<TABLE>
<CAPTION>
1993 1992 1991
(in thousands)
<S> <C> <C> <C>
Defined benefit plan:
Service cost--benefits
earned during the
period $ 628 $ 726 $ 612
Interest cost on
projected benefit
obligation 1,402 1,346 1,305
Actual return on plan
assets (2,085) (1,780) (1,607)
Net amortization and
deferral 520 346 231
------ ------ -------
Net pension charges for
defined benefit plan 465 638 541
Multi-employer plan 294 299 294
------ ------ -------
Net periodic pension
cost $ 759 $ 937 $ 835
====== ====== =======
</TABLE>

Net periodic pension cost for the defined benefit plan includes $87,000
(1993), $105,000 (1992) and $138,000 (1991) charged against accrued expenses
of the discontinued Fermont division. Net periodic pension cost for the
defined benefit plan for 1992 includes $83,000 of additional charges under
FASB Statement No. 88, "Employers' Accounting for Settlements and
Curtailments of Defined Benefit Pension Plans and for Termination Benefits,"
relating to an early retirement offer at one of the Company's divisions.

Assumptions used in accounting for the defined benefit plan as of December 31
were:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Discount rate 7.50% 7.75% 7.75%
Rate of increase in
compensation levels 5.0 % 5.0 % 5.0 %
Expected long-term rate
of return on assets 9.0 % 9.0 % 9.0 %
</TABLE>

The following table sets forth the funded status and amounts recognized in
the consolidated balance sheets

<PAGE>

Notes to Consolidated
Financial Statements (continued)

at December 31, 1993 and 1992 for the Company's defined benefit pension plan:

<TABLE>
<CAPTION>
1993 1992
(in thousands)
<S> <C> <C>
Actuarial present value of
benefit obligations:
Accumulated benefit
obligation, including vested
benefits of $16,744 and
$15,010 ($18,681) ($17,112)
Effect of salary projections (1,463) (1,529)
------ ------
Projected benefit obligation
for service rendered to date (20,144) (18,641)
Plan assets at fair value 17,257 16,095
------ ------
Projected benefit obligation in
excess of plan assets (2,887) (2,546)
Unrecognized net loss from past
experience different from
assumed and effect of changes
in assumptions 2,497 2,974
Prior service cost not yet
recognized in net periodic
pension cost 317 354
Unrecognized net asset
remaining from initial
application of FASB Statement
No. 87 (2,072) (2,462)
------- ------
Accrued pension cost ($ 2,145) ($1,680)
======= ======
</TABLE>
The 1993 change in the discount rate from 7.75% to 7.50% resulted in a
$689,000 increase in the projected benefit obligation. Plan assets are
invested in cash equivalents, guaranteed investment contracts, and equity
stocks, including common stock of the Company having a market value of
$1,500,000 and $1,300,000 at December 31, 1993 and 1992, respectively.

Information concerning the Company's share of related estimated plan benefits
and assets is not available for the multi-employer plan.

The Company has a Savings and Investment Plan for all employees not covered
by collective bargaining agreements, which qualifies as a profit sharing plan
under Section 401(k) of the Internal Revenue Code. The Company's
contributions under the Plan are based on specified percentages of employee
contributions and were $342,000 (1993), $316,000 (1992) and $578,000 (1991).

Note 15: Contingencies

The Company is a supplier to the United States Government under contracts and
subcontracts on which there are cost allocation, cost allowability and
compliance issues under examination by various agencies or departments of the
Federal government. In the course of the resolution of these issues, the
Company may be required to adjust certain prices or refund certain payments
on its government contracts and subcontracts. The Company believes that any
such price adjustments or refunds will not have a materially adverse effect
on the financial position of the Company.

In April, 1992, the Company submitted a proposed change order to the
Government seeking several million dollars in equitable compensation for
constructive changes made by the Government to a contract for the supply of
3KW generator sets to be manufactured by the Company's discontinued Fermont
division. The Company is not able to predict the outcome of its proposed
change order at this time. The Government has executed a contract
modification to continue prototype testing of the 3KW generator set which
resumed in September 1993. Negotiations on a possible settlement of the
proposed change order, which commenced in late May 1993, have recently
resumed after a delay by the Government.

The Company has been notified by the U.S. Environmental Protection Agency
("EPA") that it is a Potentially Responsible Party ("PRP") regarding
hazardous waste cleanup at a non-Company site in Connecticut and at a Company
site in California. Certain of the PRPs at the Connecticut site have agreed
with the EPA to fund a feasibility study at the site and have sued the
Company and other PRPs who have not agreed to share the costs. A property
owner neighboring the Company site in California has sued the Company and
others for allegedly causing contamination at the neighbor's property. In
addition, the Company has received notice from a state environmental agency
that it is a PRP with respect to a non-Company site in Pennsylvania, and is
also a defendant in two lawsuits seeking contribution towards the Superfund
cleanup costs relating to two other non-Company sites in that state. Based
upon its knowledge of the extent of the Company's exposure and current
statutes, rules and regulations, management believes that the anticipated
costs resulting from claims and proceedings with respect to the above
mentioned sites, including remediation, the extent and cost of which are
presently unknown, will not materially affect the financial position of the
Company.

With respect to other claims and actions against the Company, it is the
opinion of Management that they will not have a material effect on the
financial position of the Company.

18
<PAGE>

Note 16: Industry Segments:
See Financial Information About Industry Segments on pages 22 and 23 of this
report.

Note 17: Quarterly Financial Data (Unaudited):
(dollar amounts in thousands, except per share data)

<TABLE>
<CAPTION>
Three months ended Year
March 31 June 30 September 30 December 31
--------------- --------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
1993
Net sales $25,591 $25,719 $24,241 $25,778 $101,329
======= ======= ======= ======= ========
Gross profit $ 6,731 $ 6,516 $ 5,764 $ 5,792 $ 24,803
======= ======= ======= ======= ========
Income from continuing
operations $ 618 $ 727 $ 233 $ 1,099(b) $ 2,677
======= ======= ======= ======= ========
Net income (loss) ($ 1,098)(a) $ 727 $ 233 $ 1,099 $ 961
======= ======= ======= ======= ========
Income (loss) per share:
Income from continuing
operations $ .16 $ .18 $ .06 $ .28(b) $ .68
======= ======= ======= ======= ========
Net income (loss) ($ .28)(a) $ .18 $ .06 $ .28 $ .24
======= ======= ======= ======= ========
1992
Net sales $24,076 $27,528 $28,252 $30,387 $110,243
======= ======= ======= ======= ========
Gross profit $ 6,613 $ 7,808 $ 7,745 $ 8,301 $ 30,467
======= ======= ======= ======= ========
Income from continuing
operations $ 545 (c) $ 793 $ 679 $ 1,316(e) $ 3,333
======= ======= ======= ======= ========
Net income (loss) ($ 359)(d) $ 788 $ 667 $ 1,027(f) $ 2,123
======= ======= ======= ======= ========
Income (loss) per share:
Income from continuing
operations $.14 (c) $.20 $.18 $.33(e) $.85
==== ==== ==== ==== ====
Net income (loss) ($.09)(d) $.20 $.17 $.26(f) $.54
==== ==== ==== ==== ====
<FN>
(a) The Company recognized its proportionate share, in accordance with the
equity method of accounting, of CTS' net charge from its adoption of FASB
Statement No. 106, "Employers' Accounting for Postretirement Benefits Other
Than Pensions," a charge of $1,896 ($.49 per share), and FASB Statement No.
109, "Accounting for Income Taxes," a credit of $180 ($.05 per share). These
onetime, non-cash accounting changes were adopted by CTS as cumulative
effects to January 1, 1993.

(b) Increased by $608 ($.16 per share) from initial royalty under a
technology transfer agreement. Includes a charge of $286 ($.07 per share) for
restructuring costs, principally severance.

(d) Includes a charge of $942 ($.24 per share) for the cumulative effect to
January 1, 1992 of a change in the Company's method of accounting for income
taxes from the deferred method to the liability method required by FASB
Statement No. 109, "Accounting for Income Taxes."

(e) Increased by $780 ($.20 per share) for resolution of prior years tax
matters.

(f) Includes a charge of $248 ($.06 per share) for the loss on disposition of
the Company's equity investment in Farmhand, Inc.
</TABLE>
19
<PAGE>

Report of Ernst & Young, Independent Auditors

(LOGO OF ERNST & YOUNG)
1111 Summer Street
Stamford, Connecticut 06905
Phone: 203 326 8200
Fax: 203 358 9644

To the Board of Directors and Stockholders of Dynamics Corporation of America

We have audited the accompanying consolidated balance sheets of Dynamics
Corporation of America as of December 31, 1993 and 1992, and the related
consolidated statements of operations, stockholders' equity, and cash flows
for each of the three years in the period ended December 31, 1993. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits. The financial statements of CTS Corporation (a corporation in
which the Company had a 37.3% interest at December 31, 1993) have been
audited by other auditors whose report, which included an explanatory
paragraph for CTS Corporation's accounting changes discussed in Note 5 to
these consolidated financial statements, has been furnished to us; insofar as
our opinion on the consolidated financial statements relates to data included
for CTS Corporation, it is based solely on their report.

We conducted our audits in accordance with 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 that our audits and the report
of other auditors provide a reasonable basis for our opinion.

In our opinion, based on our audits and the report of other auditors, the
financial statements referred to above present fairly, in all material
respects, the consolidated financial position of Dynamics Corporation of
America at December 31, 1993 and 1992, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1993, in conformity with generally accepted accounting
principles.

As discussed in Note 13 to the consolidated financial statements, in 1992 the
Company changed its method of accounting for income taxes. As discussed in
Note 5 to the consolidated financial statements, in 1993 CTS Corporation
changed its method of accounting for income taxes and post-retirement health
care and life insurance benefits.

(Signature of Ernst & Young)

February 22, 1994

20
<PAGE>
Selected Financial Data
(amounts in thousands, except share data)

<TABLE>
<CAPTION>
Year ended December 31, 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Net sales $ 101,329 $ 110,243 $ 111,962 $ 110,306 $ 116,792
========== ========== ========== ========== ==========
Gross profit $ 24,803 $ 30,467 $ 27,890 $ 27,146 $ 27,050
========== ========== ========== ========== ==========
Income (loss) from continuing operations
before equity in CTS $ 1,058(a) $ 3,775(c) $ 2,580(f) $ 1,559(h) ($2)(i)
Income (loss) from equity investment in
continuing operations of CTS 1,619 (442) 650 893 2,586
---------- ---------- ---------- ---------- ----------
Income from continuing operations 2,677 3,333 3,230 2,452 2,584
Loss from discontinued division (4,071)(g) (1,550) (455)

Equity in income (loss) of discontinued
unconsolidated affiliate (20) (492) 201 225
Loss on disposition of unconsolidated
affiliate (248)(d)
Equity in CTS' cumulative effect to January
1, 1993 of changes in accounting methods (1,716)(b)
Cumulative effect to January 1, 1992 of
change in accounting for income taxes (942)(e)
---------- ---------- ---------- ---------- ----------
Net income (loss) $ 961 $ 2,123 ($1,333) $ 1,103 $ 2,354
========== ========== ========== ========== ==========
Average common shares outstanding 3,902,164 3,915,224 3,914,312 3,914,682 4,026,207
========== ========= ========== ========== ==========
Amounts per common share:
Income from continuing operations $.68 $.85 $.83 $.63 $.64
==== ==== ==== ==== ====
Net income (loss) $.24 $.54 ($.34) $.28 $.58
==== ==== ==== ==== ====
Cash dividends $.20 $.20 $.20 $.20 $.20
==== ==== ==== ==== ====
Stockholders' equity (j) $23.86 $23.75 $23.33 $24.01 $23.72
====== ====== ====== ====== ======
Total assets $ 115,364 $ 120,288 $ 122,020 $ 125,999 $ 127,345
========== ========== ========== ========== ==========
Long-term debt $ 623 $ 1,023 $ 1,313 $ 1,625 $ 1,927
========== ========== ========== ========== ==========
<FN>
(a) Increased by $608 ($.16 per share) from initial royalty income under a
technology transfer agreement. Includes a charge of $286 ($.07 per share) for
restructuring costs, principally severance.

(b) The Company recognized its proportionate share, in accordance with the
equity method of accounting, of CTS' net charge from its adoption of FASB
Statement No. 106, "Employers' Accounting for Postretirement Benefits Other
Than Pensions," a charge of $1,896 ($.49 per share), and FASB Statement No.
109, "Accounting for Income Taxes," a credit of $180 ($.05 per share). These
onetime, non-cash accounting changes were adopted by CTS as cumulative
effects to January 1, 1993.

(c) Increased by $780 ($.20 per share) for resolution of prior years tax
matters and $349 ($.09 per share) from the sale of property.

(d) Loss on disposition of the Company's equity investment in Farmhand Inc.
($.06 per share).

(e) Cumulative effect to January 1, 1992 of a change in the Company's method
of accounting for income taxes from the deferred method to the liability
method required by FASB Statement No. 109, "Accounting for Income Taxes"
($.24 per share).

(f) Includes income from a resolution of prior years' tax matters of $1,015
($.26 per share) and from a nonrefundable escrow deposit of $155 ($.04 per
share) from the decision by Halton OY of Finland not to proceed with the
purchase of the Company's Anemostat Division.

(g) Includes a charge of $2,678 ($.68 per share) for estimated operating
losses and costs during the phaseout period of the Company's Fermont
Division.

(h) Increased by $448 ($.12 per share) from the reversal of an overaccrual in
the prior year for a consumer product line restructuring and related product
discontinuance and $277 ($.07 per share) from interest income on refunds of
Federal income taxes, and reduced by charges of $1,051 ($.27 per share) for
costs in connection with a patent infringement judgment, $655 ($.17 per
share) for realized and unrealized losses on the Company's current marketable
securities and $560 ($.14 per share) for a special warranty program.

(i) Includes a charge of $496 ($.12 per share) to establish a reserve for
unrealized losses on the Company's current marketable securities portfolio, a
charge of $1,854 ($.46 per share) for a consumer product line restructuring
and related product discontinuance and income of $385 ($.10 per share) from
settlement of a business interruption claim.

(j) Based upon shares outstanding at end of period.

The above Selected Financial Data should be read in conjunction with the
Consolidated Financial Statements of the Company, including the Notes to
Consolidated Financial Statements, appearing elsewhere in this Annual Report.
</TABLE>
21
<PAGE>

Segments of Business
During 1993 the Company continued its operations in a number of manufacturing
businesses conducted by four divisions and a subsidiary, each of which
operates as a separate unit and each of which maintains its own sales,
administration, accounting, marketing, engineering and manufacturing
operations. Corporate headquarters determines policy and provides such
services as legal counsel, accounting, financing, cash management, auditing,
insurance, public relations and long-range planning guidance.

The methods of distribution and marketing utilized by the Company vary by
operation. In general, sales for all the Company's segments combine some
direct selling in certain market areas with appropriate manufacturers'
representatives, wholesalers, distributors and/or dealers.

The operations are classified into three industry segments: electrical
appliances and electronic devices, fabricated metal products and equipment,
and power and controlled environmental systems.

Segments are grouped according to similarities in profitability, risk, growth
potential, material and labor composition of products and/or capital
requirements.

These segments accounted for the following net sales, operating results and
other financial data for each of the three years in the period ended December
31, 1993:

Financial Information About Industry Segments

<TABLE>
<CAPTION>
Year ended December 31: 1993 1992 1991
(in thousands)
<S> <C> <C> <C>
Net Sales:
Electrical Appliances and Electronic
Devices $ 53,813 $ 62,265 $ 60,016
Fabricated Metal Products and Equipment 22,347 25,241 23,417
Power and Controlled Environmental Systems 25,169 22,737 28,529
-------- -------- --------
$101,329 $110,243 $111,962
======== ======== ========
Operating Profit (Loss):
Electrical Appliances and Electronic
Devices $ 1,438 $ 3,619 $ 3,620
Fabricated Metal Products and Equipment 498 1,667 1,785
Power and Controlled Environmental Systems 2,399 1,821 (722)
-------- -------- --------
4,335 7,107 4,683
Corporate Expenses (2,719) (2,451) (2,930)
Interest Income (Expense), net 52 (31) (87)
Other Income, net 7 314 809
-------- -------- --------
$ 1,675 $ 4,939 $ 2,475
======== ======== ========
Depreciation and Amortization:
Electrical Appliances and Electronic
Devices $ 795 $ 741 $ 704
Fabricated Metal Products and Equipment 255 253 249
Power and Controlled Environmental Systems 157 187 222
Corporate 20 9 4
-------- -------- --------
$ 1,227 $ 1,190 $ 1,179
======== ======== ========
Capital Expenditures:
Electrical Appliances and Electronic
Devices $ 748 $ 707 $ 767
Fabricated Metal Products and Equipment 149 348 218
Power and Controlled Environmental Systems 31 44 90
Corporate 22 29
-------- -------- --------
$ 950 $ 1,128 $ 1,075
======== ======== ========
Identifiable Assets:
Electrical Appliances and Electronic
Devices $ 23,317 $ 24,110 $ 23,592
Fabricated Metal Products and Equipment 8,154 8,924 8,375
Power and Controlled Environmental Systems 10,837 15,435 13,746
Corporate 71,440 69,041 71,993
-------- -------- --------
113,748 117,510 117,706
-------- -------- --------
Assets of Discontinued Operations 1,616 2,778 4,314
-------- -------- --------
$115,364 $120,288 $122,020
======== ======== ========

</TABLE>

22
<PAGE>

Financial Information About Industry Segments (continued)

<TABLE>
<CAPTION>
Year ended December 31: 1993 1992 1991
(dollar amounts in thousands)
<S> <C> <C> <C>
U.S. Government Sales, direct and indirect (occurring predominantly in
the Power and Controlled Environmental Systems segment), including
indirect sales in that segment to a single customer in excess of 10%
(1993) $18,151 $13,360 $12,112
====== ====== =======
Export Sales $ 8,787 $10,137 $17,279
====== ====== =======
Classes of Products representing 10% or more of Company net sales:
Electrical Appliances and Electronic Devices:
Consumer and Commercial Portable Electrical Appliances 37.0% 43.5% 35.7%
Quartz Crystal Products 10.6%
Fabricated Metal Products and Equipment:
Air Distribution Equipment and Controls 22.1% 22.9% 20.9%
</TABLE>

Notes:
See page 24 for the classification of the Company's present manufacturing
Divisions and Subsidiary for segment purposes and a brief description of
each.

Total revenue by industry segments includes sales to all unaffiliated
customers including the U.S. Government.

Operating profit is total revenues less operating expenses. Identifiable
assets by industry segments are those assets that are used in the Company's
operations in each industry. Corporate assets are principally cash,
receivables, assets of discontinued operations and marketable securities,
including the Company's equity investment in CTS Corporation, substantially
all of which is held by its wholly owned subsidiary, LTB Investment
Corporation.

It should be noted that the reported information follows the pronouncements
of the Financial Accounting Standards Board and does not follow the Company's
internal allocation procedures relating to interest, other income and certain
administrative costs such as management, legal and financial. Accordingly,
the information may not be indicative of the financial results of, or
investments in, the reported segments were they independent organizations, or
useful for comparison with operations of other companies.

Range of Stock Prices and Dividend Information

The Company's Common Stock (Voting) is traded on the New York Stock Exchange
(ticker symbol: DYA). There is no market for the Non-Voting Common Shares of
the Company.

The prices of the Company's Common Stock and dividends paid during 1993 and
1992 are as follows:

<TABLE>
<CAPTION>
New York Stock Exchange Dividends Paid
--------------------------------- ----------------
1993 1992 1993 1992
<S> <C> <C> <C> <C> <C> <C>
HIGH LOW HIGH LOW
---- ---- ---- ----
1st Quarter 14-3/8 12-7/8 12 9-7/8 $.10 $.10
2nd Quarter 16-3/8 13-7/8 14-3/8 11-1/2
3rd Quarter 17 15-1/2 15-1/4 13-3/8 $.10 $.10
4th Quarter 17-3/4 14-7/8 13-7/8 11-3/4
</TABLE>

As of February 22, 1994 there were 4,233 shareholders of record.

The Board of Directors of the Company established a semi-annual dividend
policy in January 1978 and expects to continue this policy. At its January
1984 meeting, the Board of Directors established the regular semi-annual
dividend rate of ten cents ($.10) per share. The first payment for 1994 was
made on March 1 to shareholders of record as of the close of business on
February 15, 1994.

The number of employees of the Company as of December 31, 1993 was 1,062.

23
<PAGE>

DCA's Manufacturing Divisions and Subsidiary

The following is the classification of the Company's present operations
for industry segment purposes and a brief description of each:

Electrical Appliances
and Electronic Devices

INTERNATIONAL ELECTRONIC
RESEARCH CORPORATION
135 West Magnolia Blvd.
Burbank, California
91502-7704

Designs and manufactures the Zero Insertion Force (ZIF(tm)) printed circuit
board retainer, ZIF II using tool free concept, thermally efficient coldwalls
and enclosures using the integrated ZIF(tm) or the machined ZIF(tm)
technology approach for high performance electronic systems, heat
dissipators/sinks and other components related to thermal management of
electronic systems for the Military/Aerospace, computer and commercial market
place worldwide.

REEVES-HOFFMAN DIVISION 400 West North Street
Carlisle, Pennsylvania
17013-2248

Designs and manufactures quartz crystals, crystal oscillators and
glass-to-metal hermetic seal packages for sales to customers worldwide.
Primary applications include telecommunications, computers, hybrid
microcircuits, navigation, position location, military communication, medical
imaging and guidance systems.

WARING PRODUCTS DIVISION 283 Main Street
New Hartford, Connecticut
06057-0319

Manufactures commercial and consumer portable electrical appliances such as
the original Blendor(R) and the NuBlend(R) blender, mixers, can openers, food
processors, juicers, juice extractors, coffee preparation products, ice cream
makers and food dehydrators and steamers sold under the Waring(R), Acme
Juicerator(R) and Qualheim(tm) brand names for both the domestic and export
markets.

Power and Controlled
Environmental Systems

ELLIS AND WATTS DIVISION 4400 Glen Willow Lake Lane
Batavia, Ohio
45103-2356

Manufactures special air conditioning equipment, liquid cooling systems,
fluid transfer units, air handling equipment, special fans, dehydrators,
mobile vans and transportable suites (Environ(R)) for specialized electronic
and medical diagnostic equipment, including "CT" Scanners, Lithotriptors and
Magnetic Resonance Imaging (MRI) systems, for government, industry, medical
and power plant use.

Fabricated Metal
Products and Equipment

ANEMOSTAT PRODUCTS
DIVISION
888 North Keyser Avenue
Scranton, Pennsylvania
18504-9723

Designs, manufactures and markets a broad line of air distribution equipment
with both pneumatic and electronic controls to meet the need for total
environmental control in laboratories, industrial buildings, commercial
buildings, and air distribution in aircraft, marine and rail equipment. Brand
names include Anemostat(R), Anemotherm(R), Multi-Vent(R), Anemotrak(R) and
Envirotrak(R). Anemostat also manufacturers a line of UL(R) approved vision
frames and louvers for fire rated doors.

24
<PAGE>

Dynamics Corporation of America

Directors
HAROLD COHAN+*
Business Consultant
PATRICK J. DORME
Vice President-Finance and
Chief Financial Officer of the
Corporation
FRANK A. GUNTHER+*
President, Highpoint Enterprises
Incorporated
HENRY V. KENSING
Vice President and General
Counsel of the Corporation
RUSSELL H. KNISEL+*
Vice Chairman, Shawmut Bank
ANDREW LOZYNIAK
Chairman of the Board and
President of the Corporation
EDWARD J. MOONEY
Vice Chairman of the Board,
Vice President and Secretary
of the Corporation
SAUL SPERBER+*
Financial Advisor

+Member of Audit Committee
*Member of Compensation Committee

Officers

ANDREW LOZYNIAK
Chairman of the Board and
President
EDWARD J. MOONEY**
Vice Chairman of the Board,
Vice President and Secretary
HENRY V. KENSING
Vice President and General
Counsel
PATRICK J. DORME
Vice President-Finance and
Chief Financial Officer
RICHARD E. SMITH
Treasurer
M. GREGORY BOHNSACK
Controller

** Retired at year end

25
<PAGE>

Dynamics Corporation of America
475 Steamboat Road
Greenwich, Connecticut 06830-7197

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

Form 10-K

(Mark One)

X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For Fiscal Year Ended December 31, 1993

____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

Commission File Number: 1-4639

CTS CORPORATION
(Exact name of registrant as specified in its charter)

Indiana 35-0225010
(State or other jurisdiction of (IRS Employer Identifi-
incorporation or organization) cation Number)

905 West Boulevard North, Elkhart, Indiana 46514
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: 219-293-7511

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

Name of Each Exchange
Title of Each Class on Which Registered

Common stock, without par value New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

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

Yes X No

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

Yes X No
There were 5,169,354 shares of Common Stock, without par value,
outstanding on March 11, 1994.

The aggregate market value of the voting stock held by non-affi-
liates of CTS Corporation was approximately $68 million on March
11, 1994.
1

<PAGE>

DOCUMENTS INCORPORATED BY REFERENCE

(1) Portions of the CTS Corporation 1993 Annual Report for
the fiscal year ended December 31, 1993, incorporated
by reference in Part I and Part II.

(2) Portions of the 1994 Proxy Statement for annual meeting
of stockholders to be held on April 29, 1994,
incorporated by reference in Part III.

(3) Certain portions of the CTS Corporation Form 10-K for
the 1987 fiscal year ended January 3, 1988, incorporated
by reference in Part IV.

(4) Certain portions of Registration Statement No. 33-
27749, effective March 23, 1989, incorporated by
reference in Part IV.

(5) Certain portions of the 1989 Proxy Statement for annual
meeting of stockholders held April 28, 1989,
incorporated by reference in Part IV.

(6) Certain portions of the CTS Corporation Form 10-K for
the 1989 fiscal year ended December 31, 1989, incorporated
by reference in Part IV.

(7) Certain portions of the CTS Corporation Form 10-K for
the 1991 fiscal year ended December 31, 1991,
incorporated by reference in Part IV.

(8) Certain portions of the CTS Corporation Form 10-K for
the 1992 fiscal year ended December 31, 1992,
incorporated by reference in Part IV.

EXHIBIT INDEX -- PAGES 16 AND 17

<PAGE>

Part I

Item 1. Business

INTRODUCTION AND GENERAL DEVELOPMENT OF BUSINESS

The registrant, CTS Corporation (CTS or Company), is an Indiana
corporation incorporated in 1929 as a successor to a company
started in 1896. CTS' principal executive offices are located at
905 West Boulevard North, Elkhart, Indiana 46514, telephone
number (219) 293-7511.

CTS designs, manufactures and sells electronic components. The
engineering and manufacturing of CTS products is performed at 15
facilities worldwide. CTS products are sold through sales
engineers, sales representatives, agents and distributors.

In March 1987, a settlement was announced between CTS and
Dynamics Corporation of America (DCA), terminating the sale
process of the Company and resolving all disputes between CTS and
DCA. Subsequently, the United States Supreme Court held that the
Control Share Acquisition Chapter was constitutional. As a
result of the Court's decision, the issue of voting rights of
1,020,000 shares of CTS common stock acquired by DCA in 1986 was
submitted to a vote of CTS stockholders at the 1987 annual
meeting. A majority of all shares eligible to vote was necessary
to grant voting rights. DCA was not eligible to vote on the
issue. The stockholders voted not to grant voting rights to DCA
on these shares. The Court's decision did not have an impact
with respect to voting rights on additional shares of CTS common
stock previously acquired by DCA. In May 1988, the settlement
agreement expired pursuant to its terms. At the end of 1993, DCA
owned 1,920,900 shares (37.3%) of CTS common stock, including the
1,020,000 shares without voting rights.

In January 1990, the Company formally announced the closing of
its Switch Division located in Paso Robles, California. The Paso
Robles manufacturing operations were relocated to the Company's
facilities in Taiwan and Bentonville, Arkansas. During 1992, the
Company completed the sale of the Paso Robles manufacturing plant
and most of the associated real estate for $1.9 million. A pre-
tax gain of $0.9 was realized from the sale. The manufacturing
operations for certain variable resistor and selector switch
products, which formerly were performed in Elkhart, Indiana, were
also transferred to Bentonville in 1990, to take advantage of any
efficiencies to be gained in consolidating such operations in
Bentonville. The buildings located in Elkhart which housed the
plastics molding, and element production, were vacated, with
these manufacturing operations being consolidated into the main
Elkhart plant.

CTS announced in July 1990 that its facility near Glasgow,
Scotland, would be expanded in order to manufacture and sell
additional electronic products in Europe. The total capital

<PAGE>

investment has been approximately $10 million as of December 31,
1993. Automotive throttle position sensors and precision and
clock oscillators were added to the product lines already
manufactured in Scotland. The decision to expand the Scottish
facility was based on several factors, including the excellent
business climate and skills base in Scotland and the anticipated
full participation of the United Kingdom in the European Economic
Community. The expansion of the Scotland facility represents a
major effort by CTS to serve the large and rapidly growing
European market on a direct basis.

In November 1991, construction was completed on a 53,000 square
foot manufacturing facility in Bangkok, Thailand. During 1992,
the Company idled operations at this facility.

Also during 1991, the Company significantly reduced the operating
activities at its Brownsville, Texas, facility and plans to sell
this property.

The manufacturing space owned by CTS in Hong Kong, which
consisted of two floors in a multi-story building, was sold in
March 1991. One floor was leased back by CTS for the
continuation of its manufacturing operations in Hong Kong.
During 1992, the Company terminated this lease and discontinued
its manufacturing operations in Hong Kong.

FINANCIAL INFORMATION ON INDUSTRY SEGMENTS

All of the Company's products are considered one industry
segment. Sales to unaffiliated customers, operating profit and
identifiable assets, by geographic area, are contained in "Note I
- Business Segment and Non-U.S. Operations," pages 21-22 , of
the CTS Corporation 1993 Annual Report, and is incorporated
herein by reference.

PRINCIPAL BUSINESS AND PRODUCTS OF CTS

CTS is primarily in the business of developing, manufacturing and
selling a broad line of electronic components principally serving
the electronic needs of original equipment manufacturers (OEM).

The Company sells classes of similar products consisting of the
following:

Automotive control devices Loudspeakers
Electronic connectors Programmable switches
Frequency control devices Resistor networks
Hybrid microcircuits Selector switches
Industrial electronics Variable resistors

Most products within these product classes are manufactured by
CTS from purchased raw materials or subassemblies. Some products
sold by CTS are purchased and resold under the Company's name.

<PAGE>

During the past three years, five classes of similar product
lines accounted for 10% or more of consolidated revenue during
one or more years, as follows:

Percent of Consolidated Revenue

Class of Similar Products 1993 1992 1991

Automotive Control Devices 26 20 18

Frequency Control Devices 15 17 16

Hybrid Microcircuits 14 11 7

Electronic Connectors 14 17 15

Resistor Networks 14 16 18

MARKETS

CTS estimates that its products have been sold in the following
segments of the electronics OEM and distribution markets and in
the following percentages during the preceding three fiscal
years:

Percent of Consolidated Revenue

Markets 1993 1992 1991

Automotive 32 25 22

Data Processing 22 20 20

Communications Equipment 17 18 19

Defense and Aerospace 12 17 19

Instruments and Controls 9 12 11

Distribution 4 5 5

Consumer Electronics 4 3 4
Total 100% 100% 100%

Products for the automotive market include throttle position
sensors, switch assemblies for operator interface, exhaust gas
recirculation subsystems, variable resistors and switches for
automotive entertainment systems and other applications, and
loudspeakers.

<PAGE>

Products for the data processing market include resistor
networks, frequency control devices, programmable switches and
hybrid microcircuits. Products for this market are principally
used in computers and computer peripheral equipment.

In the communications equipment market, CTS products include
frequency control devices, switches and resistor networks.
Products for this market are principally used in telephone
equipment and in telephone switching systems.

CTS products for the defense and aerospace market, usually
procured through government contractors or subcontractors, are
electronic connectors, hybrid microcircuits, backpanels,
frequency control devices and programmable key storage devices.

Products for the instruments and controls market include hybrid
microcircuits, variable resistors and switches. Principal end
uses are medical electronic devices and electronic testing,
measuring and servicing instruments.

In the distribution market, CTS' primary products include
programmable switches, resistor networks and frequency control
devices. In this market, standard CTS products are sold for a
wide variety of applications.

Products for the consumer electronics market, primarily variable
resistors and switches, are principally used in home
entertainment equipment and appliances.

MARKETING AND DISTRIBUTION

Sales of CTS electronic components to original equipment
manufacturers are principally by CTS sales engineers and
manufacturers representatives. CTS maintains sales offices in
Elkhart, Indiana; Detroit, Michigan; and in the United Kingdom,
Hong Kong, Taiwan and Japan. Various regions of the United
States are serviced by sales engineers working out of their
homes. The sale of electronic components is relatively
integrated such that most of the product lines of CTS are sold
through the same field sales force. Approximately 36% of net
sales in 1993 were attributable to coverage by CTS sales
engineers.

Generally, CTS sales engineers service the Company's largest
customers with application specific products. CTS sales
engineers work closely with major customers in determining
customer requirements and in designing CTS products to be
provided to such customers.

CTS uses the services of independent sales representatives and
distributors in the United States and foreign countries for
customers not serviced by CTS sales engineers. Sales represen-
tatives receive commissions from CTS. During 1993, about 60% of
net sales were attributable to coverage by sales representatives.
Independent distributors purchase products from CTS for resale to
customers. In 1993, independent distributors accounted for about
4% of net sales.
6

<PAGE>

RAW MATERIALS

Generally, CTS' major raw materials are steel, copper, brass,
certain precious metals, resistive and conductive inks, passive
components and semiconductors, used in several CTS products;
ceramic materials used particularly in resistor networks and
hybrid microcircuits; synthetic quartz used in frequency control
devices; and laminate material used in printed circuit boards.
These raw materials are purchased from several vendors, and
except for certain semiconductors, CTS does not believe that it
is dependent on one or on a very few vendors. In 1993 all of
these materials were available in adequate quantities to meet
CTS' production demands.

The Company does not presently anticipate any raw material short-
ages which would significantly affect production. However, the
lead times between the placement of orders for certain raw mater-
ials and actual delivery to CTS are quite variable, and the
Company may from time to time be required to order raw materials
in quantities and at prices less than optimal to compensate for
the variability of lead times for delivery.

Precious metals prices have a significant effect on the
manufacturing cost and selling prices of many CTS products,
particularly some programmable switches, electronic connectors
and resistor networks. CTS has continuing programs to reduce the
precious metals content of several products, when consistent with
customer specifications.

WORKING CAPITAL

CTS does not usually buy inventories or manufacture products
without actual or reasonably anticipated customer orders, except
for some standard, off-the-shelf distributor products. The
Company is not generally required to carry significant amounts of
inventories to meet rapid delivery requirements because most
customer orders are for custom products. CTS has entered into
"just-in-time" arrangements with certain major customers in order
to meet customers' just-in-time delivery needs.

CTS carries raw materials, including certain semiconductors, and
certain work-in-process and finished goods inventories which are
unique to a particular customer or to a small number of
customers, and in the event of reductions in or cancellations of
orders, some inventories are not useable or cannot be returned to
vendors for credit. CTS generally imposes charges for the
reduction or cancellation of orders by customers, and these
charges are usually sufficient to cover the financial exposure of
CTS to inventories which are unique to a customer. CTS does not
customarily grant special return privileges or payment privileges
to customers, although CTS' distributor program permits certain
returns. CTS' working capital requirements are generally
cyclical but not seasonal.
7

<PAGE>

Working capital requirements are generally dependent on the
overall business level. During 1993, working capital decreased
slightly to $47.4 million. Cash represents a significant part of
the Company's working capital. Most of CTS' cash at December 31,
1993, was held in U.S.-denominated cash equivalents for the
credit of the various non-U.S. operations. The cash, other than
approximately $5 million, is generally available to the parent
Company.

PATENTS, TRADEMARKS AND LICENSES

CTS maintains a program of obtaining and protecting U.S. and
non U.S. patents and trademarks. CTS believes that the success of
its business is not materially dependent on the existence or
duration of any patent, group of patents or trademarks.

CTS licenses the manufacture of several electronic products to
companies in the United States and non U.S. countries. In 1993
license and royalty income was 0.03% of net sales. CTS believes
that the success of its business is not materially dependent upon
any licensing arrangement where CTS is either the licensor or
licensee.

MAJOR CUSTOMERS

CTS' 15 largest customers represented about 62%, 58% and 59% of
net sales in 1993, 1992 and 1991, respectively.

Of the net sales to unaffiliated customers, approximately $40.1
million, $30.7 million and $29.9 million were derived from sales
to General Motors Corporation in 1993, 1992 and 1991,
respectively. About $24.0 million, $19.3 million and $23.5
million were derived from sales to International Business
Machines Corporation in 1993, 1992 and 1991, respectively. CTS
is dependent upon these and other customers for a significant
percentage of its sales and profits, and the loss of one or more
of these customers or reduction of orders by one or more of these
customers would have a materially adverse effect upon the
Company.

BACKLOG OF ORDERS

Backlog of orders does not necessarily provide an accurate
indication of present or future business levels for CTS. For
many electronic products, the period between receipt of orders
and delivery is relatively short. For large orders from major
customers that may constitute backlog over an extended period of

<PAGE>

time, production scheduling and delivery are subject to change or
cancellation by the customers on relatively short notice. At the
end of 1993, the Company's backlog of orders was $70.5 million,
compared with $64.0 million at the end of 1992. This increase
was primarily attributable to increased demand from automotive
customers.

The backlog of orders at the end of 1993 will generally be filled
during the 1994 fiscal year.

GOVERNMENT CONTRACTS

CTS believes that about 12% of its net sales are associated with
purchases by the U.S. Government or foreign governments,
principally for defense and aerospace applications. Because most
CTS products procured through government contractors and
subcontractors are for military end uses, the level of defense
and aerospace market sales by CTS is dependent upon government
budgeting and funding of programs utilizing electronic systems.

Almost all CTS sales involving government purchases are to
primary government contractors or subcontractors. CTS is usually
subject to contract provisions permitting termination of the
contract, usually with penalties payable by the government;
maintenance of specified accounting procedures; limitations on
and renegotiations of profits; priority production scheduling;
and possible penalties or fines against CTS for late delivery or
substandard quality. Such contract provisions have not previously
resulted in material uncertainties or disruptions for CTS.

COMPETITION

CTS competes with many domestic and non U.S. manufacturers prin-
cipally on the basis of product features, price, engineering,
quality, reliability, delivery and service. Most product lines
of CTS encounter significant competition. The number of
significant competitors varies from product line to product line.
No single competitor competes with CTS in every product line, but
many competitors are larger and more diversified than CTS. Some
competitors are divisions or affiliates of customers. CTS is
subject to competitive risks typical in the electronics industry
such as shorter product life cycles and new products causing
existing products to become obsolete.

Some customers have reduced or plan to reduce the number of
suppliers while increasing the volume of purchases from
independent suppliers. Most customers are demanding higher
quality, reliability and delivery standards from CTS as well as
competitors. These trends may create opportunities for CTS while
also increasing the risk of loss of business to competitors.

<PAGE>

The Company believes that it competes most successfully in custom
products manufactured to meet specific applications of major
original equipment manufacturers.

CTS believes that it has some advantages over certain competitors
because of its ability to apply a broad range of technologies and
materials capabilities to develop products for the special
requirements of customers. CTS also believes that it has an
advantage over some competitors in its capability to sell a broad
range of products manufactured to relatively consistent standards
of quality and delivery. CTS believes that the relative breadth
of its product lines and relative consistency in quality and
delivery across product lines is an advantage to CTS in selling
products to customers.

CTS believes that it is one of the largest manufacturers of
automotive throttle position sensors.

FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC
OPERATIONS AND EXPORT SALES

Information about revenue from sales to unaffiliated customers,
operating profit and identifiable assets, by geographic area, is
contained in "Note I - Business Segment and Non-U.S. Operations,"
pages 21-22 of the CTS Corporation 1993 Annual Report, and is
incorporated herein by reference.

In 1993 approximately 28% of net sales to unaffiliated customers,
after eliminations, were attributable to non-U.S. operations.
This represents an increase from 24% of net sales attributable to
non-U.S. operations in 1992. About 39% of total CTS assets,
after eliminations, are non-U.S. Except for cash and
equivalents, a substantial portion of these assets cannot readily
be liquidated. CTS believes that the business risks attendant to
its present non-U.S. operations, though substantial, are normal
risks for non-U.S. businesses, including expropriation, currency
controls and changes in currency exchange rates and government
regulations.

RESEARCH AND DEVELOPMENT ACTIVITIES

In 1993, 1992 and 1991, CTS spent $5.7, $6.1 and $5.7 million,
respectively, for research and development. Most CTS research
and development activities relate to new product and process
developments or the improvement of product materials. Many such
research and development activities are for the benefit of one or
a limited number of customers or potential customers.

During 1993, the Company did not enter into any new, significant
product lines, but continued to introduce additional versions of
existing products in response to present and future customer
requirements.

<PAGE>

ENVIRONMENTAL PROTECTION LAWS

In complying with federal, state and local environmental
protection laws, CTS has modified certain manufacturing processes
and expects to continue to make additional modifications. Such
modifications that have been performed have not materially
affected the capital expenditures, earnings or competitive
position of CTS.

Certain processes in the manufacture of the Company's current and
past products create hazardous waste by-products as currently
defined by federal and state laws and regulations. The Company
has been notified by the U.S Environmental Protection Agency,
state environmental agencies and, in some cases, generator
groups, that it is or may be a Potentially Responsible Party
(PRP) regarding hazardous waste remediation at several non-CTS
sites. The factual circumstances of each site are different; the
Company has determined that its role as a PRP with respect to
these sites, even in the aggregate, will not have a material
adverse effect on the Company's business or financial condition,
based on the following: 1) the Company's status as a de minimis
party; 2) the large number of other PRPs identified; 3) the
identification and participation of many larger PRPs who are
financially viable; 4) defenses concerning the nature and limited
quantities of materials sent by the Company to certain of the
sites; and 5) the Company's experience to-date in relation to the
determination of its allocable share. In addition to these non-
CTS sites, the Company has an ongoing practice of providing
reserves for probable remediation activities at certain of its
manufacturing locations and for claims and proceedings against
the Company with respect to other environmental matters. In the
opinion of management, based upon presently available
information, either adequate provision for probable costs has
been made, or the ultimate costs resulting will not materially
affect the consolidated financial position or results of
operations of the Company.

There are claims against the Company with respect to
environmental matters which the Company contests. In the opinion
of management, based upon presently available information, either
adequate provision for potential costs has been made, or the
costs which ultimately might result will not materially affect
the consolidated financial position or results of operations of
the Company.

EMPLOYEES

CTS employed an average of 3,975 persons during 1993. About 47%
of these persons were employed outside the United States at the
end of 1993. Approximately 309 employees in the United States
were covered by collective bargaining agreements as of December
31, 1993. The two collective bargaining agreements covering
these employees will expire in 1996.

<PAGE>

Item 2. Properties

CTS operations or facilities are at the following locations. The
owned properties are not subject to material liens or
encumbrances.

Lease
Approximate Owned or Expiration
Location Square Feet Leased Date
Elkhart, IN 521,813 Owned -

Berne, IN 248,726 Owned -

Singapore 158,926 Owned* -
Kaohsiung, Taiwan 132,887 Owned* -

Streetsville,
Ontario, Canada 111,740 Owned -

West Lafayette, IN 105,983 Owned -
Sandwich, IL 94,173 Owned -

Brownsville, TX 84,679 Owned -

Bentonville, AR 72,000 Owned -
Glasgow, Scotland 75,000 Owned -

New Hope, MN December,
(Science Center Dr.) 55,000 Leased 1998

Bangkok, Thailand 53,000 Owned -

Matamoros, Mexico 50,590 Owned* -
Baldwin, WI 39,050 Owned -

Cokato, MN 36,000 Owned -

TOTAL 1,839,567

* Buildings are located on land leased under renewable leases.

<PAGE>

The Company is currently seeking to sell some, or all, of the
Streetsville, Ontario, Canada, facility and related property, and
the Brownsville, Texas, manufacturing building.

The Company constructed the Bangkok, Thailand, facility during
1991. This facility was idled during 1992 and was idle for all
of 1993.

The Company regularly assesses the adequacy of its manufacturing
facilities for manufacturing capacity, available labor and
location to the markets and major customers for the Company's
products. CTS also reviews the operating costs of its facilities
and may from time to time relocate facilities or certain manufac-
turing activities in order to achieve operating cost reductions
and improved asset utilization and cash flow.

Item 3. Legal Proceedings

Contested claims involving various matters, including
environmental claims brought by government agencies, are being
litigated by CTS, both in legal and administrative forums. In
the opinion of management, based upon currently available
information, adequate provision for potential costs has been
made, or the costs which might ultimately result from such
litigation or administrative proceedings will not materially
affect the consolidated financial position of the Company or the
results of operations.

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

During the fourth quarter of 1993, no issue was submitted to a
vote of CTS stockholders.

PART II

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

The principal market for CTS common stock is the New York Stock
Exchange. Information relative to the high and low trading
prices for CTS Common Stock for each quarter of the past two
years and the frequency and amount of dividends declared during
the previous two years can be located in "Stockholder
Information," page 10, of the CTS Corporation 1993 Annual Report,
incorporated herein by reference. On March 11, 1994, there were
approximately 1,182 holders of record of CTS common stock.

The Company intends to continue a policy of considering dividends
on a quarterly basis. The declaration of a dividend and the
amount of any such dividend are subject to earnings, anticipated
working capital, capital expenditure and other investment

<PAGE>

requirements, the financial condition of CTS and such other
factors as the Board of Directors deems relevant.

Item 6. Selected Financial Data

A summary of selected financial data for CTS, for each of the
previous five fiscal years, is contained in the "Five-Year
Summary," page 11, of the CTS Corporation 1993 Annual Report,
incorporated herein by reference.

Certain divestitures and closures of businesses and certain
accounting changes affect the comparability of information con-
tained in the "Five-Year Summary."

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

Information about liquidity, capital resources and results of
operations, for the three previous fiscal years, is contained in
"Management's Discussion and Analysis of Financial Condition and
Results of Operations (1991-1993)," pages 25-27, of the CTS
Corporation 1993 Annual Report, incorporated herein by reference.

Item 8. Financial Statements and Supplementary Data

Consolidated financial statements, meeting the requirements of
Regulation S-X, and the Report of Independent Accountants, are
contained in pages 12-24 of the CTS Corporation 1993 Annual
Report, incorporated herein by reference. Quarterly per share
financial data is provided in "Stockholder Information," under
the subheading, "Quarterly Results of Operations", and "Per Share
Data," on page 10 of the CTS Corporation 1993 Annual Report, and
is incorporated herein by reference.

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

There were no disagreements.

PART III

Item 10. Directors and Executive Officers of the Registrant

Information responsive to Items 401(a) and 401(e) of Regulation
S-K pertaining to directors of CTS is contained in the 1994 Proxy
Statement under the caption "Election of Directors," pages 4-5,
filed with the Securities and Exchange Commission, and is
incorporated herein by reference.

Information responsive to Item 405 of Regulation S-K pertaining
to compliance with Section 16(a) of the Securities Exchange Act

<PAGE>

of 1934 is contained in the 1994 Proxy Statement under the
caption "Compliance with Section 16(a) of the Securities Exchange
Act of 1934," page 5, filed with the Securities and Exchange
Commission, and is incorporated herein by reference.

The individuals listed were elected as executive officers of CTS
at the annual meeting of the Board of Directors on April 30,
1993, and are expected to serve as executive officers until the
next annual meeting of the Board of Directors, scheduled on April
29, 1994, at which time the election of officers will be
considered again by the Board of Directors.

Name Age Position and Offices
Joseph P. Walker 55 Director, Chairman,
President and Chief
Executive Officer

Philip T. Christ 62 Group Vice President

Stanley J. Aris 53 Vice President Finance and
Chief Financial Officer
Jeannine M. Davis 45 Vice President, Secretary
and General Counsel

Gary N. Hoipkemier 39 Treasurer

George T. Newhart 51 Corporate Controller

Joseph P. Walker has served as Chairman of the Board, President
and Chief Operating Officer of CTS since 1988. Mr. Walker is a
Director of NBD Bank and NBD Bank,N.A. and the National Association
of Manufacturers.

Philip T. Christ was elected Group Vice President, effective
July 2, 1990. Mr. Christ served as a Senior Vice President at
Simplex Time Recorder from 1976-1986.

Stanley J. Aris was elected Vice President, Finance and Chief
Financial Officer, effective May 18, 1992. Prior to joining CTS,
Mr. Aris worked for two years as a business consultant. From
1989 to 1990 Mr. Aris served as Vice President, Finance of Hypres
Corporation.

Jeannine M. Davis, an employee since 1980, served as legal
counsel from 1980-1983, Assistant Secretary from 1982-1983 and
Assistant General Counsel from 1983-1984. She was elected
Secretary in 1983, General Counsel in 1984 and Vice President in
1988.

<PAGE>

Gary N. Hoipkemier became an employee in November 1989 and was
elected Treasurer on December 15, 1989. He served as Chief
Financial Officer of Riblet Products Corporation from 1988-1989.

George T. Newhart was elected Corporate Controller on June 19,
1989. Prior to joining the Company in June 1989, he was Chief
Financial and Administrative Officer of the Chelsea Electronic
Distribution Group from 1987-1989.

Item 11. Executive Compensation

Information responsive to Item 402 of Regulation S-K pertaining
to management remuneration is contained in the 1994 Proxy
Statement in the captions "Executive Compensation," pages 6-7 and
"Director Compensation," page 11, filed with the Securities
and Exchange Commission, and is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and
Management

Information responsive to Item 403 of Regulation S-K pertaining
to security ownership of certain beneficial owners and management
is contained in the 1994 Proxy Statement in the caption
"Securities Beneficially Owned by Principal Stockholders and
Management," pages 2-4 filed with the Securities and Exchange
Commission, and is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions

DCA owned 1,920,900 (37.3%) of the Company's outstanding common
stock as of December 31, 1993. CTS purchased products from DCA
totalling about $145,000 in 1993, $93,000 in 1992 and $192,000 in
1991, principally consisting of certain component parts used by
CTS in the manufacture of frequency control devices. CTS had no
sales to DCA in 1993 or 1992, and sales to DCA were under $70,000
in 1991.

PART IV

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

(a) (1) and (2)

The list of financial statements and financial statement
schedules required by Item 14 (a)(1) and (2) is contained on page
S-1 herein.

<PAGE>

(a)(3) Exhibits

(3)(a) Articles of Incorporation, as amended April 16,
1973, previously filed as exhibit (3)(a) to the
Company's Form 10-K for 1987, and incorporated
herein by reference.

(3)(b) Bylaws, as amended and effective June 25, 1992,
previously filed as exhibit (3)(b) to the
Company's Form 10-K for 1992, and incorporated
herein by reference.

(10)(a) Employment agreement dated June 28, 1991, between
CTS and Joseph P. Walker, previously filed as
exhibit (10)(a) to the Company's Form 10-K for
1991, and incorporated herein by reference.

(10)(b) Prototype indemnification agreement, with
Lawrence J. Ciancia, Gerald H. Frieling, Jr.,
Andrew Lozyniak, Edward J. Mooney, Joseph P.
Walker, Philip T. Christ, Stanley J. Aris,
Jeannine M. Davis, Gary N. Hoipkemier and George
T. Newhart, previously filed as exhibit (10)(b) to
the Company's Form 10-K for 1991, and incorporated
herein by reference.

(10)(c) CTS Corporation 1982 Stock Option Plan, as amended
February 24, 1989, was previously filed as exhibit
(10)(d) to the Company's Form 10-K for 1989, and
is incorporated herein by reference.

(10)(d) CTS Corporation 1986 Stock Option Plan, approved
by the stockholders at the reconvened annual
meeting on May 30, 1986. The CTS Corporation 1986
Stock Option Plan is contained in Exhibit 4 to
Registration Statement No. 33-27749, effective
March 23, 1989, and is incorporated herein by
reference.

(10)(e) CTS Corporation 1988 Restricted Stock and Cash
Bonus Plan, as adopted by the CTS Board of
Directors on December 16, 1988, and approved by
stockholders at the 1989 annual meeting of stock-
holders on April 28, 1989. The CTS Corporation
1988 Restricted Stock and Cash Bonus Plan is
contained in Appendix A, pages 11-15, of the 1989
Proxy Statement for the annual meeting of
stockholders held April 28, 1989, under the
caption "CTS Corporation 1988 Restricted Stock and
Cash Bonus Plan," previously filed with the
Securities and Exchange Commission, and is
incorporated herein by reference.

(13) CTS Corporation 1993 Annual Report.

(21) Subsidiaries of CTS Corporation.

(23) Consent of Price Waterhouse to incorporation by
reference of this Annual Report on Form 10-K for
the fiscal year 1993 to Registration Statement 2-
84230 on Form S-8 and Registration Statement 33-
27749 on Form S-8.

<PAGE>

Indemnification Undertaking

For the purposes of complying with the amendments to the
rules governing Form S-8 (effective July 13, 1990) under the
Securities Act of 1933, the undersigned registrant hereby
undertakes as follows, which undertaking shall be
incorporated by reference into registrant's Registration
Statements on Form S-8 Nos. 2-84230 (filed June 13, 1983)
and 33-27749 (filed March 23, 1989):

Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted
to directors, officers and controlling persons of
the registrant pursuant to the foregoing
provision, or otherwise, the registrant has been
advised that in the opinion of the Securities and
Exchange Commission such indemnification is
against public policy as expressed in the
Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for
indemnification against such liabilities (other
than the payment by the registrant of expenses
incurred or paid by a director, officer or
controlling person of the registrant in the
successful defense of any action, suit or
proceeding) is asserted by such director, officer
or controlling person in connection with the
securities being registered, the registrant will,
unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the
question whether such indemnification by it is
against public policy as expressed in the Act and
will be governed by the final adjudication of such
issue.

<PAGE>

SIGNATURES

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

Date
By_______________________________
Stanley J. Aris
Vice President Finance
and Chief Financial Officer

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

Date
B y _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Lawrence J. Ciancia,
Director

Date
B y _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Patrick J. Dorme,
Director

Date
By______________________________________________________________
Gerald H. Frieling, Jr.,
Director

Date
B y _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Andrew Lozyniak,
Director

Date
B y _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Joseph P. Walker,
Director

Date
B y _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
George T. Newhart,
Corporate Controller
and principal accounting
officer

Date
B y _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Jeannine M. Davis,
Vice President, Secretary
and General Counsel

<PAGE>

ANNUAL REPORT ON FORM 10-K

ITEM 14(a) (1) AND (2) AND ITEM 14(d)

LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

FINANCIAL STATEMENT SCHEDULES

YEAR ENDED DECEMBER 31, 1993

CTS CORPORATION AND SUBSIDIARIES

ELKHART, INDIANA

<PAGE>

FORM 10-K - ITEM 14(a) (1) AND (2)

CTS CORPORATION AND SUBSIDIARIES

LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

The following consolidated financial statements of CTS Corpora-
tion and subsidiaries included in the annual report of the
registrant to its shareholders for the year ended December 31,
1993, are incorporated by reference in Item 8:

Consolidated balance sheets - December 31, 1993, and
December 31, 1992

Consolidated statements of earnings - Years ended
December 31, 1993, December 31, 1992, and December 31,
1991

Consolidated statements of stockholders' equity - Years
ended December 31, 1993, December 31, 1992, and Decem-
ber 31, 1991

Consolidated statements of cash flows - Years ended
December 31, 1993, December 31, 1992, and December 31,
1991

Notes to consolidated financial statements

The following consolidated financial statement schedules of CTS
Corporation and subsidiaries, are included in item 14(d):

Page

Schedule V - Property, plant and equipment S-3

Schedule VI - Accumulated depreciation of
property, plant and equipment S-4

Schedule VIII - Valuation and qualifying
accounts S-5

All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission
have been omitted because they are inapplicable, not required or
the information is included in the consolidated financial state-
ments or notes thereto.

S-1

<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

ON FINANCIAL STATEMENT SCHEDULES

To the Board of Directors
of CTS Corporation

Our audits of the consolidated financial statements referred to in our
report dated February 7, 1994 appearing on page 24 of the CTS Corporation
1993 Annual Report to Stockholders, (which report and consolidated financial
statements are incorporated by reference in this Annual Report on Form 10-K)
also included an audit of the Financial Statement Schedules listed in
Item 14(a) of this Form 10-K. In our opinion, these Financial Statement
Schedules present fairly, in all material respects, the information set forth
therein when read in conjunction with the related consolidated financial
statements.

PRICE WATERHOUSE

South Bend, Indiana
February 7, 1994

S-2

<PAGE>

<TABLE>

CTS CORPORATION SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT (In thousands of dollars)
<CAPTION>

Balance at Other
Beginning of Additions Changes - Balance at
Classification Period at Cost Retirements Add (Deduct) End of Period
<S> <C> <C> <C> <C> <C>

Year ended December 31, 1993:
Land $ 1,161 $ 1,161
Buildings and improvements 38,056 $ 1,566 $ 30 $ (84)(c) 39,508
Machinery and equipment 144,583 9,187 14,694 (466)(a) 138,328
(282)(c)
Construction-in-progress 2,780 943 (312)(a) 3,411
$186,580 $11,696 $14,724 $(1,144) $182,408

Year ended December 31, 1992:
Land $ 1,181 $ 20 $ 1,161
Buildings and improvements 34,312 $ 3,766 1,194 $ 1,832 (a) 38,056
(660)(c)
Machinery and equipment 152,488 7,851 12,351 (897)(a) 144,583
(2,508)(c)
Construction-in-progress 6,915 (2,786) (560)(a) 2,780
(789)(c)
$194,896 $ 8,831 $13,565 $(3,582) $186,580

Year ended December 31, 1991:
Land $ 881 $ 322 (a) $ 1,181
(22)(b)
Buildings and improvements 37,242 $ 811 $ 3,105 74 (a) 34,312
(649)(b)
(61)(c)
Machinery and equipment 146,245 11,477 7,202 2,154 (a) 152,488
(186)(c)
Construction-in-progress 4,012 3,679 (769)(a) 6,915
(7)(c)
$188,380 $15,967 $10,307 $ 856 $194,896
<FN>

(a) Changes in classification and miscellaneous adjustments.
(b) Items transferred to Property Not Used in Business.
(c) Currency translation adjustment.
S-3
</TABLE>

<PAGE>

<TABLE>
CTS CORPORATION SCHEDULE VI - ACCUMULATED DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT
(In thousands of dollars)
<CAPTION>

Additions
Balance at Charged to Other
Beginning of Costs and Changes - Balance at
Classification Period Expenses Retirements Add (Deduct) End of Period

Year ended December 31, 1993:
Buildings and improvements $ 19,960 $ 1,542 $ 30 $ (153)(c) $ 21,319
Machinery and equipment 118,091 9,663 13,959 (577)(a) 113,247
29 (c)
$138,051 $11,205 $13,989 $ (701) $134,566

Year ended December 31, 1992:
Buildings and improvements $ 20,173 $ 1,564 $ 1,673 $ (1)(a) $ 19,960
(103)(c)
Machinery and equipment 120,895 9,413 11,613 345 (a) 118,091
(949)(c)
$141,068 $10,977 $13,286 $ (708) $138,051

Year ended December 31, 1991:
Buildings and improvements $ 18,991 $ 1,532 $ 940 $1,175 (a) $ 20,173
(573)(b)
(12)(c)
Machinery and equipment 116,182 10,913 6,526 432 (a) 120,895
(106)(c)
$135,173 $12,445 $7,466 $ 916 $141,068

<FN>
(a) Changes in classification and miscellaneous adjustments.
(b) Items transferred to Property Not Used in Business.
(c) Currency translation adjustment.

The following is a summarization of the estimated useful lives used in computing depreciation of property,
plant and equipment:

Estimated Life

Building and improvements 10 to 40 years
Machinery and equipment 3 to 15 years
</TABLE>
S-4

<PAGE>
<TABLE>
CTS CORPORATION SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS(In thousands of dollars)
<CAPTION>

Additions
Balance at Charged to Charged to
Beginning of Costs and Other Balance at
Classification Period Expenses Accounts Deductions End of Period
<S> <C> <C> <C> <C> <C>

Year ended December 31, 1993:

Allowance for doubtful receivables $303 $521 $86 $200 $710

Year ended December 31, 1992:

Allowance for doubtful receivables $420 $157 $ 7 (a) $281 (b) $303

Year ended December 31, 1991:

Allowance for doubtful receivables $490 $ 47 $72 (a) $189 (b) $420

<FN>
(a) Recoveries.
(b) Uncollectible accounts written off.

</TABLE>

S-5

<PAGE>

ANNUAL REPORT PAGE 10
STOCKHOLDER INFORMATION
(In thousands of dollars except per share data)

Quarterly Results of Operations
<TABLE>
<CAPTION>

Earnings
Before Net
Net Gross OperatingChanges inAccounting Earnings
Sales Earnings EarningsAccounting Changes (Loss)

1993
1st quarter $ 60,439 $12,620 $ 2,579 $1,767 $(4,614) $(2,847)
2nd quarter 62,613 12,711 3,043 1,810 1,810
3rd quarter 58,107 10,285 2,189 1,063 1,063
4th quarter 55,820 11,728 3,210 1,930 1,930

$236,979 $47,344 $11,021 $6,570 $(4,614) $1,956

1992
1st quarter $ 59,342 $11,513 $1,498 $ 867 $ 867
2nd quarter 57,700 10,129 359 504 504
3rd quarter 56,155 10,026 641 188 188
4th quarter 54,194 9,433 1,600 342 342

$227,391 $41,101 $4,098 $1,901 $1,901

</TABLE>

Per Share Data

<TABLE>
<CAPTION>
Earnings
Before Net
DividendsChanges inAccounting Earnings
High(a) Low(a) DeclaredAccounting Changes (Loss)

1993
1st quarter $19.50 $17.25 $.10 $ .34 $(.89) $(.55)
2nd quarter 21.00 17.00 .10 .35 .35
3rd quarter 22.38 20.25 .10 .21 .21
4th quarter 22.00 19.13 .10 .37 .37

$.40 $1.27 $(.89) $ .38

1992
1st quarter $22.63 $17.25 $.1875 $ .17 $ .17
2nd quarter 24.50 19.63 .1875 .10 .10
3rd quarter 24.50 19.25 .1875 .03 .03
4th quarter 19.50 17.13 .1000 .07 .07

$.6625 $ .37 $ .37

<FN>
(a) The market price range of CTS Corporation common stock on the New York
Stock Exchange for each of the quarters during the last two years.
</TABLE>

<PAGE>

ANNUAL REPORT PAGE 11 IS THE LAST PAGE OF THIS DOCUMENT
ANNUAL REPORT PAGE 12
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands of dollars except per share amounts)
Year Ended

December 31December 31December 31
1993 1992 1991

Net sales $236,979 $227,391 $229,536
Cost of goods sold 189,635 186,290 189,118

Gross earnings 47,344 41,101 40,418
Selling, general and administrative expenses 36,323 37,855 35,980
Gain on sale of property
and other related provisions--Note B (852) (1,857)

Operating earnings 11,021 4,098 6,295

Other (expenses) income:
Interest expense (980) (1,267) (1,316)
Interest income 580 656 1,157
Other (361) 334 108

Total other expenses (761) (277) (51)

Earnings before income taxes and cumulative effect
of changes in accounting principles 10,260 3,821 6,244
Income taxes--Note H 3,690 1,920 2,030

Earnings before cumulative effect of changes
in accounting principles 6,570 1,901 4,214
Cumulative effect of accounting change -
postretirement benefits--Notes A and G (5,096)
Cumulative effect of accounting change -
income taxes--Notes A and H 482

Net earnings $ 1,956 $ 1,901 $ 4,214

Net earnings per share:
Before accounting changes $1.27 $.37 $.82
Cumulative effect on prior years of
accounting changes (.89)
Net earnings per share $.38 $.37 $.82

The accompanying notes are an integral part of the consolidated financial
statements.

<PAGE>

ANNUAL REPORT PAGE 13
<TABLE>
<CAPTION>
Consolidated Statements of Stockholders' Equity
(In thousands of dollars) CumulativeDeferred
Common RetainedTranslation Compen- Treasury
Stock Earnings Adjustment sation Stock Total

Balances at December 31, 1990 $34,487 $102,110 $ 1,598 $(257) $(15,640)$122,298
Net earnings 4,214 4,214
Cash dividends of $.75 per share (3,842) (3,842)
Issued 1,700 shares on exercise of stock options (15) 49 34
Nonemployee Directors' stock retirement plan 15 15
Currency translation adjustment (304) (304)
Deferred compensation recognized 70 70

Balances at December 31, 1991 34,472 102,482 1,294 (172) (15,591) 122,485
Net earnings 1,901 1,901
Cash dividends of $.6625 per share (3,410) (3,410)
Issued 23,400 shares on exercise of stock options (204) 669 465
Nonemployee Directors' stock retirement plan 7 7
Currency translation adjustment (2,157) (2,157)
Issued 3,600 shares net on restricted
stock and cash bonus plan (23) (80) 103
Deferred compensation recognized 81 81

Balances at December 31, 1992 34,245 100,973 (863) (164) (14,819) 119,372
Net earnings 1,956 1,956
Cash dividends of $.40 per share (2,061) (2,061)
Nonemployee Directors' stock retirement plan 8 8
Currency translation adjustment (186) (186)
Issued 1,000 shares on restricted stock and
cash bonus plan (9) (19) 28
Stock compensation (14) 45 31
Deferred compensation recognized 83 83

Balances at December 31, 1993 $34,222 $100,868 $(1,049) $ (92) $(14,746)$119,203

<FN>
The accompanying notes are an integral part of the consolidated financial statements.

</TABLE>

<PAGE>

ANNUAL REPORT PAGE 14
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS December 31 December 31
(In thousands of dollars) 1993 1992

ASSETS
Current Assets
Cash and equivalents $ 23,534 $ 18,455
Accounts receivable, less allowances (1993--$710; 1992--$303) 30,627 27,880
Inventories
Finished goods 5,064 8,996
Work-in-process 15,344 14,192
Raw materials 15,651 14,034

Total inventories 36,059 37,222
Other current assets 1,929 3,819
Deferred income taxes--Note H 5,117

Total current assets 97,266 87,376
Property Plant and Equipment
Buildings and land 40,669 39,463
Machinery and equipment 141,739 147,117

Total property, plant and equipment 182,408 186,580
Less accumulated depreciation 134,566 138,051

Net property, plant and equipment 47,842 48,529
Other Assets
Goodwill, less accumulated amortization
(1993--$6,330; 1992--$5,398) 5,801 6,679
Prepaid pension expense--Note G 32,845 26,859
Other 1,310 1,330

Total other assets 39,956 34,868

Total Assets $185,064 $170,773

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes payable--Note C $ 12,822 $ 5,827
Current maturities of long-term obligations 341 799
Accounts payable 11,611 11,408
Accrued salaries and wages 5,802 4,334
Accrued taxes other than income 1,823 2,187
Other accrued liabilities 17,489 12,707

Total current liabilities 49,888 37,262
Long-term Obligations--Note D 4,995 10,826
Deferred Income Taxes--Note H 5,329 3,313
Postretirement Benefits--Note G 5,649
Stockholders' Equity
Common stock-authorized 8,000,000 shares without
par value; issued 5,807,031 shares 34,130 34,081
Retained earnings 100,868 100,973
Cumulative translation adjustment (1,049) (863)

133,949 134,191
Less cost of common stock held in treasury
(1993--653,607 shares; 1992--656,207 shares) 14,746 14,819

Total stockholders' equity 119,203 119,372

Total Liabilities and Stockholders' Equity $185,064 $170,773

<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>

<PAGE>

ANNUAL REPORT PAGE 15
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of dollars)
Year Ended

December 31December 31December 31
1993 1992 1991

Cash flows from operating activities:
Net earnings $ 1,956 $ 1,901 $ 4,214
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Cumulative effect of change in accounting for:
Postretirement benefits 5,096
Income taxes (482)
Depreciation and amortization 12,143 11,665 13,102
Deferred income taxes 767 303 741
Gain on sale of property, plant and equipment (17) (944) (3,652)
Translation loss 384 92 130
Deferred compensation 91 88 85
Provision for disposition of operations 621 366
Changes in:
Accounts receivable (2,747) 2,473 (2,272)
Inventories 1,163 3,442 4,534
Prepaid pension expense (5,986) (4,907) (4,915)
Other 1,941 (2,114) 2,910
Accounts payable and accrued liabilities 1,627 2,258 (239)
Income taxes payable 1,629 (2,040) 1,071

Total adjustments 15,609 10,937 11,861

Net cash provided by operating activities 17,565 12,838 16,075

Cash flows from investing activities:
Proceeds from sale of property, plant and equipment 998 1,401 6,963
Capital expenditures (11,696) (8,831) (15,967)
Other 129
Cash (used in) discontinued operations (1,252)

Net cash used in investing activities (10,698) (7,301) (10,256)

Cash flows from financing activities:
Proceeds from issuance of long-term obligations 2,938 7,872
Payments of long-term obligations (6,179) (2,348) (5,042)
(Decrease) increase in notes payable 6,898 (2,319) 40
Stock options exercised 465 34
Dividends paid (2,061) (3,857) (3,845)

Net cash used in financing activities (1,342) (5,121) (941)

Effect of exchange rate changes on cash (446) (92) (130)

Net increase in cash 5,079 324 4,748
Cash at beginning of year 18,455 18,131 13,383

Cash at end of year $23,534 $18,455 $18,131

Supplemental cash flow information
Cash paid during the year for:
Interest $ 1,076 $ 1,206 $ 1,526
Income taxes - net 1,294 2,819 557

<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>

<PAGE>

ANNUAL REPORT PAGE 16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A - Summary of Significant Accounting Policies

Principles of Consolidation: The consolidated financial statements
include the accounts of the Company and its wholly-owned subsidiaries.
All intercompany accounts and transactions have been eliminated.

Inventories: Inventories are stated at the lower of cost or market.
Cost is principally determined using the first-in, first-out method.

Property, Plant and Equipment: Property, plant and equipment are
stated at cost. Depreciation is computed over the estimated useful
lives of the assets principally on the straight-line method.

Goodwill: The excess of cost over the fair value of net assets of
businesses acquired is amortized on the straight-line method over the
periods expected to be benefited.

Retirement Plans: The Company has various defined benefit and defined
contribution retirement plans covering a majority of its employees.
The Company's policy is to annually fund the defined benefit pension
plans at or above the minimums required under the Employee Retirement
Income Security Act of 1974 (ERISA).

Research and Development: Research and development costs consist of
expenditures incurred during the course of planned search and
investigation aimed at discovery of new knowledge which will be useful
in developing new products or processes, or significantly enhancing
existing products or production processes, and the implementation of
such through design, testing of product alternatives or construction of
prototypes. The Company expenses all research and development costs as
they are incurred.

Income Taxes: The Company provides deferred income taxes for
transactions reported in different periods for financial reporting and
income tax return purposes pursuant to the requirements of Financial
Accounting Standards Board (FASB) Statement No. 109. The underlying
differences consist primarily of depreciation differences, pension
income, postemployment benefits, certain nondeductible accruals and
inventory reserves.

Translation of Foreign Currencies: The financial statements of all of
the Company's non-U.S. subsidiaries, except the United Kingdom
subsidiary, are remeasured into U.S. dollars using the U.S. dollar as
the functional currency with all translation adjustments included in
the determination of net income. The financial statements of the
Company's United Kingdom subsidiary are translated into U.S. dollars
principally at the current exchange rate with resulting translation
adjustments made directly to the "Cumulative translation adjustment"
component of stockholders' equity.

<PAGE>

NOTE A - Summary of Significant Accounting Policies (continued)

Financial Instruments: The Company's financial instruments consist
primarily of cash, cash equivalents and obligations under notes payable
and long-term debt. In accordance with the requirements of FASB
Statement No. 107, Disclosures about Fair Value of Financial
Instruments, the Company is providing the following fair value
estimates and information regarding valuation methodologies. The
carrying value for cash and cash equivalents approximates fair value.
Interest rates on substantially all of the notes payable and long-term
debt fluctuate based on market rates. The carrying value for these
borrowings approximates fair value.

Cash Equivalents: The Company considers all highly liquid investments
with a maturity of three months or less from the purchase date to be
cash equivalents.

Concentration of Credit Risk: The Company sells its products to
customers primarily in the automotive, data processing, communications
equipment and defense and aerospace industries, primarily in North
America, Europe and the Pacific Rim. The Company performs ongoing
credit evaluations of its customers to minimize credit risk. The
Company generally does not require collateral.

Accounting Changes: Effective January 1, 1993, the Company adopted the
provisions of FASB Statement No. 106, Employers' Accounting for
Postretirement Benefits Other Than Pensions and FASB Statement No. 109,
Accounting for Income Taxes. For postretirement benefits, the Company
changed its practice from expensing these costs as incurred to accruing
these costs during the employees' active working careers. For income
taxes, the Company changed its practice from following FASB Statement
No. 96, of the same title, which required a similar approach in
computing deferred income taxes. The primary change was to recognize
deferred tax benefits that were not recognized under FASB Statement No.
96.

ANNUAL REPORT PAGE 17
Earnings Per Share: Earnings per common share are based on the
weighted average number of shares outstanding.

<PAGE>

NOTE B - Sale of Property and Other Related Provisions

During 1992, the Company sold the assets of its tool, die and machinery
business recognizing a pretax gain of $587,000. Also, during 1992, the
Company sold its Paso Robles, California, manufacturing plant and most
of the associated real estate and recognized a net pretax gain of
$886,000. Additionally, during 1992, the Company incurred $621,000 of
expense to close its remaining Hong Kong manufacturing operations.

During 1991, the Company completed the sale of its Hong Kong
manufacturing facility for $5,720,000 and signed an agreement to lease
back a portion of the space for its manufacturing needs. A pretax
gain of $3,587,000 was realized on the sale, and the proceeds were used
to reduce debt. Also, during 1991, the Company provided $1,730,000 for
planned further restructuring of several of its businesses, including
$614,000 relating to Hong Kong.

NOTE C - Short-term Borrowings

Short-term borrowings consist of demand notes payable to various banks
with an average interest rate of 4.4% at December 31, 1993, 4.8% at
December 31, 1992, and 7.0% at December 31, 1991. The notes were
issued in connection with unsecured lines of credit arrangements, the
unused portions of which totaled $5,977,000 at December 31, 1993.
These arrangements are generally subject to annual renewal and
renegotiation, and may be withdrawn at the banks' option.

Average daily short-term borrowings, including borrowings denominated
in non-U.S. currencies, during 1993, 1992, and 1991 were $12,051,000,
$6,269,000 and $7,039,000, respectively. The weighted average interest
rates, computed by relating interest expense to average daily short-
term borrowings, were 4.3% in 1993, 5.4% in 1992 and 6.9% in 1991.

The maximum amount of short-term borrowings at the end of any month
during 1993, 1992 and 1991 was $13,842,000, $8,334,000 and $8,501,000,
respectively. The short-term borrowings outstanding at December 31,
1991, were $8,160,000.

<PAGE>

NOTE D - Long-term Obligations

Long-term obligations were comprised of the following:

(In thousands)
1993 1992

Long-term debt:
Revolving credit agreements, average
interest rates of 6.1% in 1993
and 5.1% in 1992, due in 1996 and 1997 $3,959 $ 8,612

Industrial revenue bonds, interest
at varying rates (4.1% to 5.0% in 1993
and 4.1% to 5.0% in 1992), due in varying
installments through 1995 441 932

Other 770 988

5,170 10,532

Less current maturities 341 799

Total long-term debt 4,829 9,733

Operating lease obligation, net of
sublease income 166 1,093

Total long-term obligations $4,995 $10,826

The Company has unsecured revolving credit agreements totaling
$49,000,000 with four banks, of which $4,000,000 expires in 1996 and
$45,000,000 expires in 1997. Interest rates on these borrowings and
the industrial revenue bonds fluctuate based upon market rates. The
Company pays an average commitment fee of three-tenths percent per
annum on the revolving credit agreements. The credit agreements
require, among other things, that the Company maintain certain minimum
working capital, current ratio, cash flow, interest coverage and
tangible net worth requirements.

Estimated annual maturities of long-term debt during the four years
subsequent to 1994 are as follows: 1995--$473,000; 1996--$4,152,000;
1997--$185,000; 1998--$185,000.

<PAGE>

NOTE E - Operating Leases

The Company leases certain facilities and machinery and equipment under
noncancellable operating leases which expire at various dates through
1998 and thereafter. Certain of these leases contain renewal options.
All leases require the Company to pay property taxes, insurance and
normal maintenance.
ANNUAL REPORT PAGE 18
Future minimum annual rental payments at December 31, 1993, for all
noncancellable operating leases, are as follows:

Year (In thousands)

1994 $ 411
1995 302
1996 263
1997 172
1998 172
Thereafter 153

Total minimum rental payments $1,473

<PAGE>

NOTE F - Stock Plans

Under the Company's stock option plans, options may be granted to
officers and key employees in the form of incentive stock options or
nonqualified stock options.

Options are granted at the fair market value on the grant date and are
exercisable generally in cumulative annual installments over a maximum
ten-year period, commencing at least one year from the date of grant.
Upon the exercise of stock options, payment may be made using cash,
shares of the Company's common stock or any combination thereof.

Information regarding the Company's stock option plans is as follows:
Number of Price Per
Shares Share

Outstanding at January 1, 1992 100,650 $19.75 to $25.50

Granted 13,000 19.75
Exercised (23,400) 19.75 to 20.625
Expired or cancelled (30,500) 19.75 to 25.50

Outstanding at December 31, 1992 59,750 19.75 to 25.50

Granted 11,000 19.125
Exercised -- --
Expired or cancelled (26,100) 19.75 to 25.50
Outstanding at December 31, 1993 44,650 19.125 to 20.625

Exercisable at December 31, 1993 25,900 19.75 to 20.625

Available for future grants at
December 31, 1993 251,989

The Company has a discretionary Restricted Stock and Cash Bonus Plan
(Plan) which reserves 400,000 shares of the Company's common stock
for sale, at market price or below, or award to key employees.
Shares awarded or sold are subject to restrictions against transfer
and repurchase rights of the Company. In general, restrictions lapse
at the rate of 20% per year beginning one year from the award or
sale. In addition, the Plan provides for a cash bonus to the
participant equal to the fair market value of the shares on the dates
restrictions lapse, in the case of an award, or the excess of the
fair market value over the original purchase price if the shares were
purchased. The total bonus paid to any participant during the
restricted period is limited to twice the fair market value of the
shares on the date of award or sale.

Under the Plan during 1993, 1,000 shares were awarded leaving 379,400
shares available for award or sale at December 31, 1993. During
1992, 6,000 shares were awarded and 2,400 shares were forfeited due
to terminations. No shares were awarded during 1991. In addition to
the shares issued and the amortization of deferred compensation
included in the Consolidated Statements of Stockholders' Equity, the
Company accrued $68,000, $82,000 and $75,000 for additional
compensation payable under the provisions of the Plan in 1993, 1992
and 1991, respectively.

<PAGE>

NOTE F - Stock Plans (continued)

The Company has a Stock Retirement Plan for nonemployee Directors.
This retirement plan provides for a portion of the total compensation
payable to nonemployee Directors to be deferred and paid in Company
stock. Compensation of $8,000, $7,000 and $15,000 was recognized
under this plan in 1993, 1992 and 1991, respectively.

<PAGE>

NOTE G - Employee Retirement Plans

Defined benefit plans

The Company has a number of noncontributory defined benefit pension
plans (Plans) covering approximately 43% of its employees. Plans
covering salaried employees provide pension benefits that are based
on the employees' compensation prior to retirement. Plans covering
hourly employees generally provide benefits of stated amounts for
each year of service.

ANNUAL REPORT PAGE 19
Net pension income for the Plans in 1993, 1992 and 1991 includes the
following components:
(In thousands)
1993 1992 1991

Service cost--benefits earned
during the year $ 2,143 $ 2,375 $ 1,926
Interest cost on projected
benefit obligation 4,632 4,670 4,644
Actual return on plan assets (13,622) (13,667) (16,735)
Net amortization and deferral 861 1,715 5,250

Net pension income $(5,986) $(4,907) $(4,915)

The following table details the funded status of the Plans at
December 31, 1993, and December 31, 1992:
(In thousands)
1993 1992

Actuarial present value of benefit
obligations:
Vested benefits $ 59,722 $ 53,988
Nonvested benefits 2,610 2,634

Accumulated benefit obligation $ 62,332 $ 56,622

Plan assets at fair value $121,966 $112,568
Projected benefit obligation 67,282 61,264

Plan assets in excess of the projected
benefit obligation 54,684 51,304
Unrecognized prior year service cost 351 413
Unrecognized net gain (8,883) (9,356)
Unrecognized net asset (13,307) (15,502)

Prepaid pension expense $ 32,845 $ 26,859

Assumptions used in determining net pension income and the funded
status of U.S. defined benefit pension plans were as follows:

<PAGE>

NOTE G - Employee Retirement Plans (continued)

1993 1992 1991

Discount rates 7.25% 7.75% 7.75%
Rates of increase in compensation
levels (salaried plan only) 5%-7% 5%-7% 5%-7%
Expected long-term rate of return
on assets 10% 10% 10%

Effective with the December 31, 1993, measurement date, the
discount rate was revised to 7.25% from 7.75% to better reflect
current market conditions. As a result of the change in discount
rates, the December 31, 1993, projected benefit obligation
increased by $3,500,000. The change in discount rates had no
effect on 1993 pension income, but will reduce future annual
pension income by $130,000.

The majority of U.S. defined benefit pension plan assets are
invested in common stock, including $3,933,000 in CTS common
stock, U.S. government bonds and cash and equivalents. The
balance is invested in corporate bonds, a private equity fund,
non-U.S. bonds and convertible issues.

Because the domestic plans are fully funded, the Company made no
contributions to the U.S. Plans during 1993, 1992 or 1991.
Benefits paid by all Plans during 1993, 1992, and 1991 were
$4,289,000, $3,900,000 and $3,707,000, respectively.

Contributions of $174,000, $223,000 and $164,000 were made to the
non-U.S. Plans in 1993, 1992 and 1991, respectively.

Defined contribution plans

The Company sponsors a 401(k) Plan and several other defined
contribution plans which cover some of its non-U.S. employees and
its domestic hourly employees not covered by a defined benefit
pension plan. Contributions and costs are generally determined
as a percentage of the covered employees' annual salary. Amounts
expensed for the 401(k) Plan and the other plans totaled
$2,532,000 in 1993, $1,998,000 in 1992 and $1,915,000 in 1991.

Postretirement health and life insurance plans

In addition to providing pension benefits, the Company provides
certain health care and life insurance programs for retired
employees. Substantially all of the Company's domestic employees
become eligible for these benefits if they reach normal
retirement age while working for the Company. Effective January
1, 1993, the Company implemented, on the immediate recognition
basis, FASB Statement No. 106, "Employers' Accounting for

<PAGE>

NOTE G - Employee Retirement Plans (continued)

Postretirement Benefits Other Than Pensions" which resulted in a
noncash charge of $5,096,000, net of an income tax benefit of
$3,123,000, or $.99 per share.
ANNUAL REPORT PAGE 20
Summary information on the Company's plans as of December 31,
1993, is as follows:

(In thousands)

Accumulated postretirement benefit obligation:
Active employees $(1,479)
Retirees and dependents (5,560)

Accumulated postretirement benefit obligation (7,039)
Fair value of plan assets
Funded status (7,039)
Unrecognized net gain (187)

Postretirement benefit obligation $(7,226)

The accumulated postretirement benefit obligation was determined
using relevant actuarial assumptions and the terms of the
Company's medical, dental and life insurance plans, including the
effects of capped Company contribution rates and discontinuance
of Company payments toward retiree health and dental insurance
effective January 1, 1996. The effect of a 1.0% annual increase
in the assumed medical inflation rate of zero would be
insignificant. Measurement of the accumulated postretirement
benefit obligation was based on a 7.75% discount rate at January
1, 1993, and at 7.25% at December 31, 1993. The discount rate
was revised to better reflect current market conditions. The
change in discount rates did not significantly change the
accumulated postretirement benefit obligation, had no effect on
the 1993 postretirement expense and will not have a significant
impact on future annual postretirement expense.

The Company funds medical and dental costs as incurred and funds
life insurance benefits through term life insurance policies.
The Company plans to continue funding these benefits on a pay-as-
you-go basis. The components of net periodic postretirement
benefit expense for 1993 are as follows:

(In Thousands)

Service cost-benefits earned during period $ 43
Interest cost on accumulated benefit obligation 637

Net expense $680

<PAGE>

NOTE H - Income Taxes

Effective January 1, 1993, the Company adopted the provisions of
FASB Statement No. 109, "Accounting for Income Taxes." FASB
Statement No. 109 replaced FASB Statement No. 96, of the same
title, which the Company previously used to account for income
taxes. The effect of adopting FASB Statement No. 109 is to
recognize deferred tax benefits that were not recognized under
FASB Statement No. 96. The cumulative effect of the change in
the method of accounting for income taxes as of the beginning of
1993 increased earnings by $482,000 or $.10 per share. Prior
years' financial statements have not been restated to reflect the
provisions of FASB Statement No. 109. The information disclosed
for 1992 and 1991 is computed under the requirements of FASB
Statement No. 96.

The components of earnings before income taxes and cumulative
effect of changes in accounting principles comprise the
following:

(In thousands)
1993 1992 1991

Domestic $ 8,965 $ 5,151 $1,748
Non-U.S. 1,295 (1,330) 4,496

Total $10,260 $ 3,821 $6,244

The provision for income taxes charged to earnings before
cumulative effect of changes in accounting principles comprise
the following:

(In thousands)
1993 1992 1991

Current:
Federal $ 908 $ 292 $ 155
State 375 207 100
Non-U.S. 2,124 1,115 1,034

Total current 3,407 1,614 1,289

Deferred:
Federal 154 648 950
State 429
Non-U.S. (300) (342) (209)

Total deferred 283 306 741

Total provision for
income taxes $3,690 $1,920 $2,030

The gross U.S. deferred income tax expense in 1993 was
$1,338,000.

<PAGE>

ANNUAL REPORT PAGE 21
NOTE H - Income Taxes (continued)

Significant components of the Company's deferred tax liabilities
and assets at December 31, 1993, are:

(In thousands)

Depreciation $ 270
Pensions 11,176
Other 1,013

Gross deferred tax liabilities 12,459

Postemployment benefits 2,513
Inventory reserves 1,777
Loss carryforwards 8,119
Credit carryforwards 3,764
Nondeductible accruals 3,064
Other 802

Gross deferred tax assets 20,039

Net deferred tax assets 7,580
Deferred tax assets valuation
allowance (8,023)

Total $ (443)

During 1993, the valuation allowance was increased as a result of
an increase in unutilized net operating loss carryforwards in
some taxing jurisdictions and decreased by the utilization of net
operating losses in other jurisdictions. The net decrease in the
valuation allowance was $911,000.

A reconciliation of the Company's effective income tax to the
statutory federal income tax follows:

(In thousands)
1993 1992 1991

Taxes at the U.S. statutory rate $ 3,488 $ 1,299 $2,123
State income taxes, net of federal
income tax benefit 531 176 100
Non-U.S. income taxed at rates
different than the U.S. statutory rate 1,494 1,511 (50)
Utilization of net operating loss
carryforwards and benefit of
scheduled tax credits (1,842) (1,751) (525)
Alternative Minimum Tax 711
Other 19 (26) 382

Provision for income taxes $ 3,690 $ 1,920 $2,030

<PAGE>

NOTE H - Income Taxes (continued)

Undistributed earnings of certain non-U.S. subsidiaries amounting to
$34,300,000 at December 31, 1993, are intended to be permanently
invested and accordingly, no provision has been made for non-U.S.
withholding taxes on these earnings. In the event all undistributed
earnings were remitted, approximately $4,000,000 of withholding tax
would be imposed.

The Company has tax basis net operating loss carryforwards and
business credit carryforwards of approximately $25,200,000 and
$3,000,000, respectively, at December 31, 1993. A portion,
$15,400,000, of the net operating loss and all of the business credit
carryforwards expire between the years 2000 and 2006. The remainder
of the net operating loss carryforwards has an unlimited carryforward
period. In addition, the Company has alternative minimum tax credit
carryforwards of approximately $867,000, which have no expiration
date.

<PAGE>

NOTE I - Business Segment and Non-U.S. Operations

The Company's operations comprise one business segment, the
manufacturing of electronic components. Electronic components include
production and sale of resistor networks, variable resistors,
frequency control devices, electronic connectors, hybrid
microcircuits, automotive control devices, switches, loudspeakers and
industrial electronics.

Sales to a major automotive manufacturer were $40,100,000 in 1993,
$30,700,000 in 1992 and $29,900,000 in 1991. Sales to a major
computer manufacturer were $24,000,000 in 1993, $19,300,000 in 1992
and $23,500,000 in 1991.

The non-U.S. operations or facilities are located in Taiwan,
Singapore, Hong Kong, Thailand, United Kingdom, Canada and Mexico.
Net sales to unaffiliated customers from other non-U.S. operations in
the aggregate equaled 16%, 14% and 16% of the consolidated total for
each of the years 1993, 1992 and 1991, respectively. Net sales to
unaffiliated customers from the United Kingdom operation equaled 12%,
10% and 10% of the consolidated total for 1993, 1992 and 1991,
respectively.

Net assets of subsidiaries located in non-U.S. countries as of
December 31, 1993, and December 31, 1992, are summarized as follows:
(In thousands)
1993 1992

Net current assets $19,910 $21,643
Property, plant and equipment--net 23,899 24,696
Goodwill and other long-term assets 2,304 2,458
Long-term obligations (4,699) (6,418)
Deferred income taxes (174) (233)
Total net assets of non-U.S.
subsidiaries $41,240 $42,146

ANNUAL REPORT PAGE 22
Net sales by geographic area include both sales to unaffiliated
customers and transfers between geographic areas. Such transfers are
accounted for primarily on the basis of a uniform intercompany
pricing policy. Operating profit is total revenue less operating
expenses. In computing operating profit, none of the following items
have been added or deducted: general corporate expenses, interest
expense, other income and expenses and income taxes. Identifiable
assets by geographic area are those assets that are used in the
Company's operations in each such area. The Corporate Office assets
are principally property and equipment and other noncurrent assets.

Summarized financial information concerning the geographic areas of
operation for 1993, 1992 and 1991 is shown in the following table.
The caption "Eliminations" includes intercompany sales and other
transactions which are eliminated or adjusted in arriving at
consolidated data.

<PAGE>

NOTE I - Business Segment and Non-U.S. Operations (continued)

Geographic Area (In thousands)
1993 1992 1991

Net Sales
Domestic:
Sales to unaffiliated customers $170,566 $172,646 $170,564
Transfers to non-U.S. area 4,484 4,469 2,736

175,050 177,115 173,300
Other Non-U.S.:
Sales to unaffiliated customers 37,868 32,743 36,682
Transfers to domestic area 10,397 15,703 21,524

48,265 48,446 58,206
United Kingdom:
Sales to unaffiliated customers 28,545 22,002 22,290
Transfers to domestic area 149 388

28,694 22,390 22,290
Eliminations (15,030) (20,560) (24,260)

Total net sales $236,979 $227,391 $229,536

Operating Profit
Domestic $ 12,060 $ 8,237 $ 5,834
Other Non-U.S. 4,476 2,860 5,119
United Kingdom 910 (1,313) 475
Gain on sale of property
and other related provisions (852) (1,857)

17,446 10,636 13,285
Eliminations (19) (51) (21)

17,427 10,585 13,264
General corporate expenses 6,406 6,487 6,969

Operating profit 11,021 4,098 6,295
Other expenses--net (761) (277) (51)

Earnings before income taxes and
cumulative effect of changes in
accounting principles $ 10,260 $ 3,821 $ 6,244

Assets Apportioned by Area
Domestic $ 73,256 $ 78,747 $ 82,102
Other Non-U.S. 54,452 48,331 53,522
United Kingdom 18,398 17,847 21,673

146,106 144,925 157,297
Eliminations (5,047) (2,972) (6,714)

141,059 141,953 150,583
Corporate assets 44,005 28,820 25,778

Total assets $185,064 $170,773 $176,361

<PAGE>

NOTE I - Business Segment and Non-U.S. Operations (continued)

Geographic Area (In thousands)
1993 1992 1991

Capital Expenditures
Domestic $ 7,318 $ 4,062 $ 5,999
Other Non-U.S. 3,300 1,790 4,142
United Kingdom 1,078 2,979 5,826

Total $ 11,696 $ 8,831 $ 15,967

<PAGE>

NOTE J - Supplemental Statement of Earnings Information

The following costs and expenses were charged to operations:

(In thousands)

1993 1992 1991

Maintenance and repairs $ 3,778 $ 3,248 $ 3,779

Depreciation of property, plant
and equipment 11,211 10,977 12,445

Amortization of intangible assets 932 688 657

Research and development costs 5,708 6,092 5,656

Rent expense 1,241 1,172 1,153

Royalties, taxes (other than payroll taxes and income taxes) and
advertising costs were each less than one percent of the total sales for
each of the three years.

<PAGE>

ANNUAL REPORT PAGE 23
NOTE K - Contingencies

Certain processes in the manufacture of the Company's current and past
products create hazardous waste by-products as currently defined by
federal and state laws and regulations. The Company has been notified by
the U.S Environmental Protection Agency, state environmental agencies
and, in some cases, generator groups, that it is or may be a Potentially
Responsible Party (PRP) regarding hazardous waste remediation at several
non-CTS sites. The factual circumstances of each site are different; the
Company has determined that its role as a PRP with respect to these
sites, even in the aggregate, will not have a material adverse effect on
the Company's business or financial condition, based on the following:
1) the Company's status as a de minimis party; 2) the large number of
other PRPs identified; 3) the identification and participation of many
larger PRPs who are financially viable; 4) defenses concerning the nature
and limited quantities of materials sent by the Company to certain of the
sites; and/or 5) the Company's experience to-date in relation to the
determination of its allocable share. In addition to these non-CTS
sites, the Company has an ongoing practice of providing reserves for
probable remediation activities at certain of its manufacturing locations
and for claims and proceedings against the Company with respect to other
environmental matters. In the opinion of management, based upon
presently available information, either adequate provision for probable
costs has been made, or the ultimate costs resulting will not materially
affect the consolidated financial position or results of operations of
the Company.

Certain claims are pending against the Company with respect to matters
arising out of the ordinary conduct of its business. In the opinion of
management, based upon presently available information, either adequate
provision for anticipated costs has been made by insurance, accruals or
otherwise, or the ultimate anticipated costs resulting will not
materially affect the Company's consolidated financial position or
results of operations.

NOTE L - Related Party Transactions

Dynamics Corporation of America (DCA) owned 1,920,900 shares (37.3%) of
the Company's outstanding common stock at December 31, 1993. In 1987,
CTS shareholders voted not to grant DCA voting rights on 1,020,000 of
these shares. In addition to stock ownership, as of December 31, 1993,
two representatives of DCA serve on the Company's Board of Directors.
The normal business transactions between the Company and DCA are
insignificant.

<PAGE>

ANNUAL REPORT PAGE 24

REPORT OF INDEPENDENT ACCOUNTANTS

PRICE WATERHOUSE

To the Stockholders and
Board of Directors of CTS Corporation

In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of earnings, stockholders' equity and of
cash flows present fairly, in all material respects, the financial
position of CTS Corporation and its subsidiaries at December 31, 1993,
and 1992, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1993, in
conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which 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, assessing the
accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for the opinion expressed
above.

As discussed in the Notes to Consolidated Financial Statements, effective
January 1, 1993, the Company changed its method of accounting for income
taxes by adopting Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes." Also effective January 1, 1993, the
Company changed its method of accounting for postretirement healthcare
and life insurance benefits by adopting, on an immediate recognition
basis, Statement of Financial Accounting Standards No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions."

Price Waterhouse

South Bend, Indiana
February 7, 1994

<PAGE>

ANNUAL REPORT PAGE 25

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (1991 - 1993)

Liquidity and Capital Resources

The table below highlights significant comparisons and ratios related
to liquidity and capital resources of CTS Corporation (CTS or Company)
for each of the last three years.

(In thousands)
December 31 December 31 December 31
1993 1992 1991
Net cash provided by (used in):
Operating activities $ 17,565 $ 12,838 $ 16,075
Investing activities (10,698) (7,301) (10,256)
Financing (1,342) (5,121) (941)

Working capital $ 47,378 $ 50,114 $ 51,924
Current ratio 1.95 2.34 2.31
Interest-bearing debt $ 17,992 $ 16,359 $ 18,738
Cash and equivalents 23,534 18,455 18,131
Net tangible worth 113,402 112,693 115,026
Ratio of interest-bearing debt
to net tangible worth .16 .15 .16

During 1993, positive cash flow from operating activities increased by
$4.7 million from 1992, primarily due to the $9.6 million increase in
sales, which resulted in a $4.7 million increase in earnings before
accounting changes.

Cash flow in 1992 from operating activities was $3.2 million below
that generated in 1991, primarily due to the 1992 earnings decline of
$2.3 million, payment of various restructuring costs and tooling
expenditures. Our efforts to improve collection of receivables,
reduce inventories and better manage payables offset payments for
income taxes and other liabilities, but not the reduced earnings and
payments for tooling.

A significant noncash component of operating earnings during the 1991
to 1993 period was pension income of $6.0 million in 1993, $4.9
million in 1992 and $4.9 million in 1991. During 1993, the Company
paid $4.3 million in benefits and no cash contributions were required.
As a result of the Company's overfunded pension position, no cash
contributions are anticipated to be required in the immediate future
to meet the Company's pension benefit obligations.

<PAGE>

The major investment activity during the last three years was capital
expenditures, which totaled $11.7 million in 1993, $8.8 million in
1992 and $16.0 million in 1991. The major capital expenditures in
1993 were for new products and product line enhancements, as well as
selected capacity increases. The decrease in 1992 from 1991 reflects
the significant one-time investments made in 1991, which included $8.9
million for facility expansions in Scotland and Thailand. The Company
expects to increase its capital expenditures in 1994 over 1993 levels.
These capital expenditures primarily will be for new products and cost
reduction programs.

The net cash used for financing activities in 1993 primarily reflects
loan renegotiations which reduced certain non-U.S. long-term debt and
increased short-term borrowings, and additional short-term borrowings
at certain non-U.S. locations. The primary financing use of cash in
1992 was the elective paydown of $1.7 million in debt, compared to
increases in debt of $2.9 million in 1991.

Dividends paid in 1993 were $2.1 million, compared to $3.9 million in
1992 and $3.8 million in 1991. In response to the 1992 decrease in
cash provided by operations, the Company reduced its annual quarterly
dividend from $.1875 to $.10 per share effective with its February
1993 payment.

At the end of 1993, 1992 and 1991, most of the Company's cash was held
in U.S.-denominated cash equivalents for the credit of the various
non-U.S. subsidiaries. The cash, other than approximately $5 million,
is available to the parent Company.

At the end of 1993, CTS had $49.0 million of borrowing capacity, of
which $45.0 million was available under two long-term revolving credit
agreements, both of which were renegotiated in 1993. The U.S.
revolving agreement of $45.0 million, which expires in April 1997, is
the Company's primary credit vehicle and, together with cash from
operations, should adequately fund the Company's anticipated cash
needs.

<PAGE>

ANNUAL REPORT PAGE 26
Results of Operations

The table below highlights significant information with regard to the
Company's results of twelve months of operations during the past three
fiscal years.
(In thousands)
December 31 December 31 December 31
1993 1992 1991

Net sales $236,979 $227,391 $229,536
Gross earnings 47,344 41,101 40,418
Gross earnings as a
percent of sales 20.0% 18.1% 17.6%
Selling, general and
administrative expense $ 36,323 $ 37,855 $ 35,980
Selling, general and
administrative expense
as a percent of sales 15.3% 16.6% 15.7%
Gain on sale of property and
other related provisions 852 1,857
Operating earnings $ 11,021 $ 4,098 $ 6,295
Operating earnings as a
percent of sales 4.7% 1.8% 2.7%
Earnings before income taxes
and cumulative effect of
changes in accounting
principles $ 10,260 $ 3,821 $ 6,244
Income taxes 3,690 1,920 2,030
Income tax rate 36.0% 50.2% 32.5%

From 1992 to 1993, total sales increased by 4.2%, primarily due to
increased sales in our automotive product lines, which more than
offset sales declines in our military connector and frequency controls
products.

From 1991 to 1992 total sales decreased less than 1% as increased
sales of automotive, electrocomponents and microelectronics products
were offset by continued declining demand for resistor and connector
products from our mainframe computer and military customers.

During the three-year period 1991-1993, overall sales have increased
to the automotive market from 22% to 32%, decreased in the defense
and aerospace market from 20% to 12% and remained fairly constant in
our other market areas.

The Company's 15 largest customers represented 62% of net sales in
1993, 58% in 1992 and 59% in 1991. One customer, a major manufacturer
of automobiles, comprised 17% of net sales in 1993, compared with 14%
for 1992 and 13% for 1991. Another customer, a major manufacturer of

data processing equipment, comprised 10% of net sales in 1993,
compared with 8% in 1992 and 10% in 1991.

<PAGE>

Because most of CTS' revenues are derived from the sale of custom
products, the relative contribution to revenues of changes in unit
volume cannot be meaningfully determined. The Company's products are
usually priced with reference to expected or required profit margins,
customer expectations and market competition. Pricing for most of the
Company's electronic component products frequently decreases over time
and also fluctuates in accordance with total industry utilization of
manufacturing capacity.

During 1993, improvement was realized in gross earnings, primarily due
to higher sales volume, production efficiencies and higher absorption
of manufacturing expenses. Gross earnings were relatively similar in
1992 and 1991.

Selling, general and administrative expenses, in dollars and as a
percent of sales, decreased during 1993, primarily as a result of the
cost containment and expense reduction programs in place during the
year. During 1992, selling, general and administrative expenses
increased slightly over 1991. A portion of the higher 1992 expenses
in this area was due to problems caused by defective parts from a
supplier. Also, during 1992, the Company continued to incur start-up
costs in conjunction with its European expansion efforts.

During 1992, the Company continued to dispose of nonproductive assets,
including its closed Paso Robles facility and assets of its tooling
business. These major asset sales generated cash of $2.7 million and
a net pretax gain of $1.5 million.

During 1991, the Company completed the sale of its Hong Kong
manufacturing facility for $5.7 million, realizing a pretax gain of
$3.6 million. After a restructuring provision of $0.6 million, a net
pretax gain of $3.0 million was realized from the Hong Kong facility
sale.

The primary reason for the operating earnings increase in 1993 from
1992 was the increased automotive product sales. The overall decrease
in 1992 operating earnings from 1991 is primarily a result of the 1991
gain on the sale of the Hong Kong property and 1992 losses in our
military connector and frequency control products businesses. A
portion of the frequency control business loss was caused by a
supplier-related defective component, which resulted in direct
expenses of approximately $2.0 million and negatively affected our
1992 and 1993 sales. A settlement was negotiated with this vendor in
1993 and the Company recognized a $2.25 million recovery.

ANNUAL REPORT PAGE 27
The lower effective tax rate for 1993, as compared to 1992, is a
result of improved earnings which resulted in an increase in net
operating loss carryforward utilization. Additionally, several non-
U.S. locations, where no tax benefit was available, incurred losses in
1992 which resulted in the higher 1992 effective tax rate.

<PAGE>

The effects of the new accounting pronouncements FASB 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions," and FASB
109, "Accounting for Income Taxes," have been discussed in financial
statement footnotes, Note G and Note H, respectively. Relative to
Financial Accounting Standards Board Statement No. 112, "Employers'
Accounting for Postemployment Benefits," which is effective for fiscal
years beginning after December 15, 1993, the Company believes that the
impact, if any, will be insignificant.

In terms of environmental issues, the Company has been notified by the
U.S. Environmental Protection Agency, as well as state agencies and
generator groups, that it is or may be a Potentially Responsible Party
regarding hazardous waste remediation at non-CTS sites. Additionally,
the Company provides reserves for probable remediation activities at
certain of its manufacturing locations. These issues are discussed in
Note K - Contingencies.

<PAGE>

ANNUAL REPORT PAGE 11

<TABLE>
FIVE - YEAR SUMMARY
(In thousands of dollars except per share data)

<CAPTION> % of % of %of %of %of
1993 Sales 1992 Sales 1991 Sales 1990 Sales 1989 Sales
SUMMARY OF OPERATIONS
<S> <C> <C> <C> <C> <C>

Net sales $236,979 100.0 $227,391 100.0 $229,536 100.0 $251,044 100.0 $261,961 100.0
Cost of goods sold 189,635 80.0 186,290 81.9 189,118 82.4 202,115 80.5 209,973 80.2

Gross earnings 47,344 20.0 41,101 18.1 40,418 17.6 48,929 19.5 51,988 19.8

Selling, general and
administrative expenses 36,323 15.3 37,855 16.6 35,980 15.7 38,051 15.2 35,945 13.7

(Gain) on sale of property
and other related provisions (852) (0.3) (1,857) (0.8) 796 0.3

Operating earnings 11,021 4.7 4,098 1.8 6,295 2.7 10,082 4.0 16,043 6.1

Other (expenses) (761) (0.4) (277) (0.1) (51) 0.0 (549) (0.2) 1,338 0.5
income--net
Earnings before income taxes
and cumulative effect
of changes in 10,260 4.3 3,821 1.7 6,244 2.7 9,533 3.8 17,381 6.6
accounting principles

Income taxes 3,690 1.6 1,920 0.9 2,030 0.9 2,193 0.9 3,128 1.2
Net earnings--before
accounting changes 6,570 2.7 1,901 0.8 4,214 1.8 7,340 2.9 14,253 5.4

Cumulative effect on prior
years of accounting changes (a) (4,614) (1.9)

Net earnings 1,956 0.8 1,901 0.8 4,214 1.8 7,340 2.9 14,253 5.4

Retained
earnings--beginning of year 100,973 102,482 102,110 98,629 87,786

Dividends declared (2,061) (3,410) (3,842) (3,859) (3,410)

Retained earnings--end of
year $100,868 $100,973 $102,482 $102,110 $98,629

Average shares outstanding 5,152,556 5,141,936 5,122,433 5,168,688 5,456,192

Net earnings per share:
Before accounting
changes $1.27 $0.37 $0.82 $1.42 $2.61

Cumulative effect
on prior years of
accounting changes (0.89)
Net earnings $0.38 $0.37 $0.82 $1.42 $2.61

Cash dividends per share $0.40 $0.6625 $0.750 $0.750 $0.625

Capital expenditures 11,696 8,831 15,967 11,821 10,843
Depreciation and
amortization 12,143 11,665 13,102 13,052 13,396

FINANCIAL POSITION AT YEAR-END

Current assets $97,266 $87,376 $91,493 $91,152 $94,831

Current liabilities 49,888 37,262 39,569 39,102 37,914
Current ratio 1.9 to 1 2.3 to 1 2.3to 1 2.3to1 2.5to1

Working capital $47,378 $50,114 $51,924 $52,050 $56,917

Inventories 36,059 37,222 40,855 45,389 46,508
Property, plant and
equipment--net 47,842 48,529 53,828 53,207 54,600

Total assets 185,064 170,773 176,361 172,525 176,584

Short-term notes payable 12,822 5,827 8,160 7,750 1,786
Long-term obligations 4,995 10,826 11,297 8,858 12,004

Stockholders' equity 119,203 119,372 122,485 122,298 124,878

Common shares outstanding 5,153,424 5,150,824 5,123,824 5,122,124 5,464,278

Equity (book value) per
share $23.13 $23.18 $23.91 $23.88 $22.85

OTHER DATA

Stock price range (dollars per
share to the nearest 1/8) $22.38-$17.00 $24.50-$17.13 $24.00-$16.38 $23.63-$16.00 $25.50-$22.25

Average number of employees 3,975 4,335 4,847 5,540 5,931

Number of stockholders at
year-end 1,198 1,278 1,343 1,439 1,524

<FN>
(a)The Company adopted FASB106,"Employers' Accounting for Postretirement Benefits
Other Than Pensions" and FASB 109, "Accounting for Income Taxes," as of January 1, 1993.
</TABLE>

<PAGE>

EXHIBIT 22

CTS CORPORATION AND SUBSIDIARIES

CTS Corporation (Registrant), an Indiana corporation

Subsidiaries

CTS Corporation, a Delaware corporation

CTS Singapore, Pte. Ltd., a Republic of Singapore
corporation

CTS of Panama, Inc., a Republic of Panama corporation

CTS Components Taiwan, Ltd.,1 a Taiwan, Republic of
China corporation

CTS de Mexico S.A.,1 a Republic of Mexico corporation

CTS Export Corporation, a Virgin Islands corporation

CTS of Canada, Ltd., a Province of Ontario (Canada) corporation

CTS Manufacturing (Thailand) Ltd.,1 a Thailand corporation

CTS Electronics Hong Kong Ltd.,1 a Republic of Hong Kong
corporation

CTS Corporation U.K. Ltd., a United Kingdom corporation

CTS Printex, Inc., a California corporation

CTS Micro Peripherals, Inc., a California corporation

Micro Peripherals Singapore (Private) Limited, a Republic of
Singapore corporation

Corporations whose names are indented are subsidiaries of the
preceding non-indented corporations. Except as indicated, each
of the above subsidiaries is 100% owned by its parent company.
Operations of all subsidiaries and divisions are consolidated in
the financial statements.

1 Less than 1% of the outstanding shares of stock is
owned of record by nominee shareholders pursuant to
national laws regarding resident or nominee ownership.

<PAGE>

EXHIBIT 23

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Form S-8 (No. 2-84230
and No. 33-27749) of CTS Corporation of our report dated February 7, 1994
appearing on page 24 of the 1993 CTS Corporation Annual Report to Stockholders
which is incorporated in this Annual Report on Form 10-K. We also consent to
the incorporation by reference of our report on the Financial Statement
Schedules, which appears on page S-2 of this Form 10-K.

PRICE WATERHOUSE

South Bend, Indiana
March 17, 1994