TO OUR SHAREHOLDERS

    Second quarter earnings of $6.4 million, or 64 cents per share, increased 
24 percent from last year on a sales increase of 8 percent. The continued 
strengthening of the dollar reduced sales by $1.7 million and net earnings by 
$0.4 million, or 4 cents per share.

    Six-month earnings of $10.8 million, or $1.08 per share, increased 18 
percent from last year. Sales for the period were up 8 percent. The stronger 
dollar reduced sales by $3.1 million and net earnings by $0.7 million, or 7 
cents per share.

ORDERS, OPERATING MARGIN IMPROVE

    Year-to-date orders are up 12 percent in local currencies (10 percent in 
dollars), with the strongest gains coming from industrial and commercial 
floor maintenance products in North America and international markets other 
than Europe.

    Operating margin showed a solid improvement for the quarter, rising to 
10.1 percent from 9.0 percent last year. Year-to-date operating margin of 9.1 
percent also is up nicely from last year's 8.2 percent. The improvement is 
due to a better gross margin in second quarter and expense controls that have 
been in place for over a year. Second quarter expenses were up somewhat more 
than sales. This reflects an increase in incentive compensation, due to 
better financial performance and a significant increase in the market value 
of Tennant's common stock, and a planned increase in spending on information 
technology.

OUTLOOK FOR REMAINDER OF 1997

    It appears that economic growth in North America is slowing to a more 
sustainable pace. While this will affect our business to some degree, the 
many new products we have introduced in recent years give us a strong 
competitive position, both domestically and internationally.

    We have two near-term concerns that relate to our international business: 
first, the strength of the dollar, especially against European currencies, is 
increasing the export cost of our products and reducing the translated value 
of earnings; second, soft economic conditions in key European markets such as 
Germany and France are affecting our orders.

    To compensate for the continued strength of the dollar, which we estimate 
will reduce full-year consolidated sales by $6 million and earnings by 10 to 
14 cents per share, we will maintain expense controls. In addition, we will 
continue the focus on improving gross margin, which began to show results in 
second quarter. As a result, we believe Tennant will be able to report a 
second half improvement in operating margin and earnings over last year, 
which was relatively stronger than first half 1996.

    In May 1997, the Board authorized the repurchase of up to 600,000 shares 
of the company's common stock. To date, 65,000 shares have been repurchased 
under this authority.

/s/ Roger L. Hale

Roger L. Hale
CHIEF EXECUTIVE OFFICER                                         July 17, 1997



STRONG PRODUCT LINES, FRANCHISE 
AND PARTNERSHIPS

    The Company expects to continue above-average growth in commercial 
equipment, maintain its market leadership in industrial equipment, and expand 
the floor coatings business by capitalizing on its strong product lines, 
sales/service network and customer partnerships.

- -   STRONG PRODUCTS: Tennant devotes a much higher percentage of sales to
    product engineering than do most capital goods companies and, in total 
    amount spent, significantly more than its competitors. This allows it to 
    offer a broad product line, regularly introducing new products with the 
    longest and strongest warranties in the industry.

- -   STRONG FRANCHISE: Tennant's industrial products are sold and serviced
    directly in eight countries and through full-service distributors in 45
    others--a network unmatched in the industry; and its commercial products are
    marketed in North America by one of the most extensive distributor networks 
    in the business.

- -   STRONG PARTNERSHIPS: Tennant is bringing together its three complementary
    product lines so it can work more closely with customers to help them 
    develop and implement total solutions to their cleaning needs.

    These strengths are supported by Tennant's strong cash flow and balance 
sheet. As a result, the Company expects to reach its financial mission of 
creating value for shareholders by providing an above-average total return 
through:

- -   8% sales and 10% earnings per share annual increases over the long term.

- -   20% return on beginning shareholders' equity in the years of the economic
    cycle growth.

- -   Consistent increases in the dividend.

PRODUCTS FOR A CLEANER AND SAFER WORLD

    In a classic example of engineering innovation, Tennant proudly 
introduces the new Model 6080 Walk-Behind Sweeper. Compact enough to fit into 
the tightest of spaces--whether cluttered aisles or shrinking budgets--the 
6080 is also extremely versatile. 

(PICTURE:  Tennant Model 6080 Sweeper)

    Over carpet or concrete, indoors or out, the 6080 sweeps virtually any 
type of surface in almost any environment. Best of all, the new Model 6080 is 
inexpensive to own and operate. Altogether, the machine smartly meets 
marketplace needs for a compact, easy-to-use, inexpensive power sweeper. 

    The 6080 sweeper: yet another example of Tennant's ability to respond 
effectively to the demands of the cleaning market.