The Plan is a defined contribution plan which covers any person regularly employed by Sauer-Sundstrand Company (the Company) at its La Salle, Illinois manufacturing facility whose employment is within the unit covered by the collective bargaining agreement between the Company and Local Union No. 285 of International Union, United Automobile, Aerospace and Agricultural Implement Workers of America. Persons employed on a part-time, temporary, or irregular basis for less than 1,000 hours a year are excluded from coverage.

The Plan is administered by the Employee Benefit Committee of the Company (the Plan Administrator).

Institutional Trust Company has been designated as Trustee of the Plan. Investors Fiduciary Trust Company was previously designated Trustee through August 1998.

The Plan is funded by employee and employer contributions. Participating employees may contribute a percentage of their wages ranging from 1% to 21%. Annual contributions, including life insurance purchased, may not exceed $10,000 in 1999 and 1998, as indexed by the Internal Revenue Service. The Plan also places certain restrictions on contributions from those employees defined as highly compensated.

Employer contributions consist of a non-elective 2% contribution and an additional maximum contribution of 2% at a rate of .5% for each one percent of employee contribution.

Participants have the option to invest contributions in the following funds: INVESCO Retirement Stable Value Fund, IIF Select Income Fund, IVT Total Return Fund, ITC 500 Index Fund, AIM Blue Chip Growth Fund, IDF Small Company Growth, ITC ADR Fund, and Fidelity Equity Income Fund. Participant accounts are credited for contributions and allocations of Plan earnings. Plan earnings are allocated to participants based upon their relative percentages of each fund's investment account balance. In addition, participants may elect to invest in a life insurance fund which purchases coverage for them and their families. Assets invested in participant life insurance coverage are excluded from Plan assets.

Participants may also elect to borrow up to amounts defined in the Plan. Participant loans amounting to $190,492 and $164,932 at December 31, 1999 and 1998, respectively, are included in the net value of the Plan's interest in the Trust.

Participants are immediately vested in their voluntary contributions and actual earnings thereon.

The interests of participants in the employer contributions and actual earnings thereon vest at the rate of 20% per year effective the first day of each year of service.

Administrative expenses of the Plan are paid by the Company, except for mutual fund investment fees which are paid by the Plan.

The accompanying financial statements of the Plan have been prepared on an accrual basis and present the net assets available for benefits and changes in those assets. The Plan's assets and liabilities consist of the assets and liabilities of the Sauer-Sundstrand La Salle Factory Employee Savings Plan Trust (the Trust).

The Plan Administrator has made certain estimates and assumptions relating to the reporting of assets, liabilities, and changes therein to prepare these financial statements in conformity with generally accepted accounting principles. Actual results could differ from these estimates.

In September 1999, the American Institute of Certified Public Accountants issued Statement of Position 99-3, Accounting for and Reporting of Certain Defined Contribution Plan Investments and Other Disclosure Matters (SOP 99-3). SOP 99-3 simplifies the disclosure for certain investments and is effective for plan years ending after December 15, 1999. The Plan adopted SOP 99-3 during the Plan year ended December 31, 1999. Accordingly information previously required to be disclosed about participant-directed fund investment programs is not presented in the Plan's 1999 financial statements. The Plan's 1998 financial statements have been reclassified to conform with the current year's presentation.

The Internal Revenue Service has issued a determination letter that the Plan is qualified, and the Trust established by the Plan is tax-exempt, under Sections 401(a) and 501(a) of the Internal Revenue Code. Continued qualification of the Plan will depend on the operation of the Plan in compliance with the Internal Revenue Code.

Investments are valued at quoted market prices, if available. Investments not having an established market are valued at fair value, as determined by the Trustees.

While the Company has not expressed any intent to terminate the Plan, it is free to do so at any time. Upon termination of the Plan, each participant's account shall be fully vested and nonforfeitable.