1. Parker is the world leader in motion and control technologies,
providing systematic, precision-engineered solutions for a variety
of commercial, industrial and aerospace markets.
Parker is strategically diversified, value-driven and well positioned
for global growth as the industry consolidator and supplier of choice.

2. The Year In Review
For the years ended June 30, 1998 1997
1999
Operating Data
Net sales $ 4,633,023 $ 4,091,081
$ 4,958,800
Income from operations 549,897 462,913
538,749
Net income 319,551 274,039
310,501
Per Share Data
Diluted earnings per share $ 2.85 $ 2.44
$ 2.83
Dividends .60 .51
.64
Book value 15.32 13.87
17.03
Ratios
Return on sales 6.9% 6.7%
6.3%
Return on average assets 9.8 9.3
8.6
Return on average equity 19.8 18.7
17.6
Debt to debt-equity 31.6 24.5
29.8
Other
Number of shareholders 44,250 43,014
39,380
Number of employees 39,873 34,927
38,928
Income from operations and Net income for 1998 include a non-cash, non-recurring pretax charge of $15.8 million or $12.0 million after
tax ($.11 per share) for in-process R&D purchased as part of two acquisitions. The 1998 results also include a charge of $3.7 million
($.03 per share) for the early retirement of debt.
Net Income from Net Cash Flows From
Sales Operations Income Operating Activities
Millions of Dollars Millions of Dollars Millions of Dollars Millions of Dollars
5000 600 350 500
400
480 280
4000
360 210 300
3000
240 140 200
2000
100
120 70
1000
95 96 97 98 99 95 96 97 98 99 95 96 97 98 99 95 96 97 98 99
Shareholders’ Letter: Your company in motion and control...............................................................3
Movement makes PROGRESS a reality...................................................................................................................6
Improving the world for a higher QUALITY of life .......................................................................................8
Controlling motion for ENTERPRISE everywhere........................................................................................10
Strategically diversified for balanced growth ...............................................................................................12
Driving value for customers and investors ......................................................................................................14
Financial Review .....................................................................................................................................................................17

3. To Our Shareholders
We appreciate your interest in Parker Hannifin, especially
since today’s marketplace offers you more choices than ever
before about where to invest. What you own in Parker is
a piece of virtually everything that moves. Our markets are
highly diversified, and our growth opportunities are expansive .
Wherever there is development – world over, wherever the
standard and quality of living are being improved – Parker is there.
Pictured above: Chairman Patrick Parker, second to the right; with members of the Office of the President: to the left, Vice President
Lawrence Zeno, second to the left, Executive Vice President Dennis Sullivan, and to the right, President and Chief Executive Officer Duane Collins.

4. In Motion…Leading the Industry Balanced Growth in Diverse Markets
In the past five years, we built the business model for
The consolidation movement in industrial
Parker’s future growth. We now have the most compre-
markets is favorable for Parker. We lead our
hensive product offering in the motion and control
industry, and have established the most
industry. Our operating groups have ever-broadening
complete combination of motion and control
markets in new products and applications, and jointly,
technologies for thousands of applications.
they garner incremental growth from technology
We have accompanied our customers around the
transfer and innovative systems. We are stronger than
world, delivering on our promise of premier customer
ever in our traditional markets, and we are driving
service. Now, as more customers demand one-stop
new growth in non-traditional, high-tech markets.
shopping and value-added capabilities, we have even
We have the right combination of businesses,
greater opportunities to enhance their performance
widely diversified in both product categories and
with wholly integrated systems.
geographic markets. Our operating units have
their own cycles, and all are balanced with a mix
In Control…Growing Profitably
of original-equipment and aftermarket revenues.
Parker has the financial resources and discipline to grow
We have a measured stake in mature and emerging
profitably for the long term, through the ups and downs
economies, and among the many industries we serve.
that influence the markets we serve. For example,
In our Aerospace segment, sales are divided among
in the first half of fiscal 1999, there was a prevalent
Built for Profitable Growth
Parker has built a business model to grow incrementally through technology transfer and innovative system combinations
and in the long term via strategic acquisitions, global expansion and new applications.
commercial and military contracts, with additional
slowdown among industrials. To ensure we’d be
dispersion in general and private aviation markets.
stronger on the upside of the cycle, we cut inventories
Among our largest industrial customers, none today
by nearly $100 million in the second half of fiscal 1999,
approaches four percent of sales. In these industrial
and began to see margins improve by end of the year.
markets, customer-direct transactions account for 50
For the full year, we posted record sales, up seven
percent of North American sales, and nearly 70 percent
percent despite the year’s softer industrial demand,
in the rest of the world. Yet we also have the largest
with strong contributions from our aerospace business
distribution force in the industry – a competitively
and industrial acquisitions. Earnings in 1999 were
enviable asset that is not reflected on the balance sheet.
relatively even with the prior year, off by two cents per
Parker is committed to offer products on the
diluted share, and the fourth quarter showed sequential
customers’ terms. We launched technical certification
improvement. We again exceeded our return-on-sales
programs for distributors to develop field-engineering
(ROS) target, achieving 6.3 percent for the year, and in
services to create system solutions for our customers,
the fourth quarter we reached 7.2 percent, our highest
and in turn enhance the performance of their operations.
ROS level since September 1997.
At parker.com, we are developing the industry’s most
We also generated a record $459 million in cash
from operations in 1999, bolstering our strong balance advanced e-commerce capabilities to provide online
sheet for the right acquisition opportunities. Our engineering, trouble-shooting and fulfillment.
Having recently completed international imple-
reputation for growing the businesses we buy
mentation of our enterprise information system,
makes Parker the clear choice for companies
we are now able to manage our worldwide business
looking to gain the strengths of a larger partner.
4

5. As we consolidate operations and reduce costs in these
more efficiently, with real-time, global reporting on
areas, the immediate effect will curtail first-quarter
customer demand, production, inventory and capital.
earnings, but position us for both volume and earnings
This enables us to fully realize our ability to deliver
growth in the full year.
multi-component solutions on a single purchase order;
This year, we promoted three executives to our
to concurrently engineer products around the globe;
corporate management team: Claus Beneker leads
and efficiently handle multiple currencies. The system
our engineering efforts as Chief Technical Officer;
also ensures year-2000 compliance.
Lynn Cortright continues to grow our Climate &
Industrial Controls business as Group President;
Positioned for Global Growth
and Tom Piraino oversees legal affairs as General
We are establishing a second wholly owned foreign
Counsel and Secretary.
enterprise in China, and expanding our low-cost
Throughout the year, you can expect to hear
facilities in the Czech Republic and Poland. Our three
more about our growth strategies. We are stepping
new Korean businesses are performing ahead of
up efforts to establish the respected Parker name
expectations, and we are expanding in India with a
as the foremost brand in motion and control, with
trading subsidiary and distribution facility.
an aim to win more business on the product
We completed four acquisitions in 1999, totaling
breadth and system capabilities that are our most
roughly $115 million in annualized sales: Fluid
powerful competitive advantages.
Power Systems provides solutions to global mobile
Climate & New Applications
Instrumentation
Industrial Controls
Aerospace
Automation
INCREMENTAL GROWTH LONG-TERM GROWTH
New Products
Tech Transfer
Hydraulics
Filtration Strategic Global
Systems
Acquisitions Expansion
Fluid
Seals
Connectors
equipment manufacturers. Veriflo Corporation This report is an example of that effort,
strengthens our position in the medical, analytical, to convey three things about Parker we want
petrochemical and semiconductor industries Cougar all investors to know: We are dynamic.
Valves and Fittings broadens our product offerings in We are diversified. And we are committed
the Australian-Asian market. Jinyoung Electric to creating value in everything we do.
Machinery of Korea manufactures automation compo- To those of you who already own our stock, we
nents serving growing demand in Asia and Europe. thank you for entrusting your capital to us. We will
We also completed a 33.4-percent equity investment continue to use these proceeds to make value-minded
via a strategic alliance with Tokyo-based Kuroda investments in Parker’s growth. We thank every one of
Precision Industries. Our stake in the $120-million the 400,000 customers around the globe who honor us
company establishes a strong base in the important with their business. And most of all, we thank all of
Japanese pneumatics market, with additional opportu- our Parker employees, who have doubled our sales over
nities to market Kuroda products outside Japan at a the past five years, and who are working to achieve
time of growing global demand for factory automation. the ambitious vision we have for the company: to be
We remain focused on our primary objectives: everywhere in the world, on everything that moves.
Premier customer service; Financial
performance; and Profitable growth.
In fiscal 2000, we are taking further steps to Patrick S. Parker, Duane E. Collins,
align our business as we anticipate weak international Chairman of the Board President and Chief Executive Officer
industrial markets and slowing in commercial aircraft. September 13, 1999
5

6. Progress
6

7. Our sealing technology
enables cell phones to
operate clearly, personal
computers to perform
without overheating
and ensures hydraulic
construction equipment
remains leak-free and
environmentally friendly.
Our instrumentation
products are critical
to the manufacture of
integrated circuits used
in phones, computers,
automobiles and
construction equipment.
Our hydraulics,
automation and fluid
connector systems
provide the muscle
to move heavy
equipment and the
finesse to precisely
control the stadium’s
retractable roof.
Parker Makes It Possible
Our climate control
systems ensure a
comfortable working
environment inside the
truck and construction
equipment cabs.
Our filtration systems
remove contaminants
ensuring equipment
continues to run
smoothly and
efficiently, while
our in-cab filtration
contributes to a
cleaner, healthier
work environment.
And when the stadium
is complete, our
refrigeration system
and 33 miles of our
beverage tubing will
deliver ice-cold soda
to 70,000 thirsty fans.

8. Quality
8

9. Our engineering
expertise helped Jeep
create its Quadra-drive
system for a safer,
more reliable vehicle.
Our refrigeration
and sealing systems
keep freezer cases,
ice machines and
refrigerated trucks
cold for fresher, safer,
longer-lasting food.
Our fluid connectors,
hydraulic and sealing
technologies are used in
heavy-duty truck braking,
fuel, power steering and
airbag systems helping
to transport goods
and services safely.
Our hydraulic pumps
are used in synthetic
fiber production making
durable fabrics for
clothing and upholstery.
Parker Makes It Possible
Our filters in engine
vent systems protect
the environment.
Our fluid connector,
hydraulic, automation
and filtration components
in machine tools
manufacture thousands
of products including
trucks, automobiles
and shopping carts.
Our automation
components package
food products and aid
in material handling
to get products where
they need to be.
And, our filtration
and clarification
systems ensure many
foods and beverages,
including potato chips,
taste better.

10. Enterprise
10

11. On site at the world’s
busiest and most
efficient container port
in Hong Kong, our filters,
pneumatic, hydraulic,
fluid connectors and
sealing technologies lift
and precisely position
cargo for shipment
around the world.
Our hydraulic, filtration,
fluid connectors and
sealing technologies
power winches and
propel diesel engines
in a wide variety of
marine applications.
Our instrumentation
components, filtration
and gas turbine products
are used in power
generation applications
providing electricity to
millions of people.
Parker Makes It Possible
Our filtration systems
ensure clean fluids
on land and at sea
throughout the world.
At the new Hong Kong
airport nearby, our
aerospace components
are on virtually every
aircraft flying today –
and we’re on all the right
programs for the future.
And, our strategy to
follow the customer
globally is paying off.
Parker’s Asia Pacific
Group is headquartered
in Hong Kong and we’re
establishing our second
wholly owned foreign
enterprise in China.
Parker is well positioned
to serve thousands
of multi-national
customers everyday.

12. Parker…More Diversified
Entertainment
From movies to motorsports, when you’re being
entertained… Parker plays a major role.
Parker products make cameo appearances in many
hit movies, including the epic film Titanic, which
used Parker hydraulics to sink the set of the movie
repeatedly – imitating the original disaster. In the
movie Batman & Robin, Parker provided the lift and
rotating functions for the Batlift.
Additionally, our fluid connector systems are
improving the performance of race cars at tracks
everywhere, and our components create the thrilling
motion for state-of-the-art ride simulators, including
those used to train pilots.
And theme restaurants like the Rainforest Cafe,
with locations around the world, and Mars 2112,
located in New York City’s Time Square district,
At the Bellagio resort in Las Vegas, Parker’s computerized
offer guests a unique dining experience with help
controls move more than 1,000 dancing fountains
from Parker motion and control systems.
performing water ballet synchronized to classical music,
Wherever there is excitement… and our brass fittings are part of a sophisticated air purging
Parker makes it possible. system that keeps the computerized electronics dry.
Growing Dynamic
Telecommunication
Most of the world’s population have no access to basic
telephone service. In fact, less than one-fifth of
the earth’s surface is wired for telephones and most
developing nations have no plans to build the
infrastructure to support wireline technologies.
But the world is on the move and so is Parker.
Between 1980 and 1999, more than 150 countries
introduced cellular communication services. Moreover,
worldwide cellular subscriber growth will reach one
billion by 2003 – a 250% increase from the 1999 level.
This is good news for Parker since one in
every five wireless handsets produced around the
world today includes Parker products. As wireless
communication becomes more and more widespread,
Parker products will connect people more easily by
eliminating interference problems.
Satellites provide wireless, real-time communication
Beyond portable telephones and satellite dishes,
for people everywhere, and Parker electromechanical
Parker products are in many other electronic devices
technology precisely rotates dishes for maximum
that you’ve already purchased or will want soon.
transmission efficiency.
Wherever there is communication…
Parker makes it possible.
12

13. Exploration
Space programs around the world use Parker products
to seal shuttle windows, hatches, and igniters; connect
astronaut oxygen tubes; and build efficient fuel systems.
In fact, the Hubble Space Telescope relies on our
products to keep electronics onboard at the proper
temperatures as it orbits Earth.
Parker also explores frontiers closer to home.
Medical advances are being made everyday – and Parker
is there. Our valves deflate cuffs on blood pressure
machines, control ventilator oxygen levels and move
fluid to and from dialysis patients. And, our climate
controls cool insulin for pharmaceutical companies.
For Parker, exploration extends beyond medical
and aerospace markets. Our products probe the ocean
floor on research and recovery robots. And, we go
even deeper. Parker hose and tubing plunge through
The International Space Station is humankind’s highest
the ocean floor, bringing natural resources such as
construction project, and Parker provides vital onboard
oil to the surface.
technologies to sustain a controlled environment for the
Wherever there is discovery… astronauts and their research.
Parker makes it possible.
Exciting Precise
Animation
Attractions everywhere rely on Parker technology to
make your experience more realistic and memorable.
Moving and breathing dinosaurs at Universal Studios
Florida, Sea World and Disney World, are all brought
to life by Parker motion and control systems.
Additionally, our products go behind-the-scenes in
movies like JAWS, where we control the motion of the
killer Great White, and in the motion picture Godzilla,
where the giant animatronic reptile’s crushing jaws
and swishing tail perform with help from Parker.
We not only put creatures in motion, but we also
move you on rides and attractions at theme parks
around the world. Parker systems lift, shake and drop
thrill rides including Back to the Future at Universal
Studios and the “Big Shot” acceleration ride atop the
Stratosphere in Las Vegas.
Parker breathes life into legendary characters and
Wherever there is adventure…
colossal creatures like the T-Rex shown here. At theme
Parker makes it possible.
parks everywhere, our high-tech “animatronics” create
effects realistic enough for even the most close-up
encounters (if you dare).
13

14. Driving Value for Our Customers and Investors
Premier Customer Service On-site technical support — Parker
provides in-depth, on-the-spot engineering know-how
Premier customer service nets Parker a
to customers all over the world. At Airbus facilities
customer satisfaction rate consistently above
Across a host of industries and around in Filton, England, and Toulouse, France, Parker’s
99 percent.
the world, manufacturers rely on us for quality products technical teams are on the job supporting the
and value-added services in motion and control: company’s design-and-build programs for two major
Airbus properties: the A-340-500/600 and A3XX
Automated inventory management —
Parker’s proprietary “Par-Zap” technology helps aircraft. Parker experts participate in day-to-day
Freightliner cut inventory and material handling costs. engineering, testing, and troubleshooting to ensure
Par-Zap automates inventory levels and replenishment all systems are go for this high-flying customer.
with just-in-time delivery. This allows Freightliner to System optimization and customized,
eliminate centrally stored inventory and reduce in- kits — Working with Pierce
pre-assembled
process supplies on the factory floor. In three months, Manufacturing, the world’s leading manufacturer
Parker’s Par-Zap system cut Freightliner’s inventory of fire-fighting apparatus, Parker reviewed the
costs by as much as $800,000 per plant. hydraulic system on the company’s fire trucks to
recommend design changes for more efficient
operation, longer life and easier maintenance. Because
these improvements could be life-saving, Parker
quickly developed specialized kits with all
of the components needed to make the new truck
apparatus. Now providing 350 different components
Value Driven in each kit, all under one part number and invoice,
Parker’s custom solution means reduced procurement
costs and shorter cycle times for Pierce.
Customer Service Market Diversification
Breeds Long-Term Loyalty Provides Balance
Defection Indifference Affection
Refrigeration Instrumentation Mining & mineral
10
& heating & controls processing
equipment Infrastructure/ Heavy-duty trucks
Loyalty 10=Highest
08
Electronic municipalities Factory
equipment Consumer goods automation
Machine tools
06 Lawn, garden Aerospace
Material & turf equipment & Marine
handling Power Agriculture &
04
Construction generation food processing
Parker
has a equipment Medical & Pulp & paper
Customer 02
Rubber, analytical
Satisfaction Entertainment
plastics &
Rate above 99% Oil & gas Semiconductor
petrochemical exploration
0% 25% 50% 75% 100%
Customer Satisfaction
Premier service is Parker’s most vital distinction – to deliver With more than 1,400 product lines and thousands of
capabilities that competitors can’t, offering customers applications, Parker’s business today is diversified widely
full-line, global support and systematically engineered among aerospace, commercial and industrial sectors,
solutions for all of their motion-control needs, which providing a constant balance among economic cycles
ultimately generates trust and loyalty for long-term growth. and continuously renewable growth.
14

15. Michael J. Hiemstra,
Electronic training and design certifi-
Vice President –
At parker.com, employees and distributors
cation —
Finance and Administration
anywhere in the world can access training and and Chief Financial Officer
certification modules for a variety of motion and
control applications. And because Parker is the world’s
leading authority in the engineering sciences of
electronic, hydraulic and pneumatic muscle, we’ve
developed a compact-disc series of computer-based
training and reference resources to help customers
optimize their motion-control applications. The CDs
come in a variety of languages, and also are popular
among engineering students who learn to specify
Parker in their designs for predictable performance. Financial Performance
Rapid response and made-to-order Our financial performance is solid. In S&P’s
When the John Deere Company was
products — index of diversified manufacturers, Parker is in
building a prototype of its 5000B tractor for worldwide the top quartile when compared with peers
commercialization, engineers discovered they needed in quality measures such as return on assets and
a customized fitting solution to optimize the new earnings growth. We consistently exceed our
tractor’s performance. With only three days to complete financial goals:
the project, the Deere team turned to Parker, and we Sales growth — Five-year compound sales
delivered. Within seven hours of receiving details on growth is 14 percent, against a goal of 7.5 percent.
Deere’s urgent request, Parker was able to complete Earnings margin — Return on sales was
the design, fabrication and assembly of the specialized 6.3 percent, even as international markets weakened
fittings to make the newest Deere run. through the year.
Parker’s Return on Average Assets Parker’s EPS Growth
Exceeds Peer Group Leads Peer Group
Parker Hannifin EPS Index Average EPS
Parker Hannifin S&P Diversified Manufacturers*
$3.00
12%
9% 2.50
6% 2.00
3%
1.50
1995 1996 1997 1998 1999
1995 1996 1997 1998 1999
Source: First Call
As a measure of management discipline, Parker’s return Since July 1, 1995, Parker has outperformed the S&P
on assets consistently outpaces its peers in the S&P index index of diversified manufacturers in earnings growth,
of diversified manufacturers. shown here in a rolling comparison plotted to coincide
with Parker’s fiscal year.
* Given differences among the indexed companies’ fiscal closing dates, returns were
calculated using the most recent SEC filings and annualized for 1999, while
average assets reflect the average reported at year end and most recent SEC filings.
15

16. Profitable Growth segment, where the industry is anticipating slower
build-rates for large airplanes, we launched cutbacks at
Our people are intensely focused on profitable
the facilities that support this market.
growth. Our employees own 11 percent of
All of these actions prove the integrity of our
the company, and are fully incented to meet
value philosophy. We made the adjustments as the
our economic profit goals, charting a return
markets warranted. We ran them through the income
on sales and net assets exceeding the cost
statement rather than recording a series of charges.
of capital, and therefore creating real value.
Each business unit keeps such a metric, with a And we are confident they will position us for volume
common aim to exceed the cost-of-capital goal. and profit gains in the year 2000.
We call it the “North-by-Northwest” metric, because Parker has tremendous capacity for growth. With
moving in that direction – reducing net assets to sales the burgeoning development of Latin America,
while increasing operating margins – is the surest Eastern Europe, Asia and the greater Pacific region,
way to achieve economic profit. Inside Parker, this our motion and control systems will draw greater
value-minded model is the performance measure demand than ever before: from basic infrastructure
that ensures we’re realizing our full profit potential. to every kind of technological advancement… Parker
By June 30 – the close of fiscal 1999’s fourth is established to serve these markets on-shore, and
quarter – we were already realizing margin gains from grow with them around the world.
steps we took earlier in the year to trim inventories As much as global development is a growth engine
and workforce hours. We continued these efforts into for our business, it lends greater, more immediate
the first quarter of the new year, with consolidation value potential when combined with the right
designed to improve our profit performance in Europe acquisitions. We intend to lead the consolidation of
and Latin America. We are shifting more production motion and control suppliers by offering prospective
to our lowest-cost facilities and cutting selling, partners the best business profile in the industry:
general and administrative expenses now that we have premier customer service, financial performance and
our global enterprise system in place. In the aerospace long-term, profitable growth.
Performance Metric Average Sales
Assures Value Creation per Employee
Corporate Goal
18% $150
FY95
FY96
140
FY97
Operating Margin
14%
FY98
130
FY99
120
10%
110
0.40 0.50 0.60 0.70 1995 1996 1997 1998 1999
Net Assets/Sales (dollars in thousands)
Our return-minded economic profit measure ensures Parker employees consistently prove they are our greatest
every division of Parker is managing for value creation, strength: In five years, they doubled sales and continuously
with common controls for effective asset utilization and increased productivity, with remarkable enthusiasm for
margin realization. improving the performance of their company.
16