##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





Form 10-K


|           |  |                                                                                             
|---------- |  | --------------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                             
|þ          |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934    
|           |  | For the fiscal year ended March 31, 2005                                                    
|          
|or        
|          
|o          |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934
|           |  | For the transition period
    from          to                                              

Commission file number 000-26124





IXYS Corporation


(Exact name of Registrant as specified in its charter)


|                                                                   |  |                                         
|------------------------------------------------------------------ |  | ----------------------------------------
|Delaware                                                           |  | 77-0140882                              
|(State or other jurisdiction of
    incorporation or organization) |  | (I.R.S. Employer
    Identification No.)

3540 Bassett Street


Santa Clara, California 95054-2704


(Address of principal executive offices and zip code)


(408) 982-0700


(Registrants telephone number, including area code)


Securities registered pursuant to Section 12(b) of the
Act:


None


(Title of Class)


Securities registered pursuant to Section 12(g) of the
Act:


Common stock, par value $.01 per share


(Title of Class)


þ o


o þ


þ o




Documents Incorporated
by Reference












---










IXYS CORPORATION


ANNUAL REPORT ON FORM 10-K


FOR THE FISCAL YEAR ENDED MARCH 31, 2005


TABLE OF CONTENTS


|              |  |                                                                                                                      |  |      |    |  |  | 
|------------- |  | -------------------------------------------------------------------------------------------------------------------- |  | ---- | -- |  |  | 
|              |  |                                                                                                                      |  | Page |   
|              |  |                                                                                                                      |  |      |   
|PART I       
|Item 1.       |  | Business                                                                                                             |  |      | 3  | 
|Item 2.       |  | Properties                                                                                                           |  |      | 14 | 
|Item 3.       |  | Legal Proceedings                                                                                                    |  |      | 14 | 
|Item 4.       |  | Submission of Matters to a Vote of Security
    Holders                                                              |  |      | 15 | 
|             
|PART II      
|Item 5.       |  | Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities |  |      | 17 | 
|Item 6.       |  | Selected Financial Data                                                                                              |  |      | 18 | 
|Item 7.       |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations                            |  |      | 19 | 
|Item 7A.      |  | Quantitative and Qualitative Disclosures
    About Market Risk                                                       |  |      | 43 | 
|Item 8.       |  | Financial Statements and Supplementary
    Data                                                                      |  |      | 45 | 
|Item 9.       |  | Changes In and Disagreements With
    Accountants on Accounting and Financial Disclosure                             |  |      | 81 | 
|Item 9A.      |  | Controls and Procedures                                                                                              |  |      | 81 | 
|Item 9B.      |  | Other Information                                                                                                    |  |      | 87 | 
|             
|PART III     
|Item 10.      |  | Directors and Executive Officers of the
    Registrant                                                               |  |      | 87 | 
|Item 11.      |  | Executive Compensation                                                                                               |  |      | 87 | 
|Item 12.      |  | Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder Matters                   |  |      | 88 | 
|Item 13.      |  | Certain Relationships and Related
    Transactions                                                                   |  |      | 88 | 
|Item 14.      |  | Principal Accounting Fees and Services                                                                               |  |      | 88 | 
|             
|PART IV      
|Item 15.      |  | Exhibits, Financial Statement Schedules                                                                              |  |      | 88 | 
|EXHIBIT 10.26
|EXHIBIT 10.27
|EXHIBIT 10.28
|EXHIBIT 21.1 
|EXHIBIT 23.1 
|EXHIBIT 23.2 
|EXHIBIT 31.1 
|EXHIBIT 31.2 
|EXHIBIT 32.1 



2



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FORWARD-LOOKING STATEMENTS







PART I







|        |         
|------- | --------
|Item 1. | Business













| |   |                                                                                                                                                                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | power conversion systems, including uninterruptible power
    supplies, or UPS, and switch mode power supplies, or SMPS, for
    communications infrastructure applications such as wireless base
    stations, network servers and telecommunication switching
    stations;
|
| |  | motor drives for industrial applications such as industrial
    transportation, robotics, automation, and process control
    equipment;                                                                                                                                     
|
| |  | plasma display panels;                                                                                                                                                                                                                                                       
|
| |  | medical electronics for sophisticated applications, such as
    defibrillators and MRI and CT equipment; and                                                                                                                                                                 
|
| |  | renewable energy sources like wind turbines and solar systems.                                                                                                                                                                                                               



3



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Background






| |   |                                                                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | proliferation of technology-driven products that require
    electricity, including computers, telecommunications equipment
    and the infrastructure to support portable electronics;
|
| |  | increased use of electronic content in traditional products such
    as airplanes, automobiles and home appliances;                                                                    
|
| |  | increased use of automation and electrical processes in industry
    and mass transit systems;                                                                                         
|
| |  | the growth of the Internet and mobile telecommunications
    demand; and                                                                                                               
|
| |  | penetration of technology into developing countries.                                                                                                                                   







| |   |                                                                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | convert or rectify alternating current, or AC, power
    delivered by electrical utilities to the direct current, or DC,
    power that is required by most electronic equipment;
|
| |  | convert DC power at a certain voltage level to DC power at a
    different voltage level to meet the specific voltage requirement
    for an application;                          
|
| |  | invert DC power to high frequency AC power to permit the
    processing of power using substantially smaller electronic
    components; or                                         
|
| |  | rectify high frequency AC power from switch mode power supplies
    to meet the specific DC voltage required by an application.                                                    





4



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Market Size and Trends




Growth in communications devices and infrastructure.


Increased demand for energy efficiency in motor drives.


Emergence of new applications in medical electronics.


Development of new technologies for power management.


Demand for increasing power density.


Demand for new display technologies.


5



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IXYSs Strategy




Maintain technological focus on high power, high performance
markets.


Target rapid growth.


Focus on niche markets.


Continue to diversify markets, customers and products.


Pursue selective acquisition and investment strategy.


Collaborate with select companies on product development.


Optimize mix between internal and external manufacturing.


6



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Power Semiconductors






| |                       
| | ----------------------
| | Power MOS Transistors.





| |               
| | --------------
| | Power MOSFETs.







| |       
| | ------
| | IGBTs.





7



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| |                  
| | -----------------
| | Bipolar Products.





| |            
| | -----------
| | Rectifiers.







| |            
| | -----------
| | Thyristors.



Integrated Circuits






| |                    
| | -------------------
| | Solid State Relays.





| |                                  
| | ---------------------------------
| | LCAS and DAA integrated products.

tm




| |                                          
| | -----------------------------------------
| | Application Specific Integrated Circuits.



8



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| |                                  
| | ---------------------------------
| | Power Management and Control ICs.



RF Power Semiconductors




Other Products




Products and Applications




|                         |  |               |           |  |                       |                          
|------------------------ |  | ------------- | --------- |  | --------------------- | -------------------------
|Category                 |  | IXYS Products |           |  | End User Applications
|                         |  |               |           |  |                      
|Power Conversion Systems |  |               | FRED      |  |                       | SMPS and UPS for:        
|                         |  |               | IGBT      |  |                       | Wireless base stations   
|                         |  |               | Module    |  |                       | Internet facilities      
|                         |  |               | MOSFET    |  |                       | Storage Area Networks    
|                         |  |               | Rectifier |  |                       | RF Generators            
|                         |  |               | IC Driver |  |                       |                          
|Motor Drives             |  |               | FRED      |  |                       | Automation               
|                         |  |               | IGBT      |  |                       | Robotics                 
|                         |  |               | Module    |  |                       | Process control equipment
|                         |  |               | MOSFET    |  |                       | Machine tools            
|                         |  |               | Thyristor |  |                       | Electric trains          
|                         |  |               | IC Driver |  |                       |                          
|Medical Electronics      |  |               | IGBT      |  |                       | Defibrillators           
|                         |  |               | MOSFET    |  |                       | Medical imaging devices  
|                         |  |               | Thyristor |  |                       | Laser power supplies     
|                         |  |               | IC        |  |                       | Ultrasound               
|                         |  |               | GaAs FET  |  |                       | Hearing aids             
|Telecommunication        |  |               | SSR       |  |                       | Point of sale terminals  
|                         |  |               | LCAS      |  |                       | Modems                   
|                         |  |               | GaAs FET  |  |                       | Set top boxes            
|                         |  |               | DAA       |  |                       | Wireless base stations   
|                         |  |               |           |  |                       | Central office           
|Display                  |  |               | MOSFET    |  |                       | Plasma display panels    
|                         |  |               | IC driver |  |                       | E-books                  

9



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Sales and Marketing








Research and Development








| |   |                                                                
| | - | ---------------------------------------------------------------
| |  | developing RF power MOSFETs and GaAs FETs;                     
|
| |  | increasing the operating range of our MOS and bipolar products;
|
| |  | developing new gallium arsenide products;                      
|
| |  | developing high efficiency solar cells;                        
|
| |  | developing higher power IGBT modules;                          
|
| |  | developing power solid state relays; and                       
|
| |  | developing power management ICs based on our HVIC technology.  

10



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Patents and Other Intellectual Property Rights






Manufacturing and Facilities






| |                   
| | ------------------
| | Wafer Fabrication.







11



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| |          
| | ---------
| | Assembly.







| |      
| | -----
| | Test.



Competition






| |   |                                              
| | - | ---------------------------------------------
| |  | proper new product definition;               
|
| |  | product quality, reliability and performance;
|
| |  | product features;                            
|
| |  | timely delivery of products;                 
|
| |  | price;                                       
|
| |  | timely delivery of products;                 
|
| |  | breadth of product line;                     

12



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| |   |                                                                      
| | - | ---------------------------------------------------------------------
| |  | design and introduction of new products;                             
|
| |  | market acceptance of our products and those of our
    customers; and
|
| |  | technical support and service.                                       



Backlog










Employees




Available Information




13



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|        |           
|------- | ----------
|Item 2. | Properties



|                        |  |             |         |  |                  |  |               |     |  |                                                                                           
|----------------------- |  | ----------- | ------- |  | ---------------- |  | ------------- | --- |  | ------------------------------------------------------------------------------------------
|                        |  | Approximate |         |  |                  |  |              
|                        |  | Square      |         |  |                  |  |              
|Principal Facilities    |  | Footage     |         |  | Lease Expiration |  |               | Use
|                        |  |             |         |  |                  |  |               |    
|Aliso Viejo, California |  |             | 27,000  |  |                  |  | April 2006(1) |     |  | Research and development, sales and distribution                                          
|Beverly, Massachusetts  |  |             | 83,000  |  |                  |  | (2)           |     |  | Research and development, manufacturing, sales and distribution                           
|Chippenham, England     |  |             | 100,000 |  |                  |  | December 2022 |     |  | Research and development, manufacturing, sales and distribution                           
|Fremont, California     |  |             | 30,000  |  |                  |  | November 2008 |     |  | Research and development, manufacturing, sales and distribution                           
|Lampertheim, Germany    |  |             | 170,000 |  |                  |  | (3)           |     |  | European headquarters, research and development, manufacturing,
    sales and distribution
|Santa Clara, California |  |             | 20,000  |  |                  |  | January 2009  |     |  | Corporate headquarters, research and development, sales and
    distribution              






|    |                                                                        
|--- | -----------------------------------------------------------------------
|(1) | Under contract for acquisition at a purchase price of
    $5.1 million.
|   
|(2) | Owned, not leased. Acquired on May 6, 2005 for
    $9.0 million.       
|   
|(3) | Owned, not leased.                                                     








|        |                  
|------- | -----------------
|Item 3. | Legal Proceedings









14



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|        |                                                    
|------- | ---------------------------------------------------
|Item 4. | Submission of Matters to a Vote of Security Holders







| |                                  
| | ---------------------------------
| | Proposal 1: The Director Proposal

|                |  |           |            |  |                |  |           | 
|--------------- |  | --------- | ---------- |  | -------------- |  | --------- | 
|Director        |  | Votes For |            |  | Votes Withheld | 
|                |  |           |            |  |                | 
|Donald Feucht   |  |           | 29,710,433 |  |                |  | 1,038,560 | 
|Samuel Kory     |  |           | 25,502,923 |  |                |  | 5,246,070 | 
|S. Joon Lee     |  |           | 29,778,399 |  |                |  | 970,594   | 
|Kenneth D. Wong |  |           | 29,846,818 |  |                |  | 902,175   | 
|Nathan Zommer   |  |           | 29,772,232 |  |                |  | 976,761   | 



| |                                 
| | --------------------------------
| | Proposal 2: The Auditor Proposal

|                  |  |  |            | 
|----------------- |  |  | ---------- | 
|Votes in Favor:   |  |  | 30,378,361 | 
|Votes Against:    |  |  | 365,074    | 
|Abstentions:      |  |  | 5,558      | 
|Broker Non-Votes: |  |  |           | 

15



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Executive Officers of the Registrant




|                |  |     |    |  |             |                                                                 
|--------------- |  | --- | -- |  | ----------- | ----------------------------------------------------------------
|Name            |  | Age |    |  | Position(s)
|                |  |     |    |  |            
|Nathan Zommer   |  |     | 57 |  |             | Chairman of the Board, President and Chief Executive Officer    
|Uzi Sasson      |  |     | 42 |  |             | Vice President of Finance, Chief Financial Officer and Secretary
|Peter H. Ingram |  |     | 56 |  |             | President of European Operations                                
|Kevin McDonough |  |     | 53 |  |             | President of U.S. Operations                                    



Nathan Zommer.


Uzi Sasson.


Peter H. Ingram.


Kevin McDonough.


16



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PART II







|        |                                                                                                                      
|------- | ---------------------------------------------------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity, Related
    Stockholders Matters and Issuer Purchases of Equity
    Securities



|                                  |                |      |   |       |     |  |   |      | 
|--------------------------------- | -------------- | ---- | - | ----- | --- |  | - | ---- | 
|                                  |                | High |   |       | Low | 
|                                  |                |      |   |       |     | 
|Fiscal year ending March 31, 2005 |                |      |   |       |     |  |   |     
|                                  | First Quarter  |      | $ | 10.81 |     |  | $ | 7.53 | 
|                                  | Second Quarter |      | $ | 7.98  |     |  | $ | 6.11 | 
|                                  | Third Quarter  |      | $ | 10.61 |     |  | $ | 6.66 | 
|                                  | Fourth Quarter |      | $ | 11.67 |     |  | $ | 9.19 | 
|Fiscal year ending March 31, 2004 |                |      |   |       |     |  |   |     
|                                  | First Quarter  |      | $ | 8.70  |     |  | $ | 5.16 | 
|                                  | Second Quarter |      | $ | 11.44 |     |  | $ | 6.02 | 
|                                  | Third Quarter  |      | $ | 10.55 |     |  | $ | 7.05 | 
|                                  | Fourth Quarter |      | $ | 11.55 |     |  | $ | 8.02 | 



Equity Compensation Plans Information




|                                                           |  |                      |           |        |                      |     |                      |                           |  |  |           |    
|---------------------------------------------------------- |  | -------------------- | --------- | ------ | -------------------- | --- | -------------------- | ------------------------- |  |  | --------- | ---
|                                                           |  |                      |           |        |                      | (c) |                     
|                                                           |  | (a)                  |           |        |                      |     | Number of Securities |                          
|                                                           |  | Number of Securities |           |        | (b)                  |     |                      | Remaining Available for   | 
|                                                           |  | to be Issued Upon    |           |        | Weighted-Average     |     |                      | Future Issuance Under     | 
|                                                           |  | Exercise of          |           |        | Exercise Price of    |     |                      | Equity Compensation Plans | 
|                                                           |  | Outstanding Options, |           |        | Outstanding Options, |     |                      | (Excluding Securities     | 
|Plan Category                                              |  | Warrants and Rights  |           |        | Warrants and Rights  |     |                      | Reflected in Column (a))  | 
|                                                           |  |                      |           |        |                      |     |                      |                           | 
|Equity compensation plans approved by security holders     |  |                      | 5,197,075 | (1)(2) |                      | $   | 6.68                 |                           |  |  | 3,797,858 | (2)
|Equity compensation plans not approved by security holders |  |                      |          |        |                      |     |                     |                           |  |  |          |    
|                                                           |  |                      |           |        |                      |     |                      |                           | 
|Total                                                      |  |                      | 5,197,075 |        |                      | $   | 6.68                 |                           |  |  | 3,797,858 |    
|                                                           |  |                      |           |        |                      |     |                      |                           | 






|    |                                                                                                                                                                                                                                                                                                                             
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes options to purchase 417,000 shares of our
    common stock with a weighted average exercise price of
    $12.12 per share that were assumed in business
    combinations. It is our understanding that the stockholders of
    the acquired companies approved the plans from which these
    options were granted.
|   
|(2) | The 1999 Equity Incentive Plan includes a formula that provides
    for an annual increase in the number of shares under the plan up
    to 1,000,000, upon the determination of the Board of Directors.                                                                                                                    

Issuer Purchases of Equity Securities


|                                     |  |                  |        |  |                |                     |      |                    |                     |  |                       |  |  |  |         | 
|------------------------------------ |  | ---------------- | ------ |  | -------------- | ------------------- | ---- | ------------------ | ------------------- |  | --------------------- |  |  |  | ------- | 
|                                     |  |                  |        |  |                | Total Number of     |      |                    |                    
|                                     |  |                  |        |  |                | Shares Purchased as |      |                    | Maximum Number of   | 
|                                     |  |                  |        |  |                | Part of Publicly    |      |                    | Shares that may yet | 
|                                     |  | Total Number of  |        |  | Average Price  |                     |      | Announced Plans or |                     |  | be Purchased Under    | 
|Period                               |  | Shares Purchased |        |  | Paid per Share |                     |      | Programs           |                     |  | the Plans or Programs | 
|                                     |  |                  |        |  |                |                     |      |                    |                     |  |                       | 
|January 1, 2005 - January 31, 2005   |  |                  |       |  |                |                     |     |                    |                     |  |                      |  |  |  | 925,100 | 
|February 1, 2005 - February 28, 2005 |  |                  | 56,800 |  |                | $                   | 9.98 |                    |                     |  | 56,800                |  |  |  | 868,300 | 
|March 1, 2005 - March 31, 2005       |  |                  |       |  |                |                     |     |                    |                     |  |                      |  |  |  | 868,300 | 
|                                     |  |                  |        |  |                |                     |      |                    |                     |  |                       | 
|Total                                |  |                  | 56,800 |  |                | $                   | 9.98 |                    |                     |  | 56,800                |  |  |  |         | 

17



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|        |                        
|------- | -----------------------
|Item 6. | Selected Financial Data



|                                                |                                                                     |                                          |         |        |         |   |         |         |        |   |         |         |         |      |        |        |       |   |         |        |        | 
|----------------------------------------------- | ------------------------------------------------------------------- | ---------------------------------------- | ------- | ------ | ------- | - | ------- | ------- | ------ | - | ------- | ------- | ------- | ---- | ------ | ------ | ----- | - | ------- | ------ | ------ | 
|                                                |                                                                     | Year Ended March 31,                     |        
|                                                |                                                                     |                                          |        
|                                                |                                                                     | 2005                                     |         |        | 2004(1) |   |         | 2003(2) |        |   | 2002(3) |         |         | 2001 |       
|                                                |                                                                     |                                          |         |        |         |   |         |         |        |   |         |         |         |      |       
|                                                |                                                                     | (In thousands, except per share amounts) |        
|Statement of Operations Data:                   |                                                                     |                                          |         |        |         |   |         |         |        |   |         |         |         |      |        |        |       |   |         |       
|Net revenues                                    |                                                                     | $                                        | 256,620 |        |         | $ | 187,442 |         |        | $ | 136,111 |         |         | $    | 82,821 |        |       | $ | 111,389 |       
|Cost of goods sold                              |                                                                     |                                          | 176,710 |        |         |   | 143,948 |         |        |   | 107,371 |         |         |      | 56,918 |        |       |   | 69,967  |       
|                                                |                                                                     |                                          |         |        |         |   |         |         |        |   |         |         |         |      |       
|                                                | Gross profit                                                        |                                          |         | 79,910 |         |   |         | 43,494  |        |   |         | 28,740  |         |      |        | 25,903 |       |   |         | 41,422 |       
|                                                |                                                                     |                                          |         |        |         |   |         |         |        |   |         |         |         |      |       
|Operating expenses:                             |                                                                     |                                          |         |        |         |   |         |         |        |   |         |         |         |      |        |        |       |   |         |       
|                                                | Research, development and engineering                               |                                          |         | 18,574 |         |   |         | 15,811  |        |   |         | 12,846  |         |      |        | 5,728  |       |   |         | 6,081  |       
|                                                | Selling, general and administrative                                 |                                          |         | 35,707 |         |   |         | 32,742  |        |   |         | 32,437  |         |      |        | 17,614 |       |   |         | 17,187 |       
|                                                | Restructuring charge                                                |                                          |         |       |         |   |         |        |        |   |         | 750     |         |      |        |       |       |   |         |       |       
|                                                |                                                                     |                                          |         |        |         |   |         |         |        |   |         |         |         |      |       
|Total operating expenses                        |                                                                     |                                          | 54,281  |        |         |   | 48,553  |         |        |   | 46,033  |         |         |      | 23,342 |        |       |   | 23,268  |       
|                                                |                                                                     |                                          |         |        |         |   |         |         |        |   |         |         |         |      |       
|                                                |                                                                     | Operating income (loss)                  |         |        | 25,629  |   |         |         | (5,059 | ) |         |         | (17,293 | )    |        |        | 2,561 |   |         |        | 18,154 | 
|Other income (expense):                         |                                                                     |                                          |         |        |         |   |         |         |        |   |         |         |         |      |        |        |       |   |         |       
|                                                | Interest income, net                                                |                                          |         | 633    |         |   |         | 310     |        |   |         | 720     |         |      |        | 1,318  |       |   |         | 1,030  |       
|                                                | Other income (expense), net                                         |                                          |         | (481   | )       |   |         | (1,324  | )      |   |         | (1,288  | )       |      |        | (757   | )     |   |         | 2,724  |       
|                                                |                                                                     |                                          |         |        |         |   |         |         |        |   |         |         |         |      |       
|Income (loss) before provision for income taxes |                                                                     |                                          | 25,781  |        |         |   | (6,073  | )       |        |   | (17,861 | )       |         |      | 3,122  |        |       |   | 21,908  |       
|(Provision for)benefit from income taxes        |                                                                     |                                          | (9,539  | )      |         |   | 1,641   |         |        |   | 5,716   |         |         |      | (1,184 | )      |       |   | (8,321  | )     
|                                                |                                                                     |                                          |         |        |         |   |         |         |        |   |         |         |         |      |       
|                                                | Net income (loss)                                                   |                                          | $       | 16,242 |         |   | $       | (4,432  | )      |   | $       | (12,145 | )       |      | $      | 1,938  |       |   | $       | 13,587 |       
|                                                |                                                                     |                                          |         |        |         |   |         |         |        |   |         |         |         |      |       
|                                                | Net income (loss) per share  basic                                 |                                          | $       | 0.49   |         |   | $       | (0.14   | )      |   | $       | (0.39   | )       |      | $      | 0.07   |       |   | $       | 0.54   |       
|                                                |                                                                     |                                          |         |        |         |   |         |         |        |   |         |         |         |      |       
|                                                | Weighted average shares used in per share
    calculation  basic   |                                          |         | 33,093 |         |   |         | 32,434  |        |   |         | 30,889  |         |      |        | 26,745 |       |   |         | 25,239 |       
|                                                |                                                                     |                                          |         |        |         |   |         |         |        |   |         |         |         |      |       
|                                                | Net income (loss) per share  diluted                               |                                          | $       | 0.46   |         |   | $       | (0.14   | )      |   | $       | (0.39   | )       |      | $      | 0.07   |       |   | $       | 0.49   |       
|                                                |                                                                     |                                          |         |        |         |   |         |         |        |   |         |         |         |      |       
|                                                | Weighted average shares used in per share
    calculation  diluted |                                          |         | 35,085 |         |   |         | 32,434  |        |   |         | 30,889  |         |      |        | 29,004 |       |   |         | 27,774 |       
|                                                |                                                                     |                                          |         |        |         |   |         |         |        |   |         |         |         |      |       
|Selected Operating Data:                        |                                                                     |                                          |         |        |         |   |         |         |        |   |         |         |         |      |        |        |       |   |         |       
|                                                | Gross profit margin                                                 |                                          |         | 31.1   | %       |   |         | 23.2    | %      |   |         | 21.1    | %       |      |        | 31.3   | %     |   |         | 37.2   | %     
|                                                | Depreciation and amortization                                       |                                          | $       | 10,639 |         |   | $       | 11,186  |        |   | $       | 9,297   |         |      | $      | 5,835  |       |   | $       | 3,409  |       

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|                    |                             |                 |  |         |      |  |  |         |  |  |      |         |  |      |  |         |  |  |  |         | 
|------------------- | --------------------------- | --------------- |  | ------- | ---- |  |  | ------- |  |  | ---- | ------- |  | ---- |  | ------- |  |  |  | ------- | 
|                    |                             | As of March 31, | 
|                    |                             |                 | 
|                    |                             | 2005            |  |         | 2004 |  |  | 2003    |  |  | 2002 |         |  | 2001 | 
|                    |                             |                 |  |         |      |  |  |         |  |  |      |         |  |      | 
|                    |                             | (In thousands)  | 
|Balance Sheet Data: |                             |                 |  |         |      |  |  |         |  |  |      |         |  |      |  |         |  |  |  |        
|                    | Cash and cash equivalents   |                 |  | 58,144  |      |  |  | 42,058  |  |  |      | 40,094  |  |      |  | 32,111  |  |  |  | 44,795  | 
|                    | Working capital             |                 |  | 124,063 |      |  |  | 96,246  |  |  |      | 95,425  |  |      |  | 81,399  |  |  |  | 82,007  | 
|                    | Total assets                |                 |  | 219,891 |      |  |  | 198,269 |  |  |      | 183,057 |  |      |  | 124,560 |  |  |  | 127,414 | 
|                    | Total long-term obligations |                 |  | 16,796  |      |  |  | 15,120  |  |  |      | 14,966  |  |      |  | 12,261  |  |  |  | 8,307   | 
|                    | Total stockholders equity  |                 |  | 165,277 |      |  |  | 145,531 |  |  |      | 138,809 |  |      |  | 95,219  |  |  |  | 92,724  | 






|    |                                                                                      
|--- | -------------------------------------------------------------------------------------
|(1) | During fiscal 2004, we completed our acquisition of Microwave
    Technology, Inc.   
|   
|(2) | During fiscal 2003, we completed our acquisition of Clare, Inc.                      
|   
|(3) | During fiscal 2002, we completed our acquisition of Westcode
    Semiconductors, Ltd.






|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis of Financial
    Condition and Results of Operations

This discussion contains forward-looking statements, which
are subject to certain risks and uncertainties, including,
without limitation, those described elsewhere in this
Item 7. Actual results may differ materially from the
results discussed in the forward-looking statements. For a
discussion of risks that could affect future results, see
Risk Factors below. All forward-looking statements
included in this document are made as of the date hereof, based
on the information available to us as of the date hereof, and we
assume no obligation to update any forward-looking statement.


Overview














19



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Critical Accounting Policies and Significant Management
Estimates






Revenue recognition.




Allowance for sales returns.


Allowance for stock rotation.


20



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Allowance for doubtful accounts.


Allowance for ship and debit.




|                       |            |   |     |        |  
|---------------------- | ---------- | - | --- | ------ | -
|Balance March 31, 2002 |            | $ | 355 |       
|                       | Additions  |   |     | 2,062  |  
|                       | Deductions |   |     | (1,934 | )
|                       |            |   |    
|Balance March 31, 2003 |            |   | 483 |       
|                       | Additions  |   |     | 2,189  |  
|                       | Deductions |   |     | (2,248 | )
|                       |            |   |    
|Balance March 31, 2004 |            |   | 424 |       
|                       | Additions  |   |     | 2,742  |  
|                       | Deductions |   |     | (2,613 | )
|                       |            |   |    
|Balance March 31, 2005 |            | $ | 553 |       
|                       |            |   |    

Inventories.


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|                          |                             |                                        |        |        |        |  
|------------------------- | --------------------------- | -------------------------------------- | ------ | ------ | ------ | -
|Balance at March 31, 2002 |                             | $                                      | 6,988  |       
|                          |                             | Sale of excess inventory               |        |        | (1,917 | )
|                          |                             | Scrap of excess inventory              |        |        |       |  
|                          |                             |                                        |       
|                          | Balance of excess inventory |                                        |        | 5,071  |       
|                          |                             | Additional accrual of excess inventory |        |        | 12,153 |  
|                          |                             |                                        |       
|Balance at March 31, 2003 |                             |                                        | 17,224 |       
|                          |                             | Sale of excess inventory               |        |        | (2,624 | )
|                          |                             | Scrap of excess inventory              |        |        | (504   | )
|                          |                             |                                        |       
|                          | Balance of excess inventory |                                        |        | 14,096 |       
|                          |                             | Additional accrual of excess inventory |        |        | 10,536 |  
|                          |                             |                                        |       
|Balance at March 31, 2004 |                             |                                        | 24,632 |       
|                          |                             | Sale of excess inventory               |        |        | (3,685 | )
|                          |                             | Scrap of excess inventory              |        |        | (2,555 | )
|                          |                             |                                        |       
|                          | Balance of excess inventory |                                        |        | 18,392 |       
|                          |                             | Additional accrual of excess inventory |        |        | 2,849  |  
|                          |                             |                                        |       
|Balance at March 31, 2005 |                             | $                                      | 21,241 |       
|                          |                             |                                        |       







Valuation of property, plant, equipment, and intangible
assets.


23



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Legal contingencies.


Goodwill.


Income tax.


Defined benefit plans.


24



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Recent Accounting Developments










25



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Results of Operations




|                    |                                       |                          |         |            |              |  |      |      |            |   |              |        |        |      |      |        |     |   |         |        |        | 
|------------------- | ------------------------------------- | ------------------------ | ------- | ---------- | ------------ |  | ---- | ---- | ---------- | - | ------------ | ------ | ------ | ---- | ---- | ------ | --- | - | ------- | ------ | ------ | 
|                    |                                       | Years Ended March 31,    |        
|                    |                                       |                          |        
|                    |                                       |                          |         | % Increase |              |  |      |      | % Increase |   |              |       
|                    |                                       |                          |         | from       |              |  |      |      | from       |   |              |       
|                    |                                       | 2005                     |         |            | 2004 to 2005 |  |      | 2004 |            |   | 2003 to 2004 |        |        | 2003 |     
|                    |                                       |                          |         |            |              |  |      |      |            |   |              |        |        |      |     
|Net revenues        |                                       | $                        | 256,620 |            |              |  | 36.9 |      |            | $ | 187,442      |        |        |      | 37.7 |        |     | $ | 136,111 |       
|Cost of goods sold  |                                       |                          | 176,710 |            |              |  | 22.8 |      |            |   | 143,948      |        |        |      | 34.1 |        |     |   | 107,371 |       
|                    |                                       |                          |         |            |              |  |      |      |            |   |              |        |        |      |     
|                    | Gross profit                          |                          |         | 79,910     |              |  |      | 83.7 |            |   |              | 43,494 |        |      |      | 51.3   |     |   |         | 28,740 |       
|                    |                                       |                          |         |            |              |  |      |      |            |   |              |        |        |      |     
|Operating expenses: |                                       |                          |         |            |              |  |      |      |            |   |              |        |        |      |      |        |     |   |         |       
|                    | Research, development and engineering |                          |         | 18,574     |              |  |      | 17.5 |            |   |              | 15,811 |        |      |      | 23.1   |     |   |         | 12,846 |       
|                    | Selling, general and administrative   |                          |         | 35,707     |              |  |      | 9.1  |            |   |              | 32,742 |        |      |      | 0.9    |     |   |         | 32,437 |       
|                    | Restructuring charge                  |                          |         |           |              |  |      |     |            |   |              |       |        |      |      | (100.0 | )   |   |         | 750    |       
|                    |                                       |                          |         |            |              |  |      |      |            |   |              |        |        |      |     
|                    |                                       | Total operating expenses |         |            | 54,281       |  |      |      | 11.8       |   |              |        | 48,553 |      |      |        | 5.5 |   |         |        | 46,033 | 
|                    |                                       |                          |         |            |              |  |      |      |            |   |              |        |        |      |     



|                                        |                                                              |                          |       |      |          |  |       |          |      |  |       |       |      | 
|--------------------------------------- | ------------------------------------------------------------ | ------------------------ | ----- | ---- | -------- |  | ----- | -------- | ---- |  | ----- | ----- | ---- | 
|                                        |                                                              | Years Ending March 31,   |      
|                                        |                                                              |                          |      
|                                        |                                                              | 2005                     |       |      | 2004     |  |       | 2003     |     
|                                        |                                                              | % of Net                 |       |      | % of Net |  |       | % of Net |     
|                                        |                                                              | Revenues                 |       |      | Revenues |  |       | Revenues |     
|                                        |                                                              |                          |       |      |          |  |       |          |     
|Net revenues                            |                                                              |                          | 100.0 |      |          |  | 100.0 |          |      |  | 100.0 |      
|Cost of goods sold                      |                                                              |                          | 68.9  |      |          |  | 76.8  |          |      |  | 78.9  |      
|                                        |                                                              |                          |       |      |          |  |       |          |     
|                                        | Gross profit                                                 |                          |       | 31.1 |          |  |       | 23.2     |      |  |       | 21.1  |     
|                                        |                                                              |                          |       |      |          |  |       |          |     
|Operating expenses:                     |                                                              |                          |       |      |          |  |       |          |      |  |       |      
|                                        | Research, development and engineering                        |                          |       | 7.2  |          |  |       | 8.4      |      |  |       | 9.4   |     
|                                        | Selling, general and administrative                          |                          |       | 13.9 |          |  |       | 17.5     |      |  |       | 23.8  |     
|                                        | Restructuring charge                                         |                          |       |     |          |  |       |         |      |  |       | 0.6   |     
|                                        |                                                              |                          |       |      |          |  |       |          |     
|                                        |                                                              | Total operating expenses |       |      | 21.1     |  |       |          | 25.9 |  |       |       | 33.8 | 
|                                        |                                                              |                          |       |      |          |  |       |          |     
|                                        | Operating income (loss)                                      |                          |       | 10.0 |          |  |       | (2.7     | )    |  |       | (12.7 | )   
|Other income (expense), net             |                                                              |                          | 0.0   |      |          |  | (0.5  | )        |      |  | (0.4  | )    
|                                        |                                                              |                          |       |      |          |  |       |          |     
|                                        | Income (loss) before provision for (benefit from) income tax |                          |       | 10.0 |          |  |       | (3.2     | )    |  |       | (13.1 | )   
|Provision for (benefit from) income tax |                                                              |                          | 3.7   |      |          |  | (0.9  | )        |      |  | (4.2  | )    
|                                        |                                                              |                          |       |      |          |  |       |          |     
|Net income (loss)                       |                                                              |                          | 6.3   |      |          |  | (2.3  | )        |      |  | (8.9  | )    
|                                        |                                                              |                          |       |      |          |  |       |          |     



| |          
| | ---------
| | Revenues.



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|                                    |       |       |        |         |             |  |       |          |  |  |               |         |  |          |      |  |  |  |         |         | 
|----------------------------------- | ----- | ----- | ------ | ------- | ----------- |  | ----- | -------- |  |  | ------------- | ------- |  | -------- | ---- |  |  |  | ------- | ------- | 
|                                    |       | 2005  |        |         |             |  |      
|                                    |       |       |        |         | % Change in |  |       | 2004     | 
|                                    |       | Units |        |         | ASP         |  |       | Revenues |  |  | Revenues from |         |  | Revenues |     
|                                    |       | (000) |        |         | $           |  |       | ($000)   |  |  | 2004 to 2005  |         |  | ($000)   |     
|                                    |       |       |        |         |             |  |       |          |  |  |               |         |  |          |     
|Power Semiconductors                |       |       | 87,689 |         |             |  | 2.17  |          |  |  | 190,338       |         |  |          | 36.6 |  |  |  | 139,312 |        
|Integrated Circuits                 |       |       | 47,054 |         |             |  | 0.87  |          |  |  | 40,759        |         |  |          | 23.3 |  |  |  | 33,058  |        
|Systems and RF Power Semiconductors |       |       | 1,416  |         |             |  | 18.02 |          |  |  | 25,523        |         |  |          | 69.3 |  |  |  | 15,072  |        
|                                    |       |       |        |         |             |  |       |          |  |  |               |         |  |          |     
|                                    | Total |       |        | 136,159 |             |  |       | 1.88     |  |  |               | 256,620 |  |          |      |  |  |  |         | 187,442 | 
|                                    |       |       |        |         |             |  |       |          |  |  |               |         |  |          |     









| |              
| | -------------
| | Gross Profit.





27



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| |                                       
| | --------------------------------------
| | Research, Development and Engineering.





| |                                     
| | ------------------------------------
| | Selling, General and Administrative.





| |               
| | --------------
| | Restructuring.





| |                             
| | ----------------------------
| | Other Income (Expense), Net.





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| |                                           
| | ------------------------------------------
| | (Provision for) Benefit from Income Taxes.





| |                                
| | -------------------------------
| | Liquidity and Capital Resources















29



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Disclosures about Contractual Obligations and Commercial
Commitments




|                               |  |                        |        |      |        |   |        |           |       |   |           |  |  |         |       |  |  |   |        | 
|------------------------------ |  | ---------------------- | ------ | ---- | ------ | - | ------ | --------- | ----- | - | --------- |  |  | ------- | ----- |  |  | - | ------ | 
|                               |  | Payments Due by Period |       
|                               |  |                        |       
|                               |  |                        |        | Less |        |   |       
|                               |  |                        |        | Than |        |   |        |           | After |  
|Contractual Obligations        |  | Total                  |        |      | 1 Year |   |        | 1-3 Years |       |   | 3-5 Years |  |  | 5 Years |      
|                               |  |                        |        |      |        |   |        |           |       |   |           |  |  |         |      
|Capital Lease Obligations(1)   |  | $                      | 8,083  |      |        | $ | 3,524  |           |       | $ | 3,682     |  |  | $       | 877   |  |  | $ |       | 
|Operating Lease Obligations    |  |                        | 19,864 |      |        |   | 3,331  |           |       |   | 4,664     |  |  |         | 3,652 |  |  |   | 8,217  | 
|Pension Obligations            |  |                        | 12,230 |      |        |   | 1,172  |           |       |   | 2,190     |  |  |         | 2,530 |  |  |   | 6,338  | 
|Inventory Purchase Obligations |  |                        | 11,814 |      |        |   | 11,814 |           |       |   |          |  |  |         |      |  |  |   |       | 
|Other Liabilities              |  |                        | 157    |      |        |   |       |           |       |   |          |  |  |         |      |  |  |   | 157    | 
|                               |  |                        |        |      |        |   |        |           |       |   |           |  |  |         |      
|Total                          |  | $                      | 52,148 |      |        | $ | 19,841 |           |       | $ | 10,536    |  |  | $       | 7,059 |  |  | $ | 14,712 | 
|                               |  |                        |        |      |        |   |        |           |       |   |           |  |  |         |      






|    |                                                          
|--- | ---------------------------------------------------------
|(1) | Includes anticipated interest payments totaling $941,000.

RISK FACTORS






| |                                                                                                                        
| | -----------------------------------------------------------------------------------------------------------------------
| | Our operating results fluctuate significantly because of a
    number of factors, many of which are beyond our control.



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| |   |                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------
| |  | the reduction, rescheduling or cancellation of orders by
    customers;                                                       
|
| |  | fluctuations in timing and amount of customer requests for
    product shipments;                                             
|
| |  | changes in the mix of products that our customers purchase;                                                                   
|
| |  | loss of key customers;                                                                                                        
|
| |  | the cyclical nature of the semiconductor industry;                                                                            
|
| |  | competitive pressures on selling prices;                                                                                      
|
| |  | market acceptance of our products and the products of our
    customers;                                                      
|
| |  | fluctuations in our manufacturing yields and significant yield
    losses;                                                    
|
| |  | difficulties in forecasting demand for our products and the
    planning and managing of inventory levels;                    
|
| |  | the availability of production capacity;                                                                                      
|
| |  | the amount and timing of investments in research and development;                                                             
|
| |  | changes in our product distribution channels and the timeliness
    of receipt of distributor resale information;             
|
| |  | the impact of vacation schedules and holidays, largely during
    the second and third fiscal quarters of our fiscal year; and
|
| |  | the amount and timing of costs associated with product returns.                                                               





| |                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------
| | The semiconductor industry is cyclical, and an industry
    downturn could adversely affect our operating results.





| |   |                                                                            
| | - | ---------------------------------------------------------------------------
| |  | alternating periods of overcapacity and production shortages;              
|
| |  | cyclical demand for semiconductors;                                        
|
| |  | changes in product mix in response to changes in demand;                   
|
| |  | significant price erosion;                                                 
|
| |  | variations in manufacturing costs and yields;                              
|
| |  | rapid technological change and the introduction of new
    products; and   
|
| |  | significant expenditures for capital equipment and product
    development.





| |                                                                                                       
| | ------------------------------------------------------------------------------------------------------
| | Our gross margin is dependent on a number of factors,
    including our level of capacity utilization.



31



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| |                                                                                                 
| | ------------------------------------------------------------------------------------------------
| | IXYS could be harmed by litigation involving patents and
    other intellectual property rights.











| |                                                                  
| | -----------------------------------------------------------------
| | We are dependent upon the success of our customers
    products.





| |                                                              
| | -------------------------------------------------------------
| | Our international operations expose us to material
    risks.



32



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| |   |                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------
| |  | foreign currency fluctuations;                                                                                 
|
| |  | changes in the laws, regulations or policies of the countries in
    which we manufacture or sell our products;
|
| |  | trade restrictions;                                                                                            
|
| |  | longer payment cycles;                                                                                         
|
| |  | challenges in collecting accounts receivable;                                                                  
|
| |  | cultural and language differences;                                                                             
|
| |  | employment regulations;                                                                                        
|
| |  | limited infrastructure in emerging markets;                                                                    
|
| |  | transportation delays;                                                                                         
|
| |  | seasonal reduction in business activities;                                                                     
|
| |  | work stoppages;                                                                                                
|
| |  | terrorist attack or war; and                                                                                   
|
| |  | economic or political instability.                                                                             







| |                                                                                                                                                                                                       
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We have material weaknesses in our internal control over
    financial reporting that could result in a material misstatement
    of our financial condition, results of operations or cash
    flows.





| |   |                                                                                                                                                                                                                                                                                         
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | deficiencies in the number of accounting personnel trained in
    applying United States generally accepted accounting principles,
    or US GAAP, and in reporting financial information in
    accordance with the requirements of the Securities and Exchange
    Commission, or SEC;
|
| |  | deficiencies in our over costing and valuation of inventory;                                                                                                                                                                                                                            
|
| |  | deficiencies in our control over the use of spreadsheets in our
    operations;                                                                                                                                                                                                         
|
| |  | deficiencies in the review of the consolidation process; and                                                                                                                                                                                                                            
|
| |  | inadequate segregation of duties in the purchasing cycle.                                                                                                                                                                                                                               

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34



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| |                                              
| | ---------------------------------------------
| | We may not be successful in our acquisitions.





| |   |                                                                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | diversion of managements attention during the acquisition
    process;                                                                                                                
|
| |  | disruption of our ongoing business;                                                                                                                                                    
|
| |  | the potential strain on our financial and managerial controls
    and reporting systems and procedures;                                                                                
|
| |  | unanticipated expenses and potential delays related to
    integration of an acquired business;                                                                                        
|
| |  | the risk that we will be unable to develop or exploit acquired
    technologies;                                                                                                       
|
| |  | failure to successfully integrate the operations of an acquired
    company with our own;                                                                                              
|
| |  | the challenges in achieving strategic objectives, cost savings
    and other benefits from acquisitions;                                                                               
|
| |  | the risk that our markets do not evolve as anticipated and that
    the technologies acquired do not prove to be those needed to be
    successful in those markets;                   
|
| |  | the risks of entering new markets in which we have limited
    experience;                                                                                                             
|
| |  | difficulties in expanding our information technology systems to
    accommodate the acquired businesses;                                                                               
|
| |  | failure to retain key personnel of the acquired business;                                                                                                                              
|
| |  | the challenges inherent in managing an increased number of
    employees and facilities and the need to implement appropriate
    policies, benefits and compliance programs;          
|
| |  | customer dissatisfaction or performance problems with an
    acquired company;                                                                                                         
|
| |  | adverse effects on our relationships with suppliers;                                                                                                                                   
|
| |  | the reduction in financial stability associated with the
    incurrence of debt or the use of a substantial portion of our
    available cash;                                         
|
| |  | the costs associated with acquisitions, including in-process
    R&D charges and amortization expense related to intangible
    assets, and the integration of acquired operations; and
|
| |  | assumption of known or unknown liabilities or other
    unanticipated events or circumstances.                                                                                         







| |                                                                         
| | ------------------------------------------------------------------------
| | We depend on external foundries to manufacture many of our
    products.



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| |   |                                                                                           
| | - | ------------------------------------------------------------------------------------------
| |  | the lack of control over delivery schedules;                                              
|
| |  | the unavailability of, or delays in obtaining access to, key
    process technologies;    
|
| |  | limited control over quality assurance, manufacturing yields and
    production costs; and
|
| |  | potential misappropriation of our intellectual property.                                  





| |                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------
| | We may not be able to acquire additional production
    capacity to meet the present and future demand for our
    products.





| |                                                                                
| | -------------------------------------------------------------------------------
| | Our success depends on our ability to manufacture our
    products efficiently.





| |   |                                                        
| | - | -------------------------------------------------------
| |  | contaminants in the manufacturing environment;         
|
| |  | defects in the masks used to print circuits on a wafer;
|
| |  | manufacturing equipment failure; or                    
|
| |  | wafer breakage.                                        

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| |                                                                                                                                      
| | -------------------------------------------------------------------------------------------------------------------------------------
| | Our markets are subject to technological change and our
    success depends on our ability to develop and introduce new
    products.





| |   |                                                     
| | - | ----------------------------------------------------
| |  | changing technologies;                              
|
| |  | changing customer needs;                            
|
| |  | frequent new product introductions and enhancements;
|
| |  | increased integration with other functions; and     
|
| |  | product obsolescence.                               







| |                                                                               
| | ------------------------------------------------------------------------------
| | We may not be able to protect our intellectual property
    rights adequately.





| |                                                                                              
| | ---------------------------------------------------------------------------------------------
| | Our revenues are dependent upon our products being
    designed into our customers products.



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| |                                                                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Because our products typically have lengthy sales cycles,
    we may experience substantial delays between incurring expenses
    related to research and development and the generation of
    revenues.





| |                                               
| | ----------------------------------------------
| | Our backlog may not result in future revenues.





| |                                                                   
| | ------------------------------------------------------------------
| | The markets in which we participate are intensely
    competitive.





| |   |                                                                      
| | - | ---------------------------------------------------------------------
| |  | proper new product definition;                                       
|
| |  | product quality, reliability and performance;                        
|
| |  | product features;                                                    
|
| |  | price;                                                               
|
| |  | timely delivery of products;                                         
|
| |  | breadth of product line;                                             
|
| |  | design and introduction of new products;                             
|
| |  | market acceptance of our products and those of our
    customers; and
|
| |  | technical support and service.                                       





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| |                                                                                        
| | ---------------------------------------------------------------------------------------
| | We rely on our distributors and sales representatives to
    sell many of our products.







| |                                                                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our future success depends on the continued service of
    management and key engineering personnel and our ability to
    identify, hire and retain additional personnel.





| |                                                                                                                                   
| | ----------------------------------------------------------------------------------------------------------------------------------
| | Growth and expansion place a significant strain on our
    resources, including our information systems and our employee
    base.







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| |                             
| | ----------------------------
| | Our stock price is volatile.





| |   |                                                                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | variations in our actual or expected quarterly operating results;                                                                                                                         
|
| |  | announcements or introductions of new products;                                                                                                                                           
|
| |  | technological innovations by our competitors or development
    setbacks by us;                                                                                                           
|
| |  | conditions in the communications and semiconductor markets;                                                                                                                               
|
| |  | the commencement or adverse outcome of litigation;                                                                                                                                        
|
| |  | changes in analysts estimates of our performance or
    changes in analysts forecasts regarding our industry,
    competitors or customers;                                             
|
| |  | announcements of merger or acquisition transactions or a failure
    to achieve the expected benefits of an acquisition as rapidly or
    to the extent anticipated by financial analysts;
|
| |  | terrorist attack or war;                                                                                                                                                                  
|
| |  | sales of our common stock by one or more members of management,
    including Nathan Zommer, Ph.D., our President and Chief
    Executive Officer; or                                     
|
| |  | general economic and market conditions.                                                                                                                                                   





| |                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our dependence on independent subcontractors to assemble
    and test our products subject us to a number of risks, including
    an inadequate supply of products and higher materials
    costs.





| |   |                                                                                            
| | - | -------------------------------------------------------------------------------------------
| |  | reduced control over delivery schedules and quality;                                       
|
| |  | the potential lack of adequate capacity during periods of excess
    demand;               
|
| |  | difficulties selecting and integrating new subcontractors;                                 
|
| |  | limited or no warranties by subcontractors or other vendors on
    products supplied to us;
|
| |  | potential increases in prices due to capacity shortages and
    other factors;             
|
| |  | potential misappropriation of our intellectual property; and                               

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| |   |                                                        
| | - | -------------------------------------------------------
| |  | economic or political instability in foreign countries.







| |                                                                                                                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our operating expenses are relatively fixed, and we may
    order materials in advance of anticipated customer demand.
    Therefore, we have limited ability to reduce expenses quickly in
    response to any revenue shortfalls.







| |                                                               
| | --------------------------------------------------------------
| | We depend on a limited number of suppliers for our
    wafers.





| |                                                            
| | -----------------------------------------------------------
| | Our ability to access capital markets could be
    limited.





| |                                                                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Geopolitical instability, war, terrorist attacks,
    terrorist threats, and government responses thereto, may
    negatively impact all aspects of our operations, revenues, costs
    and stock prices.





| |                                                                                
| | -------------------------------------------------------------------------------
| | Business interruptions may damage our facilities or those
    of our suppliers.



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| |                                                              
| | -------------------------------------------------------------
| | We may be affected by environmental laws and
    regulations.





| |                                                             
| | ------------------------------------------------------------
| | Our tax liability has been in dispute from time to
    time.





| |                                                                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We face the risk of financial exposure to product
    liability claims alleging that the use of products that
    incorporate our semiconductors resulted in adverse
    effects.





| |                                                                          
| | -------------------------------------------------------------------------
| | Nathan Zommer, Ph.D. owns a significant interest in
    our common stock.





| |                                                                       
| | ----------------------------------------------------------------------
| | Regulations may adversely affect our ability to sell our
    products.





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| |                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The anti-takeover provisions of our certificate of
    incorporation and of the Delaware General Corporation Law may
    delay, defer or prevent a change of control.










|         |                                                               
|-------- | --------------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosures about Market
    Risk











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|        |                                            
|------- | -------------------------------------------
|Item 8. | Financial Statements and Supplementary Data

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON


CONSOLIDATED FINANCIAL STATEMENTS














Internal Control 
Integrated Framework




| |                          
| | -------------------------
| | BDO Seidman, LLP         
| | San Francisco, California





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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM












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IXYS CORPORATION


CONSOLIDATED BALANCE SHEETS


|                                                      |                                                                                 |                                                                                                                                                      |                                            |         |      |         |        |         |     |         | 
|----------------------------------------------------- | ------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------- | ---- | ------- | ------ | ------- | --- | ------- | 
|                                                      |                                                                                 | March 31,                                                                                                                                            |                                           
|                                                      |                                                                                 |                                                                                                                                                      |                                           
|                                                      |                                                                                 | 2005                                                                                                                                                 |                                            |         | 2004 |        
|                                                      |                                                                                 |                                                                                                                                                      |                                            |         |      |        
|                                                      |                                                                                 | (In thousands, except                                                                                                                                |                                           
|                                                      |                                                                                 | share data)                                                                                                                                          |                                           
|ASSETS                                               
|Current assets:                                       |                                                                                 |                                                                                                                                                      |                                            |         |      |         |        |        
|                                                      | Cash and cash equivalents                                                       |                                                                                                                                                      | $                                          | 58,144  |      |         | $      | 42,058  |    
|                                                      | Restricted cash                                                                 |                                                                                                                                                      |                                            | 155     |      |         |        | 1,141   |    
|                                                      | Accounts receivable, net of allowances of $2,629 in 2005 and
    $2,654 in 2004 |                                                                                                                                                      |                                            | 41,388  |      |         |        | 33,131  |    
|                                                      | Inventories                                                                     |                                                                                                                                                      |                                            | 51,411  |      |         |        | 48,055  |    
|                                                      | Prepaid expenses and other current assets                                       |                                                                                                                                                      |                                            | 4,134   |      |         |        | 1,710   |    
|                                                      | Deferred income taxes                                                           |                                                                                                                                                      |                                            | 6,649   |      |         |        | 7,769   |    
|                                                      |                                                                                 |                                                                                                                                                      |                                            |         |      |        
|                                                      |                                                                                 |                                                                                                                                                      | Total current assets                       |         |      | 161,881 |        |         |     | 133,864 | 
|Property, plant and equipment, net                    |                                                                                 |                                                                                                                                                      | 27,814                                     |         |      |         | 26,369 |        
|Other assets                                          |                                                                                 |                                                                                                                                                      | 5,907                                      |         |      |         | 7,310  |        
|Deferred income taxes                                 |                                                                                 |                                                                                                                                                      | 2,787                                      |         |      |         | 9,503  |        
|Goodwill                                              |                                                                                 |                                                                                                                                                      | 21,502                                     |         |      |         | 21,223 |        
|                                                      |                                                                                 |                                                                                                                                                      |                                            |         |      |        
|                                                      |                                                                                 |                                                                                                                                                      | Total assets                               |         | $    | 219,891 |        |         | $   | 198,269 | 
|                                                      |                                                                                 |                                                                                                                                                      |                                            |         |      |        
|                                                     
|LIABILITIES AND STOCKHOLDERS EQUITY                 
|Current liabilities:                                  |                                                                                 |                                                                                                                                                      |                                            |         |      |         |        |        
|                                                      | Current portion of capitalized lease obligations                                |                                                                                                                                                      | $                                          | 2,733   |      |         | $      | 3,447   |    
|                                                      | Notes payable to bank                                                           |                                                                                                                                                      |                                            |        |      |         |        | 800     |    
|                                                      | Accounts payable                                                                |                                                                                                                                                      |                                            | 12,962  |      |         |        | 15,277  |    
|                                                      | Accrued expenses and other liabilities                                          |                                                                                                                                                      |                                            | 22,123  |      |         |        | 18,094  |    
|                                                      |                                                                                 |                                                                                                                                                      |                                            |         |      |        
|                                                      |                                                                                 |                                                                                                                                                      | Total current liabilities                  |         |      | 37,818  |        |         |     | 37,618  | 
|Capitalized lease obligations, net of current portion |                                                                                 |                                                                                                                                                      | 4,409                                      |         |      |         | 2,904  |        
|Loan payable                                          |                                                                                 |                                                                                                                                                      | 157                                        |         |      |         | 157    |        
|Pension liabilities                                   |                                                                                 |                                                                                                                                                      | 12,230                                     |         |      |         | 12,059 |        
|                                                      |                                                                                 |                                                                                                                                                      |                                            |         |      |        
|                                                      |                                                                                 |                                                                                                                                                      | Total liabilities                          |         |      | 54,614  |        |         |     | 52,738  | 
|                                                      |                                                                                 |                                                                                                                                                      |                                            |         |      |        
|Commitments and contingencies (Note 8)                |                                                                                 |                                                                                                                                                      |                                            |         |      |         |        |        
|Stockholders Equity                                  |                                                                                 |                                                                                                                                                      |                                            |         |      |         |        |        
|                                                      | Preferred stock, $0.01 par value:                                               |                                                                                                                                                      |                                            |         |      |         |        |         |    
|                                                      |                                                                                 | Authorized: 5,000,000 shares; none issued and outstanding                                                                                            |                                            |         |     |         |        |         |    |        
|                                                      | Common stock, $0.01 par value:                                                  |                                                                                                                                                      |                                            |         |      |         |        |         |    
|                                                      |                                                                                 | Authorized: 80,000,000 shares; 33,586,196 issued and
    33,359,194 outstanding in 2005 and 33,018,675 issued and
    32,923,373 outstanding in 2004 |                                            |         | 336  |         |        |         | 331 |        
|                                                      | Additional paid-in capital                                                      |                                                                                                                                                      |                                            | 153,376 |      |         |        | 151,074 |    
|                                                      | Deferred compensation                                                           |                                                                                                                                                      |                                            | (4      | )    |         |        | (10     | )  
|                                                      | Notes receivable from stockholders                                              |                                                                                                                                                      |                                            | (355    | )    |         |        | (1,388  | )  
|                                                      | Retained earnings (accumulated deficit)                                         |                                                                                                                                                      |                                            | 5,492   |      |         |        | (10,750 | )  
|                                                      | Accumulated other comprehensive income                                          |                                                                                                                                                      |                                            | 7,984   |      |         |        | 6,721   |    
|                                                      | Treasury stock, at cost: 227,002 and 95,302 common shares in
    2005 and 2004  |                                                                                                                                                      |                                            | (1,552  | )    |         |        | (447    | )  
|                                                      |                                                                                 |                                                                                                                                                      |                                            |         |      |        
|                                                      |                                                                                 |                                                                                                                                                      | Total stockholders equity                 |         |      | 165,277 |        |         |     | 145,531 | 
|                                                      |                                                                                 |                                                                                                                                                      |                                            |         |      |        
|                                                      |                                                                                 |                                                                                                                                                      | Total liabilities and stockholders equity |         | $    | 219,891 |        |         | $   | 198,269 | 
|                                                      |                                                                                 |                                                                                                                                                      |                                            |         |      |        



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IXYS CORPORATION


CONSOLIDATED STATEMENTS OF OPERATIONS


|                                                                    |                                       |                                       |         |        |        |   |         |        |        |   |         |         |        | 
|------------------------------------------------------------------- | ------------------------------------- | ------------------------------------- | ------- | ------ | ------ | - | ------- | ------ | ------ | - | ------- | ------- | ------ | 
|                                                                    |                                       | Year Ended March 31,                  |        
|                                                                    |                                       |                                       |        
|                                                                    |                                       | 2005                                  |         |        | 2004   |   |         | 2003   |       
|                                                                    |                                       |                                       |         |        |        |   |         |        |       
|                                                                    |                                       | (In thousands, except per share data) |        
|Net revenues                                                        |                                       | $                                     | 256,620 |        |        | $ | 187,442 |        |        | $ | 136,111 |        
|Cost of goods sold                                                  |                                       |                                       | 176,710 |        |        |   | 143,948 |        |        |   | 107,371 |        
|                                                                    |                                       |                                       |         |        |        |   |         |        |       
|                                                                    |                                       | Gross profit                          |         |        | 79,910 |   |         |        | 43,494 |   |         |         | 28,740 | 
|                                                                    |                                       |                                       |         |        |        |   |         |        |       
|Operating expenses:                                                 |                                       |                                       |         |        |        |   |         |        |        |   |         |        
|                                                                    | Research, development and engineering |                                       |         | 18,574 |        |   |         | 15,811 |        |   |         | 12,846  |       
|                                                                    | Selling, general and administrative   |                                       |         | 35,707 |        |   |         | 32,742 |        |   |         | 32,437  |       
|                                                                    | Restructuring                         |                                       |         |       |        |   |         |       |        |   |         | 750     |       
|                                                                    |                                       |                                       |         |        |        |   |         |        |       
|                                                                    |                                       | Total operating expenses              |         |        | 54,281 |   |         |        | 48,553 |   |         |         | 46,033 | 
|                                                                    |                                       |                                       |         |        |        |   |         |        |       
|                                                                    | Operating income (loss)               |                                       |         | 25,629 |        |   |         | (5,059 | )      |   |         | (17,293 | )     
|Other income (expense):                                             |                                       |                                       |         |        |        |   |         |        |        |   |         |        
|                                                                    | Interest income                       |                                       |         | 1,341  |        |   |         | 615    |        |   |         | 910     |       
|                                                                    | Interest expense                      |                                       |         | (708   | )      |   |         | (305   | )      |   |         | (190    | )     
|                                                                    | Other expense                         |                                       |         | (481   | )      |   |         | (1,324 | )      |   |         | (1,288  | )     
|                                                                    |                                       |                                       |         |        |        |   |         |        |       
|Income (loss) before income tax                                     |                                       |                                       | 25,781  |        |        |   | (6,073  | )      |        |   | (17,861 | )      
|(Provision for) benefit from income tax                             |                                       |                                       | (9,539  | )      |        |   | 1,641   |        |        |   | 5,716   |        
|                                                                    |                                       |                                       |         |        |        |   |         |        |       
|Net income (loss)                                                   |                                       | $                                     | 16,242  |        |        | $ | (4,432  | )      |        | $ | (12,145 | )      
|                                                                    |                                       |                                       |         |        |        |   |         |        |       
|Net income (loss) per share  basic                                 |                                       | $                                     | 0.49    |        |        | $ | (0.14   | )      |        | $ | (0.39   | )      
|                                                                    |                                       |                                       |         |        |        |   |         |        |       
|Weighted average shares used in per share
    calculation  basic   |                                       |                                       | 33,093  |        |        |   | 32,434  |        |        |   | 30,889  |        
|                                                                    |                                       |                                       |         |        |        |   |         |        |       
|Net income (loss) per share  diluted                               |                                       | $                                     | 0.46    |        |        | $ | (0.14   | )      |        | $ | (0.39   | )      
|                                                                    |                                       |                                       |         |        |        |   |         |        |       
|Weighted average shares used in per share
    calculation  diluted |                                       |                                       | 35,085  |        |        |   | 32,434  |        |        |   | 30,889  |        
|                                                                    |                                       |                                       |         |        |        |   |         |        |       



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IXYS CORPORATION


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)


|                                   |                                          |                      |        |       |      |   |        |       |  |   |         |       | 
|---------------------------------- | ---------------------------------------- | -------------------- | ------ | ----- | ---- | - | ------ | ----- |  | - | ------- | ----- | 
|                                   |                                          | Year Ended March 31, |       
|                                   |                                          |                      |       
|                                   |                                          | 2005                 |        |       | 2004 |   |        | 2003  | 
|                                   |                                          |                      |        |       |      |   |        |       | 
|                                   |                                          | (In thousands)       |       
|Net income (loss)                  |                                          | $                    | 16,242 |       |      | $ | (4,432 | )     |  | $ | (12,145 | )    
|Other comprehensive income (loss): |                                          |                      |        |       |      |   |        |       |  |   |         |      
|                                   | Foreign currency translation adjustments |                      |        | 1,263 |      |   |        | 5,363 |  |   |         | 3,721 | 
|                                   |                                          |                      |        |       |      |   |        |       | 
|Comprehensive income (loss)        |                                          | $                    | 17,505 |       |      | $ | 931    |       |  | $ | (8,424  | )    
|                                   |                                          |                      |        |       |      |   |        |       | 



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IXYS CORPORATION


CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY


|                                                                               |  |                |        |  |        |            |     |         |            |   |              |              |  |          |          |             |              |               |         |             |          |   |        |          |  |        |               |   |        |  |     |  |  |   |        |   |  |   |         |  
|------------------------------------------------------------------------------ |  | -------------- | ------ |  | ------ | ---------- | --- | ------- | ---------- | - | ------------ | ------------ |  | -------- | -------- | ----------- | ------------ | ------------- | ------- | ----------- | -------- | - | ------ | -------- |  | ------ | ------------- | - | ------ |  | --- |  |  | - | ------ | - |  | - | ------- | -
|                                                                               |  |                |        |  |        |            |     | Notes   |            |   | Retained     |              |  |          |          | Accumulated |              |               |         |             |          |   |       
|                                                                               |  |                |        |  |        | Additional |     |         | Receivable |   |              | Earnings     |  |          |          |             | Other        |               |         |             |          |   |        | Total    | 
|                                                                               |  |                |        |  |        | Paid-In    |     |         | from       |   |              | (Accumulated |  |          | Deferred |             |              | Comprehensive |         |             | Treasury |   |        | Treasury |  |        | Stockholders |  
|                                                                               |  | Shares         |        |  | Amount |            |     | Capital |            |   | Stockholders |              |  | Deficit) |          |             | Compensation |               |         | Gain (Loss) |          |   | Shares |          |  | Amount |               |   | Equity | 
|                                                                               |  |                |        |  |        |            |     |         |            |   |              |              |  |          |          |             |              |               |         |             |          |   |        |          |  |        |               |   |        | 
|                                                                               |  | (In thousands) |       
|Balances, March 31, 2002                                                       |  |                | 26,902 |  |        | $          | 270 |         |            | $ | 92,785       |              |  | $        | (853     | )           |              | $             | 5,827   |             |          |   |       |          |  | $      | (2,363        | ) |        |  | 95  |  |  | $ | (447   | ) |  | $ | 95,219  |  
|Exercise of stock options                                                      |  |                | 130    |  |        |            | 1   |         |            |   | 443          |              |  |          |         |             |              |               |        |             |          |   |       |          |  |        |              |   |        |  |    |  |  |   |       |   |  |   | 444     |  
|Issuance of common stock under Employee Stock Purchase Plan                    |  |                | 31     |  |        |            |    |         |            |   | 207          |              |  |          |         |             |              |               |        |             |          |   |       |          |  |        |              |   |        |  |    |  |  |   |       |   |  |   | 207     |  
|Issuance of common stock for the acquisition of Clare, Inc.                    |  |                | 4,894  |  |        |            | 49  |         |            |   | 51,350       |              |  |          |         |             |              |               |        |             |          |   |       |          |  |        |              |   |        |  |    |  |  |   |       |   |  |   | 51,399  |  
|Interest accrued on notes receivable                                           |  |                |       |  |        |            |    |         |            |   |             |              |  |          | (60      | )           |              |               |        |             |          |   |       |          |  |        |              |   |        |  |    |  |  |   |       |   |  |   | (60     | )
|Deferred compensation                                                          |  |                |       |  |        |            |    |         |            |   | 50           |              |  |          |         |             |              |               |        |             |          |   | (50    | )        |  |        |              |   |        |  |    |  |  |   |       |   |  |   |        |  
|Amortization of deferred compensation                                          |  |                |       |  |        |            |    |         |            |   |             |              |  |          |         |             |              |               |        |             |          |   | 24     |          |  |        |              |   |        |  |    |  |  |   |       |   |  |   | 24      |  
|Foreign currency translation adjustments                                       |  |                |       |  |        |            |    |         |            |   |             |              |  |          |         |             |              |               |        |             |          |   |       |          |  |        | 3,721         |   |        |  |    |  |  |   |       |   |  |   | 3,721   |  
|Net loss                                                                       |  |                |       |  |        |            |    |         |            |   |             |              |  |          |         |             |              |               | (12,145 | )           |          |   |       |          |  |        |              |   |        |  |    |  |  |   |       |   |  |   | (12,145 | )
|                                                                               |  |                |        |  |        |            |     |         |            |   |              |              |  |          |          |             |              |               |         |             |          |   |        |          |  |        |               |   |        | 
|Balances, March 31, 2003                                                       |  |                | 31,957 |  |        |            | 320 |         |            |   | 144,835      |              |  |          | (913     | )           |              |               | (6,318  | )           |          |   | (26    | )        |  |        | 1,358         |   |        |  | 95  |  |  |   | (447   | ) |  |   | 138,809 |  
|Exercise of stock options                                                      |  |                | 233    |  |        |            | 2   |         |            |   | 841          |              |  |          |         |             |              |               |        |             |          |   |       |          |  |        |              |   |        |  |    |  |  |   |       |   |  |   | 843     |  
|Issuance of common stock under Employee Stock Purchase Plan                    |  |                | 62     |  |        |            | 1   |         |            |   | 561          |              |  |          |         |             |              |               |        |             |          |   |       |          |  |        |              |   |        |  |    |  |  |   |       |   |  |   | 562     |  
|Issuance of common stock for the acquisition of Microwave
    Technology, Inc. |  |                | 767    |  |        |            | 8   |         |            |   | 4,348        |              |  |          |         |             |              |               |        |             |          |   |       |          |  |        |              |   |        |  |    |  |  |   |       |   |  |   | 4,356   |  
|Interest accrued on notes receivable                                           |  |                |        |  |        |            |    |         |            |   | 475          |              |  |          | (475     | )           |              |               |        |             |          |   |        |          |  |        |              |   |        |  |    |  |  |   |       |   |  |   |        |  
|Deferred compensation                                                          |  |                |       |  |        |            |    |         |            |   | 14           |              |  |          |         |             |              |               |        |             |          |   | (14    | )        |  |        |              |   |        |  |    |  |  |   |       |   |  |   |        |  
|Amortization of deferred compensation                                          |  |                |       |  |        |            |    |         |            |   |             |              |  |          |         |             |              |               |        |             |          |   | 30     |          |  |        |              |   |        |  |    |  |  |   |       |   |  |   | 30      |  
|Foreign currency translation adjustments                                       |  |                |       |  |        |            |    |         |            |   |             |              |  |          |         |             |              |               |        |             |          |   |       |          |  |        | 5,363         |   |        |  |    |  |  |   |       |   |  |   | 5,363   |  
|Net loss                                                                       |  |                |       |  |        |            |    |         |            |   |             |              |  |          |         |             |              |               | (4,432  | )           |          |   |       |          |  |        |              |   |        |  |    |  |  |   |       |   |  |   | (4,432  | )
|                                                                               |  |                |        |  |        |            |     |         |            |   |              |              |  |          |          |             |              |               |         |             |          |   |        |          |  |        |               |   |        | 
|Balances, March 31, 2004                                                       |  |                | 33,019 |  |        |            | 331 |         |            |   | 151,074      |              |  |          | (1,388   | )           |              |               | (10,750 | )           |          |   | (10    | )        |  |        | 6,721         |   |        |  | 95  |  |  |   | (447   | ) |  |   | 145,531 |  
|Exercise of stock options                                                      |  |                | 480    |  |        |            | 4   |         |            |   | 1,509        |              |  |          |         |             |              |               |        |             |          |   |       |          |  |        |              |   |        |  |    |  |  |   |       |   |  |   | 1,513   |  
|Issuance of common stock under Employee Stock Purchase Plan                    |  |                | 87     |  |        |            | 1   |         |            |   | 614          |              |  |          |         |             |              |               |        |             |          |   |       |          |  |        |              |   |        |  |    |  |  |   |       |   |  |   | 615     |  
|Interest accrued on notes receivable                                           |  |                |       |  |        |            |    |         |            |   | 60           |              |  |          | (60      | )           |              |               |        |             |          |   |       |          |  |        |              |   |        |  |    |  |  |   |       |   |  |   |        |  
|Compensation expense on shareholder loans                                      |  |                |       |  |        |            |    |         |            |   | 119          |              |  |          |         |             |              |               |        |             |          |   |       |          |  |        |              |   |        |  |    |  |  |   |       |   |  |   | 119     |  
|Repayment of notes receivable                                                  |  |                |       |  |        |            |    |         |            |   |             |              |  |          | 1,039    |             |              |               |        |             |          |   |       |          |  |        |              |   |        |  |    |  |  |   |       |   |  |   | 1,039   |  
|Interest forgiven on notes receivable                                          |  |                |       |  |        |            |    |         |            |   |             |              |  |          | 54       |             |              |               |        |             |          |   |       |          |  |        |              |   |        |  |    |  |  |   |       |   |  |   | 54      |  
|Amortization of deferred compensation                                          |  |                |       |  |        |            |    |         |            |   |             |              |  |          |         |             |              |               |        |             |          |   | 6      |          |  |        |              |   |        |  |    |  |  |   |       |   |  |   | 6       |  
|Repurchase of common stock                                                     |  |                |       |  |        |            |    |         |            |   |             |              |  |          |         |             |              |               |        |             |          |   |       |          |  |        |              |   |        |  | 132 |  |  |   | (1,105 | ) |  |   | (1,105  | )
|Foreign currency translation adjustments                                       |  |                |       |  |        |            |    |         |            |   |             |              |  |          |         |             |              |               |        |             |          |   |       |          |  |        | 1,263         |   |        |  |    |  |  |   |       |   |  |   | 1,263   |  
|Net income (loss)                                                              |  |                |       |  |        |            |    |         |            |   |             |              |  |          |         |             |              |               | 16,242  |             |          |   |       |          |  |        |              |   |        |  |    |  |  |   |       |   |  |   | 16,242  |  
|                                                                               |  |                |        |  |        |            |     |         |            |   |              |              |  |          |          |             |              |               |         |             |          |   |        |          |  |        |               |   |        | 
|Balances, March 31, 2005                                                       |  |                | 33,586 |  |        | $          | 336 |         |            | $ | 153,376      |              |  | $        | (355     | )           |              | $             | 5,492   |             |          | $ | (4     | )        |  | $      | 7,984         |   |        |  | 227 |  |  | $ | (1,552 | ) |  | $ | 165,277 |  
|                                                                               |  |                |        |  |        |            |     |         |            |   |              |              |  |          |          |             |              |               |         |             |          |   |        |          |  |        |               |   |        | 



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IXYS CORPORATION


CONSOLIDATED STATEMENTS OF CASH FLOWS


|                                                                              |                                                                                       |                                                  |        |        |         |   |        |        |         |   |        |         |        |  
|----------------------------------------------------------------------------- | ------------------------------------------------------------------------------------- | ------------------------------------------------ | ------ | ------ | ------- | - | ------ | ------ | ------- | - | ------ | ------- | ------ | -
|                                                                              |                                                                                       | Year Ended March 31,                             |       
|                                                                              |                                                                                       |                                                  |       
|                                                                              |                                                                                       | 2005                                             |        |        | 2004    |   |        | 2003   |        
|                                                                              |                                                                                       |                                                  |        |        |         |   |        |        |        
|                                                                              |                                                                                       | (In thousands)                                   |       
|Cash flows from operating activities:                                         |                                                                                       |                                                  |        |        |         |   |        |        |         |   |        |        
|                                                                              | Net income (loss)                                                                     |                                                  | $      | 16,242 |         |   | $      | (4,432 | )       |   | $      | (12,145 | )     
|                                                                              | Adjustments to reconcile net income to net cash provided by
    operating activities: |                                                  |        |        |         |   |        |        |         |   |        |         |       
|                                                                              |                                                                                       | Depreciation and amortization                    |        |        | 10,639  |   |        |        | 11,186  |   |        |         | 9,297  |  
|                                                                              |                                                                                       | Provision for receivables allowances             |        |        | 4,994   |   |        |        | 4,261   |   |        |         | 8,024  |  
|                                                                              |                                                                                       | Write down of inventories                        |        |        | 2,917   |   |        |        | 2,057   |   |        |         | 7,258  |  
|                                                                              |                                                                                       | Loss on disposal of fixed assets                 |        |        | 225     |   |        |        | 4       |   |        |         | 240    |  
|                                                                              |                                                                                       | Loss (gain) on foreign currency transactions     |        |        | 1,399   |   |        |        | 670     |   |        |         | (1,713 | )
|                                                                              |                                                                                       | Deferred income taxes                            |        |        | 7,885   |   |        |        | (4,424  | ) |        |         | (3,067 | )
|                                                                              |                                                                                       | Compensation expense for notes from shareholders |        |        | 119     |   |        |        |        |   |        |         |       |  
|                                                                              |                                                                                       | Interest forgiven on notes from shareholders     |        |        | 54      |   |        |        |        |   |        |         |       |  
|                                                                              | Changes in operating assets and liabilities:                                          |                                                  |        |        |         |   |        |        |         |   |        |         |       
|                                                                              |                                                                                       | Accounts receivable                              |        |        | (12,568 | ) |        |        | (13,262 | ) |        |         | (6,799 | )
|                                                                              |                                                                                       | Inventories                                      |        |        | (5,286  | ) |        |        | 2,253   |   |        |         | 2,987  |  
|                                                                              |                                                                                       | Prepaid expenses and other current assets        |        |        | (2,134  | ) |        |        | 144     |   |        |         | 89     |  
|                                                                              |                                                                                       | Other assets                                     |        |        | (335    | ) |        |        | (618    | ) |        |         | (1,742 | )
|                                                                              |                                                                                       | Accounts payable                                 |        |        | (2,702  | ) |        |        | 2,096   |   |        |         | (527   | )
|                                                                              |                                                                                       | Accrued expenses and other liabilities           |        |        | 2,258   |   |        |        | 4,828   |   |        |         | 379    |  
|                                                                              |                                                                                       | Pension liabilities                              |        |        | (337    | ) |        |        | 916     |   |        |         | 123    |  
|                                                                              |                                                                                       |                                                  |        |        |         |   |        |        |        
|                                                                              |                                                                                       | Net cash provided by operating activities        |        |        | 23,370  |   |        |        | 5,679   |   |        |         | 2,404  |  
|                                                                              |                                                                                       |                                                  |        |        |         |   |        |        |        
|Cash flows from investing activities:                                         |                                                                                       |                                                  |        |        |         |   |        |        |         |   |        |        
|                                                                              | Restricted cash decrease (increase)                                                   |                                                  |        | 986    |         |   |        | 1,607  |         |   |        | (321    | )     
|                                                                              | Purchases of plant and equipment                                                      |                                                  |        | (5,952 | )       |   |        | (3,679 | )       |   |        | (2,510  | )     
|                                                                              | Acquisition of Microwave Technology, Inc., net of cash acquired                       |                                                  |        |       |         |   |        | 143    |         |   |        |        |       
|                                                                              | Acquisition of Clare, Inc., net of cash acquired                                      |                                                  |        |       |         |   |        |       |         |   |        | 7,843   |       
|                                                                              |                                                                                       |                                                  |        |        |         |   |        |        |        
|                                                                              | Net cash provided by (used in) investing activities                                   |                                                  |        | (4,966 | )       |   |        | (1,929 | )       |   |        | 5,012   |       
|                                                                              |                                                                                       |                                                  |        |        |         |   |        |        |        
|Cash flows from financing activities:                                         |                                                                                       |                                                  |        |        |         |   |        |        |         |   |        |        
|                                                                              | Principal payments on capital lease obligations                                       |                                                  |        | (3,996 | )       |   |        | (3,918 | )       |   |        | (2,928  | )     
|                                                                              | Repayment of notes payable to bank                                                    |                                                  |        | (800   | )       |   |        | (10    | )       |   |        |        |       
|                                                                              | Collections on stockholder notes receivables                                          |                                                  |        | 1,039  |         |   |        | 212    |         |   |        |        |       
|                                                                              | Proceeds from loans                                                                   |                                                  |        |       |         |   |        |       |         |   |        | 1,931   |       
|                                                                              | Proceeds from issuance of common stock under the employee stock
    purchase plan     |                                                  |        | 615    |         |   |        | 562    |         |   |        | 207     |       
|                                                                              | Proceeds from exercise of stock options                                               |                                                  |        | 1,513  |         |   |        | 843    |         |   |        | 506     |       
|                                                                              | Purchase of treasury stock                                                            |                                                  |        | (1,105 | )       |   |        |       |         |   |        |        |       
|                                                                              |                                                                                       |                                                  |        |        |         |   |        |        |        
|                                                                              |                                                                                       | Net cash used in financing activities            |        |        | (2,734  | ) |        |        | (2,311  | ) |        |         | (284   | )
|                                                                              |                                                                                       |                                                  |        |        |         |   |        |        |        
|Effect of foreign exchange rate fluctuations on cash and cash
    equivalents |                                                                                       |                                                  | 416    |        |         |   | 525    |        |         |   | 851    |        
|                                                                              |                                                                                       |                                                  |        |        |         |   |        |        |        
|Net increase in cash and cash equivalents                                     |                                                                                       |                                                  | 16,086 |        |         |   | 1,964  |        |         |   | 7,983  |        
|Cash and cash equivalents at beginning of year                                |                                                                                       |                                                  | 42,058 |        |         |   | 40,094 |        |         |   | 32,111 |        
|                                                                              |                                                                                       |                                                  |        |        |         |   |        |        |        
|Cash and cash equivalents at end of year                                      |                                                                                       | $                                                | 58,144 |        |         | $ | 42,058 |        |         | $ | 40,094 |        
|                                                                              |                                                                                       |                                                  |        |        |         |   |        |        |        
|Supplemental Disclosures of Cash Flow Information:                            |                                                                                       |                                                  |        |        |         |   |        |        |         |   |        |        
|                                                                              | Cash paid during the period for interest                                              |                                                  | $      | 149    |         |   | $      | 138    |         |   | $      | 164     |       
|                                                                              | Cash paid during the period for income taxes                                          |                                                  | $      | 721    |         |   | $      | 108    |         |   | $      | 1,256   |       
|Supplemental Schedule of Noncash Investing and Financing
    Activities:      |                                                                                       |                                                  |        |        |         |   |        |        |         |   |        |        
|                                                                              | Purchase of fixed assets under capital lease                                          |                                                  | $      | 264    |         |   | $      | 683    |         |   | $      | 116     |       
|                                                                              | Common stock issued for Microwave Technology, Inc. net assets                         |                                                  | $      |       |         |   | $      | 4,356  |         |   | $      |        |       
|                                                                              | Common stock issued for Clare, Inc. net assets                                        |                                                  | $      |       |         |   | $      |       |         |   | $      | 51,399  |       



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IXYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




|   |                                
|-- | -------------------------------
|1. | Formation and Business of IXYS:







|   |                                            
|-- | -------------------------------------------
|2. | Summary of Significant Accounting Policies:



| |                             
| | ----------------------------
| | Principles of Consolidation:





| |                  
| | -----------------
| | Use of Estimates:





| |                     
| | --------------------
| | Revenue Recognition:





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IXYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




Allowance for sales returns.


Allowance for stock rotation.


Trade accounts receivable and allowance for doubtful
accounts.


Allowance for ship and debit.


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IXYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|                       |            |   |     |        |  
|---------------------- | ---------- | - | --- | ------ | -
|Balance March 31, 2002 |            | $ | 355 |       
|                       | Additions  |   |     | 2,062  |  
|                       | Deductions |   |     | (1,934 | )
|                       |            |   |    
|Balance March 31, 2003 |            |   | 483 |       
|                       | Additions  |   |     | 2,189  |  
|                       | Deductions |   |     | (2,248 | )
|                       |            |   |    
|Balance March 31, 2004 |            |   | 424 |       
|                       | Additions  |   |     | 2,742  |  
|                       | Deductions |   |     | (2,613 | )
|                       |            |   |    
|Balance March 31, 2005 |            | $ | 553 |       
|                       |            |   |    





| |                              
| | -----------------------------
| | Foreign Currency Translation:





| |                  
| | -----------------
| | Cash Equivalents:



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IXYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                   
| | ------------------
| | Reclassifications:





| |             
| | ------------
| | Inventories:









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IXYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|                          |                             |                                        |        |        |        |  
|------------------------- | --------------------------- | -------------------------------------- | ------ | ------ | ------ | -
|Balance at March 31, 2002 |                             | $                                      | 6,988  |       
|                          |                             | Sale of excess inventory               |        |        | (1,917 | )
|                          |                             | Scrap of excess inventory              |        |        |       |  
|                          |                             |                                        |       
|                          | Balance of excess inventory |                                        |        | 5,071  |       
|                          |                             | Additional accrual of excess inventory |        |        | 12,153 |  
|                          |                             |                                        |       
|Balance at March 31, 2003 |                             |                                        | 17,224 |       
|                          |                             | Sale of excess inventory               |        |        | (2,624 | )
|                          |                             | Scrap of excess inventory              |        |        | (504   | )
|                          |                             |                                        |       
|                          | Balance of excess inventory |                                        |        | 14,096 |       
|                          |                             | Additional accrual of excess inventory |        |        | 10,536 |  
|                          |                             |                                        |       
|Balance at March 31, 2004 |                             |                                        | 24,632 |       
|                          |                             | Sale of excess inventory               |        |        | (3,685 | )
|                          |                             | Scrap of excess inventory              |        |        | (2,555 | )
|                          |                             |                                        |       
|                          | Balance of excess inventory |                                        |        | 18,392 |       
|                          |                             | Additional accrual of excess inventory |        |        | 2,849  |  
|                          |                             |                                        |       
|Balance at March 31, 2005 |                             | $                                      | 21,241 |       
|                          |                             |                                        |       







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IXYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                               
| | ------------------------------
| | Property, Plant and Equipment:







| |                            
| | ---------------------------
| | Foreign Exchange Contracts:





| |                       
| | ----------------------
| | Defined Benefit Plans:





| |             
| | ------------
| | Advertising:



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IXYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                          
| | -------------------------
| | Research and Development:





| |              
| | -------------
| | Income Taxes:







| |                          
| | -------------------------
| | Other Income and Expense:





| |                 
| | ----------------
| | Indemnification:





| |                     
| | --------------------
| | Legal contingencies:



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IXYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                             
| | ----------------------------
| | Net Income (Loss) Per Share:





| |                                  
| | ---------------------------------
| | Recent Accounting Pronouncements:









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IXYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                      
| | ---------------------
| | Comprehensive Income:





| |                                  
| | ---------------------------------
| | Concentration and Business Risks:



| |                                                                    
| | -------------------------------------------------------------------
| | Dependence on Third Parties for Wafer Fabrication and
    Assembly:





| |                         
| | ------------------------
| | Dependence on Suppliers:





| |                                                         
| | --------------------------------------------------------
| | Employees Covered by Collective Bargaining Arrangements:





| |                              
| | -----------------------------
| | Concentration of Credit Risk:







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IXYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                                     
| | ------------------------------------
| | Fair Value of Financial Instruments:





| |                                
| | -------------------------------
| | Stock-Based Compensation Plans:





|                                                                                                                           |  |                      |        |   |      |   |        |      |  |   |         |  
|-------------------------------------------------------------------------------------------------------------------------- |  | -------------------- | ------ | - | ---- | - | ------ | ---- |  | - | ------- | -
|                                                                                                                           |  | Year Ended March 31, |       
|                                                                                                                           |  |                      |       
|                                                                                                                           |  | 2005                 |        |   | 2004 |   |        | 2003 | 
|                                                                                                                           |  |                      |        |   |      |   |        |      | 
|Net income (loss)                                                                                                          |  | $                    | 16,242 |   |      | $ | (4,432 | )    |  | $ | (12,145 | )
|Less: Total stock-based compensation determined under fair value
    based methods for all awards to employees, net of tax |  |                      | (1,870 | ) |      |   | (2,580 | )    |  |   | (2,366  | )
|                                                                                                                           |  |                      |        |   |      |   |        |      | 
|Pro forma net income (loss)                                                                                                |  | $                    | 14,372 |   |      | $ | (7,012 | )    |  | $ | (14,511 | )
|                                                                                                                           |  |                      |        |   |      |   |        |      | 
|As reported net income (loss) per share  basic                                                                            |  | $                    | 0.49   |   |      | $ | (0.14  | )    |  | $ | (0.39   | )
|                                                                                                                           |  |                      |        |   |      |   |        |      | 
|Pro forma net income (loss) per share  basic                                                                              |  | $                    | 0.43   |   |      | $ | (0.22  | )    |  | $ | (0.47   | )
|                                                                                                                           |  |                      |        |   |      |   |        |      | 
|As reported net income (loss) per share  diluted                                                                          |  | $                    | 0.46   |   |      | $ | (0.14  | )    |  | $ | (0.39   | )
|                                                                                                                           |  |                      |        |   |      |   |        |      | 
|Pro forma net income (loss) per share  diluted                                                                            |  | $                    | 0.41   |   |      | $ | (0.22  | )    |  | $ | (0.47   | )
|                                                                                                                           |  |                      |        |   |      |   |        |      | 



|                        |  |                      |  |                |  |               
|----------------------- |  | -------------------- |  | -------------- |  | --------------
|                        |  | Year Ended March 31,
|                        |  |                     
|                        |  | 2005                 |  | 2004           |  | 2003          
|                        |  |                      |  |                |  |               
|Risk-free interest rate |  | 3.15% to 3.49%       |  | 1.72% to 3.22% |  | 2.74% to 4.33%
|Expected term           |  | 4.0 years            |  | 4.0 years      |  | 4.0 years     
|Volatility              |  | 64%                  |  | 100%           |  | 104%          
|Dividend yield          |  | 0%                   |  | 0%             |  | 0%            

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IXYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|   |             
|-- | ------------
|3. | Acquisitions



| |                            
| | ---------------------------
| | Microwave Technology, Inc.:



|                                  |                      |   |       |       | 
|--------------------------------- | -------------------- | - | ----- | ----- | 
|Value of IXYS common stock issued |                      | $ | 4,189 |      
|Value of IXYS options issued      |                      |   | 167   |      
|Direct merger cost                |                      |   | 321   |      
|                                  |                      |   |      
|                                  | Total purchase price |   | $     | 4,677 | 
|                                  |                      |   |      





|                                        |                                  |  |       |       |  |  |  |  | 
|--------------------------------------- | -------------------------------- |  | ----- | ----- |  |  |  |  | 
|Fair value of tangible assets acquired: |                                  |  |       |       |  |  |  | 
|                                        | Current assets                   |  | $     | 2,182 |  |  |  |  | 
|                                        | Deferred tax assets  short term |  |       | 559   |  |  |  |  | 
|                                        | Plant and equipment              |  |       | 91    |  |  |  |  | 
|                                        |                                  |  |       |       |  | 
|                                        |                                  |  | 2,832 |       |  |  |  | 

|                                  |                                               |  |        |                  |  |  |  |               | 
|--------------------------------- | --------------------------------------------- |  | ------ | ---------------- |  |  |  | ------------- | 
|                                  |                                               |  |        | Estimated Useful | 
|                                  |                                               |  |        | Lives            | 
|                                  |                                               |  |        |                  | 
|Amortizable intangible assets:    |                                               |  |        |                  |  |  |  |              
|                                  | Core technology                               |  |        | 300              |  |  |  | 5 to 6 years  | 
|                                  | Existing technology                           |  |        | 1,300            |  |  |  | 5 to 6 years  | 
|                                  | Contract and related customers relationships |  |        | 400              |  |  |  | 5 to 6 years  | 
|                                  | Tradename                                     |  |        | 200              |  |  |  | 5 to 6 years  | 
|                                  | Backlog                                       |  |        | 200              |  |  |  | 3 to 6 months | 
|                                  |                                               |  |        |                  |  | 
|                                  |                                               |  | 2,400  |                  |  |  |  |              
|Total assets acquired             |                                               |  | 5,232  |                  |  |  |  |              
|Fair value of liabilities assumed |                                               |  | (2,415 | )                |  |  |  |              
|                                  |                                               |  |        |                  |  | 
|                                  | Net assets acquired                           |  |        | 2,817            |  |  |  |               | 
|Goodwill                          |                                               |  | 1,860  |                  |  |  |  |              
|                                  |                                               |  |        |                  |  | 
|                                  | Total purchase price                          |  | $      | 4,677            |  |  |  |               | 
|                                  |                                               |  |        |                  |  | 

62



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##### Table of Contents



IXYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




Pro Forma Disclosure (in thousands, except per share
data):




|                                                                    |  |                      |         |   |             |   |         |  
|------------------------------------------------------------------- |  | -------------------- | ------- | - | ----------- | - | ------- | -
|                                                                    |  | Year Ended March 31, |        
|                                                                    |  |                      |        
|                                                                    |  | 2004                 |         |   | 2003        |  
|                                                                    |  |                      |         |   |             |  
|                                                                    |  | (Unaudited)          |         |   | (Unaudited) |  
|Net revenue                                                         |  | $                    | 189,826 |   |             | $ | 148,607 |  
|Net loss                                                            |  | $                    | (6,627  | ) |             | $ | (21,215 | )
|Net loss per share  basic                                          |  |                      | (0.20   | ) |             |   | (0.65   | )
|Net loss per share  diluted                                        |  | $                    | (0.20   | ) |             | $ | (0.65   | )
|Weighted-average shares used in per share
    calculation  basic   |  |                      | 32,753  |   |             |   | 32,612  |  
|Weighted-average shares used in per share
    calculation  diluted |  |                      | 32,753  |   |             |   | 32,612  |  



| |             
| | ------------
| | Clare, Inc.:



|                                         |                      |   |        |        | 
|---------------------------------------- | -------------------- | - | ------ | ------ | 
|Value of IXYS common stock issued        |                      | $ | 47,658 |       
|Value of Clares options assumed by IXYS |                      |   | 3,741  |       
|Merger cost                              |                      |   | 1,676  |       
|                                         |                      |   |       
|                                         | Total purchase price |   | $      | 53,075 | 
|                                         |                      |   |       

63



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##### Table of Contents



IXYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                        |                                  |  |        |        |  |  |  |  | 
|--------------------------------------- | -------------------------------- |  | ------ | ------ |  |  |  |  | 
|Fair Value of tangible assets acquired: |                                  |  |        |        |  |  |  | 
|                                        | Current assets                   |  | $      | 24,861 |  |  |  |  | 
|                                        | Deferred tax assets  short term |  |        | 4,796  |  |  |  |  | 
|                                        | Plant and equipment              |  |        | 10,271 |  |  |  |  | 
|                                        | Other assets                     |  |        | 111    |  |  |  |  | 
|                                        |                                  |  |        |        |  | 
|                                        |                                  |  | 40,039 |        |  |  |  | 

|                                  |                      |                      |        |                  |        |  |  |                     |  | 
|--------------------------------- | -------------------- | -------------------- | ------ | ---------------- | ------ |  |  | ------------------- |  | 
|                                  |                      |                      |        | Estimated Useful |       
|                                  |                      |                      |        | Lives            |       
|                                  |                      |                      |        |                  |       
|Amortizable intangible assets:    |                      |                      |        |                  |        |  |  |                    
|                                  | Core technology      |                      |        | 2,700            |        |  |  | 5 to 6 years        | 
|                                  | Tradename/trademarks |                      |        | 900              |        |  |  | 3 years             | 
|                                  | Other                |                      |        | 715              |        |  |  | 3 months to 6 years | 
|                                  |                      |                      |        |                  |        | 
|                                  |                      |                      | 4,315  |                  |        |  |  |                    
|Total assets acquired             |                      |                      | 44,354 |                  |        |  |  |                    
|Fair value of liabilities assumed |                      |                      | (8,746 | )                |        |  |  |                    
|                                  |                      |                      |        |                  |        | 
|Net assets acquired               |                      |                      | 35,608 |                  |        |  |  |                    
|Goodwill                          |                      |                      | 17,467 |                  |        |  |  |                    
|                                  |                      |                      |        |                  |        | 
|                                  |                      | Total purchase price |        | $                | 53,075 |  |  |                     |  | 
|                                  |                      |                      |        |                  |        | 

Pro Forma Disclosure (in thousands, except per share
data):




|                                                      |  |                      |         |  
|----------------------------------------------------- |  | -------------------- | ------- | -
|                                                      |  | Year Ended March 31, |        
|                                                      |  |                      |        
|                                                      |  | 2003                 |        
|                                                      |  |                      |        
|                                                      |  | (Unaudited)          |        
|Net revenue                                           |  | $                    | 142,568 |  
|Net loss                                              |  | $                    | (19,938 | )
|Net loss per share  basic                            |  | $                    | (0.63   | )
|Net loss per share  diluted                          |  | $                    | (0.63   | )
|Weighted-average shares used in per share calculation |  |                      | 31,845  |  



|   |               
|-- | --------------
|4. | Restructuring:



64



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##### Table of Contents



IXYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|   |                                
|-- | -------------------------------
|5. | Goodwill and Intangible Assets:









|   |                       
|-- | ----------------------
|6. | Balance Sheet Details:



| |                                    
| | -----------------------------------
| | Allowances Movement (in thousands):

|                                                                                           |                           |            |       |       |           |   |       |            |             |   |             |        |   |      |    |    |  |   |       |       | 
|------------------------------------------------------------------------------------------ | ------------------------- | ---------- | ----- | ----- | --------- | - | ----- | ---------- | ----------- | - | ----------- | ------ | - | ---- | -- | -- |  | - | ----- | ----- | 
|                                                                                           |                           | Balance at |       |       |           |   |       |            |             |   | Balance at  |       
|                                                                                           |                           | Beginning  |       |       |           |   |       |            | Translation |   |             | End of |  
|                                                                                           |                           | of Year    |       |       | Additions |   |       | Deductions |             |   | Adjustments |        |   | Year |   
|                                                                                           |                           |            |       |       |           |   |       |            |             |   |             |        |   |      |   
|Allowances for accounts receivable and for doubtful accounts
    Year ended March 31, 2005 |                           | $          | 2,654 |       |           | $ | 4,994 |            |             | $ | (5,057      | )      |   | $    | 38 |    |  | $ | 2,629 |      
|                                                                                           | Year ended March 31, 2004 |            | $     | 3,169 |           |   | $     | 4,261      |             |   | $           | (4,849 | ) |      | $  | 73 |  |   | $     | 2,654 | 
|                                                                                           | Year ended March 31, 2003 |            | $     | 1,045 |           |   | $     | 8,024      |             |   | $           | (5,982 | ) |      | $  | 82 |  |   | $     | 3,169 | 



| |             
| | ------------
| | Inventories:



|                |  |           |        |  |      |   |        | 
|--------------- |  | --------- | ------ |  | ---- | - | ------ | 
|                |  | March 31, |       
|                |  |           |       
|                |  | 2005      |        |  | 2004 |  
|                |  |           |        |  |      |  
|Raw materials   |  | $         | 13,386 |  |      | $ | 12,117 | 
|Work in process |  |           | 25,304 |  |      |   | 26,729 | 
|Finished goods  |  |           | 12,721 |  |      |   | 9,209  | 
|                |  |           |        |  |      |  
|                |  | $         | 51,411 |  |      | $ | 48,055 | 
|                |  |           |        |  |      |  

65



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##### Table of Contents



IXYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                               
| | ------------------------------
| | Property, Plant and Equipment:



|                                                                                  |  |           |         |   |      |   |         |  
|--------------------------------------------------------------------------------- |  | --------- | ------- | - | ---- | - | ------- | -
|                                                                                  |  | March 31, |        
|                                                                                  |  |           |        
|                                                                                  |  | 2005      |         |   | 2004 |  
|                                                                                  |  |           |         |   |      |  
|Property and plant                                                                |  | $         | 6,367   |   |      | $ | 6,390   |  
|Equipment owned                                                                   |  |           | 55,300  |   |      |   | 48,267  |  
|Equipment capital leases                                                          |  |           | 16,102  |   |      |   | 17,679  |  
|Leasehold improvements                                                            |  |           | 2,954   |   |      |   | 2,954   |  
|                                                                                  |  |           |         |   |      |  
|                                                                                  |  |           | 80,723  |   |      |   | 75,290  |  
|Accumulated depreciation  owned plant, equipment, and
    leasehold improvements |  |           | (43,804 | ) |      |   | (37,599 | )
|Accumulated amortization  capital leases                                         |  |           | (9,105  | ) |      |   | (11,322 | )
|                                                                                  |  |           |         |   |      |  
|                                                                                  |  | $         | 27,814  |   |      | $ | 26,369  |  
|                                                                                  |  |           |         |   |      |  







| |              
| | -------------
| | Other Assets:



|                                                                                              |  |           |       |  |      |   |       | 
|--------------------------------------------------------------------------------------------- |  | --------- | ----- |  | ---- | - | ----- | 
|                                                                                              |  | March 31, |      
|                                                                                              |  |           |      
|                                                                                              |  | 2005      |       |  | 2004 |  
|                                                                                              |  |           |       |  |      |  
|Purchased intangible assets, net (see Note 3
    Acquisitions for historic addition activity) |  | $         | 2,724 |  |      | $ | 4,273 | 
|Loans to vendors                                                                              |  |           | 1,967 |  |      |   | 1,442 | 
|Other                                                                                         |  |           | 1,216 |  |      |   | 1,595 | 
|                                                                                              |  |           |       |  |      |  
|                                                                                              |  | $         | 5,907 |  |      | $ | 7,310 | 
|                                                                                              |  |           |       |  |      |  





| |                                        
| | ---------------------------------------
| | Accrued Expenses and Other Liabilities:



|                                                   |  |           |        |  |      |   |        | 
|-------------------------------------------------- |  | --------- | ------ |  | ---- | - | ------ | 
|                                                   |  | March 31, |       
|                                                   |  |           |       
|                                                   |  | 2005      |        |  | 2004 |  
|                                                   |  |           |        |  |      |  
|Compensation and vacation                          |  | $         | 6,374  |  |      | $ | 2,834  | 
|Legal, audit and tax preparation                   |  |           | 2,449  |  |      |   | 2,101  | 
|Commissions, royalties, deferred revenue and other |  |           | 2,511  |  |      |   | 3,962  | 
|Income taxes                                       |  |           | 5,958  |  |      |   | 7,247  | 
|Uninvoiced goods and services                      |  |           | 4,831  |  |      |   | 1,950  | 
|                                                   |  |           |        |  |      |  
|                                                   |  | $         | 22,123 |  |      | $ | 18,094 | 
|                                                   |  |           |        |  |      |  

66



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##### Table of Contents



IXYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|   |                        
|-- | -----------------------
|7. | Borrowing Arrangements:











|   |                               
|-- | ------------------------------
|8. | Commitments and Contingencies:



| |             
| | ------------
| | Commitments:







|                             |            |         |        |       |           |   |        |       | 
|---------------------------- | ---------- | ------- | ------ | ----- | --------- | - | ------ | ----- | 
|                             |            | Capital |        |       | Operating |  
|Fiscal Year Ending March 31, |            | Leases  |        |       | Leases    |  
|                             |            |         |        |       |           |  
|                             | 2006       |         | $      | 3,524 |           |   | $      | 3,331 | 
|                             | 2007       |         |        | 2,247 |           |   |        | 2,518 | 
|                             | 2008       |         |        | 1,435 |           |   |        | 2,146 | 
|                             | 2009       |         |        | 872   |           |   |        | 2,008 | 
|                             | Thereafter |         |        | 5     |           |   |        | 9,861 | 
|                             |            |         |        |       |           |  
|Total Minimum Payments       |            |         | 8,083  |       |           | $ | 19,864 |      
|                             |            |         |        |       |           |  
|Less: Interest               |            |         | (941   | )     |           |   |        |      
|                             |            |         |        |       |           |  
|                             |            |         | 7,142  |       |           |   |        |      
|Less: Current Portion        |            |         | (2,733 | )     |           |   |        |      
|                             |            |         |        |       |           |  
|                             |            | $       | 4,409  |       |           |   |        |      
|                             |            |         |        |       |           |  



67



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##### Table of Contents



IXYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)










| |                   
| | ------------------
| | Legal Proceedings:















68



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##### Table of Contents



IXYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








|   |                      
|-- | ---------------------
|9. | Stockholders Equity:



| |                                       
| | --------------------------------------
| | Stock Purchase and Stock Option Plans:





69



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##### Table of Contents



IXYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                         |                   |               |           |                     |           |  |           |                |   |          |       |              |  |       |        |        |   |   |      |       | 
|------------------------ | ----------------- | ------------- | --------- | ------------------- | --------- |  | --------- | -------------- | - | -------- | ----- | ------------ |  | ----- | ------ | ------ | - | - | ---- | ----- | 
|                         |                   |               |           | Options Outstanding |           |  | Weighted  |               
|                         |                   | Shares        |           |                     |           |  |           | Average        |  
|                         |                   | Available for |           |                     | Number of |  |           |                |   | Exercise |      
|                         |                   | Grant         |           |                     | Shares    |  |           | Exercise Price |   |          | Total |              |  | Price |       
|                         |                   |               |           |                     |           |  |           |                |   |          |       |              |  |       |       
|Balances, March 31, 2002 |                   |               | 2,749,276 |                     |           |  | 3,820,694 |                |   |          |       |              |  | $     | 19,595 |        |   | $ | 5.13 |      
|                         | Options assumed   |               |           |                     |           |  |           | 992,128        |   |          | $     | 1.91-$50.10  |  |       | $      | 14,127 |   |   | $    | 14.24 | 
|                         | New authorized    |               |           | 899,991             |           |  |           |                |   |          |       |              |  |       |        |        |   |   |      |       | 
|                         | Options granted   |               |           | (888,750            | )         |  |           | 888,750        |   |          | $     | 4.64-$7.79   |  |       | $      | 4,992  |   |   | $    | 5.62  | 
|                         | Options exercised |               |           |                     |           |  |           | (130,224       | ) |          | $     | 0.08-$5.23   |  |       | $      | (506   | ) |   | $    | 3.89  | 
|                         | Options cancelled |               |           | (58,725             | )         |  |           | (584,462       | ) |          | $     | 3.625-$50.10 |  |       | $      | (7,713 | ) |   | $    | 13.20 | 
|                         | Options expired   |               |           |                     |           |  |           | (1,875         | ) |          | $     | 17.35        |  |       | $      | (33    | ) |   | $    | 17.60 | 
|                         |                   |               |           |                     |           |  |           |                |   |          |       |              |  |       |       
|Balances, March 31, 2003 |                   |               | 2,701,792 |                     |           |  | 4,985,011 |                |   |          |       |              |  | $     | 30,462 |        |   | $ | 6.11 |      
|                         | Options assumed   |               |           |                     |           |  |           | 25,741         |   |          | $     | 1.83-$3.66   |  |       | $      | 87     |   |   | $    | 3.38  | 
|                         | New authorized    |               |           | 1,000,000           |           |  |           |                |   |          |       |              |  |       |        |        |   |   |      |       | 
|                         | Options granted   |               |           | (746,000            | )         |  |           | 746,000        |   |          | $     | 6.75-$10.63  |  |       | $      | 6,313  |   |   | $    | 8.46  | 
|                         | Options exercised |               |           |                     |           |  |           | (232,862       | ) |          | $     | 1.02-$7.73   |  |       | $      | (843   | ) |   | $    | 3.62  | 
|                         | Options cancelled |               |           | 185,676             |           |  |           | (185,676       | ) |          | $     | 3.63-$31.54  |  |       | $      | (2,314 | ) |   | $    | 12.46 | 
|                         | Options expired   |               |           | 27,650              |           |  |           | (27,650        | ) |          | $     | 3.63-$29.50  |  |       | $      | (309   | ) |   | $    | 11.18 | 
|                         |                   |               |           |                     |           |  |           |                |   |          |       |              |  |       |       
|Balances, March 31, 2004 |                   |               | 3,169,118 |                     |           |  | 5,310,564 |                |   |          |       |              |  | $     | 33,396 |        |   | $ | 6.29 |      
|                         |                   |               |           |                     |           |  |           |                |   |          |       |              |  |       |       
|                         | Options assumed   |               |           |                     |           |  |           |                |   |          |       |              |  |       |        |        |   |   |      |       | 
|                         | New authorized    |               |           | 1,000,000           |           |  |           |                |   |          |       |              |  |       |        |        |   |   |      |       | 
|                         | Options granted   |               |           | (453,000            | )         |  |           | 453,000        |   |          | $     | 6.65-$9.15   |  |       | $      | 3,687  |   |   | $    | 8.14  | 
|                         | Options exercised |               |           |                     |           |  |           | (480,751       | ) |          | $     | 1.69-$7.38   |  |       | $      | (1,551 | ) |   | $    | 3.23  | 
|                         | Options cancelled |               |           | 61,640              |           |  |           | (61,640        | ) |          | $     | 4.64-$31.54  |  |       | $      | (560   | ) |   | $    | 9.09  | 
|                         | Options expired   |               |           | 20,100              |           |  |           | (24,098        | ) |          | $     | 2.16-$19.00  |  |       | $      | (247   | ) |   | $    | 10.25 | 
|                         |                   |               |           |                     |           |  |           |                |   |          |       |              |  |       |       
|Balances, March 31, 2005 |                   |               | 3,797,858 |                     |           |  | 5,197,075 |                |   |          |       |              |  | $     | 34,725 |        |   | $ | 6.68 |      
|                         |                   |               |           |                     |           |  |           |                |   |          |       |              |  |       |       



|                    |  |                     |           |  |                  |  |     |                  |  |   |                  |  |         |                |           |  |  |   |       | 
|------------------- |  | ------------------- | --------- |  | ---------------- |  | --- | ---------------- |  | - | ---------------- |  | ------- | -------------- | --------- |  |  | - | ----- | 
|                    |  | Options Exercisable |          
|Options Outstanding |  |                     |           | 
|                    |  |                     |           |  | Weighted         | 
|                    |  | Number of           |           |  | Weighted Average |  |     | Weighted Average |  |   |                  |  | Average |               
|Exercise Price      |  | Shares              |           |  | Contractual Life |  |     | Exercise Price   |  |   | Number of Shares |  |         | Exercise Price |          
|                    |  |                     |           |  |                  |  |     |                  |  |   |                  |  |         |                |          
|$1.69-2.34          |  |                     | 807,058   |  |                  |  | 4.5 |                  |  | $ | 2.20             |  |         |                | 804,993   |  |  | $ | 2.20  | 
|$3.46-4.88          |  |                     | 1,547,180 |  |                  |  | 4.5 |                  |  | $ | 3.82             |  |         |                | 1,453,363 |  |  | $ | 3.77  | 
|$5.23-7.79          |  |                     | 1,532,162 |  |                  |  | 7.5 |                  |  | $ | 7.02             |  |         |                | 817,250   |  |  | $ | 7.01  | 
|$8.01-11.70         |  |                     | 857,591   |  |                  |  | 8.7 |                  |  | $ | 9.11             |  |         |                | 222,266   |  |  | $ | 8.81  | 
|$12.21-18.25        |  |                     | 239,511   |  |                  |  | 4.5 |                  |  | $ | 13.63            |  |         |                | 238,011   |  |  | $ | 13.62 | 
|$18.44-21.36        |  |                     | 115,499   |  |                  |  | 4.9 |                  |  | $ | 19.17            |  |         |                | 115,499   |  |  | $ | 19.17 | 
|$28.49-36.24        |  |                     | 98,074    |  |                  |  | 4.7 |                  |  | $ | 30.46            |  |         |                | 98,074    |  |  | $ | 30.46 | 
|                    |  |                     |           |  |                  |  |     |                  |  |   |                  |  |         |                |          
|                    |  |                     | 5,197,075 |  |                  |  | 6.1 |                  |  | $ | 6.68             |  |         |                | 3,749,456 |  |  | $ | 6.23  | 
|                    |  |                     |           |  |                  |  |     |                  |  |   |                  |  |         |                |          

70



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##### Table of Contents



IXYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                        |  |                      |                |  |      |  |                |      |  |  |                | 
|----------------------- |  | -------------------- | -------------- |  | ---- |  | -------------- | ---- |  |  | -------------- | 
|                        |  | Year Ended March 31, |               
|                        |  |                      |               
|                        |  | 2005                 |                |  | 2004 |  |                | 2003 | 
|                        |  |                      |                |  |      |  |                |      | 
|Risk-free interest rate |  |                      | 3.15% to 3.49% |  |      |  | 1.72% to 3.22% |      |  |  | 2.74% to 4.33% | 
|Expected term           |  |                      | 4 years        |  |      |  | 4 years        |      |  |  | 4 years        | 
|Volatility              |  |                      | 64%            |  |      |  | 100%           |      |  |  | 104%           | 
|Dividend yield          |  |                      | 0%             |  |      |  | 0%             |      |  |  | 0%             | 













|                        |  |                      |           |  |      |  |           |      |  |  |           | 
|----------------------- |  | -------------------- | --------- |  | ---- |  | --------- | ---- |  |  | --------- | 
|                        |  | Year Ended March 31, |          
|                        |  |                      |          
|                        |  | 2005                 |           |  | 2004 |  |           | 2003 | 
|                        |  |                      |           |  |      |  |           |      | 
|Risk-free interest rate |  |                      | 1.28%     |  |      |  | 1.02%     |      |  |  | 1.22%     | 
|Expected life           |  |                      | 0.5 years |  |      |  | 0.5 years |      |  |  | 0.5 years | 
|Volatility              |  |                      | 57%       |  |      |  | 100%      |      |  |  | 104%      | 
|Dividend yield          |  |                      | 0%        |  |      |  | 0%        |      |  |  | 0%        | 





71



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##### Table of Contents



IXYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|    |                                      
|--- | -------------------------------------
|10. | Employee Savings and Retirement Plan:





|    |                            
|--- | ---------------------------
|11. | Related Party Transactions:







|    |               
|--- | --------------
|12. | Pension Plans:





| |                         
| | ------------------------
| | Net Period Pension Cost:



|                                              |  |                      |        |   |      |   |       |      |  |   |       |  
|--------------------------------------------- |  | -------------------- | ------ | - | ---- | - | ----- | ---- |  | - | ----- | -
|                                              |  | Year Ended March 31, |       
|                                              |  |                      |       
|                                              |  | 2005                 |        |   | 2004 |   |       | 2003 | 
|                                              |  |                      |        |   |      |   |       |      | 
|                                              |  | (In thousands)       |       
|Service cost                                  |  | $                    | 878    |   |      | $ | 750   |      |  | $ | 750   |  
|Interest cost on projected benefit obligation |  |                      | 1,713  |   |      |   | 1,397 |      |  |   | 1,245 |  
|Expected return on plan assets                |  |                      | (1,166 | ) |      |   | (762  | )    |  |   | (957  | )
|Recognized actuarial loss (gain)              |  |                      | 118    |   |      |   | 181   |      |  |   | 63    |  
|                                              |  |                      |        |   |      |   |       |      | 
|Net periodic pension expense                  |  | $                    | 1,543  |   |      | $ | 1,566 |      |  | $ | 1,101 |  
|                                              |  |                      |        |   |      |   |       |      | 

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IXYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |               
| | --------------
| | Funded Status:

|                             |                                                           |                |   |        |      |  |   |        |  
|---------------------------- | --------------------------------------------------------- | -------------- | - | ------ | ---- |  | - | ------ | -
|                             |                                                           | March 31,      |  
|                             |                                                           |                |  
|                             |                                                           | 2005           |   |        | 2004 | 
|                             |                                                           |                |   |        |      | 
|                             |                                                           | (In thousands) |  
|Change in benefit obligation |                                                           |                |   |        |      |  |   |       
|                             | Projected benefit obligation at the beginning of the year |                | $ | 30,499 |      |  | $ | 24,469 |  
|                             | Service cost                                              |                |   | 878    |      |  |   | 750    |  
|                             | Interest cost                                             |                |   | 1,713  |      |  |   | 1,397  |  
|                             | Plan participants contribution                            |                |   | 195    |      |  |   | 294    |  
|                             | Actuarial (gain) loss                                     |                |   | (96    | )    |  |   | 1,915  |  
|                             | Benefits paid                                             |                |   | (976   | )    |  |   | (646   | )
|                             | Foreign currency translation adjustment                   |                |   | 1,561  |      |  |   | 2,320  |  
|                             |                                                           |                |   |        |      | 
|                             | Projected benefit obligation at the end of the year       |                | $ | 33,774 |      |  | $ | 30,499 |  
|                             |                                                           |                |   |        |      | 

|                      |                                                        |                |   |        |      |  |   |        |  
|--------------------- | ------------------------------------------------------ | -------------- | - | ------ | ---- |  | - | ------ | -
|                      |                                                        | March 31,      |  
|                      |                                                        |                |  
|                      |                                                        | 2005           |   |        | 2004 | 
|                      |                                                        |                |   |        |      | 
|                      |                                                        | (In thousands) |  
|Change in plan assets |                                                        |                |   |        |      |  |   |       
|                      | Fair value of plan assets at the beginning of the year |                | $ | 13,452 |      |  | $ | 10,480 |  
|                      | Actual return on plan assets                           |                |   | 1,553  |      |  |   | 2,559  |  
|                      | Employer contribution                                  |                |   | 1,152  |      |  |   | 938    |  
|                      | Plan participant contribution                          |                |   | 195    |      |  |   | 294    |  
|                      | Benefits paid                                          |                |   | (668   | )    |  |   | (322   | )
|                      | Foreign currency translation adjustment                |                |   | 2,351  |      |  |   | (497   | )
|                      |                                                        |                |   |        |      | 
|                      | Fair value of plan assets at the end of the year       |                | $ | 18,035 |      |  | $ | 13,452 |  
|                      |                                                        |                |   |        |      | 

|               |                                           |                |   |         |      |  |   |         |  
|-------------- | ----------------------------------------- | -------------- | - | ------- | ---- |  | - | ------- | -
|               |                                           | March 31,      |  
|               |                                           |                |  
|               |                                           | 2005           |   |         | 2004 | 
|               |                                           |                |   |         |      | 
|               |                                           | (In thousands) |  
|Status of plan |                                           |                |   |         |      |  |   |        
|               | Plan obligations in excess of plan assets |                | $ | (15,739 | )    |  | $ | (17,047 | )
|               | Unrecognized actuarial loss               |                |   | 3,128   |      |  |   | 3,784   |  
|               | Net loss                                  |                |   | 381     |      |  |   | 1,204   |  
|               |                                           |                |   |         |      | 
|               | Accrued benefit                           |                | $ | (12,230 | )    |  | $ | (12,059 | )
|               |                                           |                |   |         |      | 

|                                |                                                   |                |   |         |      |  |   |         |  
|------------------------------- | ------------------------------------------------- | -------------- | - | ------- | ---- |  | - | ------- | -
|                                |                                                   | March 31,      |  
|                                |                                                   |                |  
|                                |                                                   | 2005           |   |         | 2004 | 
|                                |                                                   |                |   |         |      | 
|                                |                                                   | (In thousands) |  
|Reconciliation of funded status |                                                   |                |   |         |      |  |   |        
|                                | Accrued pension cost at the beginning of the year |                | $ | (12,059 | )    |  | $ | (9,924  | )
|                                | Net period pension cost                           |                |   | (1,543  | )    |  |   | (1,566  | )
|                                | Cash contribution                                 |                |   | 1,152   |      |  |   | 938     |  
|                                | Benefits paid                                     |                |   | 976     |      |  |   | 646     |  
|                                | Foreign currency translation adjustment           |                |   | (756    | )    |  |   | (2,153  | )
|                                |                                                   |                |   |         |      | 
|                                | Accrued pension cost at the end of the year       |                | $ | (12,230 | )    |  | $ | (12,059 | )
|                                |                                                   |                |   |         |      | 

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IXYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


|            |                                             |           |  |          |      |  |  |            |  
|----------- | ------------------------------------------- | --------- |  | -------- | ---- |  |  | ---------- | -
|            |                                             | March 31, | 
|            |                                             |           | 
|            |                                             | 2005      |  |          | 2004 | 
|            |                                             |           |  |          |      | 
|Assumptions |                                             |           |  |          |      |  |  |           
|            | Discount rate                               |           |  | 5.50     | %    |  |  | 5.50       | %
|            | Expected long-term rate of return on assets |           |  | 4.0- 7.0 | %    |  |  | 4.20- 7.40 | %
|            | Salary scale                                |           |  | 1.0- 4.4 | %    |  |  | 2.20- 4.40 | %









|                  |  |           |        |  |      |   |        | 
|----------------- |  | --------- | ------ |  | ---- | - | ------ | 
|                  |  | March 31, |       
|                  |  |           |       
|                  |  | 2005      |        |  | 2004 |  
|                  |  |           |        |  |      |  
|Equity securities |  | $         | 14,348 |  |      | $ | 11,300 | 
|Debt securities   |  |           | 3,053  |  |      |   | 2,125  | 
|Other             |  |           | 634    |  |      |   | 27     | 
|                  |  |           |        |  |      |  
|                  |  | $         | 18,035 |  |      | $ | 13,452 | 
|                  |  |           |        |  |      |  



|                                                                         |  |                  |        | 
|------------------------------------------------------------------------ |  | ---------------- | ------ | 
|                                                                         |  | Benefit Payments |       
|                                                                         |  |                  |       
|Year ended March 31, 2006                                                |  | $                | 860    | 
|Year ended March 31, 2007                                                |  |                  | 935    | 
|Year ended March 31, 2008                                                |  |                  | 1,024  | 
|Year ended March 31, 2009                                                |  |                  | 1,108  | 
|Year ended March 31, 2010                                                |  |                  | 1,185  | 
|Five fiscal years ended March 31, 2015                                   |  |                  | 7,681  | 
|                                                                         |  |                  |       
|Total benefit payments for the ten fiscal years ended
    March 31, 2015 |  | $                | 12,793 | 
|                                                                         |  |                  |       

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IXYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |              
|--- | -------------
|13. | Income Taxes:



|              |  |                      |        |  |      |   |         |      |  |   |         |  
|------------- |  | -------------------- | ------ |  | ---- | - | ------- | ---- |  | - | ------- | -
|              |  | Year Ended March 31, |       
|              |  |                      |       
|              |  | 2005                 |        |  | 2004 |   |         | 2003 | 
|              |  |                      |        |  |      |   |         |      | 
|Domestic      |  | $                    | 14,829 |  |      | $ | (10,810 | )    |  | $ | (17,322 | )
|International |  |                      | 10,952 |  |      |   | 4,737   |      |  |   | (539    | )
|              |  |                      |        |  |      |   |         |      | 
|              |  | $                    | 25,781 |  |      | $ | (6,073  | )    |  | $ | (17,861 | )
|              |  |                      |        |  |      |   |         |      | 



|          |         |                                      |       |        |       |  |      |        |        |   |        |        |        |  
|--------- | ------- | ------------------------------------ | ----- | ------ | ----- |  | ---- | ------ | ------ | - | ------ | ------ | ------ | -
|          |         | Year Ended March 31,                 |      
|          |         |                                      |      
|          |         | 2005                                 |       |        | 2004  |  |      | 2003   |       
|          |         |                                      |       |        |       |  |      |        |       
|Current:  |         |                                      |       |        |       |  |      |        |        |   |        |       
|          | Federal |                                      | $     | (1,121 | )     |  | $    | (1,653 | )      |   | $      |       |       
|          | State   |                                      |       | 429    |       |  |      | 25     |        |   |        | 30     |       
|          | Foreign |                                      |       | 2,346  |       |  |      | 961    |        |   |        | 819    |       
|          |         |                                      |       |        |       |  |      |        |       
|          |         |                                      | 1,654 |        |       |  | (667 | )      |        |   | 849    |       
|          |         |                                      |       |        |       |  |      |        |       
|Deferred: |         |                                      |       |        |       |  |      |        |        |   |        |       
|          | Federal |                                      |       | 4,735  |       |  |      | (1,740 | )      |   |        | (6,458 | )     
|          | State   |                                      |       | (36    | )     |  |      | 98     |        |   |        | (546   | )     
|          | Foreign |                                      |       | 3,186  |       |  |      | 668    |        |   |        | 439    |       
|          |         |                                      |       |        |       |  |      |        |       
|          |         |                                      | 7,885 |        |       |  | (974 | )      |        |   | (6,565 | )     
|          |         |                                      |       |        |       |  |      |        |       
|          |         | Total income tax provision (benefit) |       | $      | 9,539 |  |      | $      | (1,641 | ) |        | $      | (5,716 | )
|          |         |                                      |       |        |       |  |      |        |       





|                                            |  |                      |    |   |      |  |     |      |  |  |     |   
|------------------------------------------- |  | -------------------- | -- | - | ---- |  | --- | ---- |  |  | --- | --
|                                            |  | Year Ended March 31, |   
|                                            |  |                      |   
|                                            |  | 2005                 |    |   | 2004 |  |     | 2003 | 
|                                            |  |                      |    |   |      |  |     |      | 
|Statutory federal income tax (benefit) rate |  |                      | 35 | % |      |  | (35 | )%   |  |  | (35 | )%
|State taxes, net of federal tax benefit     |  |                      | 1  |   |      |  | 2   |      |  |  | (4  | ) 
|Foreign earnings taxed at different rates   |  |                      | (3 | ) |      |  | 6   |      |  |  | 7   |   
|R&D credit                                  |  |                      | (3 | ) |      |  |    |      |  |  |    |   
|Valuation allowance                         |  |                      | 12 |   |      |  |    |      |  |  |    |   
|Other                                       |  |                      | (5 | ) |      |  |    |      |  |  |    |   
|                                            |  |                      |    |   |      |  |     |      | 
|Effective tax rate                          |  |                      | 37 | % |      |  | (27 | )%   |  |  | (32 | )%
|                                            |  |                      |    |   |      |  |     |      | 

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IXYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                     |                                       |                                      |       |         |        |   |        |         |        | 
|-------------------- | ------------------------------------- | ------------------------------------ | ----- | ------- | ------ | - | ------ | ------- | ------ | 
|                     |                                       | March 31,                            |      
|                     |                                       |                                      |      
|                     |                                       | 2005                                 |       |         | 2004   |  
|                     |                                       |                                      |       |         |        |  
|Deferred tax assets: |                                       |                                      |       |         |        |   |        |        
|                     | Reserves                              |                                      | $     | 6,765   |        |   | $      | 7,696   |       
|                     | Other liabilities and accruals        |                                      |       | 2,882   |        |   |        | 3,071   |       
|                     |                                       |                                      |       |         |        |  
|                     |                                       | Total short term deferred tax assets |       |         | 9,647  |   |        |         | 10,767 | 
|                     | Depreciable assets                    |                                      |       | 391     |        |   |        | 169     |       
|                     | Net operating loss carryforward       |                                      |       | 50,621  |        |   |        | 55,602  |       
|                     | Credits carryforward                  |                                      |       | 2,316   |        |   |        | 1,609   |       
|                     | Intangibles arising from acquisitions |                                      |       | (1,869  | )      |   |        | (2,173  | )     
|                     |                                       |                                      |       |         |        |  
|                     |                                       | Net deferred tax asset               |       | $       | 61,106 |   |        | $       | 65,974 | 
|                     | Less: Valuation allowance             |                                      |       | (51,670 | )      |   |        | (48,702 | )     
|                     |                                       |                                      |       |         |        |  
|                     |                                       | $                                    | 9,436 |         |        | $ | 17,272 |        
|                     |                                       |                                      |       |         |        |  







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IXYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








|    |                                            
|--- | -------------------------------------------
|14. | Computation of Net Income (Loss) Per Share:



|         |                                                          |                      |   |        |      |  |   |        |   |  |   |         |  
|-------- | -------------------------------------------------------- | -------------------- | - | ------ | ---- |  | - | ------ | - |  | - | ------- | -
|         |                                                          | Year Ended March 31, |  
|         |                                                          |                      |  
|         |                                                          | 2005                 |   |        | 2004 |  |   | 2003   |  
|         |                                                          |                      |   |        |      |  |   |        |  
|Basic:   |                                                          |                      |   |        |      |  |   |        |   |  |   |        
|         | Weighted-average shares                                  |                      |   | 33,093 |      |  |   | 32,434 |   |  |   | 30,889  |  
|         |                                                          |                      |   |        |      |  |   |        |  
|         | Net income (loss)                                        |                      | $ | 16,242 |      |  | $ | (4,432 | ) |  | $ | (12,145 | )
|         |                                                          |                      |   |        |      |  |   |        |  
|         | Net income (loss) per share                              |                      | $ | 0.49   |      |  | $ | (0.14  | ) |  | $ | (0.39   | )
|         |                                                          |                      |   |        |      |  |   |        |  
|Diluted: |                                                          |                      |   |        |      |  |   |        |   |  |   |        
|         | Weighted-average shares                                  |                      |   | 33,093 |      |  |   | 32,434 |   |  |   | 30,889  |  
|         | Common equivalent shares from stock options and warrants |                      |   | 1,992  |      |  |   |       |   |  |   |        |  
|         |                                                          |                      |   |        |      |  |   |        |  
|         | Shares used in per share calculation                     |                      |   | 35,085 |      |  |   | 32,434 |   |  |   | 30,889  |  
|         |                                                          |                      |   |        |      |  |   |        |  
|         | Net income (loss)                                        |                      | $ | 16,242 |      |  | $ | (4,432 | ) |  | $ | (12,145 | )
|         |                                                          |                      |   |        |      |  |   |        |  
|         | Net income (loss) per share                              |                      | $ | 0.46   |      |  | $ | (0.14  | ) |  | $ | (0.39   | )
|         |                                                          |                      |   |        |      |  |   |        |  



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IXYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |                                    
|--- | -----------------------------------
|15. | Segment and Geographic Information:



|                           |                |                      |       |         |      |  |       |         |  |  |       |         | 
|-------------------------- | -------------- | -------------------- | ----- | ------- | ---- |  | ----- | ------- |  |  | ----- | ------- | 
|                           |                | Year Ended March 31, |      
|                           |                |                      |      
|                           |                | 2005                 |       |         | 2004 |  |       | 2003    | 
|                           |                |                      |       |         |      |  |       |         | 
|North America              |                |                      |       |         |      |  |       |         |  |  |       |        
|                           | United States  |                      | $     | 72,300  |      |  | $     | 62,061  |  |  | $     | 52,932  | 
|                           | Canada         |                      |       | 3,473   |      |  |       | 5,985   |  |  |       | 4,563   | 
|Europe and the Middle East |                |                      |       |         |      |  |       |         |  |  |       |        
|                           | Germany        |                      |       | 28,821  |      |  |       | 24,631  |  |  |       | 19,071  | 
|                           | Italy          |                      |       | 7,220   |      |  |       | 6,954   |  |  |       | 6,468   | 
|                           | United Kingdom |                      |       | 15,947  |      |  |       | 10,111  |  |  |       | 8,602   | 
|                           | Other          |                      |       | 33,281  |      |  |       | 29,578  |  |  |       | 19,428  | 
|Asia Pacific               |                |                      |       |         |      |  |       |         |  |  |       |        
|                           | Korea          |                      |       | 49,990  |      |  |       | 14,513  |  |  |       | 3,872   | 
|                           | China          |                      |       | 16,800  |      |  |       | 13,565  |  |  |       | 7,239   | 
|                           | Japan          |                      |       | 6,711   |      |  |       | 4,782   |  |  |       | 4,003   | 
|                           | Other          |                      |       | 17,619  |      |  |       | 11,301  |  |  |       | 7,970   | 
|Rest of the World          |                |                      | 4,458 |         |      |  | 3,961 |         |  |  | 1,963 |        
|                           |                |                      |       |         |      |  |       |         | 
|                           | Total          |                      | $     | 256,620 |      |  | $     | 187,442 |  |  | $     | 136,111 | 
|                           |                |                      |       |         |      |  |       |         | 



|                                    |       |                      |         |         |      |   |         |         | 
|----------------------------------- | ----- | -------------------- | ------- | ------- | ---- | - | ------- | ------- | 
|                                    |       | Year Ended March 31, |        
|                                    |       |                      |        
|                                    |       | 2005                 |         |         | 2004 |  
|                                    |       |                      |         |         |      |  
|Power semiconductors                |       | $                    | 190,338 |         |      | $ | 139,312 |        
|Integrated circuits                 |       |                      | 40,759  |         |      |   | 33,058  |        
|Systems and RF power semiconductors |       |                      | 25,523  |         |      |   | 15,072  |        
|                                    |       |                      |         |         |      |  
|                                    | Total |                      | $       | 256,620 |      |   | $       | 187,442 | 
|                                    |       |                      |         |         |      |  





78



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IXYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                  |           |                      |         |         |      |   |         |         |   |   |         |         |  
|----------------- | --------- | -------------------- | ------- | ------- | ---- | - | ------- | ------- | - | - | ------- | ------- | -
|                  |           | Year Ended March 31, |        
|                  |           |                      |        
|                  |           | 2005                 |         |         | 2004 |   |         | 2003    |  
|                  |           |                      |         |         |      |   |         |         |  
|Net Revenues:     |           |                      |         |         |      |   |         |         |   |   |         |        
|                  | Foreign   |                      | $       | 99,442  |      |   | $       | 86,533  |   |   | $       | 64,977  |  
|                  | IXYS U.S. |                      |         | 157,178 |      |   |         | 100,909 |   |   |         | 71,134  |  
|                  |           |                      |         |         |      |   |         |         |  
|                  |           | $                    | 256,620 |         |      | $ | 187,442 |         |   | $ | 136,111 |        
|                  |           |                      |         |         |      |   |         |         |  
|Net Income(loss): |           |                      |         |         |      |   |         |         |   |   |         |        
|                  | Foreign   |                      | $       | 6,504   |      |   | $       | 3,206   |   |   | $       | (925    | )
|                  | IXYS U.S. |                      |         | 9,738   |      |   |         | (7,638  | ) |   |         | (11,220 | )
|                  |           |                      |         |         |      |   |         |         |  
|                  |           | $                    | 16,242  |         |      | $ | (4,432  | )       |   | $ | (12,145 | )      
|                  |           |                      |         |         |      |   |         |         |  

|                               |                |                                    |   |        |        |  |   |        |        | 
|------------------------------ | -------------- | ---------------------------------- | - | ------ | ------ |  | - | ------ | ------ | 
|                               |                | March 31,                          |  
|                               |                |                                    |  
|                               |                | 2005                               |   |        | 2004   | 
|                               |                |                                    |   |        |        | 
|Property, Plant and Equipment: |                |                                    |   |        |        |  |   |       
|                               | Germany        |                                    | $ | 13,880 |        |  | $ | 12,668 |       
|                               | Switzerland    |                                    |   | 1,207  |        |  |   | 1,713  |       
|                               | IXYS U.S.      |                                    |   | 8,668  |        |  |   | 4,457  |       
|                               | United Kingdom |                                    |   | 4,059  |        |  |   | 7,531  |       
|                               |                |                                    |   |        |        | 
|                               |                | Total Property plant and equipment |   | $      | 27,814 |  |   | $      | 26,369 | 
|                               |                |                                    |   |        |        | 



|    |                   
|--- | ------------------
|16. | Subsequent Events:











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IXYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Selected Quarterly Financial Data (unaudited)




| |                                 
| | --------------------------------
| | Fiscal Year Ended March 31, 2005

|                                                               |         |                                          |        |        |              |   |        |               |  |   |          |        |  |   |        |        | 
|-------------------------------------------------------------- | ------- | ---------------------------------------- | ------ | ------ | ------------ | - | ------ | ------------- |  | - | -------- | ------ |  | - | ------ | ------ | 
|                                                               |         | Three Months Ended                       |       
|                                                               |         |                                          |       
|                                                               |         | March 31,                                |        |        | December 31, |   |        | September 30, |  |   | June 30, |       
|                                                               |         | 2005                                     |        |        | 2004         |   |        | 2004          |  |   | 2004     |       
|                                                               |         |                                          |        |        |              |   |        |               |  |   |          |       
|                                                               |         | (In thousands, except per share amounts) |       
|Net revenues                                                   |         | $                                        | 69,023 |        |              | $ | 66,258 |               |  | $ | 61,385   |        |  | $ | 59,954 |       
|Gross profit                                                   |         |                                          | 23,169 |        |              |   | 20,055 |               |  |   | 19,511   |        |  |   | 17,175 |       
|Operating income                                               |         |                                          | 9,043  |        |              |   | 7,051  |               |  |   | 6,289    |        |  |   | 3,246  |       
|Net income                                                     |         | $                                        | 5,789  |        |              | $ | 4,749  |               |  | $ | 3,841    |        |  | $ | 1,863  |       
|Basic net income per share applicable to common stockholder    |         | $                                        | 0.17   |        |              | $ | 0.14   |               |  | $ | 0.12     |        |  | $ | 0.06   |       
|Diluted net income per share applicable to common stockholders |         | $                                        | 0.16   |        |              | $ | 0.14   |               |  | $ | 0.11     |        |  | $ | 0.05   |       
|Weighted average shares used in per share calculation          |         |                                          |        |        |              |   |        |               |  |   |          |        |  |   |        |       
|                                                               | Basic   |                                          |        | 33,034 |              |   |        | 33,076        |  |   |          | 33,007 |  |   |        | 32,952 | 
|                                                               | Diluted |                                          |        | 35,297 |              |   |        | 35,012        |  |   |          | 34,484 |  |   |        | 35,049 | 



| |                                 
| | --------------------------------
| | Fiscal Year Ended March 31, 2004

|                                                                         |         |                                          |        |        |              |   |        |               |  |   |          |        |  |   |        |        | 
|------------------------------------------------------------------------ | ------- | ---------------------------------------- | ------ | ------ | ------------ | - | ------ | ------------- |  | - | -------- | ------ |  | - | ------ | ------ | 
|                                                                         |         | Three Months Ended                       |       
|                                                                         |         |                                          |       
|                                                                         |         | March 31,                                |        |        | December 31, |   |        | September 30, |  |   | June 30, |       
|                                                                         |         | 2004                                     |        |        | 2003         |   |        | 2003          |  |   | 2003     |       
|                                                                         |         |                                          |        |        |              |   |        |               |  |   |          |       
|                                                                         |         | (In thousands, except per share amounts) |       
|Net revenues                                                             |         | $                                        | 53,676 |        |              | $ | 50,744 |               |  | $ | 42,926   |        |  | $ | 40,096 |       
|Gross profit                                                             |         |                                          | 7,871  |        |              |   | 12,045 |               |  |   | 11,237   |        |  |   | 12,341 |       
|Operating income (loss)                                                  |         |                                          | (6,077 | )      |              |   | 504    |               |  |   | (65      | )      |  |   | 579    |       
|Net income (loss)                                                        |         | $                                        | (5,152 | )      |              | $ | 386    |               |  | $ | (109     | )      |  | $ | 443    |       
|Basic net income (loss) per share applicable to common
    stockholder   |         | $                                        | (0.16  | )      |              | $ | 0.01   |               |  | $ | 0.00     |        |  | $ | 0.01   |       
|Diluted net income (loss) per share applicable to common
    stockholder |         | $                                        | (0.16  | )      |              | $ | 0.01   |               |  | $ | 0.00     |        |  | $ | 0.01   |       
|Weighted average shares used in per share calculation                    |         |                                          |        |        |              |   |        |               |  |   |          |        |  |   |        |       
|                                                                         | Basic   |                                          |        | 32,858 |              |   |        | 32,772        |  |   |          | 32,213 |  |   |        | 31,972 | 
|                                                                         | Diluted |                                          |        | 32,858 |              |   |        | 34,805        |  |   |          | 32,213 |  |   |        | 33,116 | 

80



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








|         |                        
|-------- | -----------------------
|Item 9A. | Controls and Procedures

Disclosure Controls and Procedures




Managements Report on Internal Control over Financial
Reporting


Internal
Control-Integrated Framework,






| |   |                                                                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | deficiencies in the number of accounting personnel trained in
    applying US GAAP and in reporting financial information in
    accordance with the requirements of the SEC;
|
| |  | deficiencies in our control over costing and valuation of
    inventory;                                                                                                     
|
| |  | deficiencies in our control over the use of spreadsheets in our
    operations;                                                                                              
|
| |  | deficiencies in the review of the consolidation process; and                                                                                                                 
|
| |  | inadequate segregation of duties in the purchasing cycle.                                                                                                                    





81



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Changes in Internal Control over Financial Reporting






82



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| |   |                                                                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | untimely reconciliation and aging of accounts receivable at our
    Santa Clara operation;                                                                       
|
| |  | untimely quarterly updating of inventory reserves;                                                                                                               
|
| |  | inconsistency in analyzing and appropriately capitalizing
    production variances at each quarter end;                                                          
|
| |  | lack of reconciliation of intercompany accounts;                                                                                                                 
|
| |  | inadequate review of the consolidation and controls about
    inputs, translation of foreign currency balances and recurring
    journal entries;                
|
| |  | absence of consistent accounting policies across the company for
    accounts receivable reserves and inventory reserves; and                                    
|
| |  | deficiencies in information technology controls together with
    the absence of a company-wide information technology strategy
    and organizational structure.







83



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84



---



##### Table of Contents







Inherent Limitations on Effectiveness of Controls




Report of Independent Registered Public Accounting Firm on
Internal Controls




Internal Control  Integrated Framework








85



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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. There were insufficient accounting personnel trained in
    applying United States generally accepted accounting principles
    (US GAAP) and in reporting financial information in accordance
    with the requirements of the Securities and Exchange Commission
    (SEC) to ensure the correct application of US GAAP and SEC
    requirements to amounts and disclosures within the financial
    statements.                                                                                                                                                                                                                                                                            
|
| | 2. Controls over the costing and valuation of inventory
    were inadequate to prevent and detect errors in the accuracy of
    standard costs, the capitalization of production variances and
    the computation of excess and obsolete inventory reserves,
    resulting in erroneous production variances in one facility,
    errors in capitalized variances at two locations and errors in
    calculating inventory reserves in a fourth facility. The
    correction of these errors resulted in an increase in cost of
    goods sold in the statement of operations of $624,000, a
    decrease in inventory of $122,000 and $502,000 distributed over
    a number of other accounts.
|
| | 3. There were inadequate access and validation controls in
    spreadsheets used to compute key financial statement amounts and
    disclosures to prevent and detect errors in both computation and
    data entry. As a result of these items, reported income taxes
    and other matters were corrected at March 31, 2005 by
    approximately $105,000 and $332,000, respectively.                                                                                                                                                                                                                                                                                                          
|
| | 4. Controls over the consolidation process, including the
    review of inputs, foreign currency translation and recurring
    journal entries, together with overall supervisory review of the
    consolidation were inadequate to prevent and detect errors in
    the consolidated financial statements. This deficiency resulted
    in the draft reports requiring a reduction in both deferred tax
    assets and income taxes payable of approximately
    $8.2 million and adjustments to foreign exchange totaling
    $145,000.                                                                                                                                                       
|
| | 5. Segregation of duties in the purchasing and payables
    functions was inadequate to prevent and detect material
    misstatements. In particular, at several Company facilities, the
    same individual was able to update vendor files, control
    purchase orders and process vendor invoices.                                                                                                                                                                                                                                                                                                                                                                                           



Internal
Control  Integrated Framework Internal Control  Integrated Framework












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|         |                  
|-------- | -----------------
|Item 9B. | Other Information






PART III







|         |                                                   
|-------- | --------------------------------------------------
|Item 10. | Directors and Executive Officers of the Registrant



| |                            
| | ---------------------------
| | Identification of Directors





| |                                     
| | ------------------------------------
| | Identification of Executive Officers





| |                                                           
| | ----------------------------------------------------------
| | Identification of Audit Committee and Financial
    Expert





| |                                                              
| | -------------------------------------------------------------
| | Material Changes to Procedures for Recommending
    Directors





| |                                                      
| | -----------------------------------------------------
| | Compliance with Section 16(a) of the Exchange
    Act





| |               
| | --------------
| | Code of Ethics








|         |                       
|-------- | ----------------------
|Item 11. | Executive Compensation



87



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








|         |                                               
|-------- | ----------------------------------------------
|Item 13. | Certain Relationships and Related Transactions








|         |                                       
|-------- | --------------------------------------
|Item 14. | Principal Accounting Fees and Services






PART IV







|         |                                        
|-------- | ---------------------------------------
|Item 15. | Exhibits, Financial Statement Schedules





| |                         
| | ------------------------
| | (1) Financial Statements



| |                                                                                                            
| | -----------------------------------------------------------------------------------------------------------
| | Report of Independent Registered Public Accounting Firm on
    Consolidated Financial Statements           
|
| | Report of Independent Registered Public Accounting Firm                                                    
|
| | Consolidated Balance Sheets as of March 31, 2005 and 2004                                                  
|
| | Consolidated Statement of Operations for the years ended
    March 31, 2005, 2004 and 2003                 
|
| | Consolidated Statement of Comprehensive Income (Loss) for the
    years ended March 31, 2005, 2004 and 2003
|
| | Consolidated Statement of Stockholders Equity for the
    years ended March 31, 2005, 2004 and 2003       
|
| | Consolidated Statements of Cash Flows for the years ended
    March 31, 2005, 2004 and 2003                
|
| | Notes to Consolidated Financial Statements                                                                 



| |                                                                                                                                                                                                 
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (2) Financial statements schedules. All schedules are
    omitted because they are not applicable or the required
    information is shown in the financial statements or the notes
    thereto.
|
| | (3) Exhibits.                                                                                                                                                                                   

|        |   |       |  |                                                                                                                                                                                                                                                                                                      
|------- | - | ----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |   | Title
|        |   |      
|        | 3 | .1    |  | Amended and Restated Certificate of Incorporation of the
    Registrant, as filed with the Secretary of State for the State
    of Delaware on March 23, 2001 (filed on June 28, 2001
    as Exhibit 3.1 to the Annual Report on Form 10-K
    (No. 000-26124) and incorporated herein by reference).
|        | 3 | .2    |  | Amended and Restated Bylaws of the Registrant (filed on
    November 14, 2002 as Exhibit 3.2 to the Quarterly
    Report on Form 10-Q (No. 000-26124) and incorporated
    herein by reference).                                                                                                     

88



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|        |    |       |  |                                                                                                                                                                                                                                                                                                                                                                                                           
|------- | -- | ----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    | Title
|        |    |      
|        | 10 | .1*   |  | Second Amended Executive Employment Agreement, dated as of
    February 1, 2004, by and between IXYS Corporation
    (IXYS) and Nathan Zommer (filed on June 14,
    2004 as Exhibit 10.1 to the Annual Report on Form 10-K
    (No. 000-26124) and incorporated herein by reference).                                                                                                                  
|        | 10 | .2    |  | Wafer Foundry Agreement, dated as of June 21, 1995, as
    amended on March 28, 1996 and March 13, 1998, by and
    between IXYS and Samsung Electronics Co. (filed on June 29,
    1998 as Exhibit 10.3 to Amendment No. 1 the
    Registration Statement on Form S-4 of Paradigm Technology,
    Inc. (No. 333-57003) (Amendment No. 1 to the
    Paradigm S-4) and incorporated herein by reference).
|        | 10 | .3*   |  | Indemnity Agreement, dated November 20, 1999, by and
    between IXYS and Nathan Zommer (filed on June 28, 2001
    as Exhibit 10.7 to the Annual Report on Form 10-K
    (No. 000-26124) and incorporated herein by reference).                                                                                                                                                                          
|        | 10 | .4*   |  | Indemnity Agreement, dated November 20, 1999, by and
    between IXYS and Arnold Agbayani (filed on June 28, 2001 as
    Exhibit 10.8 to the Annual Report on Form 10-K
    (No. 000-26124) and incorporated herein by reference).                                                                                                                                                                        
|        | 10 | .5*   |  | Indemnity Agreement, dated November 20, 1999, by and
    between IXYS and Samuel Kory (filed on June 28, 2001 as
    Exhibit 10.10 to the Annual Report on Form 10-K
    (No. 000-26124) and incorporated herein by reference).                                                                                                                                                                           
|        | 10 | .6*   |  | Indemnity Agreement, dated November 20, 1999, by and
    between IXYS and Kevin McDonough (filed on June 28, 2001 as
    Exhibit 10.11 to the Annual Report on Form 10-K
    (No. 000-26124) and incorporated herein by reference).                                                                                                                                                                       
|        | 10 | .7*   |  | Indemnity Agreement, dated November 20, 1999, by and
    between IXYS and Peter Ingram (filed on June 28, 2001 as
    Exhibit 10.12 to the Annual Report on Form 10-K
    (No. 000-26124) and incorporated herein by reference).                                                                                                                                                                          
|        | 10 | .8*   |  | Indemnity Agreement, dated August 4, 2000, by and between
    IXYS and Donald L. Feucht (filed on June 28, 2001 as
    Exhibit 10.13 to the Annual Report on Form 10-K
    (No. 000-26124) and incorporated herein by reference).                                                                                                                                                                         
|        | 10 | .9*   |  | Indemnity Agreement, dated August 4, 2000, by and between
    IXYS and S. Joon Lee (filed on June 28, 2001 as
    Exhibit 10.14 to the Annual Report on Form 10-K
    (No. 000-26124) and incorporated herein by reference).                                                                                                                                                                              
|        | 10 | .10*  |  | Indemnity Agreement, dated December 9, 2004, by and between
    IXYS and Kenneth D. Wong (filed on February 11, 2005
    as Exhibit 10.3 to the Quarterly Report on Form 10-Q
    (No. 000-26124) and incorporated herein by reference).                                                                                                                                                                  
|        | 10 | .11*  |  | Indemnity Agreement, dated December 9, 2004, by and between
    IXYS and Uzi Sasson (filed on February 11, 2005 as
    Exhibit 10.2 to the Quarterly Report on Form 10-Q
    (No. 000-26124) and incorporated herein by reference).                                                                                                                                                                       
|        | 10 | .12*  |  | Indemnity Agreement, dated December 9, 2004, by and between
    IXYS and Kent P. Loose (filed on February 11, 2005 as
    Exhibit 10.1 to the Quarterly Report on Form 10-Q
    (No. 000-26124) and incorporated herein by reference).                                                                                                                                                                    
|        | 10 | .13*  |  | The Paradigm 1994 Stock Option Plan, as amended (filed on
    February 16, 1999 as Exhibit 10.2 to the Quarterly
    Report on Form 10-Q (No. 000-26124) and incorporated
    herein by reference).                                                                                                                                                                                                       
|        | 10 | .14*  |  | The IXYS 1999 Equity Incentive Plan (filed on July 8, 1999
    as Exhibit 10.10 to the Annual Report on Form 10-K
    (No. 000-26124) and incorporated herein by reference).                                                                                                                                                                                                                              
|        | 10 | .15*  |  | The IXYS 1999 Employee Stock Purchase Plan (filed on
    July 8, 1999 as Exhibit 10.11 to the Annual Report on
    Form 10-K (No. 000-26124) and incorporated herein by
    reference).                                                                                                                                                                                                                   
|        | 10 | .16*  |  | The IXYS 1999 Non-Employee Directors Equity Incentive Plan
    (filed on July 8, 1999 as Exhibit 10.12 to the Annual
    Report on Form 10-K (No. 000-26124) and incorporated
    herein by reference).                                                                                                                                                                                                  
|        | 10 | .17*  |  | Form of Stock Option Agreement for the 1999 Equity Incentive
    Plan (filed on November 9, 2004 as Exhibit 10.3 to the
    Quarterly Report on Form 10-Q (No. 000-26124) and
    incorporated herein by reference).                                                                                                                                                                                      

89



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|        |    |       |  |                                                                                                                                                                                                                                                                                                                                                   
|------- | -- | ----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    | Title
|        |    |      
|        | 10 | .18*  |  | Form of Stock Option Agreement for the 1999 Non-Employee
    Directors Equity Incentive Plan (filed on November 9,
    2004 as Exhibit 10.1 to the Quarterly Report on
    Form 10-Q (No. 000-26124) and incorporated herein by
    reference).                                                                                                  
|        | 10 | .19*  |  | Form of Stock Option Agreement for the 1999 Non-Employee
    Directors Equity Incentive Plan (filed on November 9,
    2004 as Exhibit 10.2 to the Quarterly Report on
    Form 10-Q (No. 000-26124) and incorporated herein by
    reference).                                                                                                  
|        | 10 | .20*  |  | Amended and Restated Promissory Note, dated September 15,
    2000, executed by Nathan Zommer and acknowledged and agreed to
    by IXYS (filed on October 23, 2000 as Exhibit 10.1 to
    Amendment No. 3 to the Registration Statement on
    Form S-3 (No. 333-46028) (Amendment No. 3 to the
    S-3) and incorporated herein by reference).
|        | 10 | .21*  |  | Amended and Restated Promissory Note, dated September 15,
    2000, executed by Arnold P. Agbayani and acknowledged and agreed
    to by IXYS (filed on October 23, 2000 as Exhibit 10.2
    to Amendment No. 3 to the S-3 and incorporated herein by
    reference).                                                                             
|        | 10 | .22*  |  | Amended and Restated Pledge Agreement, dated September 15,
    2000, by Nathan Zommer and acknowledged and agreed to by IXYS
    (filed on October 23, 2000 as Exhibit 10.3 to
    Amendment No. 3 to the S-3 and incorporated herein by
    reference).                                                                                          
|        | 10 | .23*  |  | Amended and Restated Pledge Agreement, dated September 15,
    2000, executed by Arnold P. Agbayani and acknowledged and
    agreed to by IXYS (filed on October 23, 2000 as
    Exhibit 10.4 to Amendment No. 3 to the S-3 and
    incorporated herein by reference).                                                                            
|        | 10 | .24*  |  | Recourse Promissory Note issued to IXYS by Samuel J. Kory,
    effective as of August 30, 2002 and executed in April 2002
    (filed on August 14, 2002 as Exhibit 10.29 to the
    Quarterly Report on Form 10-Q (No. 000-26124) and
    incorporated herein by reference).                                                                      
|        | 10 | .25*  |  | Stock Pledge Agreement by Samuel J. Kory in favor of IXYS,
    effective as of August 30, 2001 and executed in April 2002
    (filed on August 14, 2002 as Exhibit 10.30 to the
    Quarterly Report on Form 10-Q (No. 000-26124) and
    incorporated herein by reference).                                                                      
|        | 10 | .26*  |  | Description of Nathan Zommers cash bonuses.                                                                                                                                                                                                                                                                                                      
|        | 10 | .27*  |  | Description of elements of Uzi Sassons compensation.                                                                                                                                                                                                                                                                                             
|        | 10 | .28*  |  | Summary of outside director compensation.                                                                                                                                                                                                                                                                                                         
|        | 21 | .1    |  | List of Subsidiaries.                                                                                                                                                                                                                                                                                                                             
|        | 23 | .1    |  | Consent of BDO Seidman, LLP.                                                                                                                                                                                                                                                                                                                      
|        | 23 | .2    |  | Consent of PricewaterhouseCoopers LLP.                                                                                                                                                                                                                                                                                                            
|        | 24 | .1    |  | Power of Attorney (included on the signature page)                                                                                                                                                                                                                                                                                                
|        | 31 | .1    |  | Certification of Chief Executive Officer pursuant to
    Rule 13a-14(a) of the Securities and Exchange Commission.                                                                                                                                                                                                                                
|        | 31 | .2    |  | Certification of Chief Financial Officer pursuant to the
    Rule 13a-14(a) of the Securities and Exchange Commission.                                                                                                                                                                                                                            
|        | 32 | .1    |  | Certification required by Rule 13a-14(b) of the Securities
    and Exchange Commission and Section 1350 of Chapter 63
    of Title 18 of the United States Code (18 U.S.C. 1350).                                                                                                                                                                 






|  |                                                         
|- | --------------------------------------------------------
|* | Management contract or compensation plan or arrangement.

90



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SIGNATURES






| |                 
| | ----------------
| | IXYS CORPORATION



| |     |                  
| | --- | -----------------
| | By: | /s/ Nathan Zommer

| |                                                
| | -----------------------------------------------
| |                                                
| | Nathan Zommer                                  
| | President, Chief Executive Officer and Chairman
| | (Principal Executive Officer)                  



POWER OF ATTORNEY






|                                         |  |                                                                                                                          |  |               |  | 
|---------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------ |  | ------------- |  | 
|Signature                                |  | Title                                                                                                                    |  | Date         
|                                         |  |                                                                                                                          |  |              
|                                        
|/s/ Nathan ZommerNathan
    Zommer       |  | President, Chief Executive Officer and Chairman (Principal
    Executive Officer) and Director                           |  | June 29, 2005
|                                        
|/s/ Uzi SassonUzi
    Sasson             |  | Vice President of Finance and Chief Financial Officer (Principal
    Financial Officer and Principal Accounting Officer) |  | June 29, 2005
|                                        
|/s/ Samuel KorySamuel
    Kory           |  | Director                                                                                                                 |  | June 29, 2005
|                                        
|/s/ Donald L. FeuchtDonald
    L. Feucht |  | Director                                                                                                                 |  | June 29, 2005
|                                        
|/s/ S. Joon LeeS.
    Joon Lee           |  | Director                                                                                                                 |  | June 29, 2005
|                                        
|/s/ Kenneth D. WongKenneth
    D. Wong   |  | Director                                                                                                                 |  | June 29, 2005

91



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Exhibit Index


|        |    |       |  |                                                                                                                                                                                                                                                                                                                                                                                                           
|------- | -- | ----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    | Title
|        |    |      
|        | 3  | .1    |  | Amended and Restated Certificate of Incorporation of the
    Registrant, as filed with the Secretary of State for the State
    of Delaware on March 23, 2001 (filed on June 28, 2001
    as Exhibit 3.1 to the Annual Report on Form 10-K (No.
    000-26124) and incorporated herein by reference).                                                                                                     
|        | 3  | .2    |  | Amended and Restated Bylaws of the Registrant (filed on
    November 14, 2002 as Exhibit 3.2 to the Quarterly
    Report on Form 10-Q (No. 000-26124) and incorporated herein by
    reference).                                                                                                                                                                                                          
|        | 10 | .1*   |  | Second Amended Executive Employment Agreement, dated as of
    February 1, 2004, by and between IXYS Corporation
    (IXYS) and Nathan Zommer (filed on June 14,
    2004 as Exhibit 10.1 to the Annual Report on Form 10-K (No.
    000-26124) and incorporated herein by reference).                                                                                                                  
|        | 10 | .2    |  | Wafer Foundry Agreement, dated as of June 21, 1995, as
    amended on March 28, 1996 and March 13, 1998, by and
    between IXYS and Samsung Electronics Co. (filed on June 29,
    1998 as Exhibit 10.3 to Amendment No. 1 the
    Registration Statement on Form S-4 of Paradigm Technology,
    Inc. (No. 333-57003) (Amendment No. 1 to the Paradigm
    S-4) and incorporated herein by reference).
|        | 10 | .3*   |  | Indemnity Agreement, dated November 20, 1999, by and
    between IXYS and Nathan Zommer (filed on June 28, 2001 as
    Exhibit 10.7 to the Annual Report on Form 10-K (No.
    000-26124) and incorporated herein by reference).                                                                                                                                                                          
|        | 10 | .4*   |  | Indemnity Agreement, dated November 20, 1999, by and
    between IXYS and Arnold Agbayani (filed on June 28, 2001 as
    Exhibit 10.8 to the Annual Report on Form 10-K (No.
    000-26124) and incorporated herein by reference).                                                                                                                                                                        
|        | 10 | .5*   |  | Indemnity Agreement, dated November 20, 1999, by and
    between IXYS and Samuel Kory (filed on June 28, 2001 as
    Exhibit 10.10 to the Annual Report on Form 10-K (No.
    000-26124) and incorporated herein by reference).                                                                                                                                                                           
|        | 10 | .6*   |  | Indemnity Agreement, dated November 20, 1999, by and
    between IXYS and Kevin McDonough (filed on June 28, 2001 as
    Exhibit 10.11 to the Annual Report on Form 10-K (No.
    000-26124) and incorporated herein by reference).                                                                                                                                                                       
|        | 10 | .7*   |  | Indemnity Agreement, dated November 20, 1999, by and
    between IXYS and Peter Ingram (filed on June 28, 2001 as
    Exhibit 10.12 to the Annual Report on Form 10-K (No.
    000-26124) and incorporated herein by reference).                                                                                                                                                                          
|        | 10 | .8*   |  | Indemnity Agreement, dated August 4, 2000, by and between
    IXYS and Donald L. Feucht (filed on June 28, 2001 as
    Exhibit 10.13 to the Annual Report on Form 10-K (No.
    000-26124) and incorporated herein by reference).                                                                                                                                                                         
|        | 10 | .9*   |  | Indemnity Agreement, dated August 4, 2000, by and between
    IXYS and S. Joon Lee (filed on June 28, 2001 as
    Exhibit 10.14 to the Annual Report on Form 10-K (No.
    000-26124) and incorporated herein by reference).                                                                                                                                                                              
|        | 10 | .10*  |  | Indemnity Agreement, dated December 9, 2004, by and between
    IXYS and Kenneth D. Wong (filed on February 11, 2005 as
    Exhibit 10.3 to the Quarterly Report on Form 10-Q (No.
    000-26124) and incorporated herein by reference).                                                                                                                                                                  
|        | 10 | .11*  |  | Indemnity Agreement, dated December 9, 2004, by and between
    IXYS and Uzi Sasson (filed on February 11, 2005 as
    Exhibit 10.2 to the Quarterly Report on Form 10-Q (No.
    000-26124) and incorporated herein by reference).                                                                                                                                                                       
|        | 10 | .12*  |  | Indemnity Agreement, dated December 9, 2004, by and between
    IXYS and Kent P. Loose (filed on February 11, 2005 as
    Exhibit 10.1 to the Quarterly Report on Form 10-Q (No.
    000-26124) and incorporated herein by reference).                                                                                                                                                                    
|        | 10 | .13*  |  | The Paradigm 1994 Stock Option Plan, as amended (filed on
    February 16, 1999 as Exhibit 10.2 to the Quarterly
    Report on Form 10-Q (No. 000-26124) and incorporated herein by
    reference).                                                                                                                                                                                                       
|        | 10 | .14*  |  | The IXYS 1999 Equity Incentive Plan (filed on July 8, 1999
    as Exhibit 10.10 to the Annual Report on Form 10-K (No.
    000-26124) and incorporated herein by reference).                                                                                                                                                                                                                              
|        | 10 | .15*  |  | The IXYS 1999 Employee Stock Purchase Plan (filed on
    July 8, 1999 as Exhibit 10.11 to the Annual Report on
    Form 10-K (No. 000-26124) and incorporated herein by reference).                                                                                                                                                                                                                       

92



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|        |    |       |  |                                                                                                                                                                                                                                                                                                                                                   
|------- | -- | ----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    | Title
|        |    |      
|        | 10 | .16*  |  | The IXYS 1999 Non-Employee Directors Equity Incentive Plan
    (filed on July 8, 1999 as Exhibit 10.12 to the Annual
    Report on Form 10-K (No. 000-26124) and incorporated herein by
    reference).                                                                                                                                          
|        | 10 | .17*  |  | Form of Stock Option Agreement for the 1999 Equity Incentive
    Plan (filed on November 9, 2004 as Exhibit 10.3 to the
    Quarterly Report on Form 10-Q (No. 000-26124) and incorporated
    herein by reference).                                                                                                                              
|        | 10 | .18*  |  | Form of Stock Option Agreement for the 1999 Non-Employee
    Directors Equity Incentive Plan (filed on November 9,
    2004 as Exhibit 10.1 to the Quarterly Report on Form 10-Q
    (No. 000-26124) and incorporated herein by reference).                                                                                                      
|        | 10 | .19*  |  | Form of Stock Option Agreement for the 1999 Non-Employee
    Directors Equity Incentive Plan (filed on November 9,
    2004 as Exhibit 10.2 to the Quarterly Report on Form 10-Q
    (No. 000-26124) and incorporated herein by reference).                                                                                                      
|        | 10 | .20*  |  | Amended and Restated Promissory Note, dated September 15,
    2000, executed by Nathan Zommer and acknowledged and agreed to
    by IXYS (filed on October 23, 2000 as Exhibit 10.1 to
    Amendment No. 3 to the Registration Statement on
    Form S-3 (No. 333-46028) (Amendment No. 3 to the
    S-3) and incorporated herein by reference).
|        | 10 | .21*  |  | Amended and Restated Promissory Note, dated September 15,
    2000, executed by Arnold P. Agbayani and acknowledged and agreed
    to by IXYS (filed on October 23, 2000 as Exhibit 10.2
    to Amendment No. 3 to the S-3 and incorporated herein by
    reference).                                                                             
|        | 10 | .22*  |  | Amended and Restated Pledge Agreement, dated September 15,
    2000, by Nathan Zommer and acknowledged and agreed to by IXYS
    (filed on October 23, 2000 as Exhibit 10.3 to
    Amendment No. 3 to the S-3 and incorporated herein by
    reference).                                                                                          
|        | 10 | .23*  |  | Amended and Restated Pledge Agreement, dated September 15,
    2000, executed by Arnold P. Agbayani and acknowledged and
    agreed to by IXYS (filed on October 23, 2000 as
    Exhibit 10.4 to Amendment No. 3 to the S-3 and
    incorporated herein by reference).                                                                            
|        | 10 | .24*  |  | Recourse Promissory Note issued to IXYS by Samuel J. Kory,
    effective as of August 30, 2002 and executed in April 2002
    (filed on August 14, 2002 as Exhibit 10.29 to the
    Quarterly Report on Form 10-Q (No. 000-26124) and incorporated
    herein by reference).                                                                      
|        | 10 | .25*  |  | Stock Pledge Agreement by Samuel J. Kory in favor of IXYS,
    effective as of August 30, 2001 and executed in April 2002
    (filed on August 14, 2002 as Exhibit 10.30 to the
    Quarterly Report on Form 10-Q (No. 000-26124) and incorporated
    herein by reference).                                                                      
|        | 10 | .26*  |  | Description of Nathan Zommers cash bonuses.                                                                                                                                                                                                                                                                                                      
|        | 10 | .27*  |  | Description of elements of Uzi Sassons compensation.                                                                                                                                                                                                                                                                                             
|        | 10 | .28*  |  | Summary of outside director compensation.                                                                                                                                                                                                                                                                                                         
|        | 21 | .1    |  | List of Subsidiaries.                                                                                                                                                                                                                                                                                                                             
|        | 23 | .1    |  | Consent of BDO Seidman, LLP.                                                                                                                                                                                                                                                                                                                      
|        | 23 | .2    |  | Consent of PricewaterhouseCoopers LLP.                                                                                                                                                                                                                                                                                                            
|        | 24 | .1    |  | Power of Attorney (included on the signature page)                                                                                                                                                                                                                                                                                                
|        | 31 | .1    |  | Certification of Chief Executive Officer pursuant to
    Rule 13a-14(a) of the Securities and Exchange Commission.                                                                                                                                                                                                                                
|        | 31 | .2    |  | Certification of Chief Financial Officer pursuant to the
    Rule 13a-14(a) of the Securities and Exchange Commission.                                                                                                                                                                                                                            
|        | 32 | .1    |  | Certification required by Rule 13a-14(b) of the Securities
    and Exchange Commission and Section 1350 of Chapter 63
    of Title 18 of the United States Code (18 U.S.C. 1350).                                                                                                                                                                 






|  |                                                         
|- | --------------------------------------------------------
|* | Management contract or compensation plan or arrangement.

93