UNITED STATES
                        SECURITIES & EXCHANGE COMMISSION
                             Washington, D. C. 20549

                                    FORM 10-K

|X|   Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
      Act of 1934
      For the fiscal year ended December 31, 2004

                                       or

|_|   Transition Report Pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934
      For the transition period from _______________ to _______________

      Commission File No. 1-5375
                             [LOGO]TECHNITROL, INC.

                                TECHNITROL, INC.
               (Exact name of registrant as specified in Charter)

      PENNSYLVANIA                                       23-1292472
(State of Incorporation)                    (IRS Employer Identification Number)

          1210 Northbrook Drive, Suite 470, Trevose, Pennsylvania 19053
               (Address of principal executive offices)         (Zip Code)

        Registrant's telephone number, including area code: 215-355-2900



Securities registered pursuant to Section 12(b) of the Act:
            Title of each class                                 Name of each Exchange on which registered
            -------------------                                 -----------------------------------------
                                                                      
Common Stock par value $.125 per share                                   New York Stock Exchange
Common Stock Purchase Rights                                             New York Stock Exchange


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 the filing
requirements for at least 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. |_|

Indicate by checkmark whether the registrant is an accelerated filer (as defined
in Rule 12b-2 of the Act).

                                 YES |X|    NO |_|

The aggregate market value of voting stock held by non-affiliates as of June 25,
2004 is $856,550,000 computed by reference to the closing price on the New York
Stock Exchange on such date.

                                                  Number of shares outstanding
         Title of each class                            February 25, 2005
         -------------------                            -----------------
Common stock par value $.125 per share                     40,472,629

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's definitive proxy statement to be used in connection
with the registrant's 2005 Annual Meeting of Shareholders are incorporated by
reference into Part III of this Form 10-K where indicated.



                                TABLE OF CONTENTS



PART I                                                                                                       PAGE
                                                                                                         
Item 1.     Business                                                                                            3
Item 2.     Properties                                                                                         14
Item 3.     Legal Proceedings                                                                                  15
Item 4.     Submission of Matters to a Vote of Security Holders                                                15

PART II

Item 5.     Market for Registrant's Common Equity and Related Stockholder Matters                              16
Item 6.     Selected Financial Data                                                                            17
Item 7.     Management's Discussion and Analysis of Financial Condition and Results of Operations              18
Item 7a.    Quantitative and Qualitative Disclosures About Market Risk                                         28
Item 8.     Financial Statements and Supplementary Data                                                        30
Item 9.     Changes in and Disagreements With Accountants on Accounting and Financial Disclosure               30
Item 9a.    Controls and Procedures                                                                            30
Item 9b.    Other Matters                                                                                      31

PART III

Item 10.    Directors and Executive Officers of the Registrant                                                 32
Item 11.    Executive Compensation                                                                             32
Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters     32
Item 13.    Certain Relationships and Related Transactions                                                     33
Item 14.    Principal Accounting Fees and Services                                                             33

PART IV

Item 15.    Exhibits and Financial Statement Schedule                                                          34
Exhibits                                                                                                       63
Signatures                                                                                                     67



                                       2


                                     Part I

Item 1 Business

General

      Technitrol, Inc. is a global producer of precision-engineered passive
magnetics-based electronic components and electrical contact products and
materials. We sometimes refer to Technitrol as "we" or "our". We believe we are
a leading global producer of these products and materials in the primary markets
we serve based on our estimates of the size of our primary markets in annual
revenues and our share of those markets relative to our competitors. Passive
magnetics-based electronic components are used in virtually all types of
electronic products to manage and regulate electronic signals and power.
Electrical contact products and materials are used in any device in which the
continuation or interruption of electrical currents is necessary. In each case,
our products are critical to the functioning of the end product.

      Our world-class design and manufacturing capabilities, together with the
breadth of our product offerings, provides us with a competitive advantage that
enables us to anticipate and deliver highly-customized solutions for our
customers' product needs. In addition, our global presence enables us to
participate in many relevant product and geographic markets and provides us with
proximity to our global customer base. This allows us to better understand and
more easily satisfy our customers' unique design and product requirements.

      We operate our business in two distinct segments: the electronic
components segment, which operates under the name Pulse, and the electrical
contact products segment, which operates under the name AMI Doduco. We refer to
these segments as ECS or Pulse, and ECPS or AMI Doduco, respectively.

      We incorporated in Pennsylvania on April 10, 1947 and we are headquartered
in Trevose, PA. Our mailing address is 1210 Northbrook Drive, Suite 470,
Trevose, PA 19053-8406, and our telephone number is 215-355-2900. Our website is
www.technitrol.com.

Pulse

      Pulse designs and manufactures a wide variety of highly-customized passive
magnetics-based electronic components and, through a majority-owned subsidiary,
connector products. These components manage and regulate electronic signals and
power for use in a variety of devices by filtering out radio frequency
interference and adjusting and ensuring proper current and voltage. These
products are often referred to as chokes, inductors, filters and transformers.
Pulse sells its products to primarily multinational original equipment
manufacturers, contract manufacturers and distributors.

      Pulse's products are used in a broad array of industries, including:

            o     consumer electronics;

            o     enterprise networking;

            o     military/aerospace;

            o     power conversion; and

            o     telecommunications.

      Representative end products that use Pulse's components include:

            o     broadband access equipment including cable modems and digital
                  subscriber line, or DSL, devices for telephone central office
                  and home use;

            o     Ethernet switches;

            o     military/aerospace navigation and weapon guidance systems;

            o     power supplies;

            o     routers;

            o     televisions and DVD players;

            o     laptop computers;

            o     video game consoles; and

            o     voice over Internet equipment.


                                       3


      Pulse's products are generally characterized by relatively short life
cycles and rapid technological change, allowing us to utilize our design and
engineering expertise to meet our customers' constantly evolving needs. We
believe that the industries served by Pulse have been, and will continue to be,
characterized by ongoing product innovation that will drive the growth in the
passive magnetics-based electronic components industry. We sometimes refer to
the Pulse business, excluding products made by factories which we acquired in
the Eldor acquisition in 2003 and Full Rise Electronics Co. Ltd. ("FRE")
acquisition in 2004, as the legacy business of Pulse, or "Pulse legacy".

      Pulse generated $320.2 million, or 55.0% of our revenues, for the year
ended December 31, 2004, and $294.1 million, or 57.8% of our revenues, for the
year ended December 26, 2003. Note 14 to the Consolidated Financial Statements
contains additional segment information.

AMI Doduco

      AMI Doduco is the only global manufacturer which produces a full array of
precious metal electrical contact products that range from materials used in the
fabrication of electrical contacts to completed contact subassemblies. Contact
products complete or interrupt electrical circuits in virtually every electrical
device. AMI Doduco provides its customers with a broad array of highly
engineered products and tools designed to meet unique customer needs. AMI Doduco
sells products primarily to multinational original equipment manufacturers.

      AMI Doduco's products are used in a broad array of industries, including:

            o     appliance;

            o     automotive;

            o     residential and non-residential construction circuitry;

            o     commercial and industrial controls;

            o     electric power distribution; and

            o     telephone equipment.

      Representative end products that use AMI Doduco's products include:

            o     electrical circuit breakers;

            o     motor and temperature controls;

            o     power substations;

            o     sensors;

            o     switches and relays;

            o     telephone equipment; and

            o     wiring devices.

      AMI Doduco's products are generally characterized by longer life cycles
and slower technological change than those of Pulse. We believe that
technological developments in some of the industries served by AMI Doduco,
particularly in the electric power, appliance and automotive industries, along
with opportunities arising from customer outsourcing and consolidation of the
electrical contact industry, may present attractive growth opportunities for AMI
Doduco.

      AMI Doduco generated $262.2 million, or 45.0% of our revenues, for the
year ended December 31, 2004, and $215.2 million, or 42.2% of our revenues, for
the year December 26, 2003. Note 14 to the Consolidated Financial Statements
contains additional segment information.


                                       4


Products

      Pulse designs and manufactures a wide array of passive magnetics-based
electronic components. These products are highly-customized to address our
customers' needs. The following table contains a list of some of Pulse's key
products:



----------------------------------------------------------------------------------------------------------------------
          Primary Products                        Function                               Application
----------------------------------------------------------------------------------------------------------------------
                                                                  
Discrete Filter or Choke              Separates high and low            Network switches, routers, hubs and personal
                                      frequency signals                 computers
                                                                        Phone, fax and alarm systems used with
                                                                        digital subscriber lines, or DSL
----------------------------------------------------------------------------------------------------------------------
Filtered Connector, which combines    Removes interference, or          Local area networks, or LANs, and wide area
a filter with a connector and stand   noise, from circuitry and         networks, or WANs, equipment for personal
alone connector products              connects electronic applications  computers and video game consoles
----------------------------------------------------------------------------------------------------------------------
Inductor/chip inductor                Regulates electrical current      AC/DC & DC/DC power supplies
                                      under conditions of varying load  Mobile phones and portable devices
----------------------------------------------------------------------------------------------------------------------
Power Transformer                     Modifies circuit voltage          AC/DC & DC/DC power supplies
----------------------------------------------------------------------------------------------------------------------
Signal Transformer                    Limits distortion of signal as    Analog circuitry
                                      it passes from one medium to      Military/aerospace navigation and weapon
                                      another                           guidance systems
----------------------------------------------------------------------------------------------------------------------
Flyback Transformer                   Generates high voltages to        Televisions
                                      illuminate cathode ray picture
                                      tubes
----------------------------------------------------------------------------------------------------------------------


      AMI Doduco designs and manufactures a wide array of contact materials,
parts and completed contact subassemblies. The following table contains a list
of some of AMI Doduco's key products:



------------------------------------------------------------------------------------------------------------------------
          Primary Products                           Function                                Application
------------------------------------------------------------------------------------------------------------------------
                                                                        
Contact prematerial such as wire and   Raw materials                          Made into our customers' and
metal tapes                                                                   competitors' electrical contact parts
------------------------------------------------------------------------------------------------------------------------
Electrical contact parts, either       Complete or interrupt an electrical    Electrical switches, relays, circuit
discrete or affixed to precision       circuit                                breakers and motor controls
stamped parts
------------------------------------------------------------------------------------------------------------------------
Component subassemblies                Integrate contact with precision       Sensors and control devices
                                       stampings and plastic housings
------------------------------------------------------------------------------------------------------------------------


      Within each segment, our primary products are similar in design, material
content, production process, application and customer base. We continually
introduce new or improved products in response to customers' needs and changes
within the markets served.

Sales, Marketing and Distribution

      Pulse and AMI Doduco sell products predominantly through separate
worldwide direct sales forces. Given the highly technical nature of our
customers' needs, our direct salespeople typically team up with members of our
engineering staff to discuss a sale with a customer's purchasing and engineering
personnel. During the sales process, there is close interaction between our
engineers and those in our customers' organizations. This interaction extends
throughout a product's life cycle, engendering strong customer relationships. As
of December 31, 2004, Pulse had approximately 75 salespeople and 14 sales
offices worldwide and AMI Doduco had approximately 35 salespeople and 11 sales
offices worldwide.

      We provide technical and sales support for our direct and indirect sales
force. We believe that our coordinated sales effort provides a high level of
market penetration and efficient coverage of our customers on a cost-effective
basis.


                                       5


Customers and End Markets

      We sell our products and services to original equipment manufacturers
("OEMs"), which design, build and market end-user products. Pulse also sells its
products to contract equipment manufacturers ("CEMs"), which contract with OEMs
to manufacture the OEM's products, as well as to independent distributors, which
sell components and materials to both OEMs and CEMs. In recent years, the trend
in the electronics industry has been for many OEMs to use CEMs primarily or
exclusively to build their products. Nonetheless, OEMs generally control the
decision as to which component designs best meet their needs. Accordingly, we
consider OEMs to be customers for our products even if they purchase our
products through CEMs or independent distributors. In order to maximize our
sales opportunities, Pulse's engineering and sales teams also maintain close
relationships with CEMs and distributors.

      No customer of either Pulse or AMI Doduco accounted for more than 10% of
our consolidated net sales for the year ended December 31, 2004 or the year
ended December 26, 2003. Sales to our ten largest customers accounted for 32.3%
of net sales for the year ended December 31, 2004 and 30.6% of net sales for the
year ended December 26, 2003.

      An increasing percentage of our sales in recent years have been outside of
the United States. For the year ended December 31, 2004, 78% of our net sales
were outside of the United States. During the year ended December 26, 2003, 76%
of our net sales were to customers outside of the United States. Sales made by
Pulse to its customers outside the United States accounted for 81% of its net
sales for the year ended December 31, 2004 and 77% of its net sales for the year
ended December 26, 2003. Sales made by AMI Doduco to its customers outside the
United States accounted for 73% of its net sales for the year ended December 31,
2004 and 75% of its net sales for the year ended December 26, 2003.

Development and Engineering

      Our development and engineering efforts are focused on the design and
development of innovative products in collaboration with our customers. We work
closely with OEMs to identify their design and engineering requirements. We
maintain strategically located design centers throughout the world where
proximity to customers enables us to better understand and more readily satisfy
their design and engineering needs. Our design process is a disciplined, orderly
process that uses a product data management system to track the level of design
activity enabling us to manage and improve how our engineers design products,
and we typically own the customized designs used to make products.

      Pulse's development and engineering expenditures were $18.4 million for
the year ended December 31, 2004, $14.5 million for the year ended December 26,
2003 and $13.9 million for the year ended December 27, 2002. AMI Doduco's
development and engineering expenditures were $4.2 million for the year ended
December 31, 2004, $4.0 million for the year ended December 26, 2003 and $3.9
million for the year ended December 27, 2002. We intend to continue to invest in
personnel and new technologies to improve product performance.

Competition

      We believe we are a market leader in the primary markets we serve based on
our estimates of the size of our primary markets in annual revenues and our
share of those markets relative to our competitors. We do not believe that any
one company competes with all of the product lines of either Pulse or AMI Doduco
on a global basis. However, both Pulse and AMI Doduco frequently encounter
strong competition within individual product lines, both domestically and
internationally. In addition, several OEMs internally manufacture some of the
products offered by Pulse or AMI Doduco. We believe that this represents an
opportunity to capture additional market share as OEMs decide to outsource
component operations. Therefore, we constantly work to identify these
opportunities and to convince these OEMs that our economies of scale, purchasing
power and manufacturing core competencies enable us to produce these products
more efficiently. Increasingly, Pulse's competitors are located in Asia and
enjoy very low cost structures and very low cost of capital. Many of these new
competitors aggressively seek market share at the expense of profits.

      Competitive factors in the markets for our products include:

            o     price;

            o     product quality and reliability;

            o     global design and manufacturing capabilities;

            o     breadth of product line;


                                       6


            o     customer service; and

            o     delivery time.

      We believe we compete favorably on the basis of each of these factors.
Product quality and reliability, as well as design and manufacturing
capabilities, are enhanced through our commitment to continually invest in and
improve our manufacturing and designing resources and our close relationships
with our customers' engineers. The breadth of our product offering provides
customers with the ability to satisfy their entire magnetic component or
electrical contact needs through one supplier. Our global presence enables us to
deepen our relationship with our customers and to better understand and more
easily satisfy the needs of local markets. In addition, our ability to purchase
raw materials in large quantities reduces our manufacturing costs, enabling us
to price our products competitively.

Employees

      As of December 31, 2004, we had approximately 22,800 full-time employees
as compared to 18,600 as of December 26, 2003. Of the 22,800 full-time
employees, approximately 800 were located in the United States and a small
number in the United States were covered by collective-bargaining arrangements.
In addition, some foreign employees are members of trade and
government-affiliated unions. The number of employees at year-end includes
employees of certain subcontractors that are integral to our operations in the
People's Republic of China. Such employees numbered approximately 14,000 and
9,800 as of December 31, 2004 and December 26, 2003, respectively. We have not
experienced any major work stoppages and consider our relations with our
employees to be good.

Raw Materials

      Raw materials necessary for the manufacture of our products include:

            o     precious metals such as silver;

            o     base metals such as copper and brass; and

            o     ferrite cores.

      We do not currently have significant difficulty obtaining any of our raw
materials and do not currently anticipate that we will face any significant
difficulties in the near future. However, many of the raw materials we use are
considered commodities and are subject to price volatility. Although we are not
dependent on any one particular source of supply, several of our raw materials
are only sold by a limited number of suppliers, which may have an adverse effect
on the price of these materials. Should prices rise or a shortage occur in any
necessary raw material, our manufacturing costs will likely increase, which may
result in lower margins or decreased sales if we were unable to pass along the
price increase to our customers.

      AMI Doduco uses precious metals, primarily silver, in manufacturing a vast
majority of its electrical contacts, contact materials and contact
subassemblies. Historically, we have leased or held these materials through
consignment arrangements with our suppliers. Leasing and consignment costs have
generally been substantially below the costs to borrow funds to purchase the
metals and these arrangements eliminate the effect of fluctuations in the market
price associated with owned precious metal. AMI Doduco's terms of sale allow us
to charge customers for the fabricated market value of silver on the day after
we deliver the silver bearing product to the customer. See additional discussion
of precious metals beginning on page 21.

Backlog

      Our backlog of orders at December 31, 2004 was $75.7 million compared to
$65.6 million at December 26, 2003. We expect to ship the majority of the
backlog over the next six months. Customers can cancel orders at any time,
sometimes requiring a payment of cancellation charges. We do not believe that
backlog is an accurate indicator of near-term business activity, as Pulse
customers may make multiple orders of the same component from multiple sources
when lead times are long and may cancel orders when business is weak and
inventories are excessive. Moreover, in the last two years, many customers have
negotiated vendor managed inventory and other similar consignment type
arrangements with us. Orders from these arrangements typically are not reflected
in backlog. Similarly, many of AMI Doduco's products are repeat products which
are continuously ordered by customers by phone for delivery within several days
and such orders generally are not included in backlog.


                                       7


Intellectual Property

      We own a number of patents and have acquired the use of patents of others
under license agreements, which impose restrictions on our ability to utilize
the intellectual property. We seek to limit disclosure of our intellectual
property by generally requiring employees and consultants with access to our
proprietary information to execute confidentiality agreements with us and by
restricting access to our proprietary information.

      Existing legal protections afford only limited protection for our
products. For example, others may independently develop similar or competing
products or attempt to copy or use aspects of our products that we regard as
proprietary. Furthermore, intellectual property law may not fully protect
products or technology that we consider to be our own, and claims of
intellectual property infringement may be asserted against us or against our
customers in connection with their use of our products.

      While our intellectual property is important to us in the aggregate, we do
not believe any individual patent, trademark, or license is material to our
business or operations.

Environmental

      Our manufacturing operations are subject to a variety of local, state,
federal, and international environmental laws and regulations governing air
emissions, wastewater discharges, the storage, use, handling, disposal and
remediation of hazardous substances and wastes and employee health and safety.
It is our policy to meet or exceed the environmental standards set by these
laws.

      We are aware of contamination at two locations. In Sinsheim, Germany,
there is a shallow groundwater and soil contamination that is naturally
decreasing over time. The German environmental authorities have not required
corrective action to date. In addition, property in Leesburg, Indiana, which was
acquired with our acquisition of GTI in 1998, is the subject of a 1994
Corrective Action Order to GTI by the Indiana Department of Environmental
Management (IDEM). Although we sold the property in early 2005, we retained the
responsibility for existing environmental issues at the site. The order requires
us to investigate and take corrective actions. Substantially all of the
corrective actions relating to impacted soil have been taken and IDEM has issued
us no further action letters for the remediated areas except for the solvent
disposal area. We expect an action letter on this area upon IDEM's final review
of the closure report submitted. Studies and analysis are ongoing with respect
to a ground water issue. We anticipate making additional environmental
expenditures in the future to continue our environmental studies, analysis and
remediation activities with respect to the ground water. Based on current
knowledge, we do not believe that any future expenses or liabilities associated
with environmental remediation will have a material impact on our operations or
our consolidated financial position, liquidity or operating results; however, we
may be subject to additional costs and liabilities if the scope of the
contamination or the cost of remediation exceeds our current expectations.

Available Information

      We make available free of charge on our website, www.technitrol.com, all
materials that we file electronically with the Securities and Exchange
Commission, including our annual reports on Form 10-K, quarterly reports on Form
10-Q, current reports on Form 8-K and amendments to those reports and all Board
charters, as soon as reasonably practicable after we electronically file or
furnish such materials to the SEC.

Factors That May Affect Our Future Results (Cautionary Statements for Purposes
of the "Safe Harbor" Provisions of the Private Securities Litigation Reform Act
of 1995)

      Our disclosures and analysis in this report contain forward-looking
statements. Forward-looking statements reflect our current expectations of
future events or future financial performance. You can identify these statements
by the fact that they do not relate strictly to historical or current facts.
They often use words such as "anticipate", "estimate", "expect", "project",
"intend", "plan", "believe", and similar terms. These forward-looking statements
are based on our current plans and expectations.

      Any or all of our forward-looking statements in this report may prove to
be incorrect. They may be affected by inaccurate assumptions we might make or by
risks and uncertainties which are either unknown or not fully known or
understood. Accordingly, actual outcomes and results may differ materially from
what is expressed or forecasted in this report.


                                       8


      We sometimes provide forecasts of future financial performance. The risks
and uncertainties described under "Risk Factors" as well as other risks
identified from time to time in other Securities and Exchange Commission
reports, registration statements and public announcements, among others, should
be considered in evaluating our prospects for the future. We undertake no
obligation to release updates or revisions to any forward-looking statement,
whether as a result of new information, future events or otherwise.

Risk Factors

Cyclical changes in the markets we serve could result in a significant decrease
in demand for our products and reduce our profitability.

      Our components are used in various products for the electronic and
electrical equipment markets. These markets are highly cyclical. The demand for
our components reflects the demand for products in the electronic and electrical
equipment markets generally. A contraction in demand would result in a decrease
in sales of our products, as our customers:

      o     may cancel many existing orders;

      o     may introduce fewer new products; and

      o     may decrease their inventory levels.

      A decrease in demand for our products would have a significant adverse
effect on our operating results and profitability. Accordingly, we may
experience volatility in both our revenues and profits.

Reduced prices for our products may adversely affect our profit margins if we
are unable to reduce our costs of production.

      The average selling prices for our products tend to decrease over their
life cycle. In addition, foreign currency movements and the need to retain
market share increase the pressure on our customers to seek lower prices from
their suppliers. As a result, our customers are likely to continue to demand
lower prices from us. To maintain our margins and remain profitable, we must
continue to meet our customers' design needs while reducing costs through
efficient raw material procurement and process and product improvements. Our
profit margins will suffer if we are unable to reduce our costs of production as
sales prices decline.

An inability to adequately respond to changes in technology may decrease our
sales.

      Pulse operates in an industry characterized by rapid change caused by the
frequent emergence of new technologies. Generally, we expect life cycles for our
products in the electronic components industry to be relatively short. This
requires us to anticipate and respond rapidly to changes in industry standards
and customer needs and to develop and introduce new and enhanced products on a
timely and cost effective basis. Our engineering and development teams place a
priority on working closely with our customers to design innovative products and
improve our manufacturing processes. Our inability to react to changes in
technology quickly and efficiently may decrease our sales and profitability.

If our inventories become obsolete, our future performance and operating results
will be adversely affected.

      The life cycles of our products depend heavily upon the life cycles of the
end products into which our products are designed. Many of Pulse's products have
very short life cycles which are measured in quarters. Products with short life
cycles require us to closely manage our production and inventory levels.
Inventory may become obsolete because of adverse changes in end market demand.
During market slowdowns, this may result in significant charges for inventory
write-offs. Our future operating results may be adversely affected by material
levels of obsolete or excess inventories.

An inability to capitalize on our recent or future acquisitions may adversely
affect our business.

      In we have completed several acquisitions in recent years. We continually
seek acquisitions to grow our business. We may fail to derive significant
benefits from our acquisitions. In addition, if we fail to achieve sufficient
financial performance from an acquisition, goodwill and other intangibles could
become impaired, resulting in our recognition of a loss. In 2002, we recorded a
goodwill impairment charge of $15.7 million related to AMI Doduco and a trade
name impairment charge of $32.1 million related to Pulse. In 2003, we recorded
an equity method investment loss of $8.7 million related to our investment in
FRE. In 2004, we recorded an aggregate intangible


                                       9


impairment charge of $18.5 million related to Pulse. The success of any of our
acquisitions depends on our ability to:

   o  successfully integrate or consolidate acquired operations into our
      existing businesses;

   o  identify and take advantage of cost reduction opportunities; and

   o  further penetrate the markets for the product capabilities acquired.

      Integration of acquisitions may take longer than we expect and may never
be achieved to the extent originally anticipated. This could result in slower
than anticipated business growth or higher than anticipated costs. In addition,
acquisitions may:

   o  cause a disruption in our ongoing business;

   o  distract our managers;

   o  unduly burden our other resources; and

   o  result in an inability to maintain our historical standards, procedures
      and controls.

Integration of acquisitions into the acquiring segment may limit the ability of
investors to track the performance of individual acquisitions and to analyze
trends in our operating results.

      Our historical practice has been to quickly integrate acquisitions into
the existing business of the acquiring segment and to report financial
performance on the segment level. As a result of this practice, we do not
separately track the stand-alone performance of acquisitions after the date of
the transaction. Consequently, investors cannot quantify the financial
performance and success of any individual acquisition or the financial
performance and success of a particular segment excluding the impact of
acquisitions. In addition, our practice of quickly integrating acquisitions into
the financial performance of each segment may limit the ability of investors to
analyze any trends in our operating results over time.

An inability to identify additional acquisition opportunities may slow our
future growth.

      We intend to continue to identify and consummate additional acquisitions
to further diversify our business and to penetrate important markets. We may not
be able to identify suitable acquisition candidates at reasonable prices. Even
if we identify promising acquisition candidates, the timing, price, structure
and success of future acquisitions are uncertain. An inability to consummate
attractive acquisitions may reduce our growth rate and our ability to penetrate
new markets.

If our customers terminate their existing agreements, or do not enter into new
agreements or submit additional purchase orders for our products, our business
will suffer.

      Most of our sales are made on a purchase order basis as needed by our
customers. In addition, to the extent we have agreements in place with our
customers, most of these agreements are either short term in nature or provide
our customers with the ability to terminate the arrangement with little or no
prior notice. Our contracts typically do not provide us with any material
recourse in the event of non-renewal or early termination. We will lose business
and our revenues will decrease if a significant number of customers:

      o     do not submit additional purchase orders;

      o     do not enter into new agreements with us; or

      o     elect to terminate their relationship with us.

If we do not effectively manage our business in the face of fluctuations in the
size of our organization, our business may be disrupted.

      We have grown rapidly over the last ten years, both organically and as a
result of acquisitions. However, we significantly reduce or expand our workforce
and facilities in response to changes in demand for our products due to
prevailing global market conditions. These rapid fluctuations place strains on
our resources and systems. If we do not effectively manage our resources and
systems, our businesses may suffer.

Uncertainty in demand for our products may result in increased costs of
production and an inability to service our customers.


                                       10


      We have very little visibility into our customers' purchasing patterns and
are highly dependent on our customers' forecasts. These forecasts are
non-binding and often highly unreliable. Given the fluctuation in growth rates
and cyclical demand for our products, as well as our reliance on often imprecise
customer forecasts, it is difficult to accurately manage our production
schedule, equipment and personnel needs and our raw material and working capital
requirements. Our failure to effectively manage these issues may result in:

      o     production delays;

      o     increased costs of production;

      o     an inability to make timely deliveries; and

      o     a decrease in profits.

A decrease in availability or increase in cost of our key raw materials could
adversely affect our profit margins.

      We use several types of raw materials in the manufacturing of our
products, including:

      o     precious metals such as silver;

      o     other base metals such as copper and brass; and

      o     ferrite cores.

      Some of these materials are produced by a limited number of suppliers.
From time to time, we may be unable to obtain these raw materials in sufficient
quantities or in a timely manner to meet the demand for our products. The lack
of availability or a delay in obtaining any of the raw materials used in our
products could adversely affect our manufacturing costs and profit margins. In
addition, if the price of our raw materials increases significantly over a short
period of time, customers may be unwilling to bear the increased price for our
products and we may be forced to sell our products containing these materials at
prices that reduce our profit margins.

      Some of our raw materials, such as precious metals, are considered
commodities and are subject to price volatility. We attempt to limit our
exposure to fluctuations in the cost of precious materials, including silver, by
holding the majority of our precious metal inventory through leasing or
consignment arrangements with our suppliers. We then typically purchase the
precious metal from our supplier at the current market price on the day after
delivery to our customer and pass this cost on to our customer. In addition,
leasing and consignment costs have historically been substantially below the
costs to borrow funds to purchase the precious metals. We currently have four
consignment or leasing agreements related to precious metals, all of which
generally have one year terms with varying maturity dates, but can be terminated
by either party with 30 days' prior notice. Our results of operations and
liquidity will be negatively impacted if:

      o     we are unable to enter into new leasing or consignment arrangements
            with similarly favorable terms after our existing agreements
            terminate, or

      o     our leasing or consignment fees increase significantly in a short
            period of time and we are unable to recover these increased costs
            through higher sale prices.

      Fees charged by the consignor are driven by interest rates and the market
price of the consigned material. The market price of the consigned material is
determined by the supply of and the demand for the material. Consignment fees
may increase if interest rates or the price of the consigned material increase.

Competition may result in lower prices for our products and reduced sales.

      Both Pulse and AMI Doduco frequently encounter strong competition within
individual product lines from various competitors throughout the world. We
compete principally on the basis of:

      o     product quality and reliability;

      o     global design and manufacturing capabilities;

      o     breadth of product line;

      o     customer service;

      o     price; and

      o     on-time delivery.

      Our inability to successfully compete on any or all of the above factors
may result in reduced sales.


                                       11


Our backlog is not an accurate measure of future revenues and is subject to
customer cancellation.

      While our backlog consists of firm accepted orders with an express release
date generally scheduled within six months of the order, many of the orders that
comprise our backlog may be canceled by customers without penalty. It is widely
known that customers in the electronics industry have on occasion double and
triple-ordered components from multiple sources to ensure timely delivery when
quoted lead time is particularly long. In addition, customers often cancel
orders when business is weak and inventories are excessive, a process that we
experienced in the recent contraction. Although backlog should not be relied on
as an indicator of our future revenues, our results of operations could be
adversely impacted if customers cancel a material portion of orders in our
backlog.

Fluctuations in foreign currency exchange rates may adversely affect our
operating results.

      We manufacture and sell our products in various regions of the world and
export and import these products to and from a large number of countries.
Fluctuations in exchange rates could negatively impact our cost of production
and sales that, in turn, could decrease our operating results and cash flow. In
addition, if the functional currency of our manufacturing costs strengthened
compared to the functional currency of our competitors manufacturing costs, our
products may get more costly than our competitors. Although we engage in limited
hedging transactions, including foreign currency contracts, to reduce our
transaction and economic exposure to foreign currency fluctuations, these
measures may not eliminate or substantially reduce our risk in the future.

Our international operations subject us to the risks of unfavorable political,
regulatory, labor and tax conditions in other countries.

      We manufacture and assemble most of our products in foreign locations,
including the Peoples' Republic of China, or PRC, and Turkey. In addition,
approximately 78% of our revenues for the year ended December 31, 2004 were
derived from sales to customers outside the United States. Our future operations
and earnings may be adversely affected by the risks related to, or any other
problems arising from, operating in international markets.

      Risks inherent in doing business internationally may include:

      o     economic and political instability;

      o     expropriation and nationalization;

      o     trade restrictions;

      o     capital and exchange control programs;

      o     transportation delays;

      o     foreign currency fluctuations; and

      o     unexpected changes in the laws and policies of the United States or
            of the countries in which we manufacture and sell our products.

      Pulse has substantially all of its non-consumer manufacturing operations
in the PRC. Our presence in the PRC has enabled Pulse to maintain lower
manufacturing costs and to adjust our work force to demand levels for our
products. Although the PRC has a large and growing economy, the potential
economic, political, legal and labor developments entail uncertainties and
risks. While the PRC has been receptive to foreign investment, we cannot be
certain that its current policies will continue indefinitely into the future. In
the event of any changes that adversely affect our ability to conduct our
operations within the PRC, our businesses may suffer. We also have manufacturing
operations in Turkey subject to unique risks, including earthquakes and those
associated with Middle East geo-political events.

      We have benefited over recent years from favorable tax treatment as a
result of our international operations. We operate in countries where we realize
favorable income tax treatment relative to the U.S. statutory rate. We have also
been granted special tax incentives commonly known as tax holidays in countries
such as the PRC and Turkey. This favorable situation could change if these
countries were to increase rates or revoke the special tax incentives, or if we
discontinue our manufacturing operations in any of these countries and do not
replace the operations with operations in other locations with favorable tax
incentives. Accordingly, in the event of changes in laws and regulations
affecting our international operations, we may not be able to continue to take
advantage of similar benefits in the future.


                                       12


Shifting our operations between regions may entail considerable expense.

      In the past we have shifted our operations from one region to another in
order to maximize manufacturing and operational efficiency. We may close one or
more additional factories in the future. This could entail significant one-time
earnings charges to account for severance, equipment write-offs or write-downs
and moving expenses as well as certain adverse tax consequences including the
loss of specialized tax incentives. In addition, as we implement transfers of
our operations we may experience disruptions, including strikes or other types
of labor unrest resulting from layoffs or termination of employees.

Liquidity requirements could necessitate movements of existing cash balances
which may be subject to restrictions or cause unfavorable tax and earnings
consequences.

      A significant portion of our cash is held offshore by our international
subsidiaries and is predominantly denominated in U.S. dollars. While we intend
to use cash held overseas to fund our international operations and growth, if we
encounter a significant domestic need for liquidity, such as paying dividends,
that we cannot fulfill through borrowings, equity offerings, or other internal
or external sources, we may experience unfavorable tax and earnings consequences
if this cash is transferred to the United States. These adverse consequences
would occur if the transfer of cash into the United States is taxed and no
offsetting foreign tax credit is available to offset the U.S. tax liability,
resulting in lower earnings. In addition, we may be prohibited from transferring
cash from the PRC. With the exception of approximately $14.0 million of non-cash
retained earnings as of December 31, 2004 in primarily the PRC that are
restricted in accordance with the PRC Foreign Investment Enterprises Law,
substantially all retained earnings are free from legal or contractual
restrictions. The PRC Foreign Investment Enterprise Law restricts 10% of our net
earnings in the PRC, up to a maximum amount equal to 50% of the total capital we
have invested in the PRC. We have not experienced any significant liquidity
restrictions in any country in which we operate and none are presently foreseen.
However, foreign exchange ceilings imposed by local governments and the
sometimes lengthy approval processes which some foreign governments require for
international cash transfers may delay our internal cash movements from time to
time.

Losing the services of our executive officers or our other highly qualified and
experienced employees could adversely affect our business.

      Our success depends upon the continued contributions of our executive
officers and management, many of whom have many years of experience and would be
extremely difficult to replace. We must also attract and maintain experienced
and highly skilled engineering, sales and marketing and managerial personnel.
Competition for qualified personnel is intense in our industries, and we may not
be successful in hiring and retaining these people. If we lose the services of
our executive officers or cannot attract and retain other qualified personnel,
our businesses could be adversely affected.

Public health epidemics (such as Severe Acute Respiratory Syndrome) or other
natural disasters (such as earthquakes or fires) may disrupt operations in
affected regions and affect operating results.

      Pulse maintains extensive manufacturing operations in the PRC and Turkey,
as do many of our customers and suppliers. A sustained interruption of our
manufacturing operations, or those of our customers or suppliers, as a result of
complications from severe acute respiratory syndrome or another public health
epidemic or other natural disasters, could have a material adverse effect on our
business and results of operations.

The unavailability of insurance against certain business risks may adversely
affect our future operating results.

      As part of our comprehensive risk management program, we purchase
insurance coverage against certain business risks. If any of our insurance
carriers discontinues an insurance policy or significantly reduces available
coverage or increases in the deductibles and we cannot find another insurance
carrier to write comparable coverage, we may be subject to uninsured losses
which may adversely affect our operating results.

Environmental liability and compliance obligations may affect our operations and
results.

      Our manufacturing operations are subject to a variety of environmental
laws and regulations governing:

      o     air emissions;


                                       13


      o     wastewater discharges;

      o     the storage, use, handling, disposal and remediation of hazardous
            substances, wastes and chemicals; and

      o     employee health and safety.

      If violations of environmental laws should occur, we could be held liable
for damages, penalties, fines and remedial actions. Our operations and results
could be adversely affected by any material obligations arising from existing
laws, as well as any required material modifications arising from new
regulations that may be enacted in the future. We may also be held liable for
past disposal of hazardous substances generated by our business or businesses we
acquire. In addition, it is possible that we may be held liable for
contamination discovered at our present or former facilities.

      We are aware of contamination at two locations. In Sinsheim, Germany,
there is a shallow groundwater and soil contamination that is naturally
decreasing over time. The German environmental authorities have not required
corrective action to date. In addition, property in Leesburg, Indiana, which was
acquired with our acquisition of GTI in 1998, is the subject of a 1994
Corrective Action Order to GTI by the Indiana Department of Environmental
Management (IDEM). Although we sold the property in early 2005, we retained the
responsibility for existing environmental issues at the site. The order requires
us to investigate and take corrective actions. Substantially all of the
corrective actions relating to impacted soil have been taken and IDEM has issued
us no further action letters for the remediated areas. Studies and analysis are
ongoing with respect to a ground water issue. We anticipate making additional
environmental expenditures in the future to continue our environmental studies,
analysis and remediation activities with respect to the ground water. Based on
current knowledge, we do not believe that any future expenses or liabilities
associated with environmental remediation will have a material impact on our
operations or our consolidated financial position, liquidity or operating
results; however, we may be subject to additional costs and liabilities if the
scope of the contamination or the cost of remediation exceeds our current
expectations.

Item 2 Properties

      We are headquartered in Trevose, Pennsylvania where we lease 8,000 square
feet of office space. Through Pulse and AMI Doduco, we operated 25 manufacturing
plants in 10 countries as of December 31, 2004. We continually seek to size our
operations in order to maximize cost efficiencies. Accordingly, in the future,
we may take further actions to increase or decrease our manufacturing capacity.
To maximize production efficiencies, we seek whenever practical to establish
manufacturing facilities in countries where we can take advantage of lower labor
costs and, if available, various government incentives and tax benefits. We also
seek to maintain facilities in those regions where we market our products in
order to maintain a local presence in proximity to our customers.

      The following is a list of the locations of our principal manufacturing
facilities at December 31, 2004:

                                                                         Approx.
Pulse                                                                 Percentage
                                      Approx.          Owned/           Used For
Location (1)                       Square Ft. (2)      Leased      Manufacturing
------------                       ----------          ------      -------------
Zhuhai, PRC                          326,000           Leased               100%
Ningbo, PRC (3)                      289,000            Owned                80%
Izmir, Turkey                        251,000            Owned                80%
Dongguan, People's Republic
    of China, or PRC                 231,000           Leased               100%
Shenzhen, PRC (3)                     29,000           Leased               100%
Greensboro, Maryland                  20,000            Owned                95%
Istanbul, Turkey                      18,000           Leased                80%
Zhongshan, PRC                        14,000           Leased               100%
Yang Mi, Taiwan                       13,000            Owned                80%
                                      ------
      Total                        1,191,000

(1)   In addition to these manufacturing locations, Pulse has 209,000 square
      feet of space which is used for engineering, sales and administrative
      support functions at various locations, including Pulse's headquarters in
      San Diego, California. In addition, Pulse leases approximately 1,398,000
      square feet of space for dormitories, canteens and other employee-related
      facilities in the PRC.

(2)   Consists of aggregate square footage in each locality where manufacturing
      facilities are located. More than one manufacturing facility may be
      located within each locality.

(3)   Facilities of Full Rise Electronic Co., Ltd. ("FRE"), a majority owned
      subsidiary, of which we owned 51% at December 31, 2004.


                                       14


                                                                         Approx.
AMI Doduco                                                            Percentage
                                      Approx.        Owned/             Used For
Location (1)                       Square Ft.        Leased        Manufacturing
------------                       ----------        ------        -------------
Pforzheim, Germany                   490,000          Owned                  70%
Reidsville, North Carolina           260,000          Owned                  60%
Sinsheim, Germany                    222,000          Owned                  60%
Export, Pennsylvania                 115,000         Leased                  80%
Tianjin, PRC                          62,000         Leased                 100%
Luquillo, Puerto Rico                 32,000          Owned                  80%
Madrid, Spain                         32,000          Owned                  90%
Mexico City, Mexico                   25,000         Leased                  80%
Lentate S/Seveso, Italy               23,000         Leased                  90%
Dorog, Hungary                        11,000         Leased                  80%
                                      ------
       Total                       1,272,000

(1)   Engineering, sales and administrative support functions for AMI Doduco are
      generally contained in these locations.

      We have developed our manufacturing processes in ways intended to maximize
our economic profitability. Accordingly, the manufacturing processes at Pulse
facilities maintain a cost structure that is labor intensive and highly
variable, except for the Consumer Division manufacturing location in Izmir,
Turkey which is highly automated. The labor intensity at legacy Pulse facilities
enables us to increase and decrease production rapidly and to contain costs
during slower periods, whereas Pulse's manufacturing plant in Izmir, Turkey is
highly automated and therefore very sensitive to the volume of production. On
the other hand, AMI Doduco's products tend to have longer business cycles,
longer time to market and are more capital intensive than legacy Pulse products.
As a result, we have automated or mechanized many functions at AMI Doduco
facilities and vertically integrated our products in an attempt to utilize all
of our manufacturing capabilities to create higher value added products and at a
lower cost.

      Traditionally, our engineers design products to meet our customers'
product needs and then we mass-produce the products once a contract is awarded
by, or orders are received from, our customer. We also service customers that
design their own components and outsource production of these components to us.
We then build the components to the customer's design.

      The productive capacity and extent of utilization of our facilities are
difficult to quantify. In any one facility, maximum capacity and utilization
vary periodically depending on the segment's manufacturing strategies, the
product being manufactured and the current market conditions and demand. We
estimate that our average utilization of overall production capacity in 2004 was
between 75% to 85% for Pulse and 75% to 80% for AMI Doduco.

Item 3 Legal Proceedings

      We are a party to various legal proceedings and administrative actions.
See Discussion in Note 7 to the Audited Consolidated Financial Statements. We
expect lawsuits to arise in the normal course of business. Although it is
difficult to predict the outcome of any legal proceeding, we do not believe
these proceedings and actions will, individually or in the aggregate, have a
material adverse effect on our consolidated financial condition or results of
operations.

Item 4 Submission of Matters to a Vote of Security Holders

      None


                                       15


                                     Part II

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

      Our common stock is traded on the New York Stock Exchange under the ticker
symbol "TNL". The following table reflects the highest and lowest sales prices
in each quarter of the last two years.

                First           Second             Third           Fourth
              Quarter          Quarter           Quarter          Quarter
              -------          -------           -------          -------

2004 High      $21.85           $23.28            $21.68           $19.91

2004 Low       $17.61           $18.80            $16.80           $16.10

2003 High      $17.65           $18.34            $21.00           $24.43

2003 Low       $13.50           $14.31            $14.95           $19.20

      On December 31, 2004, there were approximately 1,256 registered holders of
our common stock, which has a par value of $.125 per share and is the only class
of stock that we have outstanding. See additional discussion on restricted
earnings in Item 7, Liquidity and Capital Resources, and in Note 8 of Notes to
Consolidated Financial Statements.

      On April 11, 2002 we completed a follow-on offering of 6,348,000 shares of
our common stock. The proceeds of the offering, net of expenses, were
approximately $134.7 million. These proceeds resulted in a common stock increase
of $0.8 million and an additional paid-in capital increase of $133.9 million.

      After paying a dividend of $0.03375 per share on January 25, 2002 to
shareholders of record on January 4, 2002, we discontinued regular quarterly
cash dividends on our common stock. On February 2, 2005 we reinstituted the
practice of paying a quarterly dividend and announced a dividend of $0.0875 per
share, payable April 22, 2005.

      Information as of December 31, 2004 concerning plans under which our
equity securities are authorized for issuance are as follows:



                                  Number of shares to be
                                 issued upon exercise of
                                   options or grant of      Weighted average     Number of securities
                                   restricted shares or    exercise price of      remaining available
 Plan Category                    other incentive shares  outstanding options     for future issuance
                                 -----------------------------------------------------------------------
                                                                             
Equity compensation plans
approved by security holders           5,960,000                  $19.24              2,992,471

Equity compensation plans not
approved by security holders                   0                       0                      0

Total                                  5,960,000                  $19.24              2,992,471


      On May 15, 1981, our shareholders approved an incentive compensation plan
(ICP) intended to enable us to obtain and retain the services of employees by
providing them with incentives that may be created by the Board of Directors
Compensation Committee under the ICP. Subsequent amendments to the plan were
approved by our shareholders including an amendment on May 23, 2001 which
increased the total number of shares of our common stock which may be granted
under the plan to 4,900,000. Our 2001 Stock Option Plan and the Restricted Stock
Plan II were adopted under the ICP. In addition to the ICP, plans approved by us
include a 60,000 share Board of Director Stock Plan and an Employee Stock
Purchase Plan. The maximum number of shares which may be issued under our
Employee Stock Purchase Plan is 1,000,000, provided, however, that such amount
will be automatically increased annually beginning on August 1, 2002 in an
amount equal to the lesser of (a) 200,000 shares, or (b) two percent (2%)


                                       16


of the outstanding common stock as of the last day of the prior fiscal year or
alternatively (c) such an amount as may be determined by our board of directors.
In 2003, our board of directors determined that no increase for 2003 or 2004
should be made. During 2004, the operation of the Employee Stock Purchase Plan
was suspended following an evaluation of its affiliated expense and perceived
value by employees. Of the 2,992,471 shares remaining available for future
issuance, 266,249 shares are attributable to our Restricted Stock Plan, 812,099
shares are attributable to our Employee Stock Purchase Plan, and 14,634 shares
are attributable to our Board of Director Stock Plan. Note 11 to the
Consolidated Financial Statements contains additional information regarding our
stock based compensation plans.

Item 6 Selected Financial Data (In Thousands, Except Per Share Data)



                                       2004(f)(g)     2003(e)      2002(C)     2001(d)      2000
                                        --------      --------    ---------    --------    --------
                                                                            
Net sales                               $582,314      $509,247    $ 406,354    $474,199    $664,378
Net earnings (loss)                     $  6,928      $ 11,988    $ (43,537)   $  2,784    $ 99,308
     Earnings(loss) per share:
         Basic                          $    .17      $    .30    $   (1.17)   $    .08    $   3.05
         Diluted                        $    .17      $    .30    $   (1.17)   $    .08    $   3.02
Total assets                            $626,587      $588,894    $ 547,706    $525,020    $520,771
Total long-term debt                    $  7,255      $  6,837    $  16,348    $ 89,129    $ 48,588
Shareholders' equity                    $464,862      $448,750    $ 422,059    $329,231    $324,430
     Net worth per share                $  11.49      $  11.14    $   10.52    $   9.77    $   9.76
Working capital (a)                     $238,898      $199,770    $ 235,579    $189,257    $230,397
     Current ratio                      2.9 to 1      2.7 to 1     3.2 to 1    2.9 to 1    2.7 to 1
Number of shares outstanding:
     Weighted average,
       including common stock
       equivalents                        40,411        40,171       37,581      33,566      32,859
     Year end                             40,448        40,279       40,130      33,683      33,237
Dividends declared per share (b)              --            --           --    $  .1350    $  .1350
Price range per share:
     High                               $  23.28      $  24.43    $   31.40    $  57.00    $  76.13
     Low                                $  16.10      $  13.50    $   12.66    $  19.60    $  19.38


(a)   Includes cash and cash equivalents and current installments of long-term
      debt.

(b)   After January 25, 2002, we discontinued paying regular quarterly cash
      dividends on our common stock. Our last dividend declared was in 2001. On
      February 2, 2005 we announced the restoration of the practice of paying a
      quarterly dividend, beginning with a dividend of $0.0875 per share,
      payable April 22, 2005.

(c)   During 2002, we recorded a cumulative effective of accounting change of
      $15.7 million net of income tax benefit, and a $32.1 million intangible
      asset impairment, less a $12.8 million tax benefit.

(d)   During 2002, our ownership interest in a cost basis method investment
      increased from approximately 19% to 28%. The initial investment was made
      in 2001. We have adjusted 2001 to reflect the impact of a change in
      accounting for this investment from the cost basis method to the equity
      accounting method, as if this investment were accounted for as an equity
      method investment since the initial investment.

(e)   On January 9, 2003 we purchased Eldor High Tech Wire Wound Components
      S.r.L. for $83.9 million in cash.

(f)   During 2004, we recorded $18.5 million in intangible asset impairments,
      less a $2.2 million tax benefit.

(g)   On September 13, 2004 we acquired a controlling interest in Full Rise
      Electronic Co., Ltd. ("FRE"), and began consolidating FRE's results, less
      a minority interest. Our investment in FRE was previously accounted for
      under the equity method. Our ownership percentage in FRE was 51% as of
      December 31, 2004.


                                       17


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

Introduction

      This discussion and analysis of our financial condition and results of
operations as well as other sections of this report, contain certain
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995 and involve a number of risks and uncertainties.
Actual results may differ materially from those anticipated in these
forward-looking statements for many reasons, including the risks faced by us
described in "Risk Factors" section of this report on page 9 through 14.

Critical Accounting Policies

      The preparation of financial statements and related disclosures in
conformity with accounting principles generally accepted in the United States
requires us to make judgments, assumptions and estimates that affect the amounts
reported in the Consolidated Financial Statements and accompanying notes. Note 1
to the Consolidated Financial Statements on page 41 through 42 describes the
significant accounting policies and methods used in the preparation of the
Consolidated Financial Statements. Estimates are used for, but not limited to,
the accounting for inventory valuation, impairment of goodwill and other
intangibles, severance and asset impairment expense, income taxes, and
contingency accruals. Actual results could differ from these estimates. The
following critical accounting policies are impacted significantly by judgments,
assumptions and estimates used in the preparation of the Consolidated Financial
Statements.

      Inventory Valuation. We carry our inventories at lower of cost or market.
We establish inventory provisions to write down excess and obsolete inventory to
market value. We utilize historical trends and customer forecasts to estimate
expected usage of on-hand inventory. In addition, inventory purchases are based
upon future demand forecasts estimated by taking into account actual sales of
our products over recent historical periods and customer forecasts. If there is
a sudden and significant decrease in demand for our products or there is a
higher risk of inventory obsolescence because of rapidly changing technology or
customer requirements, we may be required to write down our inventory and our
gross margin could be negatively affected. Conversely, if we were to sell or use
a significant portion of inventory already written down, our gross margin could
be positively affected.

      Impairment of Goodwill and Other Intangibles. We assess the carrying cost
of goodwill and intangible assets with indefinite lives on an annual basis and
between annual tests in certain circumstances. This assessment is based on
comparing fair value to carrying cost. Fair value is based on estimating future
cash flows using various growth assumptions and discounting based on a present
value factor. Assigning a useful life and periodically reassessing a remaining
useful life (for purposes of systematic amortization) is also predicated on
various economic assumptions. Our intangible assets are also subject to
impairment as a result of other factors such as changing technology, declines in
demand that lead to excess capacity and other factors. In addition to the
various assumptions, judgments and estimates mentioned above, we may
strategically realign our resources and consider restructuring, disposing of, or
otherwise exiting businesses in response to changes in industry or market
conditions, which could result in an impairment of goodwill or other
intangibles.

      Severance and Asset Impairment Expense. Acquisition-related costs are
included in the allocation of the cost of the acquired business. Other
restructuring costs are expensed during the period in which we determine that we
will incur those costs, and all of the requirements for accrual are met in
accordance with the applicable accounting guidance. We record severance,
tangible asset and other restructuring charges such as lease terminations, in
response to declines in demand that lead to excess capacity, changing technology
and other factors. Restructuring costs are recorded based upon our best
estimates at the time, such as estimated residual values. Our actual
expenditures for the restructuring activities may differ from the initially
recorded costs. If this occurs, we adjust our initial estimates in future
periods. In the case of acquisition-related restructuring costs, depending on
whether the assets impacted came from the acquired entity and the timing of the
restructuring charge, such adjustment would generally require a change in value
of the goodwill appearing on our balance sheet, which may not affect our
earnings. In the case of other restructuring costs, we could be required either
to record additional expenses in future periods if our initial estimates were
too low, or reverse part of the charges that we recorded initially if our
initial estimates were too high.

      Income Taxes. We use the asset and liability method of accounting for
income taxes. Under this method, income tax expense is recognized for the amount
of taxes payable or refundable for the current year and for deferred tax
liabilities and assets for the future tax consequences of events that have been
recognized in an entity's financial statements or tax returns. We must make
assumptions, judgments and estimates to determine our current provision for
income taxes and also our deferred tax assets and liabilities and any valuation
allowance to be recorded against a


                                       18


deferred tax asset. Our judgments, assumptions and estimates relative to the
current provision for income tax take into account current tax laws, our
interpretation of current tax laws and possible outcomes of current and future
audits conducted by foreign and domestic tax authorities. Changes in tax law or
our interpretation of tax laws and the resolution of current and future tax
audits could significantly impact the amounts provided for income taxes in our
consolidated financial statements. Our assumptions, judgments and estimates
relative to the value of a deferred tax asset take in to account predictions of
the amount and category of future taxable income. Actual operating results and
the underlying amount and category of income in future years could render our
current assumptions, judgments and estimates of recoverable net deferred taxes
inaccurate. Any of the assumptions, judgments and estimates mentioned above
could cause our actual income tax obligations to differ from our estimates.

      Contingency Accruals. During the normal course of business, a variety of
issues may arise, which may result in litigation, environmental compliance and
other contingent obligations. In developing our contingency accruals we consider
both the likelihood of a loss or incurrence of a liability as well as our
ability to reasonably estimate the amount of exposure. We record contingency
accruals when a liability is probable and the amount can be reasonably
estimated. We periodically evaluate available information to assess whether
contingency accruals should be adjusted. Our evaluation includes an assessment
of legal interpretations, judicial proceedings, recent case law and specific
changes or developments regarding known claims. We could be required to record
additional expenses in future periods if our initial estimates were too low, or
reverse part of the charges that we recorded initially if our estimates were too
high.

Overview

      We are a global producer of precision-engineered passive magnetics-based
electronic components and electrical contact products and materials. We believe
we are a leading global producer of these products and materials in the primary
markets we serve based on our estimates of the size of our primary markets in
annual revenues and our share of those markets relative to our competitors.

      We operate our business in two distinct segments:

            o     the electronic components segment, which operates under the
                  name Pulse, and

            o     the electrical contact products segment, which operates under
                  the name AMI Doduco.

      General. We define net sales as gross sales less returns and allowances.
We sometimes refer to net sales as revenue.

      Prior to 2001, the growth in our consolidated net sales was due in large
part to the growth of electronic component markets served by Pulse. However,
beginning in late 2000, the electronics markets served by Pulse experienced a
severe global contraction. In late 2002, many of these markets began to
stabilize or increase in terms of unit sales. However, because of excess
capacity, relocation by customers from North America and Europe to Asia, and
emergence of strong competitors in Asia, the pricing environment for Pulse's
products has been and remains challenging, preventing total revenue from growing
proportionately with unit growth. Pulse has undertaken a series of
cost-reduction actions to optimize its capacity with market conditions.

      Since late 2000 and continuing through late 2003, the markets in both
North America and Europe for AMI Doduco's products have been weak. The markets
in both North America and Europe began to recover in 2004. Demand at AMI Doduco
typically mirrors the prevailing economic conditions in North America and
Europe. This is true for electrical contacts, and for component subassemblies
for automotive applications such as multi-function switches, motor control
sensors and ignition security systems, and for non-automotive uses such as
appliance and industrial controls. AMI Doduco continues its cost reduction
actions including work force adjustments and plant consolidations in line with
demand around the world in order to optimize efficiency.

      Historically, the gross margin at Pulse has been significantly higher than
at AMI Doduco. As a result, the mix of net sales generated by Pulse and AMI
Doduco during a period affects our consolidated gross margin. Our gross margin
is also significantly affected by capacity utilization, particularly at AMI
Doduco and the Pulse Consumer Division. Pulse's markets are characterized by
relatively short product life cycles compared to AMI Doduco. As a result,
significant product turnover occurs each year. Therefore, Pulse's changes in
average selling prices do not necessarily provide a meaningful and quantifiable
measure of Pulse's operations. AMI Doduco has a relatively long-term and mature
product line, with less turnover, and with less frequent variation in the prices
of product sold, relative to Pulse. Many of AMI Doduco's products are sold under
annual (or longer) purchase contracts. Therefore, AMI Doduco's revenues
historically have not been subject to significant price fluctuations. In


                                       19


addition, sales growth and contraction at AMI Doduco and Pulse's Consumer
Division are generally attributable to changes in unit volume and changes in
unit pricing, as well as foreign exchange rates, especially the U.S. dollar to
the euro.

      Acquisitions. Historically, acquisitions have been an important part of
our growth strategy. In many cases, our move into new product lines and
extensions of our existing product lines or markets has been facilitated by an
acquisition. Our acquisitions continually change the mix of our net sales. Pulse
made numerous acquisitions in recent years which have increased our penetration
into our primary markets and expanded our presence in new markets. Excelsus was
acquired in August 2001 for approximately $85.9 million, net of cash acquired.
Excelsus was based in Carlsbad, California, and was a leading producer of
customer-premises digital subscriber line filters and other broadband
accessories and it is now a core part of Pulse's telecommunications product
division. Pulse acquired Eldor's consumer electronics business in January 2003
for approximately $83.9 million, and this became the Pulse Consumer Division
headquartered in Italy with production operations in Istanbul and Izmir, Turkey
and in the PRC. The Consumer Division is a leading supplier of flyback
transformers to the European television industry. We acquired a controlling
interest in Full Rise Electronic Co., Ltd. ("FRE") in 2004. FRE is based in the
Republic of China (Taiwan) and manufacturers connector products, including
single and multiple-port jacks, and supplies such products to Pulse under a
cooperation agreement. AMI Doduco has also made acquisitions over the years.
Generally, AMI Doduco's acquisitions have been driven by our strategy of
expanding our product and geographical market presence for electrical contact
products. Due to our integration of acquisitions and the interchangeable sources
of net sales between existing and acquired operations, historically we have not
separately tracked the net sales of an acquisition after the date of the
transaction.

      Technology. Our business is continually affected by changes in technology,
design, and preferences of consumers and other end users of our products, as
well as changes in regulatory requirements. We address these changes by
continuing to invest in new product development and by maintaining a diverse
product portfolio which contains both mature and emerging technologies in order
to meet customer demands.

      Management Focus. Our executives focus on a number of important factors in
evaluating our financial condition and operational performance. We use economic
profit, which we define as operating profit after tax, less our cost of capital.
Revenue growth, gross profit as a percentage of revenue, and operating profit as
a percent of revenue are also among these factors. Operating leverage or
incremental operating profit as a percentage of incremental sales is a factor
that is discussed frequently with analysts and investors, as this is believed to
reflect the benefit of absorbing fixed overhead and operating expenses. In
evaluating working capital management, liquidity and cash flow, our executives
also use performance measures such as days sales outstanding, days payable
outstanding and inventory turnover. The continued success of our business is
largely dependent on meeting and exceeding our customers' expectations.
Therefore, non-financial performance measures relating to on-time delivery and
quality assist our management in monitoring customer satisfaction on an on-going
basis.

      Cost Reduction Programs. Our manufacturing business model for Pulse's
non-consumer markets has a very high variable cost component due to the
labor-intensity of many processes, which allows us to quickly change our
capacity based on market demand. The Pulse Consumer Division, however, is
capital intensive and therefore more sensitive to volume changes. AMI Doduco has
a higher fixed cost component of manufacturing activity than Pulse, as it is
more capital intensive. Therefore, AMI Doduco is unable to expand or contract
its capacity as quickly as Pulse in response to market demand, although
significant actions have been taken to align AMI Doduco's capacity with current
market demand.

      As a result of our continuing focus on both economic and operating profit,
we will continue to aggressively size both Pulse and AMI Doduco so that costs
are optimally matched to current and anticipated future revenue and unit demand.
We will also continue to pursue additional growth opportunities. The amounts of
additional charges will depend on specific actions taken. The actions taken over
the past several years such as plant closures, plant relocations, asset
impairments and reduction in personnel worldwide have resulted in the
elimination of a variety of costs. The majority of these costs represent the
annual salaries and benefits of terminated employees, both those directly
related to manufacturing and those providing selling, general and administrative
services, as well as lower overhead costs related to factory relocations to
lower-cost locations. The eliminated costs also include depreciation savings
from disposed equipment. We have implemented a succession of cost reduction
initiatives and programs, summarized as follows:

      During 2001, we announced the closure of our production facilities in
Thailand and Malaysia. The production at these two facilities was transferred to
other Pulse facilities in Asia. In addition, headcount was reduced by
approximately 12,300, net of new hires, during fiscal 2001 through voluntary
employee attrition and involuntary


                                       20


workforce reductions primarily at manufacturing facilities in the People's
Republic of China ("PRC"). In addition, a charge was recorded in 2001 to
writedown the value of certain Pulse fixed assets to their disposal value.

      During 2002, we announced the closure of our production facility in the
Philippines. The production at this facility was transferred to other Pulse
facilities in Asia. We also adopted other restructuring plans during 2002 for
personnel reductions. An additional provision was recorded in 2002 related to
asset writedowns, relating to primarily Asian-based production equipment that
became idle in 2002.

      During 2003, we accrued for the elimination of certain manufacturing and
support positions located in France, the United Kingdom, Mexico, the PRC and for
other facility exit costs related to Pulse. We accrued for the shutdown of
Pulse's manufacturing facility in Mexico and to write down the carrying cost of
Pulse's facility in the Philippines which is held for sale. At AMI Doduco, we
accrued for the elimination of certain manufacturing positions principally
located in North America and Germany and to complete the shutdown of a redundant
facility in Spain that we acquired from Engelhard-CLAL in 2001.

      During 2004, we accrued for the termination of personnel at AMI Doduco's
facility in Germany; for Pulse's shutdown of a facility in Carlsbad, California;
to reduce capacity at a Pulse facility in the PRC; to shutdown AMI Doduco's
facility in France; and for other severance in various locations.

      International Operations. As of December 31, 2004, we had manufacturing
operations in 10 countries and had no significant net sales in currencies other
than the U.S. dollar and the euro. A large percentage of our sales in recent
years have been outside of the United States. In the year ended December 31,
2004, 78% of our net sales were outside of the U.S. Changing exchange rates
often impact our financial results and our period-over-period comparisons. This
is particularly true of movements in the exchange rate between the U.S. dollar
and the euro. AMI Doduco's European and Pulse's Consumer Division sales are
denominated primarily in euro, and euro-denominated sales and earnings may
result in higher or lower dollar sales and net earnings upon translation for our
U.S. consolidated financial statements. We may also experience a positive or
negative translation adjustment to equity because our investment in Pulse's
Consumer Division and AMI Doduco's European operations may be worth more or less
in U.S. dollars after translation for our U. S. consolidated financial
statements. The Pulse non-consumer operations may incur foreign currency gains
or losses as euro-denominated transactions are remeasured to U.S. dollars for
financial reporting purposes. If a higher percentage of our sales is denominated
in non-U.S. currencies, increased exposure to currency fluctuations may result.

      In order to reduce our exposure resulting from currency fluctuations, we
may purchase currency exchange forward contracts and/or currency options. These
contracts guarantee a predetermined range of exchange rates at the time the
contract is purchased. This allows us to shift the majority of the risk of
currency fluctuations from the date of the contract to a third party for a fee.
As of December 31, 2004, we had one foreign currency forward contract
outstanding to sell forward approximately 58.8 million euros in order to hedge
intercompany loans. In determining the use of forward exchange contracts and
currency options, we consider the amount of sales, purchases and net assets or
liabilities denominated in local currencies, the type of currency, and the costs
associated with the contracts.

      Precious Metals. AMI Doduco uses silver, as well as other precious metals,
in manufacturing some of its electrical contacts, contact materials and contact
subassemblies. Historically, we have leased or held these materials through
consignment arrangements with our suppliers except in the case of AMI Doduco's
entity in the PRC which owns its precious metals. Leasing and consignment costs
have typically been below the costs to borrow funds to purchase the metals, and
more importantly, these arrangements eliminate the effects of fluctuations in
the market price of owned precious metal and enable us to minimize our
inventories. AMI Doduco's terms of sale generally allow us to charge customers
for precious metal content based on market value of precious metal on the day
after shipment to the customer. Thus far we have been successful in managing the
costs associated with our precious metals. While limited amounts are purchased
for use in production, the majority of our precious metal inventory continues to
be leased or held on consignment. If our leasing/consignment fees increase
significantly in a short period of time, and we are unable to recover these
increased costs through higher sale prices, a negative impact on our results of
operations and liquidity may result. Leasing/consignment fee increases are
caused by increases in interest rates or volatility in the price of the
consigned material.

      Income Taxes. Our effective income tax rate is affected by the proportion
of our income earned in high-tax jurisdictions such as those in Europe and the
income earned in low-tax jurisdictions, particularly Izmir, Turkey and the
People's Republic of China. This mix of income can vary significantly from one
period to another. We have benefited over recent years from favorable tax
incentives, inside and outside of the U.S. However, there is no guarantee as to
how long these benefits will continue to exist. Except in limited circumstances,
we have not provided


                                       21


for U.S. federal income and foreign withholding taxes on our non-U.S.
subsidiaries' undistributed earnings as per Accounting Principles Board Opinion
No. 23, Accounting for Income Taxes - Special Areas. Such earnings include
pre-acquisition earnings of foreign entities acquired through stock purchases,
and are intended to be reinvested outside of the U.S. indefinitely. We have not
provided for U.S. federal income and foreign withholding taxes on approximately
$333.0 million of our non-U.S. subsidiaries' undistributed earnings (as
calculated for income tax purposes) as of December 31, 2004, as per APB 23.
Unrecognized deferred taxes on these undistributed earnings are estimated to be
approximately $96.0 million. Where excess cash has accumulated in our non-U.S.
subsidiaries and it is advantageous for tax reasons, subsidiary earnings may be
repatriated.

Results of Operations

Year ended December 31, 2004 compared to the year ended December 26, 2003

      Net Sales. Net sales for the year ended December 31, 2004 increased $73.1
million, or 14.3%, to $582.3 million from $509.2 million in the year ended
December 26, 2003. Our sales increase from the comparable period last year was
attributable to improvement in the markets for Pulse in the first half of the
year, and for AMI Doduco throughout the year. Pulse's increase in net sales also
reflects the inclusion of Full Rise Electronic Co., Ltd. ("FRE") net sales from
the time we acquired a controlling interest in September 2004. Stronger demand
in Pulse's networking, power conversion, military/aerospace and consumer
division markets was particularly apparent in the first six months of the year.
AMI Doduco's increase in net sales was primarily due to higher prices for
precious metals and favorable translation effect of a stronger euro, as well as
stronger economic growth and successes in AMI Doduco's efforts to increase its
market share.

      Pulse's net sales increased $26.1 million, or 8.9%, to $320.2 million for
the year ended December 31, 2004 from $294.1 million in the year ended December
26, 2003. Pulse sales benefited from the inclusion of FRE's net sales from the
time we acquired a controlling interest in September 2004. Pulse also
experienced revenue increases in networking, telecommunications, power
conversion, military/aerospace and consumer division markets on a worldwide
basis. However, sales derived from the consumer division (which are denominated
in euros) were lower in local currency in the 2004 period, although this was
offset by the favorable translation effect of a stronger euro in 2004, after
translating the consumer division's sales in to U.S. dollars.

      AMI Doduco's net sales increased $47.0 million, or 21.8%, to $262.2
million for the year ended December 31, 2004 from $215.2 million in the year
ended December 26, 2003. The sales benefited from an increase in the average
euro-to-U.S. dollar exchange rate and higher prices for precious metals which
were passed on to customers. The higher average euro-to-dollar exchange rate
during 2004 versus the comparable period in 2003 had the effect of increasing
reported sales by approximately $17.6 million. Sales in the 2004 period reflect
improving demand in North America and Europe. The sales improvements were
partially offset by price adjustments related to new long-term contracts with
major customers.

      Cost of Sales. As a result of higher net sales, our cost of sales
increased $60.2 million, or 16.0%, to $436.1 million for the year ended December
31, 2004 from $375.9 million for the year ended December 26, 2003. Our
consolidated gross margin for the year ended December 31, 2004 was 25.1%,
compared with 26.2% in the year ended December 26, 2003. Our consolidated gross
margin in 2004 was negatively affected by:

   o  AMI Doduco accounting for a higher percentage of sales relative to Pulse,
      in that AMI Doduco's products typically have a lower gross margin than
      those of Pulse,

   o  lower average selling prices for most Pulse product lines through 2004;
      and

   o  lower capacity utilization at Pulse in the second half of 2004.

These negative impacts on gross margin were partially offset by the higher
capacity utilization at Pulse and AMI Doduco in the first half of 2004 versus
the comparable period in 2003.

      Selling, General and Administrative Expenses. Total selling, general and
administrative expenses for the year ended December 31, 2004 increased $10.6
million to $109.8 million from $99.2 million, for the year ended December 26,
2003. As a percentage of net sales, selling, general and administrative expenses
was 18.9% in the year ended December 31, 2004 versus 19.5% in the comparable
period, or a decrease of 0.6%. Increased spending was a result of increased
variable costs such as selling commissions and stock compensation expense due to
a higher average share price in 2004, partially offset by restructuring actions
that we took over the last year to reduce expenses and tighten spending
controls. Selling expense and stock compensation expense, in particular, were
$2.8 million and $1.1 million higher, respectively, in 2004 versus the
comparable period in 2003. European expenses that are


                                       22


denominated in euros were translated to a higher level of U.S. dollars at the
higher euro-to-dollar exchange rate in 2004. Increased spending was also a
result of the inclusion of FRE expenses in our consolidated results from the
time we acquired a controlling interest in September 2004.

      Research, development and engineering expenses are included in selling,
general and administrative expenses. We refer to research, development and
engineering expenses as RD&E. For the year ended December 31, 2004 and December
26, 2003 respectively, RD&E by segment was as follows (dollars in thousands):

                                                 2004               2003
                                                 ----               ----
          Pulse                                $18,420            $14,439
          Percentage of segment sales             5.8%               4.9%

          AMI Doduco                             4,182             $4,030
          Percentage of segment sales             1.6%               1.9%

      Higher RD&E spending in 2004 at Pulse includes additional investments in
our China Development Center, inclusion of FRE RD&E beginning in September 2004
and higher U.S. dollar reported spending of RD&E expenses incurred in euros. We
believe that future sales in the electronic components markets will be driven by
next-generation products. Design and development activities with our OEM
customers continued at an aggressive pace during 2004 and into 2005.

      Severance and Asset Impairment Expense. Total severance and asset
impairment expense for the year ended December 31, 2004 increased $18.8 million,
to $27.9 million from $9.0 million for the year ended December 26, 2003. The
increase in the 2004 period is attributable to $18.5 million of intangible
impairments related to Eldor and Excelsus acquired intangibles, and $0.4 million
for other acquired intangibles. These intangible asset impairments resulted from
updated cash flow projections relating to technology and customer relationships,
and reflect, among other things, shifting product mixes, changes among major
customers and continuing pressures on selling prices in the consumer and
telecommunication product division of the Pulse segment.

      In the year ended December 31, 2004, we accrued $9.0 million for severance
and related payments comprised of $3.1 million related to AMI Doduco's
termination of manufacturing and personnel at a facility in Germany, $2.7
million related to the termination of manufacturing and support personnel at an
AMI Doduco facility in France, $1.5 million to write-down the value of certain
Pulse fixed assets to their disposal values, $0.8 million related to Pulse's
shutdown of a facility in Carlsbad, California and $0.9 million for other
severances in various locations. The vast majority of these accruals will be
utilized by the end of the second quarter in 2005.

      In the year ended December 26, 2003, we accrued $9.0 million in the
aggregate for severance and related payments and asset impairments. At Pulse, we
accrued $1.5 million for the elimination of certain manufacturing and support
positions located in France, the United Kingdom, Mexico and the PRC and $0.7
million for other facility exit costs. We additionally accrued $1.9 million for
shutdown of Pulse's manufacturing facility in Mexico and $0.5 million to
write-down the carrying cost of Pulse's facility in the Philippines which is
held for sale. At AMI Doduco, we accrued $2.9 million for the elimination of
certain manufacturing positions principally located in North America and Germany
and $1.5 million to complete the shutdown of a redundant facility in Spain that
we acquired from Engelhard-CLAL in 2001. The majority of these accruals were
utilized by the end of 2004.

      Interest. Net interest expense was $0.3 million for the year ended
December 31, 2004 compared to net interest expense of $0.8 million for the year
ended December 26, 2003. The average higher balance of invested cash in 2004
over the comparable period in 2003, at a similar interest income yield, resulted
in slightly lower net interest expense. Recurring aggregate components of
interest expense, such as silver leasing fees, interest on bank debt and bank
commitment fees, approximated those of 2003.

      Other Income (Expense). Other income (expense) was $2.0 million of income
for the year ended December 31, 2004 versus $0.6 million of expense for the year
ended December 26, 2003. The change is attributable to a gain of $1.1 million
related to the settlement of equity rights arising from the 2001 acquisition of
the Engelhard-CLAL electrical contacts business for the year ended December 31,
2004 and $1.4 million more in foreign exchange losses during the year ended
December 26, 2003 compared to 2004.

      Equity Earnings in Minority-Owned Investments. Equity earnings in
minority-owned investments were $0.8 million of income for the year ended
December 31, 2004 versus an $8.7 million loss for the year ended December 26,
2003. The net loss in 2003 included a $9.3 million charge to the original cost
basis of our investment, offset by $0.6


                                       23


million of equity method investment earnings in 2003. Since we acquired control
of FRE in September 2004, we consolidate FRE's results, and we no longer record
equity earnings from FRE. Rather, the full consolidation of FRE and related
minority interest expense is now reflected in our financial statements.

      Income Taxes. The effective income tax rate for the year ended December
31, 2004 was 31% compared to 20% for the year ended December 26, 2003. The
higher tax rate in 2004 resulted from a higher proportion of income being
attributable to high-tax jurisdictions, the impact of non-deductible
restructuring expenses in high-tax jurisdictions and the tax effects of
intangible asset impairments.

      Minority Interest. Minority interest was $0.7 million of expense for the
year ended December 31, 2004. Since the date we acquired control of FRE on
September 13, 2004, we began consolidating FRE's results with our own. The net
earnings attributable to the minority interest are reflected as minority
interest expense in the year ended December 31, 2004.

      Year ended December 26, 2003 compared to the year ended December 27, 2002

      Net Sales. Net sales for the year ended December 26, 2003 increased $102.8
million, or 25.3%, to $509.2 million from $406.4 million in the year ended
December 27, 2002. Our sales increase from the comparable period last year was
primarily attributable to the increases from the Eldor acquisition and stronger
sales of Pulse's legacy products, tempered by ongoing pressure on selling prices
at Pulse, and to a lesser extent, weaker demand at AMI Doduco, which resulted in
lower sales of electrical contacts and contact materials on a constant-euro
basis.

      Pulse's net sales increased $89.5 million, or 43.7%, to $294.1 million for
the year ended December 26, 2003 from $204.6 million in the year ended December
27, 2002. Most of the increase is attributable to sales of Eldor since the date
of acquisition in January 2003. Increased unit revenues in many Pulse legacy
product lines were somewhat offset by our average selling price declines.

      AMI Doduco's net sales increased $13.4 million, or 6.6%, to $215.2 million
for the year ended December 26, 2003 from $201.8 million in the year ended
December 27, 2002. Sales in the 2003 period reflect weak North American and
European markets, which were more than offset by the positive translation effect
of an increase in the average euro-to-U.S. dollar exchange rate during the
period. Lower net sales in local currencies, primarily euros, resulted from
lower manufacturing activity by customers in the commercial and industrial
machinery and non-residential construction end markets.

      Cost of Sales. Our cost of sales increased $66.1 million, or 21.3%, to
$375.9 million for the year ended December 26, 2003 from $309.9 million for the
year ended December 27, 2002, which did not include Pulse's Consumer Division.
Our consolidated gross margin for the year ended December 26, 2003 was 26.2%
compared to 23.8% for the year ended December 27, 2002. Our consolidated gross
margin was positively affected by:

   o  a mix of net sales weighted more toward Pulse, whose products typically
      have a higher gross margin than those of AMI Doduco,

   o  the addition of the Pulse Consumer Division products, which typically have
      a higher gross margin than AMI Doduco products and some Pulse legacy
      products, and

   o  better capacity utilization and lower per-unit overhead costs at Pulse in
      2003 than in 2002.

      These positive impacts on gross margin in 2003 were partially offset by
manufacturing inefficiencies at AMI Doduco due to under-utilization of capacity
and continued consolidation activities among European, Asian and North American
manufacturing facilities.

      Selling, General and Administrative Expenses. Total selling, general and
administrative expenses for the year ended December 26, 2003 increased $9.9
million, or 11.1%, to $99.2 million or 19.5% of net sales, from $89.3 million or
22.0% of net sales, for the year ended December 27, 2002. The increase in the
2003 period compared to the 2002 period is primarily attributable to an increase
of $4.2 million in incentive and stock compensation expense reflecting higher
levels of profitability, and $2.4 million of intangible asset amortization
related to the Eldor acquisition. The addition of Eldor expenses and the higher
translated U.S. dollar cost of euro-denominated expenses were partially offset
by savings achieved from restructuring actions that we took over the past year
to reduce costs and tighten spending.


                                       24


      Research, development and engineering expenses are included in selling,
general and administrative expenses. We refer to research, development and
engineering expenses as RD&E. For the year ended December 26, 2003 and December
27, 2002 respectively, RD&E by segment was as follows (dollars in thousands):

                                                 2003               2002
                                                 ----               ----
          Pulse                                $14,439            $13,892
          Percentage of segment sales             4.9%               6.8%

          AMI Doduco                            $4,030             $3,903
          Percentage of segment sales             1.9%               1.9%

      Although some consolidation of RD&E, particularly design activity, has
occurred through restructuring and relocation activities at Pulse, we have
minimized spending cuts in the RD&E area as we believe that future sales in the
electronic components markets will be driven by next-generation products. Design
and development activities with our OEM customers continued at an aggressive
pace during 2003. The change in RD&E as a percentage of sales at Pulse relates
to the effect of the acquisition of Eldor, as Eldor incurs lower RD&E costs
relative to its sales as compared to Pulse legacy products.

      Severance and Asset Impairment Expense. During 2003, we accrued $9.0
million in the aggregate for severance and related payments and asset
impairments. At Pulse, we accrued $1.5 million for the elimination of certain
manufacturing and support positions located in France, the United Kingdom,
Mexico and China and $0.7 million for other facility exit costs. We additionally
accrued $1.9 million for shutdown of Pulse's manufacturing facility in Mexico
and $0.5 million to write-down carrying cost of Pulse's facility in the
Philippines which is held for sale. At AMI Doduco, we accrued $2.9 million for
the elimination of certain manufacturing positions principally located in North
America and Germany and $1.5 million to complete the shutdown of a redundant
facility in Spain that we acquired from Engelhard-CLAL in 2001. The majority of
these accruals were utilized by the end of 2004.

      During 2002, we announced the closure of our production facility in the
Philippines. The production at this facility was transferred to other Pulse
facilities in Asia. We recorded charges of $3.8 million for this plant closing,
comprising $1.4 million for severance and related payments and $2.4 million for
asset writedowns. The majority of this accrual was utilized by the end of 2002.
We also adopted other restructuring plans during 2002. In this regard, we
recorded provisions of $5.9 million for personnel reductions, and substantially
all of the employee severance and related payments in connection with these
actions were completed as of December 31, 2004. An additional provision of $7.0
million was recorded in 2002 related to asset writedowns. These assets were
primarily Asian-based production equipment which became idle in 2002. During
2002, we also recorded an impairment charge of $32.1 million of the value
assigned to the Excelsus tradename, before a $12.8 million tax benefit.

      Interest. Net interest expense was $0.8 million for the year ended
December 26, 2003 compared to net interest expense of $0.1 million for the year
ended December 27, 2002. The increase in net interest expense in the current
period is due to lower yields on a lower average cash invested balance, which
more than offset higher average outstanding bank debt and related interest
expense in the prior year period. Bank debt in 2002 consisted of
euro-denominated term loans which were paid off in July 2002, and credit
facility debt from the Excelsus acquisition which was paid off in April 2002.
Net interest expense also includes interest on our precious metal leases and
commitment fees on our unused credit facility.

      Income Taxes. The effective income tax rate for the year ended December
26, 2003 was 20.0% compared to 30.8% in the form of a benefit for the year ended
December 27, 2002. While the prior year's rate reflects a tax benefit recorded
in connection with the trade name impairment write-off, the tax rate in 2003
resulted from a higher portion of income being attributable to low-tax
jurisdictions, combined with restructuring expenses of AMI Doduco which yielded
tax benefits in high-tax jurisdictions.

      Equity method investment loss. We acquired 19.5% of Full Rise Electronic
Co., Ltd. ("FRE") in 2001, and an additional 10% in 2002. Shares of FRE began
trading on the Taiwan Stock Exchange in January of 2003, and they have
experienced considerable price volatility. We recorded a net loss on equity
method investments of $8.7 million for the year ended December 26, 2003 compared
to equity method investments earnings of $0.3 million for the year ended
December 27, 2002. The net loss in 2003 resulted from a $9.3 million charge to
the original cost basis of our investment, offset by $0.6 million of equity
method investment earnings in 2003. As of December 26, 2003, we maintained an
option to acquire a controlling interest in FRE at its market value at the time
of exercise which we did exercise in fiscal 2004. See additional information in
Note 2 of Notes to Consolidated Financial Statements.


                                       25


Liquidity and Capital Resources

      Working capital as of December 31, 2004 was $238.9 million, compared to
$199.8 million as of December 26, 2003. This increase of $39.1 million was
primarily due to increases in cash and cash equivalents, trade receivables, and
inventories which were partially offset by increases in accounts payable and
short-term debt. The inclusion of FRE in our consolidated balance sheet
accounted for $12.2 million of the increase in working capital. Cash and cash
equivalents, which are included in working capital, increased from $143.4
million as of December 26, 2003 to $156.0 million as of December 31, 2004.

      Net cash provided by operating activities was $33.3 million for the year
ended December 31, 2004 and $55.2 million in the comparable period of 2003, a
decrease of $21.9 million. This decrease was attributable to working capital
increases attributable to higher inventory, lower accounts payable and lower
accrued expenses.

      We present our statement of cash flows using the indirect method as
permitted under Financial Accounting Standards Board Statement No. 95, Statement
of Cash Flows. Our management has found that investors and analysts typically
refer to changes in accounts receivable, inventory, and other components of
working capital when analyzing operating cash flows. Also, changes in working
capital are more directly related to the way we manage our business for cash
flow than are items such as cash receipts from the sale of goods, as would
appear using the direct method.

      Capital expenditures were $11.0 million during the year ended December 31,
2004 and $7.8 million in the comparable period of 2003. The increase of $3.2
million in the 2004 period compared to 2003 was due primarily to higher
expenditures at the Pulse Consumer Division and FRE. We make capital
expenditures to expand production capacity and to improve our operating
efficiency. We plan to continue making such expenditures in the future as and
when necessary.

      We used $5.1 million for acquisitions during the year ended December 31,
2004, which is net of $11.7 million of cash held by FRE that was included in our
consolidated financial statements as of September 13, 2004. The current year
expenditures related to the acquisition by Pulse of a plastics fabrication
operation in the People's Republic of China for $3.6 million and an additional
equity investment in FRE for $13.2 million. We used $83.9 million cash for
acquisitions in the comparable period of 2003, primarily for the purchase of
Eldor's consumer electronics division in January 2003. We may acquire other
businesses or product lines to expand our breadth and scope of operations.

      We did not declare or pay cash dividends on our common stock in fiscal
2004 or 2003. On February 2, 2005 we announced a quarterly cash dividend of
$0.0875 per common share, payable on April 22, 2005 to shareholders of record on
April 8, 2005. This quarterly dividend is expected to result in a cash payment
to shareholders of approximately $3.5 million in the second quarter of 2005.
Annualized, the amount of the dividend represents a yield of approximately 2% of
the price of one common share at the close of trading on February 1, 2005.

      We entered into a new credit agreement on June 17, 2004 providing for
$125.0 million of credit capacity. The facility consists of an aggregate U.S.
dollar-equivalent revolving line of credit in the principal amount of up to
$125.0 million, which provides for borrowings in multiple currencies including
but not limited to U.S. dollars and euros, including individual sub-limits of:

      -     a U.S. dollar-based swing-line loan not to exceed $10.0 million; and

      -     a multicurrency facility providing for the issuance of letters of
            credit in an aggregate amount not to exceed the U.S. dollar
            equivalent of $15.0 million.

      The credit agreement permits us to request one or more increases in the
total commitment not to exceed $75.0 million, provided the minimum increase is
$25.0 million, subject to bank approval.

      The total amount outstanding under the credit facility may not exceed
$125.0 million, provided we do not request an increase in total commitment as
noted above. In any event, outstanding borrowings are limited to a maximum of
three times our earnings before interest, taxes depreciation and amortization
(EBITDA), as defined by the credit agreement, on a rolling twelve-month basis as
of the most recent quarter-end.

      The credit facility contains covenants specifying a maximum debt-to-EBITDA
ratio, minimum interest expense coverage, capital expenditure limitations, and
other customary and normal provisions. We are in compliance with all such
covenants. As of December 31, 2004, we have no outstanding borrowings under our
existing three-year revolving credit agreement.


                                       26


      We pay a commitment fee on the unborrowed portion of the commitment, which
ranges from 0.175% to 0.300% of the total commitment, depending on our
debt-to-EBITDA ratio, as defined above. The interest rate for each currency's
borrowing will be a combination of the base rate for that currency plus a credit
margin spread. The base rate is different for each currency. The credit margin
spread is the same for each currency and is 0.750% to 1.500%, depending on our
debt-to-EBITDA ratio, as defined above. Each of our domestic subsidiaries with
net worth equal to or greater than $5 million guarantees all obligations
incurred under the credit facility.

      We also have an obligation outstanding due in August 2009 under an
unsecured term loan agreement in Germany for the borrowing of approximately 5.1
million euros.

      At December 31, 2004, we included $6.7 million of outstanding debt of Full
Rise Electronic Co., Ltd. in connection with our consolidation of FRE's
financial statements. FRE has a total credit limit of approximately $15.5
million in U.S. dollar equivalents as of December 31, 2004. Neither Technitrol,
nor any of its subsidiaries, has guaranteed or otherwise participated in the
credit facilities of FRE.

      We had three standby letters of credit outstanding at December 31, 2004 in
the aggregate amount of $1.5 million securing transactions entered into in the
ordinary course of business.

      We had commercial commitments outstanding at December 31, 2004 of
approximately $83.4 million due under precious metal consignment-type leases.
This represents an increase of $22.8 million from the $60.6 million outstanding
as of December 26, 2003 and is attributable to volume increases and higher
average silver prices during 2004.

      As of December 31, 2004, future payments related to contractual
obligations were as follows (in thousands):



                                             Amounts due by period
                          Total  Less than 1 year  1 to 3 years   3 to 5 years    Thereafter
                          -----  ----------------  ------------   ------------    ----------
                                                                       
Debt                    $13,972           $ 6,847        $  188        $ 6,937        $    0
Operating leases         26,285             7,613         8,142          3,865         6,665
                        -------           -------        ------        -------        ------
Total                   $40,257           $14,460        $8,330        $10,802        $6,665


We believe that the combination of cash on hand, cash generated by operations
and, if necessary, borrowings under our credit agreement will be sufficient to
satisfy our operating cash requirements in the foreseeable future. In addition,
we may use internally generated funds or obtain borrowings or additional equity
offerings for acquisitions of suitable businesses or assets.

      All retained earnings are free from legal or contractual restrictions as
of December 31, 2004, with the exception of approximately $14.0 million of
retained earnings primarily in the PRC, that are restricted in accordance with
Section 58 of the PRC Foreign Investment Enterprises Law. Included in the $14.0
million is $1.8 million of retained earnings of FRE of which we own 51%. The
amount restricted in accordance with the PRC Foreign Investment Enterprise Law
is applicable to all foreign investment enterprises doing business in the PRC.
The restriction applies to 10% of our net earnings in the PRC, limited to 50% of
the total capital invested in the PRC. We have not experienced any significant
liquidity restrictions in any country in which we operate and none are foreseen.
However, foreign exchange ceilings imposed by local governments and the
sometimes lengthy approval processes which foreign governments require for
international cash transfers may delay our internal cash movements from time to
time. The retained earnings in other countries represent a material portion of
our assets. We expect to reinvest these earnings outside of the United States
because we anticipate that a significant portion of our opportunities for growth
in the coming years will be abroad. If these earnings were brought back to the
United States, significant tax liabilities could be incurred in the United
States as several countries in which we operate have tax rates significantly
lower than the U.S. statutory rate. Additionally, we have not accrued U.S.
income and foreign withholding taxes on foreign earnings that have been
indefinitely invested abroad.

      On October 22, 2004, the American Jobs Creation Act ("AJCA") was signed
into law. The AJCA introduced a limited-time 85% dividends-received deduction on
the repatriation of certain foreign earnings. This deduction would result in a
federal tax rate of approximately 5.25% on the repatriated earnings. To qualify
for the deduction, the earnings must be reinvested in the United States pursuant
to a domestic reinvestment plan established by a company's chief executive
officer and approved by the company's board of directors. Additionally, certain
other criteria, as outlined in the AJCA, must also be met. We may elect to apply
this provision to qualifying earnings repatriations in fiscal 2005. We have
begun an evaluation of the possible effects of the repatriation provision. For


                                       27


our business, however, we do not expect to be able to complete this evaluation
until after the U.S. Congress or the Treasury Department provides additional
clarifying language on key elements of the provision. In January 2005, the
Treasury Department began to issue the first of a series of clarifying guidance
documents related to this provision. We expect to complete our evaluation of the
effects of the repatriation provision within a reasonable period of time
following the publication of the additional clarifications. The amount that we
are considering for repatriation under this provision ranges from zero to
approximately $125.0 million. While we estimate that the related potential range
of additional income tax is between zero and $10.1 million, this estimation is
subject to change following technical correction legislation that we believe is
forthcoming from the U. S. Congress. The amount of additional income tax expense
would be reduced by the part of the eligible dividend that is attributable to
foreign earnings on which a deferred tax liability had been previously accrued.

New Accounting Pronouncements

      In December 2004, the FASB issued SFAS No 123 (revised 2004), Share-Based
Payment, ("SFAS No. 123(R)"), which amends SFAS No. 123, Accounting for
Stock-Based Compensation, and supersedes APB Opinion No. 25, Accounting for
Stock Issued to Employees. SFAS No. 123(R) requires compensation expense to be
recognized for all share-based payments made to employees based on the fair
value of the award at the date of grant, eliminating the intrinsic value
alternative allowed by SFAS No. 123. Generally, the approach to determining fair
value under the original pronouncement has not changed, however, there are
revisions to the accounting guidelines established, such as accounting for
forfeitures. Adoption of this standard is not expected to have a material impact
on our revenue, operating results, financial position or liquidity.

      In December 2004, the FASB issued FASB Staff Position No. FAS 109-2 ("FAS
109-2"), Accounting and Disclosure Guidance for the Foreign Earnings
Repatriation Provision within the American Jobs Creations Act of 2004. As noted
above, the AJCA introduces a limited time 85% dividends received deduction on
the repatriation of certain foreign earnings to a U.S. taxpayer (repatriation
provision), provided certain criteria are met. FAS 109-2 provides accounting and
disclosure guidance for the repatriation provision. Although FAS 109-2 is
effective immediately, we do not expect to be able to complete our evaluation of
the repatriation provision until after Congress or the Treasury Department
provides additional clarifying language on key elements of the provision.

      In November 2004, the FASB issued Statement No. 151, Inventory Costs or
Amendment of ARB No.43, Chapter 4 ("SFAS 151"). SFAS 151 provides for certain
fixed production overhead cost to be reflected as a period cost and not
capitalized as inventory. SFAS 151 is effective for the beginning of our fiscal
2006. Adoption of this standard is not expected to have a material impact on our
revenue, operating results, financial position or liquidity.

Item 7a Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk

      Our financial instruments, including cash and cash equivalents and
long-term debt, are exposed to changes in interest rates in both the U.S. and
abroad. We invest our excess cash in short-term, investment-grade
interest-bearing securities. We generally limit our exposure to any one
financial institution to the extent practical. Our board has adopted policies
relating to these risks and continually monitors compliance with these policies.

      Our existing credit facility has variable interest rates. Accordingly,
interest expense may increase if we borrow and if the rates associated with our
borrowings move higher. In addition, we may pursue additional or alternative
financing for growth opportunities in one or both segments. We may use interest
rate swaps or other financial derivatives in order to manage the risk associated
with changes in market interest rates. However, we have not used any of these
instruments to date.

      The table below presents principal amounts in U.S. dollars (or equivalent
U.S. dollars with respect to non-U.S. denominated debt) and related weighted
average interest rates by year of maturity for our foreign debt obligations. The
column captioned "Approximate Fair Value" sets forth the carrying value of our
long-term debt as of December 31, 2004, which approximates our fair value at
such date after taking into consideration current rates offered to us for
similar debt instruments of comparable maturities. We do not hold or issue
financial instruments or derivative financial instruments for trading purposes
(dollars in thousands):


                                       28




                                                                                                              Approx.
                                                                                        There-                   Fair
                                        2005      2006       2007       2008      2009  after        Total      Value
                                        ----      ----       ----       ----      ----  ------       -----      -----
                                                                                        
Liabilities
Short-term debt
---------------
   Fixed rate:
      U.S. Dollar                      $2,698                                                        $2,698     $2,698
      Taiwan New Dollars(1)            $  933                                                        $  933     $  933
      Renminbi (1)                     $2,087                                                        $2,087     $2,087
      Weighted average interest rate    3.17%

   Variable rate:
      U.S. Dollar                      $1,000                                                        $1,000     $1,000
      Weighted average interest rate    1.92%

Long-term debt
--------------
   Fixed rate:
      Euro (1)                         $  130     $143       $45                 $6,937              $7,255     $7,255
      Weighted average interest rate    9.02%    9.02%      9.02%                 5.65%


(1)   U.S. dollar equivalent

Foreign Currency Risk

      As of December 31, 2004, substantially all of our cash was denominated in
U.S. dollars. However, we conduct business in various foreign currencies,
including those of emerging market countries in Asia as well as European
countries. We utilize derivative financial instruments, primarily forward
exchange contracts in connection with fair value hedges, to manage foreign
currency risks. In accordance with SFAS 133, gains and losses related to fair
value hedges are recognized in income along with adjustments of carrying amounts
of the hedged items. Therefore, all of our forward exchange contracts are
marked-to-market, and unrealized gains and losses are included in current period
net income. These contracts guarantee a predetermined rate of exchange at the
time the contract is purchased. This allows us to shift the majority of the risk
of currency fluctuations from the date of the contract to a third party for a
fee. We believe there are two potential risks of holding these instruments. The
first is that the foreign currency being hedged could move in a direction which
could create a better economic outcome than if hedging had not taken place. The
second risk is that the counterparty to a currency hedge defaults on its
obligations. We reduce the risk of counterparty default by entering into
relatively short-term hedges with well capitalized and highly rated banks. In
determining the use of forward exchange contracts, we consider the amount of
sales and purchases made in local currencies, the type of currency and the costs
associated with the contracts. As of December 31, 2004, we had one foreign
currency forward contract outstanding to sell forward 58.8 million euro in order
to hedge intercompany loans. The term of this contract was 30 days.

      The table below provides information about our other non-derivative,
non-U.S. dollar denominated financial instruments and presents the information
in equivalent U.S. dollars. Amounts set forth under "Liabilities" represent
principal amounts and related weighted average interest rates by year of
maturity for our foreign currency debt obligations. The column captioned
"Approximate Fair Value" sets forth the carrying value of our foreign currency
long-term debt as of December 31, 2004, which approximates our fair value at
such date after taking into consideration current rates offered to us for
similar debt instruments of comparable maturities (dollars in thousands):


                                       29




                                                                                                         Approx.
                                                                                    There-                  Fair
                                       2005      2006      2007     2008     2009    after     Total       Value
                                       ----      ----      ----     ----     ----    -----     -----       -----
                                                                                   
Assets
Cash and equivalents
  Variable rate:
      Euro (1)                        $10,656                                                  $10,656     $10,656
      Other currencies (1)            $ 9,847                                                  $ 9,847     $ 9,847


Liabilities
Short-term debt
   Fixed rate:
      Taiwan New Dollars(1)           $   933                                                  $   933     $   933
      Renminbi(1)                     $ 2,087                                                  $ 2,087     $ 2,087
      Weighted average interest rate    3.17%

   Variable rate:
     U.S. Dollar                      $ 1,000                                                  $ 1,000     $ 1,000
     Weighted average interest rate     3.40%

Long-term debt
  Fixed rate:
     Euro (1)                         $   130     $143       $45           $6,937              $ 7,255     $ 7,255
     Weighted average interest rate     9.02%    9.02%     9.02%            5.65%


(1)   U.S. dollar equivalent

Item 8 Financial Statements and Supplementary Data

      Information required by this item is incorporated by reference from the
Independent Auditors' Report found on page 35 and 36, and from the consolidated
financial statements and supplementary schedule on pages 37 through 62.

Item 9 Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure

      None

Item 9a Controls and Procedures

Evaluation of Disclosure Controls and Procedures

      Based on their evaluation as of December 31, 2004, our Chief Executive
Officer and Chief Financial Officer have concluded that our disclosure controls
and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended) were sufficiently effective to ensure that the
information required to be disclosed by us in this Annual Report on Form 10-K
was recorded, processed, summarized and reported within the time periods
specified in the SEC's rules and instruction for Form 10-K.

Management's Report on Internal Control over Financial Reporting

      Our management is responsible for establishing and maintaining adequate
internal control over financial reporting (as defined in Rule 13a-15(f) under
the Securities Exchange Act of 1934, as amended). Our management assessed the
effectiveness of our internal control over financial reporting as of December
31, 2004. In making this assessment, our management used the criteria set forth
by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO")
in Internal Control-Integrated Framework. Based on this assessment, management
has concluded that, as of December 31, 2004, our internal control over financial
reporting is effective. On September 13, 2004, the Company acquired additional
shares of common stock in Full Rise Electronic Co., Ltd. (FRE) bringing the
Company's cumulative ownership to 51%. Management excluded from its assessment
of the effectiveness of the Company's internal control over financial reporting
as of December 31, 2004, FRE's internal


                                       30


control over financial reporting, as of and for the year ended December 31,
2004. FRE's total assets and total revenues represent 6% and 2% respectively, of
the related consolidated financial statement amounts as of and for the year
ended December 31, 2004. Our independent registered public accounting firm's
audit of internal control over financial reporting also excluded an evaluation
of the internal control over financial reporting of FRE. Our independent
registered public accounting firm has issued an attestation report on
management's assessment of our internal control over financial reporting, which
is included in this report on page 35.

Changes in Internal Control Over Financial Reporting

      There were no changes in our internal controls over financial reporting
during the quarter ended December 31, 2004 that have materially affected, or are
reasonably likely to materially affect, our internal controls over financial
reporting.

Limitations on the Effectiveness of Controls

      A company's internal control over financial reporting is a process
designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company's internal
control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial statements. Because of
its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.

Item 9b Other Matters

      None


                                       31


                                    Part III

Item 10 Directors and Executive Officers of the Registrant

      The disclosure required by this item is incorporated by reference to the
sections entitled, "Directors and Executive Officers" and "Section 16(a)
Beneficial Ownership Reporting Compliance" in our definitive proxy statement to
be used in connection with our 2004 Annual Meeting of Shareholders.

      We make available free of charge within the Investor Information section
of our Internet website, at www.technitrol.com, and in print to any shareholder
who requests, our Statement of Principles Policy and all of our management
charters. Requests for copies may be directed to Investor Relations, Technitrol,
Inc., 1210 Northbrook Drive, Suite 470, Trevose, PA 19053-8406, or telephone
215-355-2900. We intend to disclose any amendments to our Statement of
Principles Policy, and any waiver from a provision of our Statement of
Principles Policy, on our Internet website within five business days following
such amendment or waiver. The information contained on or connected to our
Internet website is not incorporated by reference into this Form 10-K and should
not be considered part of this or any other report that we file with or furnish
to the SEC.

Item 11 Executive Compensation

      The disclosure required by this item is incorporated by reference to the
sections entitled, "Executive Compensation," "Retirement Plan," "Executive
Employment Arrangements," "Compensation of Non-Employee Directors," "Board Stock
Ownership," "Report of Executive Compensation Committee on Compensation
Policies," "Compensation Committee Interlocks and Insider Participation," and
"Comparison of Five-Year Cumulative Total Return" in our definitive proxy
statement to be used in connection with our 2004 Annual Meeting of Shareholders.

Item 12 Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters

      The disclosure required by this item is (i) included under Part II, Item
5, and (ii) incorporated by reference to the sections entitled, "Persons Owning
More Than Five Percent of Our Stock" and "Stock Owned by Directors and Officers"
in our definitive proxy statement to be used in connection with our 2004 Annual
Meeting of Shareholders.

      Information as of December 31, 2004 concerning plans under which our
equity securities are authorized for issuance are as follows:



                                  Number of shares to be
                                  issued upon exercise of
                                   options or grant of      Weighted average     Number of securities
                                   restricted shares or    exercise price of      remaining available
 Plan Category                    other incentive shares   outstanding options    for future issuance
 -------------                   -----------------------------------------------------------------------
Equity compensation plans
                                                                             
approved by security holders           5,960,000                  $19.24              2,992,471

Equity compensation plans not
approved by security holders                   0                       0                      0

Total                                  5,960,000                  $19.24              2,992,471


      On May 15, 1981, our shareholders approved an incentive compensation plan
(ICP) intended to enable us to obtain and retain the services of employees by
providing them with incentives that may be created by the Board of Directors
Compensation Committee under the ICP. Subsequent amendments to the plan were
approved by our shareholders including an amendment on May 23, 2001 which
increased the total number of shares of our common stock which may be granted
under the plan to 4,900,000 shares. Our 2001 Stock Option Plan and the
Restricted Stock Plan II were adopted under the ICP. In addition to the ICP,
plans approved by us include a 60,000 share Board of Director Stock Plan and an
Employee Stock Purchase Plan. The maximum number of shares which may be issued
under our Employee Stock Purchase Plan is 1,000,000 shares, provided, however,
that such amount will be automatically increased annually beginning on August 1,
2002 in an amount equal to the lesser of (a) 200,000 shares or, (b) two percent
(2%) of the outstanding common stock as of the last day of the prior fiscal year
or alternatively (c)


                                       32


such an amount as may be determined by our board of directors. In 2003, our
board of directors determined that no increase for 2003 or 2004 should be made.
During 2004, the operation of the ESPP was suspended following an evaluation of
its affiliated expense and perceived value by employees. Of the 2,992,471 shares
remaining available for future issuance, 266,249 shares are attributable to our
Restricted Stock Plan, 812,099 shares are attributable to our Employee Stock
Purchase Plan, and 14,634 shares are attributable to our Board of Director Stock
Plan. Note 11 to the Consolidated Financial Statements contains additional
information regarding our stock based compensation plans.

Item 13 Certain Relationships and Related Transactions

      None

Item 14 Principal Accountant Fees and Services

      The disclosure required by this item is incorporated by reference to the
section entitled "Audit and Other Fees Paid to Independent Accountants" in our
definitive proxy statement to be used in connection with our 2004 Annual Meeting
of Shareholders.


                                       33


                                     Part IV

Item 15 Exhibits and Financial Statement Schedule

      (a)   Documents filed as part of this report

               Financial Statements

    Reports of Independent Registered Public Accounting Firm
    Consolidated Balance Sheets - December 31, 2004 and December 26, 2003
    Consolidated Statements of Operations - Years ended December 31, 2004,
      December 26, 2003 and December 27, 2002
    Consolidated Statements of Cash Flows - Years ended December 31, 2004,
      December 26, 2003 and December 27, 2002
    Consolidated Statements of Changes in Shareholders' Equity - Years ended
      December 31, 2004, December 26, 2003 and December 27, 2002
    Notes to Consolidated Financial Statements

               Financial Statement Schedule

               Schedule II, Valuation and Qualifying Accounts

      (b)   Exhibits

Information required by this item is contained in the "Exhibit Index" found on
page 63 through 66 of this report.


                                       34


             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders
Technitrol, Inc.:

      We have audited management's assessment, included in the accompanying
Management`s Report on Internal Control over Financial Reporting appearing under
Item 9A, that Technitrol, Inc. and subsidiaries (the "Company") maintained
effective internal control over financial reporting as of December 31, 2004,
based on criteria established in Internal Control-Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The
Company's management is responsible for maintaining effective internal control
over financial reporting and for its assessment of the effectiveness of internal
control over financial reporting. Our responsibility is to express an opinion on
management's assessment and an opinion on the effectiveness of the Company's
internal control over financial reporting based on our audit.

      We conducted our audit in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether
effective internal control over financial reporting was maintained in all
material respects. Our audit included obtaining an understanding of internal
control over financial reporting, evaluating management's assessment, testing
and evaluating the design and operating effectiveness of internal control, and
performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our
opinion.

      A company's internal control over financial reporting is a process
designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company's internal
control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial statements.

      Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.

      In our opinion, management's assessment that the Company maintained
effective internal control over financial reporting as of December 31, 2004, is
fairly stated, in all material respects, based on criteria established in
Internal Control-Integrated Framework issued by the Committee of Sponsoring
Organizaitons of the Treadway Commission (COSO). Also, in our opinion, the
Company maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2004, based on criteria established in
Internal Control-Integrated Framework issued by Committee of Sponsoring
Organizaitons of the Treadway Commission (COSO).

      On September 13, 2004, the Company acquired additional shares of common
stock in Full Rise Electronics Co. Ltd. ("FRE"), bringing the Company's
cumulative ownership to 51%. Management excluded from its assessment of the
effectiveness of the Company's internal control over financial reporting as of
December 31, 2004, FRE's internal control over financial reporting associated
with 6% of the total assets and 2% of the total revenues included in the
consolidated financial statements of the Company as of and for the year ended
December 31, 2004. Our audit of internal control over financial reporting of the
Company also excluded an evaluation of the internal control over financial
reporting of FRE.

      We have also audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States), the consolidated balance
sheets of Technitrol, Inc. and subsidiaries as of December 31, 2004 and December
26, 2003, and the related consolidated statements of operations, cash flows, and
changes in shareholders' equity for each of the years in the three-year period
ended December 31, 2004, and the related financial statement schedule, and our
report dated February 25, 2005 expressed an unqualified opinion on those
consolidated financial statements and the related financial statement schedule.


/s/ KPMG LLP
Philadelphia, Pennsylvania
February 25, 2005


                                       35


             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders
Technitrol, Inc.:

      We have audited the consolidated financial statements of Technitrol, Inc.
and subsidiaries (the "Company") as listed in the accompanying index. In
connection with our audits of the consolidated financial statements, we also
have audited the financial statement schedule as listed in the accompanying
index. These consolidated financial statements and the financial statement
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these consolidated financial statements and the
financial statement schedule based on our audits.

      We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). 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 provide a reasonable basis for our opinion.

      In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Technitrol,
Inc. and subsidiaries as of December 31, 2004 and December 26, 2003, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 2004, in conformity with U.S. generally
accepted accounting principles. Also in our opinion, the related financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.

      We also have audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States), the effectiveness of the
Company's internal control over financial reporting as of December 31, 2004,
based on criteria established in Internal Control-Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and
our report dated February 25, 2005 expressed an unqualified opinion on
management's assessment of, and the effective operation of, internal control
over financial reporting.

      As discussed in Note 11 to the consolidated financial statements, in 2003,
the Company changed its method of accounting for equity compensation in
accordance with Statement of Financial Accounting Standards No. 148, Accounting
for Stock-Based Compensation, Transition and Disclosure. As discussed in Note 16
to the consolidated financial statements, in 2002, the Company changed its
method of accounting for goodwill and other intangible assets in accordance with
Statement of Financial Accounting Standards No. 142, Goodwill and Other
Intangible Assets.


/s/ KPMG LLP
Philadelphia, Pennsylvania
February 25, 2005


                                       36


                        Technitrol, Inc. and Subsidiaries

                           Consolidated Balance Sheets

                     December 31, 2004 and December 26, 2003
                       In thousands, except per share data



                                Assets                                                 2004              2003
                                ------                                                 ----              ----
                                                                                              
 Current assets:
     Cash and cash equivalents                                                    $ 155,952         $ 143,448
     Trade receivables, net                                                         109,652            96,353
     Inventories                                                                     77,481            63,086
     Prepaid expenses and other current assets                                       20,917            17,435
                                                                                  ---------         ---------
           Total current assets                                                     364,002           320,322

Property, plant and equipment                                                       233,563           205,885
     Less accumulated depreciation                                                  131,387           117,836
                                                                                  ---------         ---------
           Net property, plant and equipment                                        102,176            88,049
Deferred income taxes                                                                 8,898            12,457
Goodwill and other intangibles, net                                                 148,863           153,083
Other assets                                                                          2,648            14,983
                                                                                  ---------         ---------
                                                                                  $ 626,587         $ 588,894
                                                                                  =========         =========

                 Liabilities and Shareholders' Equity
Current liabilities:
     Current installments of long-term debt                                       $     130         $     127
     Short-term debt                                                                  6,717                --
     Accounts payable                                                                48,655            46,677
     Accrued expenses                                                                69,602            73,748
                                                                                  ---------         ---------
           Total current liabilities                                                125,104           120,552

Long-term liabilities:
     Long-term debt, excluding current installments                                   7,125             6,710
     Other long-term liabilities                                                     14,766            12,882

Commitments and contingencies (Note 7)
Minority interest                                                                    14,730                --
Shareholders' equity:
     Common stock: 175,000,000 shares authorized; 40,447,955 and
       40,279,331 outstanding in 2004 and 2003, respectively; $.125
       par value per share and additional paid-in capital                           213,694           209,768

     Retained earnings                                                              239,752           232,824
     Deferred compensation                                                           (1,968)           (1,342)
     Other comprehensive income                                                      13,384             7,500
                                                                                  ---------         ---------
           Total shareholders' equity                                               464,862           448,750
                                                                                  ---------         ---------
                                                                                  $ 626,587         $ 588,894
                                                                                  =========         =========


See accompanying Notes to Consolidated Financial Statements.


                                       37


                        Technitrol, Inc. and Subsidiaries

                      Consolidated Statements of Operations

     Years ended December 31, 2004, December 26, 2003 and December 27, 2002
                       In thousands, except per share data



                                                               2004            2003            2002
                                                               ----            ----            ----
                                                                                 
Net sales                                                 $ 582,314       $ 509,247       $ 406,354
Cost of sales                                               436,103         375,929         309,848
                                                          ---------       ---------       ---------
   Gross profit                                             146,211         133,318          96,506
Selling, general and administrative expenses                109,802          99,216          89,286
Severance and asset impairment expense                       27,851           9,051          46,982
                                                          ---------       ---------       ---------
   Operating profit (loss)                                    8,558          25,051         (39,762)
Other (expense) income:
   Interest income                                            1,549           1,134           2,903
   Interest expense                                          (1,888)         (1,958)         (3,005)
   Other, net                                                 2,009            (571)           (580)
   Equity method investment earnings (loss)                     787          (8,660)            300
                                                          ---------       ---------       ---------
Earnings (loss) before taxes, minority interest, and
   cumulative effect of accounting change                    11,015          14,996         (40,144)
Income taxes (benefit)                                        3,432           3,008         (12,345)
Minority interest expense                                       655              --              --
                                                          ---------       ---------       ---------
Net earnings (loss) before cumulative
   effect of accounting change                                6,928          11,988         (27,799)
Cumulative effect of accounting
   change, net of income taxes                                   --              --         (15,738)
                                                          ---------       ---------       ---------
Net earnings (loss)                                       $   6,928       $  11,988       $ (43,537)
                                                          =========       =========       =========
Basic earnings (loss) per share before
    cumulative effect of accounting
    change                                                $     .17       $     .30       $    (.75)
Cumulative effect of accounting
   change, net of income taxes                                   --              --            (.42)
                                                          ---------       ---------       ---------
Basic earnings per share                                  $     .17       $     .30       $   (1.17)
                                                          =========       =========       =========

Diluted earnings (loss) per share
    before cumulative effect of
    accounting change                                     $     .17       $     .30       $    (.75)
Cumulative effect of accounting change, net of
    income taxes                                                 --              --            (.42)
                                                          ---------       ---------       ---------
Diluted earnings (loss) per share                         $     .17       $     .30       $   (1.17)
                                                          =========       =========       =========


See accompanying Notes to Consolidated Financial Statements.


                                       38


                        Technitrol, Inc. and Subsidiaries

                      Consolidated Statements of Cash Flows

     Years ended December 31, 2004, December 26, 2003 and December 27, 2002
                                  In thousands



                                                                                          2004            2003            2002
                                                                                          ----            ----            ----
                                                                                                            
Cash flows from operating activities:
     Net earnings (loss)                                                             $   6,928       $  11,988       $ (43,537)
     Adjustments to reconcile net earnings (loss) to net cash provided by
       operating activities:
         Depreciation and amortization                                                  24,188          23,615          19,770
         Tax effect of stock compensation                                                 (117)           (123)            406
         Amortization of stock incentive plan expense                                    3,482           2,114           1,403
         Minority interest in net earnings of consolidated subsidiary                      655              --              --
         Loss on disposal or sale of assets                                                941           1,882           7,027
         Cumulative effect of accounting change, net of taxes                               --              --          15,738
         Intangible asset impairment, net of taxes                                      16,301              --          19,260
         Deferred taxes                                                                 (2,553)         (1,950)         (1,726)
         Severance and asset impairment expense, net of cash payments
           (excluding loss on disposal of assets and intangible asset
           impairments, net of taxes)                                                    1,881           1,841           1,326
         Equity method investment (earnings) loss                                         (787)          8,660            (300)
         Inventory write-downs                                                           6,106           5,936           2,212
         Changes in assets and liabilities, net of effect of acquisitions and
           divestitures:
              Trade receivables                                                          3,811             617           1,540
              Inventories                                                              (12,106)          4,211           2,978
              Prepaid expenses and other current assets                                    (52)          2,139          (1,007)
              Accounts payable                                                          (7,726)            391           2,987
              Accrued expenses                                                          (5,023)         (5,493)         (5,325)
         Other, net                                                                     (2,624)           (669)         (1,962)
                                                                                     ---------       ---------       ---------

         Net cash provided by operating activities                                      33,305          55,159          20,790
                                                                                     ---------       ---------       ---------
Cash flows from investing activities:
     Acquisitions, net of cash acquired of $11,700 and $2,000 in 2004 and 2003,
       respectively                                                                     (5,088)        (83,860)         (6,708)
     Capital expenditures, excluding acquisitions                                      (10,992)         (7,751)         (5,755)
     Proceeds from sale of property, plant and equipment                                 1,001             482           1,695
     Foreign currency impact on intercompany lending                                    (6,407)        (12,235)         (7,124)
                                                                                     ---------       ---------       ---------

         Net cash used in investing activities                                         (21,486)       (103,364)        (17,892)
                                                                                     ---------       ---------       ---------
Cash flows from financing activities:
     Principal payments on long-term debt                                                 (152)        (11,688)        (75,318)
     Long-term borrowings                                                                   39              --              --
     Dividends paid                                                                         --              --          (1,137)
     Exercise of stock options                                                              23              88              --
     Sale of stock through employee stock purchase plan                                    652             951           1,351
     Net proceeds from follow-on offering                                                   --              --         134,700
                                                                                     ---------       ---------       ---------

         Net cash provided by (used in) financing activities                               562         (10,649)         59,596
                                                                                     ---------       ---------       ---------
Net effect of exchange rate changes on cash                                                123          (2,773)            314
                                                                                     ---------       ---------       ---------
Net increase (decrease) in cash and cash equivalents                                    12,504         (61,627)         62,808
                                                                                                     ---------       ---------
Cash and cash equivalents at beginning of year                                         143,448         205,075         142,267
                                                                                     ---------       ---------       ---------
Cash and cash equivalents at end of year                                             $ 155,952       $ 143,448       $ 205,075
                                                                                     =========       =========       =========


See accompanying Notes to Consolidated Financial Statements.


                                       39


                        Technitrol, Inc. and Subsidiaries

           Consolidated Statements of Changes in Shareholders' Equity

     Years ended December 31, 2004, December 26, 2003 and December 27, 2002
                       In thousands, except per share data




                                                                                                  Other
                                                                                        -------------------------
                                                                                                          Accumu-
                                                                                                      lated other
                                                 Common stock and                                         compre-       Compre-
                                                 paid-in capital                         Deferred         hensive       hensive
                                                 ---------------           Retained       compen-          income        income
                                              Shares        Amount         earnings        sation          (loss)        (loss)
                                              ------        ------         --------        ------          ------        ------
                                                                                                      
Balance at December 28, 2001                  33,683       $  70,184       $ 264,373       $(2,430)      $ (2,578)
Stock options, awards and related
    compensation                                  26             392              --         1,253             --
Tax effect of stock compensation                  --             406              --            --             --
Stock issued under employee stock
    purchase plan                                 73           1,351              --            --             --
Follow-on offering                             6,348         134,700              --            --             --
Currency translation adjustments                  --              --              --            --         (1,737)      $ (1,737)
Net loss                                          --              --         (43,537)           --             --        (43,537)
                                                                                                                        --------
Comprehensive loss                                                                                                      $(45,274)
                                           ---------       ---------       ---------       --------      --------       ========
Balance at December 27, 2002                  40,130       $ 207,033       $ 220,836       $(1,177)      $ (4,315)
Stock options, awards and related
    compensation                                  79           1,906              --          (165)            --
Tax effect of stock compensation                  --            (123)             --            --             --
Stock issued under employee stock
    purchase plan                                 70             952              --            --             --
Currency translation adjustments                  --              --              --            --         11,815       $ 11,815
Net earnings                                      --              --          11,988            --             --         11,988
                                                                                                                        --------
Comprehensive income                                                                                                    $ 23,803
                                           ---------       ---------       ---------       --------      --------       ========
Balance at December 26, 2003                  40,279       $ 209,768       $ 232,824       $(1,342)      $  7,500
Stock options, awards and related
    compensation                                 124           3,351              --          (626)            --
Tax effect of stock compensation                  --            (117)             --            --             --

Stock issued under employee stock
    purchase plan                                 45             692              --            --             --
Currency translation adjustments                  --              --              --            --          6,039       $  6,039
Minimum pension liability adjustment              --              --              --            --
                                                                                                             (158)          (158)
Unrealized holding gains on securities            --              --              --            --              3              3
Net earnings                                      --              --           6,928            --             --          6,928
                                                                                                                        --------
Comprehensive income                                                                                                    $ 12,812
                                           ---------       ---------       ---------       --------      --------       ========
Balance at December 31, 2004                  40,448       $ 213,694       $ 239,752       $(1,968)      $ 13,384
                                            ========       =========       =========       =======       ========


See accompanying Notes to Consolidated Financial Statements.


                                       40


                        Technitrol, Inc. and Subsidiaries

                   Notes to Consolidated Financial Statements

(1)   Summary of Significant Accounting Policies

Principles of Consolidation

      The consolidated financial statements include the accounts of Technitrol,
Inc. and all of our subsidiaries. We sometimes refer to Technitrol as "we" or
"our". All material intercompany accounts and transactions are eliminated in
consolidation.

Cash and Cash Equivalents

      Cash and cash equivalents include funds invested in a variety of liquid
short-term investments with a maturity of three months or less.

Inventories

      Inventories are stated at the lower of cost or market. Cost is determined
by the first-in, first-out method. We establish inventory provisions to
write-down excess and obsolete inventory to market value. Inventory that is
written down to market in the ordinary course of business is not written back up
after a write-down. Inventory provisions are utilized when the actual inventory
is physically disposed. The provisions are determined by comparing quantities
on-hand to historical usage and forecasted demand. Inventory reserves at
December 31, 2004 and December 26, 2003 were $11.1 million and $10.4 million,
respectively.

Property, Plant and Equipment

      Property, plant and equipment are stated at cost. Depreciation is based
upon the estimated useful life of the assets on both the accelerated and the
straight-line methods. Estimated useful lives of assets range from 5 to 30 years
for buildings and improvements and from 3 to 10 years for machinery and
equipment. Expenditures for maintenance and repairs are charged to operations as
incurred, and major renewals and betterments are capitalized. Upon sale or
retirement, the cost of the asset and related accumulated depreciation are
removed from our balance sheet, and any resulting gains or losses are included
in earnings.

Goodwill and Other Intangibles

      SFAS 142 requires that goodwill and intangible assets with indefinite
useful lives be tested for impairment at least annually. SFAS 142 also requires
that other intangible assets with definite useful lives be amortized over their
respective estimated useful lives to their estimated residual values, and
reviewed for impairment in accordance with SFAS 144. We amortize other
intangibles, except those with indefinite lives, on a straight-line basis over 2
to 20 years. We had approximately $126.2 million of goodwill and $22.7 million
of other intangibles on our balance sheet as of December 31, 2004. We had
approximately $112.9 million of goodwill and $40.2 million of other intangibles,
as of December 26, 2003. See Note 2 and Note 16 for additional information
regarding goodwill and other intangible assets.

Revenue Recognition

      Revenue is recognized upon shipment of product and passage of title
without right of return, after all performance factors have been met. We are not
subject to any significant customer acceptance provisions. All product returns
are deducted from net sales and are accrued for based on historical experience
and Financial Accounting Standard No. 48, "Revenue Recognition When Right of
Return Exists." Warranties are limited to rework, replacement of products and
other normal remedies. We record an allowance for doubtful receivables. Accounts
receivable allowances at December 31, 2004 and December 26, 2003 were $1.7
million and $2.9 million, respectively.

Stock-based Compensation

      In 2002, we accounted for stock-based compensation in accordance with
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" (APB 25). In 2003, we adopted SFAS 123 as amended by SFAS 148. Note
11 presents proforma results of operations as if FASB's Statement No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123"), had been used to account
for stock-based compensation plans for 2002.


                                       41


                        Technitrol, Inc. and Subsidiaries

                   Notes to Consolidated Financial Statements

(1)   Summary of Significant Accounting Policies

Foreign Currency Translation

      Certain of our foreign subsidiaries use the U.S. dollar as a functional
currency and others use a local currency. For subsidiaries using the U.S. dollar
as the functional currency, non-U.S. dollar monetary assets and liabilities are
remeasured at year-end exchange rates while non-monetary items are remeasured at
historical rates. Income and expense accounts are remeasured at the average
rates in effect during the year, except for depreciation that is remeasured at
historical rates. Gains or losses from changes in exchange rates are recognized
in earnings in the year of occurrence. For subsidiaries using a local currency
as the functional currency, net assets are translated at year-end rates while
income and expense accounts are translated at average exchange rates.
Adjustments resulting from these translations are reflected as currency
translation adjustments in shareholders' equity.

Financial Instruments and Derivative Financial Instruments

      The carrying value of our cash and cash equivalents, accounts receivable,
short-term borrowings and accounts payable are a reasonable estimate of their
fair value due to the short-term nature of these instruments. The carrying value
of our long-term debt approximates our fair value after taking into
consideration current rates offered for similar debt instruments of comparable
maturities. The fair values of financial instruments have been determined
through information obtained from quoted market sources and management
estimates. We do not hold or issue financial instruments or derivative financial
instruments for trading purposes.

      We are exposed to market risk from changes in interest rates, foreign
currency exchange rates and precious metal prices. To mitigate the risk from
these changes, we periodically enter into hedging transactions which have been
authorized pursuant to our policies and procedures. In accordance with SFAS 133,
gains and losses related to fair value hedges are recognized in income along
with adjustments of carrying amounts of the hedged item. Therefore, all of our
forward exchange contracts are marked-to-market, and unrealized gains and losses
are included in current-period net income. At December 31, 2004 we had one
foreign currency forward contract outstanding to sell forward 58.8 million of
euro in order to hedge intercompany loans. At December 26, 2003, we had two
foreign exchange contracts in place to sell forward approximately 70.6 million
of euro in connection with hedging intercompany loans.

Precious Metal Consignment-type Leases

      We had custody of inventories under consignment-type leases from suppliers
of $83.4 million at December 31, 2004 and $60.6 million at December 26, 2003.
The increase is the result of volume increase and higher silver prices at
December 31, 2004 than at December 26, 2003. We have four consignment-type
leases in place for sourcing all precious metals and the related inventory and
liability are not recorded on our balance sheet. The agreements are generally
one-year in duration and can be extended with annual renewals and either party
can terminate the agreements with 30 days written notice. The primary covenant
in each of the agreements is a prohibition against us creating security
interests in the consigned metals. Included in interest expense for the year
ended December 31, 2004 were consignment fees of $1.0 million. These consignment
fees were $0.8 million and $1.4 million in the years ended December 26, 2003 and
December 27, 2002, respectively.

Estimates

      Our preparation of financial statements is in conformity with what
generally accepted accounting principles require and we make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ significantly from those
estimates.

Reclassifications

      Certain amounts in the prior-year financial statements have been
reclassified to conform with the current-year presentation. Also refer to Note
15 "Equity Method Investment".


                                       42


                        Technitrol, Inc. and Subsidiaries

              Notes to Consolidated Financial Statements, continued

(2)   Acquisitions

      Full Rise Electronic Co., Ltd. (FRE): FRE is based in the Republic of
China (Taiwan) and manufactures connector products, including single and
multiple-port jacks, and supplies such products to us under a cooperation
agreement. In April 2001, we made a minority investment in the common stock of
FRE, which was accounted for by the cost-basis method of accounting. On July 27,
2002, we made an additional investment in FRE of $6.7 million which increased
the total investment to $20.9 million. As a result of the increased ownership
percentage to approximately 29%, we began to account for the investment under
the equity method of accounting beginning in the three months ended September
27, 2002. Shares of FRE began trading on the Taiwan Stock Exchange in January
2003, and they experienced considerable price volatility. In the three months
ended December 26, 2003, we recorded an $8.7 million net loss to adjust our
original cost basis of the investment to market value. In July 2004, we
purchased an additional 9.0 million shares of common stock in FRE for $10.5
million. On September 13, 2004 we acquired an additional 2.4 million shares of
common stock in FRE for $2.5 million, bringing our ownership percentage up to
51%. Accordingly, FRE's operating results are consolidated with our own
beginning September 13, 2004. Our net earnings will therefore reflect our
proportionate share of FRE's net earnings, after deducting the minority interest
due to the minority shareholders. The fair value of the proportionate net
tangible assets acquired through September 13, 2004 approximated $28.8 million,
less a minority interest of $14.0 million. Based on the fair value of net
tangible assets acquired, the preliminary allocation of the investment included
$2.8 million of identifiable intangibles and $9.4 million of goodwill. These
fair value allocations are preliminary, and are subject to adjustment.

      Eldor High Tech Wire Wound Components S.r.L.: In January 2003, we acquired
all of the capital stock of Eldor High Tech Wire Wound Components S.r.L.
(Eldor), headquartered in Senna Comasco, Italy with production operations in
Izmir and Istanbul, Turkey. Eldor produces flyback transformers and switch mode
transformers for the European television market. The purchase price was
approximately $83.9 million, net of cash acquired, plus related acquisition
costs and expenses. The fair value of net tangible assets acquired approximated
$8.3 million. In addition to the fair value of assets acquired, purchase price
allocations included $18.6 million for manufacturing know-how, $6.1 million for
customer relationships, $1.5 million for tradenames and $21.8 million allocated
to goodwill. All of the separately identifiable intangible assets will be
amortized, with estimated useful lives of 20 years for manufacturing know-how, 8
years for customer relationships and 2 years for tradenames. The purchase price
was funded with cash on hand. Eldor has formed the nucleus of a new consumer
division at Pulse and is treated as a separate reporting unit for purposes of
SFAS 142.

      Had the acquisition of Eldor occurred as of January 1, 2002, unaudited pro
forma results would have been (dollars in millions, except per share amounts):

                                                             Year Ended
                                                             ----------
                                                      December 27, 2002
                                                      -----------------
                Pro forma unaudited
                Net sales                                       $ 485.1
                Net earnings                                    $ (40.8)
                Net earnings per common share:
                     Primary                                    $ (1.10)
                     Fully diluted                              $ (1.10)

      The pro forma results reflect adjustments primarily for the increased
amortization and interest expense attributable to the acquisition. Potential
cost savings, however, from combining Eldor with our operations are not
reflected. Therefore, the pro forma results are not indicative of the results
that would have occurred had the acquisition actually been consummated on
January 1, 2002, and are not intended to be a projection of future results or
trends.


                                       43


                        Technitrol, Inc. and Subsidiaries

              Notes to Consolidated Financial Statements, continued

(3)   Financial Statement Details

      The following provides details for certain financial statement captions at
December 31, 2004 and December 26, 2003 (in thousands):

                                                            2004            2003
                                                            ----            ----
Inventories:
     Finished goods                                     $ 27,394        $ 25,326
     Work in progress                                     20,312          13,867
     Raw materials and supplies                           29,775          23,893
                                                        --------        --------
                                                        $ 77,481        $ 63,086
                                                        ========        ========
Property, plant and equipment, at cost:
     Land                                               $  4,771        $  3,576
     Buildings and improvements                           44,492          38,825
     Machinery and equipment                             184,300         163,484
                                                        --------        --------
                                                        $233,563        $205,885
                                                        ========        ========
Accrued expenses:
     Income taxes payable                               $ 29,826        $ 30,063
     Accrued compensation                                 15,610          17,613
     Other accrued expenses                               24,166          26,072
                                                        --------        --------
                                                        $ 69,602        $ 73,748
                                                        ========        ========


                                       44


                        Technitrol, Inc. and Subsidiaries

              Notes to Consolidated Financial Statements, continued

(4)   Debt

      At December 31, 2004 and December 26, 2003, short-term and long-term debt
was as follows (in thousands):



Short-term Debt

Bank Loans                                                                                      2004        2003
                                                                                                ----        ----
                                                                                                       
     Fixed-rate, (2.1%) secured debt in China (denominated in US Dollars) due 2005            $1,000      $   --

     Fixed-rate, (4.79%) unsecured debt in China (denominated in US Dollars) due 2005            870          --

     Fixed-rate, (1.92%) unsecured debt in China (denominated in US Dollars) due 2005            823          --

     Fixed-rate, (5.54%) unsecured debt in China (denominated in Renminbi) due 2005            1,850          --

     Fixed-rate, (1.90%) unsecured debt in Taiwan (denominated in Taiwan New Dollars)
        due 2005                                                                                 932          --

     Fixed-rate, (5.84%) unsecured debt in China (denominated in Renminbi) due 2005              242          --

     Variable-rate, (1.92%) unsecured debt in China (denominated in US Dollars) due 2005
                                                                                               1,000          --
                                                                                              ------      ------

     Total short-term debt                                                                    $6,717      $   --
                                                                                              ======      ======

Long-term Debt

Bank Loans
     Fixed-rate, (5.65%) unsecured debt in Germany (denominated in euros) due
        August 2, 2009                                                                         6,937       6,367

Mortgage Notes, secured by mortgages on land, buildings, and certain equipment:
     8.20% - 10.32% mortgage notes, due in monthly installments until 2007                       318         470
                                                                                              ------      ------
         Total long-term debt                                                                  7,255       6,837

     Less current installments                                                                   130         127
                                                                                              ------      ------

     Long-term debt excluding current installments                                            $7,125      $6,710
                                                                                              ======      ======



                                       45


                        Technitrol, Inc. and Subsidiaries

              Notes to Consolidated Financial Statements, continued

(4)   Debt, continued

      We entered into a new credit agreement on June 17, 2004 providing for
$125.0 million of credit capacity. The facility consists of an aggregate U.S.
dollar-equivalent revolving line of credit in the principal amount of up to
$125.0 million, which provides for borrowings in multiple currencies including
but not limited to U.S. dollars and euros, including individual sub-limits of:

      -     a U.S. dollar-based swing-line loan not to exceed $10.0 million; and

      -     a multicurrency facility providing for the issuance of letters of
            credit in an aggregate amount not to exceed the U.S. dollar
            equivalent of $15.0 million.

      The credit agreement permits us to request one or more increases in the
total commitment not to exceed $75.0 million, provided the minimum increase is
$25.0 million, subject to bank approval.

      The total amount outstanding under the credit facility may not exceed
$125.0 million, provided we do not request an increase in total commitment as
noted above. In any event, outstanding borrowings are limited to a maximum of
three times our earnings before interest, taxes, depreciation and amortization
(EBITDA), as defined by the credit agreement, on a rolling twelve-month basis as
of the most recent quarter-end.

      The credit facility contains covenants specifying a maximum debt-to-EBITDA
ratio, as defined above, minimum interest expense coverage, capital expenditure
limitations, and other customary and normal provisions. We are in compliance
with all such covenants. As of December 31, 2004, we have no outstanding
borrowings under our existing three-year revolving credit agreement.

      We pay a commitment fee on the unborrowed portion of the commitment, which
ranges from 0.175% to 0.300% of the total commitment, depending on our
debt-to-EBITDA ratio, as defined above. The interest rate for each currency's
borrowing will be a combination of the base rate for that currency plus a credit
margin spread. The base rate is different for each currency. The credit margin
spread is the same for each currency and is 0.750% to 1.500%, depending on our
debt-to-EBITDA ratio as defined above. Each of our domestic subsidiaries with
net worth equal to or greater than $5 million guarantees all obligations
incurred under the credit facility.

      Our German subsidiary, AMI Doduco GmbH, has an obligation outstanding
under a term loan agreement of approximately 5.1 million euro and the obligation
is due in August 2009. We, including several of our subsidiaries, have
guaranteed the obligations arising under this term loan agreement.

      At December 31, 2004, we included $6.7 million of outstanding debt of FRE
in connection with our consolidation of FRE's financial statements. FRE has a
total credit limit of approximately $15.5 million in U.S. dollar equivalents as
of December 31, 2004. Neither Technitrol, nor any of its subsidiaries, has
guaranteed or otherwise participated in the credit facilities of FRE.

      Principal payments due within the next five years, based on terms of our
debt arrangements, are as follows (in thousands):

                        2005                        $  6,847
                        2006                             143
                        2007                              45
                        2008                              --
                        2009                           6,937
                        Thereafter                        --
                                                    --------
                                                    $ 13,972
                                                    ========


                                       46


                        Technitrol, Inc. and Subsidiaries

              Notes to Consolidated Financial Statements, continued

(5)   Research, Development and Engineering Expenses

      Research, development and engineering expenses are included in selling,
general and administrative expenses and were $22.6 million, $18.5 million and
$17.8 million in 2004, 2003 and 2002, respectively, for continuing operations.
RD&E includes costs associated with new product development, product and process
improvement, engineering follow-through during early stages of production,
design of tools and dies, and the adaptation of existing technology to specific
situations and customer requirements. The research and development component of
RD&E, which generally includes only those costs associated with new technology,
new products or significant changes to current products or processes, was $16.5
million, $13.2 million and $12.1 million in 2004, 2003 and 2002, respectively.

(6)   Income Taxes

      Earnings (loss) before cumulative effect of accounting change and income
taxes were as follows (in thousands):

                                       2004              2003              2002
                                       ----              ----              ----
Domestic                           $ (7,595)         $ (7,451)         $(40,044)
Non-U.S                              18,610            22,447              (100)
                                   --------          --------          --------
       Total                       $ 11,015          $ 14,996          $(40,144)
                                   ========          ========          ========

      Income tax (benefit) expense was as follows (in thousands):

Current:                                     2004           2003           2002
                                         --------       --------       --------
       Federal                           $  1,594       $ (3,377)      $    608
       State and local                       (821)          (196)          (775)
       Non-U.S                              5,212          8,531          2,387
                                         --------       --------       --------
                                            5,985          4,958          2,220
Deferred tax (benefit) expense             (2,553)        (1,950)       (14,565)
                                         --------       --------       --------

Net tax (benefit) expense                $  3,432       $  3,008       $(12,345)
                                         ========       ========       ========

      A reconciliation of the statutory federal income tax rate with the
effective income tax rate was as follows:

                                                   2004        2003        2002
                                                   ----        ----        ----
Statutory federal income tax rate                    35%         35%         35%
Increase (decrease) resulting from:
       Tax-exempt earnings of subsidiary in
           Puerto Rico                               (5)         (5)          1
       State and local income taxes, net of
           federal tax effect                        (2)         (2)          5
       Non-deductible expenses and other              7          --          --
       Non-U.S. income subject to U.S. income
           tax                                       16          17          (5)
       Foreign                                      (21)        (13)         (8)
       Research and development and other
           tax credits                                1         (12)          3
                                                   ----        ----        ----
Effective tax rate                                   31%         20%         31%
                                                   ====        ====        ====


                                       47


                        Technitrol, Inc. and Subsidiaries

              Notes to Consolidated Financial Statements, continued

(6)   Income Taxes, continued

      Deferred tax assets and liabilities included the following (in thousands):

                                                          2004           2003
                                                          ----           ----
Assets:
       Inventories                                    $  1,096       $    871
       Plant and equipment                               1,706          2,418
       Vacation pay and other compensation                 462            320
       Pension expense                                   2,657          2,133
       Stock awards                                         45            647
       Accrued liabilities                               3,075          3,554
       Net operating losses                             10,929         13,481
       Tax credits                                      19,285         16,703
       Other                                             1,207          1,563
                                                      --------       --------
              Total deferred tax assets                 40,462         41,690
              Valuation allowance                       (7,608)        (6,976)
                                                      --------       --------
              Net deferred tax assets                   32,854         34,714

Liabilities:
       Foreign earnings not permanently invested        16,829         11,485
       Acquired intangibles                              3,036          6,349
                                                      --------       --------
              Total deferred tax liabilities            19,865         17,834
                                                      --------       --------
              Net deferred tax assets                   12,989         16,880
              Less current deferred tax assets           4,091          4,423
                                                      --------       --------
              Long-term deferred income taxes         $  8,898       $ 12,457
                                                      ========       ========

      Based on our history of taxable income and our projection of future
earnings, we believe that it is more likely than not that sufficient taxable
income will be generated in the foreseeable future to realize the net deferred
tax assets. Our net operating loss and tax credits will expire in fiscal 2005
through 2024.

      We have not provided for U.S. federal income and foreign withholding taxes
on approximately $333 million of non-U.S. subsidiaries' undistributed earnings
(as calculated for income tax purposes) as of December 31, 2004. Such earnings
include pre-acquisition earnings of foreign entities acquired through stock
purchases and are intended to be reinvested outside of the U.S. indefinitely.
Unrecognized deferred taxes on these undistributed earnings were estimated to be
approximately $96 million. Where excess cash has accumulated in our non-U.S.
subsidiaries and it is advantageous for tax reasons, subsidiary earnings may be
remitted.

(7)   Commitments and Contingencies

      We conduct a portion of our operations from leased premises and also lease
certain equipment under operating leases. Total rental expense amounts for the
years ended December 31, 2004, December 26, 2003 and December 27, 2002 were $7.6
million, $6.6 million and $8.2 million, respectively. The aggregate minimum
rental commitments under non-cancelable leases in effect at December 31, 2004
were as follows (in thousands):

                            Year
                           Ending
                           ------
                            2005         $ 7,613
                            2006           4,465
                            2007           3,677
                            2008           2,179
                            2009           1,686
                         Thereafter        6,665
                                         -------
                                         $26,285
                                         =======


                                       48


                        Technitrol, Inc. and Subsidiaries

              Notes to Consolidated Financial Statements, continued

(7)   Commitments and Contingencies, continued

      The aggregate minimum rental commitments schedule does not include $83.4
million due under precious metal consignment-type leases. We expect to make
payments under such leases as the precious metal is purchased in 2005 upon sale
of the precious metal to customers.

      We are involved in several legal actions relating to waste disposal sites.
Our involvement in these matters has generally arisen from the alleged disposal
by licensed waste haulers of small amounts of waste material many years ago. In
Sinsheim, Germany, there is a shallow groundwater and soil contamination that is
naturally decreasing over time. The German environmental authorities have not
required corrective action to date. In addition, property in Leesburg, Indiana,
which was acquired with our acquisition of GTI in 1998, is the subject of a 1994
Corrective Action Order to GTI by the Indiana Department of Environmental
Management (IDEM). Although we sold the property in early 2005, we retained the
responsibility for existing environmental issues at the site. The order requires
us to investigate and take corrective actions. Substantially all of the
corrective actions relating to impacted soil have been taken and IDEM has issued
us no further action letters for the remediated areas except for the solvent
disposal area. We expect an action letter on this area upon IDEM's final review
of the closure report submitted. Studies and analysis are ongoing with respect
to a ground water issue. We anticipate making additional environmental
expenditures in the future to continue our environmental studies, analysis and
remediation activities with respect to the ground water. Based on current
knowledge, we do not believe that any future expenses or liabilities associated
with environmental remediation will have a material impact on our operations or
our consolidated financial position, liquidity or operating results; however, we
may be subject to additional costs and liabilities if the scope of the
contamination or the cost of remediation exceeds our current expectations.

      We are also subject to various lawsuits, claims and proceedings which
arise in the ordinary course of our business. These actions include routine tax
audits and assessments occurring throughout numerous jurisdictions on a
worldwide basis. During 2003, Pulse and at least one other filtered connector
manufacturer was sued by a competitor, alleging that the manufacture and sale of
certain filtered connectors in the United States infringe on one of its patents.
Pulse has received an opinion of noninfringement from its legal counsel and
believes that none of the products offered by Pulse infringe the Regal patent.
Pulse intends to vigorously defend itself in this action. We do not believe that
the outcome of any of these actions will have a material adverse effect on our
financial results.

      We accrue costs associated with environmental and legal matters when they
become probable and reasonably estimable. Accruals are established based on the
estimated undiscounted cash flows to settle the obligations and are not reduced
by any potential recoveries from insurance or other indemnification claims. We
believe that any ultimate liability with respect to these actions in excess of
amounts provided will not materially affect our operations or consolidated
financial position, liquidity or operating results.

      We had three standby letters of credit outstanding at December 31, 2004 in
the aggregate amount of $1.5 million securing transactions entered into in the
ordinary course of business. We had commercial commitments outstanding at
December 31, 2004 of approximately $83.4 million due under precious metal
consignment-type leases. We had no other off-balance-sheet financing
arrangements.

(8)   Shareholders' Equity

      All retained earnings are free from legal or contractual restrictions as
of December 31, 2004, with the exception of approximately $14.0 million of
retained earnings, primarily in the PRC that are restricted in accordance with
Section 58 of the PRC Foreign Investment Enterprises Law. The restriction
applies to 10% of our net earnings in the PRC, limited to 50% of the total
capital invested in the PRC.

      We completed a follow-on offering of 6,348,000 shares of our common stock
on April 11, 2002. The proceeds of the offering, net of expenses, were
approximately $134.7 million. These proceeds resulted in a common stock increase
of $0.8 million at a par value of $0.125 per share and an additional paid-in
capital increase of $133.9 million.

      Effective August 1, 2001 we adopted a new qualified, non-compensatory
employee stock purchase plan that provides substantially all employees an
opportunity to purchase common stock. The purchase price is equal to 85% of the
fair value of the common stock on either the first day of the offering period or
the last day of the purchase


                                       49


                        Technitrol, Inc. and Subsidiaries

              Notes to Consolidated Financial Statements, continued

(8)   Shareholder Equity, continued

      period, whichever is lower. The offering periods and purchase periods are
defined by the plan, but are each currently six months in duration. In
connection with this plan, 1,000,000 shares of common stock are reserved for
issuance under the plan. In 2004, 2003 and 2002, employees purchased
approximately 45,000, 70,000 and 73,000 shares, respectively, under the plan.
During 2004, the operation of the ESPP was suspended following an evaluation of
its related expense and perceived value by employees.

      We have a Shareholder Rights Plan. The Rights are currently not
exercisable, and automatically trade with our common shares. However, after a
person or group has acquired 15% or more of our common shares, the Rights will
become exerciseable, and separate certificates representing the Rights will be
distributed. In the event that any person or group acquires 15% of our common
shares, each holder of two Rights (other than the Rights of the acquiring
person) will have the right to receive, for $135, that number of common shares
having a market value equal to two times the exercise price of the Rights.
Alternatively, in the event that, at any time following the date in which a
person or group acquires ownership of 15% or more of our common shares, and we
are acquired in a merger or other business combination transaction, or 50% or
more of our consolidated assets or earning power is sold, each holder of two
Rights (other than the Rights of such acquiring person or group) will thereafter
have the right to receive, upon exercise, that number of shares of common stock
of the acquiring entity having a then market value equal to two times the
exercise price of the Rights. The Rights may be redeemed by us at a price of
$.005 per Right at any time prior to becoming exercisable. Rights that are not
redeemed or exercised will expire on September 9, 2006.

(9)   Earnings (Loss) Per Share

      Basic earnings (loss) per share were calculated by dividing earnings
(loss) by the weighted average number of common shares outstanding during the
year (excluding restricted shares which are considered to be contingently
issuable). We had restricted shares outstanding of approximately 234,000,
199,000 and 315,000 as of December 31, 2004, December 26, 2003 and December 27,
2002 respectively, which generally vest over a three-year term. For calculating
diluted earnings per share, common share equivalents and restricted stock
outstanding were added to the weighted average number of common shares
outstanding. Common share equivalents result from outstanding options to
purchase common stock as calculated using the treasury stock method. Such
amounts were approximately 19,000 in 2004 and 5,000 in 2002. Because the
substantial majority of exercise prices of the stock options were greater than
the actual stock price as of December 26, 2003, the stock equivalents were
anti-dilutive and therefore excluded from the diluted earnings per share
calculation as of December 26, 2003. Earnings per share calculations were as
follows (in thousands, except per share amounts):



                                                  2004          2003          2002
                                                  ----          ----          ----
                                                                 
Net earnings (loss)                           $  6,928      $ 11,988      $(43,537)
   Basic earnings (loss) per share:
      Shares                                    40,178        40,032        37,281
      Per share amount, before change in
        accounting principle                  $   0.17      $   0.30      $  (0.75)
      Change in accounting principle                --            --         (0.42)
                                              --------      --------      --------
      Per share amount                        $   0.17      $   0.30      $  (1.17)
                                              ========      ========      ========
   Diluted earnings (loss) per share:
      Shares                                    40,411        40,171        37,581
      Per share amount before change in
        accounting principle                  $   0.17      $   0.30      $  (0.75)
      Change in accounting principle                --            --         (0.42)
                                              --------      --------      --------
      Per share amount                        $   0.17      $   0.30      $  (1.17)
                                              ========      ========      ========



                                       50


                        Technitrol, Inc. and Subsidiaries

              Notes to Consolidated Financial Statements, continued

(10)  Employee Benefit Plans

      We maintain defined benefit pension plans for certain of our U.S.
employees. Certain of our non-U.S. subsidiaries have varying types of retirement
plans providing benefits for substantially all of their employees. Benefits are
based on years of service and average final compensation. In 2004, we began to
aggregate the retirement plan of FRE, a majority-owned subsidiary, in connection
with our consolidation of FRE's financial statements upon obtaining a
controlling interest in September 2004. For U.S. plans we fund at least the
minimum amount required by the Employee Retirement Income Security Act of 1974
annually. Depending on the investment performance of plan assets and other
factors, the funding amount in any given year may be zero.

      Pension expense was as follows (in thousands):

                                                2004          2003          2002
                                                ----          ----          ----
Principal defined benefit plans               $1,426        $1,910        $  960
Other employee benefit plans                     410           638           140
                                              ------        ------        ------
                                              $1,836        $2,548        $1,100
                                              ======        ======        ======

      The net expense for the principal defined benefit pension plans included
the following components (in thousands):

                                               2004          2003          2002
                                               ----          ----          ----
Service cost                                $ 1,481       $ 1,471       $ 1,578
Interest cost                                 2,073         1,976         1,954
Expected return on plan assets               (2,239)       (1,880)       (2,546)
Amortization of transition obligation            17            18            18
Amortization of prior service cost              270           269           272
Recognized actuarial (gain) loss               (176)           56          (316)
                                            -------       -------       -------
         Net periodic pension cost          $ 1,426       $ 1,910       $   960
                                            =======       =======       =======


                                       51


                        Technitrol, Inc. and Subsidiaries

              Notes to Consolidated Financial Statements, continued

(10)  Employee Benefit Plans, continued

      The financial status of the principal defined benefit plans at December
31, 2004 and December 26, 2003, was as follows (in thousands):



                                                                2004           2003
                                                                ----           ----
                                                                     
Change in benefit obligation:

     Projected benefit obligation at beginning of year      $ 34,514       $ 31,176

         Service cost                                          1,481          1,471
         Interest cost                                         2,073          1,976
         Plan amendments                                        (101)            --
         Actuarial loss                                        1,338          1,020
         Plans not previously aggregated                         872
         Benefits paid                                        (1,208)        (1,130)
                                                            --------       --------
     Projected benefit obligation at end of year            $ 38,969       $ 34,514
                                                            --------       --------

Change in plan assets:

     Fair value of plan assets at beginning of year         $ 28,418       $ 24,180

         Actual return on plan assets                          2,899          5,309
         Employer contributions                                  111             59
         Plans not previously aggregated                         284             --
         Benefits paid                                        (1,208)        (1,130)
                                                            --------       --------
     Fair value of plan assets at end of year               $ 30,504       $ 28,418
                                                            ========       ========

Funded status                                               $ (8,465)      $ (6,096)

         Unrecognized actuarial gains                         (1,620)        (2,406)
         Unrecognized prior service cost                       2,889          3,124
         Unrecognized transition obligation                      136              2
         Intangible asset                                         (2)        (2,701)
                                                            --------       --------
Accrued pension costs at the end of the year                $ (7,062)      $ (8,077)
                                                            ========       ========

Accumulated benefit obligation                              $ 32,294       $ 28,215
                                                            ========       ========


      The aggregate benefit obligation, accumulated benefit obligation and fair
value of plan assets for plans with benefit obligations in excess of plan
assets, as of the measurement date of each statement of financial position
presented, is as follows, (in thousands):

                                                           2004             2003
                                                           ----             ----
Benefit obligation                                       $8,125           $7,140
Accumulated benefit obligation                           $6,394           $5,491
Plan assets                                              $   --           $   --

      The principal defined benefit plan weighted-average asset allocations at
December 31, 2004 and December 26, 2003 were as follows:

Asset Category                                           2004              2003
--------------                                           ----              ----
   Equity securities                                       66%               75%
   Debt securities                                         33%               24%
   Other                                                    1%                1%
                                                          ---               ---
   Total                                                  100%              100%
                                                          ===               ===


                                       52


                        Technitrol, Inc. and Subsidiaries

              Notes to Consolidated Financial Statements, continued

(10)  Employee Benefit Plans, continued

      Our asset allocation policy is for a target investment of 65% to 75%
equity securities and 25% to 35% fixed income securities. The goal of our asset
investment policy is to achieve a return in excess of the rate of inflation with
acceptable levels of volatility. We utilize professionally run mutual funds to
invest our assets. Our pension assets are invested in a variety of small and
large capitalization domestic and international mutual stock funds and a bond
fund.

      To develop the expected long-term rate-of-return on assets assumption, we
considered historical returns and the future expectations for returns for each
asset class, weighted by the target asset allocations. This resulted in the
selection of the 8.0% long-term rate of return on assets assumption.

      Assumptions used to develop data were as follows:

                                                             2004          2003
                                                             ----          ----
Discount rate                                                5.75%         6.25%
Annual compensation increases                                4.25%         4.25%
Expected long-term rates of return on plan assets            8.00%         8.00%

      Our measurement date is the last day of the year.

      We expect to contribute approximately $0.2 million to the principal
defined benefit plans in 2005. Additionally, we expect to make benefit payments
in 2005 of approximately $1.3 million from our principal defined benefit plans.
The following table shows expected benefit payments for the next five fiscal
years and the aggregate five years thereafter from the principal defined benefit
plans (in millions):

                            Year
                           Ending
                           ------
                            2005           $ 1.3
                            2006             1.4
                            2007             1.5
                            2008             1.6
                            2009             1.8
                         Thereafter         12.3

      We maintain defined contribution 401(k) plans covering substantially all
U.S. employees not affected by certain collective bargaining agreements. Under
our 401(k) plans, we contributed a matching amount equal to $1.00 for each $1.00
of the participant's contribution, not in excess of a maximum of 4% to 6% of the
participant's annual wages, depending on the plan. The total contribution
expense under the 401(k) plans for employees of continuing operations was
$1,556,000, $1,563,000 and $1,188,000 in 2004, 2003 and 2002 respectively.

      We do not provide any post-retirement benefits except as may be required
by certain jurisdictions outside of the U.S.

(11)  Stock-Based Compensation

      We have an incentive compensation plan for our employees. One component of
this plan is restricted stock, which grants the recipient the right of ownership
of our common stock, conditional on the achievement of performance objectives
and/or continued employment. Stock options are also granted under this plan. A
summary of the shares under the incentive compensation plan is as follows:


                                       53


                        Technitrol, Inc. and Subsidiaries

              Notes to Consolidated Financial Statements, continued

(11) Stock-Based Compensation, continued



                                                                      2004             2003             2002
                                                                      ----             ----             ----
                                                                                          
Shares available to be granted                                   2,320,290        2,505,426        2,686,249
New authorized shares                                                   --               --               --
Restricted stock and options awarded, net of cancellations        (154,552)        (185,136)        (180,823)
                                                                ----------       ----------       ----------
Balance available at the end of the year                         2,165,738        2,320,290        2,505,426
                                                                ==========       ==========       ==========


      During the years ended December 31, 2004, December 26, 2003 and December
27, 2002, we issued to employees, net of cancellations, restricted stock having
an approximate fair value at date of issue of $2,303,000, $1,091,000 and
$293,000, respectively. The fair value of the restricted stock is based on fair
market price of the stock at the award date and is recorded as deferred
compensation. Compensation is recognized over the vesting period which is
generally three years. Shares are held by us until the continued employment
requirement and/or performance criteria have been attained. For shares subject
to continued employment requirements, the market value of the shares at the date
of grant is charged to expense during the vesting period on a straight-line
basis. For shares subject to performance criteria, the expense varies with the
market value of the shares until the performance criteria are met or are deemed
to be unachievable. Cash awards, which accompany shares released under the
incentive compensation plan and are intended to assist recipients with their
resulting personal tax liability, are based on the market value of the shares
when restrictions lapse. Cash awards are accrued over the restriction period,
and the related expense is variable based on the market value of the shares.
Amounts charged to expense as a result of the restricted stock plan and related
expenses were approximately $2,461,000 in 2004, $1,601,000 in 2003 and
$1,404,000 in 2002.

      We also have a stock award plan for non-employee directors. The Board of
Directors Stock Plan was approved in 1998 to assist us in attracting and
retaining highly qualified persons to serve on our board of directors. Under the
terms of the plan, 60,000 shares of our common stock are available for grant. On
an annual basis, shares amounting to a dollar value predetermined by the plan
are issued to non-employee directors and are recorded as an expense at issuance.
In 2004, 2003, and 2002, 7,570, 10,206 and 6,895, shares, respectively,
(including those deferred at the directors' election) were issued under the
plan. A total of 14,634 shares remain available for issuance under the plan.

      In February of 2001, our Board of Directors Compensation Committee adopted
a stock option plan. All U.S. employees and designated employees of subsidiaries
are eligible to participate in the stock option plan. Except as limited by the
terms of the option plan, the committee has discretion to select the persons to
receive options and to determine the terms and conditions of the option,
including the number of shares underlying the option, the exercise price, the
vesting schedule and term. The options are granted at no cost to the employee
and cannot be granted with an exercise price less than the fair market value at
the date of grant. The options granted in 2004, 2003 and 2002 vest equally over
four years and expire in seven years from the date of grant. During 2004, 2003
and 2002, a total of approximately 100,700, 159,100 and 159,600 options, net of
cancellations, were awarded to employees at a weighted average strike price of
$16.55, $18.41 and $19.24 per share, respectively. None of the shares granted in
2004 were vested as of December 31, 2004, whereas 25% of the shares granted in
2003 and 50% of the shares granted in 2002 were vested as of December 31, 2004.

      We adopted SFAS 123, as amended by SFAS 148, at the beginning of the 2003
fiscal year. We implemented SFAS 123 under the prospective method approach per
SFAS 148, whereby compensation expense was recorded for all awards subsequent to
adoption. As permitted by the provisions of SFAS 123, we applied Accounting
Principles Board Opinion 25, "Accounting for Stock Issued to Employees" and
related interpretations in accounting for our stock option and purchase plans
prior to adoption of SFAS 123 in fiscal 2003. Accordingly, no compensation cost
was recognized for our stock option and employee purchase plans prior to fiscal
2003.


                                       54


                        Technitrol, Inc. and Subsidiaries

              Notes to Consolidated Financial Statements, continued

(11)  Stock-Based Compensation, continued

      If compensation cost for issuances under our stock option plan and stock
purchase plan had been determined based on the fair value as required by SFAS
123 for all awards, our pro forma net income (loss) and earnings (loss) per
basic and diluted share would have been as follows (amounts are in thousands,
except per share amounts):



                                                                         2004           2003           2002
                                                                         ----           ----           ----
                                                                                          
Net income (loss), as reported                                       $  6,928       $ 11,988       $(43,537)
Add: Stock-based compensation expense included in reported net
    income (loss), net of taxes                                         1,944          1,269            870
Deduct: Total stock-based compensation expense determined under
     fair value based method for all awards, net of taxes              (2,764)        (2,124)        (1,533)
                                                                     --------       --------       --------
Net income (loss) adjusted                                           $  6,108       $ 11,133       $(44,200)
Basic net income (loss) per share - as reported                      $   0.17       $   0.30       $  (1.17)
Basic net income (loss) per share - adjusted                         $   0.15       $   0.28       $  (1.19)
Diluted net income (loss) per share - as reported                    $   0.17       $   0.30       $  (1.17)
Diluted net income (loss) per share - adjusted                       $   0.15       $   0.28       $  (1.19)


      At December 31, 2004, we had approximately 528,000 options outstanding,
representing approximately 1% of our outstanding shares of common stock. The
value of restricted stock has always been and continues to be recorded as
compensation expense over the restricted period, and such expense is included in
the results of operations for all years presented.

(12)  Severance and Asset Impairment Expense

      We implemented numerous restructuring initiatives during 2004, 2003 and
2003 in order to reduce our cost structure and capacity in response to a global
recession in the electronics industry in 2002 and 2001 and an increasingly
competitive environment in both the electronics and electrical markets which
followed.

      In the year ended December 31, 2004, we accrued $9.0 million for severance
and related payments comprised of $3.1 million related to AMI Doduco's
termination of manufacturing and personnel at a facility in Germany, $2.7
million related to the termination of manufacturing and support personnel at an
AMI Doduco facility in France, $1.5 million to writedown the value of certain
Pulse fixed assets to their disposal values, $0.8 million related to Pulse's
shutdown of a facility in Carlsbad, California and $0.9 million for other
severances in various locations. The vast majority of these accruals will be
utilized by the end of the second quarter in 2005. Additionally, in the quarter
ended December 31, 2004, we recorded an intangible asset impairment of $18.5
million related to Eldor and Excelsus acquired intangibles, and $0.4 million for
other acquired intangibles. These intangible asset impairments resulted from
updated cash flow projections relating to technology and customer relationships,
and reflect, among other things, shifting product mixes, changes among major
customers and continuing pressures on selling prices in the consumer and
telecommunication product divisions of the Pulse segment.

      In the year ended December 26, 2003, we accrued $9.0 million for
severance, severance related payments and asset impairments. At Pulse, we
accrued $1.5 million for the elimination of certain manufacturing and support
positions located in France, the United Kingdom, Mexico and China and $0.7
million for other facility exit costs. We additionally accrued $1.9 million for
shutdown of Pulse's manufacturing facility in Mexico and $0.5 million to
write-down the carrying cost of Pulse's facility in the Philippines which is
held for sale. At AMI Doduco, we accrued $2.9 million for the elimination of
certain manufacturing positions principally located in North America and Germany
and $1.5 million to complete the shutdown of a redundant facility in Spain that
we acquired from Engelhard-CLAL in 2001. The majority of these accruals were
utilized by the end of 2004.

      In the year ended December 27, 2002, we announced the closure of our
production facility in the Philippines. The production at this facility was
transferred to other Pulse facilities in Asia. We recognized expense of $3.8
million for this plant closing, comprising $1.4 million for severance and
related payments and $2.4 million for asset writedowns. The majority of this
accrual was utilized by the end of 2002. We also adopted other restructuring
plans during 2002. In this regard, provisions of $5.9 million were recorded
during 2002. Approximately 800 personnel were terminated in 2002 and
substantially all of the employee severance and related payments in


                                       55


                        Technitrol, Inc. and Subsidiaries

              Notes to Consolidated Financial Statements, continued

(12)  Severance and Asset Impairment Expense, continued

connection with these actions were completed as of December 31, 2004. An
additional expense charge of $7.0 million was recorded in 2002 related to asset
write-downs. These assets were primarily Asian-based production equipment that
became idle in 2002. The remaining cost basis of the assets has been
reclassified from fixed assets to assets held for sale in the balance sheet as
of December 31, 2004. An additional $32.1 million of Excelsus trade name
impairment was recorded in 2002. The impairment charge was triggered by the
combined effect of reorganizing Pulse into product line based organization and
updated forecasts for digital subscriber line microfilters to which the trade
name applies. A total of $1.9 million was also recognized as an offset to
severance and asset impairment expense income in 2002, attributable to positive
adjustments primarily resulting from the favorable outcome of certain legal
matters of long vintage. The majority of these accruals were utilized by the end
of 2003.

      As a result of our continuing focus on both economic and operating profit,
we will continue to aggressively size both Pulse and AMI Doduco so that costs
are optimally matched to current and anticipated future revenue and unit demand,
and as we pursue additional growth opportunities. The amounts of additional
charges will depend on specific actions taken. The actions taken over the past
three years such as plant closures, plant relocations, asset impairments and
reduction in personnel worldwide have resulted in the elimination of a variety
of costs. The majority of these costs represent the annual salaries and benefits
of terminated employees, both those directly related to manufacturing and those
providing selling, general and administrative services. The eliminated costs
also include depreciation savings from disposed equipment.

      Our restructuring charges are summarized for 2004 as follows:



                                                           AMI
Restructuring provision (in millions):                   Doduco      Pulse      Total
                                                         ------      -----      -----
                                                                        
Balance accrued at December 26, 2003                       $2.1       $1.7       $3.8
Accrued for the twelve months ended December 31, 2004       6.0        3.0        9.0
Severance and other cash payments                          (5.0)      (2.1)      (7.1)
Non-cash asset disposals                                   (1.3)      (1.4)      (2.7)
                                                           ----       ----       ----
Balance accrued at December 31, 2004                       $1.8       $1.2       $3.0
                                                           ====       ====       ====


(13)  Supplementary Information

      The following amounts were charged directly to costs and expenses (in
thousands):

                                               2004         2003         2002
                                               ----         ----         ----
     Depreciation                           $19,711      $19,580      $18,137
     Amortization of intangible assets        4,477        4,035        1,633
     Advertising                                376          202          248
     Repairs and maintenance                 13,779        8,179        7,524
     Bad debt expense                           544          427          899

Cash payments made:
     Income taxes                           $ 4,063      $ 3,816      $ 9,027
     Interest                                 1,975        1,868        3,318

      Accumulated other comprehensive income as disclosed in the Consolidated
Statements of Changes in Shareholders' Equity consists principally of foreign
currency translation items.


                                       56


                        Technitrol, Inc. and Subsidiaries

              Notes to Consolidated Financial Statements, continued

(14)  Segment and Geographical Information

      We operate our business in two segments: the Electronic Components
Segment, which operates under the name Pulse, and the Electrical Contact
Products Segment, which operates under the name AMI Doduco. We refer to these
segments as ECS or Pulse, and ECPS or AMI Doduco, respectively. Each segment is
managed by a President who reports to our Chief Executive Officer.

      Pulse designs and manufactures a wide variety of highly-customized passive
magnetics-based electronic components. These components manage and regulate
electronic signals and power for use in a variety of devices by filtering out
radio frequency interference and adjusting and ensuring proper current and
voltage. These products are often referred to as chokes, inductors, filters and
transformers. Pulse sells its products to multinational original equipment
manufacturers, contract manufacturers and distributors. Through a majority-owned
subsidiary, Pulse also supplies a variety of electronic connectors, modules,
wireless antennas and other accessories.

      AMI Doduco is a global manufacturer of a full range of electrical contact
products, from contact materials to completed contact subassemblies. Contact
products complete or interrupt electrical circuits in virtually every electrical
device. AMI Doduco provides its customers with a broad array of highly
engineered products and tools designed to meet unique customer needs.


                                       57


                        Technitrol, Inc. and Subsidiaries

              Notes to Consolidated Financial Statements, continued

(14)  Segment and Geographical Information, continued



Amounts are in thousands:
                                                                  2004            2003            2002
                                                                  ----            ----            ----
                                                                                    
Net sales from continuing operations
     Pulse                                                   $ 320,154       $ 294,092       $ 204,570
     AMI Doduco                                                262,160         215,155         201,784
                                                             ---------       ---------       ---------
         Total                                               $ 582,314       $ 509,247       $ 406,354
                                                             =========       =========       =========
Operating profit(loss) before income taxes
     Pulse                                                   $   9,485       $  27,197       $ (38,520)
     AMI Doduco                                                   (927)         (2,146)         (1,242)
                                                             ---------       ---------       ---------
         Total operating profit                                  8,558          25,051         (39,762)
     Items not included in segment profit (1)                    2,457         (10,055)           (382)
                                                             ---------       ---------       ---------
     Earnings (loss) before income taxes and cumulative
       effect of accounting change                           $  11,015       $  14,996       $ (40,144)
                                                             =========       =========       =========
Assets at end of year
     Pulse                                                   $ 326,131       $ 302,261       $ 195,407
     AMI Doduco                                                126,733         109,390         104,665
                                                             ---------       ---------       ---------
         Segment assets                                        452,864         411,651         300,072
     Assets not included in Segment assets (2)                 173,723         177,243         247,316
                                                             ---------       ---------       ---------
         Total                                               $ 626,587       $ 588,894       $ 547,388
                                                             =========       =========       =========
Capital expenditures (3)
     Pulse                                                   $  27,962       $  29,078       $     681
     AMI Doduco                                                  4,219           4,547           5,074
                                                             ---------       ---------       ---------
         Total                                               $  32,181       $  33,625       $   5,755
                                                             =========       =========       =========
Depreciation and amortization
     Pulse                                                   $  17,281       $  16,048       $  12,501
     AMI Doduco                                                  6,907           7,567           7,269
                                                             ---------       ---------       ---------
         Total                                               $  24,188       $  23,615       $  19,770
                                                             =========       =========       =========


(1)   Includes interest income, interest expense and other non-operating items
      disclosed in our Consolidated Statements of Operations. We exclude these
      items when measuring segment operating profit.

(2)   Cash and cash equivalents are the primary corporate assets. We exclude
      cash and cash equivalents, net deferred tax assets, and intercompany
      receivables when measuring segment assets.

(3)   During the past three years, we have acquired several companies and
      majority interests. We have included acquired property, plant and
      equipment in these capital expenditure amounts.

      We have no significant intercompany revenue between our segments. We do
not use income taxes when measuring segment results; however, we allocate income
taxes to our segments to determine certain performance measures. These
performance measures include economic profit. The following pro forma disclosure
of segment income tax expense is based on simplified assumptions and includes
allocations of corporate tax items. These allocations are based on the
proportionate share of total tax expense for each segment, obtained by
multiplying our respective segment's operating profit by the relevant estimated
effective tax rate for the year. The allocated tax expense amounts for Pulse
were, in thousands, $3,014, $4,437, and $(13,395) in 2004, 2003 and 2002,
respectively. For AMI Doduco, they were, in thousands, $418, $(1,429) and $1,050
in 2004, 2003 and 2002, respectively.


                                       58


                        Technitrol, Inc. and Subsidiaries

              Notes to Consolidated Financial Statements, continued

(14)  Segment and Geographical Information, continued

      We sell our products to customers throughout the world. The following
table summarizes our sales to customers in the United States and Germany, where
sales are significant. Other countries in which our sales are not significant
are grouped into regions. We attribute customer sales to the country addressed
in the sales invoice. The product is usually shipped to the same country.
Amounts are in thousands:

                                            2004            2003            2002
                                            ----            ----            ----
Sales to customers in:
Europe, other than Germany              $171,615        $179,598        $106,277
Asia                                     166,884         108,590          86,441
United States                            131,194         124,007         127,256
Germany                                   84,284          72,374          54,871
Other                                     28,337          24,678          31,509
                                        --------        --------        --------
         Total                          $582,314        $509,247        $406,354
                                        ========        ========        ========

      The following table includes net property, plant and equipment located in
Turkey, Germany, the United States and China, where assets are significant.
Other countries in which such assets are not significant are grouped into
regions. Property, plant and equipment represents all of the relevant assets
that have long useful lives. Amounts are in thousands:



                                                       2004         2003         2002
                                                       ----         ----         ----
                                                                     
Net property, plant and equipment located in:
Turkey                                             $ 31,491      $31,091      $    --
China                                                26,802       12,545       17,703
Germany                                              18,894       18,026       15,796
United States                                        10,230       12,831       16,308
Europe, other than Turkey and Germany                 8,258       11,338       10,576
Asia, other than Turkey and China                     5,598        1,114        2,020
Other                                                   903        1,104        2,458
                                                   --------      -------      -------
         Total                                     $102,176      $88,049      $64,861
                                                   ========      =======      =======


(15)  Equity Method Investment

      In April 2001, we made a minority investment in the common stock of FRE,
which was accounted for by the cost-basis method of accounting. On July 27,
2002, we made an additional investment in FRE of $6.7 million which increased
our total investment to $20.9 million. As a result of the increased ownership
percentage to approximately 29%, we began to account for the investment under
the equity method beginning in the three months ended September 27, 2002. In
2003, we recorded a $8.7 million net charge for our equity method investment in
FRE. The net loss in 2003 resulted from a $9.3 million charge to adjust the
original cost basis of our investment to market value, offset by $0.6 million of
equity method investment earnings in 2003. Shares of FRE began trading on the
Taiwan Stock Exchange in January of 2003, and they have experienced considerable
price volatility. In July 2004, we purchased an additional 9.0 million shares of
common stock in FRE for $10.5 million. On September 13, 2004, we acquired an
additional 2.4 million shares of common stock in FRE for $2.5 million, bringing
our total investment percentage up to 51%. Accordingly, FRE's operating results
are consolidated with our own beginning September 13, 2004. In 2004, we recorded
$0.8 million of equity earnings which reflects our proportionate share of
earnings for the period prior to September 13, 2004.


                                       59


                        Technitrol, Inc. and Subsidiaries

              Notes to Consolidated Financial Statements, continued

(16)  Goodwill and Other Intangible Assets

      In July 2001, the FASB issued Statement No. 142, Goodwill and Other
Intangible Assets ("SFAS 142"). SFAS 142 requires that goodwill and intangible
assets with indefinite useful lives no longer be amortized, but instead be
tested for impairment at least annually in accordance with the provisions of
SFAS 142. SFAS 142 also requires that other intangible assets with definite
useful lives be amortized over their respective estimated useful lives to their
estimated residual values, and reviewed for impairment in accordance with
Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets. ( in thousands, except per share amounts):

                                                         2002
                                                         ----
Net earnings (loss) - as reported                    $(43,537)
Adjustments:
     Cumulative effect of accounting change            15,763
     Income tax effect                                    (25)
                                                     --------

           Net adjustments                             15,738
                                                     --------

Net earnings (loss) - adjusted                       $(27,799)
                                                     ========

Basic net income (loss) per share - as reported      $  (1.17)
Basic net income (loss) per share - adjusted         $  (0.75)
Diluted net income (loss) per share - as reported    $  (1.17)
Diluted net income (loss) per share - adjusted       $  (0.75)

      In the first quarter of 2002, upon our transitional assessment, we
recorded a goodwill impairment charge of $15.7 million, net of income tax
benefit, related to AMI Doduco, as a cumulative effect of accounting change.
During the quarter ended June 28, 2002, we recorded an impairment charge of
$32.1 million of the value assigned to the Excelsus trade name, less a $12.8
million income tax benefit. The charge was included in the line "Severance and
asset impairment expense" on the consolidated statement of operations. This
charge was triggered by the combined effect of reorganizing Pulse into a
product-line based organization and updated financial forecasts for DSL
mircofilters, to which the trade name applies.

      The changes in the carrying amounts of goodwill for the years ended
December 31, 2004 and December 26, 2003 were as follows:

              Balance at December 27, 2002             $  86,648

              Goodwill acquired during the year           21,762
              Currency translation adjustment              4,498
                                                       ---------

              Balance at December 26, 2003               112,908

              Goodwill acquired during the year           11,379
              Purchase price allocation and other
              adjustment                                    (450)
              Currency translation adjustment              2,341
                                                       ---------

              Balance at December 31, 2004             $ 126,178
                                                       =========

      The majority of our goodwill and other intangibles relate to our Pulse
segment.


                                       60


                        Technitrol, Inc. and Subsidiaries

              Notes to Consolidated Financial Statements, continued

(16)  Goodwill and Other Intangible Assets, continued

      Other intangible assets were as follows:

                                           December 31,        December 26,
                                                   2004                2003
                                           -------------       ------------
   Intangible Assets Subject to
      Amortization  (Definite Lived)            $29,874             $38,995
   Accumulated Amortization                     (11,780)             (6,720)
                                                -------             -------
   Net Intangible Assets Subject to
   Amortization                                  18,094              32,275
   Intangibles Assets Not Subject to
   Amortization (Indefinite Lived)                4,591               7,900
                                                -------             -------
                                                $22,685             $40,175
                                                =======             =======

      Amortization expense was $4,477,000, $4,035,000 and $1,633,000 for the
years ended December 31, 2004, December 26, 2003 and December 27, 2002,
respectively. Estimated annual amortization expense for each of the next five
years is as follows: (in thousands)

                         Year Ending
                         -----------
                            2005                $ 1,690
                            2006                  1,690
                            2007                  1,690
                            2008                  1,650
                            2009                  1,571

      In the quarter ended December 31, 2004, we recorded an intangible asset
impairment of $18.5 million related to Eldor and Excelsus acquired intangibles.
These intangible asset impairments resulted from updated cash flow projections
relating to technology and customer relationships, and reflect, among other
things, shifting product mixes, changes among major customers and continuing
pressures on selling prices in the consumer and telecommunication product
divisions of the Pulse segment.

(17)  Quarterly Financial Data (Unaudited)

      Quarterly results of operations (unaudited) for 2004 and 2003 are
summarized as follows (in thousands, except per share data)



                                                        Quarter Ended
                                                        -------------
                                       Mar. 26       June 25        Oct. 1        Dec. 31
                                       -------       -------        ------        -------
                                                                    
2004:
    Net sales                         $139,607      $146,970      $146,452      $ 149,285
    Gross profit                        38,099        39,592        34,938         33,582
    Earnings (loss) before taxes         7,589        11,066         5,876        (12,785)
    Net earnings (loss)                  5,765         9,274         4,438        (12,549)
    Basic                             $   0.14      $   0.23      $   0.11      $   (0.31)
    Diluted                           $   0.14      $   0.23      $   0.11      $   (0.31)

                                       Mar. 28       June 27      Sept. 26        Dec. 26
                                       -------       -------      --------        -------
2003:
    Net sales                         $122,544      $125,706      $126,260      $ 134,737
    Gross profit                        30,421        32,818        33,941         36,138
    Earnings (loss) before taxes         2,739         7,286         7,881         (2,910)
    Net earnings (loss)                  2,634         6,020         6,412         (3,078)
    Basic                             $   0.07      $   0.15      $   0.16      $   (0.08)
    Diluted                           $   0.07      $   0.15      $   0.16      $   (0.08)



                                       61


                        Technitrol, Inc. and Subsidiaries

                         Financial Statement Schedule II

                        Valuation and Qualifying Accounts

                            (In thousands of dollars)



                                                                   Additions (Deductions)
                                                                   ----------------------
                                                             Charged to
                                                Opening       costs and  Write-offs and           Ending
Description                                     Balance        expenses        payments          Balance
-----------                                     -------        --------        --------          -------
                                                                                    
Year ended December 31, 2004:
Provisions for obsolete and slow-moving
    inventory                                  $ 10,410        $  6,106        $ (5,419)        $ 11,097
                                               ========        ========        ========         ========
Allowances for doubtful accounts               $  2,881        $    544        $ (1,710)        $  1,715
                                               ========        ========        ========         ========

Year ended December 26, 2003:
Provisions for obsolete and slow-moving
    inventory                                  $ 15,564        $  5,936        $(11,090)        $ 10,410
                                               ========        ========        ========         ========
Allowances for doubtful accounts               $  3,255        $    427        $   (801)        $  2,881
                                               ========        ========        ========         ========

Year ended December 27, 2002:
Provisions for obsolete and slow-moving
    inventory                                  $ 23,517        $  2,214        $(10,167)        $ 15,564
                                               ========        ========        ========         ========
Allowances for doubtful accounts               $  2,560        $    899        $   (204)        $  3,255
                                               ========        ========        ========         ========



                                       62


                                  Exhibit Index

2.1      Share Purchase Agreement, dated as of January 9, 2003, by Pulse
         Electronics (Singapore) Pte. Ltd. and Forfin Holdings B.V. that are
         signatories thereto (incorporated by reference to Exhibit 2 to our Form
         8-K dated January 10, 2003).

3.1      Amended and Restated Articles of Incorporation (incorporated by
         reference to Exhibit 3.1 to our Form 10-K for the year ended December
         26, 2003).

3.3      By-laws (incorporated by reference to Exhibit 3.3 to our Form 10-K for
         the year ended December 27, 2002).

4.1      Rights Agreement, dated as of August 30, 1996, between Technitrol, Inc.
         and Registrar and Transfer Company, as Rights Agent (incorporated by
         reference to Exhibit 3 to our Registration Statement on Form 8-A dated
         October 24, 1996).

4.2      Amendment No. 1 to the Rights Agreement, dated March 25, 1998, between
         Technitrol, Inc. and Registrar and Transfer Company, as Rights Agent
         (incorporated by reference to Exhibit 4 to our Registration Statement
         on Form 8-A/A dated April 10, 1998).

4.3      Amendment No. 2 to the Rights Agreement, dated June 15, 2000, between
         Technitrol, Inc. and Registrar and Transfer Company, as Rights Agent
         (incorporated by reference to Exhibit 5 to our Registration Statement
         on Form 8-A/A dated July 5, 2000).

10.1     Technitrol, Inc. 2001 Employee Stock Purchase Plan (incorporated by
         reference to Exhibit 4.1 to our Registration Statement on Form S-8
         dated June 28, 2001, File Number 333-64060).

10.1(1)  Form of Stock Option Agreement (incorporated by reference to Exhibit
         10.1(1) to our Form 10-Q for the three months ended October 1, 2004).

10.2     Technitrol, Inc. Restricted Stock Plan II, as amended and restated as
         of January 1, 2001 (incorporated by reference to Exhibit C, to our
         Definitive Proxy on Schedule 14A dated March 28, 2001).

10.3     Technitrol, Inc. 2001 Stock Option Plan (incorporated by reference to
         Exhibit 4.1 to our Registration Statement on Form S-8 dated June 28,
         2001, File Number 333-64068).

10.4     Technitrol, Inc. Board of Directors Stock Plan (incorporated by
         reference to Exhibit 4.1 to our Registration Statement on Form S-8
         dated June 1, 1998, File Number 333-55751).

10.5     Revolving Credit Agreement, by and among Technitrol, Inc. and certain
         of its subsidiaries, JPMorgan Chase Bank. as Agent and Lender, and
         certain other Lenders that are signatories thereto, dated as of June
         17, 2004 (incorporated by reference to Exhibit 10.5 to our Form 10-Q
         for the three months ended June 25, 2004).

10.6     Lease Agreement, dated October 15, 1991, between Ridilla-Delmont and
         AMI Doduco, Inc. (formerly known as Advanced Metallurgy Incorporated),
         as amended September 21, 2001 (incorporated by reference to Exhibit
         10.6 to the Company's Amendment No. 1 to Registration Statement on Form
         S-3 dated February 28, 2002, File Number 333-81286).

10.7     Incentive Compensation Plan of Technitrol, Inc. (incorporated by
         reference to Exhibit 10.7 to Amendment No. 1 to our Registration
         Statement on Form S-3 filed on February 28, 2002, File Number
         333-81286).

10.8     Technitrol, Inc. Supplemental Retirement Plan, amended and restated
         January 1, 2002 (incorporated by reference to Exhibit 10.8 to Amendment
         No. 1 to our Registration Statement on Form S-3 filed on February 28,
         2002, File Number 333-81286).


                                       63


                            Exhibit Index, continued

10.9     Agreement between Technitrol, Inc. and James M. Papada, III, dated July
         1, 1999, as amended April 23, 2001, relating to the Technitrol, Inc.
         Supplemental Retirement Plan (incorporated by reference to Exhibit 10.9
         to Amendment No. 1 to our Registration Statement on Form S-3 filed on
         February 28, 2002, File Number 333-81286).

10.10    Letter Agreement between Technitrol, Inc. and James M. Papada, III,
         dated April 16, 1999, as amended October 18, 2000 (incorporated by
         reference to Exhibit 10.10 to Amendment No. 1 to our Registration
         Statement on Form S-3 filed on February 28, 2002, File Number
         333-81286).

10.10(1) Letter Agreement between Technitrol, Inc. and James M. Papada, III
         dated July 1, 2004 (incorporated by reference to Exhibit 10.10(1) to
         our Form 10-Q for the three months ended October 1, 2004).

10.11    Form of Indemnity Agreement (incorporated by reference to Exhibit 10.11
         to our Form 10-K for the year ended December 27, 2002).

10.12    Technitrol Inc. Supplemental Savings Plan (incorporated by reference to
         Exhibit 10.15 to our Form 10-Q for the three months ended September 26,
         2003)

10.13    Technitrol, Inc. 401(K) Retirement Savings Plan, as amended
         (incorporated by reference to post-effective Amendment No. 1, to our
         Registration Statement on Form S-8 filed on October 31, 2003, File
         Number 033-35334) (incorporated by reference to Exhibit 10.16 to our
         Form 10-Q for the three months ended March 26, 2003).

10.14    Pulse Engineering, Inc. 401(K) Plan as amended (incorporated by
         reference to post-effective Amendment No. 1, to our Registration
         Statement on Form S-8 filed on October 31, 2003, File Number 033-94073)
         (incorporated by reference to Exhibit 10.16 to our Form 10-Q for the
         three months ended March 26, 2003).

10.15    Amended and Restated Short-Term Incentive Plan.

10.16    Amended and Restated Consignment Agreement, Dated May 27, 1997, by and
         among Rhode Island Hospital Trust National Bank, Doduco GmbH, Doduco
         Espana, S.A. and Technitrol, Inc.

10.16(1) First Amendment to Amended and Restated Consignment Agreement, Dated
         May 27, 1997, by and among Rhode Island Hospital Trust National Bank,
         Doduco GmbH, Doduco Espana, S.A. and Technitrol, Inc. (incorporated by
         reference to Exhibit 10.16(1) to our Form 10-Q for the three months
         ended October 1, 2004).

10.16(2) Second Amendment to Amended and Restated Consignment Agreement, Dated
         May 27, 1997, by and among Rhode Island Hospital Trust National Bank,
         Doduco GmbH, Doduco Espana, S.A. and Technitrol, Inc. (incorporated by
         reference to Exhibit 10.16(2) to our Form 10-Q for the three months
         ended October 1, 2004).

10.16(3) Third Amendment to Amended and Restated Consignment Agreement, Dated
         May 27, 1997, by and among Rhode Island Hospital Trust National Bank,
         Doduco GmbH, Doduco Espana, S.A. and Technitrol, Inc. (incorporated by
         reference to Exhibit 10.16(3) to our Form 10-Q for the three months
         ended October 1, 2004).

10.16(4) Fourth Amendment to Amended and Restated Consignment Agreement, Dated
         May 27, 1997, by and among Rhode Island Hospital Trust National Bank,
         Doduco GmbH, Doduco Espana, S.A. and Technitrol, Inc. (incorporated by
         reference to Exhibit 10.16(4) to our Form 10-Q for the three months
         ended October 1, 2004).


                                       64


                            Exhibit Index, continued

10.16(5) Fifth Amendment to Amended and Restated Consignment Agreement, Dated
         May 27, 1997, by and among Rhode Island Hospital Trust National Bank,
         Doduco GmbH, Doduco Espana, S.A. and Technitrol, Inc. (incorporated by
         reference to Exhibit 10.16(5) to our Form 10-Q for the three months
         ended October 1, 2004).

10.17    Consignment agreement dated December 17, 1997, among Fleet Precious
         Metals Inc., Technitrol, Inc. and Advanced Metallurgy Incorporated
         (incorporated by reference to Exhibit 10.17 to our Form 10-Q for the
         three months ended October 1, 2004).

10.17(1) First Amendment to Consignment agreement dated December 17, 1997, among
         Fleet Precious Metals Inc., Technitrol, Inc. and Advanced Metallurgy
         Incorporated (incorporated by reference to Exhibit 10.17(1) to our Form
         10-Q for the three months ended October 1, 2004).

10.17(2) Letter Amendment to Consignment agreement dated December 17, 1997,
         among Fleet Precious Metals Inc., Technitrol, Inc. and Advanced
         Metallurgy Incorporated (incorporated by reference to Exhibit 10.17(2)
         to our Form 10-Q for the three months ended October 1, 2004).

10.17(3) Letter Amendment to Consignment Agreement dated December 15, 2003,
         among Fleet Precious Metals, Inc., Technitrol, Inc., and AMI Doduco,
         Inc. (incorporated by reference to Exhibit 10.17(3) to our Form 10-Q
         for the three months ended October 1, 2004).

10.17(4) Letter Amendment to Consignment Agreement dated January 29, 2004, among
         Fleet Precious Metals, Inc., Technitrol, Inc. and AMI Doduco, Inc.
         (incorporated by reference to Exhibit 10.17(4) to our Form 10-Q for the
         three months ended October 1, 2004).

10.18    Silver Lease Agreement dated April 9, 1996 between Standard Chartered
         Bank Mocatta Bullion - New York and Advanced Metallurgy, Inc. and
         Guarantee dated April 29, 1996 by Technitrol, Inc. (incorporated by
         reference to Exhibit 10.18 to our Form 10-Q for the three months ended
         October 1, 2004).

10.18(1) Letter Agreement dated April 9, 1996 between Standard Chartered Bank
         Mocatta Bullion - New York and Advanced Metallurgy, Inc. (incorporated
         by reference to Exhibit 10.18(1) to our Form 10-Q for the three months
         ended October 1, 2004).

10.18(2) Amendment to Silver Lease Agreement dated February 14, 1997 between
         Standard Chartered Bank Mocatta Bullion - New York and Advanced
         Metallurgy Inc. (incorporated by reference to Exhibit 10.18(2) to our
         Form 10-Q for the three months ended October 1, 2004).

10.18(3) Amendment to Silver Lease Agreement dated November 3, 1997 between
         Standard Chartered Bank Mocatta Bullion - New York and Advanced
         Metallurgy Inc. (incorporated by reference to Exhibit 10.18(3) to our
         Form 10-Q for the three months ended October 1, 2004).

10.18(4) Amendment to Silver Lease Agreement dated May 21, 2003 between Standard
         Chartered Bank Mocatta Bullion - New York and AMI Doduco, Inc.
         (incorporated by reference to Exhibit 10.18(4) to our Form 10-Q for the
         three months ended October 1, 2004).

10.19    Consignment Agreement dated September 24, 2004 between Mitsui & Co.
         Precious Metals Inc., and AMI Doduco, Inc. (incorporated by reference
         to Exhibit 10.19 to our Form 10-Q for the three months ended October 1,
         2004).

10.20    Unlimited Guaranty dated December 16, 1996 by Technitrol, Inc. in favor
         of Rhode Island Hospital Trust National Bank (incorporated by reference
         to Exhibit 10.20 to our Form 10-Q for the three months ended October 1,
         2004).


                                       65


                            Exhibit Index, continued

10.21    Corporate Guaranty dated November 1, 2004 by Technitrol, Inc. in favor
         of Mitsui & Co. Precious Metals, Inc. (incorporated by reference to
         Exhibit 10.21 to our Form 10-Q for the three months ended October 1,
         2004).

10.30    Schedule of Board of Director and Committee Fees

21       Subsidiaries of Registrant

23       Consent of Independent Registered Public Accounting Firm

31.1     Certification of Principal Executive Officer pursuant to Section 302(a)
         of the Sarbanes-Oxley Act of 2002.

31.2     Certification of Principal Financial Officer pursuant to Section 302(a)
         of the Sarbanes-Oxley Act of 2002.

32.1     Certification of Principal Executive Officer pursuant to 18 U.S.C.
         Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
         Act of 2002.

32.2     Certification of Principal Financial Officer pursuant to 18 U.S.C.
         Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
         Act of 2002.


                                       66


                                   Signatures

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

TECHNITROL, INC.


By     /s/James M. Papada, III
       -------------------------------------------------
       James M. Papada, III
       Chairman, President and CEO

Date February 25, 2005

         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.


                                                    
By     /s/Alan E. Barton                        By        /s/ Edward M. Mazze
       ------------------------------------               -----------------------------------------------
       Alan E. Barton                                     Edward M. Mazze
       Director                                           Director

Date   February 25, 2005                        Date      February 25, 2005


By     /s/John E. Burrows, Jr.                  By        /s/ C. Mark Melliar-Smith
       ------------------------------------               -----------------------------------------------
       John E. Burrows, Jr.                               C. Mark Melliar-Smith
       Director                                           Director

Date   February 25, 2005                        Date      February 25, 2005


By     /s/David H. Hofmann                      By        /s/James M. Papada, III
       ------------------------------------               -----------------------------------------------
       David H. Hofmann                                   James M. Papada, III
       Director                                           Chairman, President and CEO
                                                          (Principal Executive Officer)
Date   February 25, 2005
                                                Date      February 25, 2005


By     /s/Dennis J. Horowitz
       ------------------------------------
       Dennis J. Horowitz                       By        /s/Drew A. Moyer
       Director                                           -----------------------------------------------
                                                          Drew A. Moyer
                                                          Senior Vice President
Date   February 25, 2005                                  and Chief Financial Officer
                                                          (Principal Financial and Accounting Officer)


By     /s/Graham Humes                          Date      February 25, 2005
       ------------------------------------
       Graham Humes
       Director

Date   February 25, 2005



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