##### 



TRENCH ELECTRIC B.V. FORM 20-F
Equivalent
 SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 20549
 (Mark One) o
    
    Registration statement pursuant to Section 12(b) or 12(g) of
the Securities Exchange Act of 1934.ORo
    
    Annual report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934.For the fiscal year ended December 31, 2003ORo
    
    Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
 For the transition period fromto Commission file number 333-8334-02 Trench Electric B.V.  The Netherlands
(Jurisdiction of Incorporation or Organization) Prof. J.H. Bavincklaan 7, 1183 AT, Amstelveen, The Netherlands
(Address of Principal Executive Offices) Securities registered or to be registered pursuant to Section 12(b) of
the Act: Name of Each ExchangeTitle of Each Class
    
    On Which RegisteredNone
 Securities registered or to be registered pursuant to Section
12(g) of the Act: None (Title of Class) Securities in respect of which this annual report is furnished: Trench Electric
SA/Trench Inc. 10 1⁄4% Senior Subordinated Notes due 2007
(Title of Class) Indicate the number of outstanding shares of each of the issuers
classes of capital or common stock as of the close of the period
covered by the annual report. 40,000 Common Shares, 1 Dutch Guilder par value per share (0.45 ) Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes
o  No
x Indicate by check mark which financial statement item the
registrant has elected to follow. Item 17
x     Item 18
o  *
    
    This Form 20-F Equivalent is furnished pursuant to an indenture agreement.




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TRENCH ELECTRIC B.V. - FORM 20-F Equivalent TABLE OF CONTENTS Presentation of Financial and Other Information
    
    
    4PART IItem 1
    
    
    
    Identity of Directors, Senior Management and Advisers
    
    
    4Item 2
    
    
    
    Offer Statistics and Expected Timetable
    
    
    4Item 3
    
    
    
    Key Information
    
    
    5A.
    
    Selected financial data
    
    
    5B.
    
    Capitalization and indebtedness
    
    
    6C.
    
    Reasons for the offer and use of proceeds
    
    
    6D.
    
    Risk Factors
    
    
    6Item 4
    
    
    
    Information on the Company
    
    
    9A.
    
    History and development of the Company
    
    
    9B.
    
    Business overview
    
    
    11C.
    
    Organizational structure
    
    
    17D.
    
    Property, plant and equipment
    
    
    18Item 5
    
    
    
    Operating and Financial Review and Prospects
    
    
    19A.
    
    Operating results
    
    
    19B.
    
    Liquidity and capital resources
    
    
    26C.
    
    Research and development, patents and licenses, etc
    
    
    28D.
    
    Trend information
    
    
    28E.
    
    Off-balance sheet arrangements
    
    
    28F.
    
    Tabular disclosure of contractual obligations
    
    
    28G.
    
    Safe harbor
    
    
    28H.
    
    Other - Recent accounting pronouncements
    
    
    28Item 6
    
    
    
    Directors, Senior Management and Employees
    
    
    29A.
    
    Directors and Senior Management
    
    
    29B.
    
    Compensation
    
    
    30C.
    
    Board practices
    
    
    30D.
    
    Employees
    
    
    31E.
    
    Share ownership
    
    
    31Item 7
    
    
    
    Major Shareholders and Related Party Transactions
    
    
    32A.
    
    Major shareholders
    
    
    32B.
    
    Related party transactions
    
    
    32C.
    
    Interests of experts and counsel
    
    
    33Item 8
    
    
    
    Financial Information
    
    
    33A.
    
    Consolidated Statements and Other Financial Information
    
    
    33B.
    
    Significant Changes
    
    
    34Item 9
    
    
    
    The Offer and Listing
    
    
    34A.
    
    Offer and listing details
    
    
    34B.
    
    Plan of distribution
    
    
    35C.
    
    Markets
    
    
    35D.
    
    Selling shareholders
    
    
    35E.
    
    Dilution
    
    
    35F.
    
    Expenses of the issue
    
    
    35Item 10
    
    
    
    Additional Information
    
    
    35A.
    
    Share capital
    
    
    35B.
    
    Memorandum and articles of association
    
    
    36C.
    
    Material contracts
    
    
    37D.
    
    Exchange controls
    
    
    37E.
    
    Taxation
    
    
    38F.
    
    Dividends and Paying Agents
    
    
    38
 2




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TRENCH ELECTRIC B.V. - FORM 20-F Equivalent G.
    
    Statement by Experts
    
    
    38H.
    
    Documents on display
    
    
    38I.
    
    Subsidiary Information
    
    
    39Item 11
    
    
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    39Item 12
    
    
    
    Description of Securities Other than Equity Securities
    
    
    40PART IIItem 13
    
    
    
    Defaults, Dividend Arrearages and Delinquencies
    
    
    41Item 14
    
    
    
    Material Modifications to the Rights of Security Holders and Use of Proceeds
    
    
    41Item 15
    
    
    
    Controls and Procedures
    
    
    41Item 16A
    
    
    
    Audit Committee Financial Expert Disclosure
    
    
    41Item 16B
    
    
    
    Code of Ethics Disclosure
    
    
    41Item 16C
    
    
    
    Principal Accountant Fees and Services
    
    
    42PART IIIItem 17
    
    
    
    Financial Statements
    
    
    43Item 18
    
    
    
    Financial Statements
    
    
    43Item 19
    
    
    
    Exhibits
    
    
    43
 3




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TRENCH ELECTRIC B.V. - FORM 20-F Equivalent 
 PRESENTATION OF FINANCIAL INFORMATION This Form 20-F Equivalent is furnished pursuant to an indenture agreement. In this Form 20-F Equivalent, unless the context otherwise requires, we have
used Group, Trench, We or Our to mean Trench Electric B.V. (Trench
Electric) together with its direct or indirect subsidiaries and their
predecessor companies. Company refers to the stand-alone Trench Electric B.V. Unless otherwise indicated, we have prepared all historical financial
statements included in this Form 20-F Equivalent in accordance with U.S.
generally accepted accounting principles and these are set forth in thousands
of U.S. dollars, unless otherwise stated. Note:THIS DOCUMENT CONTAINS FORWARD-LOOKING STATEMENTS AS ENCOURAGED BY THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. ALL STATEMENTS CONTAINED IN
THIS DOCUMENT, OTHER THAN HISTORICAL INFORMATION, ARE FORWARD-LOOKING
STATEMENTS. IN ADDITION, WE OR OUR REPRESENTATIVES MAY FROM TIME TO TIME MAKE
ORAL OR WRITTEN STATEMENTS, WHICH SHOULD ALSO BE CONSIDERED FORWARD-LOOKING
STATEMENTS. THESE STATEMENTS REPRESENT MANAGEMENTS CURRENT EXPECTATION AND
BELIEFS CONCERNING FUTURE EVENTS IMPACTING US AND THEREFORE INVOLVE A NUMBER OF
RISKS AND UNCERTAINTIES. MANAGEMENT ACKNOWLEDGES THAT FORWARD-LOOKING
STATEMENTS ARE NOT GUARANTEES AND THAT ACTUAL RESULTS COULD BE MATERIALLY
DIFFERENT FROM THOSE EXPRESSED OR IMPLIED. A VARIETY OF FACTORS COULD CAUSE
BUSINESS CONDITIONS AND OUR RESULTS TO DIFFER MATERIALLY FROM THOSE EXPECTED BY
US OR EXPRESSED IN OUR FORWARD-LOOKING STATEMENTS. THESE FACTORS INCLUDE,
WITHOUT LIMITATION, CHANGES IN MARKET PRICE OR MARKET DEMAND; CHANGES IN RAW
MATERIAL COSTS OR AVAILABILITY; LOSS OF BUSINESS FROM CUSTOMERS; UNANTICIPATED
EXPENSES; CHANGES IN FINANCIAL MARKETS; FOREIGN CURRENCY CHANGES; POTENTIAL
EQUIPMENT MALFUNCTIONS AND THE OTHER FACTORS DISCUSSED IN THIS FORM 20-F
EQUIVALENT. WHILE WE PERIODICALLY REASSESS MATERIAL TRENDS AND UNCERTAINTIES AFFECTING OUR
RESULTS OF OPERATIONS AND FINANCIAL CONDITION IN CONNECTION WITH THE OPERATING
AND FINANCIAL REVIEW AND PROSPECTS AND CERTAIN OTHER SECTIONS CONTAINED IN OUR
QUARTERLY, ANNUAL OR OTHER REPORTS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION, WE DO NOT INTEND TO REVIEW OR REVISE ANY PARTICULAR
FORWARD-LOOKING STATEMENT IN THE LIGHT OF FUTURE EVENTS. 
 PART I 
 Item 1. Identity of Directors, Senior Management and Advisors Not applicable  Annual Report on Form 20-F Equivalent 
 Item 2. Offer Statistics and Expected Timetable Not applicable  Annual Report on Form 20-F Equivalent 4




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TRENCH ELECTRIC B.V. - FORM 20-F Equivalent 
 Item 3. Key Information: 
 A. Selected Financial Data: The financial data as set forth below at December 31, 2003 and 2002 and for
each of the years in the three-year period ended December 31, 2003 have been
derived from our consolidated financial statements included in Item 17 of this
Form 20-F Equivalent. Financial data at December 31, 1999, 2000 and 2001 and
for each of the years in the two-year period ended December 31, 2000 have been
derived from Trenchs previously published audited consolidated financial
statements not included in this document. The financial data at December 31, 2003 and 2002 and for each of the three
years in the three-year period ended December 31, 2003 should be read in
conjunction with, and are qualified in their entirety by reference to, our
audited consolidated financial statements. Years EndedDec. 31
    
    Dec. 31
    
    Dec. 31
    
    Dec. 31
    
    Dec. 312003
    
    2002
    
    2001
    
    2000
    
    1999(in millions of U.S. dollars, unless stated otherwise)Statements of Operations Data:Sales
    
    $
    279.5
    
    
    $
    255.9
    
    
    $
    224.3
    
    
    $
    200.8
    
    
    $
    211.7Cost of sales
    
    
    190.1
    
    
    
    177.2
    
    
    
    160.8
    
    
    
    141.2
    
    
    
    146.9Gross profit
    
    
    89.4
    
    
    
    78.7
    
    
    
    63.5
    
    
    
    59.6
    
    
    
    64.8Contract termination
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.6
    
    
    
    Selling, general and
administrative expenses (1)
    
    
    46.9
    
    
    
    46.1
    
    
    
    46.4
    
    
    
    44.4
    
    
    
    42.9Restructuring
    
    
    1.5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.6Gain on sale of assets
    
    
    (0.9
    )
    
    
    (0.7
    )
    
    
    
    
    
    
    
    
    
    
    (1.8
    )Operating income
    
    
    41.9
    
    
    
    33.3
    
    
    
    17.1
    
    
    
    14.6
    
    
    
    22.1Foreign exchange (gains) losses (2)
    
    
    (26.3
    )
    
    
    (2.3
    )
    
    
    9.1
    
    
    
    7.7
    
    
    
    2.4Gain on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2.2
    )
    
    
    Interest expense and other (3)
    
    
    19.6
    
    
    
    19.6
    
    
    
    19.9
    
    
    
    23.7
    
    
    
    21.2Income (loss) before income taxes
and minority interest
    
    
    48.6
    
    
    
    16.0
    
    
    
    (11.9
    )
    
    
    (14.6
    )
    
    
    (1.5
    )Provision for income taxes
    
    
    8.7
    
    
    
    6.8
    
    
    
    2.1
    
    
    
    3.0
    
    
    
    0.8Net income (loss) before minority interest
    
    
    39.9
    
    
    
    9.2
    
    
    
    (14.0
    )
    
    
    (17.6
    )
    
    
    (2.3
    )Minority interest
    
    
    4.9
    
    
    
    2.7
    
    
    
    1.2
    
    
    
    0.3
    
    
    
    Net income (loss)
    
    $
    35.0
    
    
    $
    6.5
    
    
    $
    (15.2
    )
    
    $
    (17.9
    )
    
    $
    (2.3
    )Balance Sheet Data (End of Period):Total assets
    
    $
    413.5
    
    
    $
    345.7
    
    
    $
    317.0
    
    
    $
    328.6
    
    
    $
    307.2Total debt
    
    
    174.4
    
    
    
    185.1
    
    
    
    192.3
    
    
    
    194.3
    
    
    
    181.6Share capital (in thousands of U.S. dollars)
    
    
    20.0
    
    
    
    20.0
    
    
    
    20.0
    
    
    
    20.0
    
    
    
    20.0Shareholders equity
    
    
    81.5
    
    
    
    41.8
    
    
    
    23.4
    
    
    
    39.1
    
    
    
    61.0Other Financial Data:Depreciation and goodwill amortization
    
    
    8.1
    
    
    
    7.0
    
    
    
    10.4
    
    
    
    12.1
    
    
    
    9.1Capital expenditure
    
    
    9.7
    
    
    
    5.2
    
    
    
    7.7
    
    
    
    3.7
    
    
    
    3.7Number of common shares
outstanding (in thousands)
    
    
    40.0
    
    
    
    40.0
    
    
    
    40.0
    
    
    
    40.0
    
    
    
    40.0Basic and diluted earnings (loss)
per common share (in U.S. dollars)
    
    
    874.20
    
    
    
    162.05
    
    
    
    (380.68
    )
    
    
    (447.95
    )
    
    
    (56.63
    )Cash flows provided by (used in):Operating activities
    
    
    36.7
    
    
    
    13.8
    
    
    
    2.8
    
    
    
    8.4
    
    
    
    6.4Investing activities
    
    
    (7.5
    )
    
    
    (0.3
    )
    
    
    (9.5
    )
    
    
    (11.6
    )
    
    
    19.2Financing activities
    
    
    (14.4
    )
    
    
    (10.4
    )
    
    
    (2.1
    )
    
    
    6.4
    
    
    
    (47.9
    )
  (1)
    
    Starting in 2002, under FAS 142 Goodwill and Other Intangible Assets,
we are no longer required nor permitted to record goodwill amortization.
Goodwill now has an indefinite useful life and will not be amortized but
rather will be tested at least annually for impairment. Accordingly, we
did not incur goodwill amortization expense in 2002 or 2003, whereas, in
2001, we incurred goodwill amortization expense of $3.5 million, which is
included in selling, administrative and general expense (2000 - $3.6
million, 1999 - $3.6 million).  (2)
    
    Foreign exchange gains/losses include a gain of $29.4 million in 2003
(2002  gain of $ 5.8 million, 2001  loss of $8.9 million) relating to
the 101⁄4 Senior Subordinated Notes due 2007, being the year to year
revaluation of the debt using exchange rates as of December 31, 2001, 2002
and 2003. There is no immediate cash benefit as a result of this gain.  (3)
    
    Interest expense includes amortization of deferred financing costs and
writeoffs of deferred financing costs associated with our outstanding
Senior Subordinated Notes and the senior facilities agreement. 5




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TRENCH ELECTRIC B.V. - FORM 20-F Equivalent 
 B. Capitalization and indebtedness. Not applicable  Annual Report on Form 20-F Equivalent 
 C. Reasons for the offer and use of proceeds. Not applicable  Annual Report on Form 20-F Equivalent 
 D. Risk Factors Substantial Leverage We have incurred significant indebtedness. In addition, we may incur
additional indebtedness in the future, subject to limitations imposed by
existing indebtedness. In 1997, we issued 101⁄4 percent Senior Subordinated Notes due 2007 (the
Notes) in the aggregate amount of $160 million, which are listed on the
Luxembourg Stock Exchange. The Senior Subordinated Notes will mature on
December 15, 2007. In connection with the issuance of the Senior Subordinated
Notes, we entered into a certain Indenture (Indenture) that places certain
limitations on our operations. The Indenture outlines certain limitations that
restrict our ability to, including without limitation, assume indebtedness,
make payments of certain types, grant liens, enter into certain types of
transactions with subsidiaries, sell assets, enter into mergers or
consolidations, issue preferred and capital stock, and enter into
sale/leaseback transactions. These covenants may restrict our ability to enter
into future transactions as easily as other entities because of these
limitations. Our ability to improve our operating performance and financial results depends
upon economic, financial, competitive and other factors beyond our control,
including fluctuations in interest rates and general economic conditions.
There can be no assurance that we will generate sufficient cash flow from our
operations in the future to service our debt, to make necessary capital
expenditure and initiate acquisitions. We incurred significant indebtedness in connection with the 1997 acquisition of
the shares of five companies representing the Trench group, all wholly owned
subsidiaries of BBA Group plc and have consolidated indebtedness that is
substantial in relation to our shareholders equity. As at December 31, 2003,
our consolidated total debt and shareholders equity were $174.4 million and
$81.5 million, respectively. As at December 31, 2002, our consolidated total
debt and shareholders equity were $185.1 million and $41.8 million,
respectively. The consolidated debt net of cash was $143.4 million at December
31, 2003 (2002 - $169.7 million). At December 31, 2003, $32.3 million,
excluding letters of credit and bank guarantees, was available to us for
borrowings under a revolving credit facility governed by the Facilities
Agreement dated April 18, 2000 (Facilities Agreement) with our Senior
Lenders, arranged by CIBC World Markets Plc, providing for Term Loan Facilities
and Revolving Credit Facilities. Of the $32.3 million available, $5.1 million
is restricted, and we would require the consent of the Senior Lenders to access
this portion (2002- $6.3 million). If CIBC letters of credit and bank
guarantees are factored in, the net available revolving credit facility was
$12.8 million compared to $7.5 million in 2002. There are other guarantees in
other subsidiaries that do not affect the available revolving credit facility.
The change in the net available revolving credit facility year over year is
mainly due to cash generated from operations during 2003. Any borrowings under
the Revolving Credit Facility are guaranteed by the Group and other subsidiary
guarantors. In addition, we may incur additional indebtedness in the future,
subject to limitations imposed by the Facilities Agreement and the Indenture.
Please refer to Item 17, Note 23 for more information. There can be no assurance that Trench will generate sufficient cash flow from
our operations in the future to service our debt and to allow us to make
necessary capital expenditure. If we are unable to generate sufficient cash
flow in the future we may be required to refinance all or a portion of our
existing debt, including the Notes, to sell assets or to obtain additional
financing. There can be no assurance that any such refinancing would be
possible or that any such sales of assets or additional financing could be
achieved. For additional information, see Item 5.B.  Liquidity and capital
resources and Item 17, note 9. 6




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TRENCH ELECTRIC B.V. - FORM 20-F Equivalent Debt Service Our high level of debt will have several important effects on future
operations, including the following: (a) we will have significant cash
requirements to service debt, reducing funds available for operations and
future business opportunities and increasing the vulnerability of Trench to
adverse general economic and industry conditions; (b) we may be restricted in
the future from obtaining additional financing, whether for acquisitions,
working capital or other purposes; (c) we will be required to comply with
certain financial covenants and other restrictions contained in the Facilities
Agreement and the Indenture, certain of which become more restrictive with the
passage of time or the achievement of certain targets; and (d) due to the fact
that borrowings under the Facilities Agreement bear interest at floating rates,
increases in interest rates under the Facilities Agreement will reduce amounts
available for acquisitions, working capital, capital expenditure and general
corporate purposes. For additional information, see Item 5.B.  Liquidity and
capital resources. Restrictions Imposed by the Facilities Agreement and the Indenture The Facilities Agreement requires Trench Electric Holding BV (the Parent) and
the Group to maintain specified financial ratios and tests, among other
obligations, including a minimum interest coverage ratio, a minimum fixed
charge coverage ratio and a maximum leverage ratio. In addition, the
Facilities Agreement restricts, among other things, our ability to incur
additional indebtedness, make certain payments or dividends, merge, consolidate
or make acquisitions. A failure to comply with the restrictions contained in
the Facilities Agreement could lead to an event of default, which would result
in the acceleration of such indebtedness. Such an acceleration would
constitute an event of default under the Indenture relating to our Senior
Subordinated Notes. In addition, the Indenture restricts, among other things,
the incurrence of additional indebtedness by subsidiaries of the Company
(Subsidiaries), the payment of dividends and other restricted payments by
Subsidiaries, transactions with affiliates, the sale or issuance of
Subsidiaries capital stock and preferred stock, the creation of restrictions
on distributions from Subsidiaries, asset sales, other senior subordinated
indebtedness, the incurrence of liens and sale/leaseback transactions, and
mergers, consolidations or sales of assets and other matters customarily
restricted in such agreements. A failure to comply with the restrictions in
the Indenture could result in an event of default under the Indenture. Operating Performance Our ability to improve our operating performance and financial results depends
upon financial, competitive and other factors beyond our control, fluctuations
in foreign currency vis-à-vis the U.S. dollar, interest rates, material costs
and general economic conditions. For additional information, please see Item
4.B.  Business Overview. Risk of Growth Strategy A significant component of our business strategy is the growth of our product
and customer base through the acquisition of companies in similar lines of
business. Although the Group believes that opportunities currently exist for
such acquisitions, there can be no assurance that we will be able to
successfully exploit any such opportunities (due to, among other things, an
inability to obtain sufficient financing) or that such opportunities will be
available in the future. In order to capitalize on any such acquisition
opportunities, we may need to obtain additional capital. To raise such
capital, we may elect to undertake additional debt financing, which would
result in additional leverage. The issuance of additional debt securities or
borrowings are restricted by the terms of the Indenture and the Facilities
Agreement. Also, growth through acquisition, as well as internal expansion,
will place demands on our management, employees, operations and physical and
financial resources. Exchange Rate Fluctuations Our operations are conducted by operating subsidiaries in many countries, and
accordingly our results of operations are subject to currency translation risk
and currency transaction risk. With respect to currency translation risk, the
financial condition and results of operations of each of these entities is
reported in the relevant local currency and then translated into U.S. dollars
at the applicable currency exchange rate for inclusion in the financial
statements. Fluctuations in the U.S. dollar against certain currencies,
particularly the Euro, the Brasilian real, the Canadian dollar, the Chinese
renminbi, the Swiss franc and the British pound could have a positive or
negative impact on our reported sales and operating income. 7




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TRENCH ELECTRIC B.V. - FORM 20-F Equivalent Significant changes in the value of the U.S. dollar relative to other
currencies in which we conduct our operations could also have an adverse effect
on our ability to meet interest and principal payments on debt in U.S. dollar
denominations, including the Notes. Because our indebtedness may be
denominated in different currencies, changes in the values of such currencies
relative to other currencies in which we conduct our operations could have an
adverse effect on our ability to meet principal and interest obligations on
such indebtedness. In addition to currency translation risks, we incur currency transaction risk
whenever one of our subsidiaries enters into either a purchase or a sales
transaction using a different currency than its functional currency, which is
generally the local currency of the operating company. Currency transaction
risk is reduced, to a certain extent, by matching sales revenues and
manufacturing costs in the same currency. Given the volatility of exchange
rates, there can be no assurance that we will be able to effectively manage our
currency transaction risks or that any volatility in currency exchange rates
will not have a material adverse effect on our financial condition or results
of operations. Dependence on Key Customers A substantial portion of our business relationships are informal and certain of
our contractual arrangements may be terminated at will. Although we believe
that our business relationships with our major customers are currently mutually
satisfactory, there can be no assurance that sales to our major customers will
continue at the same level of volume or pricing or that one or more major
customers will not terminate or seek to materially alter the terms of their
relationship with us. There can be no assurance that any of our major
customers will not shift their sourcing to other suppliers, develop in-house
manufacturing capabilities for our products or take other actions which could
adversely affect us. The loss of any of our major customers or a substantial
decrease in any of such customers purchases from us, or a material
deterioration in our ability to obtain orders, could have a material adverse
effect on our financial condition and results of operations. Several of our customers, including many of our largest customers, have strict
manufacturing and quality standards (some of which are imposed by government
regulation) with which we must comply. In many cases, our compliance with such
standards must be demonstrated prior to supplying the product. Failure by us
to maintain compliance or to obtain approvals for new products could result in
a material loss of sales to such customers. Such opportunities would be lost
by any failure to maintain product approvals. The occurrence of any of the
foregoing events could have a material adverse effect on our financial
condition and results of operations. Competition The market for high voltage transmission products in which Trench operates is
relatively fragmented in terms of both geographical location and product line.
Segments of the power transmission equipment industry are subject to intense
competition, on a price, quality and customer service basis. We face
competition from other manufacturers, many of which are diversified
manufacturing companies that have significantly greater financial and other
resources than ourselves. We continually experience price pressures from
competitors in certain product lines and geographic markets. As a result, our
ability to increase prices in certain product lines is limited. Dependence on Certain Raw Materials Aluminium, copper, insulating paper, oils, gases, resin, porcelain and silicone
are each key raw materials for our products. Because changes in the prices of
such raw materials may be passed through to our customers, increases or
decreases in such prices generally cause corresponding increases and decreases
in reported net sales, causing fluctuations in reported revenues that are
unrelated to the level of business activity. However, if we are unable to pass
through such changes in raw material prices to our customers in the future, we
could be materially adversely affected. Any major dislocation in the supply
and/or price of such raw materials could have a material adverse effect on our
business and financial condition. Dependence on Key Personnel We are dependent on the continued services of our senior management team and
certain key engineers. Although we believe that we could replace key employees
in an orderly fashion should the need arise, the loss of such key personnel
could have a material adverse effect on Trench. We do not have key man
insurance to insure against the loss of key personnel. 8




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##### 



TRENCH ELECTRIC B.V. - FORM 20-F Equivalent Electric Utility Deregulation Government deregulation of the electric utility industry in North America and
Europe, and to a lesser extent in Southeast Asia, Latin America, Australia and
New Zealand, has impacted current and potential customers in such markets to
limit their long-term capital expenditure on power transmission products.
Until the impact of deregulation becomes more apparent, electric utilities and
Independent Power Producers are reluctant to commit resources for capital
expenditure because they are uncertain as to which aspects of the transmission
and distribution processes they will ultimately be able to own or manage.
While management believes that capital expenditure on power transmission
products will increase once the effects of deregulation in such regions become
apparent, it remains unclear how the market for such products will be affected
as such deregulation progresses. Environmental, Health and Safety Matters Our facilities, like similar manufacturing facilities, are subject to a range
of federal, state, local and foreign environmental and occupational health and
safety laws including those laws relating to air emissions, wastewater
discharges, the handling and disposal of solid and hazardous waste, and the
remediation of contamination associated with the current and historic use of
hazardous substances or materials. If a release of hazardous substances or
materials occurs on or from our properties or any offsite disposal location
used by Trench, or if contamination from prior activities is discovered at any
of our properties, we may be held liable for the costs of remediation
(including any response costs), natural resource damages and associated
transaction costs. While the amount of such liability could be material, we
devote resources to ensure that our current operations are conducted in a
manner that reduces such risks. We believe that we are currently in compliance with, and not subject to
liability under, any environmental laws, except where such non-compliance or
liability would not reasonably be expected to have a material adverse effect on
our consolidated financial position, results of operations or liquidity. 
 Item 4. Information on the Company: 
 A. History and development of the company Corporate Information:Name:
    
    Trench Electric B.V.Date Incorporated:
    
    December 3, 1997 formally approved. Process began September 6, 1997.Country of Incorporation:
    
    The NetherlandsAddress of registered office:
    
    Prof. J.H. Bavincklaan 7, 1183 AT, Amstelveen, The Netherlands.Telephone number: +31 (0)20 301 3600Key investor contact:
    
    Michael Bissell, 7th Floor, The Exchange, Station Parade, Harrogate, England, HG1 1HLTelephone number: + 44 1423 531 000.
 History In 1962, Anthony Trench founded Trench Electric (Canada) in Toronto to
manufacture an innovative high voltage Coil product (the air-core reactor) used
to smooth current fluctuations in high voltage systems. Since then, we have
expanded our business to include a variety of other high voltage transmission
products. Beginning in the 1980s, our principal competitors began to consolidate, with
many smaller competitors exiting the market and several large, diversified
companies selling or outsourcing their high voltage equipment businesses  in
many cases to Trench. As a result, we have continued to build our presence in
the market for high voltage equipment with the following strategic add-on
acquisitions and divestitures listed below: 9




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##### 



TRENCH ELECTRIC B.V. - FORM 20-F Equivalent Date
    
    Acquisition
    
    Location
    
    Strategic Benefits1990.
    
    Spezielektra GmbH
    
    Austria
    
    Established a European
manufacturing base for Coil
products.1990.
    
    The reactor equipment
unit of ABB, USA
    
    Assets purchased and
transferred to Canada
    
    Consolidated our position
as the only major producer of
air-core reactors in North
America.1991.
    
    The line trap equipment
unit of ABB, USA
    
    Assets purchased and
transferred to Canada
    
    Consolidated our position
as the only major producer of
line traps in North America.1993.
    
    Haefely Holdings AG
    
    Switzerland and France
    
    Established our position as the
largest independent producer
of Instrument Transformers in
the world & as a global leader
in high voltage test equipment.1993.
    
    Messwandlerbau
GmbH
    
    Bamberg
Germany
    
    Established Trench as a world
leader in explosion-proof gas-insulated instrument
transformers.1996.
    
    Instrument Transformer
business of Square D
Company, a subsidiary
of Groupe Schneider
    
    Assets purchased and
transferred to Canada
    
    Enhanced our market
position and broadened its
range of metering Instrument
Transformers in North America.1999
    
    Power Line Carrier
(PLC) business
from GE
    
    Assets purchased and
transferred to Canada
    
    Enhanced our market
position and broadened its
range of communications
products.2000
    
    Bushing Division of VA
Tech Reyrolle, a
subsidiary of VA Tech
Elin
    
    Hebburn, England
    
    Enhanced our market position
and broadened our range of
bushing products.2000
    
    Coil business
    
    Belo Horizonte,
Brasil  New
Manufacturing
Facility
    
    Enhanced our market position in
South America.2000
    
    Instrument Transformer
business
    
    Shanghai, China
    
    Increased ownership to 65%
from 40% and broadened our
range of Instrument
Transformer products in China
as well as start up of bushing
manufacturing. As a result of
this SITW ownership was
reduced from 60% to 35%.2001
    
    Bushing business
    
    Fushun, China
    
    50.4% joint venture ownership
of Bushings manufacturer.
Enhanced our market position
in China.2002
    
    Bushing business
    
    Fushun, China
    
    Increased ownership to 65%
with SITW taking 33% and
leaving 2% with the original
joint venture partner (FEPW).2002-03
    
    Coil business
    
    Shanghai, China
    
    Expanded the scope and size of
the current joint venture to
add Coil technology to
Trenchs Shanghai operations.
 10




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##### 



TRENCH ELECTRIC B.V. - FORM 20-F Equivalent Our capital expenditure for the years ending December 31, 2003, 2002 and 2001
were $9.7 million, $5.2 million and $7.7 million, respectively. Purchase of property, plant and
equipment(in thousands of U.S. dollars)
    
    2003
    
    2002
    
    2001American operations
    
    $
    1,306
    
    
    $
    1,429
    
    
    $
    867European operations
    
    
    2,564
    
    
    
    2,098
    
    
    
    3,520International operations
    
    
    5,818
    
    
    
    1,663
    
    
    
    3,338$
    9,688
    
    
    $
    5,190
    
    
    $
    7,725
 During 2003, Trench China in Shanghai invested $3,242 in capital expenditures
for the Coil business. On December 12, 2002, we completed the acquisition of an additional 14.6% share
in the Trench Fushun Bushing Co. Ltd (Fushun), previously known as Fushun
Reyrolle Bushing Co. Ltd, by Trench Limited in Canada to bring our share of
ownership to 65%. On April 21, 2001, Trench UK signed agreements with VA Tech and Fushun
Electric Porcelain Works (Fushun Electric), pursuant to which Trench UK would
acquire VA Techs 50.4% equity interest in Fushun Reyrolle Bushing Co. Ltd, a
joint venture company organized under the laws of the Peoples Republic of
China and owned jointly by VA Tech and Fushun Electric, for a purchase price of
approximately £1 million ($1,454). The transaction completed on November 26,
2001. 
 B. Business Overview Trench is an industry leader in the design and production of electrical
equipment for high current/high voltage substation environments, for outdoor
use under severe environmental and climatic conditions, for improving power
quality, and for the measurement of electrical properties and characteristics.
Trenchs highly integrated manufacturing capability allows us to respond
quickly and efficiently to the demand for the custom products that form a
significant part of our sales. North America experienced a clear reduction in investment in generating
substations in the aftermath of the Enron situation. This particularly had a
negative impact on demand for Instrument Transformers and Bushings. The extent
of new generation investments in 2001 and 2002 led to significant operational
issues related to the grid resulting in increased Coil orders which helped
offset the above shortfall in demand for Instrument Transformers and Bushings
referred to above. Less than adequate transmission and distribution investment
continues to be a problem that will require political involvement. Western European demand remained relatively flat over 2003. An increase in
sales and orders from contractors participating in the relatively strong
markets of the Middle East, Eastern Europe as well as Northern Africa helped
offset the Western weakness. South East Asia continues to remain weak relative
to the highs of the mid-nineties however inquiry levels are increasing and
order intake began to increase in the latter part of 2003. The demand for Transmission and Distribution equipment in China remains very
strong with near double-digit growth. The introduction of new products in
Trench China has been well received and customer support continues to grow. Trench has built a diversified presence in the industry with various strategic
acquisitions over the past several years (refer to Item 4A above-History and
Development of the Company). Today, we serve our customers from our facilities
in Austria, Brasil, Canada, China, England, France, Germany and Switzerland. Trench hopes to continue its strategy for growth with particular emphasis on
expanding international markets. We will also focus on developing and
marketing an extended range of technologically advanced, specialized electrical
products for the utility and industrial markets worldwide. In an era of deregulation, the global utility and industrial markets are
becoming much more active and accessible. Our manufacturing presence in eight
countries on four continents is one of our main competitive strengths. The
rapid evolution from markets restricted by political borders to an open, global
marketplace, brings with it a much wider range of opportunities. 11




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TRENCH ELECTRIC B.V. - FORM 20-F Equivalent Trench operates in one market segment, Transmission and Distribution. Our
sales by year and by geographical area are as follows: Main Category of Activity:(dollars in millions)
    
    2003
    
    2002
    
    2001Transmission and Distribution
    
    $
    279.5
    
    
    $
    255.9
    
    
    $
    224.3
 Sales by Customer Location:(in millions of US dollars)
    
    2003
    
    2002
    
    2001Americas
    
    $
    84.8
    
    
    $
    94.7
    
    
    $
    92.6Europe
    
    
    104.7
    
    
    
    88.0
    
    
    
    86.1Asia
    
    
    72.6
    
    
    
    61.1
    
    
    
    38.9Other
    
    
    17.4
    
    
    
    12.1
    
    
    
    6.7Total Sales by Customer location
    
    $
    279.5
    
    
    $
    255.9
    
    
    $
    224.3
 Markets and Review of Business Performance Corporate Strategy and Market Trends As the worlds utility companies continue to undergo different degrees of
transformation in the wake of deregulation and market liberalization, we will
continue to pursue our vision of being the leading supplier of specialist
products and services to the global power industry. We now have operations in
both North America and Europe that are capable of producing all of our main
products, and we hope to continue to build or acquire facilities in those
geographic areas that reflect both low costs of manufacture and a high
indigenous market potential. We are currently focused on China and South
America in this regard. We have almost completed the construction of a new
facility in Shanghai to expand our business to include Coil manufacturing, with
production expected to begin in the second quarter of 2004. We have market-leading positions in high voltage Instrument Transformers,
Bushings and a number of Coil-based products. We continue to seek expansion of
our product offerings to the utility companies and the prime turnkey
contractors, and to this end we hope to continue to build on our communications
products. American Operations North American Operations The Trench facilities based in Canada include specialist factories producing
Instrument Transformers, Bushings, Coil products as well as communication
equipment for electric utility applications. As a result of the impact of the weak U.S. dollar, along with reduced demand
for Instrument Transformers and Bushings results in North America were somewhat
disappointing. This led to some reductions in personnel. As anticipated the
increased Coil activity partially offset the above shortfall in sales. The Utility Communication market was also impacted by the drop in transmission
and distribution spending. Combined with the late completion of development
work on the new generation of transmitters and receivers, the overall results
were lower than the previous year. Brasil The Trench Brasil Coil facility located in Belo Horizonte generated increased
sales and a small profit in 2003. The establishment of Trench Brasil has had a
positive impact on our ability to do business in a market that is otherwise
difficult to access. The Brasilian market is in a period of uncertainty due to economic issues in
the region as well as the political situation in Brasil. The latter seems to
be stabilizing and the demand for our type of product is expected to be very
strong through the mid to latter part of the decade. We have recently
pioneered new applications in Brasil for Coils with the completion of the 500kV
High Voltage Current 12




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##### 



TRENCH ELECTRIC B.V. - FORM 20-F Equivalent Limiting Reactor (HVCLR) project at Tucurui in Northern Brasil. We feel
confident in the development of this new market over the long-term. European Operations We have Transmission product facilities in Switzerland, France, Germany and
England and a Coil facility in Austria. Towards the end of 1999, we started to
integrate the French and Swiss operations into a single management unit in
order to bring the overhead of the units more in line with expected sales
volume. The combined business is referred to as Trench Suisse-France (TSF).
We decided early in 2001 that the Group should close all main production
operations on the Swiss site. This process is now complete. The Swiss site
continues to be our main centre of engineering for Instrument Transformers in
Europe and will also be the global base for R&D activities in new designs and
measurement technologies. The continued softness in Western Europe as well as the drop off in North
American sales resulted in further restructuring in France and Germany,
resulting in a reduction in headcount of 87. The restructured TSF had improved
operating results in spite of a lower turnover. Trench Austria enjoyed another
good year with a growth in sales resulting from strong demand in new European
markets for our specialized Coil product line. Our entering order book in Transmission products for 2004 is lower than it was
in 2003 resulting from the drop off in new orders from North America. As in
Canada, however, the Coil order book remains strong due to the continued demand
in Europe for specialty Coils as well as global demand for High Voltage DC & AC
projects. Many Eastern European countries are now in the process of modernizing their
electrical grids and we expect this will continue to increase demand throughout
2004. North Africa and the Middle East remain active as a result of the
continued construction of the Mediterranean Ring, a major international
electric power interconnection project to provide interconnection of electric
power transmission grids among the countries and regions that encircle the
Mediterranean Sea. International Operations China The demand for Transmission and Distribution products in China continues to
show strong growth of 7 to 10% per annum. Trench Shanghai, with its newly
introduced products, experienced greater than 33% year over year overall growth
in sales. In late 2002, Trench (65%) and SITW (Shanghai Instrument
Transformers Works - 35%) agreed to further expand the Trench operation in
Shanghai through the introduction of Coil technology. A new production
facility for the Coil business is under construction adjacent to the
Transmission facility and will be completed and in production by the end of the
second quarter of 2004. From the technology transfer transaction Trench will receive approximately $10
million in proceeds. We received $6 million of the proceeds by the end of 2003
and the balance will be received over the next three years. The income arising
from the sale of technology is recognized over the life of the licensing
agreement (10 years) in the Group accounts as required by U.S. GAAP. In late 2002 we further increased our ownership of the Fushun Reyrolle Bushing
Co. in North East China from 50.4% to 65% for a consideration of $0.8 million. At the same time, SITW acquired 33% of the shares of the Fushun Reyrolle
Bushing Co. leaving the original partner with the remaining 2%. Fushun is a
specialized manufacturer of Bushings with some overlap in product with Trench
Shanghai. This ownership change has allowed a common Board structure and an
integration of the business management of the businesses in Shanghai and
Fushun. The Fushun company has been re-named and approval has been received
to change the name to the Trench Fushun Bushing Co. Ltd. The outlook for China remains strong and our management feels it has a solid
position, with a state-of-the-art facility in Shanghai and a capable management
team able to capitalize on the opportunity. 13




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TRENCH ELECTRIC B.V. - FORM 20-F Equivalent Outlook The 2004 business outlook is rather mixed. We expect the North American demand
for Instrument Transformers and Bushings to remain soft through the first half,
with the demand for Coil products increasing as more utilities are trying to
increase the power handling capabilities of the existing transmission grid.
This is evident in the demand for high voltage AC Coils as well as upgrades in
the major DC interconnections. The uncertainties of deregulation along with the reduction of the Independent
Power Producers (IPP) market continued throughout 2003 and increased capital
spending in North America is not expected before the latter part of 2004.
Mexico entered a new phase of integration into NAFTA (North American Free Trade
Agreement) in 2003 and demand for transmission construction remains strong
combined with greater market access. Parts of South America are expected to be
active in 2004; however, a number of the larger projects in Brasil are not
expected to materialize until 2005. Parts of Western Europe are experiencing increased demand for specialty Coils
which we expect to continue throughout 2004. In addition, the demand for
Instrument Transformers in Germany is also showing an increase. There are
considerable opportunities for Instrument Transformers in the former Union of
Soviet Socialist Republics as the Western fringe countries upgrade their
electrical grids. Although much of this demand is for oil insulated equipment
as produced in France and Canada, it is also expected there will be
opportunities for the newer gas products manufactured in Germany. We expect
that this demand will continue to help offset the drop in North America. Due to the overall dependence of Transformer manufacturers on the North
American market, we expect Bushing sales from the European facilities in France
and England in 2004 to be similar to 2003. Our Canadian business has increased
its capabilities in Bushing design and production and demand in China remains
strong. The specialty gas business is expected to increase due to a sharp
increase in South East Asia relating to specific known projects. As a result,
we expect the Groups overall Bushing turnover to increase in 2004. The market in China is not showing any signs of slow down and we expect growth
in the Trench operations to continue throughout 2004. Products We manufacture products primarily for high voltage applications in the
transmission and distribution of electricity. Electric transmission systems
carry electric power from a generating plant into a high voltage utility grid,
which ultimately distributes power to customers. Typically, electricity is
generated at high currents (generally between 8,000 and 20,000 amps) and medium
voltages (approximately 15,000 or 27,000 volts) but can be transmitted
efficiently over long distances only at substantially lower currents (typically
800 to 3,000 amps) and higher voltages (ranging from approximately 69,000 to
800,000 volts) that minimize the loss of power in the transmission process. To
facilitate such high voltage transmission, the voltage leaving a generating
plant must be increased substantially, transmitted over high voltage lines and
then reduced to customer utilization levels through the use of substations that
require large capacity power transformers, high voltage switchgear, and other
network measurement, control, protection and correction products. Seismic specifications for electrical equipment are becoming increasingly
demanding as utilities throughout the world seek better earthquake protection.
Our products are recognized worldwide for their seismic capabilities. Trench is the worlds largest independent producer of specialty high-voltage
technology products and we believe that we have attained a worldwide reputation
for the quality, reliability and cost-effectiveness of our engineered products
which include: Instrument Transformers.Instrument Transformers consist of specialized
windings of conductors and foils insulated with paper and oil or gas, housed in
either a hollow porcelain Bushing or a fibreglass tube with silicone rubber
skirts. Our transformers have two basic functions: (i) to decrease voltages
from the high transmission and distribution levels to a common secondary
voltage (120 volts and one to five amps) to permit the measurement of voltage
(voltage transformer) or current (current transformer) on high voltage
transmission lines through the use of meters, relays and other secondary
control devices and (ii) to provide insulation between primary and secondary
circuits to protect meters from exposure to high voltages and to increase
safety for personnel. Our Instrument 14




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TRENCH ELECTRIC B.V. - FORM 20-F Equivalent Transformers are used mainly in high voltage substations, although some
products are used at the beginning of the transmission line at the power plant
site. Generally, oil-soaked paper or a non-conducting gas (such as
SF6, sulfur
hexafluoride gas) is used as the insulating medium to insulate high voltage
components from low voltage components. We produce a broad range of
transformers, including inductive voltage transformers, capacitive voltage
transformers, current transformers, and combined Instrument Transformers. Low
Power Instrument Transformers (LOPO) are a next generation product and open
up a new business area for Trench. Based on our many years of experience with
high voltage products, our LOPO line of Instrument Transformers is designed for
Air & Gas Insulated Systems and HV Gas Insulated Systems. The initial
applications are for medium voltage switchgear. Bushings.In many power systems, high voltage cables must be routed through
different mediums. Bushings are connectors that both conduct and insulate an
electric current whenever a high voltage conductor passes from one medium to
another (for example, through a wall or from inside to outside a substation).
A Bushing consists of a transformer stem with a conductive core and can be oil,
resin or gas-insulated. Trench manufactures a complete line of Bushing
products, including transformer Bushings (for outdoor applications and indoor
gas-insulated substations), generator Bushings, wall Bushings, railway power
distribution system Bushings and special Bushings designed to customer
specifications. Bushing Product Line improvements include advanced insulation
and winding techniques for enhanced performance of our high current line. Our
high voltage designs have been tested successfully to the extreme 765 kV
transmission voltage level. Composite Insulators.Composite (silicone rubber) insulators are increasingly
replacing porcelain or glass insulators in utility markets worldwide. They
weigh less and provide improved electrical insulation properties in polluted
environments. Trench is a leader in the application of composite (silicone
rubber) insulators and we now offer an entire Bushing and instrument
transformer line with composite insulator shells incorporating a unique design
and backed by more than 10 years of installed experience. Reactors.Reactors consist of circumferentially wound coils of aluminum
separated by insulating materials. The core or centre of the winding may be
iron, but our main market is for air-core reactors. Air-core reactors are used
to smooth current fluctuations in high voltage systems and to limit current
loads for safety. Line Traps.Line traps are smaller aluminum coils designed to facilitate
communication along a high voltage transmission line by blocking and limiting
signals at certain frequencies without affecting other frequencies. Effective
management of power generation and distribution systems depends on rapid and
reliable communication. The frequencies carrying the data to be transmitted
are superimposed on the high voltage line via a coupling capacitor, where the
direction and destination of those frequencies are controlled by line traps and
line tuners. Power Line Carrier (PLC).The use of high voltage transmission lines for the
transmission of communication signals is a global utility practice, utilizing
technology called power line carrier transmission. PLC equipment uses the high
voltage line as the transmission medium for high frequency signals of
supervisory control, relay and voice communications. PLC products offer an
exciting area for future growth as well as complementing our line trap products
in similar applications. Reactor and Electronic Control Systems. Another specialty power quality
product manufactured by Trench includes a reactor and electronic control system
to minimize the fault current that can flow through the system when underground
cable is damaged. Manufactured exclusively in our Austrian factory, this
product is growing in usage in Europe as utilities continue to develop higher
levels of operating quality and reliability in the electrical network. Sales and Marketing Our global sales network is centrally coordinated. This structure is designed
to provide accessible and responsive support to our customers. It also allows
us to provide a comprehensive range of products and services for enhanced
customer value. Trenchs Executive Vice President of Sales and Marketing, based in Toronto,
coordinates our sales efforts, via General Sales Managers (GSMs) located at
each of our main manufacturing plants. The GSMs manage a number of Regional
Sales Managers (RSMs) who have a geographical or direct customer
responsibility for all of our products. The RSMs receive support at each plant
from a marketing department responsible for the products manufactured at the
particular plant as well as the order handling of products sold from remote
plants. Responsibility for the preparation of all the documentation related to
the sale rests with the marketing department, including preparation of price
quotations, contract negotiations, the gathering of data from the sales force, 15




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TRENCH ELECTRIC B.V. - FORM 20-F Equivalent literature on the plants products and interfacing with operations. Trenchs international sales network is strongly represented in each of the
worlds major markets and is complemented by over 150 independent
representatives in strategic locations worldwide. The unique combination of
quality, low-cost products, geographically diversified manufacturing, close
customer contact, and an intimate knowledge of local conditions gives our
professional sales and marketing staff a powerful competitive advantage that
translates into a strong market position. For information on sales by customer location, refer to Item 4.B. For
information on total sales and operating income by geographical areas in which
we operate, refer to note 17 in Item 17. Seasonality of Trenchs Main Business There is no specific pattern of seasonality in our main business. However,
lower production and revenues typically occur in our third quarter, due to
scheduled plant shutdowns, mainly as a result of the summer vacation period.
In addition, some products experience higher fourth quarter sales as utility
construction and maintenance departments utilize their current year budgets. Sources and Availability of Raw Materials Aluminium, copper, insulating paper, oils, gases, resin, porcelain and silicone
are all key raw materials for our products. There is no centralized purchasing
for raw materials and it is up to each individual sub-unit to do its own
procurement. Many raw materials are purchased on short-term and long-term
contracts in the normal course of business and are subject to price
fluctuations. Competitive Position Trench is the largest independent producer of specialized electrical products
serving customers worldwide in the utility and industrial markets. We believe
that the Group is ideally positioned to capitalize on the ongoing industry
realignment and further enhance our market positions around the globe.  
    
    Products.Our areas of specialization include: air core reactors,
line traps, high voltage measurement Transformers, and Bushings.
    
    Market Position.There are no available industry statistics
regarding these specific product lines. We maintain our own database
of statistics, based on actual market requirements, won and lost
orders. We also maintain a database on competitors in the various
product categories. In addition, with the electrical utility business
being a global business, we have extensive geographical
representation, which ensures that we are invited to tender on almost
all requirements in commercially open markets. This would include the
Americas, Western Europe, parts of Eastern Europe, Asian countries as
well as Australia and New Zealand. In addition, given that the
countries where we have activities are members of the World Trade
Organization, Trench is invited to participate in closed markets on
all internationally financed projects. We also enjoy a preferred
supplier status with several utility and turnkey system suppliers and
in many cases we have been the supplier of choice for more than six
consecutive years.
    
    Industry Realignment.Industry realignment has been ongoing on both
the supply side and the customer side. We have demonstrated the
capability and the resources to capitalize on the supply side
restructuring through the acquisition of companies or assets of
companies producing these types of products for a period in excess of
20 years. Trench Austria, Trench Germany, Trench France, Trench UK,
Trench Switzerland and Trench Fushun are all examples of previous
acquisitions. In addition to these acquisitions of on-going concerns
we have also made asset acquisitions whereby the assets were
transferred to existing operations and integrated within the existing
facilities. Some examples of these include Square D instrument
transformer assets, GE CVT and line trap assets, WEC line trap assets,
and GE PLC product lines.
    
    Customer Base Realignment.Given our reputation for quality and
technical capabilities, we are well positioned to achieve a prominent
supplier position as well-established utilities expand their business
globally and implement common design practices. 16




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TRENCH ELECTRIC B.V. - FORM 20-F Equivalent Material Effects of Government Regulations Recent government deregulation of the electric utility industry in North
America and Europe, and to a lesser extent in Southeast Asia, Latin America,
Australia and New Zealand, have had the immediate effect of leading many
current and potential customers in such markets to limit their capital
expenditure on power transmission products. Until the impact of deregulation
becomes more apparent, electric utilities and independent power producers are
reluctant to commit resources for capital expenditure because they are
uncertain as to which aspects of the transmission and distribution processes
they will ultimately be able to own or manage. While we believe that capital
expenditure on power transmission products will increase once the effects of
deregulation in such regions become apparent, it remains unclear how the market
for such products will be affected as such deregulation progresses. In certain
markets the demand for higher accuracy Instrument Transformers led to an up
swing in demand. Trench management views this buoyancy as a step function that
may or may not be repeated in other states or countries. 
 C. Organizational Structure Control of Registrant - Trench Electric The following table sets forth certain information with respect to the Parents
equity interest in Trench Electric. Identity of
    
    Par Value
    
    Number ofTitle of Class
    
    Person or Group
    
    of Share
    
    Shares Owned
    
    Percent of ClassCommon shares
    
    Parent - Trench
Electric Holding
B.V.
    
    One Dutch Guilder
(0.45 )/ share
    
    
    40,000
    
    
    
    100
    %
 The Parent The principal shareholders of the Parent, Trench Electric Holding B.V., are
four entities which are managed or advised by CVC Capital Partners Limited:
Citicorp Capital Investors Europe Limited, CVC European Equity Partners
(Jersey) L.P., CVC European Equity Partners L.P. and Capital Ventures Nominees
Limited (collectively CVC). Organization Chart of the Company. An organization chart for Trench Electric B.V. is shown below, identifying the
position of the Company within the structure. Ownership of each entity by its
parent is 100%, except where indicated otherwise. (TRENCH CORPORATE STRUCTURE CHART) 17




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##### 



TRENCH ELECTRIC B.V. - FORM 20-F Equivalent 
 D. Property, plant and equipment Description of Property We have twelve facilities: one in Belo Horizonte, Brasil, one in Shanghai,
China, one in Fushun, China, four in North America and five in Europe. Our
North American facilities are located in Toronto, Ontario. Our European
facilities are located in Linz (Austria), Basel (Switzerland), St. Louis (in
France, across the border from Basel), Bamberg (Germany) and Harrogate and
Hebburn (England). All our manufacturing facilities are ISO 9001 certified.
The following table provides an overview of our manufacturing facilities. Production
    
    Owned/
    
    LeaseFacility
    
    Products
    
    Space (m2)
    
    Leased
    
    ExpiryToronto
    
    Oil-insulated instrument transformers
    
    
    3,902
    
    
    Leased
    
    Jul. 1, 2012Toronto
    
    Bushings
    
    
    2,790
    
    
    Leased
    
    Apr. 30, 2012Toronto
    
    Reactors, line traps
    
    
    10,277
    
    
    Leased
    
    Jun. 30, 2012Toronto
    
    PLC
    
    
    739
    
    
    Leased
    
    Apr. 30, 2005Basel (Note 1)
    
    Low power instrument transformers
    
    
    15,515
    
    
    Owned
    
    N/ASt. Louis
    
    Oil-insulated instrument transformers, Bushings
    
    
    22,260
    
    
    Owned
    
    N/ABamberg
    
    Gas-insulated current and voltage transformers
    
    
    8,449
    
    
    Owned
    
    N/ALinz
    
    Reactors, arc suppression Coils, line traps
    
    
    7,296
    
    
    Leased
    
    Nov. 31, 2015Belo Horizonte
    
    Reactors, line traps
    
    
    3,500
    
    
    Leased
    
    Sep. 30, 2005Hebburn
    
    Bushings
    
    
    11,560
    
    
    Owned
    
    N/AShanghai
    
    Gas-insulated current and voltage transformers
    
    
    13,812
    
    
    Leased
    
    Mar. 31, 2026Fushun
    
    Bushings
    
    
    4,115
    
    
    Owned
    
    N/ATOTAL
    
    
    104,215
 Note 1  The Test Equipment business, which was sold to a third party in mid
July 1999, continues to function on the Basel site under a series of lease and
service agreements. On January 24, 2001, the Board of Directors approved and
the Company announced the closure of all main production operations for Trench
Switzerland. This was completed by the end of 2001. The Swiss site continues
to be our main centre of engineering for Instrument Transformers in Europe and
is the base for our R&D activities in new designs and measurement technologies. For information on the year end balance sheet value of property, plant and
equipment for Trench, refer to Item 17, note 5 to the financial statements. The assets of Trench are distributed geographically as shown in the following
table: As at December 31,(in thousands of U.S. dollars)
    
    2003
    
    2002Total assetsAmerican operations
    
    $
    148,100
    
    
    $
    119,492European operations
    
    
    202,194
    
    
    
    177,105International operations
    
    
    63,195
    
    
    
    49,123$
    413,489
    
    
    $
    345,720
 Our Shanghai subsidiary is undergoing a period of expansion with respect to its
Coil business in 2003 and 2004. Manufacturing Technical and manufacturing leadership are critical to maintaining our
competitive edge. Our global scope, integrated structure, extensive
engineering expertise and demonstrated manufacturing efficiencies allow us to
respond quickly and effectively to market opportunities and customer needs for
custom products. We strive to be a one stop source for a variety of our
customers requirements. Our product lines share similar high voltage
insulation technology and manufacturing requirements and are keyed to the
specific needs of individual markets around the world. Through our subsidiaries, we are an active participant in international
standards associations for electrical products and requirements. 18




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##### 



TRENCH ELECTRIC B.V. - FORM 20-F Equivalent Trench has also established strategic alliances with many customers,
universities, test laboratories and suppliers around the globe. As a result,
we believe that Trench is always at the leading edge of emerging world market
regulations, technical developments and trends. This advanced intelligence
allows us to focus research, development and manufacturing on product areas
with the most potential for global success. Trench is at the forefront of manufacturing expertise for air-core reactors.
Anthony Trench invented the fibreglass encapsulated air-core reactor in 1962
and since that time, we have remained a world leader in these products. Trench
manufactures all the components necessary for most Coil products and only needs
to purchase the raw materials. In addition, we have the technical capabilities
and manufacturing expertise to build our Coil products to customer
specifications. Environmental, Health and Safety Matters Our facilities, like similar manufacturing facilities, are subject to a range
of federal, state, local and foreign environmental and occupational health and
safety laws including those laws relating to air emissions, wastewater
discharges, the handling and disposal of solid and hazardous waste, and the
remediation of contamination associated with the current and historic use of
hazardous substances or materials. If a release of hazardous substances or
materials occurs on or from our properties or any offsite disposal location
used by us, or if contamination from prior activities is discovered at any of
our properties, we may be held liable for the costs of remediation (including
any response costs), natural resource damages and associated transaction costs.
While the amount of such liability could be material, we devote resources to
ensure that our current operations are conducted in a manner that reduces such
risks. We believe that we are currently in compliance with, and not subject to
liability under, any environmental laws, except where such noncompliance or
liability would not reasonably be expected to have a material adverse effect on
the consolidated financial position, results of operations or liquidity of the
Group. We have also completed the implementation of ISO 14001 environmental protection
standards at some of our manufacturing locations. 
 Item 5. Operating and Financial Review and Prospects 
 A. Operating Results The following discussion generally relates to the historical consolidated
results of operations and financial position of the Trench group of companies
and our consolidated results of operations and financial position and should be
read in conjunction with the audited consolidated financial statements in Item
17. Operating results in the three years ended December 31, 2003 have been
impacted by the following significant events: During the year our operating income has benefited by a net gain of $905
arising from the sale of an unused building in China. In 2002, our operating
income benefited by a net gain of $755 arising from the sale of the AVC product
line in Canada. In December 2002, we increased our ownership of Trench Fushun Bushing Co. Ltd
by an additional 14.6% to 65.0%. Effect of Currency Fluctuations on Results of Operations Trench conducts its business internationally, although our principal operations
are located in Austria, Brasil, Canada, China, England, France, Germany and
Switzerland. For financial reporting purposes, Trench has chosen the U.S.
dollar as its reporting currency. Therefore, changes in the rate of exchange
between the U.S. dollar and the local currencies in which the financial
statements of its international operations are maintained affect our results of
operations and financial position as reported in our financial statements. We
have translated the assets and liabilities into U.S. dollars at the exchange
rate prevailing at the balance sheet date. Income statement items are
translated at the average exchange rates for the periods. Given this broad
geographical spread of our businesses, variations in exchange rates against the
U.S. dollar have a major impact on our reported results. Refer to Item 11 for
further details. 19




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##### 



TRENCH ELECTRIC B.V. - FORM 20-F Equivalent Selected Foreign Exchange Rates Relative to the U.S. Dollar (2001 to 2003) 2001
    
    2002
    
    2003Average
    
    Spot
    
    Average
    
    Spot
    
    Average
    
    SpotCanadian dollar
    
    
    0.6458
    
    
    
    0.6278
    
    
    
    0.6369
    
    
    
    0.6376
    
    
    
    0.7158
    
    
    
    0.7752Euro ()
    
    
    0.8956
    
    
    
    0.8906
    
    
    
    0.9452
    
    
    
    1.0411
    
    
    
    1.1317
    
    
    
    1.2591English Pound (£)
    
    
    1.4379
    
    
    
    1.4540
    
    
    
    1.5024
    
    
    
    1.6023
    
    
    
    1.6348
    
    
    
    1.7910Swiss Franc (CHF)
    
    
    0.5958
    
    
    
    0.6025
    
    
    
    0.6444
    
    
    
    0.7167
    
    
    
    0.7441
    
    
    
    0.8074Brasilian Real
    
    
    0.4300
    
    
    
    0.4328
    
    
    
    0.3538
    
    
    
    0.2817
    
    
    
    0.3272
    
    
    
    0.3471Chinese Renminbi
    
    
    0.1208
    
    
    
    0.1208
    
    
    
    0.1208
    
    
    
    0.1208
    
    
    
    0.1208
    
    
    
    0.1208
 Please refer to the further analyses under Item 5.A. in the Results of
Operations section. Critical Accounting Policies Our significant accounting policies below are more fully described in Note 2 to
the consolidated financial statements in Item 17. The preparation of financial
statements in conformity with accounting principles generally accepted in the
United States requires that we make estimates and assumptions in certain
circumstances that affect amounts reported in the accompanying consolidated
financial statements and related footnotes. In preparing these financial
statements, we have made our best estimates and judgments of certain amounts
included in the financial statements, giving due consideration to materiality.
Application of these accounting policies involves the exercise of judgment and
use of assumptions as to future uncertainties and, as a result, our actual
results could differ from these estimates. Revenue Recognition: The timing of our revenue recognition for sales of electrical equipment depends
on the nature of each sales contract. When sales contracts include substantive
customer acceptance clauses, we recognize revenue when customers have
acknowledged acceptance of the equipment. When sales contracts do not include
substantive customer acceptance clauses, we recognize revenue when the terms of
the contract with the customer have been substantially met (i.e. when control
is transferred to the customer). We also recognize revenue on certain bill and hold arrangements with our
customers. The recognition of such revenue is conditional upon: such
arrangements are requested in writing by our customers, and include a fixed
delivery date; equipment held for customers is segregated from other inventory,
cannot be used to fill other customer orders and is complete and ready for
shipment; the transfer of control and risk of loss for such equipment pass to
the customer prior to delivery; and we do not retain any specific performance
obligations related to this equipment such that the earnings process is not
complete. We and others in our industry normally engage in this practice when,
for example, certain larger installations may not be ready to accept goods as
initially scheduled due to construction delays. Shipping costs are expensed in the cost of sales line in the income
statement. Allowance for Doubtful Accounts Receivable: Accounts receivable are reduced by an allowance for amounts that may prove not
to be collectable in the future. Substantially all of our receivables are due
from the utility and industrial markets worldwide. The estimated allowance for
doubtful accounts is based primarily on our evaluation of the financial
condition of the customer. Of note is that there is more judgment required in
China due to the lower level of certainty and historical experience regarding
trade in the region (compared to North America and Europe). The Company maintains credit limits for all customers that are developed based
upon several factors, included but not limited to payment history, published
credit reports and use of credit references. Each fiscal quarter, management
performs various analyses to evaluate accounts receivable balances to ensure
recorded amounts reflect estimated net realizable value. This review includes
accounts receivable aging, other operating trends and relevant business
conditions, including general economic factors, as they relate to each of the
Companys domestic and international customers. If this analysis leads
management to the conclusion that potential significant accounts are
uncollectible, a reserve will be provided. As of December 31, 2003, management
has provided for $2,065 (2002  $1,751). 20




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TRENCH ELECTRIC B.V. - FORM 20-F Equivalent Inventories: Inventories are stated at the lower of cost or market on an average cost basis.
Each fiscal quarter, we utilize various analyses based on sales forecasts,
historical sales and inventory levels to ensure the current carrying value of
inventory accurately reflects current and expected requirements within a
reasonable timeframe. As a result of this analysis in 2003, management believes
the inventory levels are sufficient based upon the expected requirements in
fiscal 2004 and beyond. The inventory obsolescence provision is based upon a thorough analysis by our
management of inventory, especially slow moving inventory, and taking into
account estimated future usage and sales. We have provided for $2,785 in
obsolete and slow moving inventory (2002 - $1,891). While our management
believes that the provision for inventory obsolescence is adequate and the
judgment applied is appropriate, the estimated amounts could differ materially
from what will actually transpire in the future. Goodwill, Intangible and Other Long-Lived Assets: Property, plant and equipment, intangible and certain other long-lived assets
are amortized over their useful lives. Useful lives are based on our
managements estimates of the period that the assets will generate revenue.
Our management periodically reviews the carrying value of the long-lived assets
and investments for continued appropriateness. This review is based upon
projections of anticipated future cash flows. While we believe that estimates
of future cash flows are reasonable, different assumptions regarding such cash
flows could materially affect our evaluations. Trench assesses the impairment of identifiable intangibles, long-lived assets
and related goodwill and enterprise level goodwill whenever events or changes
in circumstances indicate that the carrying value may not be recoverable.
Factors that we consider to be important which could trigger an impairment
review include the following:  
    
    significant underperformance relative to expected historical or projected future operating results;
    
    significant changes in the manner of the use of the acquired assets or the strategy for the overall business;
    
    significant negative industry or economic trends; When we determine that the carrying value of intangibles, long-lived assets and
related goodwill and enterprise level goodwill may not be recoverable based
upon the existence of one or more of the above indicators of impairment, a
writedown may be required. In January, 2002, Statement of Financial Accounting
Standards (FAS) No. 142, Goodwill and Other Intangible Assets became
effective and we were required to perform an initial impairment review of
goodwill in 2002 and an annual impairment review thereafter. We completed the
initial review by the second quarter of 2002. We did not record an impairment
charge upon completion of the initial impairment review as our initial
impairment testing of goodwill did not indicate any impairment. Our goodwill
impairment test in 2003 did not indicate any impairment. This accounting policy is considered critical given the material effect an
impairment charge against goodwill could have on the groups financial
statements and the management judgements inherent in the review for potential
impairment. That review is significantly affected by assumptions used in the
calculations, for example: determining the clusters of business aggregated to
form reporting units for the purposes of FAS142; the forecast/projected
profits and cash flows by territory; and the discount rates applied (2003 
13.1%, 2002 - 7.9%). Deferred income taxes: As part of the process of preparing our consolidated financial statements, we
are required to estimate the income taxes in each of the jurisdictions in which
we operate. This process involves estimating actual current tax exposure
together with assessing temporary differences resulting from differing
treatment of items, such as deferred revenue, for tax and accounting purposes.
These differences result in deferred tax assets and liabilities, which are
included within the consolidated balance sheet. Trench must then assess the
likelihood that deferred tax assets will be recovered from future taxable
income and to the extent we believe that recovery is not likely, a valuation
allowance must be recorded. To the extent a valuation allowance is established
or this allowance is increased in a period, there must be an expense within the
tax provision in our statement of profit and loss. Income taxes have been provided using the full liability method whereby current
tax liabilities or assets are recognized for the estimated taxes payable or
refundable tax for the current year and deferred tax liabilities or assets are
recognized for the estimated 21




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##### 



TRENCH ELECTRIC B.V. - FORM 20-F Equivalent future tax effects attributable to temporary differences and carry forwards.
Current and deferred tax liabilities and assets are measured based on
provisions of the enacted tax laws. Trench records valuation allowances
against deferred tax assets where management does not expect such assets to be
realized based upon current forecasts. In the event that actual results differ
from these estimates or management adjusts these estimates in future periods,
we may need to establish an additional valuation allowance that could
materially impact our financial position and the results of operations. This
accounting policy is considered critical by management on grounds of the
material impact on the groups financial statements and the judgements taken in
estimating the likely recovery of deferred tax assets. The net deferred tax asset as of December 31, 2003 was $15,508, net of a
valuation allowance of $7,567. The net deferred tax asset as of December 31,
2002 was $12,071, net of a valuation allowance of $7,852. Provisions for warranties: The preparation of financial statements in conformity with generally accepted
accounting principles in the United States of America requires our management
to make estimates and assumptions that affect the reported amounts of assets
and liabilities and 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 from those
estimates. Trench records provisions for warranties based upon historical
trends and any known warranty issues and such provisions represent our
managements best estimate of the amounts necessary to settle future and
existing claims on products sold as of the balance sheet date. Please refer to
Item 17, Note 22 for more information. Pension and other post retirement benefits: The determination of our obligations and expenses for pension and other post
retirement benefits is dependent on the selection of certain assumptions used
by actuaries in calculating such amounts. Those assumptions are described in
Notes 11 and 12 to the consolidated financial statements and include, among
others, the discount rate, expected long-term rate of return on plan assets and
rates of increase in compensation and healthcare costs. In accordance with
generally accepted accounting principles, actual results that differ from the
assumptions are accumulated and amortized over future periods and therefore,
generally affect the recognized expense and recorded obligation in such future
periods. While we believe that the assumptions are appropriate, significant
differences in the actual experience or significant changes in the assumptions
may materially affect the pension and other post retirement obligations and the
future expense. The service costs for defined benefit pension plans and post-retirement plans
for the years ended December 31, 2003 and 2002 were $1,788 and $1,405,
respectively. 22




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##### 



TRENCH ELECTRIC B.V. - FORM 20-F Equivalent Results of Operations For purposes of comparison, the following table includes our consolidated
results of operations from January 1, 2001 to December 31, 2003. Year Ended
    
    Year Ended
    
    Year EndedConsolidated
    
    Dec. 31, 2003
    
    Dec. 31, 2002
    
    Dec. 31, 2001(in millions of U.S. dollars)Sales
    
    $
    279.5
    
    
    $
    255.9
    
    
    $
    224.3Cost of sales
    
    
    190.1
    
    
    
    177.2
    
    
    
    160.8Gross profit
    
    
    89.4
    
    
    
    78.7
    
    
    
    63.5Selling, general and administrative expenses (1)
    
    
    46.9
    
    
    
    46.1
    
    
    
    46.4Restructuring
    
    
    1.5
    
    
    
    
    
    
    
    Gain on sale of assets
    
    
    (0.9
    )
    
    
    (0.7
    )
    
    
    Operating income
    
    
    41.9
    
    
    
    33.3
    
    
    
    17.1Foreign exchange losses (gains) (2)
    
    
    (26.3
    )
    
    
    (2.3
    )
    
    
    9.1Interest expense and other (3)
    
    
    19.6
    
    
    
    19.6
    
    
    
    19.9Income (loss) before income taxes
and minority interest
    
    
    48.6
    
    
    
    16.0
    
    
    
    (11.9
    )Provision for income taxes
    
    
    8.7
    
    
    
    6.8
    
    
    
    2.1Income (loss) before minority interest
    
    
    39.9
    
    
    
    9.2
    
    
    
    (14.0
    )Minority interest
    
    
    4.9
    
    
    
    2.7
    
    
    
    1.2Net income (loss)
    
    $
    35.0
    
    
    $
    6.5
    
    
    $
    (15.2
    )
  (1)
    
    Starting in 2002, under FAS 142 Goodwill and Other Intangible Assets,
we are no longer required nor permitted to record goodwill amortization.
Goodwill now has an indefinite useful life and will not be amortized but
rather will be tested at least annually for impairment. Accordingly, we
did not incur goodwill amortization expense in 2002 or 2003, whereas, in
2001, we incurred goodwill amortization expense of $3.5 million, which is
included in selling, administrative and general expense (2000 - $3.6
million, 1999 - $3.6 million).(2)
    
    Foreign exchange gains/losses include a gain of $29.4 million in 2003
(2002  gain of $ 5.8 million, 2001  loss of $8.9 million) relating to
the 101⁄4 Senior Subordinated Notes due 2007, being the year to year
revaluation of the debt using exchange rates as of December 31, 2001, 2002
and 2003. There is no immediate cash benefit as a result of this gain.(3)
    
    Interest expense includes amortization of deferred financing costs and
writeoffs of deferred financing costs associated with our outstanding
Senior Subordinated Notes and the senior facilities agreement. The following table sets forth, for the periods indicated, percentage
relationships for certain items in our consolidated financial statements: Percentage of SalesYear Ended December,2003
    
    2002
    
    2001%
    
    %
    
    %Sales
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0Cost of sales
    
    
    68.0
    
    
    
    69.3
    
    
    
    71.7Gross profit
    
    
    32.0
    
    
    
    30.7
    
    
    
    28.3Selling, general and administrative expenses
    
    
    16.8
    
    
    
    18.0
    
    
    
    20.7Operating income
    
    
    15.0
    
    
    
    13.0
    
    
    
    7.6
 2003 Compared to 2002 Results of Operations 2003
    
    2002
    
    Change(in millions of U.S. dollars)Sales
    
    $
    279.5
    
    
    $
    255.9
    
    
    
    9.2%
 Salesin 2003 were $279.5 million, an increase of $23.6 million from 2002.
Excluding the effect of foreign exchange rates on translation, sales in 2003
decreased $6.8 million or 2.7% from 2002. Excluding the effect of foreign
exchange rates on translation, sales of Coil products increased, while sales of
Transmission and Bushings products decreased year over year. Instrument 23




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##### 



TRENCH ELECTRIC B.V. - FORM 20-F Equivalent Transformer and Bushing sales (excluding China) have been affected by a
shortage of transmission projects,
particularly in North America. Sales from our subsidiary in China increased
from $40.9 million in 2002 to $53.7 million in 2003, an increase of 32%. 2003
    
    2002
    
    Change(in millions of U.S. dollars)Gross Profit
    
    $
    89.4
    
    
    $
    78.7
    
    
    
    13.6%Percentage of net sales
    
    
    32.0
    %
    
    
    30.7
    %
 Gross Profitfor 2003 was $89.4 million, an increase of $10.7 million from
2002. Excluding the effect of foreign exchange rates on translation, gross
profit increased slightly over 2002. Gross profit as a percentage of sales in
2003 was 32.0% compared with 30.7% in 2002 mainly due to improved overall
margins from the Chinese units. 2003
    
    2002
    
    Change(in millions of U.S. dollars)Selling, general and administrative
expenses
    
    $
    46.9
    
    
    $
    46.1
    
    
    
    1.8%Percentage of net sales
    
    
    16.8
    %
    
    
    18.0
    %
 Selling, general and administrative expensesin 2003 were $46.9 million, an
increase of $0.8 million from 2002. Excluding the effect of foreign exchange
rates on translation, selling, general and administrative expenses in 2003
decreased by $4.8 million. Selling, general and administrative expenses as a
percentage of sales for 2003 at 16.8% was slightly better than the percentage
achieved in 2002 at 18.0%. Excluding the effects of foreign exchange rates on
translation, there were lower administration payroll and overheads, bad debt
expense and commission expenses in 2003 than in 2002. Much of the improvement
is due to cost cutting initiatives in the Americas and Europe in 2003. Restructuring.In 2003, there were restructuring expenses amounting to $1.5
million related to our European operations. There were no restructuring
expenses in 2002. Gain on sale of assets.In 2003, Trench China in Shanghai disposed of the land
use rights and building of its former factory facility for a net gain of $0.9
million. In 2002, Trench Limited in Canada sold a product line, which
generated a gain of $0.8 million. 2003
    
    2002
    
    Change(in millions of U.S. dollars)Operating Income
    
    $
    41.9
    
    
    $
    33.3
    
    
    
    25.6%Percentage of net sales
    
    
    15.0
    %
    
    
    13.0
    %
 Operating Income.Operating income in 2003 was $42.3 million, an increase of
$8.6 million from 2002. Excluding the effect of foreign exchange rates on
translation, 2003 operating income increased by $4.0 million or 13.7%, of which
$0.9 million arose from the sale of assets in China. In 2002, there was a gain
of $0.8 million from the sale of a product line. The reasons for the increase
are referred to above under the sales, gross profit, selling, general and
administrative expenses, restructuring and gain on sale of assets sections. 24




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TRENCH ELECTRIC B.V. - FORM 20-F Equivalent 2002 Compared to 2001 Results of Operations 2002
    
    2001
    
    Change(in millions of U.S. dollars)Sales
    
    $
    255.9
    
    
    $
    224.3
    
    
    
    14.1%
 Salesin 2002 were $255.9 million, an increase of 14.1% from 2001. Excluding
the effect of foreign exchange rates on translation, sales in 2002 increased
12.2% from 2001 due to an increase in the sales of the core product lines, but
primarily the transmission products. There were increases in sales in the
Americas, Europe and Asia. The increased sales in China accounted for nearly
half of the 14.1% sales increase from the prior year, due to an increase in
sales of $15.7 million. Trench Fushun only became a part of Trench at the end
of November 2001, whereas in 2002 it operated for the entire year. 2002
    
    2001
    
    Change(in millions of U.S. dollars)Gross Profit
    
    $
    78.7
    
    
    $
    63.5
    
    
    
    24.0%Percentage of net sales
    
    
    30.7
    %
    
    
    28.3
    %
 Gross Profitin 2002 was $78.7 million, an increase of $15.2 million from 2001.
Excluding the effect of foreign exchange rates on translation, gross profit
increased by $13.5 million or 21.3% from 2001. Gross profit as a percentage of
sales in 2002 was 30.7% compared with 28.3% in 2001. A large part of the
increase in gross profit was due to the units in China. Trench Fushun became a
part of the Group at the end of November, 2001. 2002
    
    2001
    
    Change(in millions of U.S. dollars)Selling, general and administrative
expenses (including TSF integration)
    
    $
    46.1
    
    
    $
    46.4
    
    
    
    (0.5)%Percentage of net sales
    
    
    18.0
    %
    
    
    20.7
    %Selling, general and administrative
expenses (excluding goodwill amortization
in 2001 and including TSF integration
charges in 2001)
    
    $
    46.1
    
    
    $
    42.8
    
    
    
    7.7%Percentage of net sales
    
    
    18.0
    %
    
    
    19.1
    %Selling, general and administrative
expenses (excluding TSF integration
charges and excluding
goodwill amortization in 2001)
    
    $
    46.1
    
    
    $
    39.4
    
    
    
    17.0%Percentage of net sales
    
    
    18.0
    %
    
    
    17.6
    %
 Selling, general and administrative expensesin 2002 were $46.1 million, a
decrease of $0.3 million from 2001. Excluding the effect of foreign exchange
rates on translation, selling, general and administrative expenses in 2002
decreased by $1.5 million. Selling, general and administrative expenses as a
percentage of sales for 2002 at 18.0% are lower than the percentage achieved in
2001 of 20.7%. The major reason for this decrease in selling, general and
administrative expenses in 2002 is that the 2001 result includes $3.4 million
in integration charges (none in 2002). Excluding the 2001 integration charges,
selling, general and administrative expenses as a percentage of sales in 2001
was 19.1%. Also, in 2002, the selling, general and administrative expenses 25




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##### 



TRENCH ELECTRIC B.V. - FORM 20-F Equivalent no longer includes a charge for amortization of goodwill. If the goodwill
amortization charge and TSF integration charges were not included in 2001
results, then the selling, general and administrative expenses as a percentage
in 2001 would have been 17.6%, which is closer to the 2002 percentage. 2002
    
    2001
    
    Change(in millions of U.S. dollars)Operating Income
    
    $
    33.3
    
    
    $
    17.1
    
    
    
    94.5%Percentage of net sales
    
    
    13.0
    %
    
    
    7.6
    %
 Operating Incomein 2002 was $33.3 million, an increase of $16.2 million from
2001. Excluding the effect of foreign exchange rates on translation, in 2002
operating income increased by $16.0 million or 93.5%. The operating income in
2001 included an integration charge of $4.2 million and goodwill amortization
of $3.5 million. Excluding the effect of the integration charge in 2001 and
the goodwill amortization, the 2001 operating income as a percentage of net
sales would have been 10.7%, which is closer to the 2002 operating income as a
percentage of net sales of 13.0%. Refer to the gross profit, integration
expenses, and the selling, general and administrative expenses sections above
for more details. 
 B. Liquidity and capital resources During the year ended December 31, 2003, cash generated by operating activities
amounted to $36,689 the principal components of which can be described as
follows:  
    
    The net income for the year ended December 31, 2003 of
$34,968 plus three non-cash items, depreciation of $8,093,
deferred finance cost amortization of $1,650 and minority
interest of $4,886.
    
    At the end of December 2003 overall trade working capital
(sum of inventories, trade receivables, advance billings and
trade payables) stood at $66,424, compared with the prior year
of $73,717. The higher foreign currency exchange rates to the
U.S. dollar had an adverse impact on external trade working
capital of $8,512 (translation using the 2002 versus 2003
rates).
    
    Inventory stood at $48,763 compared to the prior year
level of $39,888. The higher foreign currency exchange rates to
the US dollar accounted for the majority of the variance.
Conversion of 2003 inventory using 2002 exchange rates would
have reduced inventory by $6,153. Increased activity in the
Chinese joint ventures accounted for $2,800 of the increase.
    
    Trade accounts receivable at the end of December 2003
were $70,194 versus the prior year level of $67,266. The
higher foreign currency exchange rates to the US dollar from
2002 to 2003 had an adverse impact on receivables. Foreign
exchange differences from 2003 to 2002 accounted for $8,313 of
the variance. Excluding the effect of the exchange rate from
2003 to 2002, trade accounts receivable would have declined
from 2002 to 2003 by $5,385.
    
    Trade accounts payable at the end of the month were
$44,147 against the prior year level of $27,355. The higher
foreign currency exchange rates to the US dollar increased our
accounts payable significantly. The Chinese joint ventures
accounted for an additional $3,600 of the increase. Trade
payables in 2003 were $4,998 higher due to the effect of the
higher Canadian dollar, Brasilian real and all European
currency rates versus the U.S. dollar from 2002 to 2003. During the year ended December 31, 2003, net cash used in investing activities
was $7,528, consisting mainly of additions to property and equipment of $9,688
and offset by proceeds of disposal of $2,307 from the disposal of the old
premises (Jumen Road) in Shanghai, China which generated a gain of $905. There
was also the purchase by our Austrian subsidiary of certain arc suppression
coil technologies for consideration of $1,196 paid in 2003 and a further $252
to be paid in 2004. Our Canadian subsidiary received a 26




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##### 



TRENCH ELECTRIC B.V. - FORM 20-F Equivalent $1,000 instalment payment for the coil technology sale, which occurred in 2002.
As of December 31, 2003, we have received $6,000 from SITW for the coil
technology sale and we will receive the remaining $4,000 over the next three
years. The net cash used in financing activities amounted to $14,438,
including $5,842 in repayments of the revolver and $6,878 in repayment of
short-term and long-term debts of the Company. There was also a dividend paid
to our joint venture partner (SITW) in China of $1,945. At December 31, 2003 the Group had total debt of $174.4 million and cash of
$31.1 million, compared to $185.1 million and $15.4 million, respectively, at
the end of 2002. Our cash and cash equivalents are held in the following
currencies: Brasilian real, British pound, Canadian dollar, Chinese renminbi,
Euro, Swiss franc and the U.S. dollar. There exists an annual cash interest
expense of approximately $18 million associated with borrowings under the
Facilities Agreement and the Senior Subordinated Notes, as well as anticipated
principal payments of term and other loans of $13.7 million, $5.8 million, $3.9
million, and $151.1 million in 2004, 2005, 2006 and 2007, respectively, which
will increase our liquidity requirements. The scheduled repayment in 2004 of
$13.7 million includes $8.3 million in China, consisting of two loans, which
may be renewed annually. The Facility Agreement covenants comprise: EBITDA to Net cash interest payable;
Cash flow to Debt service; Net debt to EBITDA; Adjusted net worth; and separate
annual capital expenditure thresholds for Shanghai and non-Shanghai operations.
At December 31, 2003 Trench has exceeded the permitted threshold for Shanghai
capital expenditure by $91 following the early delivery (in late December 2003)
of certain assets which will be brought into use in 2004. Trench has received
a waiver in this regard from the Banks. In all other respects Trench has
complied with the above financial covenants. Having taken account of waiver
and amendment letters received from our Senior Lenders, we anticipate remaining
in compliance with those covenants. The amendments permitted us to take the
entire gain of approximately $5.5 million over the six quarters ending March
2002 (for covenant calculation purposes only) on the sale in 2000 of certain
Instrument Transformer and Bushings technologies in connection with our
Shanghai operation. This amendment was consented to on the basis that
substantially all of the gain has already been realized in cash. Similarly, we
have obtained an amendment letter from our Senior Lenders to allow us to
recognize (for covenant purposes only) the $10 million gain from the sale of
certain Coil technologies in 2002 in connection with our Shanghai operation on
an accelerated basis to the end of December 31, 2006. Under U.S. GAAP both of
these gains will be recognized over the life of the licensing agreement (10
years). In addition, our Senior Lenders agreed to increase the headroom available to us
within the financial covenants for the interest coverage and the leverage
ratios from 31st March 2003 to 31st December 2005. For the avoidance of doubt
no changes have been made to the Net Worth covenant or the Cash Flow to Debt
Service covenant. Also, our Senior Lenders agreed that both the cash costs and the profit and
loss write-offs associated with the reorganization in Switzerland in 2000 and
2001 can be excluded from all covenant calculations as originally defined.
Items associated with the reorganization in Switzerland have been subject to
separate additional covenant tests. The amendments also create additional flexibility under our capital expenditure
covenant in connection with the capital expenditure in China. The original
capital expenditure covenant was set prior to Trench China, in Shanghai being
consolidated into the Group results. Notwithstanding the foregoing, there can be no guarantee that we will remain in
compliance with our financial covenants. Failure to remain in compliance, or
to obtain additional amendments, would have a material adverse effect on our
liquidity. Our primary sources of liquidity are cash flows from operations and borrowings
under the revolving credit facility of our Facilities Agreement. At December
31, 2003, $32.3 million was available to us for borrowings under the revolving
credit facility compared to $27.7 million in 2002, with both amounts calculated
without the effect of letters of credit and bank guarantees. Of the amount
available, $5.1 million (2002- $6.3 million) is a restricted revolving credit
facility, the use of which is not anticipated by Trench and is subject to the
consent of our Senior Lenders. If CIBC letters of credit and bank guarantees
are factored in, the net available revolving credit facility was $12.8 million
compared to $7.5 million in 2002. There are other guarantees in other
subsidiaries that do not affect the available revolving credit facility. In
addition, we are forecasting positive cash flows from operations in 2004,
although there can be no assurances that our cash flows in 2004 will be
positive or sufficient to meet our requirements. Our management believes that
cash generated from operations, together with borrowings under the revolving
credit facility, will be sufficient to meet our working capital, capital
expenditure and debt servicing needs for the foreseeable future. Please refer
to Item 17, Note 22 for more information. 27




---



##### 



TRENCH ELECTRIC B.V. - FORM 20-F Equivalent 
 C. Research and development, patents and licenses, etc. Trench conducts research and development (R&D) mainly on a decentralized
basis (at the manufacturing units) with our primary focus on design and process
engineering in order to continuously improve our manufacturing efficiency to
maintain our cost advantage in our product lines. At each of our manufacturing
locations, several engineers are partly or fully dedicated to R&D activities
and our R&D expense consists of an allocation of the engineers time spent on
product development as well as the cost of building prototypes. In 2001,
Trench Switzerland was designated to be our base for R&D activities in new
designs and measurement technologies. In addition, we collaborate with leading
research institutes on the development of new products and new technologies.
Trench also collaborates with certain primary contractors for the development
of new products and applications. These initiatives, as well as our
customer-oriented approach to our R&D work, have positioned us as a leader in
high voltage technology products. Our R&D expenses for the years ended
December 31, 2003, 2002, and 2001 were $5.2 million, $4.5 million, and $3.5
million, respectively. 
 D. Trend information - For Trend information responsive to this item, refer to Items 3.A. and 4.B. above 
 E. Off-balance sheet arrangements We do not have transactions, arrangements or other relationships with
unconsolidated entities or persons that are reasonably likely to materially
affect our liquidity or the availability of or requirements for capital
resources. Unconsolidated entities are often referred to as structured finance
or special purpose entities and we do not engage in activities with such
entities. 
 F. Tabular disclosure of contractual obligations Within 1
    
    
    
    
    
    After 5In 000s of U.S. Dollars
    
    Year
    
    2-3 Years
    
    4-5 Years
    
    YearsOperating leases
    
    $
    2,943
    
    
    $
    5,489
    
    
    $
    5,025
    
    
    $
    20,911Purchase obligations
    
    
    184
    
    
    
    
    
    
    
    
    
    
    
    Capital leases
    
    
    308
    
    
    
    364
    
    
    
    181
    
    
    
    Royalty/licensing
agreements
    
    
    580
    
    
    
    1,341
    
    
    
    1,622
    
    
    
    4,019Long-term debt repayment
    
    
    13,695
    
    
    
    9,679
    
    
    
    151,072
    
    
    
    $
    17,710
    
    
    $
    16,873
    
    
    $
    157,900
    
    
    $
    24,930
 Operating leases include a long term factory rental payable to our joint
venture partner in China, SITW. The annual operating lease payment for the
Trench China factory in Shanghai is $501 and the lease expires in July 2026. 
 G. Safe Harbor Please refer to page 4 of this Form 20-F Equivalent under Presentation of
Financial Information. 
 H. Other Recent Accounting Pronouncements In January 2003, the FASB issued Interpretation 46, Consolidation of Variable
Interest Entities. In general, a variable interest entity is a corporation,
partnership, trust, or any other legal structure used for business purposes
that either (a) does not have equity investors with voting rights or (b) has
equity investors that do not provide sufficient financial resources for the
entity to support its activities. Interpretation 46 requires a variable
interest entity to be combined by a company if that company is subject to a
majority of the risk of loss from the variable interest entitys activities or
entitled to receive a majority of the entitys residual returns or both. In
December 2003, the FASB issued FASB Interpretation 46(R), Consolidation of
Variable Interest Entities. FIN 46(R) replaces FIN 46 and clarifies the
accounting for interests in variable interest entities. FIN 46(R) should be
applied to entities considered to be Special Purpose Entities (SPEs) no later
than the end of the first reporting period after December 15, 2003 and by the
end of the first reporting period that ends after March 15, 2004 to entities
other than SPEs. Certain of the disclosure requirements apply in all financial
statements issued after January 31, 2003, regardless of when the variable
interest entity was established. We have assessed this new standard and do not
believe that it has a material effect on our results of operations or financial
condition. 28




---



##### 



TRENCH ELECTRIC B.V. - FORM 20-F Equivalent In December 2003, FASB issued Statement No. 132R, Employers Disclosures about
Pensions and Other Postretirement Benefitsan amendment of FASB Statements No.
87, 88, and 106. FAS 132R revises employers disclosures about pension plans
and other postretirement benefit plans. It does not change the measurement or
recognition of those plans required by FASB Statements No. 87, Employers
Accounting for Pensions, No. 88, Employers Accounting for Settlements and
Curtailments of Defined Benefit Pension Plans and for Termination Benefits, and
No. 106, Employers Accounting for Postretirement Benefits Other Than Pensions.
This Statement retains the disclosure requirements contained in FASB Statement
No. 132, Employers Disclosures about Pensions and Other Postretirement
Benefits, which it replaces. It requires additional disclosures to those in the
original Statement 132 about the assets, obligations, cash flows, and net
periodic benefit cost of defined benefit pension plans and other defined
benefit postretirement plans. The required information should be provided
separately for pension plans and for other postretirement benefit plans. This
Statement retains the disclosures required by Statement 132, which standardized
the disclosure requirements for pensions and other postretirement benefits to
the extent practicable and required additional information on changes in the
benefit obligations and fair values of plan assets. Additional disclosure
requirements have been added in response to concerns expressed by users of
financial statements; those disclosures include information describing the
types of plan assets, investment strategy, measurement date(s), plan
obligations, cash flows, and components of net periodic benefit cost recognized
during interim periods. The provisions of Statement 132 remain in effect until
the provisions of this Statement are adopted. Except as noted below, this
Statement is effective for financial statements with fiscal years ending after
December 15, 2003. The interim-period disclosures required by this Statement
are effective for interim periods beginning after December 15, 2003.
Disclosure of information about foreign plans required by paragraphs 5(d),
5(e), 5(g), and 5(k) of this Statement is effective for fiscal years ending
after June 15, 2004. All of the Groups pension and post-retirement benefits
arise from foreign plans. The Group is therefore required to present the
additional disclosures for its 2004 year. We have not evaluated the impact of
FAS 132R and do not intend to early adopt for fiscal 2003. 
 Item 6. Directors, Senior Management and Employees 
 A. Directors and Senior Management As at December 31, 2003, the sole director of Trench Electric BV was Trench
Electric Holding BV. Executive Officers of Trench Electric BV The following table sets forth certain information regarding the executive
officers of Trench Electric (ages as of December 31, 2003): Date appointedName
    
    Age
    
    Position
    
    to current positionHoward Poulson
    
    
    60
    
    
    Chairman and Chief Executive Officer
    
    June 1999John H.G. Finlay
    
    
    64
    
    
    Executive Vice President, North America & International
    
    April 2000Allan M. Finn
    
    
    52
    
    
    Executive Vice President, Sales and Marketing
    
    July 1999Michael J. Bissell
    
    
    52
    
    
    Group Finance Director
    
    April 2000Alfred Wittenhofer
    
    
    63
    
    
    Chief Executive - European Operations
    
    April 2001Michael J. Galley
    
    
    55
    
    
    CEO Designate European Operations
    
    October 2003
 Mr. Howard Poulsonwas appointed Chairman of Trench Electric in March 1998 at
the request of the main investor CVC. On June 1st 1999 Mr. Poulson took over
the post of Chief Executive following the retirement of Ron Montgomery from
that office. Prior to joining Trench, Mr. Poulson has had a long career as a
director and chief executive of a number of public companies largely operating
in the electronics industry. He is currently the Chairman of Aramis Ltd and
the Chairman of ZVC UK Ltd. Mr. John H.G. Finlaybecame Executive Vice President and Chief Financial
Officer of Trench Electric at the time of its formation in September 1997. Mr.
Finlay joined Trench Limited in Canada in 1988 as Chief Financial Officer. He
was Chief Financial Officer and Executive Vice President of Trench and its
predecessors from its formation in 1993. In 2000 he was made Executive Vice
President, North America and International of Trench Electric. Mr. Allan M. Finnbecame Vice President, Sales and Marketing of Trench Electric
at the time of its formation in September 1997. He joined Trench Electric
Canada in 1970 and has held the senior sales executive position at Trench since
1993. Mr. Finn has been with Trench and its predecessors for 33 years and has held a number of management
positions including manufacturing throughout his tenure. In July 1999 he
became Executive Vice President, Sales and Marketing. 29




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##### 



TRENCH ELECTRIC B.V. - FORM 20-F Equivalent Mr. Michael J. Bisselljoined the Group in April 2000, as Group Finance
Director. Prior to joining Trench, Mr. Bissell held various senior financial
positions with multi-site, international manufacturing businesses and spent a
period of time based in the U.S.A. His experience included being Group Finance
Director of GEI International PLC, a publicly traded British company, Finance
Director of one of Britains pre-eminent private engineering companies and also
of various substantial divisions of global contracting and capital goods
businesses. Mr. Alfred Wittenhoferwas appointed Chief Executive of Trench European
Operations in 2001. Mr. Wittenhofer has been Managing Director of Trench
Austria GmbH and its predecessor Group-member Spezielektra since 1976. Mr. Michael J. Galleywas appointed Chief Executive Officer Designate for the
Trench European Operations with effect from October 2003. Prior to joining
Trench he worked initially in the automotive sector during the 1970s and then
following achieving an MBA he progressed into general management roles in the
electrical, electronic products and systems sector. He has held a number of
positions in both UK and international companies, most recently with ABB and
Delta plc. Mr. Poulson, Mr. Finlay, Mr. Finn and Mr. Bissell are also Members of the Board
of Trench Electric Holding BV. Non-executive Board Members of Trench Electric Holding BV Mr. Marc Boughton,40, joined CVC in 1995, having worked previously for Electra
Fleming Ltd. and PricewaterhouseCoopers (London) where he qualified as a
Chartered Accountant and worked as a manager in the Corporate Finance Division.
He joined the Board on September 3, 1997. Mr. Boughton is a director of CVC
Capital Partners Ltd., Amatek Holdings, Acordis BV and Herbspring (December
2000 Sale) Ltd. Mr. James F. Joy,66 is Managing Director, European Business Development for
CVC Capital Partners Limited. Mr. Joy is a non-executive director for Metzeler
Automotive Profile Systems and a director of First Republic Bank (US). Mr. Joy
was appointed to the Board on February 16, 2000. Mr. Gijsbert C. Vuursteen, 30, was appointed to the Board on August 14, 2000 as
one of the CVC board members. He joined CVC in 2000 and is Investment Director
of CVC Capital Partners Ltd and a member of the supervisory board of Verdugt
Holding BV. 
 B. Compensation The aggregate compensation paid to executive officers of the Group including
benefits in kind for the year ended December 31, 2003 was approximately $2.3
million (2002 - $1.5 million). For the year ended December 31, 2003 the highest paid executive officer
received approximately $0.8 million (2002 - $0.5 million) including benefits in
kind. All executive officers of the Company take part in bonus schemes that
pay according to profit targets set by the non-executive officers. The amount
that was paid in 2003 is included in the above paragraph. 
 C. Board Practices Officers of Trench Electric BV and Trench Electric Holding BV are appointed on
a continuing basis and are not required to retire by rotation. Service
contracts for officers of Trench do not provide for any benefits upon
termination of employment other than the right to notice. Trench Electric BV has established an Audit Committee and a Remuneration
Committee. The members of both committees comprise Mr. Marc Boughton and Mr.
James Joy who are both non-executive officers of Trench Electric Holding BV. The Audit Committee meets at least four times per year or more frequently as
circumstances dictate. In addition, the Audit Committee will meet at least
annually with management and the independent auditor in separate sessions to
discuss any matters that the Audit Committee or either of these groups believes
should be discussed privately. 30




---



##### 



TRENCH ELECTRIC B.V. - FORM 20-F Equivalent The Audit Committees responsibilities are to monitor the integrity of our
financial reporting process and systems of internal controls regarding
accounting, finance and legal compliance and to monitor the independence and
performance of Trenchs independent auditors. The Audit Committee has to
approve any non-audit work performed by Trenchs auditors. The Remuneration Committees responsibilities include ensuring that the
remuneration and service contract terms of the executive officers and senior
management are appropriate. 
 D. Employees As of December 31, 2003, 2002 and 2001 respectively Trench employed 1,771,
1,832 and 1,839 employees worldwide. Number of EmployeesYear Ended December 31,2003
    
    2002
    
    2001American operations
    
    
    551
    
    
    
    571
    
    
    
    559European operations
    
    
    775
    
    
    
    852
    
    
    
    895International operations
    
    
    445
    
    
    
    409
    
    
    
    385Total
    
    
    1,771
    
    
    
    1,832
    
    
    
    1,839
 Historically, we have had very good relations with our workforce. There are no
independent unions at the Canadian Coil and Bushing facilities, or at the
Brasilian, Chinese and Swiss operations. Workers at our Canadian Instrument
Transformer facility are unionized with the Canadian Auto Workers union, at the
English facility under Amicus and GMB Union, and those at our French, Austrian
and German facilities are unionized with national or local work councils. All
of our manufacturing sites have good health and safety records, with no
significant employee accidents reported at any of the facilities since they
became a part of the Group. 
 E. Share Ownership There are arrangements to grant stock options in the Parent that would increase
the issued shares of the Parent by a maximum of 12%. During the year, the
Parent did not grant any stock options but certain options were
granted after the financial year end. Mr. Howard Poulson exercised 1,371
stock options for the year ended December 31, 2003 (2002 nil). For more
information on stock options, please refer to Item 17, note 21. Shares were
issued on January 24, 2002 that increased the number of issued Ordinary A
shares by 10,749 and the Ordinary B Shares by 2,096. On the same date the
par value of the shares was converted from Dutch Guilders to Euros at the
official exchange rate of NLG 2.20371 to one Euro (). The share capital of Trench Electric Holding B.V., the parent of the Company,
is as follows: Authorized
    
    
    
    No. of SharesOrdinary shares A ten votes/share
    
    4.54 Euro / share par value
    
    
    27,285Ordinary shares B one vote/share
    

0.45
Euro / share par value & 4.09 Euro premium
    
    
    4,986Preference shares A ten votes/share
    
    4.54 Euro / share par value
    
    
    1,700,000Preference shares B one vote/share
    

0.45
Euro / share par value & 4.09 Euro premium
    
    
    5,700,000
 Stated value
    
    TranslatedIssued
    
    No. of Shares
    
    Euro
    
    US$Ordinary
shares A ten votes/share - Issued by January 24, 2002 and outstanding
    
    
    25,688
    
    
    
    116,624
    
    
    
    92,625Ordinary shares B one vote/share  Issued January 24, 2002 and outstanding
    
    
    4,984
    
    
    
    2,263
    
    
    
    1,797Preference shares A ten votes/share  Issued on December 31, 1997 and outstanding
    
    
    1,682,413
    
    
    
    7,638,155
    
    
    
    6,066,361Preference shares B one vote/share  Issued on December 31, 1997 and outstanding
    
    
    560,804
    
    
    
    254,605
    
    
    
    202,2128,011,647
    
    
    
    6,362,995Share premium on ordinary shares B (4.09 Euro / share)
    
    
    
    
    
    
    20,365
    
    
    
    16,174Share premium on Preference shares B (4.09 Euro / share)
    
    
    
    
    
    
    2,291,445
    
    
    
    1,819,907Total shareholders equity
    
    
    
    
    
    
    10,323,457
    
    
    
    8,199,076
 31




---



##### 



TRENCH ELECTRIC B.V. - FORM 20-F Equivalent There are four principal shareholders, namely, CVC European Equity Partners
L.P., CVC European Equity Partners (Jersey) L.P., Citicorp Capital Investors
Europe Limited and Capital Ventures Nominees Limited. For additional
information, see Item 7.A.  Major shareholders. 
 Item 7. Major Shareholders and Related Party Transactions 
 A. Major shareholders The parent company of Trench Electric B.V. is Trench Electric Holding B.V.,
which owns all the outstanding shares of the Company.
There are nine shareholders of the Parent, namely, CVC European Equity Partners
L.P., CVC European Equity Partners (Jersey) L.P., Citicorp Capital Investors
Europe Limited, Capital Ventures Nominees Limited, Mr. Ronald Montgomery, Mr.
Howard Poulson, Mr. John Henry George Finlay, Mr. Allan Michael Finn and Mr.
Alfred Wittenhofer. The total number of shares owned by each shareholder and the value in Euros is
as follows. A Ordinary
    
    B Ordinary
    
    A Prefer.
    
    B Prefer.
    
    Total
    
    Proportion of# of shares
    
    # of shares
    
    # of shares
    
    # of shares
    
    Euro
    
    voting rightsCVC European Equity Partners L.P.
    
    
    19,009
    
    
    
    
    
    
    
    1,501,609
    
    
    
    
    
    
    
    6,903,606
    
    
    
    86.17
    %CVC European Equity Partners (Jersey) L.P.
    
    
    2,289
    
    
    
    
    
    
    
    180,804
    
    
    
    
    
    
    
    831,242
    
    
    
    10.38
    %Citicorp Capital Investors Europe Limited
    
    
    695
    
    
    
    4,984
    
    
    
    
    
    
    
    560,804
    
    
    
    2,571,833
    
    
    
    3.25
    %Capital Ventures Nominees Limited
    
    
    1,420
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,447
    
    
    
    0.08
    %Mr. Ronald Montgomery
    
    
    300
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,362
    
    
    
    0.02
    %Mr. Howard Poulson
    
    
    1,613
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,323
    
    
    
    0.09
    %Mr. John Henry George Finlay
    
    
    130
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    590
    
    
    
    0.01
    %Mr. Allan Michael Finn
    
    
    116
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    527
    
    
    
    0.00
    %Mr. Alfred Wittenhofer
    
    
    116
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    527
    
    
    
    0.00
    %25,688
    
    
    
    4,984
    
    
    
    1,682,413
    
    
    
    560,804
    
    
    
    10,323,457
    
    
    
    100.00
    %
 The voting rights associated with each class of share are indicated in Item
6.E.  Share ownership. 
 B. Related Party transactions During 2003, we paid dividends to our joint venture partner in China, SITW
(Shanghai Instrument Transformers Works), an amount of $1,945 (2002 - $694).
In 2002, we also paid to SITW an equalization dividend of $1,176. In addition,
we paid factory building rent of $501 and royalties of $41 to SITW in 2003. During the year, our Chinese subsidiary in Shanghai borrowed $1,329 from a
bank, SEC Finance Company, which is related to our joint venture partner,
SITW. The Peoples Bank of China (PBOC) has approved the SEC Finance Company
as an accredited lending institution. On May 12, 2003 the $16,070 Floating Rate Notes due 2008 (vendor loan note)
between BBA Properties Limited (creditor) and the Parent (debtor), were
transferred by BBA Properties Limited to Trench LN Holdings S.A., a company
registered in Luxembourg. This is considered a related party transaction as
certain companies at the Trench Electric BV level or below are
cross-guaranteeing the loan. The shareholders of Trench LN Holdings S.A. are
CVC European Equity Partners L.P., CVC European Equity Partners (Jersey) L.P.,
Capital Venture Nominees Limited, Citicorp Capital Investors Europe Limited,
the Poulson Family Trust, Michael J Bissell and Allan Finn, all of whom are
shareholders or directors in the Parent. The outstanding value as at December
31, 2003 was $28,471 and the interest rate attaching is 6.09%. During 2003, the CVC group of companies charged the Company a monitoring fee in
the amount of $0.8 million (2002 - $0.6 million, 2001 - $0.6 million). 32




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##### 



TRENCH ELECTRIC B.V. - FORM 20-F Equivalent There are various loans between the Trench group companies that are mainly
related to financing the original acquisition from BBA in 1997. The loans between Trench group members as of December 31, 2003 consisted of the
following: Trench Limited (Canada): loans from Trench Inc. related to financing the original acquisition from BBA  
    
    Cdn$31,233 loan from Trench Inc. (Rate 10.0625%)
    
    US$129,278 loan from Trench Inc. (Rate 10.3125% - 11.73%) Trench Inc. (Canadian Holding Co.): loan related to financing the original acquisition from BBA  
    
    Cdn$31,233 loan to Trench Limited (Rate 10.0625%)
    
    US$129,278 loan to Trench Limited (Rate 10.3125% - 11.73%)
    
    Cdn$29,825 loan from TEBV (Company) (Rate 10.00%)
    
    US$1,427 loan from TEBV (Company) (Rate 11.667%) Finatrench (France): loan related to financing the original acquisition from BBA  
    
    Euro 35,668 loan from Valtimon Holding BV (Rate 8.75%) Valtimon Holding BV: loan related to financing the original acquisition from BBA  
    
    Euro 35,436 loan from TEBV (Rate 8.625%)
    
    Euro 35,668 loan to Finatrench (Rate 8.75%) Trench Electric BV: loan related to financing the original acquisition from BBA  
    
    Euro 35,436 loan to Valtimon Holding BV (Rate 8.625%)
    
    Cdn$29,825 loan to Trench Inc. (Rate 10.00%)
    
    US$1,427 loan to Trench Inc. (Rate 11.667%)
    
    Euro 2,350 loan to Trench UK (Rate 5.0%)
    
    Euro 3,100 loan from Trench Germany (Rate 5.0%) Trench Electric SA (TESA)  
    
    US$19,000 investment in 10.5% Trench Austria bonds Trench (UK) Limited  
    
    Euro 2,350 loan from TEBV (Rate 5.0%) Trench
Germany GmbH  
    
    Euro 3,100 loan to TEBV (Rate 5.0%) 
 C. Interest of experts and counsel Not applicable  Annual Report on Form 20-F Equivalent 
 Item 8. Financial Information 
 A. Consolidated Statements and Other Financial Information Refer to Item 17  Financial Statements. Export Sales Trench Electric is incorporated in The Netherlands and we export all of our
sales by way of our manufacturing facilities located elsewhere in the world. 33




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##### 



TRENCH ELECTRIC B.V. - FORM 20-F Equivalent Legal Proceedings Neither Trench Electric nor any of its subsidiaries is currently a party to any
pending legal proceedings other than such proceedings incidental to its
business. Management believes that such proceedings would not, individually or
in the aggregate, reasonably be expected to have a material adverse effect on
the consolidated financial position, results of operations or liquidity of the
Company. Dividend Distribution Policy We are required under the articles of the joint venture agreements with our
Chinese joint venture partners to declare and pay dividends upon the approval
of the Board of Directors. Of the total dividends paid by Trench China in
Shanghai, 35% will accrue to our joint venture partner, SITW and of the total
dividends paid by Trench Fushun, 33% will accrue to SITW and 2% to FEPW. 
 B. Significant Changes On February 11, 2004, we announced a restructuring plan for Trench UK (TUK).
This restructuring plan aims to improve the long-term competitiveness of TUK in
the market. The restructuring includes the termination of 9 employees. The
estimated total costs associated with this restructuring is approximately $0.3
million (GBP 155K), which is accounted for under FAS 112 and 146. 
 Item 9. The Offer and Listing 
 A. Offer and listing details Five Year History The Notes were originally issued on December 15, 1997. Par = $100.00
    
    2003
    
    2002
    
    2001
    
    2000Annual High Market Price
    
    $
    103.00
    
    
    $
    82.00
    
    
    $
    71.00
    
    
    $
    74.00Annual Low Market Price
    
    $
    74.00
    
    
    $
    71.00
    
    
    $
    54.00
    
    
    $
    58.00
 Quarterly History The high and low sell prices by quarter for 2003 and 2002 are as follows: High
    
    Low(Par = $100.00)2003Qtr 1
    
    $
    80.00
    
    
    $
    74.00Qtr 2
    
    
    98.00
    
    
    
    85.00Qtr 3
    
    
    102.00
    
    
    
    96.00Qtr 4
    
    
    103.00
    
    
    
    101.002002Qtr 1
    
    $
    75.00
    
    
    $
    74.00Qtr 2
    
    
    80.00
    
    
    
    78.00Qtr 3
    
    
    82.00
    
    
    
    79.00Qtr 4
    
    
    76.00
    
    
    
    71.00
 34




---



##### 



TRENCH ELECTRIC B.V. - FORM 20-F Equivalent Monthly History The high and low sell prices for the last six months are as follows: High
    
    Low(Par = $100.00)2004February
    
    
    103.00
    
    
    
    101.63January
    
    
    102.00
    
    
    
    101.002003December
    
    
    103.00
    
    
    
    102.00November
    
    
    103.00
    
    
    
    102.00October
    
    
    102.00
    
    
    
    101.00September
    
    
    102.00
    
    
    
    101.50
 
 B. Plan of Distribution Not applicable  Annual Report on Form 20-F Equivalent 
 C. Markets The Senior Subordinated Notes are listed on the Luxembourg Stock Exchange.
Accordingly, no assurance can be given that an active market will develop for
any of the Notes or as to the liquidity of the trading market for any of the
Senior Subordinated Notes. If a trading market does not develop or is not
maintained, holders of the Notes may experience difficulty in reselling such
Notes or may be unable to sell them at all. If a market for the Senior
Subordinated Notes develops, any such market may be discontinued at any time.
If a trading market develops for the Senior Subordinated Notes, future trading
prices of such Senior Subordinated Notes will depend on many factors, including
among other things, prevailing interest rates, our results of operations and
the market for similar securities. Depending on prevailing interest rates, the
market for similar securities and other factors, including the financial
condition of the Group, the notes may trade at a discount from their principal
amount. We do not intend to list the Senior Subordinated Notes on any national
securities exchange other than the Luxembourg Stock Exchange or to seek the
admission thereof to trading in the National Association of Securities Dealers
Automated Quotation System. 
 D. Selling Shareholders Not applicable  Annual Report on Form 20-F Equivalent 
 E. Dilution Not applicable  Annual Report on Form 20-F Equivalent 
 F. Expenses of the Issue Not applicable  Annual Report on Form 20-F Equivalent 
 Item 10. Additional Information 
 A. Share Capital Not applicable  Annual Report on Form 20-F Equivalent 35




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##### 



TRENCH ELECTRIC B.V. - FORM 20-F Equivalent 
 B. Memorandum and Articles of Association The Articles of Association (Articles of Association) have been filed as an
exhibit to the report (see Item 19). The highlights of the Articles of
Association are as follows: Company and Objects The registered office of Trench Electric B.V. is in Amsterdam, The Netherlands
at Prof. J.H. Bavincklaan 7, 1183 AT, Amstelveen,. As per Article 2 of the
Articles of Association, the objects for which the Group is established are:  (a)
    
    to finance companies and other enterprises, to borrow, to lend and to
raise funds, to participate in all types of financial transactions,
including the issue of bonds, promissory notes or other securities or
evidences of indebtedness, to bind the company and to grant security
over its assets for obligations of companies and other enterprises with
which it forms a group and of third parties;(b)
    
    to incorporate and to participate in any way whatsoever in, to
manage, to supervise and to cooperate with companies and other
enterprises, to acquire, to keep, to divest or in any other manner to
manage all sorts of participations and interests in other companies and
other enterprises, to enter into joint ventures with other companies and
enterprises;(c)
    
    to acquire, to manage, to operate, to encumber and to divest personal
and real property and any right to or interest in personal and real
property;(d)
    
    to obtain, to exploit and to sell patents and other intellectual
property rights, to acquire and to grant licences, sub-licences and
similar rights of whatever name and description and if necessary, to
protect rights derived from patents and other intellectual property
rights, licences and similar rights against infringement by third
parties; and(e)
    
    to engage, in any way whatsoever, in trading activities, including
the import, export, purchase, sale, distribution and marketing of
products and raw materials. Directors Role and Decision-Making Power The Company shall be managed by a Board of Management consisting of one or more
members, who shall be appointed by the General Meeting of Shareholders and may
be suspended or removed from office by meeting at any time. A legal entity may
be a member of the Board of Management. The remuneration of the members of the
Board of Management, any rights to bonuses and the further terms of appointment
shall be determined by the General Meeting of Shareholders for each member of
the Board of Management individually. If the Board of Management has more than one member, then the following
provisions will take place with respect to decision making. Resolutions of the
Board of Management are adopted by absolute majority of the votes validly cast.
Meetings of the Board of Management can be convened by any member giving
notice to all other members of the Board in writing, at least three days prior
to the date of the meeting. The Board of Management shall be responsible for the management and
administration of the Company. The General Meeting of Shareholders may give
instructions to the Board of Management regarding the general directions of the
financial, social, economic and personnel policies to be pursued. The Board of
Management shall act in accordance with such instructions. Loans for the purpose of acquiring shares in its capital may be granted by the
Company up to the amount of its distributable reserves, provided that the
Company shall maintain a non-distributable reserve equal to the amount
outstanding on such loans. Share Description The authorized capital of the Company is two hundred thousand Dutch Guilders
(NLG 200,000 =  90,756) divided into two hundred thousand (200,000)
common shares of one Dutch Guilder (NLG 1.00 =  0.45) each. There is
no other class of shares. The shares shall be indivisible, shall be registered
shares, and shall be numbered consecutively from one onwards. No share
certificates shall be issued. Shares not yet issued shall be issued at such
price, upon such conditions and at such times as the General Meeting of
Shareholders, or another body to which the General Meeting of Shareholders has
transferred its power in relation thereto, shall determine, provided that the
shares shall not be issued at a price below par value. In the event of new
shares being issued, each 36




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##### 



TRENCH ELECTRIC B.V. - FORM 20-F Equivalent existing shareholder shall have a preferential right to subscribe to them in
proportion to his existing shareholding. Each share carries the right to one vote, subject to the following two conditions.  
    
    Shares held by the Company or by a subsidiary carry no right to vote in a General Meeting.
    
    In determining what proportion of shareholders exercise their votes,
are present or represented, or what proportion of the share capital is
provided or represented, the shares in respect of which no voting rights
can be exercised shall not be taken into account. The transfer of shares requires a written instrument, taking into account the
provisions of Article 196 of the Dutch Civil Code, Book 2. There are no limitations on the rights to own securities. Meeting for Annual Accounts Within five months after the end of the financial year, except for an extension
of a maximum of six months on account of special circumstances, the Board of
Management shall draw up the annual accounts, which shall be available at the
office of the Company for inspection by shareholders. General Meetings of
Shareholders shall be convened by means of notices sent not later than fifteen
days prior to the meeting by a Managing Director to the shareholders at the
address specified in the shareholders register. Distribution of Profit and Dividends A portion of the profits as determined by the approved profit and loss account
shall be reserved by the Company at the General Meeting of Shareholders on a
proposal of the Board of Management. The remainder shall be the distributable
profits, the appropriation of which shall be determined by the General Meeting
of Shareholders. The Company may only make distributions to its shareholders and to others
entitled to receive part of its distributable profits, if and to the extent
that the Companys shareholders equity exceeds the aggregate of its paid up
share capital (including calls made) and the amount of such reserves as it is
required by statute or by the Articles of Association to maintain. Insofar as
the Company has a profit, the General Meeting of Shareholders, on the proposal
of the Board of Management, may decide to pay an interim dividend, provided
that it complies with paragraph 3 of the Article dealing with distribution of
profit and dividends. Dividends (including interim dividends) shall be made
payable at the Companys offices from the date the dividend is declared, unless
the resolution concerned shall provide for a different date or place.
Dividends which have not been claimed within five years of being payable shall
be forfeited and shall accrue to the benefit of the Company. 
 C. Material Contracts In June 2003 a Know-How License Agreement was concluded between Trench Austria
(TA) and Highvolt Prüftechnik Dresden, Germany (HV). The agreement grants TA
the exclusive license to use the HV Know-How worldwide for the production and
sale of adjustable arc suppression coils (ASC) for consideration of $1,448
(Euro 1,150K), of which $252 (Euro 200K) is to be paid in 2004. The term of the
agreement is for 10 years and we expect strengthening of TAs ASC market share
in the future. 
 D. Exchange Controls Exchange Controls and Other Limitations Affecting Security Holders (a) There are currently no governmental laws, decrees or regulations in The
Netherlands, Canada or Luxembourg that restrict the export or import of
capital, including, but not limited to, foreign exchange controls, or that
affect the remittance of interest or other payments to non-resident holders of
the Notes. (b) There are no limitations under Dutch, Canadian or Luxembourg law or Trench
Electrics Articles of Association on the right of non-resident or foreign
owners to hold Trench Electrics Notes. 37




---



##### 



TRENCH ELECTRIC B.V. - FORM 20-F Equivalent 
 E. Taxation Material Non-U.S. Income Tax Considerations This summary is of a general nature and is included herein solely for
informational purposes. It is not intended to be, nor should it be construed
to be, legal or tax advice. No representation with respect to the consequences
to any particular holder of the Notes is made. Prospective purchasers should
consult their own tax advisors with respect to their particular circumstances
and the effects of local, state, federal and foreign (including Luxembourg and
Canadian) tax laws to which they may be subject. Non-United States holders
should consult their own tax advisors with respect to both their local tax
considerations and non-local tax considerations. Canada The following describes the material Canadian federal income tax consequences
generally applicable to a holder of a Note who for the purposes of the Income
Tax Act (Canada) (the Canadian Tax Act), and at all relevant times, is a
non-resident of Canada, deals at arms length with Trench Canada and does not
use or hold and is not deemed to use or hold the Note in the course of carrying
on business in Canada and is not an insurer that carries on an insurance
business in Canada and elsewhere. This summary is based on the current
provisions of the Canadian Tax Act and the regulations there under (the
Regulations) in force on the date hereof, counsels understanding of the
current administrative and assessing practices and policies published by Canada
Customs and Revenue Agency, and all specific proposals to amend the Canadian
Tax Act and the Regulations publicly announced by the Canadian Minister of
Finance prior to the date hereof (the Proposed Amendments). This summary is
not exhaustive of all possible Canadian federal income tax consequences and,
except for the Proposed Amendments, does not take into account or anticipate
changes in the law or the administrative or assessing practices of Canada
Customs and Revenue Agency, whether by judicial, governmental or legislative
action or interpretation, nor does it take into account provincial, territorial
or foreign tax legislation or considerations. This summary is of a general nature only and is not intended to be, and should
not be interpreted as, legal or tax advice to any particular holder of a Note.
Accordingly, prospective purchasers are urged to consult their own tax advisors
with respect to their particular circumstances. The payment by Trench Canada (under or with respect to its Guarantee) of
interest, principal or premium (if any) on the Notes will be exempt from
Canadian withholding tax. No other tax on income (including taxable capital
gains) will be payable under the Canadian Tax Act in respect of the holding,
redemption or disposition of the Notes or the receipt of interest, principal or
premium (if any) thereon. Luxembourg Payments of interest on the Notes will not be subject to withholding taxes in
Luxembourg. A holder of Notes who is not a resident of Luxembourg, does not
have a permanent establishment in Luxembourg and does not hold Notes in
connection with the conduct of a business in Luxembourg, will not be subject to
income or withholding taxes imposed by jurisdictions in respect of gains
realized on the sale, exchange or other disposition of Notes. Transfers of interests in the Notes outside Luxembourg will not be subject to
any stamp duties or other transfer taxes imposed by Luxembourg. 
 F. Dividends and Paying Agents Not applicable  Annual Report on Form 20-F Equivalent 
 G. Statement by Experts Not applicable  Annual Report on Form 20-F Equivalent 
 H. Documents on display Certain documents concerning our Group, which are referred to in the document,
will be either on file with the SEC or available for inspection at the
Companys principal place of business as shown in Item 4.A. 38




---



##### 



TRENCH ELECTRIC B.V. - FORM 20-F Equivalent 
 I. Subsidiary Information Not applicable  Annual Report on Form 20-F Equivalent 
 Item 11. Quantitative and Qualitative Disclosure about Market Risks The following discussion of our financial risk management activities includes
forward-looking statements that involve risks and uncertainties. Actual
results could differ materially from those projected in the forward looking
statements. As a result of its global operating and financial activities, we are exposed to
market risk by way of changes in interest rates and foreign currency exchange
rates. Theses changes may adversely affect our consolidated financial position
and results of operations. We seek to manage market risk by using various
financial instruments to manage its primary market exposures associated with
our underlying assets and liabilities as well as anticipated transactions.
These financial instruments are used to reduce risk by essentially creating
offsetting market exposures. These contracts are entered into with financial
institutions in accordance with Group treasury policies and procedures, thereby
reducing the risk of credit loss. Derivative financial instruments are used
only for purposes other than trading. The following discussion contains sensitivity analyses which present the
hypothetical loss in cash flows or fair values of the financial instruments and
derivative financial instruments held by our Group as of December 31, 2003 that
were subject to changes in interest rates and foreign currency exchange rates.
The range of sensitivities chosen for these analyses reflects our view of
changes that are reasonably possible over a one-year period. In the normal course of business, we also face risks that are either
non-financial or non-quantifiable. These risks principally include country,
commodity, credit and legal risks and are not represented in the following
analyses. Interest Rate Risk Our exposure to changes in interest rates result from our borrowing activities
used to meet our liquidity needs. Long-term debt is generally used to finance
long-term investments, while short-term debt is used to meet our working
capital requirements. The majority of our long-term borrowings are in fixed-rate instruments that are
not exposed to changes in interest rates. Other long-term and short-term
borrowings have floating interest rates (e.g. LIBOR (London Interbank Offering
Rate) plus 2.0% to 2.5%). There is inherent rollover risk for short-term
borrowings as they mature and are renewed at current market rates. The extent
of this risk is not quantifiable or predictable because of the variability of
future interest rates and business financing requirements. Assuming an
interest rate increase of 1% on the outstanding term loan facility and
revolving credit facility, as at December 31, 2003, our additional annualized
interest costs would be approximately $0.144 million (2002 - $0.243 million). Foreign Currency Exchange Rates We conduct our business internationally, and our principal manufacturing and
sales operations are located in Austria, Brasil, Canada, China, England,
France, Germany, Malaysia, Switzerland and the United States. For financial
reporting purposes, we have chosen the U.S. dollar as our reporting currency.
Therefore, changes in the rate of exchange between the U.S. dollar and the
local currencies in which the financial statements of our international
operations are maintained affect our results of operations and financial
position as reported in our financial statements. Our long term debt is denominated in U.S. dollars, Euros, Chinese renminbis and
British pounds while our subsidiary operations account for their businesses in
local currencies; namely, Brasilian reals, British pounds, Canadian dollars,
Chinese renminbis, Euros, Swiss francs and U.S. dollars. Only as payments are
made against long term debt over the next several years will an actual loss or
gain crystallize. We also utilize U.S. denominated commercial paper and
borrowings as well as foreign currency denominated borrowings to fund our
working capital and investment needs. We occasionally enter into foreign currency forward contracts to manage foreign
currency exposures related to sales to foreign customers. These contracts are
designed to hedge firm commitments to pay European, Asian, Australian and North
American currencies within a one-year period. The maturities of these
contracts are planned to coincide with the receipts of the foreign funds. 39




---



##### 



TRENCH ELECTRIC B.V. - FORM 20-F Equivalent During the year ended December 31, 2003, the Company recognized a net foreign
currency gains of $26.3 million (2002  gain of $2.3 million). The Company
would be subject to a foreign currency exchange loss of approximately $15.1
million (2002 - $15.1 million), on the Senior Subordinated Notes, assuming a
10% foreign currency exchange devaluation from the December 31, 2003 spot rates
of the issuers, vis-à-vis the U.S. dollar. Foreign exchange gains in 2003
include $29.4 million (2002  gain of $ 5.8 million) relating to the Senior
Subordinated Notes, being the difference between the US dollar exchange rate at
December 31, 2002 and the rate at December 31, 2003. There is no immediate
cash receipt as a result of this gain. Counterparty Risk from the Use of Derivative Financial Instruments We are exposed to credit (or repayment) risk and market risk through the use of
derivative instruments. If the counterparty fails to fulfill its performance
obligations under a derivative contract, our credit risk will equal the fair
value gain in a derivative. Currently, when the fair value of a derivative
contract is positive, this indicates that the counterparty owes us, thus
creating a repayment risk. When the fair value of a derivative contract is
negative, we owe the counterparty and, therefore, assume no repayment risk. In order to minimize the credit risk in derivative instruments, we enter into
transactions with high quality counterparties, which include financial
institutions that satisfy our established credit approval criteria. Derivative
transactions are generally executed on the basis of standard agreements that
allow all outstanding transactions with contracting partners to be offset. As of December 31, 2003, we did not have any derivative positions, including
forward foreign currency contracts. 
 Item 12. Description of Securities Other than Equity Securities Not applicable  Annual Report on Form 20-F Equivalent 40




---



##### 



TRENCH ELECTRIC B.V. - FORM 20-F Equivalent 
 PART II 
 Item 13. Defaults, Dividend Arrearages and Delinquencies None 
 Item 14. Material Modifications to the Rights of Security Holders and Use of
Proceeds None 
 Item 15. Controls and Procedures Evaluation of Disclosure Controls and Procedures. The Companys Chief
Executive Officer and Chief Financial Officer, after evaluating the
effectiveness of the Companys disclosure controls and procedures (as defined
in Exchange Act Rules 13a  15(f) and 15d  15(f)), have concluded that the
Companys disclosure controls and procedures are adequate and effective to
ensure that material information relating to the Company and its consolidated
subsidiaries would be made known to them by others within those entities,
particularly during the period in which this quarterly report is being
prepared. Changes in Internal Controls. There were no significant changes in the
Companys internal controls or in other factors that could significantly affect
the Companys disclosure controls and procedures subsequent to the evaluation
date, nor any significant deficiencies or material weaknesses in such
disclosure controls and procedures requiring corrective actions. 
 Item 16A. Audit Committee Financial Expert Disclosure On February 4, 2003 the Board of Directors of our Parent determined that Marc
Boughton, who was appointed as a member of the Audit Committee on the same
date, meets the standard of audit committee financial expert as defined by
the Sarbanes - Oxley Act. Further to Rules released by the SEC in January and April of 2003, Trench must
now disclose whether its designated Audit Committee Financial Expert is
independent. The guidelines for independence in this regard have been
incorporated from the NYSE governance standards, which state that no director
would qualify as independent unless the board affirmatively determines that
the director has no material relationship with the company (either directly or
as a partner, shareholder or officer of an organization that has a relationship
with the company). In our opinion, Marc Boughton is not independent by virtue of his relationship
with CVC, which is the major shareholder of Trench Electric Holding B.V. 
 Item 16B. Code of Ethics Disclosure The Board of Directors of our Parent approved a Code of Ethics on February 4,
2003, which is provided as an exhibit to this report. Any amendments or
waivers will be disclosed in future annual reports on Form 20-F Equivalent and
quarterly reports on Form 6-K Equivalent. 41




---



##### 



TRENCH ELECTRIC B.V. - FORM 20-F Equivalent 
 Item 16C. Principal Accountant Fees and Services Aggregate fees for professional services rendered by PricewaterhouseCoopers LLP
for the years ended: Year Ended December 31,(in thousands of U.S. dollars)
    
    2003
    
    2002Audit
    
    $
    626
    
    
    $
    656Audit related
    
    
    5
    
    
    
    252Tax (see below)
    
    
    67
    
    
    
    349All Other
    
    
    
    
    
    
    19$
    698
    
    
    $
    1,276
 Year Ended December 31,(in thousands of U.S. dollars)
    
    2003
    
    2002Tax - compliance
    
    $
    22
    
    
    $
    208Tax - advisory
    
    
    45
    
    
    
    141$
    67
    
    
    $
    349
 Audit committee pre-approval policies and procedures On an ongoing basis, our management defines and communicates specific projects
and categories of service for which the advance approval of our Audit Committee
is requested. Our Audit Committee reviews these requests and advises our
management if the Committee approves the engagement of PricewaterhouseCoopers
LLP (PwC). On a quarterly basis, our management reports to our Audit Committee
regarding the actual spending for such projects and services compared to the
approved amounts. The projects and categories of service are as follows: AuditThese fees include the cost of professional services to audit our
financial statements in accordance with Generally Accepted Auditing Standards
(GAAS). The cost of the annual audit in accordance with GAAS includes costs
associated with information system reviews performed in connection with the
audit and scope modifications initiated during the course of the audit work. Audit Related ServicesThe Committee separately pre-approves budgets for
services related to accounting consultations, internal control reviews and the
assessment of risk management controls in connection with the implementation of
Section 404 of the Sarbanes-Oxley Act of 2002. TaxThese services are related to tax compliance, advice and planning. The
specific types of tax services approved include (a) the review of tax returns;
(b) assistance with tax examinations and elections; and (c) advice regarding
tax codes including interpretations, procedures and private letter rulings
thereof, or their equivalent in applicable jurisdictions in the following
areas: income tax; value added tax; sales and use tax; excise taxes. All Other  Other services include treasury advisory services; corporate
finance advisory, risk management, internal control projects; forensic audits
(but these are prohibited when the auditor will be involved in subsequent legal
procedures other than as expert witness); consultancy (all other non-audit
services). For all these non-audit services, the Audit Committee or an authorized
executive pre-approves the engagement as follows:  1.
    
    A defined budget for estimated spend on PwC non-audit fees will be
established each year. In future years this budget will be approved as a
part of the normal annual budget process. In 2003 the budget was for
$370K ($450K incurred in 2002). In addition, the nature of these
services is considered against a defined list of approved services for
2004 and subsequent fiscal years.2.
    
    Expenditure against the budget will be monitored quarterly. 42




---



##### 



TRENCH ELECTRIC B.V. - FORM 20-F Equivalent  3.
    
    Specific projects will be authorized as follows:  i.
    
    Projects up to $20K authorized by Michael
Bissell, John Finlay, or Alfred Wittenhofer up to an
aggregate of $50K per annum, per person.ii.
    
    Individual projects in excess of $20K or
items that have exceeded the $50K to be authorized by Howard
Poulson.iii.
    
    Individual projects over $150K to be
specifically pre authorized by the Audit Committee.  4.
    
    A list of projects and expenditures will be included in the papers
for each Audit Committee meeting.5.
    
    If we exceed the budget the Audit Committee will receive a formal
request to authorize any increase required. 
 PART III 
 Item 17. Financial Statements See pages F-1 to F-32. 
 Item 18. Financial Statements Not applicable (see Item 17) 
 Item 19. Exhibits Location of Documentin SequentialItem No.
    
    
    
    Numbering System1.1
    
    Articles of Association of Trench Electric B.V
    
    
    (1
    )2.1
    
    Indenture dated as of December 16, 1997 among Trench Electric B.V.,
Trench Inc., Trench Electric S.A., Trench Limited, Haefely Trench
AG, Haefely Trench Austria GmbH, Haefely Trench MWB GmbH, and The
Chase Manhattan Bank, as trustee
    
    
    (1
    )2.2
    
    Form of 101⁄4% Senior Subordinated Note
    
    
    (1
    )2.3
    
    Registration Rights Agreement dated as of December 11, 1997 among
Trench Electric B.V., Trench Inc., Trench Electric S.A., Trench
Limited, Haefely Trench AG, Haefely Trench Austria GmbH, Haefely
Trench MWB GmbH and Credit Suisse First Boston Corporation
    
    
    (1
    )2.4
    
    Purchase Agreement dated as of December 11, 1997 among the Issuers,
the Guarantors, and Credit Suisse First Boston Corporation
    
    
    (1
    )2.5
    
    Facilities Agreement dated September 15, 1997, between Valiant
Investments B.V., Finatrench (France) S.A., Haefely Trench S.A.,
Trench Holding A.G., Haefely Holding A.G., Haefely Trench A.G.,
Haefely Trench MWB GmbH, Haefely Trench Austria A.G., Trench GmbH,
Trench Corporation, BBA Canada Limited, Trench Inc., Credit Suisse
First Boston, and Credit Suisse First Boston Canada
    
    
    (1
    )2.6
    
    Supplemental Agreement relating to the Facilities Agreement dated
September, 15 1997, dated December 16, 1997, between Valiant
Investments B.V., Finatrench (France) S.A., Haefely Trench S.A.,
Trench Holding A.G., Haefely Holding A.G., Haefely Trench A.G.,
    
    
    (1
    )
 43




---



##### 



TRENCH ELECTRIC B.V. - FORM 20-F Equivalent Haefely Trench MWB GmbH, Haefely Trench Austria GmbH, Trench
Limited, Trench Inc., Trench Electric B.V., Valtimon Holdings B.V.,
Trench Electric S.A., Credit Suisse First Boston, and Credit Suisse
First Boston Canada2.7
    
    Intercreditor Agreement dated September 15, 1997, between Credit
Suisse First Boston, Credit Suisse First Boston Corporation, BBA
Properties Limited, CVC European Equity Partners L.P., CVC European
Equity Partners (Jersey) L.P., Capital Ventures Nominees Limited,
Citicorp Capital Investors Europe Limited, Valiant Investments
B.V., Finatrench (France) S.A., Haefely Trench S.A., Trench Holding
A.G., Haefely Holding A.G., Haefely Trench A.G., Haefely Trench MWB
GmbH, Haefely Trench A.G., Trench GmbH, Trench Inc., Trench
Corporation and BBA Canada Limited
    
    
    (1
    )3.1
    
    Agreement for the Sale and Purchase of the issued share capital of
the Haefely Trench group of companies, dated September 15, 1997,
between BBA Group PLC, BBA Properties Limited, BBA Overseas
Holdings Limited, BBA France S.A., The Guthrie Corporation Limited,
Valiant Investments B.V., Trench GmbH, Finatrench France S.A. and
Trench Holding AG
    
    
    (1
    )3.2
    
    Environmental Deed of Indemnity, dated September 15, 1997, between
BBA Group PLC, BBA Properties Limited, BBA Overseas Holdings
Limited, BBA France S.A., The Guthrie Corporation Limited, Valiant
Investments B.V., Trench GmbH, Finatrench France S.A. and Trench
Holding AG
    
    
    (1
    )3.3
    
    Letter of Employment, dated September 15, 1997, from Trench Inc. to
Ron Montgomery
    
    
    (1
    )3.4
    
    Letter of Employment, dated September 15, 1997, from Trench Inc. to
Allan Finn
    
    
    (1
    )3.5
    
    Letter of Employment, dated September 15, 1997, from Trench Inc. to
John Finlay
    
    
    (1
    )3.6
    
    Asset Purchase Agreement dated July 1, 1999 by and between Haefely
Test AG, a Swiss Corporation and Trench Switzerland AG, a Swiss
Corporation.
    
    
    (1
    )4.1
    
    Facilities Agreement in relation to a US$25,000,000 Term Facility
and a US$25,000,000 Revolving Credit Facility between Trench
Electric Holding BV as parent along with Original Borrowers and
Guarantors and Charging Companies and CIBC World Markets Plc.,
dated April 18, 2000.
    
    
    (1
    )4.2
    
    Asset Sale and Purchase Agreement dated April 18, 2000 by and
between VA Tech Reyrolle Limited, VA Tech Properties (UK) Limited,
VA Tech Elin Service B.V., Trench (UK) Limited and Trench Limited.4.3
    
    CVT Base Box Technology Head-Licence Agreement dated March 3, 2000
by and between Trench Limited, Shanghai Instrument Transformer
Works and Shanghai Sitico International Trading Company4.4
    
    Bushing Technology Head-Licence Agreement dated March 3, 2000 by
and between Trench Switzerland AG, Shanghai Instrument Transformer
Works and Shanghai Sitico International Trading Company
 44




---



##### 



TRENCH ELECTRIC B.V. - FORM 20-F Equivalent 4.5
    
    Restated Articles of Association for MWB (Shanghai) Co., Ltd. to
be renamed Trench China Ltd. dated April 7, 2000.4.6
    
    Restated Equity Joint Venture Contract for MWB (Shanghai) Co.,
Ltd. to be renamed Trench China Ltd. dated April 7, 2000 among
Shanghai Instrument Transformer Works, Trench Germany GmbH, Trench
Switzerland AG, and Trench Limited.4.7
    
    Agreement to amend the Joint Venture Contract, Articles of
Association and Related Agreement of Fushun Reyrolle Bushing
Company Limited dated April 21, 2001.4.8
    
    Equity Transfer Agreement to increase the shareholding in Trench
Fushun Bushing Co. Ltd dated December 12, 20024.9
    
    Shunt Reactor Technology Head Licence Agreement dated April 16,
2002 by and between Trench Limited, Shanghai Instrument
Transformer Works Co. Ltd., and MWB (Shanghai) Co. Ltd.4.10
    
    Series Reactor Technology Head Licence Agreement dated April 16,
2002 by and between Trench Limited, Shanghai Instrument
Transformer Works Co. Ltd., and MWB (Shanghai) Co. Ltd.4.11
    
    Line Trap Technology Head Licence Agreement dated April 16, 2002
by and between Trench Limited, Shanghai Instrument Transformer
Works Co. Ltd., and MWB (Shanghai) Co. Ltd.4.12
    
    Amendment to the Articles of Association for MWB (Shanghai) Co.
Ltd. dated April 13, 20024.13
    
    Fushun joint Venture Contract dated September 27, 20024.14
    
    CIBC World Markets PLC Covenant Amendment and Waivers with Trench,
dated November 29, 20004.15
    
    CIBC World Markets PLC Covenant Amendment and Waivers with Trench,
dated January 12, 20014.16
    
    CIBC World Markets PLC Covenant Amendment and Waivers with Trench,
dated July 12, 20014.17
    
    CIBC World Markets PLC Covenant Amendment and Waivers with Trench,
dated March 7, 20024.18
    
    CIBC World Markets PLC Covenant Amendment and Waivers with Trench,
dated September 9, 20024.19
    
    CIBC World Markets PLC Covenant Amendment and Waivers with Trench,
dated November 6, 20024.20
    
    CIBC World Markets PLC Covenant Amendment and Waivers with Trench,
dated November 7, 20024.21
    
    CIBC World Markets PLC Covenant Amendment and Waivers with Trench,
dated March 21, 2003
 45




---



##### 



TRENCH ELECTRIC B.V. - FORM 20-F Equivalent 4.22
    
    Know-How License Agreement dated June 11, 2003 by and between
Trench
Austria GmbH and HIGHVOLT Prüftechnik Dresden GmbH4.23
    
    CIBC World Markets PLC Covenant Waiver with Trench,
dated March 24, 200410.1
    
    Code of Ethics dated February 4, 200310.2
    
    Trench Electric BV Remuneration Committee Charter, dated March 23,
200410.3
    
    Trench Electric BV Audit Committee Charter, dated February 4, 200331.1
    
    Certification of Form 20-F
Equivalent for the year ended December 31, 2003 signed by
Michael J. Bissell, dated March 24, 200431.2
    
    Certification of Form 20-F
Equivalent for the year ended December 31, 2003 signed by Howard
Poulson, dated March 24, 2004
   (1)
    
    Incorporated by reference to the Companys Form F-4 Registration Statement No.
333-8334 46




---



##### 



TRENCH ELECTRIC B.V. - FORM 20-F Equivalent Index to Financial Statements  Report of Independent Auditors
    
    F-2 Consolidated Balance Sheets
    
    F-3 Consolidated Statements of Income (Loss) and Comprehensive
Income (Loss)
    
    F-4 Consolidated Statements of Shareholders Equity
    
    F-5 Consolidated Statements of Cash Flows
    
    F-6 Notes to Consolidated Financial Statements
    
    F-7 to F-25 Supplemental Consolidated Condensed Balance Sheets
    
    F-26 to F-27 Supplemental Consolidated Condensed Statements of Income (Loss)
    
    F-28 to F-29 Supplemental Consolidated Condensed Statements of Cash Flows
    
    F-30 to F-32Other information Analysis of provisions
    
    F-33 Subsidiary information
    
    F-34
 F-1




---



##### 



REPORT OF INDEPENDENT AUDITORS To the Board of Directors and Shareholders of
TRENCH ELECTRIC B.V. We have audited the accompanying consolidated balance sheets of Trench Electric
B.V. and its subsidiaries (the Group) as of December 31, 2003 and 2002 and
related consolidated statements of income (loss) and comprehensive income
(loss), of shareholders equity and of cash flows for each of the three years
ended December 31, 2003. These financial statements are the responsibility of
the Groups management. Our responsibility is to express an opinion on these
financial statements based on our audits. We have conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform an 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. The Groups financial statements do not disclose certain segment information
required by FAS 131, including information about countries in which the Group
earns revenues and holds assets, and information on income before taxes,
extraordinary items and minority interests. In our opinion, disclosure of this
information is required by accounting principles generally accepted in the
United States of America. In our opinion, except for the omission of the information discussed in the
preceding paragraph, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of the Group as at December 31, 2003 and 2002, and the consolidated results of
its operations and its cash flows for the three years ended December 31, 2003
in conformity with accounting principles generally accepted in the United
States of America. As discussed in Note 7 to the Consolidated Financial Statements, effective
January 1, 2002 Trench Electric B.V. ceased amortizing goodwill in accordance
with the requirements of Statement of Financial Accounting Standard No. 142,
Goodwill and Other Intangible Assets. (PRICEWATERHOUSECOOPERS LLP) PricewaterhouseCoopers LLP
Chartered Accountants and Registered Auditors
Leeds, United Kingdom
March 23, 2004 F-2




---



##### 



TRENCH ELECTRIC B.V. - FORM 20-F Equivalent CONSOLIDATED BALANCE SHEETS (expressed in thousands of U.S. dollars, except for share information) Dec. 31,
    
    Dec. 31,2003
    
    2002ASSETSCurrent assetsCash and cash equivalents
    
    $
    31,081
    
    
    $
    15,422Trade accounts receivable  net of allowance of $2,065
(2002  $1,751)
    
    
    70,194
    
    
    
    67,266Inventories, net (note 4)
    
    
    48,763
    
    
    
    39,888Prepayments
    
    
    1,706
    
    
    
    643Deferred income tax (note 8)
    
    
    701
    
    
    
    362Other current assets
    
    
    5,971
    
    
    
    4,518Total current assets
    
    
    158,416
    
    
    
    128,099Property, plant and equipment (note 5)
    
    
    80,968
    
    
    
    71,215Intangible asset  net of accumulated
amortization of $13 (2002  $nil) (note 6)
    
    
    1,435
    
    
    
    Goodwill (notes 3 and 7)
    
    
    148,835
    
    
    
    123,910Prepaid pension (note 11)
    
    
    287
    
    
    
    252Deferred financing costs  net of accumulated
amortization of $13,211 (2002  $9,615)
    
    
    4,000
    
    
    
    4,720Deferred income tax (note 8)
    
    
    14,807
    
    
    
    11,709Long-term receivables
    
    
    4,718
    
    
    
    5,735Other assets
    
    
    23
    
    
    
    80Total assets
    
    $
    413,489
    
    
    $
    345,720LIABILITIESCurrent liabilitiesBank indebtedness (note 9)
    
    $
    
    
    
    $
    5,808Trade accounts payable
    
    
    44,147
    
    
    
    27,355Accrued liabilities (note 10)
    
    
    28,212
    
    
    
    25,602Advance billings
    
    
    8,386
    
    
    
    6,082Due to parent (note 8)
    
    
    11,165
    
    
    
    6,103Income tax payable
    
    
    3,579
    
    
    
    3,307Deferred income tax (note 8)
    
    
    92
    
    
    
    180Current portion of obligation under capital lease (note 13)
    
    
    309
    
    
    
    557Current portion of long-term debt (note 9)
    
    
    13,695
    
    
    
    13,286Total current liabilities
    
    
    109,585
    
    
    
    88,280Long-term portion of obligation under capital lease (note 13)
    
    
    544
    
    
    
    119Long-term debt (note 9)
    
    
    160,751
    
    
    
    166,050Pension and post-retirement benefits (notes 11 and 12)
    
    
    21,309
    
    
    
    16,587Deferred income tax (note 8)
    
    
    15,045
    
    
    
    12,087Other liabilities (note 14)
    
    
    13,113
    
    
    
    12,090Total liabilities
    
    
    320,347
    
    
    
    295,213Contingencies and commitments (note 13)Minority interest
    
    
    11,639
    
    
    
    8,698SHAREHOLDERS EQUITYShare capitalAuthorized (200,000 common shares of one Dutch Guilder (0.45
) each, Issued and outstanding 40,000 common shares of one
Dutch Guilder (0.45 ) each)
    
    
    20
    
    
    
    20Additional paid in capital
    
    
    75,694
    
    
    
    75,694Accumulated other comprehensive income (loss)
    
    
    3,749
    
    
    
    (2,922
    )Retained earnings (Accumulated deficit)
    
    
    2,040
    
    
    
    (30,983
    )Total shareholders equity
    
    
    81,503
    
    
    
    41,809Total liabilities and shareholders equity
    
    $
    413,489
    
    
    $
    345,720
 The accompanying notes are an integral part of these consolidated financial statements. F-3




---



##### 



TRENCH ELECTRIC B.V. - FORM 20-F Equivalent CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS) (expressed in thousands of U.S. dollars except per share data) Year ended
    
    Year ended
    
    Year endedDecember 31,
    
    December 31,
    
    December 31,2003
    
    2002
    
    2001Sales
    
    $
    279,542
    
    
    $
    255,886
    
    
    $
    224,256Cost of sales
    
    
    190,134
    
    
    
    177,208
    
    
    
    160,781Gross profit
    
    
    89,408
    
    
    
    78,678
    
    
    
    63,475Selling, general and administrative
expenses
    
    
    46,911
    
    
    
    46,082
    
    
    
    46,328Restructuring
    
    
    1,522
    
    
    
    
    
    
    
    Gain on sale of assets
    
    
    (905
    )
    
    
    (755
    )
    
    
    Operating income
    
    
    41,880
    
    
    
    33,351
    
    
    
    17,147Foreign exchange (gains) losses
    
    
    (26,288
    )
    
    
    (2,293
    )
    
    
    9,102Interest expense and other
    
    
    19,551
    
    
    
    19,638
    
    
    
    19,918Income (loss) before income taxes
and minority interest
    
    
    48,617
    
    
    
    16,006
    
    
    
    (11,873
    )Provision for income taxes (note 8)
    
    
    8,763
    
    
    
    6,765
    
    
    
    2,162Income (loss) before minority interest
    
    
    39,854
    
    
    
    9,241
    
    
    
    (14,035
    )Minority interest
    
    
    4,886
    
    
    
    2,759
    
    
    
    1,192Net income (loss) for the period
    
    
    34,968
    
    
    
    6,482
    
    
    
    (15,227
    )Minimum pension liability adjustment, net of tax
    
    
    (389
    )
    
    
    (285
    )
    
    
    114Foreign currency translation adjustment
    
    
    7,060
    
    
    
    12,889
    
    
    
    (614
    )Comprehensive income (loss) for the
period
    
    $
    41,639
    
    
    $
    19,086
    
    
    $
    (15,727
    )Basic and diluted earnings per share:Earnings (loss) per common share
    
    $
    874.20
    
    
    $
    162.05
    
    
    $
    (380.68
    )Weighted average number of shares
    
    
    40,000
    
    
    
    40,000
    
    
    
    40,000
 The accompanying notes are an integral part of these consolidated financial statements. F-4




---



##### 



TRENCH ELECTRIC B.V. - FORM 20-F Equivalent CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY (expressed in thousands of U.S. dollars except for issued shares) AccumulatedAdditional
    
    other
    
    
    
    
    
    TotalIssued
    
    Share
    
    paid in
    
    comprehensive
    
    Accumulated
    
    shareholdersshares
    
    capital
    
    capital
    
    income (expense)
    
    deficit
    
    equityBalance  December 31, 2000
    
    
    40,000
    
    
    $
    20
    
    
    $
    75,694
    
    
    $
    (15,026
    )
    
    $
    (21,544
    )
    
    $
    39,144Net loss for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,227
    )
    
    
    (15,227
    )Minimum pension liability adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    114
    
    
    
    
    
    
    
    114Foreign currency cumulative
translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (614
    )
    
    
    
    
    
    
    (614
    )Balance  December 31, 2001
    
    
    40,000
    
    
    $
    20
    
    
    $
    75,694
    
    
    $
    (15,526
    )
    
    $
    (36,771
    )
    
    $
    23,417Net income for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,482
    
    
    
    6,482Dividends paid out to minority interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (694
    )
    
    
    (694
    )Minimum pension liability adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (285
    )
    
    
    
    
    
    
    (285
    )Foreign currency cumulative
translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,889
    
    
    
    
    
    
    
    12,889Balance  December 31, 2002
    
    
    40,000
    
    
    $
    20
    
    
    $
    75,694
    
    
    $
    (2,922
    )
    
    $
    (30,983
    )
    
    $
    41,809Net income for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    34,968
    
    
    
    34,968Dividends paid out to minority interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,945
    )
    
    
    (1,945
    )Minimum pension liability adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (389
    )
    
    
    
    
    
    
    (389
    )Foreign currency cumulative
translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,060
    
    
    
    
    
    
    
    7,060Balance  December 31, 2003
    
    
    40,000
    
    
    $
    20
    
    
    $
    75,694
    
    
    $
    3,749
    
    
    $
    2,040
    
    
    $
    81,503
 The accompanying notes are an integral part of these consolidated financial
statements. F-5




---



##### 



TRENCH ELECTRIC B.V. - FORM 20-F Equivalent CONSOLIDATED STATEMENTS OF CASH FLOWS (expressed in thousands of U.S. dollars) Year ended
    
    Year ended
    
    Year endedDecember 31,
    
    December 31,
    
    December 31,2003
    
    2002
    
    2001Cash provided by (used in)OPERATING ACTIVITIESNet income (loss) for the period
    
    $
    34,968
    
    
    $
    6,482
    
    
    $
    (15,227
    )Adjustments to reconcile net income to net cash
provided by operating activities:Minority interest
    
    
    4,886
    
    
    
    2,759
    
    
    
    1,192Depreciation of property, plant and equipment
    
    
    8,093
    
    
    
    6,990
    
    
    
    6,925Amortization of goodwill
    
    
    
    
    
    
    
    
    
    
    3,487Loss on disposal of property, plant and
equipment
    
    
    45
    
    
    
    263
    
    
    
    Loss on investment writedown
    
    
    67
    
    
    
    
    
    
    
    Gain on sale of assets
    
    
    (905
    )
    
    
    (781
    )
    
    
    (58
    )Amortization of deferred financing costs
and other non-cash interest
    
    
    1,650
    
    
    
    1,455
    
    
    
    1,197Unrealized exchange (gain) loss on long-term debt
and bank indebtedness
    
    
    (29,141
    )
    
    
    (3,665
    )
    
    
    9,302Changes in non-cash working capital
and other non-cash items (note 16)
    
    
    17,026
    
    
    
    324
    
    
    
    (4,035
    )$
    36,689
    
    
    $
    13,827
    
    
    $
    2,783INVESTING ACTIVITIESAcquisitions, net of acquired cash (note 3)
    
    $
    
    
    
    $
    (952
    )
    
    $
    (2,232
    )Purchase of property, plant and equipment
    
    
    (9,688
    )
    
    
    (5,190
    )
    
    
    (7,725
    )Purchase of intangible assets
    
    
    (1,196
    )
    
    
    
    
    
    
    Proceeds on sale of assets
    
    
    2,356
    
    
    
    850
    
    
    
    Proceeds on sale of technology
    
    
    1,000
    
    
    
    5,000
    
    
    
    Proceeds on disposal of property, plant and
equipment
    
    
    
    
    
    
    1
    
    
    
    452$
    (7,528
    )
    
    $
    (291
    )
    
    $
    (9,505
    )FINANCING ACTIVITIESPayments on revolving credit
facility with CIBC  net
    
    $
    (5,842
    )
    
    $
    (5,840
    )
    
    $
    Proceeds from revolving credit
facility with CIBC  net
    
    
    
    
    
    
    
    
    
    
    557Proceeds from short-term debt
    
    
    164
    
    
    
    362
    
    
    
    Payments on short-term debt
    
    
    (526
    )
    
    
    
    
    
    
    Payments on long-term debt
    
    
    (6,352
    )
    
    
    (3,769
    )
    
    
    (3,603
    )Proceeds from capital leases
    
    
    676
    
    
    
    
    
    
    
    967Payments on capital leases
    
    
    (613
    )
    
    
    (532
    )
    
    
    Dividends paid to joint venture partner
    
    
    (1,945
    )
    
    
    (694
    )
    
    
    $
    (14,438
    )
    
    $
    (10,473
    )
    
    $
    (2,079
    )Effect of exchange rate changes on cash
    
    $
    936
    
    
    $
    630
    
    
    $
    11Increase (decrease) in cash and
cash equivalents during the period
    
    
    15,659
    
    
    
    3,693
    
    
    
    (8,790
    )Cash and cash equivalents  Beginning of
period
    
    
    15,422
    
    
    
    11,729
    
    
    
    20,519Cash and cash equivalents  End of period
    
    $
    31,081
    
    
    $
    15,422
    
    
    $
    11,729Supplemental disclosures:Cash paid during the period for:Income taxes
    
    $
    6,117
    
    
    $
    6,032
    
    
    $
    1,337Interest
    
    $
    17,901
    
    
    $
    18,183
    
    
    $
    18,640
 The accompanying notes are an integral part of these consolidated
financial statements. F-6




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##### 



TRENCH ELECTRIC B.V. - FORM 20-F Equivalent NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (expressed in thousands of U.S. dollars unless stated otherwise) 1. FORMATION AND BASIS OF PRESENTATION Trench Electric B.V. (the Company), incorporated in the Netherlands, is a
multinational manufacturing and engineering group with our major operations in
Austria, Brasil, Canada, China, England, France, Germany and Switzerland.
Trench Electric B.V. and its subsidiary companies (collectively the Group)
manufacture electrical Transmission and Distribution equipment that transforms,
regulates, conditions and measures electricity for utilities and industrial
customers. In this Form 20-F Equivalent, unless the context otherwise requires, we have
used Group, Trench, We or Our to mean Trench Electric B.V. (Trench
Electric) together with its direct or indirect subsidiaries and their
predecessor companies. Company refers to the stand-alone Trench Electric B.V. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of consolidation The consolidated financial statements include the accounts of Trench Electric
B.V. and all of our subsidiaries (together the Group). All significant
inter-company items are eliminated in consolidation. Entities which are not
controlled but over which we have the ability to exercise significant influence
are accounted for using the equity method. Businesses acquired during the
financial period have been fully consolidated using the purchase method from
the date the responsibility for the operations was transferred to us. Accounting estimates The preparation of financial statements in conformity with generally accepted
accounting principles in the United States of America requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and 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 from those estimates. Foreign currency Translation gains and losses result from the effect of exchange rate changes on
transactions denominated in currencies other than the operating entities local
currencies. Gains and losses on those transactions are included in the income
statement for the period in which exchange rates change. For operations with functional currencies other than the U.S. dollar, all
assets and liabilities are translated into U.S. dollars at the exchange rates
prevailing at the balance sheet date, equity at historical rates and all income
and expenses are translated at the average exchange rates prevailing during the
period. The resulting translation adjustments are recorded as a component of
other comprehensive income (loss). Revenue recognition The timing of our revenue recognition for sales of electrical equipment depends
on the nature of each sales contract. When sales contracts include substantive
customer acceptance clauses, we recognize revenue when customers have
acknowledged acceptance of the equipment. When sales contracts do not include
substantive customer acceptance clauses, we recognize revenue when the terms of
the contract with the customer have been substantially met (i.e. when control
is transferred to the customer). We also recognize revenue on certain bill and hold arrangements with our
customers. The recognition of such revenue is conditional upon: such
arrangements are requested in writing by our customers, and include a fixed
delivery date; equipment held for customers is segregated from other inventory,
cannot be used to fill other customer orders and is complete and ready for
shipment; the transfer of control and risk of loss for such equipment pass to
the customer prior to delivery; and we do not retain any specific performance
obligations related to this equipment such that the earnings process is not
complete. We and others in our industry normally engage in this practice when,
for example, certain larger installations may not be ready to accept goods as
initially scheduled due to construction delays. F-7




---



##### 



TRENCH ELECTRIC B.V.  FORM 20-F Equivalent Shipping costs are expensed in the cost of sales line in the income
statement. Cash and cash equivalents Cash and cash equivalents include bank deposits and term deposits at varying
rates of interest and with original maturities less than ninety days. Inventories Inventories include materials, labor and an allocation of overhead.
Inventories are stated at the lower of cost, determined on a first-in,
first-out basis, and either replacement cost for raw materials or net
realizable value for work-in-process and finished goods. Property, plant and equipment Property, plant and equipment are stated at cost net of accumulated
depreciation. Depreciation is provided over the estimated useful lives of the
assets on a straight-line basis, using the following annual rates: Buildings
    
    
    2.5%  10
    %Machinery and equipment
    
    
    6.5%  33.3
    %
 Intangible Assets Intangible assets are stated at cost net of accumulated depreciation.
Amortization is provided over the estimated useful lives of the assets on a
straight-line basis, using the following useful life: Intellectual property
    
    10 years
 Goodwill Up to 2001, goodwill arising from purchase business combinations was amortized
over a range of ten to forty years on a straight-line basis. The estimated
useful life of goodwill varied depending on the nature of each acquisition. Effective January 1, 2002, we have followed the requirements of FAS 142,
Goodwill and Other Intangible Assets, which requires that goodwill not be
amortized but tested at least annually for impairment. Please refer to note 7
for more information. Deferred financing costs Deferred financing costs are amortized over the expected life of the related
debt on a straight-line basis and form part of total interest expense. Impairment of long-lived assets We regularly evaluate whether events or circumstances have occurred that
indicate that the carrying amount of long-lived assets may not be recoverable.
When factors indicate possible impairment, we recognize an impairment loss if
the sum of the expected future undiscounted and without interest charges cash
flow is less than the carrying amount of the asset. The amount of the
impairment loss would be the difference between the fair value of the
respective asset and our carrying amount. We regularly evaluate the realizability of long-lived assets based on projected
undiscounted cash flows and operating income. Effective January 1, 2002, we
have followed the requirements of FAS 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. Research and development Research and development expenses, comprising employee costs and overheads, are
charged to the statement of income as incurred. Research and development
expenses for the years ended December 31, 2003, 2002 and 2001 were $5,212,
$4,474 and $3,538, respectively. F-8




---



##### 



TRENCH ELECTRIC B.V. - FORM 20-F Equivalent Asset retirement On January 1, 2003, we adopted Statement of Financial Accounting Standards No.
143, Accounting for Asset Retirement Obligations (FAS 143). FAS 143 sets
forth how companies must account for the costs of removal of long-lived assets
when those assets are no longer used in a companys business, but only if a
company is legally required to remove such assets. FAS 143 requires that
companies record the fair value of the costs of removal in the period in which
the obligations are incurred and capitalize that amount as part of the book
value of the long-lived asset. To determine whether we have a legal obligation
to remove our long-lived assets, we reviewed the relevant laws and contracts
including leases applicable to our subsidiaries. Based on this review, we
concluded that there may be a minor cost to bring certain leasehold properties
back to the required state as per the lease contract. We believe that this
standard does not have a material impact on our financial position or results
of operations. Income taxes Income taxes have been provided using the full liability method whereby current
tax liabilities or assets are recognized for the estimated taxes payable or
refundable tax for the current year and deferred tax liabilities or assets are
recognized for the estimated future tax effects attributable to temporary
differences and carry forwards. Current and deferred tax liabilities and assets
are measured based on provisions of the enacted tax laws. We record valuation
allowances against deferred tax assets where we do not expect such assets to be
realized. Financial instruments Our financial instruments recorded on the consolidated balance sheet include
cash, accounts receivable, accounts payable, accrued liabilities and debt
obligations. The book values of cash, accounts receivable and payable, advance
billings, accrued liabilities, due to parent and bank indebtedness are
considered to be representative of fair values because of the short-term to
maturity of these instruments. The fair values of the long-term debt are based
on rates available to us for debt with similar terms and maturities. Statement of Financial Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities (SFAS 133) as amended by FAS 137 and FAS
138 and as interpreted by the Derivatives Implementation Group, was adopted by
us effective as of January 1, 2001. FAS 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts (collectively referred to as
derivatives) and for hedging activities. FAS 133 requires that an entity
recognize all derivatives as either assets or liabilities in the consolidated
balance sheet and measure those instruments at fair value. FAS 133 prescribes
requirements for designation and documentation of hedging relationships and
ongoing assessments of effectiveness in order to qualify for hedge accounting. Certain contracts that meet the definition of a derivative under FAS 133 may
qualify as a normal purchase or a normal sale. A normal purchase or a normal
sale is excluded from the scope of FAS 133. Specific criteria must be met and
documented in order for a contract that would otherwise be regarded as a
derivative to qualify as a normal purchase or normal sale. We have evaluated
all commodity contracts to determine if they meet the definition of a
derivative and qualify as a normal purchase or normal sale. We did not designate any of our derivatives as qualifying hedge instruments
under FAS 133 and accordingly recorded the cumulative effect of adopting FAS
133 at January 1, 2001. We have not subsequently designated any of our
derivatives as qualifying hedge instruments under FAS 133. Gains and losses
related to the fair value adjustment of all derivative instruments are
classified in the consolidated statement of income under currency gains and
cash flows in the net income (loss) figure in accordance with the earnings
treatment of the hedged transaction. We evaluated our contracts for embedded derivatives, and considered whether
any embedded derivatives would have to be bifurcated, or separated, from the
host contracts in accordance with FAS 133 requirements. We occasionally enter into foreign currency forward contracts to manage foreign
currency exposures related to sales to foreign customers. These contracts are
designed to hedge firm commitments to pay European, Asian and North American
currencies within a two-year period. The maturities of these contracts are
planned to coincide with the receipts of the foreign funds. Recognition of
gains and losses on the foreign exchange contracts are deferred until
settlement of the particular transaction being hedged. The gains and losses on
the contracts offset losses and gains of the transactions being hedged,
resulting in protection from the risks of foreign exchange movements for those
transactions and the avoidance of losses affecting results of operations.
There were no derivative F-9




---



##### 



TRENCH ELECTRIC B.V. - FORM 20-F Equivalent financial instruments in our Company in 2003. Gains and losses related to the
derivative financial instruments for the year ended December 31, 2002 were
included within the respective line items within the consolidated statement of
income and cash flows to which the item being hedged relates. See Note 17 for
discussion of our strategy and objectives for the use of derivative
instruments. Concentration of credit risk Financial instruments that potentially subject us to credit risk are trade
accounts receivable and foreign exchange contracts. Concentration of credit
risk with respect to trade accounts receivable is limited due to the large
number of customers comprising our customer base and the breakdown of the
customer base among geographical areas. We are exposed to credit risk with
respect to foreign exchange contracts in the event of non-performance by the
counterparties to these financial instruments, which are major financial
institutions. Management believes the likelihood of incurring material losses
related to this credit risk is remote. Other comprehensive income Other comprehensive income refers to revenues, expenses, gains and losses that
under generally accepted accounting principles in the United States of America
are included in comprehensive income but are excluded from net income as these
amounts are recorded directly as an adjustment to shareholders equity. Our
other comprehensive income is comprised of cumulative foreign currency
translation adjustments and minimum pension liabilities adjustments. Prior year comparatives Certain reclassifications have been made to the consolidated financial
statements for the prior periods presented to conform with the December 31,
2003 presentation. Recent accounting pronouncements In January 2003, the FASB issued Interpretation 46, Consolidation of Variable
Interest Entities. In general, a variable interest entity is a corporation,
partnership, trust, or any other legal structure used for business purposes
that either (a) does not have equity investors with voting rights or (b) has
equity investors that do not provide sufficient financial resources for the
entity to support its activities. Interpretation 46 requires a variable
interest entity to be combined by a company if that company is subject to a
majority of the risk of loss from the variable interest entitys activities or
entitled to receive a majority of the entitys residual returns or both. In
December 2003, the FASB issued FASB Interpretation 46®, Consolidation of
Variable Interest Entities. FIN 46® replaces FIN 46 and clarifies the
accounting for interests in variable interest entities. FIN 46® should be
applied to entities considered to be Special Purpose Entities (SPEs) no later
than the end of the first reporting period after December 15, 2003 and by the
end of the first reporting period that ends after March 15, 2004 to entities
other than SPEs. Certain of the disclosure requirements apply in all financial
statements issued after January 31, 2003, regardless of when the variable
interest entity was established. We believe that this standard does not have a
material impact on our financial position or results of operations. In April 2003, FASB issued Statement No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities. This Statement amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives) and for hedging activities under FASB
Statement No. 133, Accounting for Derivative Instruments and Hedging
Activities. This statement amends Statement 133 for decisions made (1) as part
of the Derivatives Implementation Group process that effectively required
amendments to Statement 133, (2) in connection with other Board projects
dealing with financial instruments, and (3) in connection with implementation
issues raised in relation to the application of the definition of a derivative,
in particular, the meaning of an initial net investment that is smaller than
would be required for other types of contracts that would be expected to have a
similar response to changes in market factors, the meaning of an underlying,
and the characteristics of a derivative that contains financing components.
This Statement is effective for contracts entered into or modified after June
30, 2003, with certain exceptions, and for hedging relationships designated
after June 30, 2003. In addition, with certain exceptions, all provisions of
this Statement should be applied prospectively. We believe that this standard
does not have a material impact on our financial position or results of
operations. In May 2003, FASB issued Statement No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity. FAS 150
establishes standards for how an issuer classifies and measures in its balance
sheet certain financial instruments with characteristics of both liabilities
and equity. It requires that an issuer classify a financial instrument that is
within its scope as a liability (or an asset in some circumstances) because
that financial instrument embodies an obligation of the issuer. This Statement
is effective for financial instruments entered into or modified after May 31,
2003, and otherwise is effective at the beginning of the first F-10




---



##### 



TRENCH ELECTRIC B.V. - FORM 20-F Equivalent interim period beginning after June 15, 2003. We believe that this standard
does not have a material impact on our financial position or results of
operations. 3. ACQUISITIONS On December 12, 2002, we completed the acquisition of an additional 14.6% share
in the Trench Fushun Bushing Co. Ltd (Fushun), previously known as Fushun
Reyrolle Bushing Co. Ltd, by Trench Limited in Canada. This brought our total
investment in the Fushun joint venture to 65%. The excess of the purchase
price over the fair value of identifiable net assets was $339 and represented
goodwill. Effective November 26, 2001, we completed the acquisition, which began in April
2000, of the 50.4% voting equity interests consisting of 1,699 common shares in
the Fushun Reyrolle Bushing Co. Ltd joint venture from VA Tech. On April 21,
2001, Trench UK signed agreements with VA Tech and Fushun Electric Porcelain
Works (Fushun Electric), pursuant to which Trench UK would acquire VA Techs
50.4% equity interest in Fushun Reyrolle Bushing Co. Ltd, a joint venture
company organized under the laws of the Peoples Republic of China and owned
jointly by VA Tech and Fushun Electric, for a purchase price of approximately
£1 million ($1,454). The excess of the purchase price over the fair value of
identifiable fixed assets was $69 and represented goodwill. Net assets acquiredCash and cash equivalents
    
    $
    321Accounts receivable
    
    
    3,362Inventories
    
    
    1,241Property, plant and equipment
    
    
    2,887Goodwill (including transaction costs of $40)
    
    
    69Accounts payable and other current liabilities
    
    
    (3,560
    )Term loans
    
    
    (1,502
    )Minority interest of JV partner
    
    
    (1,364
    )Net assets acquired
    
    $
    1,454ConsiderationCash
    
    $
    1,454
 The main objective of the purchase was to expand the Trench presence in the
growing Chinese market. The Fushun joint ventures results are consolidated
within our groups results. 4. INVENTORIES Inventories by major category were as follows at: Dec. 31
    
    Dec. 312003
    
    2002Raw materials
    
    $
    26,449
    
    
    $
    23,202Work-in-process
    
    
    17,121
    
    
    
    11,881Finished goods
    
    
    7,978
    
    
    
    6,69651,548
    
    
    
    41,779Less: provision
    
    
    2,785
    
    
    
    1,891$
    48,763
    
    
    $
    39,888
 5. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment was as follows at: Dec. 31
    
    Dec. 312003
    
    2002Land
    
    $
    25,350
    
    
    $
    22,279Buildings
    
    
    36,517
    
    
    
    33,547Machinery and equipment
    
    
    63,331
    
    
    
    47,003125,198
    
    
    
    102,829Less: accumulated depreciation
    
    
    44,230
    
    
    
    31,614$
    80,968
    
    
    $
    71,215
 F-11




---



##### 



TRENCH ELECTRIC B.V. - FORM 20-F Equivalent Dec. 31Continuity:
    
    2003Opening net book value
    
    $
    71,215Exchange on opening book value
    
    
    9,985Adjusted opening balance
    
    
    81,200Additions
    
    
    9,688Disposals
    
    
    (1,496
    )Depreciation
    
    
    (8,093
    )Exchange on depreciation,
additions and disposals
    
    
    (331
    )Ending net book value
    
    $
    80,968
 6. INTANGIBLE ASSET Intangible asset was as follows at: Dec. 312003Intellectual property
    
    $
    1,448Less: accumulated amortization
    
    
    13$
    1,435
 During the year, our Austrian subsidiary purchased intellectual property. The
expected annual amortization is expected to be $145, subject to foreign
currency fluctuations. 7. GOODWILL Goodwill was as follows at: Dec. 31
    
    Dec. 312003
    
    2002Goodwill
    
    $
    167,456
    
    
    $
    139,252Less: accumulated amortization
    
    
    18,621
    
    
    
    15,342$
    148,835
    
    
    $
    123,910
 Dec. 31Continuity:
    
    2003Opening book value
    
    $
    123,910Exchange
    
    
    24,925Ending net book value
    
    $
    148,835
 According to FAS 142, goodwill and intangible assets with indefinite lives are
no longer subject to amortization, but rather an annual assessment of
impairment by applying a fair value based test. The statement requires a test
for impairment to be performed annually, or immediately if conditions indicate
that such an impairment could exist. We adopted the statement effective January 1, 2002. As a result of adopting
FAS 142 we no longer record goodwill amortization. We have completed the
transitional and annual goodwill impairment tests as required under FAS 142 and
no impairment was identified. F-12




---



##### 



TRENCH ELECTRIC B.V. - FORM 20-F Equivalent The following table provides the comparable effects of the adoption of FAS 142
for the period ended December 31, 2003, 2002 and 2001. In 2003 and 2002, the
reported net income figure is without any goodwill amortization, whereas in
2001 the reported net income figure is net of goodwill amortization. (in thousands, except per share data) 2003
    
    2002
    
    2001Net income (loss), after goodwill amortization
as presented
    
    $
    34,968
    
    
    $
    6,482
    
    
    $
    (15,227
    )Add back: goodwill amortization (none in 2003 and 2002)
    
    
    
    
    
    
    
    
    
    
    3,487Net income (loss) before goodwill amortization
    
    $
    34,968
    
    
    $
    6,482
    
    
    $
    (11,740
    )Basic and diluted earnings (loss) per share:Income (loss) per common share before
minority interest, after goodwill amortization
    
    $
    996.35
    
    
    $
    231.03
    
    
    $
    (350.88
    )Add back: goodwill amortization
    
    
    
    
    
    
    
    
    
    
    87.18Net income (loss) per share before minority interest
    
    $
    996.35
    
    
    $
    231.03
    
    
    $
    (263.70
    )Net income (loss) per common share,
before change in accounting principle
    
    $
    874.20
    
    
    $
    162.05
    
    
    $
    (380.68
    )Add back: goodwill amortization
    
    
    
    
    
    
    
    
    
    
    87.18Net income (loss) per common share before goodwill
amortization
    
    $
    874.20
    
    
    $
    162.05
    
    
    $
    (293.50
    )
 8. INCOME TAXES Year ended
    
    Year ended
    
    Year endedDecember 31,
    
    December 31,
    
    December 31,2003
    
    2002
    
    2001Current
    
    $
    8,056
    
    
    $
    5,529
    
    
    $
    4,519Deferred
    
    
    707
    
    
    
    1,236
    
    
    
    (2,357
    )Total provision for income taxes
    
    $
    8,763
    
    
    $
    6,765
    
    
    $
    2,162
 Substantially all of our results of operations are generated outside of the
Netherlands. Trench Electric B.V. (TEBV) and our parent company file a
consolidated tax return in The Netherlands. Included in the tax provision is
$1,583 (2002 - $1,477) in respect of TEBV, which has been computed as if TEBV
were a separate taxpayer (the separate return method). Of the total current
provision of $8,056 (2002 - $5,529), current income taxes in the amount of
$1,583 (2002- $1,477) have been reflected as a component of due to parent on
the balance sheet as TEBVs profits are shielded by the parent companys losses
for tax purposes. The following summarizes the recognition of income tax expense using a weighted
average income tax rate (as a reference point only in that there is no single
jurisdiction in which we operate that is predominant or for which there is a
more appropriate rate) compared with our actual income tax expense. The
weighted average rate has been determined based on the proportion of the
statutory rate in each jurisdiction to the income before tax attributable to
each jurisdiction. F-13




---



##### 



TRENCH ELECTRIC B.V. - FORM 20-F Equivalent Year ended
    
    Year ended
    
    Year endedDecember 31,
    
    December 31,
    
    December 31,2003
    
    2002
    
    2001Tax provision at weighted average
statutory rate
(2003  27.27%, 2002  26.08%,
2001 29.51%)
    
    $
    13,364
    
    
    $
    4,174
    
    
    $
    (3,856
    )Effects of specific rate differences
from weighted average
statutory rate
    
    
    (1,253
    )
    
    
    (670
    )
    
    
    (625
    )Non-deductible goodwill
    
    
    
    
    
    
    
    
    
    
    1,503Non taxable portion of foreign
exchange gains and losses
    
    
    (4,995
    )
    
    
    (230
    )
    
    
    2,648Valuation allowance for loss
carryforward
    
    
    (1,384
    )
    
    
    1,990
    
    
    
    17Other
    
    
    3,031
    
    
    
    1,501
    
    
    
    2,475Total provision for income taxes
    
    $
    8,763
    
    
    $
    6,765
    
    
    $
    2,162Effective tax rate
    
    
    18
    %
    
    
    42
    %
    
    
    18
    %
 The significant components of deferred income tax are as follows at: Dec. 31
    
    Dec. 312003
    
    2002Current deferred income tax assetWarranty
    
    $
    496
    
    
    $
    362Other
    
    
    205
    
    
    
    701
    
    
    
    362Non-current deferred income tax assetLoss carryforwards
    
    
    15,024
    
    
    
    15,654Pension and post-retirement benefits
    
    
    3,801
    
    
    
    2,152Deferred income
    
    
    2,122
    
    
    
    593Other
    
    
    1,427
    
    
    
    1,16223,075
    
    
    
    19,923Less: valuation allowance
    
    
    (7,567
    )
    
    
    (7,852
    )Total deferred income tax asset
    
    $
    15,508
    
    
    $
    12,071Current deferred income tax liabilityWarranty
    
    
    (42
    )
    
    
    (147
    )Other
    
    
    (50
    )
    
    
    (33
    )(92
    )
    
    
    (180
    )Non-current deferred income tax liabilityFixed assets
    
    
    (9,815
    )
    
    
    (8,847
    )Unrealized foreign exchange adjustments
    
    
    (2,451
    )
    
    
    (848
    )Other
    
    
    (2,779
    )
    
    
    (2,392
    )Total deferred income tax liability
    
    $
    (15,137
    )
    
    $
    (12,267
    )Net deferred income tax asset/(liability)
    
    $
    371
    
    
    $
    (196
    )
 The loss carry forwards relate primarily to our French, German and Swiss
subsidiaries. These loss carry forwards are available to reduce taxes
otherwise payable. We have net operating loss carry forwards of approximately
$48,190 (2002  $48,898) at December 31, 2003 which expire as follows: 2006
    
    
    5092007
    
    
    13,8552008
    
    
    1,551Indefinite
    
    
    32,275Total
    
    $
    48,190
 FAS 109 requires that deferred income tax assets be reduced by a valuation
allowance if it is more likely than not that some portion or all of the
deferred income tax asset will not be realized. The net valuation allowance
against the deferred income tax asset decreased by $285 in 2003 (2002 
increase by $923). The valuation allowance recorded by us is in respect of the
loss carry forwards after giving consideration to the uncertainty associated
with our ability to realize the benefit of the loss carry forwards in future
years. Cumulative undistributed earnings of foreign subsidiaries approximated $65,405
at December 31, 2003 (2002  $32,796). Such earnings are expected to be
reinvested indefinitely. Determination of the amount of unrecognized deferred
tax liability with respect to such earnings is not practicable. While there are
no specific plans to remit the undistributed earnings in the immediate future,
where economically appropriate to do so, such earnings may be remitted. F-14




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##### 



TRENCH ELECTRIC B.V. - FORM 20-F Equivalent 9. LONG-TERM DEBT AND BANK INDEBTEDNESS Long-term debt consists of the following at: Dec. 31
    
    Dec. 31
    
    Currency2003
    
    2002
    
    Denomination10 1⁄4% Senior subordinated notes
    
    $
    150,915
    
    
    $
    150,915
    
    
    U.S. dollarsCIBC World Markets PlcTerm Facility
    
    
    14,421
    
    
    
    18,537
    
    
    U.S. dollars/Euros/
Pounds SterlingOtherICBC Bank Shanghai Branch
    
    
    5,999
    
    
    
    7,207
    
    
    Chinese renminbisBank of China
    
    
    946
    
    
    
    1,864
    
    
    Chinese renminbisAgence Rhin Meuse
    
    
    836
    
    
    
    692
    
    
    EurosSEC (Shanghai Electric Company) Finance Company
    
    
    1,329
    
    
    
    121
    
    
    Chinese renminbisTotal long-term debt
    
    
    174,446
    
    
    
    179,336Less: current portion of long-term debt
    
    
    13,695
    
    
    
    13,286Non-current portion of long-term debt
    
    $
    160,751
    
    
    $
    166,050
 Interest payments on the Senior Subordinated Notes, which are repayable on
December 15, 2007, are due on June 15 and December 15 of each year. The Senior
Subordinated Notes are redeemable at the option of the issuers, Trench Electric
S.A. (Luxembourg) and Trench Inc. (Canada), in whole or in part upon the
occurrence of certain events. The Senior Subordinated Notes are subordinated
in right of payment to existing and future senior indebtedness of the issuers
and the Group, including the term facilities noted above. The Senior
Subordinated Notes are fully and unconditionally guaranteed by us and our
subsidiaries other than our French subsidiary, Trench France S.A. its parent,
Finatrench (France) S.A., the Chinese joint ventures, Valtimon Holding BV and
Trench Brasil Ltda. The bond indenture includes certain covenants that, among
other things, limit or otherwise affect the incurrence of additional
indebtedness by us and certain of our subsidiaries; the payment of dividends
and other restricted payments; transactions with affiliates; the sale or
issuance of certain subsidiaries capital stock and preferred stock; the
creation of restrictions on distributions from certain subsidiaries; asset
sales; other senior subordinated indebtedness; the incurrence of liens and
sale/leaseback transactions; and mergers, or consolidations. The Facility Agreement covenants comprise: EBITDA to Net cash interest payable;
Cash flow to Debt service; Net debt to EBITDA; Adjusted net worth; and separate
annual capital expenditure thresholds for Shanghai and non-Shanghai operations.
At December 31, 2003 Trench has exceeded the permitted threshold for Shanghai
capital expenditure by $91 following the early delivery (in late December 2003)
of certain assets which will be brought into use in 2004. Trench has received
a waiver in this regard from the Banks. In all other respects Trench has
complied with the above financial covenants. Having taken account of waiver
and amendment letters received from our Senior Lenders, we anticipate remaining
in compliance with those covenants. The amendments permitted us to take the
entire gain of approximately $5.5 million over the six quarters ending March
2002 (for covenant calculation purposes only) on the sale in 2000 of certain
instrument transformer and bushings technologies in connection with our
Shanghai operation. This amendment was consented to on the basis that
substantially all of the gain has already been realized in cash. Similarly,
we have obtained an amendment letter from our Senior Lenders to allow us to
recognize (for covenant purposes only) the $10 million gain from the sale of
certain coil technologies in 2002 in connection with our Shanghai operation on
an accelerated basis to the end of December 31, 2006. Under U.S. GAAP both of
these gains will be recognized over the life of the licensing agreement (10
years). In addition, our Senior Lenders agreed to increase the headroom available to us
within the financial covenants for the interest coverage and the leverage
ratios from 31st March 2003 to 31st December 2005. For the avoidance of doubt
no changes have been made to the Net Worth covenant or the Cash Flow to Debt
Service covenant. Also, our Senior Lenders agreed that both the cash costs and the profit and
loss write-offs associated with the reorganization in Switzerland in 2000 and
2001 can be excluded from all covenant calculations as originally defined.
Items associated with the reorganization in Switzerland have been subject to
separate additional covenant tests. The amendments also create additional flexibility under our capital
expenditures covenant in connection with the capital expenditures in China.
The original capital expenditure covenant was set prior to Trench China, in
Shanghai being consolidated into the Group results. Notwithstanding the foregoing, there can be no guarantee that we will remain in
compliance with our financial covenants. Failure to remain in compliance, or
to obtain additional amendments, would have a material adverse effect on our
liquidity. F-15




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##### 



TRENCH ELECTRIC B.V.  - FORM 20-F Equivalent In April, 2000, our debt was refinanced by means of senior debt arranged by
CIBC World Markets plc (CIBC). The senior facilities are collateralized by
fixed and floating charges on all our assets and shares and upstream, cross and
downstream guarantees. The CIBC Term loan is denominated in U.S. dollars, Euros and British pounds and
bears interest at LIBOR plus 2%. If certain financial ratios are met, the
margin can be reduced to as low as 1.5%. We qualified for the lower rate in
2003. The margin reduced from 2% to 1.75% on May 7, 2003 and then to 1.5% on
October 29, 2003. The loans from ICBC Bank Shanghai Branch bear interest at a rate of 5.31%. The
loan from SEC (Shanghai Electric Company) Finance Company bears interest at a
rate of 4.78%. The loans from Bank of China bear interest at a rate of 5.0%. The loan from Agence Rhin Meuse bears interest at a rate of 0%. Long-term debt is repayable as follows: 2004
    
    $
    13,6952005
    
    
    5,7852006
    
    
    3,8942007
    
    
    151,072$
    174,446
 In 2000, CIBC World Markets plc made available a revolving credit facility by
way of cash advances at a rate of LIBOR plus 2% and letters of credit not to
exceed a maximum of $35,000. The shares of our operating companies, with the
exception of Austria, Brasil and the Chinese joint ventures, have been pledged
as collateral for the Term Loan and the revolving credit facility. A
non-utilization fee of 0.75% per annum (2002  0.75%) on the daily unused
facility is payable. As at December 31, 2003, $NIL (2002  $5,808) had been drawn against this
facility and is recorded as bank indebtedness on the balance sheet. The average
weighted interest rate on bank indebtedness was 5.0% at December 31, 2003 (2002
 4.9%). 10. ACCRUED LIABILITIES AND OTHER LIABILITIES Accrued liabilities and other liabilities were as follows at: Dec. 31
    
    Dec. 312003
    
    2002Accrued payroll costs
    
    $
    7,224
    
    
    $
    5,285Accrued employee benefits
    
    
    4,555
    
    
    
    3,543Deferred income
    
    
    1,847
    
    
    
    1,851Warranty (note 22)
    
    
    3,159
    
    
    
    2,729Accrued interest
    
    
    1,072
    
    
    
    1,290Head office cost accruals
    
    
    3,205
    
    
    
    3,462Accrued commissions
    
    
    2,182
    
    
    
    3,287Payments received on account
    
    
    
    
    
    
    467Other liabilities
    
    
    4,968
    
    
    
    3,688$
    28,212
    
    
    $
    25,602
 11. PENSION ASSETS AND LIABILITIES Certain subsidiaries sponsor, for substantially all employees, defined benefit
pension plans. The assets for some of these plans are kept externally,
however, in Germany, no independent assets exist for the pension obligations.
Where plan assets exist, these have been measured at market value. The
benefits under these plans are based primarily on years of service and either
final average salary or fixed amounts for each year of service. Plan assets
consist principally of publicly traded equity and fixed-income securities. F-16




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##### 



TRENCH ELECTRIC B.V.  - FORM 20-F Equivalent The funded status of our defined benefit pension plans was as follows at : Dec. 31
    
    Dec. 312003
    
    2002Change in benefit obligationBenefit obligation  Beginning of year
    
    $
    35,792
    
    
    $
    32,531Service costs
    
    
    1,251
    
    
    
    964Interest costs
    
    
    2,666
    
    
    
    2,207Amendments
    
    
    246
    
    
    
    Net actuarial loss (gain)
    
    
    3,227
    
    
    
    (809
    )Employee contributions
    
    
    565
    
    
    
    476Benefits paid
    
    
    (1,369
    )
    
    
    (1,052
    )Exchange effect
    
    
    8,236
    
    
    
    1,475Benefit obligation  End of year
    
    $
    50,614
    
    
    $
    35,792Change in plan assetsFair value of plan assets  Beginning of year
    
    $
    19,314
    
    
    $
    21,056Actual return on plan assets
    
    
    2,666
    
    
    
    (2,167
    )Employer contribution
    
    
    1,102
    
    
    
    234Employee contribution
    
    
    565
    
    
    
    476Benefits paid
    
    
    (821
    )
    
    
    (611
    )Exchange effect
    
    
    4,461
    
    
    
    326Fair value of plan assets  End of year
    
    $
    27,287
    
    
    $
    19,314Funded status
    
    $
    (23,327
    )
    
    $
    (16,478
    )Unrecognized actuarial loss
    
    
    10,413
    
    
    
    6,790Unrecognized prior service cost
    
    
    415
    
    
    
    118Net amount recognized
    
    $
    (12,499
    )
    
    $
    (9,570
    )Amounts recognized in the consolidated balance sheet consists of:Prepaid benefits cost
    
    $
    287
    
    
    $
    252Accrued benefits liability
    
    
    (12,824
    )
    
    
    (9,822
    )Minimum pension liability adjustment
    
    
    (1,472
    )
    
    
    (1,050
    )Accumulated other comprehensive income
    
    
    1,510
    
    
    
    1,050Net amount recognized
    
    $
    (12,499
    )
    
    $
    (9,570
    )
 The projected benefit obligation and fair value of plan assets for the pension
plans with projected benefit obligations in excess of plan assets were $50,614
and $27,287, respectively, as at December 31, 2003 (2002  $35,792 and $19,314,
respectively). The projected benefit obligation, accumulated benefit
obligation and fair value of plan assets for the pension plans with accumulated
benefit obligations in excess of plan assets were $50,614, $41,011 and $27,287
as at December 31, 2003 (2002  $11,719, $11,683 and $1,003 respectively). Assumptions used to develop the net periodic benefits cost for the defined
benefit plans were as follows for the years ended: Dec. 31
    
    Dec. 31
    
    Dec. 312003
    
    2002
    
    2001Discount rate
    
    
    6.0
    %
    
    
    6.4
    %
    
    
    6.6
    %Expected return on plan assets
    
    
    7.5
    %
    
    
    7.5
    %
    
    
    8.5
    %Rate of compensation increase
    
    
    3.2
    %
    
    
    3.2
    %
    
    
    3.9
    %
 Prior service costs are amortized over the estimated average remaining service
lives of employees. The components of net periodic benefits cost for the defined benefit plans were
as follows for the years ended: Dec. 31
    
    Dec. 31
    
    Dec. 312003
    
    2002
    
    2001Components of net periodic benefits costService cost
    
    $
    1,251
    
    
    $
    964
    
    
    $
    970Interest cost
    
    
    2,666
    
    
    
    2,207
    
    
    
    2,091Expected return on plan assets
    
    
    (1,658
    )
    
    
    (1,606
    )
    
    
    (1,852
    )Recognized actuarial loss
    
    
    26
    
    
    
    207
    
    
    
    7Amortization of prior service cost
    
    
    225
    
    
    
    10
    
    
    
    Net periodic benefits cost
    
    $
    2,510
    
    
    $
    1,782
    
    
    $
    1,216
 In addition, we sponsor defined contribution pension plans covering
substantially all of the employees of the Swiss subsidiary, UK subsidiary and
French subsidiary. Contributions are determined by matching a percentage of
employee contributions. The pension expense for these defined contribution
plans for the years ended December 31, 2003, 2002 and 2001 were $490, $859 and
$970, respectively. F-17




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##### 



TRENCH ELECTRIC B.V.  - FORM 20-F Equivalent 12. POST-RETIREMENT LIABILITIES Our Canadian subsidiary provides health care and life insurance benefits to
their eligible retired employees, with some of these retirees paying a portion
of the related costs. The funded status of the plan was as follows at: Dec. 31
    
    Dec. 312003
    
    2002Change in benefit obligationBenefit obligation  Beginning of year
    
    $
    2,871
    
    
    $
    2,278Service costs
    
    
    144
    
    
    
    116Interest costs
    
    

    221
    
    
    
    182Amendments
    
    
    12
    
    
    
    Actuarial loss
    
    
    78
    
    
    
    278Benefits paid
    
    
    (49
    )
    
    
    (19
    )Exchange effect
    
    
    654
    
    
    
    36Benefit obligation  End of year
    
    $
    3,931
    
    
    $
    2,871Funded status
    
    $
    (3,931
    )
    
    $
    (2,871
    )Unrecognized prior service cost
    
    
    12
    
    
    
    Unrecognized actuarial loss
    
    
    484
    
    
    
    330Net amount recognized in the consolidated balance sheet
    
    $
    (3,435
    )
    
    $
    (2,541
    )
 All of our post-retirement plans have a projected benefit obligation in excess
of plan assets. Assumptions used to develop the net periodic benefits cost for the
post-retirement plans were as follows for the years ended: 2003
    
    2002
    
    2001Discount rate
    
    
    6.2
    %
    
    
    6.8
    %
    
    
    7.3
    %Medical  initial
    
    
    8.0
    %
    
    
    8.0
    %
    
    
    3.2
    %Medical  ultimate
    
    
    5.0
    %
    
    
    5.0
    %
    
    
    3.2
    %Years to ultimate
    
    7 yr
    
    6 yr
    
    0 yrDental
    
    
    4.0
    %
    
    
    4.0
    %
    
    
    3.3
    %SensitivitiesEffect of 1% increase in trend rate Service cost and interest cost
    
    $
    60
    
    
    $
    50
    
    
    $
    75Accrued post-retirement
benefit obligation
    
    
    508
    
    
    
    402
    
    
    
    562Effect of 1% decrease in trend rate Service cost and interest cost
    
    
    (52
    )
    
    
    (47
    )
    
    
    (67
    )Accrued post-retirement
benefit obligation
    
    
    (436
    )
    
    
    (352
    )
    
    
    (454
    )
 The medical and dental assumptions and sensitivities are applicable only to the
Canadian obligation. Dec. 31
    
    Dec. 31
    
    Dec. 312003
    
    2002
    
    2001Components of net periodic benefits costService cost
    
    $
    144
    
    
    $
    116
    
    
    $
    95Interest cost
    
    
    220
    
    
    
    182
    
    
    
    159Recognized actuarial cost
    
    
    4
    
    
    
    4
    
    
    
    Net periodic benefits cost
    
    $
    368
    
    
    $
    302
    
    
    $
    254
 In addition to the above, our Austrian subsidiary provides severance benefits
and jubilee payments to eligible employees. The accrued liability in respect
of these benefits was $3,585 as at December 31, 2003 (2002 - $3,174). The
charge to income for 2003 was $393 (2002 - $325, 2001 - $472). F-18




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##### 



TRENCH ELECTRIC B.V.  - FORM 20-F Equivalent 13. COMMITMENTS AND CONTINGENCIES Operating leases We are committed under various operating leases for buildings, machinery and
equipment. The minimum annual payments under these contracts are approximately
as follows: 2004
    
    $
    2,9432005
    
    
    2,8262006
    
    
    2,6632007
    
    
    2,5822008
    
    
    2,4432009 and beyond
    
    
    20,911$
    34,368
 Operating lease expense for the years ended December 31, 2003, 2002 and 2001
were $2,265, $2,185 and $1,755, respectively. Included in the item 2009 and
beyond is a 11-year land lease commitment for Fushun and a 16.5-year land and
building lease commitment for Trench China in Shanghai. Capital leases We are committed under various capital leases for plant and equipment. In
2003, the portion of the software, machinery and equipment financed by capital
leases is cost of $2,529 (2002  $1,523), accumulated depreciation of $1,507
(2002  $694) and a net book value of $1,022 (2002  $829). The minimum annual payments under capital leases are approximately as follows: 2004
    
    $
    3392005
    
    
    1962006
    
    
    2052007
    
    
    198938Imputed interest
    
    
    85$
    853
 Litigation In the ordinary course of business, we are the subject of or party to pending
or threatened litigation and claims. While it is not possible to predict with
certainty the outcome of such matters individually or in the aggregate,
management believes that the ultimate results will not have a material adverse
effect on our consolidated financial position, results of operations, or
liquidity. Environmental matters Our facilities are subject to a range of federal, state, local and foreign
environmental and occupational health and safety laws, including those laws
relating to air emissions, wastewater discharges, the handling and disposal of
solid and hazardous waste and the remediation of contamination associated with
the current and historic use of hazardous substances or materials. If a
release of hazardous substances or materials occurs on or from our properties
or any off-site disposal location used by us, or if contamination from prior
activities is discovered at any of its properties, we may be held liable for
the costs of remediation, natural resource damages and associated transaction
costs. While the amount of such liability could be material, we devote
resources to ensure that our current operations are conducted in a manner that
reduces such risks. We believe that we are currently in compliance with, and not subject to
liability under, any environmental laws, except where such non-compliance or
liability would not reasonably be expected to have a material adverse effect on
our consolidated financial position or results of operations. 14. OTHER NON-CURRENT LIABILITIES Other non-current liabilities at December 31, 2003 and 2002 include the
non-current portion of proceeds received from the joint venture partner, SITW,
in Shanghai, China relating to sale of coil, bushing and instrument transformer
technology. The amount is net of certain expenses and is being recognized into
income on a straight-line basis over a ten-year period. F-19




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##### 



TRENCH ELECTRIC B.V. - FORM 20-F Equivalent 15. OTHER MATTERS Restructuring In 2003, we announced restructuring plans for both Trench Suisse-France (TSF)
and Trench Germany (TG). These restructuring plans aim to improve the
long-term competitiveness of TSF and TG in the market. The restructuring
includes the termination of 87 jobs (TSF 58, TG 29). As of December 31,
2003, $1,522 has been expensed in the accounts, of which $392 is accrued at the
year end. Trench Suisse-France Restructuring: A redundancy of 58 positions was announced at Trench Suisse-France in 2003. In
accordance with FAS 146, effective for the Group from January 1, 2003, such
costs are charged to the income statement as incurred, other than for
discretionary amounts which are charged evenly over the period of an employees
remaining service. In 2003, $838 has been charged to Restructuring
representing payments to employees of $728 and related legal advice and
employee consultancy advice of $110. Trench Germany Restructuring: A smaller redundancy has been carried out in Germany, and on the same basis,
the costs incurred and accrued under FAS 146/112 at December 31, 2003 amounted
to $573. There was a reduction in headcount of 14 in 2003 and a planned
further reduction of 15 in 2004. Trench UK Restructuring: We have accrued $111 for the statutory element of restructuring to be paid in
2004, in respect of 9 employees. 16. CHANGES IN NON-CASH WORKING CAPITAL AND OTHER NON-CASH ITEMS Changes in non-cash working capital are as follows: Year ended
    
    Year ended
    
    Year endedDecember 31,
    
    December 31,
    
    December 31,2003
    
    2002
    
    2001Decrease/(increase) in trade
accounts receivable,
prepayments and other
current assets
    
    $
    1,415
    
    
    $
    3,415
    
    
    $
    (6,337
    )(Increase) decrease in inventories
    
    
    (2,854
    )
    
    
    (353
    )
    
    
    253Increase (decrease) in accounts
payable, accrued liabilities
and advance billings
    
    
    14,650
    
    
    
    (5,598
    )
    
    
    1,728(Decrease) Increase in
income tax payable
    
    
    (305
    )
    
    
    382
    
    
    
    1,114Increase in due to parent
    
    
    3,559
    
    
    
    1,782
    
    
    
    1,309Decrease in pension assets
    
    
    18
    
    
    
    769
    
    
    
    170Increase in pension
and post-retirement benefits
    
    
    1,120
    
    
    
    898
    
    
    
    78Decrease in
deferred income tax
    
    
    (380
    )
    
    
    (971
    )
    
    
    (2,350
    )Increase in long-term
deferred income and other
    
    
    (197
    )
    
    
    
    
    
    
    $
    17,026
    
    
    $
    324
    
    
    $
    (4,035
    )
 17. FINANCIAL INSTRUMENTS During the normal course of business, we are exposed to foreign currency risk.
These risks create volatility in earnings and cash flows from period to period.
We occasionally make use of derivative instruments to eliminate or limit these
risks. Our objective is to reduce the volatility of earnings and cash flows
associated with market risks. Derivative instruments held by us are used for
hedging and non-speculative purposes. F-20




---



##### 



TRENCH ELECTRIC B.V.  - FORM 20-F Equivalent We have recognized obligations denominated in foreign currencies. We seek to
hedge a portion of the foreign currency risk arising from foreign
currency-denominated forecasted transactions and certain significant recognized
assets and liabilities. Forward contracts are used to fix or protect the
exchange rate to be used for designated foreign currency-denominated forecasted
transactions. The gains and losses on the derivative contracts offset, to a
certain extent, the gains and losses on the transactions being hedged resulting
in the avoidance, to a certain extent, of losses affecting our results of
operations. On December 31, 2003, we did not have any contracts to sell foreign currencies.
At December 2002, we were committed to sell foreign currencies for proceeds of
$256. We did not designate any of our derivatives as qualifying hedge
instruments under FAS 133. The cumulative effect of adopting FAS 133 at
January 1, 2001, representing the initial revaluation of derivatives as an
after tax charge, would have been $56 in net income as a cumulative-effect-type
adjustment. The carrying amounts and fair values of our significant financial instruments
were as follows at December 31, 2003 and 2002: 2003
    
    2002Carrying
    
    
    
    
    
    CarryingAmount
    
    Fair value
    
    amount
    
    Fair valueCash and cash equivalents
    
    $
    31,081
    
    
    $
    31,081
    
    
    $
    15,422
    
    
    $
    15,422Trade receivables, prepayments and other current assets
    
    
    77,871
    
    
    
    77,871
    
    
    
    72,427
    
    
    
    72,427Bank indebtedness
    
    
    
    
    
    
    
    
    
    
    5,808
    
    
    
    5,808Accounts payable, accrued liabilities, advance
billings, income tax payable and due to parent
    
    
    95,489
    
    
    
    95,489
    
    
    
    68,449
    
    
    
    68,449Long-term debt (including current portion)
    
    
    174,446
    
    
    
    177,464
    
    
    
    179,336
    
    
    
    141,607Foreign currency forward contracts
    
    
    
    
    
    
    
    
    
    
    45
    
    
    
    45
 Valuation of Derivative Instruments The fair value of derivative instruments is sensitive to movements in the
underlying market rates and variables. We monitor the fair value of derivative
instruments on a periodic basis. Foreign currency and commodity forwards are
valued using forward rates observed from quoted prices in the relevant markets
when possible. We assume parties to long-term contracts are economically
rational and will immediately exercise early termination rights if economically
beneficial when such rights exist in the contract. F-21




---



##### 



TRENCH ELECTRIC B.V. - FORM 20-F Equivalent 18. SEGMENTED INFORMATION We operate in one industry segment that designs and manufactures electrical
transmission and distribution equipment that transforms, regulates, conditions
and measures electricity for utility and industrial customers. Sales,
operating income, total assets, purchase of property, plant and equipment,
depreciation and goodwill amortization and sales by customer location
pertaining to the geographic areas in which we operate are presented below.
Product transfers between geographic areas are accounted for based on the
estimated fair market value of the products. Year ended
    
    Year ended
    
    Year endedDecember 31,
    
    December 31,
    
    December 31,2003
    
    2002
    
    2001Sales by originAmerican operations
    
    $
    103,483
    
    
    $
    106,085
    
    
    $
    102,303European operations
    
    
    160,700
    
    
    
    143,864
    
    
    
    130,140International operations
    
    
    54,915
    
    
    
    40,963
    
    
    
    25,281Intersegment elimination
    
    
    (39,556
    )
    
    
    (35,026
    )
    
    
    (33,468
    )$
    279,542
    
    
    $
    255,886
    
    
    $
    224,256Operating incomeAmerican operations
    
    $
    14,391
    
    
    $
    17,475
    
    
    $
    15,588European operations
    
    
    10,965
    
    
    
    7,680
    
    
    
    (2,628
    )International operations
    
    
    16,524
    
    
    
    8,196
    
    
    
    4,187$
    41,880
    
    
    $
    33,351
    
    
    $
    17,147Purchase of property, plant and
equipmentAmerican operations
    
    $
    1,306
    
    
    $
    1,429
    
    
    $
    867European operations
    
    
    2,564
    
    
    
    2,098
    
    
    
    3,520International operations
    
    
    5,818
    
    
    
    1,663
    
    
    
    3,338$
    9,688
    
    
    $
    5,190
    
    
    $
    7,725Depreciation and goodwill
amortizationAmerican operations
    
    $
    1,160
    
    
    $
    1,103
    
    
    $
    3,205European operations
    
    
    5,526
    
    
    
    4,615
    
    
    
    6,273International operations
    
    
    1,407
    
    
    
    1,272
    
    
    
    934$
    8,093
    
    
    $
    6,990
    
    
    $
    10,412Sales by customer locationAmericas
    
    $
    84,840
    
    
    $
    94,722
    
    
    $
    92,604Europe
    
    
    104,734
    
    
    
    88,039
    
    
    
    86,072Asia
    
    
    72,577
    
    
    
    61,088
    
    
    
    38,928Other
    
    
    17,391
    
    
    
    12,037
    
    
    
    6,652$
    279,542
    
    
    $
    255,886
    
    
    $
    224,256
 Dec. 31
    
    Dec. 312003
    
    2002Total assetsAmerican operations
    
    $
    148,100
    
    
    $
    119,492European operations
    
    
    202,194
    
    
    
    177,105International operations
    
    
    63,195
    
    
    
    49,123$
    413,489
    
    
    $
    345,720
 19. RELATED PARTY TRANSACTIONS During the year, we paid $0.8 million (2002 - $0.6 million,
2001 - $0.6
million) in monitoring fees to CVC Capital Partners Limited (CVC). The
principal shareholders of the parent company are four entities, which are
managed or advised by CVC. During the year, our Chinese subsidiary in Shanghai borrowed $1,329 from a
bank, SEC Finance Company, which is related to our joint venture partner,
SITW. The Peoples Bank of China (PBOC) has approved the SEC Finance Company
as an accredited lending institution. F-22




---



##### 



TRENCH ELECTRIC B.V. - FORM 20-F Equivalent On May 12, 2003 the $16,070 Floating Rate Notes due 2008 (vendor loan note)
between BBA Properties Limited and Trench Electric Holding BV, the parent of
Trench Electric BV, were transferred to Trench LN Holdings S.A., a company
registered in Luxembourg. This is considered a related party transaction as
certain companies at the TEBV level or below are cross-guaranteeing the loan.
The shareholders of Trench LN Holdings S.A. are CVC European Equity Partners
L.P., CVC European Equity Partners (Jersey) L.P., Capital Venture Nominees
Limited, Citicorp Capital Investors Europe Limited, the Poulson Family Trust,
Michael J. Bissell and Allan Finn, all of whom are shareholders or directors in TEHBV.
The outstanding value as at December 31, 2003 was $28,471 and the interest rate
attaching is 6.09%. 20. NEW ACCOUNTING STANDARD In December 2003, FASB issued Statement No. 132R, Employers Disclosures about
Pensions and Other Postretirement Benefitsan amendment of FASB Statements No.
87, 88, and 106. FAS 132R revises employers disclosures about pension plans
and other postretirement benefit plans. It does not change the measurement or
recognition of those plans required by FASB Statements No. 87, Employers
Accounting for Pensions, No. 88, Employers Accounting for Settlements and
Curtailments of Defined Benefit Pension Plans and for Termination Benefits, and
No. 106, Employers Accounting for Postretirement Benefits Other Than Pensions.
This Statement retains the disclosure requirements contained in FASB Statement
No. 132, Employers Disclosures about Pensions and Other Postretirement
Benefits, which it replaces. It requires additional disclosures to those in the
original Statement 132 about the assets, obligations, cash flows, and net
periodic benefit cost of defined benefit pension plans and other defined
benefit postretirement plans. The required information should be provided
separately for pension plans and for other postretirement benefit plans. This
Statement retains the disclosures required by Statement 132, which standardized
the disclosure requirements for pensions and other postretirement benefits to
the extent practicable and required additional information on changes in the
benefit obligations and fair values of plan assets. Additional disclosure
requirements have been added in response to concerns expressed by users of
financial statements; those disclosures include information describing the
types of plan assets, investment strategy, measurement date(s), plan
obligations, cash flows, and components of net periodic benefit cost recognized
during interim periods. The provisions of Statement 132 remain in effect until
the provisions of this Statement are adopted. Except as noted below, this
Statement is effective for financial statements with fiscal years ending after
December 15, 2003. The interim-period disclosures required by this Statement
are effective for interim periods beginning after December 15, 2003.
Disclosure of information about foreign plans required by paragraphs 5(d),
5(e), 5(g), and 5(k) of this Statement is effective for fiscal years ending
after June 15, 2004. All of the Groups pension and post-retirement benefits
arise from foreign plans. The Group is therefore required to present the
additional disclosures for its 2004 year. We have not evaluated the impact of
FAS 132R and do not intend to early adopt for fiscal 2003. 21. SHARE OPTIONS During the year ended December 31, 2000, Trench Electric Holdings B.V., the
parent company of Trench Electric B.V., approved a new share option scheme,
which included in its terms the ability to grant share options to certain
employees of Trench Electric B.V. The share options granted under this scheme
may only be exercised within a 10 day period preceding the sale or flotation of
the Group. These options do not have an expiry date but may not be exercised
unless sale or flotation occurs. No compensation cost has been recognized for
this scheme for the year ended December 31, 2003 (2002  nil and 2001  nil) as
it was not considered probable that the future performance criteria would be
met as of December 31, 2003. This result is not necessarily indicative of
compensation that may be recognized in future years in respect of these
options. As of December 31, 2001 and 2002, there were 3,398 shares under option at a
weighted average price of $4.08. During 2003, 1,371 options were exercised at
$5.37 (Euro 4.54), which did not result in a compensation charge. No amounts
have been recognized in the financial statements of the Company in connection
with the issuance, by the Companys parent company, Trench Electric Holdings
B.V., of these options. On
March 23, 2004, 152 share options in Trench Electric
Holding B.V. were granted to Michael Bissell, a director of
Trench Electric Holding B.V., under the scheme that was approved
in 2000. F-23




---



##### 



TRENCH ELECTRIC B.V.  - FORM 20-F Equivalent 22. GUARANTEES We extend a variety of financial and product warranty guarantees to third
parties. As of December 31, 2003 and 2002 the following were outstanding: 2003
    
    2002Maximum
    
    Carrying
    
    Maximum
    
    CarryingPotential
    
    Amount of
    
    Potential
    
    Amount ofIn 000s U.S. Dollars
    
    Payment
    
    Liability
    
    Payment
    
    LiabilityFinancial guarantees:CIBC letters of credit and guarantees
    
    $
    14,414
    
    
    $
    
    
    
    $
    13,879
    
    
    $
    Other letters of credit and guarantees
    
    
    7,223
    
    
    
    
    
    
    
    6,144
    
    
    
    $
    21,637
    
    
    $
    
    
    
    $
    20,023
    
    
    $
    
 We accrue for costs associated with guarantees when it is probable that a
liability has been incurred and the amount can be reasonably estimated. The
most likely cost to be incurred is accrued based on an evaluation of currently
available facts, and where no amount within a range of estimates is more
likely, the minimum is accrued. We provide service and warranty policies on our products and extend performance
and operating cost guarantees beyond normal service and warranty policies on
some of our products. Liability under service and warranty policies is based
upon a review of historical warranty and service claim experience. Liability
for performance and operating cost guarantees is based upon future product
performance and durability, and is estimated largely based upon historical
experience. Adjustments are made to accruals as claim data and historical
experience warrant. In addition, we may incur discretionary costs to service
our products in connection with product performance issues. The changes in the carrying amount of service and product warranties and
product performance guarantees for the year ended December 31, 2003 and 2002
are as follows: Dec. 31
    
    Dec. 31In 000s U.S. Dollars
    
    2003
    
    2002Balance as of January 1
    
    $
    2,729
    
    
    $
    2,027Warranties and guarantees issued
    
    
    675
    
    
    
    1,267Settlements made
    
    
    (599
    )
    
    
    (736
    )Adjustments to provision
    
    
    (109
    )
    
    
    10Exchange
    
    
    463
    
    
    
    161Balance as of December 31
    
    $
    3,159
    
    
    $
    2,729
 Certain companies at the TEBV level or below are cross guaranteeing the loans
at the TEHBV parent level, namely the former vendor loan to Trench LN Holdings
S.A. and certain shareholder loans by the four CVC entities. 23. SUBSEQUENT EVENT On February 11, 2004, we announced a restructuring plan for Trench UK (TUK).
This restructuring plan aims to improve the long-term competitiveness of TUK in
the market. The restructuring includes the termination of 9 jobs. The
estimated total costs associated with this restructuring is approximately $0.3
million (GBP 155K), which is accounted for under FAS 112 and 146. 24. SUPPLEMENTAL GUARANTOR INFORMATION Trench Electric S.A. and Trench Inc., two wholly owned subsidiaries, issued
senior subordinated notes in the amount of $160,000, which are fully and
unconditionally guaranteed on an unsecured, senior subordinated joint and
several basis by the Group and each of our material members, other than Trench
France S.A., Finatrench (France) S.A., Valtimon Holding BV, the Chinese joint
ventures and Trench Brasil Ltda. The following combining financial data
illustrates the composition of the parent, issuers, guarantor members and the
non-guarantor members. Separate complete financial statements of the
respective guarantors would not provide additional information which would be
useful in assessing the financial composition of the guarantor members and thus
are not presented. The eliminations in the combining balance sheet include the elimination of
Finatrench (France) S.A.s investment in its subsidiary companies, Trench
Germany GmbH, a guarantor, and Trench France S.A., a non-guarantor. There are
further eliminations of the F-24




---



##### 



TRENCH ELECTRIC B.V.  - FORM 20-F Equivalent investment in equity of the joint ventures and Trench Brasil. The accompanying condensed consolidating financial information has been
prepared and presented pursuant to SEC rules and regulations. This information
is not intended to present the financial position, results of operations and
cash flows of the companies in accordance with generally accepted accounting
principles. F-25




---



##### 



TRENCH ELECTRIC B.V. - FORM 20-F Equivalent SUPPLEMENTAL CONSOLIDATED CONDENSED BALANCE SHEETS As at December 31, 2003
(expressed in thousands of U.S. dollars) Non-Guarantor
    
    GuarantorParent
    
    Issuer
    
    Members
    
    Members
    
    Eliminations
    
    ConsolidatedASSETSCurrent assetsCash and cash equivalents
    
    $
    127
    
    
    $
    68
    
    
    $
    15,215
    
    
    $
    15,671
    
    
    $
    
    
    
    $
    31,081Trade accounts receivable
    
    
    
    
    
    
    
    
    
    
    37,973
    
    
    
    32,221
    
    
    
    
    
    
    
    70,194Inventories, net
    
    
    
    
    
    
    
    
    
    
    23,407
    
    
    
    25,356
    
    
    
    
    
    
    
    48,763Prepayments
    
    
    15
    
    
    
    9
    
    
    
    1,474
    
    
    
    208
    
    
    
    
    
    
    
    1,706Deferred income tax
    
    
    
    
    
    
    
    
    
    
    505
    
    
    
    196
    
    
    
    
    
    
    
    701Income tax receivable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other current assets
    
    
    292
    
    
    
    10
    
    
    
    3,813
    
    
    
    1,856
    
    
    
    
    
    
    
    5,971Total current assets
    
    
    434
    
    
    
    87
    
    
    
    82,387
    
    
    
    75,508
    
    
    
    
    
    
    
    158,416Property, plant and equipment
    
    
    78
    
    
    
    
    
    
    
    55,477
    
    
    
    25,413
    
    
    
    
    
    
    
    80,968Intangible asset
    
    
    
    
    
    
    
    
    
    
    1,435
    
    
    
    
    
    
    
    
    
    
    
    1,435Goodwill
    
    
    
    
    
    
    
    
    
    
    145,808
    
    
    
    11,951
    
    
    
    (8,924
    )
    
    
    148,835Prepaid pension
    
    
    
    
    
    
    
    
    
    
    287
    
    
    
    
    
    
    
    
    
    
    
    287Deferred financing costs
    
    
    
    
    
    
    
    
    
    
    3,522
    
    
    
    478
    
    
    
    
    
    
    
    4,000Deferred income tax
    
    
    
    
    
    
    
    
    
    
    13,497
    
    
    
    1,310
    
    
    
    
    
    
    
    14,807Long-term receivables
    
    
    
    
    
    
    
    
    
    
    4,440
    
    
    
    278
    
    
    
    
    
    
    
    4,718Other assets
    
    
    23,669
    
    
    
    1,727
    
    
    
    79,336
    
    
    
    51,552
    
    
    
    (156,261
    )
    
    
    23Total assets
    
    $
    24,181
    
    
    $
    1,814
    
    
    $
    386,189
    
    
    $
    166,490
    
    
    $
    (165,185
    )
    
    $
    413,489LIABILITIESCurrent liabilitiesTrade accounts payable
    
    $
    
    
    
    $
    
    
    
    $
    21,848
    
    
    $
    22,299
    
    
    $
    
    
    
    $
    44,147Accrued liabilities
    
    
    3,204
    
    
    
    732
    
    
    
    16,314
    
    
    
    7,962
    
    
    
    
    
    
    
    28,212Advance billings
    
    
    
    
    
    
    
    
    
    
    5,858
    
    
    
    2,528
    
    
    
    
    
    
    
    8,386Due to parent
    
    
    10,975
    
    
    
    
    
    
    
    190
    
    
    
    
    
    
    
    
    
    
    
    11,165Income tax payable
    
    
    
    
    
    
    (32
    )
    
    
    3,385
    
    
    
    226
    
    
    
    
    
    
    
    3,579Deferred income tax
    
    
    
    
    
    
    
    
    
    
    45
    
    
    
    47
    
    
    
    
    
    
    
    92Current portion of obligation under capital lease
    
    
    
    
    
    
    
    
    
    
    174
    
    
    
    135
    
    
    
    
    
    
    
    309Current portion of long-term debt
    
    
    
    
    
    
    
    
    
    
    3,591
    
    
    
    10,104
    
    
    
    
    
    
    
    13,695Total current liabilities
    
    
    14,179
    
    
    
    700
    
    
    
    51,405
    
    
    
    43,301
    
    
    
    
    
    
    
    109,585Group loans and intercompany
    
    
    (71,501
    )
    
    
    (133,714
    )
    
    
    151,419
    
    
    
    53,796
    
    
    
    
    
    
    
    Current portion of obligation under capital lease
    
    
    
    
    
    
    
    
    
    
    544
    
    
    
    
    
    
    
    
    
    
    
    544Long-term debt
    
    
    
    
    
    
    132,001
    
    
    
    25,432
    
    
    
    3,318
    
    
    
    
    
    
    
    160,751Pension and post-retirement benefits
    
    
    
    
    
    
    
    
    
    
    21,309
    
    
    
    
    
    
    
    
    
    
    
    21,309Deferred income tax
    
    
    
    
    
    
    
    
    
    
    13,528
    
    
    
    1,517
    
    
    
    
    
    
    
    15,045Other liabilities
    
    
    
    
    
    
    
    
    
    
    13,049
    
    
    
    64
    
    
    
    
    
    
    
    13,113Total liabilities
    
    
    (57,322
    )
    
    
    (1,013
    )
    
    
    276,686
    
    
    
    101,996
    
    
    
    
    
    
    
    320,347Minority interest
    
    
    
    
    
    
    
    
    
    
    11,639
    
    
    
    
    
    
    
    
    
    
    
    11,639Contingencies and commitmentsSHAREHOLDERS EQUITYTotal shareholders equity
    
    
    81,503
    
    
    
    2,827
    
    
    
    97,864
    
    
    
    64,494
    
    
    
    (165,185
    )
    
    
    81,503Total liabilities and shareholders equity
    
    $
    24,181
    
    
    $
    1,814
    
    
    $
    386,189
    
    
    $
    166,490
    
    
    $
    (165,185
    )
    
    $
    413,489
 F-26




---



##### 



TRENCH ELECTRIC B.V. - FORM 20-F Equivalent SUPPLEMENTAL CONSOLIDATED CONDENSED BALANCE SHEETS As at December 31, 2002
(expressed in thousands of U.S. dollars) Non-Guarantor
    
    GuarantorParent
    
    Issuers
    
    Members
    
    Members
    
    Eliminations
    
    ConsolidatedASSETSCurrent assetsCash and cash equivalents
    
    
    428
    
    
    
    40
    
    
    $
    8,623
    
    
    $
    6,331
    
    
    $
    
    
    
    $
    15,422Trade accounts receivable
    
    
    
    
    
    
    
    
    
    
    38,102
    
    
    
    29,164
    
    
    
    
    
    
    
    67,266Inventories, net
    
    
    
    
    
    
    
    
    
    
    17,854
    
    
    
    22,034
    
    
    
    
    
    
    
    39,888Prepayments
    
    
    8
    
    
    
    
    
    
    
    442
    
    
    
    193
    
    
    
    
    
    
    
    643Deferred income tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    416
    
    
    
    (54
    )
    
    
    362Income tax receivable
    
    
    
    
    
    
    
    
    
    
    22
    
    
    
    
    
    
    
    (22
    )
    
    
    Other current assets
    
    
    
    
    
    
    18
    
    
    
    2,760
    
    
    
    1,740
    
    
    
    
    
    
    
    4,518Total current assets
    
    
    436
    
    
    
    58
    
    
    
    67,803
    
    
    
    59,878
    
    
    
    (76
    )
    
    
    128,099Property, plant and equipment
    
    
    
    
    
    
    
    
    
    
    48,890
    
    
    
    22,325
    
    
    
    
    
    
    
    71,215Goodwill
    
    
    
    
    
    
    
    
    
    
    121,176
    
    
    
    9,882
    
    
    
    (7,148
    )
    
    
    123,910Prepaid pension
    
    
    
    
    
    
    
    
    
    
    252
    
    
    
    
    
    
    
    
    
    
    
    252Deferred financing costs
    
    
    
    
    
    
    
    
    
    
    4,199
    
    
    
    521
    
    
    
    
    
    
    
    4,720Deferred income tax
    
    
    
    
    
    
    
    
    
    
    3,970
    
    
    
    7,739
    
    
    
    
    
    
    
    11,709Long-term receivables
    
    
    
    
    
    
    
    
    
    
    5,735
    
    
    
    
    
    
    
    
    
    
    
    5,735Other assets
    
    
    (7,445
    )
    
    
    601
    
    
    
    73,797
    
    
    
    51,552
    
    
    
    (118,425
    )
    
    
    80Total assets
    
    $
    (7,009
    )
    
    $
    659
    
    
    $
    325,822
    
    
    $
    151,897
    
    
    $
    (125,649
    )
    
    $
    345,720LIABILITIESCurrent liabilitiesBank indebtedness
    
    $
    
    
    
    $
    
    
    
    $
    4,767
    
    
    $
    1,041
    
    
    $
    
    
    
    $
    5,808Trade accounts payable
    
    
    
    
    
    
    
    
    
    
    13,626
    
    
    
    13,729
    
    
    
    
    
    
    
    27,355Accrued liabilities
    
    
    3,813
    
    
    
    711
    
    
    
    8,803
    
    
    
    12,275
    
    
    
    
    
    
    
    25,602Advance billings
    
    
    
    
    
    
    
    
    
    
    1,955
    
    
    
    4,127
    
    
    
    
    
    
    
    6,082Due to parent
    
    
    5,948
    
    
    
    
    
    
    
    155
    
    
    
    
    
    
    
    
    
    
    
    6,103Income tax payable
    
    
    
    
    
    
    (37
    )
    
    
    3,353
    
    
    
    13
    
    
    
    (22
    )
    
    
    3,307Deferred income tax
    
    
    104
    
    
    
    
    
    
    
    76
    
    
    
    
    
    
    
    
    
    
    
    180Current portion of obligation under capital lease
    
    
    
    
    
    
    
    
    
    
    50
    
    
    
    507
    
    
    
    
    
    
    
    557Current portion of long-term debt
    
    
    
    
    
    
    
    
    
    
    3,167
    
    
    
    10,119
    
    
    
    
    
    
    
    13,286Total current liabilities
    
    
    9,865
    
    
    
    674
    
    
    
    35,952
    
    
    
    41,811
    
    
    
    (22
    )
    
    
    88,280Group loans and intercompany
    
    
    (59,846
    )
    
    
    (129,134
    )
    
    
    146,240
    
    
    
    42,740
    
    
    
    
    
    
    
    Current portion of obligation under capital lease
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    116
    
    
    
    
    
    
    
    119Long-term debt
    
    
    
    
    
    
    126,917
    
    
    
    33,992
    
    
    
    5,141
    
    
    
    
    
    
    
    166,050Pension and post-retirement benefits
    
    
    
    
    
    
    
    
    
    
    16,587
    
    
    
    
    
    
    
    
    
    
    
    16,587Deferred income tax
    
    
    1,163
    
    
    
    
    
    
    
    4,302
    
    
    
    6,676
    
    
    
    (54
    )
    
    
    12,087Other liabilities
    
    
    
    
    
    
    
    
    
    
    12,090
    
    
    
    
    
    
    
    
    
    
    
    12,090Total liabilities
    
    
    (48,818
    )
    
    
    (1,543
    )
    
    
    249,166
    
    
    
    96,484
    
    
    
    (76
    )
    
    
    295,213Minority interest
    
    
    
    
    
    
    
    
    
    
    8,698
    
    
    
    
    
    
    
    
    
    
    
    8,698Contingencies and commitmentsSHAREHOLDERS EQUITYTotal shareholders equity
    
    
    41,809
    
    
    
    2,202
    
    
    
    67,958
    
    
    
    55,413
    
    
    
    (125,573
    )
    
    
    41,809Total liabilities and shareholders equity
    
    $
    (7,009
    )
    
    $
    659
    
    
    $
    325,822
    
    
    $
    151,897
    
    
    $
    (125,649
    )
    
    $
    345,720
 F-27




---



##### 



TRENCH ELECTRIC B.V. - FORM 20-F Equivalent SUPPLEMENTAL CONSOLIDATED CONDENSED STATEMENTS OF INCOME (LOSS) For the year ended December 31, 2003
(expressed in thousands of U.S. dollars) Non-Guarantor
    
    GuarantorParent
    
    Issuer
    
    Members
    
    Members
    
    Eliminations
    
    ConsolidatedOperating revenue
    
    $
    
    
    
    $
    
    
    
    $
    215,367
    
    
    $
    103,760
    
    
    $
    (39,585
    )
    
    $
    279,542Operating expenses
    
    
    (433
    )
    
    
    109
    
    
    
    188,820
    
    
    
    87,162
    
    
    
    (37,996
    )
    
    
    237,662Operating income
    
    
    433
    
    
    
    (109
    )
    
    
    26,547
    
    
    
    16,598
    
    
    
    (1,589
    )
    
    
    41,880Foreign exchange losses (gains)
    
    
    285
    
    
    
    373
    
    
    
    (27,246
    )
    
    
    300
    
    
    
    
    
    
    
    (26,288
    )Interest expense (income)
    
    
    (5,444
    )
    
    
    (206
    )
    
    
    20,800
    
    
    
    4,401
    
    
    
    
    
    
    
    19,551Income before income taxes,
and minority interest and others
    
    
    5,592
    
    
    
    (276
    )
    
    
    32,993
    
    
    
    11,897
    
    
    
    (1,589
    )
    
    
    48,617Exceptional item
    
    
    5,093
    
    
    
    407
    
    
    
    402
    
    
    
    (4,313
    )
    
    
    (1,589
    )
    
    
    Dividend income
    
    
    
    
    
    
    
    
    
    
    3,612
    
    
    
    1,358
    
    
    
    (4,970
    )
    
    
    Income (loss) before income
taxes and minority interest
    
    
    499
    
    
    
    (683
    )
    
    
    36,203
    
    
    
    17,568
    
    
    
    (4,970
    )
    
    
    48,617Provision for income taxes
    
    
    1,976
    
    
    
    93
    
    
    
    3,083
    
    
    
    3,611
    
    
    
    
    
    
    
    8,763Income before minority interest
    
    
    (1,477
    )
    
    
    (776
    )
    
    
    33,120
    
    
    
    13,957
    
    
    
    (4,970
    )
    
    
    39,854Equity income in subsidiaries
    
    
    36,445
    
    
    
    1,688
    
    
    
    9,266
    
    
    
    
    
    
    
    (47,399
    )
    
    
    Minority interests
    
    
    
    
    
    
    
    
    
    
    4,886
    
    
    
    
    
    
    
    
    
    
    
    4,886Net income for the year
    
    $
    34,968
    
    
    $
    912
    
    
    $
    37,500
    
    
    $
    13,957
    
    $
    
    (52,369
    )
    
    $
    34,968
 F-28




---



##### 



TRENCH ELECTRIC B.V. - FORM 20-F Equivalent SUPPLEMENTAL CONSOLIDATED CONDENSED STATEMENTS OF INCOME (LOSS) For the year ended December 31, 2002
(expressed in thousands of U.S. dollars) Non-Guarantor
    
    guarantorParent
    
    Issuers
    
    members
    
    Members
    
    Eliminations
    
    ConsolidatedOperating revenues
    
    $
    
    
    
    $
    
    
    
    $
    207,265
    
    
    $
    83,647
    
    
    $
    (35,026
    )
    
    $
    255,886Operating expenses
    
    
    278
    
    
    
    116
    
    
    
    179,008
    
    
    
    78,159
    
    
    
    (35,026
    )
    
    
    222,535Operating income (loss)
    
    
    (278
    )
    
    
    (116
    )
    
    
    28,257
    
    
    
    5,488
    
    
    
    
    
    
    
    33,351Foreign exchange losses (gains)
    
    
    2,945
    
    
    
    95
    
    
    
    (5,803
    )
    
    
    470
    
    
    
    
    
    
    
    (2,293
    )Interest expense (income)
    
    
    (4,060
    )
    
    
    (367
    )
    
    
    20,531
    
    
    
    3,534
    
    
    
    
    
    
    
    19,638Income before income taxes,
exceptional item and minority
interest
    
    
    837
    
    
    
    156
    
    
    
    13,529
    
    
    
    1,484
    
    
    
    
    
    
    
    16,006Dividend income
    
    
    
    
    
    
    
    
    
    
    1,288
    
    
    
    2,363
    
    
    
    (3,651
    )
    
    
    Exceptional items
    
    
    (2,214
    )
    
    
    302
    
    
    
    1,277
    
    
    
    635
    
    
    
    
    
    
    
    Provision for income taxes
    
    
    1,477
    
    
    
    121
    
    
    
    4,688
    
    
    
    479
    
    
    
    
    
    
    
    6,765Income before minority interest
    
    
    1,574
    
    
    
    (267
    )
    
    
    8,852
    
    
    
    2,733
    
    
    
    (3,651
    )
    
    
    9,241Equity income in subsidiary
    
    
    4,908
    
    
    
    916
    
    
    
    5,192
    
    
    
    
    
    
    
    (11,016
    )
    
    
    Minority interests
    
    
    
    
    
    
    
    
    
    
    2,759
    
    
    
    
    
    
    
    
    
    
    
    2,759Net income for the year
    
    $
    6,482
    
    
    $
    649
    
    
    $
    11,285
    
    
    $
    2,733
    
    
    $
    (14,667
    )
    
    $
    6,482
 SUPPLEMENTAL CONSOLIDATED CONDENSED STATEMENTS OF INCOME (LOSS) For the year ended December 31, 2001
(expressed in thousands of U.S. dollars) Non-Guarantor
    
    guarantorParent
    
    Issuers
    
    members
    
    Members
    
    Eliminations
    
    ConsolidatedOperating revenues
    
    $
    
    
    
    $
    
    
    
    $
    198,114
    
    
    $
    59,609
    
    
    $
    (33,467
    )
    
    $
    224,256Operating expenses
    
    
    674
    
    
    
    58
    
    
    
    175,397
    
    
    
    60,221
    
    
    
    (29,241
    )
    
    
    207,109Operating income (loss)
    
    
    (674
    )
    
    
    (58
    )
    
    
    22,717
    
    
    
    (612
    )
    
    
    (4,226
    )
    
    
    17,147Foreign exchange losses (gains)
    
    
    (40
    )
    
    
    (148
    )
    
    
    9,423
    
    
    
    (133
    )
    
    
    
    
    
    
    9,102Interest expense (income)
    
    
    (4,023
    )
    
    
    (348
    )
    
    
    20,780
    
    
    
    3,509
    
    
    
    
    
    
    
    19,918(Loss) income before income
taxes, dividend income,
exceptional item and minority
interest
    
    
    3,389
    
    
    
    438
    
    
    
    (7,486
    )
    
    
    (3,988
    )
    
    
    (4,226
    )
    
    
    (11,873
    )Dividend income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,955
    
    
    
    (2,955
    )
    
    
    Exceptional item
    
    
    
    
    
    
    
    
    
    
    4,226
    
    
    
    
    
    
    
    (4,226
    )
    
    
    Provision for (recovery of)
income taxes
    
    
    1,432
    
    
    
    171
    
    
    
    1,297
    
    
    
    (738
    )
    
    
    
    
    
    
    2,162(Loss) income before minority
interest
    
    
    1,957
    
    
    
    267
    
    
    
    (13,009
    )
    
    
    (295
    )
    
    
    (2,955
    )
    
    
    (14,035
    )Equity income (loss) in subsidiary
    
    
    (17,184
    )
    
    
    (315
    )
    
    
    1,806
    
    
    
    
    
    
    
    15,693
    
    
    
    Minority interests
    
    
    
    
    
    
    
    
    
    
    1,192
    
    
    
    
    
    
    
    
    
    
    
    1,192Net (loss) income for the year
    
    $
    (15,227
    )
    
    $
    (48
    )
    
    $
    (12,395
    )
    
    $
    (295
    )
    
    $
    12,738
    
    
    $
    (15,227
    )
 F-29




---



##### 



TRENCH ELECTRIC B.V. - FORM 20-F Equivalent SUPPLEMENTAL CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS For the year ended December 31, 2003
(expressed in thousands of U.S. dollars) Non-Guarantor
    
    guarantorParent
    
    Issuers
    
    Members
    
    Members
    
    ConsolidatedCash provided by (used in)OPERATING ACTIVITIESNet income (loss) for the period,
before equity income adjustments
    
    $
    (1,477
    )
    
    $
    (776
    )
    
    $
    24,622
    
    
    $
    12,599
    
    
    $
    34,968Adjustments to reconcile net income to net cash
provided by operating activities:Minority interest
    
    
    
    
    
    
    
    
    
    
    4,886
    
    
    
    
    
    
    
    4,886Depreciation of property, plant and equipment
    
    
    2
    
    
    
    
    
    
    
    4,605
    
    
    
    3,486
    
    
    
    8,093Loss on disposal of property, plant and
equipment
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    35
    
    
    
    45Loss on investment writedown
    
    
    
    
    
    
    
    
    
    
    67
    
    
    
    
    
    
    
    67Gain on sale of assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (905
    )
    
    
    (905
    )Amortization of deferred financing costs
and other non-cash interest
    
    
    
    
    
    
    
    
    
    
    1,514
    
    
    
    136
    
    
    
    1,650Unrealized exchange (gain) loss on long-term debt
and bank indebtedness
    
    
    226
    
    
    
    (45
    )
    
    
    (29,322
    )
    
    
    
    
    
    
    (29,141
    )Changes in non-cash working capital
and other non-cash items (note 16)
    
    
    666
    
    
    
    (3,958
    )
    
    
    12,070
    
    
    
    8,248
    
    
    
    17,026$
    (583
    )
    
    $
    (4,779
    )
    
    $
    18,452
    
    
    $
    23,599
    
    
    $
    36,689INVESTING ACTIVITIESPurchase of property, plant and equipment
    
    $
    (72
    )
    
    $
    
    
    
    $
    (3,307
    )
    
    $
    (6,309
    )
    
    $
    (9,688
    )Purchase of intangible assets
    
    
    
    
    
    
    
    
    
    
    (1,196
    )
    
    
    
    
    
    
    (1,196
    )Proceeds on sale of assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,356
    
    
    
    2,356Proceeds on sale of technology
    
    
    
    
    
    
    
    
    
    
    1,000
    
    
    
    
    
    
    
    1,000Proceeds on disposal of property, plant and
equipment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (72
    )
    
    $
    
    
    
    $
    (3,503
    )
    
    $
    (3,953
    )
    
    $
    (7,528
    )FINANCING ACTIVITIESPayments on revolving credit
facility with CIBC  net
    
    $
    
    
    
    $
    
    
    
    $
    (4,756
    )
    
    $
    (1,086
    )
    
    $
    (5,842
    )Proceeds from short-term debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    164
    
    
    
    164Payments on short-term debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (526
    )
    
    
    (526
    )Payments on long-term debt
    
    
    
    
    
    
    
    
    
    
    (3,827
    )
    
    
    (2,525
    )
    
    
    (6,352
    )Net proceeds from (payments on) capital leases
    
    
    
    
    
    
    
    
    
    
    613
    
    
    
    (550
    )
    
    
    63Intercompany financing
    
    
    303
    
    
    
    5,359
    
    
    
    (4,169
    )
    
    
    (1,493
    )
    
    
    Dividends received (paid)
    
    
    
    
    
    
    
    
    
    
    2,254
    
    
    
    (4,199
    )
    
    
    (1,945
    )$
    303
    
    
    $
    5,359
    
    
    $
    (9,885
    )
    
    $
    (10,215
    )
    
    $
    (14,438
    )Effect of exchange rate changes on cash
    
    $
    51
    
    
    $
    (552
    )
    
    $
    1,529
    
    
    $
    (92
    )
    
    $
    936Increase (decrease) in cash and
cash equivalents during the period
    
    
    (301
    )
    
    
    28
    
    
    
    6,593
    
    
    
    9,339
    
    
    
    15,659Cash and cash equivalents  Beginning of
period
    
    
    428
    
    
    
    40
    
    
    
    8,622
    
    
    
    6,332
    
    
    
    15,422Cash and cash equivalents  End of period
    
    $
    127
    
    
    $
    68
    
    
    $
    15,215
    
    
    $
    15,671
    
    
    $
    31,081Supplemental disclosures:Cash paid during the period for:Income taxes
    
    $
    
    
    
    $
    82
    
    
    $
    4,222
    
    
    $
    1,813
    
    
    $
    6,117Interest
    
    $
    201
    
    
    $
    (68
    )
    
    $
    17,062
    
    
    $
    706
    
    
    $
    17,901
 F-30




---



##### 



TRENCH ELECTRIC B.V. - FORM 20-F Equivalent SUPPLEMENTAL CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS For the year ended December 31, 2002
(expressed in thousands of U.S. dollars) Non-Guarantor
    
    guarantorParent
    
    Issuers
    
    Members
    
    Members
    
    ConsolidatedCash provided by (used in)OPERATING ACTIVITIESNet income (loss) for the period,
before equity income adjustments
    
    $
    1,574
    
    
    $
    (267
    )
    
    $
    4,805
    
    
    $
    370
    
    
    $
    6,482Adjustments to reconcile net income to net
cash provided by operating activities
Minority interest
    
    
    
    
    
    
    
    
    
    
    2,759
    
    
    
    
    
    
    
    2,759Depreciation of property, plant and equipment
    
    
    
    
    
    
    
    
    
    
    3,960
    
    
    
    3,030
    
    
    
    6,990Amortization of goodwill
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Loss on sale of assets
    
    
    
    
    
    
    
    
    
    
    218
    
    
    
    45
    
    
    
    263Gain on sale of assets
    
    
    
    
    
    
    
    
    
    
    (781
    )
    
    
    
    
    
    
    (781
    )Amortization of deferred financing costs
and other non-cash interest
    
    
    
    
    
    
    
    
    
    
    1,342
    
    
    
    113
    
    
    
    1,455Unrealized exchange gain on long-term debt
and bank indebtedness
    
    
    2,782
    
    
    
    57
    
    
    
    (6,504
    )
    
    
    
    
    
    
    (3,665
    )Changes in non-cash working capital
and other non-cash items
    
    
    (1,668
    )
    
    
    (92
    )
    
    
    7,363
    
    
    
    (5,279
    )
    
    
    3242,688
    
    
    
    (302
    )
    
    
    13,162
    
    
    
    (1,721
    )
    
    
    13,827INVESTING ACTIVITIESAcquisitions, net of cash acquired
    
    
    
    
    
    
    
    
    
    
    (1,933
    )
    
    
    981
    
    
    
    (952
    )Purchases of property, plant and equipment
    
    
    
    
    
    
    
    
    
    
    (3,061
    )
    
    
    (2,129
    )
    
    
    (5,190
    )Proceeds on sale of assets
    
    
    
    
    
    
    
    
    
    
    850
    
    
    
    1
    
    
    
    851Proceeds on sale of technology
    
    
    
    
    
    
    
    
    
    
    5,000
    
    
    
    
    
    
    
    5,000
    
    
    
    
    
    
    
    856
    
    
    
    (1,147
    )
    
    
    (291
    )FINANCING ACTIVITIESNet payments on revolving
credit facility with CIBC  net
    
    
    
    
    
    
    
    
    
    
    (5,712
    )
    
    
    (128
    )
    
    
    (5,840
    )Proceeds from short-term debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    362
    
    
    
    362Payments on long-term debt
    
    
    
    
    
    
    
    
    
    
    (2,811
    )
    
    
    (958
    )
    
    
    (3,769
    )Payments on capital leases
    
    
    
    
    
    
    
    
    
    
    (72
    )
    
    
    (460
    )
    
    
    (532
    )Increase/(decrease) in debt payable to affiliate
    
    
    (2,361
    )
    
    
    (1,213
    )
    
    
    (729
    )
    
    
    4,303
    
    
    
    Intercompany bond sale
    
    
    
    
    
    
    1,528
    
    
    
    (1,528
    )
    
    
    
    
    
    
    Dividends
    
    
    
    
    
    
    
    
    
    
    100
    
    
    
    (794
    )
    
    
    (694
    )(2,361
    )
    
    
    315
    
    
    
    (10,572
    )
    
    
    2,325
    
    
    
    (10,473
    )Effect of exchange rate changes on cash
    
    
    42
    
    
    
    7
    
    
    
    511
    
    
    
    70
    
    
    
    630Increase (decrease) in cash and cash
equivalents during the year
    
    
    369
    
    
    
    20
    
    
    
    3,777
    
    
    
    (473
    )
    
    
    3,693Cash and cash equivalents  Beginning of
Year
    
    
    59
    
    
    
    20
    
    
    
    4,846
    
    
    
    6,804
    
    
    
    11,729Cash and cash equivalents  End of year
    
    $
    428
    
    
    $
    40
    
    
    $
    8,623
    
    
    $
    6,331
    
    
    $
    15,422Supplemental disclosures:Cash paid during the year for:Income taxes
    
    $
    
    
    
    $
    430
    
    
    $
    3,363
    
    
    $
    2,239
    
    
    $
    6,032Interest
    
    $
    (708
    )
    
    $
    (69
    )
    
    $
    18,175
    
    
    $
    785
    
    
    $
    18,183
 F-31




---



##### 



TRENCH ELECTRIC B.V. - FORM 20-F Equivalent SUPPLEMENTAL CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS For the year ended December 31, 2001
(expressed in thousands of U.S. dollars) Non-Guarantor
    
    guarantorParent
    
    Issuers
    
    members
    
    Members
    
    ConsolidatedCash provided by (used in)OPERATING ACTIVITIESNet income (loss) for the period,
before equity income adjustments
    
    $
    1,957
    
    
    $
    269
    
    
    $
    (14,204
    )
    
    $
    (3,249
    )
    
    $
    (15,227
    )Adjustments to reconcile net income to net
cash provided by operating activities
Minority interest
    
    
    
    
    
    
    
    
    
    
    1,192
    
    
    
    
    
    
    
    1,192Depreciation of property, plant and equipment
    
    
    
    
    
    
    
    
    
    
    4,038
    
    
    
    2,887
    
    
    
    6,925Amortization of goodwill
    
    
    
    
    
    
    
    
    
    
    3,229
    
    
    
    258
    
    
    
    3,487(Gain) loss on sale of assets
    
    
    
    
    
    
    
    
    
    
    (58
    )
    
    
    
    
    
    
    (58
    )Amortization of deferred financing costs
and other non-cash interest
    
    
    (143
    )
    
    
    
    
    
    
    897
    
    
    
    443
    
    
    
    1,197Unrealized exchange loss on long-term debt
and bank indebtedness
    
    
    (163
    )
    
    
    (87
    )
    
    
    9,685
    
    
    
    (133
    )
    
    
    9,302Changes in non-cash working capital
and other non-cash items
    
    
    (429
    )
    
    
    (143
    )
    
    
    (2,525
    )
    
    
    (938
    )
    
    
    (4,035
    )1,222
    
    
    
    39
    
    
    
    2,254
    
    
    
    (732
    )
    
    
    2,783INVESTING ACTIVITIESAcquisitions, net of cash acquired
    
    
    
    
    
    
    
    
    
    
    (2,553
    )
    
    
    321
    
    
    
    (2,232
    )Purchases of property, plant and equipment
    
    
    
    
    
    
    
    
    
    
    (998
    )
    
    
    (6,727
    )
    
    
    (7,725
    )Proceeds on disposal of property, plant and
Equipment
    
    
    
    
    
    
    
    
    
    
    452
    
    
    
    
    
    
    
    452
    
    
    
    
    
    
    
    (3,099
    )
    
    
    (6,406
    )
    
    
    (9,505
    )FINANCING ACTIVITIESProceeds from revolving
credit facility with CIBC  net
    
    
    
    
    
    
    
    
    
    
    (366
    )
    
    
    923
    
    
    
    557Proceeds from long-term debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Payments on long-term debt
    
    
    
    
    
    
    
    
    
    
    (2,544
    )
    
    
    (1,059
    )
    
    
    (3,603
    )Proceeds from capital leases
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    967
    
    
    
    967Increase/(decrease) in debt payable to affiliate
    
    
    (2,175
    )
    
    
    (275
    )
    
    
    275
    
    
    
    2,175
    
    
    
    Increase/(decrease) in capital
    
    
    
    
    
    
    
    
    
    
    (636
    )
    
    
    636
    
    
    
    Dividends
    
    
    
    
    
    
    
    
    
    
    (2,955
    )
    
    
    2,955
    
    
    
    (2,175
    )
    
    
    (275
    )
    
    
    (6,226
    )
    
    
    6,597
    
    
    
    (2,079
    )Effect of exchange rate changes on cash
    
    
    272
    
    
    
    (17
    )
    
    
    (55
    )
    
    
    (189
    )
    
    
    11Increase (decrease) in cash and cash
equivalents during the year
    
    
    (681
    )
    
    
    (253
    )
    
    
    (7,126
    )
    
    
    (730
    )
    
    
    (8,790
    )Cash and cash equivalents  Beginning of
Year
    
    
    740
    
    
    
    273
    
    
    
    11,972
    
    
    
    7,534
    
    
    
    20,519Cash and cash equivalents  End of year
    
    $
    59
    
    
    $
    20
    
    
    $
    4,846
    
    
    $
    6,804
    
    
    $
    11,729Supplemental disclosures:Cash paid during the year for:Income taxes
    
    $
    
    
    
    $
    95
    
    
    $
    825
    
    
    $
    417
    
    
    $
    1,337Interest (received)
    
    $
    176
    
    
    $
    (4
    )
    
    $
    17,602
    
    
    $
    866
    
    
    $
    18,640
 F-32




---



##### 



TRENCH ELECTRIC B.V. - FORM 20-F Equivalent Other information: Analysis of provisions: Year ended
    
    Year ended
    
    Year endedDecember 31,
    
    December 31,
    
    December 31,2003
    
    2002
    
    2001Allowance for doubtful accountsBalance, beginning of period
    
    $
    1,751
    
    
    $
    843
    
    
    $
    2,446Reversal of accrual to income in Trench
UK
    
    
    
    
    
    
    
    
    
    
    (1,003
    )Charged to income statement
    
    
    (64
    )
    
    
    (265
    )
    
    
    (447
    )Adjustment to allowance, net of exchange
    
    
    378
    
    
    
    1,173
    
    
    
    (153
    )Balance, end of period
    
    $
    2,065
    
    
    $
    1,751
    
    
    $
    843
 Year ended
    
    Year ended
    
    Year endedDecember 31,
    
    December 31,
    
    December 31,2003
    
    2002
    
    2001Provision for inventory obsolescenceBalance, beginning of period
    
    $
    1,891
    
    
    $
    2,188
    
    
    $
    2,320Charged to income statement
    
    
    (36
    )
    
    
    (534
    )
    
    
    (1,044
    )Additional provision, net of exchange
    
    
    930
    
    
    
    237
    
    
    
    912Balance, end of period
    
    $
    2,785
    
    
    $
    1,891
    
    
    $
    2,188
 F-33




---



##### 



TRENCH ELECTRIC B.V. - FORM 20-F Equivalent Subsidiary Information We own, directly or indirectly 100%, of the following companies (except for MWB
(Shanghai) Co. Ltd. in China, which is 65% owned and Trench Fushun Bushing Co.
Ltd in Fushun, China, which is 65% owned). Trench Electric BV
    
    Trench Limited
    
    Trench Germany GmbHProf. J.H. Bavincklaan 7
    
    71 Maybrook Drive
    
    Nürnberger Strasse 1991183 AT, Amstelveen
    
    Scarborough, Ontario
    
    D-96050 BambergThe Netherlands
    
    M1V 4B6
    
    Germany+31 20 301 3600
    
    Canada
    
    +49 951 1803 0+1 416 298 8108Trench Austria GmbH
    
    Trench Inc.
    
    Finatrench (France) SAPaschinger Strasse 49
    
    71 Maybrook Drive
    
    112 Avenue KleberA-4060 Linz-Leonding
    
    Scarborough, Ontario
    
    BP 163, Trocadero 75770Austria
    
    M1V 4B6
    
    Paris, France+43 732 6793 0
    
    Canada
    
    +33 3 89 70 23 23+1 416 298 8108Trench Switzerland A.G.
    
    Trench Electric SA
    
    Trench France SALehenmattstrasse 353
    
    180 rue des Aubepines
    
    16 rue du Général-CassagnouCH 4052, Basel
    
    Luxembourg
    
    68302 St. Louis, CedexSwitzerland
    
    L-1145
    
    France+41 61.315 51 11
    
    
    
    +33 3 89 70 23 23MWB (Shanghai) Co. Ltd.
    
    Trench (UK) Ltd.
    
    Trench Brasil Ltda3658 Jiang Cheng Road
    
    South Drive, Hebburn
    
    Via Expressa de Contagem, 2685Minhang, Shanghai, China
    
    Tyne & Wear
    
    CEP: 32370-485200245
    
    England
    
    Contagem, MG+86 21 6463 3611
    
    +44 191 483 4711
    
    Brasil
+55 31 391 5959Trench Fushun Bushing Co., Ltd
    
    Valtimon Holding BVDong Er Dao, Shuncheng District
    
    Prof. J.H. Bavincklaan 7Fushun, Liaoning, 113126
    
    1183 AT, AmstelveenChina
    
    The Netherlands+86 413 764 4095
 F-34




---



##### 



TRENCH ELECTRIC B.V. - FORM 20-F Equivalent SIGNATURE The registrant hereby certifies that it meets all of the
requirements for filing on Form 20-F Equivalent and that it has duly
caused the undersigned to sign this annual report on its behalf. Dated this: 24th March 2004
    
    
    
    TRENCH ELECTRIC B.V.By:
    

(-s- MICHAEL J. BISSELL)Michael J. Bissell
Group Finance Director
 F-35