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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,
    2003                                                
|          
|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)


Indicate by check mark whether the Registrant
(1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and
(2) has been subject to such filing requirements for the
past
90 days.     Yes þ          No o

Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be
contained, to the best of Registrants knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Annual Report on
Form 10-K or any amendments to this Annual Report on
Form 10-K.     Yes o          No þ

Indicate by check mark whether the Registrant is
an accelerated filer (as defined in Rule 12b-2 of the
Act).     Yes þ          No o

The aggregate market value of the voting stock
held by non-affiliates of the Registrant, computed by reference
to the last sale price on the Nasdaq National Market on
September 30, 2002, was approximately $91,627,299. The
number of shares of the Registrants Common Stock
outstanding as of June 23, 2003 was 31,897,663.



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TABLE OF CONTENTS



|              |                                                                                               |  |  |  |  |  |  | 
|------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I       
|              | Item 1. IXYS Business                                                                        
|              | Item 2. Properties                                                                           
|              | Item 3. Legal Proceedings                                                                    
|              | Item 4. Submission of Matters to a Vote of Security Holders                                  
|PART II      
|              | Item 5. Market for Registrants Common Equity and Related Stockholders Matters               
|              | Item 6. Selected Financial Data                                                              
|              | Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
|              | Item 7A. Quantitative and Qualitative Disclosures About Market Risk                          
|              | Item 8. Financial Statements                                                                 
|              | Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 
|PART III     
|              | Item 10. Directors and Executive Officers of the Registrant                                  
|              | Item 12. Security Ownership of Certain Beneficial Owners and Management                      
|              | Item 13. Certain Relationships and Related Transactions                                      
|              | Item 14. Controls and Procedures                                                             
|PART IV      
|              | Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K                    
|EXHIBIT INDEX
|EXHIBIT 23.1 
|EXHIBIT 99.1 



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IXYS CORPORATION

ANNUAL REPORT ON FORM 10-K

FOR THE FISCAL YEAR ENDED MARCH 31,
2003


TABLE OF CONTENTS

|         |  |                                                                                           |  |      |    | 
|-------- |  | ----------------------------------------------------------------------------------------- |  | ---- | -- | 
|         |  |                                                                                           |  | Page
|         |  |                                                                                           |  |     
|PART I  
|Item 1.  |  | IXYS Business                                                                             |  |      | 1  | 
|Item 2.  |  | Properties                                                                                |  |      | 21 | 
|Item 3.  |  | Legal Proceedings                                                                         |  |      | 21 | 
|Item 4.  |  | Submission of Matters to a Vote of Security
    Holders                                   |  |      | 22 | 
|PART II 
|Item 5.  |  | Market for Registrants Common Equity and
    Related Stockholders Matters                |  |      | 23 | 
|Item 6.  |  | Selected Financial Data                                                                   |  |      | 23 | 
|Item 7.  |  | Managements Discussion and Analysis of
    Financial Condition and Results of Operations |  |      | 25 | 
|Item 7a. |  | Quantitative and Qualitative Disclosures About
    Market Risk                            |  |      | 32 | 
|Item 8.  |  | Financial Statements                                                                      |  |      | 34 | 
|Item 9.  |  | Changes In and Disagreements With Accountants on
    Accounting and Financial Disclosure  |  |      | 64 | 
|PART III
|Item 10. |  | Directors and Executive Officers of The Registrant                                        |  |      | 64 | 
|Item 11. |  | Executive Compensation                                                                    |  |      | 65 | 
|Item 12. |  | Security Ownership of Certain Beneficial Owners
    and Management                        |  |      | 69 | 
|Item 13. |  | Certain Relationships and Related Transactions                                            |  |      | 70 | 
|Item 14. |  | Controls and Procedures                                                                   |  |      | 71 | 
|PART IV 
|Item 15. |  | Exhibits, Financial Statement Schedules, and
    Reports on Form 8-K                      |  |      | 73 | 



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FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains
forward-looking statements that include, but are not limited to,
statements concerning projected revenues, expenses, gross profit
and income, the need for additional capital and the outcome of
pending litigation. These forward-looking statements are based
on our current expectations, estimates and projections about our
industry, managements beliefs, and certain assumptions
made by us. In some cases, these statements may be identified by
terminology such as may, will,
should, expects, plans,
anticipates, believes,
estimates, predicts,
potential, or continue or the negative
of such terms and other comparable expressions. These statements
involve known and unknown risks and uncertainties that may cause
our results, levels of activity, performance or achievements or
our industry to be materially different than those expressed or
implied by the forward-looking statements. Factors that may
cause or contribute to such differences include, but are not
limited to, our ability to compete successfully in our industry,
to continue to develop new products on a timely basis,
cancellation of customer orders, and other factors discussed
below and under the caption Risk Factors. We
disclaim any obligation to update any of the forward-looking
statements contained in this report to reflect any future events
or developments.




PART I




Item 1.     IXYS
Business

We are a leading company in the design,
development, manufacture and marketing of high power, high
performance power semiconductors. Our power semiconductors
improve system efficiency and reliability by converting
electricity at relatively high voltage and current levels into
the finely regulated power required by electronic products. We
focus on the market for power semiconductors that are capable of
processing greater than 500 watts of power.

Our power semiconductor products have
historically been divided into two primary categories, power
MOS, and power bipolar products. Our power semiconductors are
sold as individual units and are also packaged in high power
modules that frequently consist of multiple semiconductor dies.
In fiscal year 2003, power semiconductors constituted
approximately 78.5% of our revenues, which included 29.7% from
power MOS transistors and 48.5% from bipolar products. We also
sell gallium arsenide power semiconductors and manufacture our
proprietary direct copper bond, or DCB, substrate for use in our
own power semiconductors as well as for sale to other power
semiconductor manufacturers. Additionally, we sell integrated
circuits, or ICs, that have applications in power management,
telecommunications, and display products. In fiscal year 2003,
ICs constituted approximately 19.3% of our revenues.

IXYSs power semiconductor products are used
primarily to control electricity in:



| |   |                                                                                                                                                                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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; and                                                                                                                                 
|
| |  | medical electronics for sophisticated
    applications, such as defibrillators and medical imaging.                                                                                                                                                                          
|
| |  | renewable energy sources like wind turbines and
    solar systems.                                                                                                                                                                                                           

We design our products primarily for industrial
and business applications, rather than for use in personal
computers, mobile phones or other household appliances. In
fiscal year 2003, we sold our products to over 2,000 customers
worldwide. Our major customers include ABB, Astec, Delta
Electronics, Eupec, Huawei, Guidant, Medtronics, Siemens and
Still. In many cases, our customers incorporate our products
into systems sold to their own customers, which include
Ericsson, General Electric, Hewlett-Packard, IBM, Motorola and
Sun Microsystems.

Our predecessor was founded in 1983. We are
organized as a Delaware corporation.

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On June 10, 2002, we completed the
acquisition of Clare, Inc., a provider of high voltage analog
and mixed-signal semiconductor integrated circuits for use in
telecommunication, industrial, and medical equipment
applications. In connection with this acquisition, we issued
approximately 4.89 million shares of IXYS common stock to
the holders of outstanding shares of Clare common stock and
assumed options to purchase approximately 1.0 million
shares of IXYS common stock.

Industry Background

The worldwide demand for electrical energy is
currently increasing due to:



| |   |                                                                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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; and                                                                                     
|
| |  | penetration of technology into developing
    countries.                                                                                                                               

Not only is demand increasing, but the
requirements for electricity are also changing. Electronic
products in all markets are becoming increasingly sophisticated,
offering more intelligence through the use of
microprocessors and additional components. The increasing
complexity of such products requires more precisely regulated
power quality and greater power reliability. In addition, the
increasing costs of electricity, coupled with governmental
regulations and environmental concerns, have caused an increased
demand for energy efficiency.

Power semiconductors are used to provide the
precisely regulated power required by sophisticated electronic
products and equipment and address the growing demand for energy
efficiency. In most cases, power semiconductors:



| |   |                                                                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | convert or rectify alternating
    current, or AC, power delivered by electrical utilities to
    direct current, or DC, power which 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.                                                 

The more sophisticated the end product, the
greater the need for specially formatted, finely regulated
power, and the greater the need for a high performance power
semiconductor.

Power semiconductors improve system efficiency
and reliability by processing and converting electrical energy
into more usable, higher quality power. Specifically, power
semiconductors are used primarily in controlling energy in power
conversion systems, including switch mode power supplies,
uninterruptible power supplies and motor drive controls. Switch
mode power supplies efficiently convert power to meet the
specific voltage requirements of an application, such as
communications equipment. Uninterruptible power supplies provide
a short term backup of electricity in the event of power
failure. Motor drive controls regulate the voltage, current and
frequency of power to a motor.

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Market Size and Trends

The primary markets we serve are characterized by
complex technological development and higher power level
requirements. We believe the following key trends are driving
the demand for our products:

Growth in communications devices and
infrastructure.The worldwide
communications industry has experienced rapid growth in recent
years, fueled largely by growth in the Internet, deregulation,
competition, privatization and other technological advances,
including the convergence of voice, video and data
communication. The proliferation of electronic devices and the
infrastructure to support them is resulting in increasing power
level requirements and the demand for greater power reliability.

Increased demand for energy efficiency in
motor drives.Electronic motors
consume approximately one-half of the worlds electricity.
Due to costs and complexity, motor controls that permit variable
speed operation, which in turn reduce energy consumption, have
been predominantly used only in higher end applications.
However, recent advancements in power management enable more
cost effective, variable speed motor controls, which enhance
energy efficiency and improve performance in a wide range of
industrial and commercial applications, such as heating,
ventilation and air conditioning systems.

Emergence of new applications in medical
electronics.Continued advancements in
medical technologies are resulting in more sophisticated medical
electronic devices. Power semiconductors can greatly reduce the
size of equipment and improve the precision of medical
measurements and functionality. For example, power
semiconductors have enabled cardiac defibrillators to become
much smaller and more portable, improving the ability to install
these devices in more non-medical establishments, such as
airplanes and office buildings.

Development of new technologies for power
management.New technologies such as
the use of radio frequency, or RF, for nontraditional power
applications are opening new markets for power semiconductors.
For example, RF based semiconductor production equipment is
migrating to high frequency power MOS transistors from
traditional RF tubes. Additionally, material science
developments, such as gallium arsenide, are enabling the
production of higher power density power management products,
such as those required for wireless base stations.

Demand for increasing power density.The need for higher levels of power in
end use applications is causing purchasers of power
semiconductors to demand more power for their applications from
the same physical space. In the communications industry, the
growth in bandwidth demands is requiring communications
equipment providers to add more equipment or more powerful
equipment to confined spaces in highly populated areas. As a
result, power semiconductor manufacturers are being required to
design and produce products that enable their customers to
expand power levels without expanding product footprints, or
maintaining levels of power while shrinking product footprints.

IXYSs Strategy

We focus on meeting the needs of the high power,
high performance segment of the power semiconductor market. Our
ICs are similarly focused in their applications. We intend to
continue building a leading position within our targeted
segments of these markets by pursuing the following strategies:

Maintain technological focus on high power,
high performance markets.Our
technological expertise enable us to focus on the high power,
high performance markets. Due to technological complexities,
fewer industry players compete in these markets, resulting in a
more favorable competitive environment for us. We believe our
technological expertise differentiates us from most of our
competitors. This expertise encompasses a wide range of
scientific disciplines and technical capabilities, including
physics, mechanical engineering, chemistry, circuit design,
material science and packaging. Using our technological
expertise, we continually strive to introduce innovative
products.

Target rapid growth opportunities within the
high power, high performance market.We select the specific markets where
we intend to compete by evaluating their potential growth, our
ability to establish an advantage based upon our technological
capabilities and the performance of competing products. For
example,

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to capitalize on the power density and switching
speed of our products, we entered the telecommunications and
data communications segments of the communications
infrastructure market. These segments include applications for
wireless base stations, internet servers for co-location
facilities and storage area networks.


Continue to diversify markets, customers and
products.We believe that diversifying
the markets and customers we serve and the products we produce
enables us to minimize the traditional cyclical effects of the
semiconductor industry on our business. We have a significant
market presence in Europe, North America and Asia, the three
principal geographic markets for high performance power
semiconductors. Moreover, our products are used in a broad range
of applications, from communications infrastructure to
industrial automation to medical electronics, thereby reducing
our reliance on customers from any particular industry. Our
product line spans a broad range of functionality and price,
which allows us to provide an appropriate solution to most of
our customers power semiconductor needs. This product
diversity permits our customers to reduce the number of their
suppliers by enabling them to purchase a substantial portion of
their power semiconductor needs from us.

Pursue selective acquisition and investment
strategy.We seek to access additional
technological capabilities and complementary product lines
through selective acquisitions and strategic investments. For
example, through the acquisition of Directed Energy, Inc., we
added scientific expertise and additional products related to
laser diode drivers, high voltage pulse generators and
modulators. Through the acquisition of Westcode Semiconductors
Limited, a UK-based power semiconductor manufacturer, we added a
portfolio of very high power semiconductor products that
supplemented our historical product line. Westcodes
products are used in a variety of applications including
induction heating, welding, motion controls (AC and DC drives),
traction, electric vehicles and HVDC. Through the acquisition of
Clare, Inc., we expanded our product offerings into the
semiconductor segment of the market that replaces
electromagnetic relays, or EMRs, with solid state relays, or
SSRs. Clares semiconductor products are capable of
integrating a number of functions previously provided by
discrete components into one package and including product
applications such as modems, modem interfaces to the Internet,
cable set top boxes, and other computer telephony uses such as
voice mail systems. Our Clare Micronix subsidiary has developed
mixed-signal ICs for the medical and military markets and for
emerging flat panel displays based on organic light emitting
diodes, or OLEDs. We also believe there may be significant
opportunities to capitalize on our distribution system and
market additional Clare products to many of our 2,000 customers.

Collaborate with select companies on product
development.We seek to enter into
collaborative arrangements with existing and potential customers
in attractive end user markets in order to optimize our products
for their use. We believe that our ability to provide technical
assistance to these companies in the design of their hardware
and software systems encourages the incorporation of our
products in their devices. For example, we partnered with
manufacturers of portable defibrillators at an early stage in
the development of this market, and we have become a leading
supplier of power semiconductors for these devices.

Optimize mix between internal and external
manufacturing.We intend to continue
using both internal wafer fabrication facilities and our
external foundry relationships. We also seek to balance our
product assembly through multiple sourcing relationships. We
believe these strategies enable us to maximize our manufacturing
efficiency and flexibility. We also believe that our internal
manufacturing capabilities enable us to lower our manufacturing
cost with respect to certain products, bring products to market
more quickly than would be possible if we were required to rely
exclusively on external foundries, retain certain proprietary
aspects of our process technology and more quickly introduce new
process and product innovations through close collaboration
between our design and process engineers. Our alliances with
external foundries and assembly subcontractors allow us to
substantially reduce capital spending and manufacturing overhead
expenses, obtain competitive pricing and technologies and expand
manufacturing capacity more rapidly than could be achieved with
internal facilities alone.

Products

We focus on high power, high performance power
semiconductors, and manage our business as a single segment.
Within the segment, our power semiconductor products have
historically been divided into two

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primary categories, power MOS transistors and
bipolar products. Our power semiconductors are sold separately
and are also packaged in high power modules that frequently
consist of multiple semiconductor dies. In fiscal year 2003,
power semiconductors constituted approximately 78.5% of our
revenues, which included 29.7% from power MOS transistors and
48.5% from bipolar products. In fiscal year 2002, power
semiconductors constituted approximately 95.1% of our revenues,
which included 39.2% from power MOS transistors and 55.3% from
bipolar products. In fiscal year 2001, power semiconductors
constituted approximately 93.9% of our revenues, which included
49.2% from power MOS transistors and 44.0% from bipolar
products. We also sell gallium arsenide power semiconductors,
and manufacture our proprietary Direct Copper Bond, or DCB,
substrate for use in our own power semiconductors as well as for
sale to other power semiconductor manufacturers. Additionally,
we sell ICs that have applications in power management,
telecommunications and displays. In fiscal year 2003, ICs
constituted approximately 19.3% of our revenues.




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

Power MOS transistors offer significant
price/performance benefits over traditional bipolar transistors.
Power MOS transistors operate at much greater switching speeds,
allowing the design of smaller and less costly end products,
primarily due to the smaller and less expensive peripheral
components required at higher switching frequencies. Power MOS
transistors are activated by voltage rather than current, so
they require less external circuitry to operate, making them
more compatible with IC controls. Power MOS transistors also
offer more reliable long term performance and are more rugged
than traditional bipolar transistors, permitting them to better
withstand adverse operating conditions. Our power MOS
transistors consist of power MOSFETs and IGBTs.



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

A power MOSFET, or metal oxide semiconductor
field effect transistor, is a switch controlled by voltage at
the gate. Power MOSFETs are used in combination with passive
components to vary the amperage and frequency of electricity by
switching on and off at high frequency.

Our power MOSFETs are used primarily in power
conversion systems and are focused on higher voltage
applications ranging from 60 to 1,100 volts. Our power MOSFETs
have on state resistance among the lowest available for a given
die size and voltage. Lower on state resistance results in
increased efficiency of a power semiconductor device. We believe
that as the power requirements of workstations, servers and
other computers increase as the result of larger and more
powerful microprocessors, disk drives and CD/ ROMs, the
designers of power supplies will increasingly demand higher
power density. MOSFETs accommodate this need by providing higher
power without increasing the physical size of the power supply
incorporated into the equipment.



| |      
| | -----
| | IGBTs

IGBTs, or insulated gate bipolar transistors,
also are used as switches. IGBTs have achieved many of the
advantages of power MOSFETs and of traditional bipolar
technology by combining the voltage controlled switching
features of power MOSFETs with the superior conductivity and
energy efficiency of bipolar transistors. For a given
semiconductor die size, IGBTs can operate at higher currents and
voltages, making them a more cost effective device compared to
power MOSFETs for high energy applications. The principal
tradeoff of IGBTs compared to power MOSFETs is the switching
speed of IGBTs, which is slower than that of power MOSFETs.
IGBTs are seldom used in applications where very fast switching
is required, including SMPS operating at speeds over 150
kilohertz.

Since inception, we have been a leader in the
development of IGBTs for high voltage applications. Our current
products are focused on voltage applications ranging from 300
volts to 2,000 volts. Our IGBTs are used principally in AC motor
drives and defibrillators.

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Bipolar
Products

Bipolar products are also used to process
electricity, but are activated by current rather than voltage.
Bipolar products are capable of switching electricity at
substantially higher power levels than power MOS transistors.
However, switching speeds of bipolar products are slower than
those of power MOS transistors, and as a result, bipolar
products are preferred where very high power is required. Our
bipolar products consist of rectifiers and thyristors.

Rectifiers

Rectifiers convert AC power to DC power and are
used primarily in input and output rectification and inverters.
Our rectifiers are used in DC and AC motor drives, power
supplies, lighting and heating controls and welding equipment.

A subset of our rectifier product group is a very
fast switching device known as a FRED, or fast recovery
epitaxial diode. FREDs limit spikes in voltage across the power
switch to reduce power dissipation and electromagnetic
interference. Our FREDs are used principally in AC motor drives
and power supplies.

Thyristors

Thyristors are switches that can be turned on by
a controlled signal and turned off only when the output current
is reduced to zero, which occurs in the flow of AC power.
Thyristors are preferred over power MOSFETs and IGBTs in high
voltage, low frequency AC applications because their on state
resistance is lower than the on state resistance of power
MOSFETs and IGBTs. Our thyristors are used in motor drives,
defibrillators, power supplies, lighting and heating controls
and welding.

Gallium
Arsenide Products

Our gallium arsenide products are Schottky
rectifiers, useful for high power density applications, such as
power supplies for wireless communications base stations.
Gallium arsenide offers higher frequency and higher temperature
operation, enabling substantially greater power density than
silicon-based solutions.

Integrated
Circuits.

Our ICs include solid state relays, or SSRs, for
telecommunications applications and power management and control
ICs, such as current regulators, motion controllers, digital
power modulators and power MOSFET and IGBT drivers.

Other
Products

We manufacture our proprietary DCB substrates for
use in our own semiconductor products as well as for sale to a
variety of customers, including those in the power semiconductor
industry. DCB technology cost effectively provides excellent
thermal transfer while maintaining high electrical isolation.
This technology addresses thermal fatigue and die cracking
problems encountered by manufacturers of power semiconductor
modules utilizing traditional copper base plates. Additionally,
we manufacture and sell laser diode drivers, and high voltage
pulse generators and modulators.

Customers and Applications

Our power semiconductors are used primarily to
control electricity in power conversion systems, motor drives
and medical electronics. Our ICs are used mainly to interface
with telecommunication lines, to control power semiconductors
and to drive medical equipment and displays. The following table
summarizes the

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primary categories of uses for our products, our
products used in each category, the end user applications served
by these products and some representative customers.


|                         |  |               |            |                       |  |                                |  |                       
|------------------------ |  | ------------- | ---------- | --------------------- |  | ------------------------------ |  | ----------------------
|Category                 |  | IXYS Products |            | End User Applications |  | Selected Customers            
|                         |  |               |            |                       |  |                               
|Power Conversion Systems |  |               | FREDs      |                       |  | SMPS and UPS for:              |  | ASCOM                 
|                         |  |               | IGBTs      |                       |  | Wireless base stations         |  | Delta Electronics     
|                         |  |               | Modules    |                       |  | Internet co-locator facilities |  | Emerson Electric      
|                         |  |               | MOSFETs    |                       |  | Storage Area Networks          |  | Tyco                  
|                         |  |               | Rectifiers |                       |  | RF Generators                  |  | Power-One             
|                         |  |               | IC Drivers |                       |  |                                |  | Schneider Group       
|Motor Drives             |  |               | FREDs      |                       |  | Industrial transportation      |  | ABB                   
|                         |  |               | IGBTs      |                       |  | Robotics                       |  | Eurotherm             
|                         |  |               | Modules    |                       |  | Process control equipment      |  | Rockwell International
|                         |  |               | MOSFETs    |                       |  | Machine tools                  |  | Siemens               
|                         |  |               | Thyristors |                       |  | Electric vehicles              |  | Still                 
|                         |  |               | IC Drivers |                       |  |                                |  |                       
|Medical Electronics      |  |               | IGBTs      |                       |  | Defibrillators                 |  | General Electric      
|                         |  |               | MOSFETs    |                       |  | Medical imaging devices        |  | Guidant               
|                         |  |               | Thyristors |                       |  | Laser power supplies           |  | Medtronic             
|                         |  |               | ICs        |                       |  | Ultrasound                     |  | Philips               
|                         |  |               |            |                       |  | Hearing aids                   |  |                       
|Telecommunication        |  |               | SSRs       |                       |  | Point of sale terminals        |  |                       
|                         |  |               |            |                       |  | Modems                         |  |                       
|                         |  |               |            |                       |  | Set top boxes                  |  |                       

We also sell our power semiconductor chips and
DCB substrates to other power semiconductor companies for use in
their modules. These customers include Infineon, International
Rectifier, Powersem and Tyco.

Sales and Marketing

We sell our products through a worldwide selling
organization that includes direct sales personnel, independent
representatives and distributors managed through our Santa
Clara, California, Beverly, Massachusetts, Lampertheim, Germany,
Chippenham, UK and Biel, Switzerland offices. As of
March 31, 2003, we employed 56 people in sales and
marketing and customer support and service and used 20 sales
representative organizations and 4 distributors in North and
South America and 69 sales representative organizations and
distributors in the rest of the world. Sales to distributors
accounted for approximately 43% of net revenues in fiscal year
2001, 41% of net revenues in fiscal year 2002, and 36% of net
revenues in fiscal year 2003.

In fiscal year 2003, North American sales
represented approximately 42.2%, and international sales
represented approximately 57.8%, of our net revenues. Of our
international sales in fiscal year 2003, approximately 68.1%
were derived from sales in Europe and the Middle East and
approximately 31.9% were derived from sales in Asia. No single
end customer accounted for more than 10% of our net revenues in
fiscal year 2003. For financial information about geographic
areas for each of our last three fiscal years, see our Audited
Consolidated Financial Statements, Note 13, Segment and
Geographic Information provided elsewhere in this Annual Report
on Form 10-K. We market our products through
advertisements, technical articles and press releases that
appear regularly in a variety of trade publications, as well as
through the dissemination of brochures, data sheets and
technical manuals. Additionally, we participate in industry
trade shows on a regular basis. We also have a presence on the
Internet through a worldwide web page that enables engineers to
access and download technical information and data sheets.

Research and Development

We believe that we successfully compete in the
power semiconductor market because of our ability to design,
develop and introduce to the market on a timely basis new
products offering technological improvements. We are a pioneer
in technology with respect to higher power MOSFETs, IGBTs, SSRs,

7



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OLED driver ICs and direct bonded substrates.
While the time from initiation of design to volume production of
new power semiconductors products often takes 18 months or
longer, our power semiconductors have a product lifetime
exceeding an average of 10 years. Our research and
development expenses were approximately $6.1 million in
fiscal year 2001, $5.7 million in fiscal year 2002 and
$12.8 million in fiscal year 2003. As of March 31, 2003, we
employed 108 people in engineering and research and development
activities.


We are engaged in ongoing research and
development efforts focused on enhancements to existing products
and the development of new products. Currently, we are pursuing
research and development projects with respect to:



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

Research and development activities are conducted
in collaboration with manufacturing activities to help expedite
new products from the development phase to manufacturing and to
more quickly implement new process technologies.

Our research and development efforts also include
participation in technology collaborations with universities and
research institutions. These technology collaborations allow
research and development activities that would otherwise require
potentially cost prohibitive capital expenditures since the
necessary capital equipment is often available at research
institutes and universities. Through these technology
collaborations, we believe we are able to maximize our range of
research and development activities without diffusing the focus
of our internal research and development work.

Patents

As of March 31, 2003, we held 138 issued
patents, of which 89 that were issued in the U.S. and 49 were
issued in international jurisdictions. As of March 31,
2003, we also held 114 pending patents, of which 60 were pending
in the U.S. and 54 were pending in international jurisdictions.
We rely on a combination of patent rights, copyrights and trade
secrets to protect the proprietary elements of our products. Our
policy is to file patent applications to protect technology,
inventions and improvements that are important to our business.
We also seek to protect our trade secrets and proprietary
technology, in part, through confidentiality agreements with
employees, consultants and other parties.

While we believe that our intellectual property
rights are valuable, we also believe that other factors, such as
innovative skills, technical expertise, the ability to adapt
quickly to new technologies and evolving customer requirements,
product support and customer relations, are of greater
competitive significance.

Manufacturing and Facilities

The production of our products is a highly
complex and precise process. We manufacture our products in our
own manufacturing facilities and by utilizing external wafer
foundries and subcontract assembly facilities. We divide our
manufacturing operations into three key areas, wafer
fabrication, assembly and test.

8



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Wafer
Fabrication

We own an approximately 170,000 square foot
facility in Lampertheim, Germany at which we fabricate all of
our bipolar products. We also have an approximately 100,000
square foot facility in Chippenham, England where we fabricate
the majority of our very high power devices, and an
approximately 83,000 square foot facility in Beverly,
Massachusetts, capable of manufacturing high voltage silicon on
insulator ICs, where we fabricate our SSR products. We believe
that our internal fabrication capabilities enable us to lower
our manufacturing cost with respect to certain products, bring
products to the market more quickly than would be possible if we
were required to rely exclusively on external foundries, retain
certain proprietary aspects of our process technology and more
quickly introduce new process innovations.

In addition to maintaining our own fabrication
facilities, we have established alliances with selected
foundries for wafer fabrication. This approach allows us to
reduce substantial capital spending and manufacturing overhead
expenses, obtain competitive pricing and technologies and expand
manufacturing capacity more rapidly than could be achieved with
internal foundries alone. We retain the flexibility to shift the
production of our products to different or additional foundries
for cost or performance reasons. Our product designs enable the
production of our devices at multiple foundries using well
established and cost effective processes.

We relied on external foundries for approximately
37.2% of our wafer fabrication requirements in fiscal year 2003,
and our utilization of external foundries is expected to grow.
We have arrangements with seven external wafer foundries, two of
which provide the wafers for power semiconductors that we
purchase from external foundries. Our principal external foundry
is Samsung Electronics s facility located in Kiheung,
South Korea. Our relationship with Samsung Electronics extends
over 18 years. We provide our foundries forecasts for wafer
fabrication six months in advance and make firm purchase
commitments one to two months in advance of delivery. Other than
these firm commitments, we do not have any obligations to order
any minimum quantities.

Wafer fabrication of power semiconductors
generally employs process technology and equipment already
proven in IC manufacturing. Power semiconductors are
manufactured using fabrication equipment that is one or more
generations behind the equipment used to fabricate leading edge
ICs. Used fabrication equipment can be obtained at prices
substantially less than the original cost of such equipment or
than the cost of current equipment applying the latest
technology. Consequently, the fabrication of power
semiconductors is less capital intensive than the fabrication of
leading edge ICs.

Assembly

Packaging or assembly is the sequence of
production steps that divide the wafer into individual chips and
enclose the chips in external structures, termed packages, that
make them useable in a circuit. Discrete manufacturing involves
the assembly and packaging of single die devices. Module
manufacturing involves the assembly of multiple devices within a
single package. SSR products involve multiple chip assembly on a
specialized lead frame. The resulting packages vary in
configuration, but all have leads that are used to mount the
package through holes in the customers printed circuit
boards.

Most of our wafers are sent to independent
subcontract assembly facilities. We have equipment at, or
manufacturing supply arrangements with, assembly subcontractors
located in Asia and Europe in order to take advantage of low
assembly costs. Approximately 65.3% of our products are
assembled at external assembly facilities, and the remainder are
assembled in our Lampertheim and Chippenham facilities.

Test

Generally, each die on our wafers is electrically
tested for performance after wafer fabrication. Following
assembly, our products are typically returned to our facilities
for testing and final inspection prior to shipment to customers.

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Competition

The semiconductor industry is intensely
competitive and is characterized by price competition,
technological change, limited fabrication capacity,
international competition and manufacturing yield problems. The
competitive factors in the market for our products include:



| |   |                                              
| | - | ---------------------------------------------
| |  | product quality, reliability and performance;
|
| |  | product features;                            
|
| |  | price;                                       
|
| |  | timely delivery of products;                 
|
| |  | breadth of product line;                     
|
| |  | design and introduction of new products; and 
|
| |  | technical support and service.               

We believe that we are one of a limited group of
companies focused on the development and marketing of high
power, high performance semiconductors capable of performing all
of the basic functions of power semiconductor design and
manufacture. Our primary power semiconductor competitors include
Advanced Power Technology, Fairchild Semiconductor, Fuji,
International Rectifier, Infineon, On Semiconductor, Powerex,
Semikron International, STMicroelectronics, Siemens and Toshiba.
Our IC products compete principally with those of Agere, Legacy,
NEC and Silicon Labs.

Backlog

At March 31, 2003, our backlog of orders was
approximately $49.8 million, as compared with
$31.1 million at March 31, 2002. We reasonably expect
our backlog of orders at March 31, 2003 to be filled within
the current fiscal year. Backlog represents firm orders
anticipated to be shipped within the next 12 months. Our
business and, to a large extent, that of the entire
semiconductor industry is characterized by short term order and
shipment schedules. Because orders constituting our current
backlog are subject to changes in delivery schedules or to
cancellation at the option of the purchaser without significant
penalty, backlog is not necessarily an indication of future
revenues.

Employees

At March 31, 2003, we employed 776
employees, of whom 108 were primarily engaged in engineering and
research and development activities, 56 in marketing, sales and
customer support, 559 in manufacturing and 53 in administration
and finance. Of these employees, 103 hold engineering or science
degrees, including 16 Ph.D.s. Certain employees at our
Lampertheim facility and our Chippenham facility are subject to
collective bargaining agreements. There have been no work
stoppages at any of our facilities to date. We believe that our
employee relations are good.

Available Information

We file electronically with the United States
Securities and Exchange Commission, or SEC, our annual report on
Form 10-K, quarterly interim reports on Form 10-Q,
current reports on Form 8-K, and amendments to those
reports pursuant to Section 13(a) or 15(d) of the
Securities and Exchange Act of 1934. We currently make available
through our website at http://www.IXYS.com, free of charge,
copies of these reports as soon as reasonably practicable after
submitting the information to the SEC. None of the information
posted on our website is incorporated by reference into this
Annual Report. You can also request free copies of such
documents by contacting us at 408-982-0700 or by sending an
e-mail to admins@IXYS.net.

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RISK FACTORS

In addition to the other information in this
Annual Report on Form 10-K, the following risk factors
should be considered carefully in evaluating us and our
business. You should carefully consider the risks described
below before making an investment decision. Additional risks not
presently known to us or that we currently believe are not
serious may also impair our business and its financial
condition. The trading price of our common stock could decline
at any time due to any of these risks, and you could lose all or
part of your investment.

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

Our operating results may fluctuate
significantly. Some of the factors that may affect our quarterly
and annual results are:



| |   |                                                                                                                                   
| | - | ----------------------------------------------------------------------------------------------------------------------------------
| |  | the reduction, rescheduling or cancellation of
    orders by customers;                                                           
|
| |  | fluctuations in timing and amount of customer
    requests for product shipments;                                                 
|
| |  | the cyclical nature of the semiconductor industry;                                                                                
|
| |  | competitive pressures on selling prices;                                                                                          
|
| |  | market acceptance of our products;                                                                                                
|
| |  | fluctuations in our manufacturing yields and
    significant yield losses;                                                        
|
| |  | changes in the mix of products that our customers
    purchase;                                                                   
|
| |  | difficulties in forecasting demand for our
    products and the planning and managing of inventory levels;                        
|
| |  | the amount and timing of costs associated with
    product warranties and returns;                                                
|
| |  | 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
|
| |  | availability of production capacity.                                                                                              

As a result of these factors, many of which are
difficult to control or predict, as well as the other risk
factors discussed in this Annual Report on Form 10-K, we
may experience material adverse fluctuations in our future
operating results on a quarterly or annual basis.

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

Business conditions in the semiconductor industry
have rapidly changed from periods of strong demand. The industry
is characterized by:



| |   |                                                             
| | - | ------------------------------------------------------------
| |  | 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;               

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| |   |                                                                            
| | - | ---------------------------------------------------------------------------
| |  | rapid technological change and the introduction
    of new products; and   
|
| |  | significant expenditures for capital equipment
    and product development.

These factors could harm our business and cause
our operating results to suffer.

Our ability to grow and sustain growth levels
may be adversely affected by the slowdown in the
U.S. economy.

Due to the decrease in corporate profits, capital
spending and consumer confidence, we have experienced weakness
in certain of our end markets. We market our products to several
commercial markets, including telecommunications infrastructure,
medical electronics and industrial motor drives, which have been
affected by the slowdown in the U.S. economy. In particular, the
slowdown in telecommunications has adversely affected the sales
of our ICs used in telecommunication applications, including our
SSRs. If the economic slowdown continues, our business,
financial condition and results of operations may be adversely
affected.

We may not be successful in our
acquisitions.

We have in the past made, and may in the future
make, acquisitions. These acquisitions involve numerous risks,
including:



| |   |                                                                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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;                                                                              
|
| |  | 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;                                                                                               
|
| |  | the cost associated with acquisitions and the
    integration of acquired operations; and                                                                                    
|
| |  | assumption of known or unknown liabilities or
    other unanticipated events or circumstances.                                                                               

We cannot assure you that we will be able to
successfully acquire other businesses or product lines or
integrate them into our operations without substantial expense,
delay in implementation or other operational or financial
problems.

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

As a general matter, the semiconductor industry
is characterized by substantial litigation regarding patent and
other intellectual property rights. We have been sued on
occasion for purported patent infringement and are currently
defending against a number of such claims. For example, we have
been sued by International Rectifier for purportedly infringing
some of its patents covering power MOSFETs. After trial, the
U.S. District Court awarded damages to International
Rectifier of $27.2 million, plus attorney fees. In
addition, the U.S. District Court has issued a permanent
injunction against IXYS, effectively barring us from selling or
distributing the allegedly-infringing products. IXYS has
appealed the injunction and the award of

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damages, and the United States Court of Appeals
for the Federal Circuit has stayed the injunction and award
pending further review. We continue to contest International
Rectifiers claims vigorously but the outcome of this
litigation remains uncertain. See IXYS
Business  Legal Proceedings provided elsewhere
in this Item 1 to the Annual Report on Form 10-K.


Additionally, in the future, we could be accused
of infringing the intellectual property rights of International
Rectifier or other third parties. We also have certain
indemnification obligations to customers with respect to the
infringement of third party intellectual property rights by our
products. No assurance can be provided that any future
infringement claims by third parties or claims for
indemnification by customers or end users of our products
resulting from infringement claims will not be asserted or that
assertions of infringement, if proven to be true, will not harm
our business.

In the event of any adverse ruling in any
intellectual property litigation, including the pending power
MOSFET litigation with International Rectifier, we could be
required to pay substantial damages, cease the manufacturing,
use and sale of infringing products, discontinue the use of
certain processes or obtain a license from the third party
claiming infringement with royalty payment obligations by us. An
adverse decision in the International Rectifier power MOSFET
litigation would, and in any other infringement action could,
materially and adversely affect our financial condition and
results of operations.

Any litigation relating to the intellectual
property rights of third parties, whether or not determined in
our favor or settled by us, is costly and may divert the efforts
and attention of our management and technical personnel.

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

Of our revenues in fiscal year 2003, 37.2% came
from wafers manufactured for us by external foundries. Our
dependence on external foundries may grow. We have arrangements
with seven wafer foundries, two of which produce the wafers for
power semiconductors that we purchase from external foundries.
Samsung Electronicss facility in Kiheung, South Korea is
our principal external foundry.

Our relationships with our external foundries do
not guarantee prices, delivery or lead times, or wafer or
product quantities sufficient to satisfy current or expected
demand. These foundries manufacture our products on a purchase
order basis. We provide these foundries with rolling forecasts
of our production requirements; however, the ability of each
foundry to provide wafers to us is limited by the foundrys
available capacity. At any given time, these foundries could
choose to prioritize capacity for their own use or other
customers or reduce or eliminate deliveries to us on short
notice. Accordingly, we cannot be certain that these foundries
will allocate sufficient capacity to satisfy our requirements.
In addition, we cannot be certain that we will continue to do
business with these or other foundries on terms as favorable as
our current terms. If we are not able to obtain additional
foundry capacity as required, our relationships with our
customers could be harmed and our revenues would likely be
reduced. Moreover, even if we are able to secure additional
foundry capacity, we may be required, either contractually or as
a practical business matter, to utilize all of that capacity or
incur penalties or an adverse effect on the business
relationship. The costs related to maintaining foundry capacity
could be expensive and could harm our operating results. Other
risks associated with our reliance on external foundries include:



| |   |                                                                                           
| | - | ------------------------------------------------------------------------------------------
| |  | 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.                              

Our requirements typically represent a small
portion of the total production of the external foundries that
manufacture our wafers and products. We cannot be certain these
external foundries will continue to devote resources to the
production of our wafers and products or continue to advance the
process design technologies on which the manufacturing of our
products is based. These circumstances could harm our ability to
deliver our products on time or increase our costs.

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

We manufacture our products in facilities that
are owned and operated by us, as well as in external wafer
foundries and independent subcontract assembly facilities. The
fabrication of semiconductors is a highly complex and precise
process, and a substantial percentage of wafers could be
rejected or numerous die on each wafer could be nonfunctional as
a result of, among other factors:



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

For these and other reasons, we could experience
a decrease in manufacturing yields. Additionally, as we increase
our manufacturing output, we may also experience a decrease in
manufacturing yields. As a result, we may not be able to cost
effectively expand our production capacity in a timely manner.

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

Our ability to compete is affected by our ability
to protect our intellectual property rights. We rely on a
combination of patents, trademarks, copyrights, trade secrets,
confidentiality procedures and non-disclosure and licensing
arrangements to protect our intellectual property rights.
Despite these efforts, we cannot be certain that the steps we
take to protect our proprietary information will be adequate to
prevent misappropriation of our technology, or that our
competitors will not independently develop technology that is
substantially similar or superior to our technology. More
specifically, we cannot assure you that our pending patent
applications or any future applications will be approved, or
that any issued patents will provide us with competitive
advantages or will not be challenged by third parties. Nor can
we assure you that, if challenged, our patents will be found to
be valid or enforceable, or that the patents of others will not
have an adverse effect on our ability to do business.
Furthermore, others may independently develop similar products
or processes, duplicate our products or processes or design
their products around any patents that may be issued to us.

Our international operations expose us to
material risks.

During fiscal year 2003, our product sales by
region were approximately 42.2% in North America, approximately
39.4% in Europe and the Middle East and approximately 18.4% in
Asia. We expect revenues from foreign markets to continue to
represent a significant portion of total revenues. IXYS
maintains significant operations in Germany and the United
Kingdom and contracts with suppliers and manufacturers in South
Korea, Japan and elsewhere in Europe and Asia. Some of the risks
inherent in doing business internationally are:



| |   |                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------
| |  | 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;                                                                                        
|
| |  | transportation delays;                                                                                         
|
| |  | work stoppages; and                                                                                            
|
| |  | economic or political instability.                                                                             

14



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Our sales of products manufactured in our
Lampertheim, Germany facility and our costs at that facility are
denominated in Euros, and sales of products manufactured in our
Chippenham, U.K. facility and our costs at that facility are
primarily denominated in British pounds and Euros. Fluctuations
in the value of the Euro and the British pound against the
U.S. dollar could have a significant impact on our balance
sheet and results of operations, including our net income. We
currently do not enter into foreign currency hedging
transactions to control or minimize these risks. Fluctuations in
currency exchange rates could cause our products to become more
expensive to customers in a particular country, leading to a
reduction in sales or profitability in that country. If we
expand our international operations or change our pricing
practices to denominate prices in other foreign currencies, we
could be exposed to even greater risks of currency fluctuations.

In addition, the laws of certain foreign
countries may not protect our products or intellectual property
rights to the same extent as do U.S. laws regarding the
manufacture and sale of our products in the U.S. Therefore, the
risk of piracy of our technology and products may be greater
when we manufacture or sell our products in these foreign
countries.

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

Some of our new products are incorporated into
customers products or systems at the design stage. The
value of any design win largely depends upon the customers
decision to manufacture the designed product in production
quantities, the commercial success of the customers
product and on the extent to which the design of the
customers electronic system also accommodates
incorporation of components manufactured by our competitors. In
addition, our customers could subsequently redesign their
products or systems so that they no longer require our products.
We may not achieve design wins or our design wins may not result
in future revenues.

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.

The time from initiation of design to volume
production of new power semiconductor products often takes
18 months or longer. We first work with customers to
achieve a design win, which may take nine months or longer. Our
customers then complete the design, testing and evaluation
process and begin to ramp up production, a period which may last
an additional nine months or longer. As a result, a significant
period of time may elapse between our research and development
efforts and our realization of revenues, if any, from volume
purchasing of our products by our customers.

Our backlog may not result in future
revenues.

Our business is characterized by short term
orders and shipment schedules. Customer orders typically can be
cancelled or rescheduled without penalty to the customer. As a
result, our backlog at any particular date is not necessarily
indicative of actual revenues for any succeeding period. A
reduction of backlog during any particular period, or the
failure of our backlog to result in future revenues, could harm
our results of operations.

The markets in which we participate are
intensely competitive.

Certain of our target markets are intensely
competitive. Our ability to compete successfully in our target
markets depends on the following factors:



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

15



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| |   |                                             
| | - | --------------------------------------------
| |  | design and introduction of new products; and
|
| |  | technical support and service.              

In addition, our competitors or customers may
offer new products based on new technologies, industry standards
or end user or customer requirements, including products that
have the potential to replace, or provide lower cost or higher
performance alternatives to, our products. The introduction of
new products by our competitors or customers could render our
existing and future products obsolete or unmarketable.

Our primary power semiconductor competitors
include Advanced Power Technology, Fairchild Semiconductor,
Fuji, International Rectifier, Infineon, On Semiconductor,
Powerex, Semikron International, STMicroelectronics, Siemens and
Toshiba. Our IC products compete principally with those of
Agere, Legacy, NEC and Silicon Labs. Many of our competitors
have greater financial, technical, marketing and management
resources than we have. Some of these competitors may be able to
sell their products at prices below which it would be profitable
for us to sell our products or benefit from established customer
relationships that provide them with a competitive advantage.

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

A substantial majority of our products are sold
to distributors and through sales representatives. Our
distributors and sales representatives could reduce or
discontinue sales of our products. They may not devote the
resources necessary to sell our products in the volumes and
within the time frames that we expect. In addition, we depend
upon the continued viability and financial resources of these
distributors and sales representatives, some of which are small
organizations with limited working capital. These distributors
and sales representatives, in turn, depend substantially on
general economic conditions and conditions within the
semiconductor industry. We believe that our success will
continue to depend upon these distributors and sales
representatives.

At March 31, 2003, no distributor accounted
for greater than 10% of our outstanding receivables. If this or
any other distributor or sales representative experiences
financial difficulties, or otherwise becomes unable or unwilling
to promote and sell our products, our business could be harmed.

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

Our success depends, to a significant extent,
upon the efforts and abilities of Nathan Zommer, Ph.D., our
president and chief executive officer, and other members of
senior management. The loss of the services of one or more of
our senior management or other key employees could adversely
affect our business. We do not maintain key person life
insurance on any of our officers, employees or consultants.
There is intense competition for qualified employees in the
semiconductor industry, particularly for highly skilled design,
applications and test engineers. Competition is especially
intense in the Silicon Valley, where our U.S. design facility
for power semiconductors is located. We may not be able to
continue to attract and retain engineers or other qualified
personnel necessary for the development of our business or to
replace engineers or other qualified individuals who could leave
us at any time in the future. Our anticipated growth is expected
to place increased demands on our resources, and will likely
require the addition of new management and engineering staff as
well as the development of additional expertise by existing
management employees. If we lose the services of or fail to
recruit key engineers or other technical and management
personnel, our business could be harmed.

Periods of rapid growth and expansion could
continue to place a significant strain on our resources,
including our employee base.

To manage our possible future growth effectively,
we will be required to continue to improve our operational,
financial and management systems. In doing so, we will
periodically implement new software and other systems that will
affect our internal operations regionally or globally. The
conversion process from one system to another is complex and
requires, among other things, that data from the existing system
be made

16



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compatible with the upgraded system. During any
transition, we could experience errors, delays and other
inefficiencies, which could adversely affect our business.


Future growth will also require us to
successfully hire, train, motivate and manage our employees. In
addition, our continued growth and the evolution of our business
plan will require significant additional management, technical
and administrative resources. We may not be able to effectively
manage the growth and evolution of our current business.

Our stock price is volatile.

The market price of our common stock has
fluctuated significantly to date. See
Item 5  Market for Registrants
Common Equity and Related Stockholders Matters provided
elsewhere in this Annual Report on Form 10-K. The future
market price of our common stock may also fluctuate
significantly due to:



| |   |                                                                                                                                                                                                  
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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; or
|
| |  | general economic and market conditions.                                                                                                                                                          

In addition, the stock market in recent years has
experienced extreme price and volume fluctuations that have
affected the market prices of many high technology companies,
including semiconductor companies. These fluctuations have often
been unrelated or disproportionate to the operating performance
of companies in our industry, and could harm the market price of
our common stock.

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.

We depend on independent subcontractors for the
assembly and testing of our products. During fiscal year 2003,
the majority of our products were assembled by independent
subcontractors located outside of the United States. Our
reliance on these subcontractors involves the following
significant risks:



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

These risks may lead to delayed product delivery
or increased costs, which would harm our profitability and
customer relationships.

In addition, we use a limited number of
subcontractors to assemble a significant portion of our
products. If one or more of these subcontractors experiences
financial, operational, production or quality assurance

17



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##### Table of Contents



difficulties, we could experience a reduction or
interruption in supply. Although we believe alternative
subcontractors are available, our operating results could
temporarily suffer until we engage one or more of those
alternative subcontractors.


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

The markets for our products are characterized by:



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

To develop new products for our target markets,
we must develop, gain access to and use leading technologies in
a cost effective and timely manner and continue to expand our
technical and design expertise. Failure to do so could cause us
to lose our competitive position and seriously impact our future
revenues.

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.

Our operating expenses are relatively fixed, and,
therefore, we have limited ability to reduce expenses quickly in
response to any revenue shortfalls. Consequently, our operating
results will be harmed if our revenues do not meet our revenue
projections.

We also typically plan our production and
inventory levels based on internal forecasts of customer demand,
which are highly unpredictable and can fluctuate substantially.
From time to time, in response to anticipated long lead times to
obtain inventory and materials from our external suppliers and
foundries, we may order materials or production in advance of
anticipated customer demand. This advance ordering may result in
excess inventory levels or unanticipated inventory write downs
if expected orders fail to materialize.

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

We purchase silicon wafers from three vendors
with whom we do not have long term supply agreements. Any of
these suppliers could eliminate or terminate our supply of
wafers at any time. Our reliance on a limited number of
suppliers involves several risks, including potential inability
to obtain an adequate supply of silicon wafers and reduced
control over the price, timely delivery, reliability and quality
of the silicon wafers. We cannot assure that problems will not
occur in the future with suppliers.

Our ability to access capital markets could be
limited.

From time to time we access the capital markets
to obtain long-term financing. Although we believe that we can
continue to access the capital markets on acceptable terms and
conditions, our flexibility with regard to long-term financing
activity could be limited by: our existing capital structure,
our credit ratings, and the health of the semiconductor
industry. In addition, many of the factors that affect our
ability to access the capital markets, such as the liquidity of
the overall capital markets and the current state of the
economy, are outside of our control. There can be no assurances
that we will continue to have access to the capital markets on
favorable terms.

18



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##### Table of Contents



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

The semiconductor industry has been characterized
by periodic limitations on production capacity. Although we can
currently obtain the capacity necessary to meet present demand,
if we are unable to increase our production capacity to meet
possible future demand, some of our customers may seek other
sources of supply or our future growth may be limited.

Regulations may adversely affect our ability
to sell our products.

Power semiconductors with operating voltages
above 40 volts are subject to regulations intended to address
the safety, reliability and quality of the products. These
regulations relate to processes, design, materials and assembly.
For example, in the United States some high voltage products are
required to pass Underwriters Laboratory recognition for voltage
isolation and fire hazard tests. Sales of power semiconductors
outside of the United States are subject to international
regulatory requirements that vary from country to country. The
process of obtaining and maintaining required regulatory
clearances can be lengthy, expensive and uncertain. The time
required to obtain approval for sale internationally may be
longer than that required for U.S. approval, and the
requirements may differ.

In addition, approximately 17.1% of our revenues
in fiscal year 2003 were derived from the sale of products
included in medical devices that are subject to extensive
regulation by numerous governmental authorities in the United
States and internationally, including the U.S. Food and
Drug Administration, or FDA. The FDA and certain foreign
regulatory authorities impose numerous requirements for medical
device manufacturers to meet, including adherence to Good
Manufacturing Practices, or GMP, regulations and similar
regulations in other countries, which include testing, control
and documentation requirements. Ongoing compliance with GMP and
other applicable regulatory requirements is monitored through
periodic inspections by federal and state agencies, including
the FDA, and by comparable agencies in other countries. Our
failure to comply with applicable regulatory requirements could
prevent our products from being included in approved medical
devices.

Our business could also be harmed by delays in
receiving or the failure to receive required approvals or
clearances, the loss of previously obtained approvals or
clearances or the failure to comply with existing or future
regulatory requirements.

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

Our operations are vulnerable to interruption by
fire, earthquake and other natural disasters, as well as power
loss, telecommunications failure and other events beyond our
control. We do not have a detailed disaster recovery plan and do
not have backup generators. Our corporate headquarters in
California is located near major earthquake fault lines and has
experienced earthquakes in the past. California also has
recently been subject to shortages of electrical power and is
subject to power outages. If power outages occur, our ability to
conduct administrative matters and test our products could be
seriously impaired, which could harm our business, financial
condition and results of operations. We cannot be sure that the
insurance we maintain against general business interruptions
will be adequate to cover all our losses.

In addition, some of our suppliers are located in
California and are subject to the same earthquake and power
outage risks. A fire, major earthquake or other natural disaster
near one or more of our facilities or those of our major
suppliers could disrupt our operations and those of our
suppliers, which could in turn limit the supply of our products
and harm our business.

We may be affected by environmental laws and
regulations.

We are subject to a variety of laws, rules and
regulations in the United States, England and Germany related to
the use, storage, handling, discharge and disposal of certain
chemicals and gases used in our manufacturing process. Any of
those regulations could require us to acquire expensive
equipment or to incur substantial other expenses to comply with
them. If we incur substantial additional expenses, product costs

19



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##### Table of Contents



could significantly increase. Our failure to
comply with present or future environmental laws, rules and
regulations could result in fines, suspension of production or
cessation of operations.


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

Approximately 17.1% of our net revenues in fiscal
year 2003 were derived from sales of products used in medical
devices such as defibrillators. Product liability risks may
exist even for those medical devices that have received
regulatory approval for commercial sale. We do not currently
carry product liability insurance, and any defects in our
products used in these devices could result in significant
recall or product liability costs to us.

ABB AG and Nathan Zommer, Ph.D. own a
controlling interest in our common stock.

ABB AG and Nathan Zommer, Ph.D., our
president and chief executive officer, collectively beneficially
own, as of May 15, 2003, approximately 40.0% of the
outstanding shares of our common stock. As a result, ABB AG and
Dr. Zommer, acting together, could exercise significant
control over all matters requiring stockholder approval,
including the election of the board of directors. These
concentrated holdings could result in a delay of, or serve as a
deterrent to, possible changes in control of IXYS, which may
reduce the market price of our common stock. See
Item 12  Security Ownership of Certain
Beneficial Owners and Management provided elsewhere in
this Annual Report on Form 10-K.

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

Our board of directors has the authority to issue
up to 5,000,000 shares of preferred stock and to determine the
price, rights, preferences and privileges and restrictions,
including voting rights, of those shares without any further
vote or action by our stockholders. The rights of the holders of
common stock will be subject to, and may be harmed by, the
rights of the holders of any shares of preferred stock that may
be issued in the future. The issuance of preferred stock may
delay, defer or prevent a change in control because the terms of
any issued preferred stock could potentially prohibit our
consummation of any merger, reorganization, sale of
substantially all of our assets, liquidation or other
extraordinary corporate transaction, without the approval of the
holders of the outstanding shares of preferred stock. In
addition, the issuance of preferred stock could have a dilutive
effect on our stockholders.

Our stockholders must give substantial advance
notice prior to the relevant meeting to nominate a candidate for
director or present a proposal to our stockholders at a meeting.
These notice requirements could inhibit a takeover by delaying
stockholder action. The Delaware anti-takeover law restricts
business combinations with some stockholders once the
stockholder acquires 15% or more of our common stock. The
Delaware statute makes it more difficult for us to be acquired
without the consent of our board of directors and management.

20



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##### Table of Contents








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

Our principal facilities are described below:

|                        |  |             |         |            |  |     |                |  |  |                                                                                           
|----------------------- |  | ----------- | ------- | ---------- |  | --- | -------------- |  |  | ------------------------------------------------------------------------------------------
|                        |  | Approximate |         |            |  |    
|                        |  | Square      |         | Lease      |  |    
|Principal Facilities    |  | Footage     |         | Expiration |  | Use
|                        |  |             |         |            |  |    
|Santa Clara, California |  |             | 20,000  |            |  |     | January 2004   |  |  | Corporate headquarters, research and development,
    sales and distribution              
|Aliso Viejo, California |  |             | 27,000  |            |  |     | April 2006     |  |  | Research and development, sales and distribution                                          
|Beverly, Massachusetts  |  |             | 83,000  |            |  |     | September 2011 |  |  | Research and development, manufacturing, sales
    and distribution                       
|Lampertheim, Germany    |  |             | 170,000 |            |  |     | (1)            |  |  | European headquarters, research and development,
    manufacturing, sales and distribution
|Chippenham, England     |  |             | 100,000 |            |  |     | December 2022  |  |  | Research and development, manufacturing, sales
    and distribution                       



---



|    |                   
|--- | ------------------
|(1) | Owned, not leased.

We hold an option to extend our lease on the
Santa Clara, California facility for five years. We believe that
our current facilities will be adequate through at least fiscal
year 2004 and that suitable additional or replacement space will
be available in the future as needed on commercially reasonable
terms.






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

On June 22, 2000, International Rectifier
Corporation filed an action for patent infringement against us
in the United States District Court for the Central District of
California, alleging that certain of our products sold in the
United States infringe U.S. patents owned by International
Rectifier. International Rectifiers complaint against us
contended that our alleged infringement of International
Rectifiers patents has been and continues to be willful
and deliberate. Subsequently, the U.S. District Court
decided that certain of our power MOSFETs and IGBTs infringe
certain claims of each of three International Rectifier
U.S. patents.

On May 21, 2002, the U.S. District
Court entered a permanent injunction, which became effective
June 5, 2002, barring us from making, using, offering to
sell or selling in, or importing into, the United States,
MOSFETs (including IGBTs) covered by the subject patents. On
August 2, 2002, a three-judge panel of the United States
Court of Appeals for the Federal Circuit granted our motion to
stay, pending appeal, the permanent injunction issued by the
U.S. District Court. In granting this motion, the panel
stated, among other things, that we had shown a strong
likelihood of success regarding our challenge to the
U.S. District Courts finding that we infringe the
International Rectifier patents. Our appeal from the award of
permanent injunction, including the finding of infringement upon
which it is based, was argued on July 7, 2003 and the
outcome is pending.

On August 5, 2002, the U.S. District
Court entered its ruling that International Rectifier should be
awarded damages of $9.1 million for our alleged
infringement of International Rectifiers patents. In
addition, the U.S. District Court ruled that we had been
guilty of willful infringement. Subsequently, the
U.S. District Court increased the damages to a total of
$27.2 million, plus attorney fees. We have appealed the
damages award. The United States Court of Appeals for the
Federal Circuit has granted our motion to stay the damages award
pending disposition of the related appeals and has suspended
briefing of our appeal from the damages award pending outcome of
the appeals argued on July 7, 2003.

In light of the August 2, 2002 decision by
the Federal Circuit, we believe our defenses to the various
claims and its arguments on appeal are meritorious. However,
there can be no assurance of a favorable outcome. In the event
of an adverse outcome, damages or injunctions awarded by the
U.S. District Court

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would be materially adverse to our financial
condition and results of operations. Management has not accrued
any amounts in the accompanying balance sheets for the
International Rectifier matter described above.


International Rectifier also contends that our
importation into the United States of certain MOSFET products of
our design manufactured for us by Samsung Electronics Co., Ltd.
is in violation of a consent decree and injunction entered
against Samsung in another lawsuit to which we were not a party.
International Rectifier sought enforcement of the Samsung
injunction against Samsung and us, a contempt citation and a
fine. On March 19, 2002, the U.S. District Court
decided, among other things, that we are bound by, and our
devices are not excepted from, the Samsung injunction. On
June 12, 2002, the Federal Circuit stayed the application
of the Samsung injunction to us, stating that we had shown a
likelihood of success on appeal. This appeal was heard on
July 7, 2003. On October 15, 2002, the District Court
found contempt against Samsung as its final ruling in this
matter. Subsequently, the District Court received briefing
on the subject of monetary sanctions. Following oral argument in
April 2003, the District Court took the matter under submission.
On July 7, 2003 it issued an order awarding International
Rectifier monetary damages for contempt and attorneys fees of
$350,000. Under the order, if we are found to infringe, Samsung
is liable for a net amount of damages equal to
$2.5 million. International Rectifier has agreed to a stay
of the contempt award pending resolution of the appeal. We
intervened in these damages proceedings against Samsung.

It remains our intent to continue to vigorously
contest the claims of International Rectifier. Furthermore, we
expect to appeal the final ruling of contempt, including the
monetary sanctions awarded against our foundry, Samsung.

In response to International Rectifiers
claims, Samsung contends that we are contractually obligated
under the terms of our wafer supply agreement with Samsung to
defend it against the contempt claims made by International
Rectifier and indemnify and hold Samsung harmless in connection
with such claims. While we believe that neither we nor Samsung
are or could be in violation of the injunction for various
reasons that we believe to be meritorious, including an express
reservation as to our designed parts in the consent decree,
there can be no assurance of a favorable outcome. In the event
of an adverse ruling against us on the ultimate issue of
contempt, or if we are obligated to indemnify Samsung, any
damages awarded or injunction entered by the U.S. District
Court could be materially adverse to our financial condition and
results of operations.

On January 17, 2002, we sued International
Rectifier in the United States District Court for the Northern
District of California for infringement of three of our
U.S. patents. On April 1, 2002, we amended our
complaint to assert infringement by International Rectifier of a
modified group of five of our U.S. patents, including
patents that relate to modules. In addition, the patents include
our patents for direct copper bond technology. After suit was
filed, International Rectifier introduced a new product which
purported to replace the originally accused product. The
District Court has granted International Rectifiers
motions for summary judgment of non-infringement as to the new
product. The District Court has also granted in part and denied
in part International Rectifiers motion for summary
judgment as to pre-complaint damages for the original product.
On July 12, 2002, the U.S. District Court denied
International Rectifiers motions to dismiss and for
summary judgment. Trial is currently set to begin on
October 6, 2003.

In August 2002, we filed an action for patent
infringement against Advanced Power Technology, Inc., or APT, in
the United States District Court for the Northern District of
California, claiming that APT is infringing two of our patents.
APT has denied our claim of infringement, has asserted several
affirmative defenses and has filed a counterclaim against us,
claiming that we are infringing one of APTs patents.

We are currently a party to various legal
proceedings, including those noted above. While management
currently believes that the ultimate outcome of these
proceedings, individually and in the aggregate, will not have a
material adverse effect on our financial position, litigation is
subject to inherent uncertainties. Were an unfavorable ruling to
occur, there exists the possibility of a material adverse impact
on the results of operations of the period in which the ruling
occurs.






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

No matter was submitted to a vote of our
stockholders during the fourth quarter of 2002.

22



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##### Table of Contents






PART II






|        |                                                                           
|------- | --------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity
    and Related Stockholders Matters

The following table presents, for the periods
indicated, the high and low sale prices per share of our common
stock as reported by The Nasdaq National Market:

|                                      |                |      |   |       |  |  |   |       | 
|------------------------------------- | -------------- | ---- | - | ----- |  |  | - | ----- | 
|                                      |                | High |   | Low  
|                                      |                |      |   |      
|Fiscal year ending March 31,
    2003 |                |      |   |       |  |  |   |      
|                                      | First Quarter  |      | $ | 12.00 |  |  | $ | 4.68  | 
|                                      | Second Quarter |      | $ | 5.78  |  |  | $ | 4.00  | 
|                                      | Third Quarter  |      | $ | 7.70  |  |  | $ | 4.01  | 
|                                      | Fourth Quarter |      | $ | 7.38  |  |  | $ | 5.07  | 
|Fiscal year ending March 31,
    2002 |                |      |   |       |  |  |   |      
|                                      | First Quarter  |      | $ | 19.45 |  |  | $ | 10.20 | 
|                                      | Second Quarter |      | $ | 15.30 |  |  | $ | 4.27  | 
|                                      | Third Quarter  |      | $ | 8.41  |  |  | $ | 5.13  | 
|                                      | Fourth Quarter |      | $ | 12.55 |  |  | $ | 7.25  | 

The number of record holders of our common stock
as of June 23, 2003 was 288.

Dividends

To date, we have never declared or paid cash
dividends.

Securities Authorized for Issuance Under IXYS
Equity Compensation Plans

|                                                               |  |                         |           |                      |  |                          |      |  |  |  |           | 
|-------------------------------------------------------------- |  | ----------------------- | --------- | -------------------- |  | ------------------------ | ---- |  |  |  | --------- | 
|                                                               |  | (a)                     |           | (b)                  |  | (c)                     
|                                                               |  |                         |           |                      |  |                         
|                                                               |  |                         |           |                      |  | Number of Securities    
|                                                               |  |                         |           |                      |  | Remaining Available for 
|                                                               |  | Number of Securities to |           | Weighted-Average     |  | Issuance Under Equity   
|                                                               |  | be Issued upon Exercise |           | Exercise Price of    |  | Compensation Plans      
|                                                               |  | of 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     |  |                         | 4,922,896 | (1)                  |  | $                        | 6.07 |  |  |  | 2,701,792 | 
|Equity compensation plans not approved by
    security holders |  |                         |          |                      |  |                          |     |  |  |  |          | 
|                                                               |  |                         |           |                      |  |                          |      |  |  |  |           | 
|Total                                                          |  |                         | 4,922,896 |                      |  | $                        | 6.07 |  |  |  | 2,701,792 | 
|                                                               |  |                         |           |                      |  |                          |      |  |  |  |           | 



---



|    |                                                                                                                                                                                                                                                                                                               
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes options to purchase 438,677 shares of
    our common stock with a weighted average exercise price of
    $14.78 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.






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

The following selected consolidated financial
information should be read in conjunction with our Consolidated
Financial Statements and related notes and Managements
Discussion and Analysis of Financial Condition and Results of
Operations included elsewhere in this Annual Report on
Form 10-K. The consolidated statements of operations data
for the years ended March 31, 2003, 2002 and 2001 and the
balance sheet data as of March 31, 2003 and 2002 are
derived from our consolidated financial statements included
elsewhere in this Annual Report on Form 10-K. The
statements of operations data for the years ended March 31,
2000 and 1999 and the balance sheet data as of March 31,
2001, 2000 and 1999 are derived

23



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##### Table of Contents



from our consolidated financial statements that
are not included in this Annual Report on Form 10-K.
Historical results are not necessarily indicative of results to
be expected in any future period.


|                                                    |                                                                        |                                          |         |         |   |         |        |        |  |      |         |        |  |   |        |        |  |   |        |        |  
|--------------------------------------------------- | ---------------------------------------------------------------------- | ---------------------------------------- | ------- | ------- | - | ------- | ------ | ------ |  | ---- | ------- | ------ |  | - | ------ | ------ |  | - | ------ | ------ | -
|                                                    |                                                                        |                                         
|                                                    |                                                                        | Year Ended March 31,                    
|                                                    |                                                                        |                                         
|                                                    |                                                                        | 2003(1)                                  |         | 2002(2) |   | 2001(3) |        | 2000   |  | 1999
|                                                    |                                                                        |                                          |         |         |   |         |        |        |  |     
|                                                    |                                                                        |                                         
|                                                    |                                                                        | (In thousands, except per share amounts)
|Statement of Operations Data:                       |                                                                        |                                          |         |         |   |         |        |        |  |      |         |        |  |   |        |        |  |   |        |       
|Net revenues                                        |                                                                        | $                                        | 136,111 |         |   | $       | 82,821 |        |  | $    | 111,389 |        |  | $ | 76,627 |        |  | $ | 66,523 |       
|Cost of goods sold                                  |                                                                        |                                          | 107,371 |         |   |         | 56,918 |        |  |      | 69,967  |        |  |   | 49,290 |        |  |   | 44,939 |       
|                                                    |                                                                        |                                          |         |         |   |         |        |        |  |      |         |        |  |   |        |        |  |   |        |       
|                                                    | Gross profit                                                           |                                          |         | 28,740  |   |         |        | 25,903 |  |      |         | 41,422 |  |   |        | 27,337 |  |   |        | 21,584 |  
|                                                    |                                                                        |                                          |         |         |   |         |        |        |  |      |         |        |  |   |        |        |  |   |        |       
|Operating expenses:                                 |                                                                        |                                          |         |         |   |         |        |        |  |      |         |        |  |   |        |        |  |   |        |       
|                                                    | Research, development and engineering                                  |                                          |         | 12,846  |   |         |        | 5,728  |  |      |         | 6,081  |  |   |        | 4,668  |  |   |        | 4,196  |  
|                                                    | Selling, general and administrative                                    |                                          |         | 27,721  |   |         |        | 12,884 |  |      |         | 13,959 |  |   |        | 11,450 |  |   |        | 9,855  |  
|                                                    | Write off of goodwill and in process research and
    development      |                                          |         |        |   |         |        |       |  |      |         |       |  |   |        |       |  |   |        | 10,401 |  
|                                                    | Restructuring charge                                                   |                                          |         | 750     |   |         |        |       |  |      |         |       |  |   |        |       |  |   |        |       |  
|                                                    |                                                                        |                                          |         |         |   |         |        |        |  |      |         |        |  |   |        |        |  |   |        |       
|Total operating expenses                            |                                                                        |                                          | 41,317  |         |   |         | 18,612 |        |  |      | 20,040  |        |  |   | 16,118 |        |  |   | 24,452 |       
|                                                    |                                                                        |                                          |         |         |   |         |        |        |  |      |         |        |  |   |        |        |  |   |        |       
|                                                    | Operating income (loss)                                                |                                          |         | (12,577 | ) |         |        | 7,291  |  |      |         | 21,382 |  |   |        | 11,219 |  |   |        | (2,868 | )
|Interest income (expense), net                      |                                                                        |                                          | 720     |         |   |         | 1,318  |        |  |      | 1,030   |        |  |   | (417   | )      |  |   | (993   | )     
|Gain (loss) on foreign currency transactions        |                                                                        |                                          | (1,249  | )       |   |         | (46    | )      |  |      | 119     |        |  |   | 184    |        |  |   | 37     |       
|Other (expense) income, net                         |                                                                        |                                          | (4,755  | )       |   |         | (5,441 | )      |  |      | (623    | )      |  |   | (199   | )      |  |   | 669    |       
|                                                    |                                                                        |                                          |         |         |   |         |        |        |  |      |         |        |  |   |        |        |  |   |        |       
|Income (loss) before provision for income
    taxes |                                                                        |                                          | (17,861 | )       |   |         | 3,122  |        |  |      | 21,908  |        |  |   | 10,787 |        |  |   | (3,155 | )     
|Benefit from (provision for) income taxes           |                                                                        |                                          | 5,716   |         |   |         | (1,184 | )      |  |      | (8,321  | )      |  |   | (3,888 | )      |  |   | (2,083 | )     
|                                                    |                                                                        |                                          |         |         |   |         |        |        |  |      |         |        |  |   |        |        |  |   |        |       
|                                                    | Net income (loss)                                                      |                                          | $       | (12,145 | ) |         | $      | 1,938  |  |      | $       | 13,587 |  |   | $      | 6,899  |  |   | $      | (5,238 | )
|                                                    |                                                                        |                                          |         |         |   |         |        |        |  |      |         |        |  |   |        |        |  |   |        |       
|                                                    | Net income (loss) per share 
    basic(4)                             |                                          | $       | (0.39   | ) |         | $      | 0.07   |  |      | $       | 0.54   |  |   | $      | 0.29   |  |   | $      | (0.28  | )
|                                                    |                                                                        |                                          |         |         |   |         |        |        |  |      |         |        |  |   |        |        |  |   |        |       
|                                                    | Weighted average shares used in per share
    calculation  basic(4)   |                                          |         | 30,889  |   |         |        | 26,745 |  |      |         | 25,239 |  |   |        | 23,970 |  |   |        | 18,746 |  
|                                                    |                                                                        |                                          |         |         |   |         |        |        |  |      |         |        |  |   |        |        |  |   |        |       
|                                                    | Net income (loss) per share 
    diluted(4)                           |                                          | $       | (0.39   | ) |         | $      | 0.07   |  |      | $       | 0.49   |  |   | $      | 0.28   |  |   | $      | (0.28  | )
|                                                    |                                                                        |                                          |         |         |   |         |        |        |  |      |         |        |  |   |        |        |  |   |        |       
|                                                    | Weighted average shares used in per share
    calculation  diluted(4) |                                          |         | 30,889  |   |         |        | 29,004 |  |      |         | 27,774 |  |   |        | 24,826 |  |   |        | 18,746 |  
|                                                    |                                                                        |                                          |         |         |   |         |        |        |  |      |         |        |  |   |        |        |  |   |        |       

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|                         |                               |                      |   |       |  |      |   |       |  |      |   |       |  |  |   |       |  |  |   |       | 
|------------------------ | ----------------------------- | -------------------- | - | ----- |  | ---- | - | ----- |  | ---- | - | ----- |  |  | - | ----- |  |  | - | ----- | 
|                         |                               |                     
|                         |                               | Year Ended March 31,
|                         |                               |                     
|                         |                               | 2003                 |   | 2002  |  | 2001 |   | 2000  |  | 1999
|                         |                               |                      |   |       |  |      |   |       |  |     
|                         |                               |                     
|                         |                               | (In thousands)      
|Selected Operating Data: |                               |                      |   |       |  |      |   |       |  |      |   |       |  |  |   |       |  |  |   |      
|                         | Gross profit margin           |                      |   | 21.1% |  |      |   | 31.3% |  |      |   | 37.2% |  |  |   | 35.7% |  |  |   | 32.4% | 
|                         | Depreciation and amortization |                      | $ | 9,297 |  |      | $ | 5,835 |  |      | $ | 3,409 |  |  | $ | 3,352 |  |  | $ | 2,614 | 

|                    |                             |                |   |         |  |      |   |         |  |      |   |         |  |  |   |        |  |  |   |        | 
|------------------- | --------------------------- | -------------- | - | ------- |  | ---- | - | ------- |  | ---- | - | ------- |  |  | - | ------ |  |  | - | ------ | 
|                    |                             |               
|                    |                             | March 31,     
|                    |                             |               
|                    |                             | 2003           |   | 2002    |  | 2001 |   | 2000    |  | 1999
|                    |                             |                |   |         |  |      |   |         |  |     
|                    |                             |               
|                    |                             | (In thousands)
|Balance Sheet Data: |                             |                |   |         |  |      |   |         |  |      |   |         |  |  |   |        |  |  |   |       
|                    | Cash and cash equivalents   |                | $ | 40,094  |  |      | $ | 32,111  |  |      | $ | 44,795  |  |  | $ | 9,455  |  |  | $ | 7,087  | 
|                    | Working capital             |                |   | 95,425  |  |      |   | 81,399  |  |      |   | 82,007  |  |  |   | 30,345 |  |  |   | 24,409 | 
|                    | Total assets                |                |   | 183,057 |  |      |   | 124,560 |  |      |   | 127,414 |  |  |   | 63,045 |  |  |   | 57,100 | 
|                    | Total long-term obligations |                |   | 14,966  |  |      |   | 12,261  |  |      |   | 8,307   |  |  |   | 12,182 |  |  |   | 13,794 | 
|                    | Total stockholders equity  |                |   | 138,809 |  |      |   | 95,219  |  |      |   | 92,724  |  |  |   | 30,897 |  |  |   | 25,720 | 



---



|    |                                                                                                                                                                                                                                                                                                                                                                  
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | During the fiscal year ended March 31, 2003,
    the company completed its acquisition of Clare, Inc.                                                                                                                                                                                                                                                            
|   
|(2) | During the fiscal year ended March 31, 2002,
    the company completed its acquisition of Westcode Semiconductors
    Ltd.                                                                                                                                                                                                                                       
|   
|(3) | During the fiscal year ended March 31, 2001,
    the company completed its acquisition of Directed Energy, Inc.                                                                                                                                                                                                                                                  
|   
|(4) | Shares used in per share calculation in fiscal
    year 1999 have been restated to reflect IXYS shares outstanding
    as a result of the Paradigm Technology, Inc. merger, as
    described in the IXYS Annual Report on Form 10-K for the
    year ended March 31, 2001. In the Paradigm merger, each
    outstanding share was converted into 0.115684 shares.






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

For an understanding of the significant
factors that influenced our performance during the past three
years, the following discussion should be read in conjunction
with the consolidated financial statements and the other
information appearing elsewhere in this report.

Overview

We are a leading company in the design,
development, manufacture and marketing of high power, high
performance power semiconductors. Our power semiconductors
improve system efficiency and reliability by converting
electricity at relatively high voltage and current levels into
the finely regulated power required by electronic products. We
focus on the market for power semiconductors that are capable of
processing greater than 500 watts of power.

The semiconductor industry is cyclical and has
from time to time experienced depressed business conditions. The
semiconductor industry has historically experienced a decrease
in average selling prices of products over time. The power
semiconductor industry is currently experiencing a slowdown in
demand and worldwide overcapacity, resulting in price erosion.
Additionally, a number of factors can result in quarter to
quarter fluctuations in operating results, including: the
reduction, rescheduling or cancellation of orders by customers;
fluctuations in the timing and amount of customer requests for
product shipments; fluctuations in the manufacturing yields and
significant yield losses; and availability of production
capacity.

In fiscal year 2003, North American sales
represented approximately 42.2%, and international sales
represented approximately 57.8%, of our net revenues. Of our
international sales, approximately 68.1% were derived from sales
in Europe and the Middle East and approximately 31.9% were
derived from sales in Asia. No single end customer accounted for
more than 10% of our net revenues in fiscal year 2003. We do not
hedge

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our foreign currency transactions. Accordingly,
although many of our sales and expenses occur in the same
currency, translation of foreign currencies into U.S. dollars
may negatively impact us.


Critical Accounting Policies

Our financial statements and accompanying notes
are prepared in accordance with generally accepted accounting
principles in the United States. Preparing financial statements
requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenue, and
expenses. These estimates and assumptions are affected by
managements application of accounting policies. Our
critical accounting policies are as follows:

Allowance for sales
returns.We maintain allowances for
sales returns for estimated product returns by our customers. We
estimate our allowance for sales returns based on our historical
return experience, current economic trends, changes in customer
demand, known returns we have not received and other
assumptions. If we make different judgments or utilize different
estimates, the amount and timing of our revenue could be
materially different.

Allowance for doubtful
accounts.We maintain allowance for
doubtful accounts for estimated losses from the inability of our
customers to make required payments. We evaluate our allowance
for doubtful accounts based on the aging of our accounts
receivable, the financial condition of our customers and their
payment history, our historical write-off experience and other
assumptions. If we were to make different judgments of the
financial condition of our customers or the financial condition
of our customers were to deteriorate, resulting in an impairment
of their ability to make payments, additional allowances may be
required.

Inventories.Inventories are recorded at the lower
of standard cost, which approximates actual cost on a
first-in-first-out basis, or market value. Our policy for
valuation of inventory, including the determination of excess
inventory, requires us to estimate the future demand for our
products within specific time horizons, generally twelve to
twenty four months or less. We typically plan our production and
inventory levels based on internal forecasts of customer demand,
which is difficult to predict and can fluctuate substantially.
The estimates of future demand that we use in the valuation of
inventory are the basis for our published revenue forecast,
which is also consistent with our short-term manufacturing plan.
If our demand forecast for specific products is greater than
actual demand and we fail to reduce manufacturing output
accordingly, we could be required to record additional inventory
write downs, which would have a negative impact on our gross
margin. Our inventories include high technology parts and
components that are specialized in nature or subject to
technological obsolescence. We regularly review inventory
quantities on hand and record a write down for obsolete
inventory. Our write down for obsolete inventories includes on
hand finished goods inventory with a date of manufacture of
greater than three years old. Actual demand and market
conditions may be different from those projected by our
management. This could have a material effect on our operating
results and financial position. If we make different judgments
or utilize different estimates, the amount and timing of our
inventory write-downs may be materially different.

Warranty accrual.Our products are generally subject to
warranty and we provide for the estimated future costs of
repair, replacement or customer accommodation upon shipment of
the product in the accompanying statements of operations. Our
warranty accrual is estimated based on historical claims
compared to historical revenues and assumes that we have to
replace products subject to a claim. For new products, we use
our historical percentage for the appropriate class of product.
Should actual product failure rates differ from our estimates,
revisions to the estimated warranty liability would be required.

Valuation of Plant, Equipment, and Intangible
Assets.We evaluate the recoverability
of our plant and equipment and intangible assets in accordance
with Statement of Financial Accounting Standards No. 144,
or SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. The standard retains the
previously existing accounting requirements related to the
recognition and measurement of the impairment of long-lived
assets to be held and used while expanding the measurement
requirements of long-lived assets to be disposed of by sale to
include discontinued operations. It also expands on the
previously existing reporting requirements for discontinued
operations to include a component of an entity that either has
been disposed of

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or is classified as held for sale. Actual useful
lives and cash flows could be different from those estimated by
our management. This could have a material effect on our
operating results and financial position.


Revenue Recognition.We recognize revenue from product
sales upon shipment provided that we have received an executed
purchase order, the price is fixed, title has transferred,
collection of resulting receivables is reasonably assured, there
are no customer acceptance requirements, and there are no
remaining significant obligations. Reserves for sales returns
and allowances are recorded at the time of shipment.
Specifically, our management must make estimates of potential
future product returns and allowance for so called ship
and debit transactions related to current period product
revenue. Our management analyzes historical returns discounts
and ship and debit transactions, current economic trends and
changes in customer demand and acceptance of our products when
evaluating the adequacy of the sales returns and other
allowances. Significant management judgments and estimates must
be made and used in connection with establishing the sales
returns and other allowances in any accounting period. Material
differences may result in the amount and timing of our revenue
for any period if management made different judgments or
utilized different estimates.

In addition, in connection with the acquisition
of Clare, we adopted a critical accounting policy for
nonrecurring engineering, or NRE, work. NRE work relates to
engineering work performed by our Clare Micronix division, to
design chip prototypes that will later be used to produce
required units. Customers enter into arrangements with Clare
Micronix to perform engineering work for a fixed fee. Clare
Micronix records fixed-fee payments during the development phase
from customers in accordance with Emerging Issues Task Force, or
EITF, Abstracts 99-5, Accounting for Pre-production Costs
Related to Long-term Supply Arrangements. Clare Micronix
records research and development costs as expenses are incurred.
Clare Micronix then credits research and development expenses
for payments made by the customer. Up-front payments made by the
customer are initially recorded as customer deposits and are
charged to the statement of income as expenses for the project
as costs are incurred.

Goodwill.We
regularly evaluate whether events and circumstances have
occurred that indicate a possible impairment of goodwill. In
determining whether there is an impairment of goodwill, we
calculate the estimated fair value of our company based on the
closing sales price of our common stock and projected discounted
cash flows as of the date we perform the impairment tests. We
allocate a portion of the total fair value to different
reporting units based on discounted cash flows. We then compare
the resulting fair values of reporting units to their respective
net book values, including goodwill. If the net book value of
our company exceeds its fair value, we measure the amount of the
impairment loss by comparing the implied fair value of our
goodwill with the carrying amount of that goodwill. To the
extent that the carrying amount of a reporting units
goodwill exceeds its implied fair value, we recognized a
goodwill impairment loss. We perform this impairment test
annually and whenever facts and circumstances indicate that
there is a possible impairment of goodwill. We have completed
the required annual impairment test, which resulted in no
impairment for fiscal year 2003. We believe the methodology we
use in testing impairment of goodwill provides us with
reasonable basis in determining whether an impairment charge
should be taken.

Pension Obligation.The determination of our obligation
and expense for pension and other postretirement benefits is
dependent on our selection of certain assumptions used by
actuaries in calculating such amounts. Those assumptions are
described in Note 10 to the Consolidated Financial
Statements and include, among others, the discount rate,
expected long-term rate of return on plan assets and rates of
increase in compensation. In accordance with generally accepted
accounting principles, actual results that differ from our
assumptions are accumulated and amortized over future periods
and therefore generally affect our recognized expenses and
recorded obligations in such future periods. While we believe
that our assumptions are appropriate, significant differences in
our actual experience or significant changes in our assumptions
may materially affect our pension and other postretirement
obligations and our future expenses.

Legal Contingencies.We are subject to various legal
proceedings and claims, the outcomes of which are subject to
significant uncertainty. SFAS No. 5, Accounting for
Contingencies, requires that an estimated loss from a loss
contingency should be accrued by a charge to income if it is
probable that an asset has been impaired or a liability has been
incurred and the amount of the loss can be reasonably estimated.
Disclosure of a contingency is required if there is at least a
reasonable possibility that a loss has been incurred. We
evaluate,

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among other factors, the degree of probability of
an unfavorable outcome and the ability to make a reasonable
estimate of the amount of loss. Changes in these factors could
materially impact our financial position or our results of
operations.


Income Taxes.As
part of the process of preparing our consolidated financial
statements we are required to estimate our income taxes in each
of the jurisdictions in which we operate. This process involves
us estimating our actual current exposure together with
assessing temporary differences resulting from differing
treatment of items, such as pensions or capital leases, for tax
and accounting purposes. These differences result in differed
tax assets and liabilities, which are included within our
consolidated balance sheet. We must then assess the likelihood
that our deferred tax assets will be recovered from future
taxable income and to the extent we believe that recovery is not
likely, we must establish a valuation allowance. To the extent
we establish a valuation allowance or increase this allowance in
a period, we must include an expense within the tax provision in
the statement of operations.

Significant management judgment is required in
determining our provision for income taxes, our deferred tax
assets and liabilities and any valuation allowance recorded
against our net deferred tax assets. In the event that actual
results differ from these estimates or we adjust these estimates
in future periods we may need to establish an additional
valuation allowance which could materially impact our financial
position and results of operations.

Results of Operations

Net Revenues.Net
revenues for fiscal year 2003 were $136.1 million, a 64.3%
increase from net revenues of $82.8 million in fiscal year
2002. International net revenues were $78.6 million for
fiscal year 2003, or 57.8% of net revenues, as compared to
$55.6 million for fiscal year 2002, or 67.1% of net
revenues. The increase in net revenues for fiscal year 2003 from
fiscal year 2002 is primarily related to the inclusion of
revenues from acquired entities and includes an approximate 3.4%
increase in units shipped in fiscal year 2003 in our traditional
product line as compared to fiscal year 2002 and an approximate
4.1% increase in average selling prices across our traditional
product line (which does not include products from our acquired
entities, Clare and Westcode). Net revenues for fiscal year 2002
were $82.8 million, a 25.6% decrease from net revenues of
$111.4 million in fiscal year 2001. International net
revenues were $55.6 million for fiscal year 2002, or 67.1%
of net revenues, as compared to $66.8 million for fiscal
year 2001, or 60.0% of net revenues. The decrease in net
revenues for fiscal year 2002 from fiscal year 2001 is primarily
related to an approximately 18.1% decrease in units shipped in
fiscal year 2002 in our traditional product line as compared to
fiscal year 2001 and an approximately 14.9% decrease in average
selling prices across our traditional product line. We believe
that the decrease in unit sales volume in 2002 was largely
attributable to decreased demand for power conversion systems
for communications infrastructure applications.

Gross Profit.Gross
profit was $28.7 million, or 21.1% of net revenues in
fiscal year 2003, as compared to $25.9 million, or 31.3% of
net revenues, in fiscal year 2002. The decrease in margins was
primarily due to a $7.3 million write down of excess
inventories, an increase in unabsorbed manufacturing overhead
from acquired entities, and offset by an approximate 4.1%
increase in average selling prices across our traditional
product line. Our excess inventory write off in 2003 of
$7.3 million reflects our assessment of the marketplace for
our traditional products sold in the U.S. Work in process and
finished goods inventory are determined to be excess based on a
demand forecast within a specific time horizon, generally 12 to
24 months or less. Inventory in excess of saleable amounts
is written down and carried at no value, and the remaining
inventory is valued at the lower of cost or market. Gross profit
was $25.9 million, or 31.3% of net revenues in fiscal year
2002, as compared to $41.4 million, or 37.2% of net
revenues, in fiscal year 2001. The decrease in margins was
primarily due to a 14.9% decrease in average selling price as
well as a change in the mix of product sold.

Research, Development and Engineering.During fiscal year 2003, research,
development and engineering, or R&D, expense was
$12.8 million, or 9.4% of net revenues, as compared to
$5.7 million, or 6.9% of net revenues, in fiscal year 2002.
The dollar and percentage increases were due to the addition of
the Clare and Westcode engineering teams. During fiscal year
2002, R&D expense was $5.7 million, or 6.9% of net
revenues, as compared to $6.1 million, or 5.5% of net
revenues, in fiscal year 2001. The dollar decrease was due to a

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fewer number of research and development
projects. As a percentage of revenues, R&D expense increased
as a result of such expenses decreasing at a relatively slower
rate than revenues.


Selling, General and Administrative.During fiscal year 2003, selling,
general and administrative, or SG&A, expense was
$27.7 million, or 20.4% of net revenues, as compared to
$12.9 million, or 15.6% of net revenues, in fiscal year
2002. The percentage and dollar amount increase is caused mainly
by the acquisition of Clare and Westcode. During fiscal year
2002, SG&A expense was $12.9 million, or 15.6% of net
revenues, as compared to $14.0 million, or 12.5% of net
revenues, in fiscal year 2001. The dollar amount decrease
reflects a decrease in expenses to support a lower revenue
level. As a percentage of revenues, SG&A expense increased
as a result of such expenses decreasing at a relatively slower
rate than revenues.

Restructuring.In
June 2002, we adopted a corporate restructuring program to
reduce expenses and preserve our cash. The restructuring mainly
relates to a reduction in the workforce designed to eliminate
redundant positions at Clare. The restructuring charge, which
consists mainly of involuntary employee separation costs of
$750,000, was recorded in operating expense for the year ended
March 31, 2003. The separation cost is for
33 employees worldwide: 5 in sales and marketing,
7 in research and development, 3 in general and
administrative and 9 in operations functions in the United
States; and 8 in sales and marketing and 1 in general
and administrative outside the United States.

Interest Income (Expense), Net.During fiscal year 2003, interest
income (expense), net, was $0.7 million, as compared to
interest income (expense), net, of $1.3 million in fiscal
year 2002. The decrease is mainly due to reduced interest rates
on invested balances. During fiscal year 2002, interest income
(expense), net, was $1.3 million, as compared to
$1.0 million in fiscal year 2001. The increase is mainly
due to interest received from the investment of the net proceeds
from our secondary public offering during the whole fiscal year
2002.

Other Income (Expense), Net.Other income (expense), net, including
gain (loss) on foreign currency transactions, in fiscal year
2003 was $(6.0 million), as compared to $(5.5 million)
in fiscal year 2002. The increase in other expenses was
primarily due to the fluctuation in the Euros and UK pound
sterling against the US dollar. Other income (expense), net,
including gain on foreign currency transactions, in fiscal year
2002 was $(5.5 million) as compared to $(504,000) in fiscal
year 2001. The increase in other expense was mainly due to
litigation defense costs of $4.6 million.

Benefit from (Provision For) Income Taxes.In fiscal year 2003, the benefit from
income taxes reflects an effective tax rate of 32%, as compared
to a provision for 38% in fiscal 2002. The lower tax benefit
rate for 2003 was primarily related to income tax allowances
related to losses incurred in certain foreign jurisdictions. The
fiscal year 2002 provision for income taxes reflects an
effective tax rate of 38% in fiscal year 2002, which remained
unchanged from fiscal 2001.

Liquidity and Capital Resources

Cash and Cash Equivalents.As of March 31, 2003, cash and
cash equivalents were $40.1 million, an increase of
$8.0 million from cash and cash equivalents of
$32.1 million at March 31, 2002, which was a decrease
of $12.7 million from cash and cash equivalents of
$44.8 million at March 31, 2001. The increase in cash
and cash equivalents from fiscal years 2002 to 2003 was
primarily due to cash received in the acquisition of Clare. The
decrease in cash and cash equivalents from fiscal years 2001 to
2002 was related to the acquisition of additional manufacturing
equipment and cash used in the acquisition of Westcode.

Cash flows from operating activities.Net cash provided by operating
activities in fiscal year 2003 was $2.4 million, which was
relatively unchanged from $2.2 million in fiscal year 2002.
Net cash provided by operating activities in fiscal year 2002
decreased $1.0 million from the $3.1 million provided
in fiscal year 2001.

Cash flows from investing activities.Net cash provided by investing
activities in fiscal year 2003 was $2.4 million, primarily
resulting from the net cash acquired in the acquisition of Clare
offset by purchases of manufacturing equipment. In fiscal years
2002 and 2001, net cash used in investing activities was
$16.0 million and $4.0 million, respectively. Net cash
used in investing activities in 2002 was principally used for the

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acquisition of Westcode and for plant and
equipment purchases. Net cash used in investing activities in
2001 was principally used for plant and equipment purchases.


Cash flows from financing activities.During fiscal year 2003, net cash
provided by financing activities was $2.4 million, which
was mainly due to proceeds from loans and exercises of stock
options, offset in part, by an increase in restricted cash. In
fiscal years 2002 and 2001, net cash provided by financing
activities was $1.3 million and $36.6 million,
respectively. Net cash provided by financing activities in 2002
was principally proceeds from capital lease obligations, while
in 2001 it was primarily proceeds from a secondary offering of
our common stock, reduced by the repayment of bank debt.

There are three lines of credit facilities
available to us. We have one line of credit with a
U.S. bank that consists of a $5.0 million commitment
amount which is available through September 2003. The line bears
interest at the banks prime rate (4.25% at March 31,
2003). The line is collateralized by certain assets and contains
certain general and financial covenants. At March 31, 2003,
we had drawn $700,000 against such line of credit. As of
March 31, 2003, we were not in compliance with financial
covenants and we received a waiver of non-compliance from the
lender.

We have another line of credit with a
U.S. bank that consists of a $100,000 commitment, which is
available through September 2003. The line bears interest at a
fixed rate of 9.5%. The line is collateralized by a $100,000
certificate of deposit that we have with the bank. At
March 31, 2003, there were no amounts being drawn against
such line of credit.

In 2001, IXYS Semiconductor GmbH obtained a
$5.0 million line of credit with a German bank. This line
supports a letter of credit facility. At March 31, 2003
there are no amounts outstanding under this line.

In 2000, a German bank issued to IXYS a
commitment letter for a (EUR) 3.8 million equipment lease
facility. The equipment leases facility provides financing at
varying pricing for periods up to 48 months. In addition to
the rights to the equipment, the bank holds a security interest
in the general asset of IXYS Semiconductor GmbH and unrestricted
amounts deposited with the bank.

In 2000, in the same commitment letter discussed
above, the bank also committed to issue a credit line to IXYS
GmbH up to (EUR) 5.1 million for a wafer fabrication
facility in Germany, including leasehold improvements, clean
room construction and fabrication, computer and office
equipment. At March 31, 2003, we had drawn
(EUR) 204,000 under this commitment. The security interest
of the bank under the equipment lease facility also
collateralizes this line.

In 2001, IXYS entered into a term loan with a
Swiss bank in the amount of SFR 200,000. The loan bears
interest of 5.25% and is due in November 2006.

Our accounts receivable at March 31, 2003
were $21.5 million, an increase of 28.6% as compared to
$16.7 million at March 31, 2002. Our inventories at
March 31, 2003 were $49.2 million, an increase of 6.1%
as compared to $46.3 million at March 31, 2002. Net
plant and equipment at March 31, 2003 were
$28.7 million, an increase of 49.3% as compared to
$19.2 million at March 31, 2002.

As of March 31, 2003, we had
$40.1 million in cash and cash equivalents. We believe that
these balances, including interest to be earned thereon, and
borrowings available under our credit facilities will be
sufficient to fund our working and other capital requirements,
including potential investments in other companies and other
assets to support the strategic growth of our business, over the
next twelve months. In the ordinary course of business, we
evaluate opportunities to acquire businesses, products and
technologies and we expect to use our cash to fund these types
of activities in the future. In the event additional needs for
cash arise, we may raise additional funds from a combination of
sources including the potential issuance of debt or equity
securities. Additional financing might not be available on terms
favorable to us, or at all, particularly in light of the recent
decline in the capital markets. If adequate funds were not
available or were not available on acceptable terms, our ability
to take advantage of unanticipated opportunities or respond to
competitive pressures could be limited.

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Disclosures about Contractual Obligations and
Commercial Commitments

Details of our contractual obligations and
commitments as of March 31, 2003 to make future payments
under contracts are set forth below:

|                            |  |                        |        |           |  |           |        |           |  |         |        |  |  |   |       |  |  |   |       | 
|--------------------------- |  | ---------------------- | ------ | --------- |  | --------- | ------ | --------- |  | ------- | ------ |  |  | - | ----- |  |  | - | ----- | 
|                            |  |                       
|                            |  | Payments Due by Period
|                            |  |                       
|                            |  |                        |        | Less than |  |           |        | After    
|Contractual Obligations     |  | Total                  |        | 1 year    |  | 1-3 years |        | 3-5 years |  | 5 years
|                            |  |                        |        |           |  |           |        |           |  |        
|Long Term Debt Obligations  |  | $                      | 700    |           |  | $         | 700    |           |  | $       |       |  |  | $ |      |  |  | $ |       | 
|Capital Lease Obligations   |  |                        | 8,125  |           |  |           | 3,238  |           |  |         | 4,887  |  |  |   |      |  |  |   |      | 
|Operating Lease Obligations |  |                        | 9,731  |           |  |           | 4,676  |           |  |         | 4,530  |  |  |   | 525   |  |  |   |      | 
|Pension Obligations         |  |                        | 9,924  |           |  |           | 547    |           |  |         | 1,173  |  |  |   | 1,333 |  |  |   | 6,871 | 
|Purchase Obligations        |  |                        | 5,806  |           |  |           | 5,806  |           |  |         |       |  |  |   |      |  |  |   |      | 
|Other liabilities           |  |                        | 155    |           |  |           |       |           |  |         | 155    |  |  |   |      |  |  |   |      | 
|                            |  |                        |        |           |  |           |        |           |  |         |        |  |  |   |       |  |  |   |       | 
|Total                       |  | $                      | 34,441 |           |  | $         | 14,967 |           |  | $       | 10,745 |  |  | $ | 1,858 |  |  | $ | 6,871 | 
|                            |  |                        |        |           |  |           |        |           |  |         |        |  |  |   |       |  |  |   |       | 

On September 22, 2000, IXYS Corporation
entered into a guaranty for $5.0 million in favor of
Commerzbank AG to obtain a line of credit granted by Commerzbank
AG to IXYS Semiconductor GmbH. At March 31, 2003, there
were no amounts outstanding under this line of credit.

New Accounting Standards

In June 2002, the FASB issued
SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities, which addresses
accounting for restructuring and similar costs.
SFAS No. 146 supercedes previous accounting guidance,
principally Emerging Issues Task Force Issue, or EITF,
No. 94-3. SFAS No. 146 requires that a liability
for costs associated with an exit or disposal activity be
recognized when the liability is incurred. Under
EITF No. 94-3, a liability for an exit cost was
recognized at the date of the entitys commitment to an
exit plan. SFAS No. 146 also requires that the
liability be initially measured and recorded at fair value.
SFAS No. 146 was effective for exit or disposal
activities that are initiated after December 31, 2002. We
adopted SFAS No. 146 in the fourth quarter of fiscal
2003, and its adoption did not have a material impact on our
results of operations and financial condition.

In November 2002, the FASB issued Interpretation
No. 45, or FIN 45, entitled Guarantors
Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others. It expands
previously issued accounting guidance and disclosure
requirements for certain guarantees. FIN 45 requires an
entity to recognize an initial liability for the fair value of
an obligation assumed by issuing a guarantee. The provision for
initial recognition and measurement of the liability will be
applied on a prospective basis to guarantees issued or modified
after December 31, 2002. We do not expect this
interpretation to have a material impact on its consolidated
results of operations or financial position. We have included
additional disclosures in accordance with FIN 45 in the
footnotes to these consolidated financial statements.

In December 2002, the FASB issued
SFAS No. 148, Accounting for Stock-Based
Compensation, Transition and Disclosure.
SFAS No. 148 provides alternative methods of
transition for a voluntary change to the fair value based method
of accounting for stock-based employee compensation.
SFAS No. 148 also requires that disclosures of the pro
forma effect of using the fair value method of accounting for
stock-based employee compensation be displayed more prominently
and in a tabular format. Additionally, SFAS No. 148
requires disclosure of the pro forma effect in interim financial
statements. The additional disclosure requirements of
SFAS No. 148 are effective for fiscal years ended
after December 15, 2002. We will continue to account for
stock-based compensation in accordance with APB Opinion
No. 25. We have included additional disclosures in
accordance with SFAS No. 148 in the footnotes to these
consolidated financial statements.

In January 2003, the FASB issued FASB
Interpretation No. 46, or FIN 46, entitled
Consolidation of Variable Interest Entities, an
Interpretation of ARB No. 51. FIN 46
requires certain variable interest entities

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to be consolidated by the primary beneficiary of
the entity if the equity investors in the entity do not have the
characteristics of a controlling financial interest or do not
have sufficient equity at risk for the entity to finance its
activities without additional subordinated financial support
from other parties. FIN 46 is effective immediately for all
new variable interest entities created or acquired after
January 31, 2003. For variable interest entities created or
acquired prior to February 1, 2003, the provisions of
FIN 46 must be applied for the first interim or annual
period beginning after June 15, 2003. We believe that the
adoption of this standard will have no material impact on our
financial statements.


In May 2003, the FASB issued SFAS No. 150,
Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity. SFAS
No. 150 establishes standards for how an issuer classifies
and measures certain financial instruments with characteristics
of both liabilities and equity. SFAS No. 150 is effective
for financial instruments entered into or modified after
May 31, 2003, and otherwise is effective at the beginning
of the first interim period beginning after June 15, 2003.
SFAS No. 150 is to be implemented by reporting the
cumulative effect of a change in an accounting principle for
financial instruments created before the issuance date of the
statement and still existing at the beginning of the interim
period of adoption. We do not expect the adoption of SFAS
No. 150 to have a significant impact on our financial
position or results of operations.






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

We are exposed to interest rate, market and
credit risk and related change in the market values of our
investment portfolio. We place our investment portfolio
primarily in debt instruments of the United States government
and high quality corporate issuers. Investments in both fixed
and floating rate securities have some degree of interest rate
risk. Fixed rate securities may have their fair market value
adversely impacted by increases in interest rates. Floating rate
securities may produce less income than anticipated if interest
rates fall. As a result, changes in interest rates may cause us
to incur losses in principal if we are forced to sell securities
that have declined in market value or may result in lower than
anticipated investment income. Our investment portfolio is
categorized as available-for-sale and accordingly is presented
at fair value on the balance sheet.

We manage our exposure to interest rate, market
and credit risk in the investment portfolio with investment
policies and procedures that limit such things as term, credit
rating and the amount of credit exposure to any one issue,
issuer and type of instrument. We have not used derivative
financial instruments in our investment portfolio.

We are also exposed to short-term fluctuations in
interest rates as our lines of credit have variable interest
rates. An increase in interest rates would have an adverse
impact on our interest expense. However, our cash and marketable
securities greatly exceed the balances that we borrow through
lines of credit and, if necessary to limit the burden of
interest expense, we could reduce our borrowing.

During the year ended March 31, 2003, the
effects of changes in interest rates on the fair market value of
our marketable investment securities and our earnings were
insignificant. The impact on the fair market value of our
securities and our earnings from a hypothetical 100 basis point
adverse change in interest rates as of the end each of fiscal
2003 and 2002 would not have been significant.

International revenues from our foreign
subsidiaries were approximately 47.7% of total revenues in
fiscal year 2003. These revenues come from our German and UK
subsidiaries and are primarily denominated in Euros and British
pounds, respectively. Our foreign subsidiaries also incur most
of their expenses in the local currency. Certain of our foreign
subsidiaries use their respective local currencies as their
functional currency. We have not entered into foreign currency
hedging transactions, although if circumstances warrant, we may
consider such transactions.

It is possible that our future financial results
could be directly affected by changes in foreign currency
exchange rates, and the prices of our products would become more
expensive in a particular foreign market if the value of the
U.S. dollar, the Euro or the British pound rises in
comparison to the local currency, which may make it more
difficult to sell our products in that market. We will continue
to face foreign currency

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exchange risk in the future. Therefore, our
financial results could be directly affected by weak economic
conditions in foreign markets. In addition, a strengthening of
the U.S. dollar, the Euro or the British pound could make
our products less competitive in foreign markets. A hypothetical
10% increase in the value of the Euro against the
U.S. dollar and the British pound against the
U.S. dollar would have had the effect of reducing our
annual net income as of the end of each of fiscal 2003 and 2002
by an amount less than $1.0 million.


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|        |                     
|------- | --------------------
|Item 8. | Financial Statements

Financial Statements

Our financial statements required by this Item
are set forth at the pages indicated in the accompanying index.

IXYS CORPORATION

INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS

|                                                                                                            |  |      |    | 
|----------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                                                                                            |  | Page
|                                                                                                            |  |     
|Report of Independent Auditors                                                                              |  |      | 35 | 
|Consolidated Balance Sheets as of March 31,
    2003 and 2002                                               |  |      | 36 | 
|Consolidated Statement of Operations for the
    years ended March 31, 2003, 2002 and 2001                  |  |      | 37 | 
|Consolidated Statement of Comprehensive Income
    (Loss) for the years ended March 31, 2003, 2002 and 2001 |  |      | 38 | 
|Consolidated Statement of Stockholders
    Equity for the years ended March 31, 2003, 2002 and 2001        |  |      | 39 | 
|Consolidated Statements of Cash Flows for the
    years ended March 31, 2003, 2002 and 2001                 |  |      | 40 | 
|Notes to Consolidated Financial Statements                                                                  |  |      | 41 | 

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REPORT OF INDEPENDENT AUDITORS

To the Stockholders and Board of Directors IXYS
Corporation

In our opinion, the consolidated financial
statements listed in the accompanying index present fairly, in
all material respects, the financial position of IXYS
Corporation and its subsidiaries at March 31, 2003 and
2002, and the results of their operations and their cash flows
for each of the three years ended March 31, 2003, in
conformity with accounting principles generally accepted in the
United States of America. These financial statements are the
responsibility of IXYSs management; our responsibility is
to express an opinion on these financial statements based on our
audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform
the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.

As discussed in Note 5 to the Consolidated
Financial Statements, IXYS Corporation changed its method of
accounting for goodwill and other intangible assets effective
April 1, 2002.

/s/ PRICEWATERHOUSECOOPERS LLP

San Jose, California

July 11, 2003


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IXYS CORPORATION

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)


|                                                          |                                                                                                      |                                                                                                      |        |         |         |  |        |        |         | 
|--------------------------------------------------------- | ---------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------- | ------ | ------- | ------- |  | ------ | ------ | ------- | 
|                                                          |                                                                                                      |                                                                                                     
|                                                          |                                                                                                      | March 31,                                                                                           
|                                                          |                                                                                                      |                                                                                                     
|                                                          |                                                                                                      | 2003                                                                                                 |        | 2002   
|                                                          |                                                                                                      |                                                                                                      |        |        
|ASSETS                                                   
|Current assets:                                           |                                                                                                      |                                                                                                      |        |         |         |  |        |       
|                                                          | Cash and cash equivalents                                                                            |                                                                                                      | $      | 40,094  |         |  | $      | 32,111 |        
|                                                          | Restricted cash                                                                                      |                                                                                                      |        | 2,748   |         |  |        | 205    |        
|                                                          | Accounts receivable, net of allowance for
    doubtful accounts of $3,169 in 2003 and $1,045 in 2002 |                                                                                                      |        | 21,475  |         |  |        | 16,697 |        
|                                                          | Inventories                                                                                          |                                                                                                      |        | 49,162  |         |  |        | 46,317 |        
|                                                          | Prepaid expenses                                                                                     |                                                                                                      |        | 943     |         |  |        | 596    |        
|                                                          | Deferred income taxes                                                                                |                                                                                                      |        | 10,285  |         |  |        | 2,553  |        
|                                                          |                                                                                                      |                                                                                                      |        |         |         |  |        |       
|                                                          |                                                                                                      | Total current assets                                                                                 |        |         | 124,707 |  |        |        | 98,479  | 
|Plant and equipment, net                                  |                                                                                                      |                                                                                                      | 28,715 |         |         |  | 19,238 |       
|Other assets                                              |                                                                                                      |                                                                                                      | 5,655  |         |         |  | 2,932  |       
|Deferred income taxes                                     |                                                                                                      |                                                                                                      | 2,563  |         |         |  | 2,015  |       
|Goodwill                                                  |                                                                                                      |                                                                                                      | 21,417 |         |         |  | 1,896  |       
|                                                          |                                                                                                      |                                                                                                      |        |         |         |  |        |       
|                                                          |                                                                                                      | Total assets                                                                                         |        | $       | 183,057 |  |        | $      | 124,560 | 
|                                                          |                                                                                                      |                                                                                                      |        |         |         |  |        |       
|LIABILITIES AND STOCKHOLDERS EQUITY                      
|Current liabilities:                                      |                                                                                                      |                                                                                                      |        |         |         |  |        |       
|                                                          | Current portion of capitalized lease obligations                                                     |                                                                                                      | $      | 3,238   |         |  | $      | 2,391  |        
|                                                          | Current portion of notes payable to bank                                                             |                                                                                                      |        | 700     |         |  |        | 700    |        
|                                                          | Accounts payable                                                                                     |                                                                                                      |        | 11,177  |         |  |        | 5,606  |        
|                                                          | Accrued expenses and other liabilities                                                               |                                                                                                      |        | 14,167  |         |  |        | 8,383  |        
|                                                          |                                                                                                      |                                                                                                      |        |         |         |  |        |       
|                                                          |                                                                                                      | Total current liabilities                                                                            |        |         | 29,282  |  |        |        | 17,080  | 
|Capitalized lease obligations, net of current
    portion |                                                                                                      |                                                                                                      | 4,887  |         |         |  | 4,770  |       
|Other liabilities                                         |                                                                                                      |                                                                                                      | 155    |         |         |  | 118    |       
|Pension liabilities                                       |                                                                                                      |                                                                                                      | 9,924  |         |         |  | 7,373  |       
|                                                          |                                                                                                      |                                                                                                      |        |         |         |  |        |       
|                                                          |                                                                                                      | Total liabilities                                                                                    |        |         | 44,248  |  |        |        | 29,341  | 
|                                                          |                                                                                                      |                                                                                                      |        |         |         |  |        |       
|Commitments and contingencies (Note 7)                    |                                                                                                      |                                                                                                      |        |         |         |  |        |       
|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; issued and
    outstanding: 31,957,182 in 2003 and 26,902,192 in 2002 |        |         | 320     |  |        |        | 270     | 
|                                                          | Additional paid-in capital                                                                           |                                                                                                      |        | 144,835 |         |  |        | 92,785 |        
|                                                          | Deferred compensation                                                                                |                                                                                                      |        | (26     | )       |  |        |       |        
|                                                          | Notes receivable from stockholders                                                                   |                                                                                                      |        | (913    | )       |  |        | (853   | )      
|                                                          | Retained earnings (accumulated deficit)                                                              |                                                                                                      |        | (6,318  | )       |  |        | 5,827  |        
|                                                          | Accumulated other comprehensive income (loss)                                                        |                                                                                                      |        | 1,358   |         |  |        | (2,363 | )      
|                                                          | Less cost of treasury stock: 95,302 common shares
    in 2003 and 2002                               |                                                                                                      |        | (447    | )       |  |        | (447   | )      
|                                                          |                                                                                                      |                                                                                                      |        |         |         |  |        |       
|                                                          |                                                                                                      | Total stockholders equity                                                                           |        |         | 138,809 |  |        |        | 95,219  | 
|                                                          |                                                                                                      |                                                                                                      |        |         |         |  |        |       
|                                                          |                                                                                                      | Total liabilities and stockholders equity                                                           |        | $       | 183,057 |  |        | $      | 124,560 | 
|                                                          |                                                                                                      |                                                                                                      |        |         |         |  |        |       

The accompanying notes are an integral part of
these consolidated financial statements.

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IXYS CORPORATION

CONSOLIDATED STATEMENTS OF
OPERATIONS

|                                                                    |                                              |                                       |         |         |        |      |        |        |        |   |         |        |        | 
|------------------------------------------------------------------- | -------------------------------------------- | ------------------------------------- | ------- | ------- | ------ | ---- | ------ | ------ | ------ | - | ------- | ------ | ------ | 
|                                                                    |                                              |                                      
|                                                                    |                                              | Years Ended March 31,                
|                                                                    |                                              |                                      
|                                                                    |                                              | 2003                                  |         | 2002    |        | 2001
|                                                                    |                                              |                                       |         |         |        |     
|                                                                    |                                              |                                      
|                                                                    |                                              | (In thousands, except per share data)
|Net revenues                                                        |                                              | $                                     | 136,111 |         |        | $    | 82,821 |        |        | $ | 111,389 |       
|Cost of goods sold                                                  |                                              |                                       | 107,371 |         |        |      | 56,918 |        |        |   | 69,967  |       
|                                                                    |                                              |                                       |         |         |        |      |        |        |        |   |         |       
|                                                                    |                                              | Gross profit                          |         |         | 28,740 |      |        |        | 25,903 |   |         |        | 41,422 | 
|                                                                    |                                              |                                       |         |         |        |      |        |        |        |   |         |       
|Operating expenses:                                                 |                                              |                                       |         |         |        |      |        |        |        |   |         |       
|                                                                    | Research, development and engineering        |                                       |         | 12,846  |        |      |        | 5,728  |        |   |         | 6,081  |       
|                                                                    | Selling, general and administrative          |                                       |         | 27,721  |        |      |        | 12,884 |        |   |         | 13,959 |       
|                                                                    | Restructuring                                |                                       |         | 750     |        |      |        |       |        |   |         |       |       
|                                                                    |                                              |                                       |         |         |        |      |        |        |        |   |         |       
|                                                                    |                                              | Total operating expenses              |         |         | 41,317 |      |        |        | 18,612 |   |         |        | 20,040 | 
|                                                                    |                                              |                                       |         |         |        |      |        |        |        |   |         |       
|                                                                    | Operating income (loss)                      |                                       |         | (12,577 | )      |      |        | 7,291  |        |   |         | 21,382 |       
|Interest income                                                     |                                              |                                       | 910     |         |        |      | 1,509  |        |        |   | 1,504   |       
|Interest expense                                                    |                                              |                                       | (190    | )       |        |      | (191   | )      |        |   | (474    | )     
|Other income (expense):                                             |                                              |                                       |         |         |        |      |        |        |        |   |         |       
|                                                                    | Gain (loss) on foreign currency transactions |                                       |         | (1,249  | )      |      |        | (46    | )      |   |         | 119    |       
|                                                                    | Litigation defense cost                      |                                       |         | (4,716  | )      |      |        | (4,635 | )      |   |         | (3,258 | )     
|                                                                    | Litigation settlements                       |                                       |         |        |        |      |        |       |        |   |         | 2,520  |       
|                                                                    | Other income (expense)                       |                                       |         | (39     | )      |      |        | (806   | )      |   |         | 115    |       
|                                                                    |                                              |                                       |         |         |        |      |        |        |        |   |         |       
|Income before income tax                                            |                                              |                                       | (17,861 | )       |        |      | 3,122  |        |        |   | 21,908  |       
|Benefit from (provision for) income tax                             |                                              |                                       | 5,716   |         |        |      | (1,184 | )      |        |   | (8,321  | )     
|                                                                    |                                              |                                       |         |         |        |      |        |        |        |   |         |       
|Net income (loss)                                                   |                                              | $                                     | (12,145 | )       |        | $    | 1,938  |        |        | $ | 13,587  |       
|                                                                    |                                              |                                       |         |         |        |      |        |        |        |   |         |       
|Net income (loss) per share  basic                                 |                                              | $                                     | (0.39   | )       |        | $    | 0.07   |        |        | $ | 0.54    |       
|                                                                    |                                              |                                       |         |         |        |      |        |        |        |   |         |       
|Weighted average shares used in per share
    calculation  basic   |                                              |                                       | 30,889  |         |        |      | 26,745 |        |        |   | 25,239  |       
|                                                                    |                                              |                                       |         |         |        |      |        |        |        |   |         |       
|Net income (loss) per share 
    diluted                           |                                              | $                                     | (0.39   | )       |        | $    | 0.07   |        |        | $ | 0.49    |       
|                                                                    |                                              |                                       |         |         |        |      |        |        |        |   |         |       
|Weighted average shares used in per share
    calculation  diluted |                                              |                                       | 30,889  |         |        |      | 29,004 |        |        |   | 27,774  |       
|                                                                    |                                              |                                       |         |         |        |      |        |        |        |   |         |       

The accompanying notes are an integral part of
these consolidated financial statements.

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IXYS CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE
INCOME (LOSS)

|                                   |                                          |                       |         |       |  |      |       |     |  |   |        |      |  
|---------------------------------- | ---------------------------------------- | --------------------- | ------- | ----- |  | ---- | ----- | --- |  | - | ------ | ---- | -
|                                   |                                          |                      
|                                   |                                          | Years Ended March 31,
|                                   |                                          |                      
|                                   |                                          | 2003                  |         | 2002  |  | 2001
|                                   |                                          |                       |         |       |  |     
|                                   |                                          |                      
|                                   |                                          | (In thousands)       
|Net income (loss)                  |                                          | $                     | (12,145 | )     |  | $    | 1,938 |     |  | $ | 13,587 |     
|Other comprehensive income (loss): |                                          |                       |         |       |  |      |       |     |  |   |        |     
|                                   | Foreign currency translation adjustments |                       |         | 3,721 |  |      |       | 119 |  |   |        | (494 | )
|                                   |                                          |                       |         |       |  |      |       |     |  |   |        |     
|Comprehensive income (loss)        |                                          | $                     | (8,424  | )     |  | $    | 2,057 |     |  | $ | 13,093 |     
|                                   |                                          |                       |         |       |  |      |       |     |  |   |        |     

The accompanying notes are an integral part of
these consolidated financial statements.

38



---



##### Table of Contents



IXYS CORPORATION

CONSOLIDATED STATEMENT OF STOCKHOLDERS
EQUITY

|                                                                                                         |  |                                       |        |        |  |            |     |              |  |              |         |              |  |               |      |          |  |               |         |   |  |   |     |   |  |   |        |   |  |   |      |   |  |   |         |  
|-------------------------------------------------------------------------------------------------------- |  | ------------------------------------- | ------ | ------ |  | ---------- | --- | ------------ |  | ------------ | ------- | ------------ |  | ------------- | ---- | -------- |  | ------------- | ------- | - |  | - | --- | - |  | - | ------ | - |  | - | ---- | - |  | - | ------- | -
|                                                                                                         |  |                                       |        |        |  |            |     | Notes        |  | Retained     |         |              |  | Accumulated   |      |          |  |              
|                                                                                                         |  |                                       |        |        |  | Additional |     | Receivable   |  | Earnings     |         |              |  | Other         |      |          |  | Total        
|                                                                                                         |  |                                       |        |        |  | Paid-In    |     | from         |  | (Accumulated |         | Deferred     |  | Comprehensive |      | Treasury |  | Stockholders
|                                                                                                         |  | Shares                                |        | Amount |  | Capital    |     | Stockholders |  | Deficit)     |         | Compensation |  | Loss          |      | Stock    |  | Equity       
|                                                                                                         |  |                                       |        |        |  |            |     |              |  |              |         |              |  |               |      |          |  |              
|                                                                                                         |  |                                      
|                                                                                                         |  | (In thousands, except per share data)
|Balances, March 31, 2000                                                                                 |  |                                       | 24,028 |        |  | $          | 240 |              |  | $            | 43,206  |              |  | $             | (861 | )        |  | $             | (9,698  | ) |  | $ |    |   |  | $ | (1,988 | ) |  | $ | (2   | ) |  | $ | 30,897  |  
|Exercise of stock options                                                                                |  |                                       | 213    |        |  |            | 2   |              |  |              | 406     |              |  |               |     |          |  |               |        |   |  |   |    |   |  |   |       |   |  |   |     |   |  |   | 408     |  
|Issuance of common stock for the acquisition of
    Directed Energy, Inc.                                |  |                                       | 250    |        |  |            | 3   |              |  |              | 2,797   |              |  |               |     |          |  |               |        |   |  |   |    |   |  |   |       |   |  |   |     |   |  |   | 2,800   |  
|Issuance of common stock under Employee Stock
    Purchase Plan                                          |  |                                       | 55     |        |  |            | 1   |              |  |              | 237     |              |  |               |     |          |  |               |        |   |  |   |    |   |  |   |       |   |  |   |     |   |  |   | 238     |  
|Exercise of warrants                                                                                     |  |                                       | 96     |        |  |            | 1   |              |  |              | (1      | )            |  |               |     |          |  |               |        |   |  |   |    |   |  |   |       |   |  |   |     |   |  |   |        |  
|Payment on notes receivable from stockholders                                                            |  |                                       |       |        |  |            |    |              |  |              |        |              |  |               | 38   |          |  |               |        |   |  |   |    |   |  |   |       |   |  |   |     |   |  |   | 38      |  
|Foreign currency translation adjustments                                                                 |  |                                       |       |        |  |            |    |              |  |              |        |              |  |               |     |          |  |               |        |   |  |   |    |   |  |   | (494   | ) |  |   |     |   |  |   | (494    | )
|Issuance of common stock from secondary offering
    at $24.50 per share, net of issuance cost of $1,070 |  |                                       | 2,000  |        |  |            | 20  |              |  |              | 45,230  |              |  |               |     |          |  |               |        |   |  |   |    |   |  |   |       |   |  |   |     |   |  |   | 45,250  |  
|Net income                                                                                               |  |                                       |       |        |  |            |    |              |  |              |        |              |  |               |     |          |  |               | 13,587  |   |  |   |    |   |  |   |       |   |  |   |     |   |  |   | 13,587  |  
|                                                                                                         |  |                                       |        |        |  |            |     |              |  |              |         |              |  |               |      |          |  |               |         |   |  |   |     |   |  |   |        |   |  |   |      |   |  |   |         |  
|Balances, March 31, 2001                                                                                 |  |                                       | 26,642 |        |  |            | 267 |              |  |              | 91,875  |              |  |               | (823 | )        |  |               | 3,889   |   |  |   |    |   |  |   | (2,482 | ) |  |   | (2   | ) |  |   | 92,724  |  
|Exercise of stock options                                                                                |  |                                       | 196    |        |  |            | 2   |              |  |              | 598     |              |  |               |     |          |  |               |        |   |  |   |    |   |  |   |       |   |  |   |     |   |  |   | 600     |  
|Issuance of common stock under Employee Stock
    Purchase Plan                                          |  |                                       | 44     |        |  |            | 1   |              |  |              | 312     |              |  |               |     |          |  |               |        |   |  |   |    |   |  |   |       |   |  |   |     |   |  |   | 313     |  
|Repurchase of common stock                                                                               |  |                                       | (75    | )      |  |            |    |              |  |              |        |              |  |               |     |          |  |               |        |   |  |   |    |   |  |   |       |   |  |   | (445 | ) |  |   | (445    | )
|Issuance of notes receivable                                                                             |  |                                       |       |        |  |            |    |              |  |              |        |              |  |               | (30  | )        |  |               |        |   |  |   |    |   |  |   |       |   |  |   |     |   |  |   | (30     | )
|Foreign currency translation adjustments                                                                 |  |                                       |       |        |  |            |    |              |  |              |        |              |  |               |     |          |  |               |        |   |  |   |    |   |  |   | 119    |   |  |   |     |   |  |   | 119     |  
|Net income                                                                                               |  |                                       |       |        |  |            |    |              |  |              |        |              |  |               |     |          |  |               | 1,938   |   |  |   |    |   |  |   |       |   |  |   |     |   |  |   | 1,938   |  
|                                                                                                         |  |                                       |        |        |  |            |     |              |  |              |         |              |  |               |      |          |  |               |         |   |  |   |     |   |  |   |        |   |  |   |      |   |  |   |         |  
|Balances, March 31, 2002                                                                                 |  |                                       | 26,807 |        |  |            | 270 |              |  |              | 92,785  |              |  |               | (853 | )        |  |               | 5,827   |   |  |   |    |   |  |   | (2,363 | ) |  |   | (447 | ) |  |   | 95,219  |  
|Exercise of stock options                                                                                |  |                                       | 130    |        |  |            | 1   |              |  |              | 505     |              |  |               |     |          |  |               |        |   |  |   |    |   |  |   |       |   |  |   |     |   |  |   | 506     |  
|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  |              |  |              | 51,288  |              |  |               |     |          |  |               |        |   |  |   |    |   |  |   |       |   |  |   |     |   |  |   | 51,337  |  
|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                                                                                 |  |                                       | 31,862 |        |  | $          | 320 |              |  | $            | 144,835 |              |  | $             | (913 | )        |  | $             | (6,318  | ) |  | $ | (26 | ) |  | $ | 1,358  |   |  | $ | (447 | ) |  | $ | 138,809 |  
|                                                                                                         |  |                                       |        |        |  |            |     |              |  |              |         |              |  |               |      |          |  |               |         |   |  |   |     |   |  |   |        |   |  |   |      |   |  |   |         |  

The accompanying notes are an integral part of
these consolidated financial statements.

39



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##### Table of Contents



IXYS CORPORATION

CONSOLIDATED STATEMENTS OF CASH
FLOWS

|                                                                              |                                                                                              |                                                                 |                                           |         |        |       |         |        |         |       |        |        |         |       | 
|----------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------- | --------------------------------------------------------------- | ----------------------------------------- | ------- | ------ | ----- | ------- | ------ | ------- | ----- | ------ | ------ | ------- | ----- | 
|                                                                              |                                                                                              |                                                                
|                                                                              |                                                                                              | Years Ended March 31,                                          
|                                                                              |                                                                                              |                                                                
|                                                                              |                                                                                              | 2003                                                            |                                           | 2002    |        | 2001 
|                                                                              |                                                                                              |                                                                 |                                           |         |        |      
|                                                                              |                                                                                              |                                                                
|                                                                              |                                                                                              | (In thousands)                                                 
|Cash flows from operating activities:                                         |                                                                                              |                                                                 |                                           |         |        |       |         |        |         |       |        |       
|                                                                              | Net income (loss)                                                                            |                                                                 | $                                         | (12,145 | )      |       | $       | 1,938  |         |       | $      | 13,587 |        
|                                                                              | Adjustments to reconcile net income (loss) to net
    cash provided by operating activities: |                                                                 |                                           |         |        |       |         |        |         |       |        |        |        
|                                                                              |                                                                                              | Depreciation and amortization                                   |                                           |         | 9,297  |       |         |        | 5,835   |       |        |        | 3,409   |      
|                                                                              |                                                                                              | Provision for accounts receivable reserves                      |                                           |         | 8,024  |       |         |        | 7,029   |       |        |        | 6,101   |      
|                                                                              |                                                                                              | Provision for write down of excess and obsolete
    inventories |                                           |         | 7,258  |       |         |        | 790     |       |        |        | 1,854   |      
|                                                                              |                                                                                              | (Gain) loss on disposal of fixed assets                         |                                           |         | 240    |       |         |        | 287     |       |        |        | (8      | )    
|                                                                              |                                                                                              | (Loss) gain on foreign currency transactions                    |                                           |         | (1,713 | )     |         |        | (318    | )     |        |        | (56     | )    
|                                                                              |                                                                                              | Deferred income taxes                                           |                                           |         | (3,067 | )     |         |        | 861     |       |        |        | (466    | )    
|                                                                              | Changes in operating assets and liabilities                                                  |                                                                 |                                           |         |        |       |         |        |         |       |        |        |        
|                                                                              |                                                                                              | Accounts receivable                                             |                                           |         | (6,799 | )     |         |        | 6,445   |       |        |        | (15,996 | )    
|                                                                              |                                                                                              | Inventories                                                     |                                           |         | 2,987  |       |         |        | (8,574  | )     |        |        | (14,992 | )    
|                                                                              |                                                                                              | Prepaid expenses and other current assets                       |                                           |         | 89     |       |         |        | (71     | )     |        |        | 257     |      
|                                                                              |                                                                                              | Other assets                                                    |                                           |         | (1,742 | )     |         |        | 1,140   |       |        |        | 889     |      
|                                                                              |                                                                                              | Accounts payable                                                |                                           |         | (527   | )     |         |        | (7,356  | )     |        |        | 5,348   |      
|                                                                              |                                                                                              | Accrued expenses and other liabilities                          |                                           |         | 379    |       |         |        | (5,603  | )     |        |        | 2,805   |      
|                                                                              |                                                                                              | Pension liabilities                                             |                                           |         | 123    |       |         |        | (252    | )     |        |        | 373     |      
|                                                                              |                                                                                              |                                                                 |                                           |         |        |       |         |        |         |       |        |       
|                                                                              |                                                                                              |                                                                 | Net cash provided by operating activities |         |        | 2,404 |         |        |         | 2,151 |        |        |         | 3,105 | 
|                                                                              |                                                                                              |                                                                 |                                           |         |        |       |         |        |         |       |        |       
|Cash flows used in investing activities:                                      |                                                                                              |                                                                 |                                           |         |        |       |         |        |         |       |        |       
|                                                                              | Purchases of plant and equipment                                                             |                                                                 |                                           | (5,491  | )      |       |         | (7,502 | )       |       |        | (4,262 | )      
|                                                                              | Net cash acquired in acquisition of Directed
    Energy Inc.                                 |                                                                 |                                           |        |        |       |         |       |         |       |        | 135    |        
|                                                                              | Acquisition of Westcode Semiconductor, net of
    cash acquired                              |                                                                 |                                           |        |        |       |         | (8,529 | )       |       |        |       |        
|                                                                              | Net cash acquired in acquisition of Clare, Inc.                                              |                                                                 |                                           | 7,843   |        |       |         |        |         |       |        |        |        
|                                                                              | Proceeds from sale of plant and equipment                                                    |                                                                 |                                           |         |        |       |         | 6      |         |       |        | 163    |        
|                                                                              |                                                                                              |                                                                 |                                           |         |        |       |         |        |         |       |        |       
|                                                                              |                                                                                              | Net cash provided by (used in) investing
    activities         |                                           |         | 2,352  |       |         |        | (16,025 | )     |        |        | (3,964  | )    
|                                                                              |                                                                                              |                                                                 |                                           |         |        |       |         |        |         |       |        |       
|Cash flows from financing activities:                                         |                                                                                              |                                                                 |                                           |         |        |       |         |        |         |       |        |       
|                                                                              | Proceeds from capital lease obligations                                                      |                                                                 |                                           | 2,981   |        |       |         | 4,249  |         |       |        | 1,044  |        
|                                                                              | Restricted cash decrease (increase)                                                          |                                                                 |                                           | (321    | )      |       |         | 182    |         |       |        | (83    | )      
|                                                                              | Principal payments on capital lease obligations                                              |                                                                 |                                           | (2,928  | )      |       |         | (2,734 | )       |       |        | (2,017 | )      
|                                                                              | Repayment of notes payable to bank                                                           |                                                                 |                                           |        |        |       |         | (54    | )       |       |        | (6,379 | )      
|                                                                              | Proceeds from loans                                                                          |                                                                 |                                           | 1,931   |        |       |         |       |         |       |        |       |        
|                                                                              | Issuance of loans                                                                            |                                                                 |                                           |        |        |       |         | (926   | )       |       |        | (1,868 | )      
|                                                                              | Proceeds from secondary offering                                                             |                                                                 |                                           |        |        |       |         |       |         |       |        | 45,250 |        
|                                                                              | Proceeds from notes receivables                                                              |                                                                 |                                           |        |        |       |         | 99     |         |       |        | 38     |        
|                                                                              | Proceeds from issuance of common stock under the
    employee stock purchase plan            |                                                                 |                                           | 207     |        |       |         | 313    |         |       |        | 238    |        
|                                                                              | Proceeds from exercise of stock options                                                      |                                                                 |                                           | 506     |        |       |         | 600    |         |       |        | 408    |        
|                                                                              | Purchase of treasury stock                                                                   |                                                                 |                                           |         |        |       |         | (445   | )       |       |        |       |        
|                                                                              |                                                                                              |                                                                 |                                           |         |        |       |         |        |         |       |        |       
|                                                                              |                                                                                              | Net cash provided by financing activities                       |                                           |         | 2,376  |       |         |        | 1,284   |       |        |        | 36,631  |      
|                                                                              |                                                                                              |                                                                 |                                           |         |        |       |         |        |         |       |        |       
|Effect of foreign exchange rate fluctuations on
    cash and cash equivalents |                                                                                              |                                                                 | 851                                       |         |        |       | (94     | )      |         |       | (432   | )     
|                                                                              |                                                                                              |                                                                 |                                           |         |        |       |         |        |         |       |        |       
|Net increase (decrease) in cash and cash
    equivalents                      |                                                                                              |                                                                 | 7,983                                     |         |        |       | (12,684 | )      |         |       | 35,340 |       
|Cash and cash equivalents at beginning of year                                |                                                                                              |                                                                 | 32,111                                    |         |        |       | 44,795  |        |         |       | 9,455  |       
|                                                                              |                                                                                              |                                                                 |                                           |         |        |       |         |        |         |       |        |       
|Cash and cash equivalents at end of year                                      |                                                                                              | $                                                               | 40,094                                    |         |        | $     | 32,111  |        |         | $     | 44,795 |       
|                                                                              |                                                                                              |                                                                 |                                           |         |        |       |         |        |         |       |        |       
|Supplemental Disclosures of Cash Flow
    Information:                        |                                                                                              |                                                                 |                                           |         |        |       |         |        |         |       |        |       
|                                                                              | Cash paid during the period for interest                                                     |                                                                 | $                                         | 164     |        |       | $       | 191    |         |       | $      | 388    |        
|                                                                              | Cash paid during the period for income taxes                                                 |                                                                 | $                                         | 1,256   |        |       | $       | 3,694  |         |       | $      | 6,704  |        
|                                                                              | Accrued interest on notes receivable                                                         |                                                                 | $                                         | 60      |        |       | $       |       |         |       | $      |       |        
|Supplemental Schedule of Noncash Investing and
    Financing Activities:      |                                                                                              |                                                                 |                                           |         |        |       |         |        |         |       |        |       
|                                                                              | Purchase of fixed assets under capital lease                                                 |                                                                 | $                                         | 116     |        |       | $       | 621    |         |       | $      | 3,277  |        
|                                                                              | Common stock issued for Clare, Inc., net assets                                              |                                                                 | $                                         | 51,399  |        |       | $       |       |         |       | $      |       |        
|                                                                              | Common stock issued for Directed Energy, net
    assets                                      |                                                                 | $                                         |        |        |       | $       |       |         |       | $      | 2,800  |        

The accompanying notes are an integral part of
these consolidated financial statements.

40



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##### Table of Contents



IXYS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



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

IXYS Corporation (IXYS or the
Company) designs, develops and markets power
semiconductors and digital and analog integrated circuits
(ICs). Power semiconductors are used primarily in
controlling energy in motor drives, power conversion (including
uninterruptible power supplies (UPS) and switch mode
power supplies (SMPS) and medical electronics.
IXYSs power semiconductors convert electricity at
relatively high voltage and current levels to create efficient
power as required by a specific application. IXYSs target
market includes segments of the power semiconductor market that
require medium to high power semiconductors, with a particular
emphasis on high power semiconductors. IXYS sells power
semiconductors, including power metal oxide semiconductor field
effect transistors (Power MOSFETs), insulated gate
bipolar transistors (IGBTs), thyristors and
rectifiers, including fast recovery epitaxial diodes
(FREDs). IXYSs ICs include solid state relays
(SSRs) for telecommunications applications and power
management and control ICs, such as current regulators, motion
controllers, digital power modulators and power MOSFET and IGBT
drivers.



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



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

The consolidated financial statements include the
accounts of IXYS and its wholly owned subsidiaries after
elimination of all significant intercompany balances and
transactions.



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

The preparation of financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could
materially differ from IXYSs estimates.



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

The local currency is considered to be the
functional currency of IXYSs wholly owned international
subsidiaries, IXYS Semiconductor GmbH (IXYS GmbH),
IXYS Berlin GmbH (IXYS Berlin) and Westcode
Semiconductors Limited (Westcode). Accordingly,
assets and liabilities are translated at the exchange rate in
effect at year-end and revenues and expenses are translated at
average rates during the year. Adjustments resulting from the
translation of the accounts of IXYS GmbH, IXYS Berlin and
Westcode into U.S. dollars are included in accumulated
other comprehensive income (loss), a separate component of
stockholders equity. Foreign currency transaction gains
and losses are included as a component of non-operating income
and expense.



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

IXYS considers all highly liquid investments with
original or remaining maturities of three months or less at the
time of purchase to be cash equivalents.



| |                  
| | -----------------
| | Reclassifications

Certain reclassifications have been made to the
prior years consolidated financial statements to conform
to the current years presentation. Such reclassifications
had no effect on previously reported results of operations or
retained earnings.

41



---



##### Table of Contents



IXYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |            
| | -----------
| | Inventories

Inventories, consisting primarily of wafers,
bipolar devices, transistors, diodes and integrated circuits,
are stated at the lower of cost or market value. Inventory cost
is computed on a currently adjusted standard basis (which
approximates actual cost on a current average or first-in,
first-out basis). Work in process and finished goods inventory
are determined to be saleable based on a demand forecast within
a specific time horizon, generally 12 to 24 months or less.
Inventory in excess of saleable amounts is not valued, and the
remaining inventory is valued at the lower of cost or market.



| |                    
| | -------------------
| | Plant and Equipment

Plant and equipment, including equipment under
capital leases, is stated at cost less accumulated depreciation
and amortization. Depreciation or amortization is computed using
the straight-line method over estimated useful lives of three to
five years for equipment and twenty years for buildings. Upon
disposal, the assets and related accumulated depreciation are
removed from IXYSs accounts and the resulting gains or
losses are reflected in the statements of operations.
IXYSs policy is to regularly review the carrying value of
specialized assets to evaluate the remaining life and
recoverability of such equipment in light of current market
conditions.



| |                                         
| | ----------------------------------------
| | Goodwill and Other Intangible
    Assets

In accordance with Statement of Financial
Accounting Standards (SFAS) No. 142,
Goodwill and Other Intangible Assets, IXYS is
required to perform an annual impairment test for goodwill.
SFAS No. 142 requires IXYS to compare the fair value
of the Company to its carrying amount on an annual basis to
determine if there is potential impairment. If the fair value of
the Company is less than its carrying value, an impairment loss
is recorded to the extent that the fair value of the goodwill
within the reporting unit is less than the carrying value. The
fair value for goodwill is determined based on discounted cash
flows.

Other intangible assets are recorded at cost and
amortized over periods ranging from 3 months to
6 years.

Additionally, IXYS had approximately
$21.4 million in goodwill at March 31, 2003, primarily
related to our acquisition of Clare which was recorded in
accordance with SFAS No. 142 under the transitional
rules of that statement. IXYS performs goodwill impairment tests
on an annual basis and more frequently when events and
circumstances occur that indicate a possible impairment of
goodwill. In determining whether there is an impairment of
goodwill, IXYS calculates the estimated fair value of the
reporting unit in which the goodwill is recorded using a
discounted future cash flow method. IXYS then compares the
resulting fair value to the net book value of the reporting
unit, including goodwill. If the net book value of a reporting
unit exceeds its fair value, IXYS measures the amount of the
impairment loss by comparing the implied fair value of the
reporting units goodwill with the carrying amount of the
goodwill. To the extent that the carrying amount of a reporting
units goodwill exceeds its implied fair value, IXYS
recognizes a goodwill impairment loss. IXYS performed its annual
impairment test in 2003 and IXYS determined that no impairment
had occurred. The discounted future cash flow method used in the
first step of the impairment test involves significant estimates
including future cash inflows from estimated revenues, future
cash outflows from estimated project cost and general and
administrative costs, estimates of timing of collection and
payment of various items and future growth rates as well as
discount rate and terminal value assumptions. Although IXYS
believes the estimates and assumptions that it used in testing
for impairment are reasonable and supportable, significant
changes in any one of these assumptions could produce a
significantly different result.



| |                                    
| | -----------------------------------
| | Impairment of Long-Lived
    Assets

IXYS reviews long-lived assets for impairment
whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable, or whenever
management has committed to a

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IXYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

plan to dispose of the assets. Such assets are
carried at the lower of depreciated cost or fair market value as
estimated by management based on appraisals, current market
value, and comparable sales value, as appropriate.
Recoverability of an asset is measured by comparison of its
carrying amount to future undiscounted net cash flows that the
asset is expected to generate. If such assets are considered to
be impaired, the impairment recognized is measured by the amount
by which the carrying amount of the assets exceeds the projected
discounted future cash flows arising from the assets.



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

Revenue from power semiconductor and IC product
sales is recognized upon shipment, provided that a signed
purchase order was received, the price is fixed, title has
transferred, collection of resulting receivables is reasonably
assured, and there are no remaining significant obligations.
Reserves for sales returns and allowances, including allowances
for so called ship and debit transactions, are
recorded at the time of shipment, based on historical returns
discounts, current economic trends and changes in customer
demand. Reserves for warranties are recorded at the time of
shipment for amounts necessary to replace or repair products
during the warranty period, which is generally one year.

Revenues from nonrecurring engineering, or NRE,
relating to engineering work performed for a fixed fee to design
chip prototypes that will later be used to produce required
units, is recognized in accordance with Emerging Issues Task
Force, or EITF, Abstracts 99-5, Accounting for
Pre-production Costs Related to Long-term Supply
Arrangements. The company records research and development
costs as expenses are incurred and then credits research and
development expenses for payments made by the customer. Up-front
payments made by the customer are initially recorded as customer
deposits and are charged to the statement of income as expenses
for the project as costs are incurred.



| |         
| | --------
| | Warranty

IXYS accrues for estimated warranty costs upon
shipment of products in accordance with SFAS No. 5,
Accounting for Contingencies. Actual warranty costs
incurred have not materially differed from those accrued.
IXYSs warranty policy is effective for shipped products
which are considered defective or fail to meet the product
specifications. IXYS analyze historical claims compared to
historical revenue in evaluating the adequacy of the warranty
allowance. Warranty costs are reflected in the income statement
as a cost of revenues. A reconciliation of the changes in the
warrant liability for the year ending March 31, 2003
follows (in thousands):

|                                               |  |   |      |  
|---------------------------------------------- |  | - | ---- | -
|Warranty accrual at the beginning of the year  |  | $ | 600  |  
|Accruals for warranties issued during the year |  |   | 567  |  
|Settlements made in kind during the year       |  |   | (480 | )
|Translation adjustment                         |  |   | (87  | )
|                                               |  |   |      |  
|Warranty accrual at the end of the year        |  | $ | 600  |  
|                                               |  |   |      |  



| |            
| | -----------
| | Advertising

IXYS expenses advertising as the costs are
incurred. Advertising expense for the years ended March 31,
2003, 2002 and 2001 was $657,000, $299,000 and $379,000,
respectively.



| |        
| | -------
| | Pension

The determination of IXYSs obligation and
expense for pension is dependent on its selection of certain
assumptions used by actuaries in calculating such amounts. Those
assumptions are among others, the discount rate, expected
long-term rate of return on plan assets and rates of increase in
compensation. In accordance

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IXYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

with generally accepted accounting principles,
actual results that differ from IXYSs assumptions are
accumulated and amortized over future periods and therefore
generally affect the recognized expenses and recorded
obligations in such future periods. While IXYS believes that its
assumptions are appropriate, significant changes in its
assumptions may materially affect IXYSs pension and other
postretirement obligations and its future expenses.

IXYSs practice is to fund the various
pension plans in amounts at least sufficient to meet the minimum
requirements of U.S. federal laws and regulations or
applicable local laws and regulations. The assets of the various
plans are invested in corporate equities, corporate debt
securities, government securities and other institutional
arrangements. The portfolio of each plan depends on plan design
and applicable local laws. Depending on the design of the plan,
local custom and market circumstances, the minimum liabilities
of a plan may exceed qualified plan assets. IXYS accrues for all
such liabilities.



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

Research and development costs are charged to
operations as incurred.



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

IXYSs provision for income taxes is
comprised of its current tax liability and the change in
deferred tax assets and liabilities. Deferred tax assets and
liabilities are determined based on differences between
financial reporting and tax bases of assets and liabilities and
are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse.



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

Other income and expense primarily consists of
legal expenses, gains and losses on foreign currency
transactions and gains and losses on sales of fixed assets.



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

Basic earnings per share is computed by dividing
net income (loss) by the weighted-average number of common
shares outstanding for the period. Diluted earnings per share
reflects the potential dilution from the exercise or conversion
of options into common stock. The calculation of dilutive net
income (loss) per share excludes potential stocks if their
effect is anti-dilutive or if the exercise price of the option
exceeds the market price. Potential stocks consist of
incremental common shares issuable upon the exercise of stock
options.



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

In June 2002, the Financial Accounting Standards
Board (FASB) issued Statement of Financial Accounting Standard
(SFAS) No. 146, Accounting for Costs Associated
with Exit or Disposal Activities, which addresses
accounting for restructuring and similar costs.
SFAS No. 146 supercedes previous accounting guidance,
principally Emerging Issues Task Force Issue (EITF)
No. 94-3. SFAS No. 146 requires that a liability
for costs associated with an exit or disposal activity be
recognized when the liability is incurred. Under
EITF No. 94-3, a liability for an exit cost was
recognized at the date of the entitys commitment to an
exit plan. SFAS No. 146 also requires that the
liability be initially measured and recorded at fair value.
SFAS No. 146 was effective for exit or disposal
activities that are initiated after December 31, 2002. The
adoption of SFAS No. 146 did not have a material impact on
its results of operations and financial condition.

In November 2002, the FASB issued Interpretation
No. (FIN) 45, Guarantors Accounting
and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others, which expands
previously issued accounting guidance and disclosure
requirements for certain guarantees. FIN 45 requires an
entity to recognize an initial liability for the fair value of
an obligation assumed by issuing a

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IXYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

guarantee. The provision for initial recognition
and measurement of the liability will be applied on a
prospective basis to guarantees issued or modified after
December 31, 2002. The Company does not expect this
interpretation to have a material impact on its consolidated
results of operations or financial position. The Company has
included additional disclosures in accordance with FIN 45
in the footnotes to these consolidated financial statements.

In December 2002, the FASB issued SFAS
No. 148, Accounting for Stock-Based Compensation,
Transition and Disclosure. SFAS No. 148 provides
alternative methods of transition for a voluntary change to the
fair value based method of accounting for stock-based employee
compensation. SFAS No. 148 also requires that
disclosures of the pro forma effect of using the fair value
method of accounting for stock-based employee compensation be
displayed more prominently and in a tabular format.
Additionally, SFAS No. 148 requires disclosure of the
pro forma effect in interim financial statements. The additional
disclosure requirements of SFAS No. 148 are effective
for fiscal years ended after December 15, 2002. The Company
will continue to account for stock-based compensation in
accordance with APB No. 25. The Company has included
additional disclosures in accordance with SFAS No. 148
in the footnotes to these consolidated financial statements.

In January 2003, the FASB issued FASB
Interpretation No. 46 (FIN 46),
Consolidation of Variable Interest Entities, an
Interpretation of ARB No. 51. FIN 46
requires certain variable interest entities to be consolidated
by the primary beneficiary of the entity if the equity investors
in the entity do not have the characteristics of a controlling
financial interest or do not have sufficient equity at risk for
the entity to finance its activities without additional
subordinated financial support from other parties. FIN 46
is effective immediately for all new variable interest entities
created or acquired after January 31, 2003. For variable
interest entities created or acquired prior to February 1,
2003, the provision of FIN 46 must be applied for the first
interim or annual period beginning after June 15, 2003. The
Company believes that the adoption of this standard will have no
material impact on its financial statements.

In May 2003, the FASB issued SFAS No. 150,
Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity. SFAS
No. 150 establishes standards for how an issuer classifies
and measures certain financial instruments with characteristics
of both liabilities and equity. SFAS No. 150 is effective
for financial instruments entered into or modified after
May 31, 2003, and otherwise is effective at the beginning
of the first interim period beginning after June 15, 2003.
SFAS No. 150 is to be implemented by reporting the
cumulative effect of a change in an accounting principle for
financial instruments created before the issuance date of the
statement and still existing at the beginning of the interim
period of adoption. The Company does not expect the adoption of
SFAS No. 150 to have a significant impact on its financial
position or results of operations.



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

IXYSs change in the cumulative translation
adjustment represent the only component of comprehensive income
(loss) which is excluded from net income (loss) for 2003
and prior years.



| |               
| | --------------
| | Business Risks



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

IXYS manufactures approximately 63% of its
wafers, an integral component of its products, in its wholly
owned facilities in Germany, the UK and Massachusetts. There can
be no assurance that material disruptions in supply will not
occur in the future. In such event, IXYS may have to identify
and secure additional foundry capacity and may be unable to
identify or secure additional foundry capacity from another
manufacturer, particularly at the levels that IXYS currently
anticipates such foundries to provide. Even if such capacity is
available from another manufacturer, the qualification process
could take six months or longer. If IXYS were

45



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IXYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

unable to qualify alternative manufacturing
sources for existing or new products in a timely manner or if
such sources were unable to produce semiconductor devices with
acceptable manufacturing yields and at acceptable prices,
IXYSs business, financial condition and results of
operations would be materially and adversely affected.



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

IXYS purchases silicon wafers from three vendors
with whom IXYS does not have long term supply agreements. Any of
these suppliers could eliminate or terminate IXYSs supply
of wafers at any time. IXYSs reliance on a limited number
of suppliers involves several risks, including potential
inability to obtain an adequate supply of silicon wafers and
reduced control over the price, timely delivery, reliability and
quality of the silicon wafers. There can be no assurance that
problems will not occur in the future with suppliers.



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

IXYS invests its excess cash primarily in
short-term time deposit accounts with a major German bank and
money market accounts with a U.S. bank. Additionally, IXYS
invests in commercial paper with financial institutions that
management believes to be creditworthy. These securities mature
within ninety days or less and bear minimal credit risk. IXYS
has not experienced any losses on such investments.

IXYS sells its products primarily to distributors
and original equipment manufacturers. IXYS performs ongoing
credit evaluations of its customers and generally does not
require collateral. An allowance for potential credit losses is
maintained by IXYS and such losses have not been material.

At March 31, 2003 and March 31, 2002,
no customer accounted for greater than 10% of accounts
receivable.

Financial instruments that potentially subject
IXYS to concentrations of credit risks comprise principally
cash, investments and trade accounts receivable. IXYS invests
its excess cash in accordance with its investment policy that
has been approved by the Board of Directors and is reviewed
periodically to minimize credit risk. The policy authorizes the
investment of excess cash in government securities, tax exempt
municipal securities, Eurodollar notes and bonds, time deposits,
certificates of deposit, commercial paper rated Aa or better and
other specific money market accounts and corporate instruments
of similar liquidity and credit quality.



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

Carrying amounts of certain of IXYSs
financial instruments including cash and cash equivalents,
accounts receivable and accounts payable approximate fair value
due to their short maturities. Based on borrowing rates
currently available to IXYS for loans with similar terms, the
carrying value of notes and loans payable to bank and notes
receivable from shareholders approximate fair value.



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

IXYS accounts for stock-based compensation using
the intrinsic value method prescribed in APB Opinion
No. 25, Accounting for Stock Issued to
Employees. Under APB No. 25, compensation cost
is measured as the excess, if any, of the quoted market price of
IXYSs stock at the date of grant over the exercise price
of the option granted. Compensation cost for stock options,
if any, is recognized ratably over the vesting period.
IXYSs policy is to grant options with an exercise price
equal to the quoted market price of IXYSs stock on the
grant date. Accordingly, no compensation has been recognized for
its stock option plans. IXYS provides additional pro forma
disclosures as required under SFAS No. 123,
Accounting for Stock-Based Compensation.

46



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##### Table of Contents



IXYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Had compensation cost for its stock plans been
determined based on the fair value at the grant date for awards
in fiscal years 2003, 2002 and 2001 consistent with the
provisions of SFAS No. 123, IXYSs net income
(loss) per share for fiscal years 2003, 2002 and 2001 would have
decreased to the pro forma amounts indicated below (in
thousands, except per share amounts):

|                                                      |  |                      |         |      |  |      |       |   |  |   |        |  
|----------------------------------------------------- |  | -------------------- | ------- | ---- |  | ---- | ----- | - |  | - | ------ | -
|                                                      |  |                     
|                                                      |  | Year Ended March 31,
|                                                      |  | 2003                 |         | 2002 |  | 2001
|                                                      |  |                      |         |      |  |     
|Net income (loss)                                     |  | $                    | (12,145 | )    |  | $    | 1,938 |   |  | $ | 13,587 |  
|Less: Total stock-based compensation                  |  |                      | (512    | )    |  |      | (497  | ) |  |   | (743   | )
|                                                      |  |                      |         |      |  |      |       |   |  |   |        |  
|Pro forma net income (loss)                           |  |                      | (12,657 | )    |  | $    | 1,441 |   |  | $ | 12,844 |  
|                                                      |  |                      |         |      |  |      |       |   |  |   |        |  
|As reported net income (loss) per
    share  basic   |  | $                    | (0.39   | )    |  | $    | 0.07  |   |  | $ | 0.54   |  
|                                                      |  |                      |         |      |  |      |       |   |  |   |        |  
|Pro forma net income (loss) per share 
    basic     |  | $                    | (0.41   | )    |  | $    | 0.05  |   |  | $ | 0.51   |  
|                                                      |  |                      |         |      |  |      |       |   |  |   |        |  
|As reported net income (loss) per
    share  diluted |  | $                    | (0.39   | )    |  | $    | 0.07  |   |  | $ | 0.49   |  
|                                                      |  |                      |         |      |  |      |       |   |  |   |        |  
|Pro forma net income (loss) per share 
    diluted   |  | $                    | (0.41   | )    |  | $    | 0.05  |   |  | $ | 0.46   |  
|                                                      |  |                      |         |      |  |      |       |   |  |   |        |  



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



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

On June 10, 2002, IXYS completed its
acquisition of Clare, Inc. (Clare), a manufacturer
of high-performance analog and mixed-signal integrated circuits
based in the United States. The acquisition of Clare was
intended to allow the combined organization to be more
competitive and to achieve greater financial strength,
operational efficiencies, access to capital and growth potential
than either company could separately achieve. In connection with
the acquisition, (a) each outstanding share of Clare common
stock was converted into the right to receive 0.49147 of a share
of IXYS common stock, which resulted in the issuance of
approximately 4.89 million shares of IXYS common stock, and
(b) each option to purchase Clare common stock outstanding
immediately prior to the consummation of the acquisition was
converted into an option to purchase 0.49147 of a share of IXYS
common stock, resulting in the assumption of options exercisable
for approximately 1.0 million shares of IXYS common stock.
The estimated total purchase price is as follows (in thousands):

|                                         |                      |   |        |        | 
|---------------------------------------- | -------------------- | - | ------ | ------ | 
|Value of IXYS common stock issued        |                      | $ | 47,658 |       
|Value of Clares options assumed by IXYS |                      |   | 3,679  |       
|Merger cost                              |                      |   | 1,738  |       
|                                         |                      |   |        |       
|                                         | Total purchase price |   | $      | 53,075 | 
|                                         |                      |   |        |       

IXYS has finalized the fair values of
identifiable intangible assets acquired and plant and equipment.
Replacement cost has been used to determine the fair value of
the plant and equipment acquired. IXYS has

47



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##### Table of Contents



IXYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

allocated the purchase price to identifiable
intangible assets, tangible assets, liabilities assumed and
goodwill as follows (in thousands):

|                                         |                                  |   |        |        |  |  |                        |                     | 
|---------------------------------------- | -------------------------------- | - | ------ | ------ |  |  | ---------------------- | ------------------- | 
|Value of IXYS common stock issued        |                                  | $ | 47,658 |        |  |  |                        |                    
|Value of Clares options assumed by IXYS |                                  |   | 3,679  |        |  |  |                        |                    
|Merger cost                              |                                  |   | 1,738  |        |  |  |                        |                    
|                                         |                                  |   |        |        |  |  |                        |                    
|                                         | Total purchase price             |   | $      | 53,075 |  |  |                        |                     | 
|                                         |                                  |   |        |        |  |  |                        |                    
|Fair Value of tangible assets acquired:  |                                  |   |        |        |  |  |                        |                    
|                                         | Current assets                   |   | $      | 24,861 |  |  |                        |                     | 
|                                         | Deferred tax assets  short term |   |        | 2,742  |  |  |                        |                     | 
|                                         | Plant and equipment              |   |        | 10,271 |  |  |                        |                     | 
|                                         | Other assets                     |   |        | 111    |  |  |                        |                     | 
|                                         |                                  |   |        |        |  |  |                        |                    
|                                         |                                  | $ | 37,985 |        |  |  |                        |                    
|Amortizable intangible assets:           |                                  |   |        |        |  |  | Estimated Useful Lives |                    
|                                         | 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                    |                                  |   | 42,300 |        |  |  |                        |                    
|Fair value of liabilities assumed        |                                  |   | (8,746 | )      |  |  |                        |                    
|                                         |                                  |   |        |        |  |  |                        |                    
|Net assets acquired                      |                                  |   | 33,554 |        |  |  |                        |                    
|Goodwill                                 |                                  |   | 19,521 |        |  |  |                        |                    
|                                         |                                  |   |        |        |  |  |                        |                    
|                                         | Total purchase price             |   | $      | 53,075 |  |  |                        |                     | 
|                                         |                                  |   |        |        |  |  |                        |                    

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



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The following unaudited pro forma combined
    amounts give effect to the acquisition of Clare as if the
    acquisition had occurred on April 1, 2003, 2002 and 2001.
    On a pro forma basis, the results of operations of Clare for the
    year ended March 31, 2003, 2002 and 2001 are consolidated
    with IXYS results for the same periods. The pro forma amounts do
    not purport to be indicative of what would have occurred had the
    acquisition been made as of the beginning of each period or of
    results that may occur in the future.

|                                     |  |                      |         |      |  |      |         |   |  |   |         |  
|------------------------------------ |  | -------------------- | ------- | ---- |  | ---- | ------- | - |  | - | ------- | -
|                                     |  |                     
|                                     |  | Year Ended March 31,
|                                     |  |                     
|                                     |  | 2003                 |         | 2002 |  | 2001
|                                     |  |                      |         |      |  |     
|                                     |  |                     
|                                     |  | (Unaudited)         
|Revenue                              |  | $                    | 142,568 |      |  | $    | 125,759 |   |  | $ | 173,609 |  
|Net loss                             |  | $                    | (19,938 | )    |  | $    | (23,348 | ) |  | $ | (3,426  | )
|Net loss per share  basic           |  | $                    | (0.63   | )    |  | $    | (0.74   | ) |  | $ | (0.11   | )
|Net loss per share  diluted         |  | $                    | (0.63   | )    |  | $    | (0.74   | ) |  | $ | (0.11   | )
|Shares used in per share calculation |  |                      | 31,845  |      |  |      | 31,643  |   |  |   | 30,137  |  

Westcode
Semiconductors Limited

On January 22, 2002, IXYS completed the
acquisition of Westcode, a power semiconductor manufacturer
based in the United Kingdom. Westcode manufactures high voltage
power semiconductors. The primary reason for IXYS acquiring
Westcode was to provide IXYS with access to higher voltage
market segments

48



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IXYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

especially in Europe and to acquire a skilled
manufacturing workforce. The acquisition has been accounted for
as a purchase with a total cost of $9,260,000, which consisted
of cash consideration of $9,000,000 and $260,000 of direct
transaction costs. In connection with the acquisition, IXYS has
also assumed liabilities of $7,482,000. Intangible assets
acquired were not material. The assets and liabilities acquired
were recorded based on their fair values as of the date of
acquisition. The excess of fair value of net assets acquired
over costs has been allocated to proportionately reduce the fair
values of plant and equipment. The effects of the acquisition on
IXYSs financial statements are not material.

Directed
Energy, Inc.

On May 16, 2000, IXYS completed the
acquisition of Directed Energy, Inc. in a stock-for-stock
acquisition. In connection with the acquisition, IXYS issued
250,370 shares of IXYSs common stock in exchange for all
the issued and outstanding capital stock of Directed Energy,
Inc. The shares issued in the transaction reflect a total
purchase price of $2.8 million.

The acquisition was accounted for using the
purchase method of accounting, and accordingly, the recognized
purchase price of $2.8 million was allocated to the
tangible and identifiable intangible assets acquired and
liabilities assumed on the basis of their fair values on the
acquisition date of May 16, 2000. The purchase price in
excess of the fair value of identified tangible and intangible
assets and liabilities assumed in the amount of
$2.32 million was allocated to goodwill. The effects of the
acquisition on IXYSs financial statements are not material.

4.     Restructuring

In June 2002, the Company adopted a corporate
restructuring program to reduce expenses and preserve the
Companys cash. The restructuring mainly relates to a
reduction in the workforce designed to eliminate redundant
positions at Clare. The restructuring charge, which consists
mainly of involuntary employee separation costs of $750,000, was
recorded in operating expense for the year ended March 31,
2003. The separation cost is for 33 employees worldwide: 5 in
sales and marketing, 7 in research and development, 3 in general
and administrative and 9 in operations functions in the United
States; and 8 in sales and marketing and 1 in general and
administrative outside the United States.

|                                |  |           |      |  
|------------------------------- |  | --------- | ---- | -
|                                |  | March 31,
|                                |  | 2003     
|                                |  |          
|Accruals for restructuring cost |  | $         | 750  |  
|Less: Amount paid               |  |           | (750 | )
|                                |  |           |      |  
|Balance, March 31, 2003         |  | $         |     |  
|                                |  |           |      |  

5.     Goodwill and
Intangible Assets

Effective as of the beginning of the first
quarter of fiscal year 2003, the Company completed the adoption
of SFAS No. 141, Business Combinations, and
SFAS No. 142, Goodwill and Other Intangible
Assets. SFAS No. 141 requires all business
combinations initiated after June 30, 2001 to be accounted
for using the purchase method of accounting. As required by SFAS
No. 142, the Company discontinued amortizing the remaining
balance of goodwill as of the beginning of the Companys
fiscal year 2003. All remaining and future acquired goodwill
will be subject to impairment tests, annually or earlier if
indicators of potential impairment exist, using a
fair-value-based-approach. All other intangible assets will
continue to be amortized over their estimated useful lives and
assessed for impairment under SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived
Assets. The Company continues to assess the value of its
long-lived assets, which could result in an impairment charge in
the future. In conjunction with the implementation of SFAS
No. 142, the Company has completed a goodwill impairment
review as of the beginning of fiscal year 2003 and found no

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IXYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

impairment. The effect of this accounting change
was reflected prospectively. Had SFAS No. 142 been
retroactively applied, the effect of excluding goodwill
amortization expense would have been as follows (in thousands,
except per share amounts):

|                                |                                                    |                      |         |       |   |      |       |      |  |   |        |      | 
|------------------------------- | -------------------------------------------------- | -------------------- | ------- | ----- | - | ---- | ----- | ---- |  | - | ------ | ---- | 
|                                |                                                    |                     
|                                |                                                    | Year Ended March 31,
|                                |                                                    |                     
|                                |                                                    | 2003                 |         | 2002  |   | 2001
|                                |                                                    |                      |         |       |   |     
|Reported net income (loss)      |                                                    | $                    | (12,145 | )     |   | $    | 1,938 |      |  | $ | 13,587 |     
|Add back: Goodwill amortization |                                                    |                      |        |       |   |      | 235   |      |  |   | 206    |     
|                                |                                                    |                      |         |       |   |      |       |      |  |   |        |     
|Adjusted net income (loss)      |                                                    | $                    | (12,145 | )     |   | $    | 2,173 |      |  | $ | 13,793 |     
|                                |                                                    |                      |         |       |   |      |       |      |  |   |        |     
|Basic earnings per share:       |                                                    |                      |         |       |   |      |       |      |  |   |        |     
|                                | Reported net income (loss) per
    share  basic   |                      | $       | (0.39 | ) |      | $     | 0.07 |  |   | $      | 0.54 | 
|                                | Goodwill amortization                              |                      |         |      |   |      |       | 0.01 |  |   |        | 0.01 | 
|                                |                                                    |                      |         |       |   |      |       |      |  |   |        |     
|                                |                                                    | $                    | (0.39   | )     |   | $    | 0.08  |      |  | $ | 0.55   |     
|                                |                                                    |                      |         |       |   |      |       |      |  |   |        |     
|Diluted earnings per share:     |                                                    |                      |         |       |   |      |       |      |  |   |        |     
|                                | Reported net income (loss) per
    share  diluted |                      | $       | (0.39 | ) |      | $     | 0.07 |  |   | $      | 0.49 | 
|                                | Goodwill amortization                              |                      |         |      |   |      |       | 0.01 |  |   |        | 0.01 | 
|                                |                                                    |                      |         |       |   |      |       |      |  |   |        |     
|                                |                                                    | $                    | (0.39   | )     |   | $    | 0.08  |      |  | $ | 0.50   |     
|                                |                                                    |                      |         |       |   |      |       |      |  |   |        |     

5.     Balance Sheet
Details



| |                                                            
| | -----------------------------------------------------------
| | Allowance for Doubtful Accounts Movement
    (in thousands)

|                                |                           |              |   |           |  |              |   |             |  |               |   |        |   |  |   |     |   |  |   |       | 
|------------------------------- | ------------------------- | ------------ | - | --------- |  | ------------ | - | ----------- |  | ------------- | - | ------ | - |  | - | --- | - |  | - | ----- | 
|                                |                           | Balance at   |   |           |  |              |   |             |  |              
|                                |                           | Beginning of |   |           |  |              |   | Translation |  | Balance at   
|                                |                           | Period       |   | Additions |  | (Deductions) |   | Adjustments |  | End of Period
|                                |                           |              |   |           |  |              |   |             |  |              
|Allowance for doubtful accounts |                           |              |   |           |  |              |   |             |  |               |   |        |   |  |   |     |   |  |   |      
|                                | Year ended March 31, 2003 |              | $ | 1,045     |  |              | $ | 8,563       |  |               | $ | (6,521 | ) |  | $ | 82  |   |  | $ | 3,169 | 
|                                | Year ended March 31, 2002 |              | $ | 2,823     |  |              | $ | 7,036       |  |               | $ | (8,812 | ) |  | $ | (2  | ) |  | $ | 1,045 | 
|                                | Year ended March 31, 2001 |              | $ | 1,427     |  |              | $ | 9,194       |  |               | $ | (7,778 | ) |  | $ | (20 | ) |  | $ | 2,823 | 

Inventories

Inventories consist of the following (in
thousands):

|                |  |           |        |      |  |   |        | 
|--------------- |  | --------- | ------ | ---- |  | - | ------ | 
|                |  |          
|                |  | March 31,
|                |  |          
|                |  | 2003      |        | 2002
|                |  |           |        |     
|Raw materials   |  | $         | 8,765  |      |  | $ | 5,494  | 
|Work in process |  |           | 31,842 |      |  |   | 32,299 | 
|Finished goods  |  |           | 8,555  |      |  |   | 8,524  | 
|                |  |           |        |      |  |   |        | 
|                |  | $         | 49,162 |      |  | $ | 46,317 | 
|                |  |           |        |      |  |   |        | 

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IXYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Plant and
Equipment

Plant and equipment consists of the following (in
thousands):

|                                                         |  |           |         |      |  |   |         |  
|-------------------------------------------------------- |  | --------- | ------- | ---- |  | - | ------- | -
|                                                         |  |          
|                                                         |  | March 31,
|                                                         |  |          
|                                                         |  | 2003      |         | 2002
|                                                         |  |           |         |     
|Buildings                                                |  | $         | 4,297   |      |  | $ | 4,297   |  
|Equipment owned                                          |  |           | 33,995  |      |  |   | 26,275  |  
|Equipment capital leases                                 |  |           | 22,606  |      |  |   | 13,542  |  
|Leasehold improvements                                   |  |           | 2,060   |      |  |   | 70      |  
|                                                         |  |           |         |      |  |   |         |  
|                                                         |  |           | 62,958  |      |  |   | 44,184  |  
|Accumulated depreciation  owned plant
    and equipment |  |           | (19,573 | )    |  |   | (16,748 | )
|Accumulated amortization  capital
    leases            |  |           | (14,670 | )    |  |   | (8,198  | )
|                                                         |  |           |         |      |  |   |         |  
|                                                         |  | $         | 28,715  |      |  | $ | 19,238  |  
|                                                         |  |           |         |      |  |   |         |  

Depreciation and amortization expense for fiscal
years ended March 31, 2003, 2002 and 2001 amounted to
$9.3 million, $5.8 million and $3.4 million,
respectively.

Accrued
Expenses and Other Liabilities

Accrued expenses and other liabilities consist of
the following (in thousands):

|                                 |  |           |        |      |  |   |       | 
|-------------------------------- |  | --------- | ------ | ---- |  | - | ----- | 
|                                 |  |          
|                                 |  | March 31,
|                                 |  |          
|                                 |  | 2003      |        | 2002
|                                 |  |           |        |     
|Accrued compensation             |  | $         | 2,519  |      |  | $ | 2,376 | 
|Warranty                         |  |           | 600    |      |  |   | 600   | 
|Income taxes                     |  |           | 4,384  |      |  |   | 1,717 | 
|Other accrued goods and services |  |           | 6,664  |      |  |   | 3,690 | 
|                                 |  |           |        |      |  |   |       | 
|                                 |  | $         | 14,167 |      |  | $ | 8,383 | 
|                                 |  |           |        |      |  |   |       | 

6.     Borrowing
Arrangements

IXYS entered into a loan and security agreement
with a U.S. bank to borrow up to an aggregate amount not to
exceed $5.0 million. The loan bears interest at the
banks prime rate 4.25% at March 31, 2003, payable
monthly, and matures in September 2003. The loan is
collateralized by certain assets and contains certain general
and financial covenants, including a requirement that IXYS
remain solvent and able to pay its debts as they become due. At
March 31, 2003, IXYS has drawn $700,000 against the loan.
As of March 31, 2003, IXYS was not in compliance with
financial covenants and IXYS received a waiver of non-compliance
from the lender. IXYS has another line of credit with a
U.S. bank that consists of a $100,000 commitment, which is
available through September 2003. The line bears interest at a
fixed rate of 9.5%. The line is collateralized by a $100,000
certificate of deposit that it has with the bank. At
March 31, 2003, there were no amounts being drawn down
against such line of credit.

In 2001, IXYS Semiconductor GmbH obtained a
$5.0 million line of credit with a German bank. This line
supports a letter of credit facility. At March 31, 2003
there are no amounts outstanding under this line.

In 2000, a German bank issued to IXYS a
commitment letter for a (EUR) 3.8 million equipment lease
facility. The equipment leases facility provides financing at
varying pricing for periods up to 48 months. In addition to
the rights to the equipment, the bank holds a security interest
in the general assets of IXYS Semiconductor GmbH and
unrestricted amounts deposited with the bank.

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IXYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

In 2000, in the same commitment letter discussed
above, the bank also committed to issue a credit line to IXYS
GmbH of up to (EUR) 5.1 million for a wafer fabrication
facility in Germany, including leasehold improvements, clean
room construction and fabrication, computer and office
equipment. At March 31, 2003, IXYS had drawn
(EUR) 204,000 under this commitment. The security interest
of the bank under the equipment lease facility also
collateralizes this line.

In 2001, IXYS entered into a term loan with a
Swiss bank in the amount of SFR 200,000. The loan bears
interest of 5.25% and is due in November 2006.

7.     Commitments
and Contingencies:

Commitments

IXYS leases certain equipment under capital lease
arrangements expiring through fiscal year 2006 at interest rates
of 6.5% to 10.2%.

IXYS rents certain of its facilities under
operating leases which expire in 2011. IXYS is responsible for
insurance and property taxes.

Future minimum lease payment under capital and
operating leases are (in thousands):

|                             |      |            |        |           |   |   |       |       |     | 
|---------------------------- | ---- | ---------- | ------ | --------- | - | - | ----- | ----- | --- | 
|                             |      | Capital    |        | Operating
|                             |      | Leases     |        | Leases   
|                             |      |            |        |          
|Fiscal year ending March 31, |      |            |        |           |   |   |       |      
|                             | 2004 |            | $      | 3,623     |   |   | $     | 4,676 |    
|                             | 2005 |            |        | 3,195     |   |   |       | 2,108 |    
|                             | 2006 |            |        | 1,525     |   |   |       | 1,336 |    
|                             | 2007 |            |        | 543       |   |   |       | 1,086 |    
|                             |      | Thereafter |        |           |  |   |       |       | 525 | 
|                             |      |            |        |           |   |   |       |      
|Total Minimum Payments       |      |            | 8,886  |           |   | $ | 9,731 |      
|                             |      |            |        |           |   |   |       |      
|Less: Interest               |      |            | (761   | )         |   |   |       |      
|                             |      |            |        |           |   |   |       |      
|                             |      |            | 8,125  |           |   |   |       |      
|Less: Current Portion        |      |            | (3,238 | )         |   |   |       |      
|                             |      |            |        |           |   |   |       |      
|                             |      | $          | 4,887  |           |   |   |       |      
|                             |      |            |        |           |   |   |       |      

Rent expense for fiscal years ended
March 31, 2003, 2002 and 2001 amounted to $2,128,000,
$438,000 and $378,000, respectively.

As of March 31, 2003, 2002 and 2001, IXYS
had cash deposits with a financial institution of $2,748,000,
$205,000, and $387,000, respectively, which were restricted as
to use and represent compensating balances for current or future
discounted acceptances and letters of credit which is included
in restricted cash on the Companys balance sheets.

As of March 31, 2003, IXYS is committed to
purchase $5.6 million of inventory from a supplier of IXYS.

IXYS Corporation guarantees the $5.0 million
line of credit in favor of Commerzbank AG for IXYS Semiconductor
GmbH. At March 31, 2003, there are no amounts outstanding
under this line.

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IXYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Legal
Proceedings

On June 22, 2000, International Rectifier
Corporation filed an action for patent infringement against IXYS
in the United States District Court for the Central District of
California, alleging that certain of IXYSs products sold
in the United States infringe U.S. patents owned by
International Rectifier. International Rectifiers
complaint against IXYS contended that IXYSs alleged
infringement of International Rectifiers patents has been
and continues to be willful and deliberate. Subsequently, the
U.S. District Court decided that certain of IXYSs
power MOSFETs and IGBTs infringe certain claims of each of three
International Rectifier U.S. patents.

On May 21, 2002, the U.S. District Court
entered a permanent injunction, which became effective
June 5, 2002, barring IXYS from making, using, offering to
sell or selling in, or importing into, the United States,
MOSFETs (including IGBTs) covered by the subject patents. On
August 2, 2002, a three-judge panel of the United States
Court of Appeals for the Federal Circuit granted IXYSs
motion to stay, pending appeal, the permanent injunction issued
by the U.S. District Court. In granting this motion, the
panel stated, among other things, that IXYS had shown a strong
likelihood of success regarding its challenge to the
U.S. District Courts finding that IXYS infringes the
International Rectifier patents. IXYSs appeal from the
award of permanent injunction, including the finding of
infringement upon which it is based, was argued on July 7,
2003 and the outcome is pending.

On August 5, 2002, the U.S. District Court
entered its ruling that International Rectifier should be
awarded damages of $9.1 million for IXYSs alleged
infringement of International Rectifiers patents. In
addition, the U.S. District Court ruled that IXYS had been
guilty of willful infringement. Subsequently, the U.S. District
Court increased the damages to a total of $27.2 million,
plus attorney fees. IXYS has appealed the damages award. The
United States Court of Appeals for the Federal Circuit has
granted IXYSs motion to stay the damages award pending
disposition of the related appeals and has suspended briefing of
IXYSs appeal from the damages award pending outcome of the
appeals argued on July 7, 2003.

In light of the August 2, 2002 decision by
the Federal Circuit, IXYS believes its defenses to the various
claims and its arguments on appeal are meritorious. However,
there can be no assurance of a favorable outcome. In the event
of an adverse outcome, damages or injunctions awarded by the
U.S. District Court would be materially adverse to
IXYSs financial condition and results of operations.
Management has not accrued any amounts in the accompanying
balance sheets for the International Rectifier matter described
above.

International Rectifier also contends that
IXYSs importation into the United States of certain
IXYS-designed MOSFET products manufactured for IXYS by Samsung
Electronics Co., Ltd. is in violation of a consent decree and
injunction entered against Samsung in another lawsuit to which
IXYS was not a party. International Rectifier sought enforcement
of the Samsung injunction against IXYS and Samsung, a contempt
citation and a fine. On March 19, 2002, the
U.S. District Court decided, among other things, that IXYS
is bound by, and IXYSs devices are not excepted from, the
Samsung injunction. On June 12, 2002, the Federal Circuit
stayed the application of the Samsung injunction to IXYS,
stating that IXYS had shown a likelihood of success on appeal.
This appeal was heard on July 7, 2003. On October 15,
2002, the District Court found contempt against Samsung as its
final ruling in this matter. Subsequently, the
District Court received briefing on the subject of monetary
sanctions. Following oral argument in April 2003, the District
Court took the matter under submission. On July 7, 2003 it
issued an order awarding International Rectifier monetary
damages for contempt and attorneys fees of $350,000. Under the
order, if IXYS is found to infringe, Samsung is liable for a net
amount of damages equal to $2.5 million. International
Rectifier has agreed to a stay of the contempt award pending
resolution of the appeal. IXYS intervened in these damages
proceedings against Samsung.

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IXYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

It remains IXYSs intent to continue to
vigorously contest the claims of International Rectifier.
Furthermore, IXYS expects to appeal the final ruling of
contempt, including the monetary sanctions awarded against its
foundry, Samsung.

In response to International Rectifiers
claims, Samsung contends that IXYS is contractually obligated
under the terms of IXYSs wafer supply agreement with
Samsung to defend it against the contempt claims made by
International Rectifier and indemnify and hold Samsung harmless
in connection with such claims. While IXYS believes that neither
it nor Samsung are or could be in violation of the injunction
for various reasons that IXYS believes to be meritorious,
including an express reservation as to IXYSs designed
parts in the consent decree, there can be no assurance of a
favorable outcome. In the event of an adverse ruling against
IXYS on the ultimate issue of contempt, or if IXYS is obligated
to indemnify Samsung, any damages awarded or injunction entered
by the U.S. District Court could be materially adverse to
IXYSs financial condition and results of operations.

On January 17, 2002, IXYS sued International
Rectifier in the United States District Court for the Northern
District of California for infringement of three IXYS U.S.
patents. On April 1, 2002, IXYS amended its complaint to
assert infringement by International Rectifier of a modified
group of five IXYS U.S. patents, including patents that
relate to modules. In addition, the patents include IXYSs
patents for direct copper bond technology. After suit was filed,
International Rectifier introduced a new product which purported
to replace the originally accused product. The District Court
has granted International Rectifiers motions for summary
judgment of non-infringement as to the new product. The District
Court has also granted in part and denied in part International
Rectifiers motion for summary judgment as to pre-complaint
damages for the original product. On July 12, 2002, the
U.S. District Court denied International Rectifiers
motions to dismiss and for summary judgment. Trial is currently
set to begin on October 6, 2003.

In August 2002, IXYS filed an action for patent
infringement against Advanced Power Technology, Inc., or APT, in
the United States District Court for the Northern District of
California, claiming that APT is infringing two of IXYSs
patents. APT has denied IXYSs claim of infringement, has
asserted several affirmative defenses and has filed a
counterclaim against IXYS, claiming that IXYS is infringing one
of APTs patents.

IXYS is currently a party to various legal
proceedings, including those noted above. While management
currently believes that the ultimate outcome of these
proceedings, individually and in the aggregate, will not have a
material adverse effect on IXYSs financial position,
litigation is subject to inherent uncertainties. Were an
unfavorable ruling to occur, there exists the possibility of a
material adverse impact on the results of operations of the
period in which the ruling occurs.

8.     Stockholders
Equity

Stock
Purchase and Stock Option Plans

IXYS has the 1999 Non-Employee Directors
Equity Incentive Plan and the 1999 Equity Incentive Plan (the
Plans) under which incentive stock options may be
granted not less than 85% of fair market value at the time of
grant. The options once granted expire ten years from the date
of grant. The Board of Directors has the full power to determine
the provisions of each option issued under the Plans. The 1994
Stock Option Plan was terminated in May 1999.

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IXYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Stock option activity under the Plans is
summarized below (in thousands, except share data):

|                         |                   |               |           |                     |   |                |           |          |   |       |             |                |  |   |        |        |   |   |      |       | 
|------------------------ | ----------------- | ------------- | --------- | ------------------- | - | -------------- | --------- | -------- | - | ----- | ----------- | -------------- |  | - | ------ | ------ | - | - | ---- | ----- | 
|                         |                   |               |           |                     |   |               
|                         |                   |               |           | Options Outstanding |   |               
|                         |                   |               |           |                     |   | Weighted      
|                         |                   | Shares        |           |                     |   | Average       
|                         |                   | Available for |           | Number of           |   |                |           | Exercise
|                         |                   | Grant         |           | Shares              |   | Exercise Price |           | Total    |   | Price
|                         |                   |               |           |                     |   |                |           |          |   |      
|Balances, March 31, 2000 |                   |               | 1,890,762 |                     |   |                | 3,293,860 |          |   |       | $0.01-$3.81 |                |  | $ | 10,345 |        |   | $ | 3.14 |      
|                         | New authorized    |               |           | 830,467             |   |                |           |          |   |       |             |                |  |   |        |        |   |   |      |       | 
|                         | Options granted   |               |           | (178,300            | ) |                |           | 178,300  |   |       |             | $9.00-$29.50   |  |   | $      | 4,308  |   |   | $    | 24.16 | 
|                         | Options exercised |               |           |                     |   |                |           | (213,342 | ) |       |             | $0.01-$4.44    |  |   | $      | (408   | ) |   | $    | 1.91  | 
|                         | Options cancelled |               |           | 73,420              |   |                |           | (73,420  | ) |       |             | $0.01-$3.63    |  |   | $      | (222   | ) |   | $    | 3.02  | 
|                         |                   |               |           |                     |   |                |           |          |   |       |             |                |  |   |        |        |   |   |      |      
|Balances, March 31, 2001 |                   |               | 2,616,349 |                     |   |                | 3,185,398 |          |   |       |             |                |  | $ | 14,023 |        |   | $ | 4.40 |      
|                         | New authorized    |               |           | 901,621             |   |                |           |          |   |       |             |                |  |   |        |        |   |   |      |       | 
|                         | Options granted   |               |           | (782,800            | ) |                |           | 782,800  |   |       |             | $6.60-$15.48   |  |   | $      | 4,878  |   |   | $    | 7.14  | 
|                         | Options exercised |               |           |                     |   |                |           | (195,513 | ) |       |             | $0.0085-$3.625 |  |   | $      | (600   | ) |   | $    | 3.12  | 
|                         | Options cancelled |               |           | 14,106              |   |                |           | (14,106  | ) |       |             | $19.00         |  |   | $      | (268   | ) |   | $    | 19.00 | 
|                         |                   |               |           |                     |   |                |           |          |   |       |             |                |  |   |        |        |   |   |      |      
|Balances, March 31, 2002 |                   |               | 2,749,276 |                     |   |                | 3,758,579 |          |   |       |             |                |  | $ | 18,033 |        |   | $ | 4.80 |      
|                         | 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    | ) |   | $    | 17.35 | 
|                         |                   |               |           |                     |   |                |           |          |   |       |             |                |  |   |        |        |   |   |      |      
|Balances, March 31, 2003 |                   |               | 2,701,792 |                     |   |                | 4,922,896 |          |   |       |             |                |  | $ | 28,900 |        |   | $ | 6.07 |      
|                         |                   |               |           |                     |   |                |           |          |   |       |             |                |  |   |        |        |   |   |      |      

The following table summarizes information about
stock options outstanding at March 31, 2003:

|                    |              |                     |  |                  |           |                  |  |           |     |                  |  |   |       |  |  |  |           |  |  |   |       | 
|------------------- | ------------ | ------------------- |  | ---------------- | --------- | ---------------- |  | --------- | --- | ---------------- |  | - | ----- |  |  |  | --------- |  |  | - | ----- | 
|                    |              |                    
|Options Outstanding |              | Options Exercisable
|                    |              |                    
|                    |              | Number of           |  | Weighted Average |           | Weighted Average |  | Number of |     | Weighted Average
|Exercise Price      |              | Shares              |  | Contractual Life |           | Exercise Price   |  | Shares    |     | Exercise Price  
|                    |              |                     |  |                  |           |                  |  |           |     |                 
|                    | $1.02-1.02   |                     |  |                  | 590       |                  |  |           | 1.3 |                  |  | $ | 1.02  |  |  |  | 590       |  |  | $ | 1.02  | 
|                    | $1.69-2.34   |                     |  |                  | 1,010,595 |                  |  |           | 6.5 |                  |  | $ | 2.18  |  |  |  | 962,595   |  |  | $ | 2.18  | 
|                    | $3.46-4.88   |                     |  |                  | 2,040,209 |                  |  |           | 6.7 |                  |  | $ | 3.78  |  |  |  | 1,337,709 |  |  | $ | 3.65  | 
|                    | $5.23-7.79   |                     |  |                  | 1,164,854 |                  |  |           | 9.0 |                  |  | $ | 7.06  |  |  |  | 151,414   |  |  | $ | 6.78  | 
|                    | $8.01-12.72  |                     |  |                  | 304,144   |                  |  |           | 7.6 |                  |  | $ | 10.89 |  |  |  | 216,644   |  |  | $ | 11.94 | 
|                    | $13.23-19.00 |                     |  |                  | 260,674   |                  |  |           | 6.3 |                  |  | $ | 16.75 |  |  |  | 206,104   |  |  | $ | 16.49 | 
|                    | $20.86-29.50 |                     |  |                  | 112,597   |                  |  |           | 7.2 |                  |  | $ | 27.56 |  |  |  | 66,397    |  |  | $ | 27.56 | 
|                    | $31.54-36.24 |                     |  |                  | 29,233    |                  |  |           | 4.6 |                  |  | $ | 33.18 |  |  |  | 29,233    |  |  | $ | 33.18 | 
|                    |              |                     |  |                  |           |                  |  |           |     |                  |  |   |       |  |  |  |           |  |  |   |       | 
|                    | $1.02-36.24  |                     |  |                  | 4,922,896 |                  |  |           | 7.2 |                  |  | $ | 6.07  |  |  |  | 2,970,686 |  |  | $ | 5.66  | 
|                    |              |                     |  |                  |           |                  |  |           |     |                  |  |   |       |  |  |  |           |  |  |   |       | 

55



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##### Table of Contents



IXYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The fair value of option grants has been
estimated on the date of grant using the Black-Scholes option
pricing model with the following weighted average assumptions:

|                        |  |                      |                |      |  |      |                |  |  |  |                | 
|----------------------- |  | -------------------- | -------------- | ---- |  | ---- | -------------- |  |  |  | -------------- | 
|                        |  |                     
|                        |  | Year Ended March 31,
|                        |  |                     
|                        |  | 2003                 |                | 2002 |  | 2001
|                        |  |                      |                |      |  |     
|Risk-free interest rate |  |                      | 2.74% to 4.33% |      |  |      | 3.60% to 4.69% |  |  |  | 5.35% to 5.99% | 
|Expected term           |  |                      | 4 years        |      |  |      | 4 years        |  |  |  | 4 years        | 
|Volatility              |  |                      | 104%           |      |  |      | 103%           |  |  |  | 142%           | 
|Dividend yield          |  |                      | 0%             |      |  |      | 0%             |  |  |  | 0%             | 

No dividend yield is assumed as IXYS has not paid
dividends and has no plans to do so.

The weighted average expected life was calculated
based on the vesting period and the expected life at the date of
the grant. The risk free interest rate was calculated based on
rates prevailing during grant periods and the expected life of
the options at the date of grants. The weighted average fair
values of options granted to employees during the fiscal years
ended March 31, 2003, 2002 and 2001 were $4.41, $5.13 and
$20.62, respectively.

IXYS has sold 3,908,095 shares of common stock to
certain members of IXYSs management under a restricted
stock purchase agreement subject to IXYSs right of
repurchase, which lapses ratably over five years. The shares
were purchased through recourse promissory notes at a purchase
price of $0.11 per share. Interest is due on the notes at a rate
of 5.79% per annum through September 15, 2000 and 6.25% per
annum after that date, with the balance outstanding due in full
September 2005. At March 31, 2003, 2002 and 2001, there
were no shares of common stock were subject to IXYSs right
of repurchase, respectively.

In May 1999, IXYS approved the 1999 Employee
Stock Purchase Plan (Purchase Plan) and terminated
all prior Paradigm employee stock purchase plans. Under the
Purchase Plan, substantially all employees may purchase the
Companys common stock at a price equal to 85.0% of the
lower of the fair market value at the beginning or the end of
each specified six-month offering period. Stock purchases are
limited to 15.0% of an employees eligible compensation.
There are 500,000 shares of common stock reserved for issuance
under the Purchase Plan. During the year ended March 31,
2003, there were 31,383 shares purchased under the Purchase Plan.

The fair value for the purchase rights issued
under the Purchase Plan using the Black-Scholes valuation model
was calculated with the following weighted average assumptions:

|                        |  |                      |           |      |  |      |           |  |  |  |           | 
|----------------------- |  | -------------------- | --------- | ---- |  | ---- | --------- |  |  |  | --------- | 
|                        |  |                     
|                        |  | Year Ended March 31,
|                        |  |                     
|                        |  | 2003                 |           | 2002 |  | 2001
|                        |  |                      |           |      |  |     
|Risk-free interest rate |  |                      | 1.22%     |      |  |      | 2.52%     |  |  |  | 5.84%     | 
|Expected life           |  |                      | 0.5 years |      |  |      | 0.5 years |  |  |  | 0.5 years | 
|Volatility              |  |                      | 104%      |      |  |      | 103%      |  |  |  | 142%      | 
|Dividend yield          |  |                      | 0%        |      |  |      | 0%        |  |  |  | 0%        | 

The weighted average fair value per share of
those purchase rights granted in 2003, 2002 and 2001 was $2.70,
$3.15 and $8.00, respectively.

8.     Employee
Savings and Retirement Plan

IXYS has a 401(k) plan, known as the IXYS
Corporation and Subsidiary Employee Savings and Retirement
Plan. Eligibility to participate in the plan is subject to
certain minimum service requirements. Employees may voluntarily
contribute up to 20% of yearly compensation and IXYS may make
matching contributions as determined by the Board of Directors
in a resolution on or before the end of the fiscal year.

56



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##### Table of Contents



IXYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Employees are 100% vested immediately. For the
years ended March 31, 2003, 2002 and 2001, IXYS contributed
$424,000, $136,000 and $168,000 respectively.

9.     Related Party
Transactions

ABB is a principal stockholder of IXYS. In fiscal
year 2003, 2002 and 2001, IXYS generated revenues of $2,711,000,
$808,000 and $707,000, respectively from product sales to ABB
and to ABBs affiliates for use as components in their
products. At March 31, 2003 and 2002, IXYS had receivables
outstanding from ABB of $415,000 and $653,000, respectively.

10.     Pension
Plans

Employees of IXYS GmbH, Westcode and Clare, Inc.
foreign subsidiaries participate in a number of employee
retirement plans, including a defined benefit pension plan, the
benefits for which will be paid out of the general assets of
IXYS GmbH, Westcode and Clare, Inc. foreign subsidiaries, as
well as other government sponsored retirement plans to which
IXYS GmbH, Westcode and Clare, Inc. foreign subsidiaries and
eligible employees are required to contribute.

The Company deposits funds for certain of these
plans with insurance companies, third-party trustees, or into
government-managed accounts, and/or accrues for the unfunded
portion of the obligation, in each case consistent with the
requirements of local law. The assumptions used in calculating
the obligation for the non-U.S. plans depend on the local
economic environment. A substantial majority of the
Companys pension assets and obligations relate to non-U.S.
pension plans.

The Companys practice is to fund the
various pension plans in amounts at least sufficient to meet the
minimum requirements of U.S. federal laws and regulations or
applicable local laws and regulations. The assets of the various
plans are invested in corporate equities, corporate debt
securities, government securities and other institutional
arrangements. The portfolio of each plan depends on plan design
and applicable local laws. Depending on the design of the plan,
local custom and market circumstances, the minimum liabilities
of a plan may exceed qualified plan assets. The Company accrues
for all such liabilities.

In addition to providing income at retirement,
many of these plans also provide survivor, termination and
disability benefits. The defined benefits pension plan covers
substantially all employees of IXYS GmbH, Westcode and Clare
foreign subsidiaries and benefits are based on years of service
and the employees compensation.

Net Period
Pension Cost

The net periodic pension expense for 2003, 2002
and 2001 included the following components:

|                                              |  |                      |       |      |  |      |      |   |  |   |     |  
|--------------------------------------------- |  | -------------------- | ----- | ---- |  | ---- | ---- | - |  | - | --- | -
|                                              |  |                     
|                                              |  | Year Ended March 31,
|                                              |  |                     
|                                              |  | 2003                 |       | 2002 |  | 2001
|                                              |  |                      |       |      |  |     
|                                              |  |                     
|                                              |  | (In thousands)      
|Service cost                                  |  | $                    | 750   |      |  | $    | 214  |   |  | $ | 99  |  
|Interest cost on projected benefit obligation |  |                      | 1,245 |      |  |      | 424  |   |  |   | 286 |  
|Expected return on plan assets                |  |                      |      |      |  |      | 46   |   |  |   | (30 | )
|Amortization of prior service cost            |  |                      |      |      |  |      |     |   |  |   | 1   |  
|Recognized actuarial loss (gain)              |  |                      | 63    |      |  |      | (280 | ) |  |   | 5   |  
|                                              |  |                      |       |      |  |      |      |   |  |   |     |  
|Net periodic pension expense                  |  | $                    | 2,058 |      |  | $    | 404  |   |  | $ | 361 |  
|                                              |  |                      |       |      |  |      |      |   |  |   |     |  

57



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##### Table of Contents



IXYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Funded
Status

|                             |                                                            |                |   |        |   |  |   |        |  
|---------------------------- | ---------------------------------------------------------- | -------------- | - | ------ | - |  | - | ------ | -
|                             |                                                            |               
|                             |                                                            | March 31,     
|                             |                                                            |               
|                             |                                                            | 2003           |   | 2002  
|                             |                                                            |                |   |       
|                             |                                                            |               
|                             |                                                            | (In thousands)
|Change in benefit obligation |                                                            |                |   |        |   |  |   |       
|                             | Benefit obligation at the beginning of year                |                | $ | 19,612 |   |  | $ | 5,365  |  
|                             | Additional benefit obligation acquired during the
    year |                |   | 86     |   |  |   | 13,648 |  
|                             | Service cost                                               |                |   | 750    |   |  |   | 214    |  
|                             | Interest cost                                              |                |   | 1,245  |   |  |   | 424    |  
|                             | Plan participants contribution                             |                |   | 131    |   |  |   | 23     |  
|                             | Actuarial loss (gain)                                      |                |   | 539    |   |  |   | (259   | )
|                             | Benefits paid                                              |                |   | (656   | ) |  |   | (252   | )
|                             | Foreign currency translation adjustment                    |                |   | 2,762  |   |  |   | 449    |  
|                             |                                                            |                |   |        |   |  |   |       
|                             | Benefit obligation at the end of the year                  |                | $ | 24,469 |   |  | $ | 19,612 |  
|                             |                                                            |                |   |        |   |  |   |       

|                      |                                                            |                |   |        |   |  |   |        |  
|--------------------- | ---------------------------------------------------------- | -------------- | - | ------ | - |  | - | ------ | -
|                      |                                                            |               
|                      |                                                            | March 31,     
|                      |                                                            |               
|                      |                                                            | 2003           |   | 2002  
|                      |                                                            |                |   |       
|                      |                                                            |               
|                      |                                                            | (In thousands)
|Change in plan assets |                                                            |                |   |        |   |  |   |       
|                      | Fair value of plan assets at the beginning of the
    year |                | $ | 11,975 |   |  | $ | 580    |  
|                      | Additional plan assets acquired during the year            |                |   |       |   |  |   | 11,077 |  
|                      | Actual return on plan assets                               |                |   | (3,085 | ) |  |   | 298    |  
|                      | Employer contribution                                      |                |   | 667    |   |  |   | 94     |  
|                      | Plan participant contribution                              |                |   | 131    |   |  |   | 23     |  
|                      | Benefits paid                                              |                |   | (438   | ) |  |   | (91    | )
|                      | Foreign currency translation adjustment                    |                |   | 1,230  |   |  |   | (6     | )
|                      |                                                            |                |   |        |   |  |   |       
|                      | Fair value of plan assets at the end of the year           |                | $ | 10,480 |   |  | $ | 11,975 |  
|                      |                                                            |                |   |        |   |  |   |       

|               |                                           |                |   |         |   |  |   |        |  
|-------------- | ----------------------------------------- | -------------- | - | ------- | - |  | - | ------ | -
|               |                                           |               
|               |                                           | March 31,     
|               |                                           |               
|               |                                           | 2003           |   | 2002   
|               |                                           |                |   |        
|               |                                           |               
|               |                                           | (In thousands)
|Status of plan |                                           |                |   |         |   |  |   |       
|               | Plan obligations in excess of plan assets |                | $ | (13,989 | ) |  | $ | (7,637 | )
|               | Unrecognized actuarial loss               |                |   | 3,885   |   |  |   |       |  
|               | Net loss                                  |                |   | 180     |   |  |   | 264    |  
|               |                                           |                |   |         |   |  |   |       
|               | Accrued benefit                           |                | $ | (9,924  | ) |  | $ | (7,373 | )
|               |                                           |                |   |         |   |  |   |       

58



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##### Table of Contents



IXYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                                |                                                           |                |   |        |   |  |   |        |  
|------------------------------- | --------------------------------------------------------- | -------------- | - | ------ | - |  | - | ------ | -
|                                |                                                           |               
|                                |                                                           | March 31,     
|                                |                                                           |               
|                                |                                                           | 2003           |   | 2002  
|                                |                                                           |                |   |       
|                                |                                                           |               
|                                |                                                           | (In thousands)
|Reconciliation of funded status |                                                           |                |   |        |   |  |   |       
|                                | Accrued pension at the beginning of year                  |                | $ | (7,373 | ) |  | $ | (4,882 | )
|                                | Additional pension liability acquired during the
    year |                |   | (86    | ) |  |   | (2,574 | )
|                                | Net period pension cost                                   |                |   | (1,126 | ) |  |   | (404   | )
|                                | Cash contribution                                         |                |   | 621    |   |  |   | 58     |  
|                                | Benefits paid                                             |                |   | 341    |   |  |   | 252    |  
|                                | Foreign currency translation adjustment                   |                |   | (2,301 | ) |  |   | 177    |  
|                                |                                                           |                |   |        |   |  |   |       
|                                | Accrued pension cost at the end of the year               |                | $ | (9,924 | ) |  | $ | (7,373 | )
|                                |                                                           |                |   |        |   |  |   |       

|            |                                             |           |  |              |   |  |  |              |  
|----------- | ------------------------------------------- | --------- |  | ------------ | - |  |  | ------------ | -
|            |                                             |          
|            |                                             | March 31,
|            |                                             |          
|            |                                             | 2003      |  | 2002        
|            |                                             |           |  |             
|Assumptions |                                             |           |  |              |   |  |  |             
|            | Discount rate                               |           |  | 5.00 -  5.75 | % |  |  | 6.00 -  6.10 | %
|            | Expected long-term rate of return on assets |           |  | 4.60 -  7.20 | % |  |  | 5.03 -  7.50 | %
|            | Salary scale                                |           |  | 2.40 -  4.00 | % |  |  | 3.00 -  3.50 | %

11.     Income
Taxes

Income (loss) before income tax provision
(benefit) consists of the following (in thousands):

|              |  |                      |         |      |  |      |        |   |  |   |        | 
|------------- |  | -------------------- | ------- | ---- |  | ---- | ------ | - |  | - | ------ | 
|              |  |                     
|              |  | Year Ended March 31,
|              |  |                     
|              |  | 2003                 |         | 2002 |  | 2001
|              |  |                      |         |      |  |     
|Domestic      |  | $                    | (17,322 | )    |  | $    | 4,764  |   |  | $ | 20,086 | 
|International |  |                      | (539    | )    |  |      | (1,642 | ) |  |   | 1,822  | 
|              |  |                      |         |      |  |      |        |   |  |   |        | 
|              |  | $                    | (17,861 | )    |  | $    | 3,122  |   |  | $ | 21,908 | 
|              |  |                      |         |      |  |      |        |   |  |   |        | 

IXYSs provision for (benefit from) income
taxes consists of the following (in thousands):

|          |         |                                      |        |        |        |      |     |       |       |  |       |       |       | 
|--------- | ------- | ------------------------------------ | ------ | ------ | ------ | ---- | --- | ----- | ----- |  | ----- | ----- | ----- | 
|          |         |                                     
|          |         | Year Ended March 31,                
|          |         |                                     
|          |         | 2003                                 |        | 2002   |        | 2001
|          |         |                                      |        |        |        |     
|Current:  |         |                                      |        |        |        |      |     |       |       |  |       |      
|          | Federal |                                      | $      |       |        |      | $   | 429   |       |  | $     | 6,200 |      
|          | State   |                                      |        | 30     |        |      |     | 87    |       |  |       | 1,270 |      
|          | Foreign |                                      |        | 819    |        |      |     | (193  | )     |  |       | 777   |      
|          |         |                                      |        |        |        |      |     |       |       |  |       |      
|          |         |                                      | 849    |        |        |      | 323 |       |       |  | 8,247 |      
|          |         |                                      |        |        |        |      |     |       |       |  |       |      
|Deferred: |         |                                      |        |        |        |      |     |       |       |  |       |      
|          | Federal |                                      |        | (6,458 | )      |      |     | 1,103 |       |  |       |      |      
|          | State   |                                      |        | (546   | )      |      |     | 176   |       |  |       | 132   |      
|          | Foreign |                                      |        | 439    |        |      |     | (418  | )     |  |       | (58   | )    
|          |         |                                      |        |        |        |      |     |       |       |  |       |      
|          |         |                                      | (6,565 | )      |        |      | 861 |       |       |  | 74    |      
|          |         |                                      |        |        |        |      |     |       |       |  |       |      
|          |         | Total income tax provision (benefit) |        | $      | (5,716 | )    |     | $     | 1,184 |  |       | $     | 8,321 | 
|          |         |                                      |        |        |        |      |     |       |       |  |       |      

59



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##### Table of Contents



IXYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

IXYSs effective tax rate differs from the
statutory federal income tax rate for the years ended
March 31, 2003, 2002 and 2001 as shown in the following
table:

|                                            |  |                      |     |      |  |      |    |   |  |  |    |  
|------------------------------------------- |  | -------------------- | --- | ---- |  | ---- | -- | - |  |  | -- | -
|                                            |  |                     
|                                            |  | Year Ended March 31,
|                                            |  |                     
|                                            |  | 2003                 |     | 2002 |  | 2001
|                                            |  |                      |     |      |  |     
|Statutory federal income tax (benefit) rate |  |                      | (35 | )%   |  |      | 35 | % |  |  | 35 | %
|State taxes, net of federal tax benefit     |  |                      | (4  | )    |  |      | 4  |   |  |  | 4  |  
|Foreign taxes at higher rates               |  |                      | 7   |      |  |      | 0  |   |  |  | 0  |  
|Other                                       |  |                      | 0   |      |  |      | (1 | ) |  |  | (1 | )
|                                            |  |                      |     |      |  |      |    |   |  |  |    |  
|Effective tax rate                          |  |                      | (32 | )%   |  |      | 38 | % |  |  | 38 | %
|                                            |  |                      |     |      |  |      |    |   |  |  |    |  

The components of net deferred income tax assets
are as follows (in thousands):

|                     |                                       |                                      |   |        |        |  |   |       |       | 
|-------------------- | ------------------------------------- | ------------------------------------ | - | ------ | ------ |  | - | ----- | ----- | 
|                     |                                       |                                     
|                     |                                       | March 31,                           
|                     |                                       |                                     
|                     |                                       | 2003                                 |   | 2002  
|                     |                                       |                                      |   |       
|Deferred tax assets: |                                       |                                      |   |        |        |  |   |      
|                     | Reserves                              |                                      | $ | 5,871  |        |  | $ | 869   |      
|                     | Other liabilities and accruals        |                                      |   | 4,414  |        |  |   | 1,684 |      
|                     |                                       |                                      |   |        |        |  |   |      
|                     |                                       | Total short term deferred tax assets |   |        | 10,285 |  |   |       | 2,553 | 
|                     | Depreciable assets                    |                                      |   | 747    |        |  |   | (320  | )    
|                     | Net operating loss carried forward    |                                      |   | 3,392  |        |  |   | 2,335 |      
|                     | Intangibles arising from acquisitions |                                      |   | (1,576 | )      |  |   |      |      
|                     |                                       |                                      |   |        |        |  |   |      
|                     |                                       | Net deferred tax asset               |   | $      | 12,848 |  |   | $     | 4,568 | 
|                     |                                       |                                      |   |        |        |  |   |      

As of March 31, 2003, the Company had net
operating loss carryforwards of approximately $6.2 million
in the U.S., $1.8 million in Germany and $3.2 million
in the UK available to reduce its future taxable income. The
US net operating losses begin to expire in 2023 while the
German and UK net operating losses can be carried forward
indefinitely.

Currently, management has determined that no
valuation allowance is required against its deferred tax assets
as it is more likely than not that the deferred tax assets can
be realized. Under the Tax Reform Act of 1986, the amount of a
benefit from net operating loss carryforwards and credit
carryforwards may be impaired or limited in certain
circumstances. Events which may restrict utilization of a
companys net operating loss and credit carryforwards
include, but are not limited to, certain ownership change
limitations as defined in Internal Revenue Code Section 382
and similar state provisions. In the event the Company has had a
change of ownership, defined as a cumulative ownership change of
more than 50% over a three-year period, utilization of
carryforwards could be restricted to an annual limitation. The
annual limitation may result in the expiration of net operating
loss carryforwards and credit carryforwards before utilization.

60



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IXYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

12.     Computation
of Net Income (Loss) Per Share

Basic and diluted earnings per share are
calculated as follows (in thousands, except per share amounts):

|         |                                                              |                      |   |         |   |      |   |        |  |  |   |        | 
|-------- | ------------------------------------------------------------ | -------------------- | - | ------- | - | ---- | - | ------ |  |  | - | ------ | 
|         |                                                              |                     
|         |                                                              | Year Ended March 31,
|         |                                                              |                     
|         |                                                              | 2003                 |   | 2002    |   | 2001
|         |                                                              |                      |   |         |   |     
|Basic:   |                                                              |                      |   |         |   |      |   |        |  |  |   |       
|         | Weighted-average shares                                      |                      |   | 30,889  |   |      |   | 26,745 |  |  |   | 25,239 | 
|         |                                                              |                      |   |         |   |      |   |        |  |  |   |       
|         | Net income (loss)                                            |                      | $ | (12,145 | ) |      | $ | 1,938  |  |  | $ | 13,587 | 
|         |                                                              |                      |   |         |   |      |   |        |  |  |   |       
|         | Net income (loss) per share                                  |                      | $ | (0.39   | ) |      | $ | 0.07   |  |  | $ | 0.54   | 
|         |                                                              |                      |   |         |   |      |   |        |  |  |   |       
|Diluted: |                                                              |                      |   |         |   |      |   |        |  |  |   |       
|         | Weighted-average shares                                      |                      |   | 30,889  |   |      |   | 26,745 |  |  |   | 25,239 | 
|         | Common equivalent shares from stock options and
    warrants |                      |   |        |   |      |   | 2,259  |  |  |   | 2,535  | 
|         |                                                              |                      |   |         |   |      |   |        |  |  |   |       
|         | Shares used in per share calculation                         |                      |   | 30,889  |   |      |   | 29,004 |  |  |   | 27,774 | 
|         |                                                              |                      |   |         |   |      |   |        |  |  |   |       
|         | Net income (loss)                                            |                      | $ | (12,145 | ) |      | $ | 1,938  |  |  | $ | 13,587 | 
|         |                                                              |                      |   |         |   |      |   |        |  |  |   |       
|         | Net income (loss) per share                                  |                      | $ | (0.39   | ) |      | $ | 0.07   |  |  | $ | 0.49   | 
|         |                                                              |                      |   |         |   |      |   |        |  |  |   |       

In 2003, there were outstanding options to
purchase 4,922,896 shares at a weighted average price of $6.07
that were not included in the computation of net loss per share
because their effect was anti-dilutive. In 2002 and 2001, there
were outstanding options to purchase 207,800 and 178,300 shares,
respectively, at a weighted average price of $22.92 and $24.16,
respectively, that were not included in the computation of
dilutive net income per share since the exercise prices of the
options exceeded the market price of the common stock. These
options could dilute earnings per share in future periods.

13.     Segment and
Geographic Information

IXYS operates in a single industry segment
comprising power semiconductors used primarily in controlling
energy in motor drives, power conversion (including
uninterruptible power supplies and switch mode power supplies
and medical electronics). IXYSs sales by major geographic
area (based on destination) were as follows:

|                           |       |                      |        |         |  |      |        |        |  |   |        |         | 
|-------------------------- | ----- | -------------------- | ------ | ------- |  | ---- | ------ | ------ |  | - | ------ | ------- | 
|                           |       |                     
|                           |       | Year Ended March 31,
|                           |       |                     
|                           |       | 2003                 |        | 2002    |  | 2001
|                           |       |                      |        |         |  |     
|North America              |       | $                    | 57,495 |         |  | $    | 27,224 |        |  | $ | 44,634 |        
|Europe and the Middle East |       |                      | 53,569 |         |  |      | 43,291 |        |  |   | 46,488 |        
|Japan                      |       |                      | 4,003  |         |  |      | 1,284  |        |  |   | 861    |        
|Asia Pacific               |       |                      | 21,044 |         |  |      | 11,022 |        |  |   | 19,406 |        
|                           |       |                      |        |         |  |      |        |        |  |   |        |        
|                           | Total |                      | $      | 136,111 |  |      | $      | 82,821 |  |   | $      | 111,389 | 
|                           |       |                      |        |         |  |      |        |        |  |   |        |        

There was no single end customer providing more
than 10% of IXYSs sales for years ended March 31,
2003, 2002 and 2001.

Sales in North America consist primarily of sales
in the United States. Sales in Europe and Middle East consist
primarily of sales in Germany, UK and Italy. Sales in Asia
Pacific consist primarily of sales in China and Korea.

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IXYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

IXYSs foreign operations consist of those
of its subsidiaries, IXYS GmbH and IXYS Berlin in Germany, IXYS
CH in Switzerland and Westcode in the United Kingdom. Sales and
net income of IXYS CH, which was established in fiscal year
2002, were not significant and are combined with German
operations. The following tables summarize the sales and net
income of IXYSs U.S. and foreign operations (in
thousands), long-lived assets by country (in thousands), and
revenue by product (in thousands):

|                   |           |                      |         |         |   |      |        |        |   |   |         |        | 
|------------------ | --------- | -------------------- | ------- | ------- | - | ---- | ------ | ------ | - | - | ------- | ------ | 
|                   |           |                     
|                   |           | Year Ended March 31,
|                   |           |                     
|                   |           | 2003                 |         | 2002    |   | 2001
|                   |           |                      |         |         |   |     
|Sales:             |           |                      |         |         |   |      |        |        |   |   |         |       
|                   | Foreign   |                      | $       | 64,977  |   |      | $      | 55,597 |   |   | $       | 49,172 | 
|                   | IXYS U.S. |                      |         | 71,134  |   |      |        | 27,224 |   |   |         | 62,217 | 
|                   |           |                      |         |         |   |      |        |        |   |   |         |       
|                   |           | $                    | 136,111 |         |   | $    | 82,821 |        |   | $ | 111,389 |       
|                   |           |                      |         |         |   |      |        |        |   |   |         |       
|Net Income (loss): |           |                      |         |         |   |      |        |        |   |   |         |       
|                   | Foreign   |                      | $       | (925    | ) |      | $      | (311   | ) |   | $       | 4,514  | 
|                   | IXYS U.S. |                      |         | (11,220 | ) |      |        | 2,249  |   |   |         | 9,073  | 
|                   |           |                      |         |         |   |      |        |        |   |   |         |       
|                   |           | $                    | (12,145 | )       |   | $    | 1,938  |        |   | $ | 13,587  |       
|                   |           |                      |         |         |   |      |        |        |   |   |         |       

|                   |                |           |        |        |  |   |        |        | 
|------------------ | -------------- | --------- | ------ | ------ |  | - | ------ | ------ | 
|                   |                |          
|                   |                | March 31,
|                   |                |          
|                   |                | 2003      |        | 2002  
|                   |                |           |        |       
|Long-Lived Assets: |                |           |        |        |  |   |        |       
|                   | Germany        |           | $      | 14,771 |  |   | $      | 13,550 | 
|                   | Switzerland    |           |        | 1,657  |  |   |        | 2,543  | 
|                   | United States  |           |        | 10,934 |  |   |        | 4,869  | 
|                   | United Kingdom |           |        | 4,026  |  |   |        | 1,208  | 
|                   |                |           |        |        |  |   |        |       
|                   |                | $         | 31,388 |        |  | $ | 22,170 |       
|                   |                |           |        |        |  |   |        |       

|                    |                       |                      |         |        |  |      |        |        |  |   |         |        | 
|------------------- | --------------------- | -------------------- | ------- | ------ |  | ---- | ------ | ------ |  | - | ------- | ------ | 
|                    |                       |                     
|                    |                       | Year Ended March 31,
|                    |                       |                     
|                    |                       | 2003                 |         | 2002   |  | 2001
|                    |                       |                      |         |        |  |     
|Revenue by product: |                       |                      |         |        |  |      |        |        |  |   |         |       
|                    | Power MOS Transistors |                      | $       | 40,420 |  |      | $      | 32,452 |  |   | $       | 54,815 | 
|                    | Bipolar Products      |                      |         | 65,998 |  |      |        | 45,773 |  |   |         | 48,985 | 
|                    | IC and Other          |                      |         | 29,693 |  |      |        | 4,596  |  |   |         | 7,589  | 
|                    |                       |                      |         |        |  |      |        |        |  |   |         |       
|                    |                       | $                    | 136,111 |        |  | $    | 82,821 |        |  | $ | 111,389 |       
|                    |                       |                      |         |        |  |      |        |        |  |   |         |       

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Selected Quarterly Financial Data, as Restated
(Unaudited)

On May 13, 2003, we announced that we had
discovered errors in our accounting for inventories in certain
prior period financial statements, requiring restatement of the
quarterly financial statements for these periods. Our balance
sheets as of June 30, 2002, September 30, 2002 and
December 31, 2002 and statements of operations and cash
flows for the period then ended were restated to correct the
errors.



| |                                     
| | ------------------------------------
| | Fiscal Year Ended March 31,
    2003

|                                                                                   |         |                                         |        |               |  |               |        |               |  |               |        |               |  |               |        |        |  |   |        |        |  |   |        |        |  |   |        |        | 
|---------------------------------------------------------------------------------- | ------- | --------------------------------------- | ------ | ------------- |  | ------------- | ------ | ------------- |  | ------------- | ------ | ------------- |  | ------------- | ------ | ------ |  | - | ------ | ------ |  | - | ------ | ------ |  | - | ------ | ------ | 
|                                                                                   |         |                                        
|                                                                                   |         | Three Months Ended                     
|                                                                                   |         |                                        
|                                                                                   |         | March 31,                               |        | December 31,  |  | December 31,  |        | September 30, |  | September 30, |        | June 30,      |  | June 30,     
|                                                                                   |         | 2003                                    |        | 2002          |  | 2002          |        | 2002          |  | 2002          |        | 2002          |  | 2002         
|                                                                                   |         |                                         |        |               |  |               |        |               |  |               |        |               |  |              
|                                                                                   |         |                                        
|                                                                                   |         | (In thousands, except per share amount)
|                                                                                   |         |                                         |        | (As Reported) |  | (As Restated) |        | (As Reported) |  | (As Restated) |        | (As Reported) |  | (As Restated)
|Net revenues                                                                       |         | $                                       | 37,819 |               |  | $             | 35,544 |               |  | $             | 35,544 |               |  | $             | 35,311 |        |  | $ | 35,311 |        |  | $ | 27,437 |        |  | $ | 27,437 |       
|Gross profit(1)                                                                    |         |                                         | 4,329  |               |  |               | 9,934  |               |  |               | 8,803  |               |  |               | 9,784  |        |  |   | 9,232  |        |  |   | 7,459  |        |  |   | 6,376  |       
|Operating income (loss)(1)                                                         |         |                                         | (7,072 | )             |  |               | (695   | )             |  |               | (1,826 | )             |  |               | (2,112 | )      |  |   | (2,664 | )      |  |   | 68     |        |  |   | (1,015 | )     
|Net income (loss)(1)(2)                                                            |         |                                         | (5,505 | )             |  |               | (1,052 | )             |  |               | (1,787 | )             |  |               | (3,076 | )      |  |   | (3,435 | )      |  |   | (714   | )      |  |   | (1,418 | )     
|Basic and diluted net income (loss) per share
    applicable to common stockholder |         | $                                       | (0.17  | )             |  | $             | (0.03  | )             |  | $             | (0.06  | )             |  | $             | (0.10  | )      |  | $ | (0.11  | )      |  | $ | (0.03  | )      |  | $ | (0.05  | )     
|Weighted average shares used in per share
    calculation                          |         |                                         |        |               |  |               |        |               |  |               |        |               |  |               |        |        |  |   |        |        |  |   |        |        |  |   |        |       
|                                                                                   | Basic   |                                         |        | 31,918        |  |               |        | 31,797        |  |               |        | 31,797        |  |               |        | 31,842 |  |   |        | 31,842 |  |   |        | 27,999 |  |   |        | 27,999 | 
|                                                                                   | Diluted |                                         |        | 31,918        |  |               |        | 31,797        |  |               |        | 31,797        |  |               |        | 31,842 |  |   |        | 31,842 |  |   |        | 27,999 |  |   |        | 27,999 | 



| |                                     
| | ------------------------------------
| | Fiscal Year Ended March 31,
    2002

|                                                                       |         |                                          |        |              |  |               |        |          |  |   |        |        |  |   |        |        | 
|---------------------------------------------------------------------- | ------- | ---------------------------------------- | ------ | ------------ |  | ------------- | ------ | -------- |  | - | ------ | ------ |  | - | ------ | ------ | 
|                                                                       |         |                                         
|                                                                       |         | Three Months Ended                      
|                                                                       |         |                                         
|                                                                       |         | March 31,                                |        | December 31, |  | September 30, |        | June 30,
|                                                                       |         | 2002                                     |        | 2001         |  | 2001          |        | 2001    
|                                                                       |         |                                          |        |              |  |               |        |         
|                                                                       |         |                                         
|                                                                       |         | (In thousands, except per share amounts)
|Net revenues                                                           |         | $                                        | 20,395 |              |  | $             | 16,082 |          |  | $ | 20,739 |        |  | $ | 25,605 |       
|Gross profit                                                           |         |                                          | 5,615  |              |  |               | 4,950  |          |  |   | 7,033  |        |  |   | 8,306  |       
|Operating income                                                       |         |                                          | 312    |              |  |               | 605    |          |  |   | 2,726  |        |  |   | 3,648  |       
|Net income (loss)                                                      |         | $                                        | (584   | )            |  | $             | (105   | )        |  | $ | 1,041  |        |  | $ | 1,586  |       
|Basic net income (loss) per share applicable to
    common stockholder |         | $                                        | (0.02  | )            |  | $             | 0.00   |          |  | $ | 0.04   |        |  | $ | 0.06   |       
|Diluted net income per share applicable to common
    stockholders     |         | $                                        | (0.02  | )            |  | $             | 0.00   |          |  | $ | 0.04   |        |  | $ | 0.05   |       
|Weighted average shares used in per share
    calculation              |         |                                          |        |              |  |               |        |          |  |   |        |        |  |   |        |       
|                                                                       | Basic   |                                          |        | 26,771       |  |               |        | 26,728   |  |   |        | 26,755 |  |   |        | 26,690 | 
|                                                                       | Diluted |                                          |        | 26,771       |  |               |        | 26,728   |  |   |        | 28,837 |  |   |        | 29,180 | 



---



|    |                                                                                                                                                                                                                                                                                   
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | For the quarters ending June 30, 2002,
    September 30, 2002 and December 31, 2002, adjustments
    of $1.1 million, $0.6 million and $1.1 million,
    respectively, have been made to restate cost of sales relating
    to the errors in the accounting for inventories.      
|   
|(2) | For the quarters ending June 30, 2002,
    September 30, 2002 and December 31, 2002, adjustments
    of $0.4 million, $0.2 million and $0.4 million,
    respectively, have been made to reflect the benefit from income
    tax associated with the restatement of cost of sales.

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

None.




PART III




Item 10.     Directors
and Executive Officers of the Registrant

Our board of directors is currently comprised of
six directors. Our directors and executive officers, their ages
and positions at IXYS, as well as certain biographical
information of these individuals, are set forth below. The ages
of the individuals are provided as of March 31, 2003.

|                   |  |     |    |             |  |                                                                                    
|------------------ |  | --- | -- | ----------- |  | -----------------------------------------------------------------------------------
|Name               |  | Age |    | Position(s)
|                   |  |     |    |            
|Nathan Zommer      |  |     | 55 |             |  | Chairman of the Board, President and Chief
    Executive Officer                   
|Arnold P. Agbayani |  |     | 57 |             |  | Senior Vice President, Finance, Chief Financial
    Officer, Secretary and Director
|Donald L. Feucht   |  |     | 69 |             |  | Director                                                                           
|Andreas Hartmann   |  |     | 59 |             |  | Director                                                                           
|Samuel Kory        |  |     | 59 |             |  | Director                                                                           
|S. Joon Lee        |  |     | 63 |             |  | Director                                                                           
|Peter H. Ingram    |  |     | 54 |             |  | President of European Operations                                                   
|Kevin McDonough    |  |     | 51 |             |  | President of U.S. Operations                                                       

Nathan Zommer.Dr. Zommer, our founder, has served as a Director since our
inception in 1983, and has served as Chairman of the Board,
President and Chief Executive Officer since March 1993. From
1984 to 1993, Dr. Zommer served as our Executive Vice
President. Prior to founding IXYS, Dr. Zommer served in a
variety of positions with Intersil, Hewlett Packard and General
Electric, including as a scientist in the Hewlett Packard
Laboratories and Director of the Power MOS Division for
Intersil/ General Electric. Dr. Zommer received his B.S.
and M.S. degrees in Physical Chemistry from Tel Aviv University
and a Ph.D. in Electrical Engineering from Carnegie Mellon
University.

Arnold P. Agbayani.Mr. Agbayani has served as our Senior Vice President,
Finance, Chief Financial Officer, Secretary and Director since
1993. From 1989 to 1993, he served as our Controller. Prior to
joining us, Mr. Agbayani held various financial positions
with National Semiconductor, Fairchild Camera and Instruments,
ATARI and Frito-Lay. Mr. Agbayani received his B.S. in
Finance and an M.B.A. from Roosevelt University of Chicago.

Donald L. Feucht.Dr. Feucht has served as Director since July 2000. From
1992 until his retirement in 1998, Dr. Feucht served as
Vice President for Operations for Associated Western
Universities. He was employed as a Program Management Specialist
for EG&G Rocky Flats, Inc. from 1990 until 1992. Prior to
1990, Dr. Feucht served in several positions with the
National Renewable Energy Laboratory, or NREL, including Deputy
Director. Prior to joining NREL, he served as Professor of
Electrical Engineering and Associate Dean at Carnegie-Mellon
University. Dr. Feucht received his B.S. degree in
Electrical Engineering from Valparaiso University and his M.S.
and Ph.D. degrees in Electrical Engineering from Carnegie-Mellon
University.

Andreas Hartmann.Mr. Hartmann has served as a Director since November 1998.
Since 1990, he has served as Assistant General Counsel and Vice
President of ABB. Mr. Hartmann received his degree in law
from Erlangen Nurnberg University in 1970 and his degree in Law
from the Ministry of Justice of the State of Bavaria in 1973.

Samuel Kory.Mr. Kory has served as a Director since November 1999. In
1988, he founded Samuel Kory Associates, a management consulting
firm. Since founding the firm, Mr. Kory has served as the
firms sole proprietor and principal as well as a
consultant for the firm. Mr. Kory received his B.S.M.E.
from Pennsylvania State University in 1965.

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##### Table of Contents



S. Joon Lee.Dr. Lee has served as a Director since July 2000. Since
1990, Mr. Lee has served as President of Omni Electronics.
Dr. Lee also served as President of Adaptive Logic from
1991 until 1996. Dr. Lee received his B.S., M.S. and Ph.D.
degrees in Electrical Engineering from the University of
Minnesota.

Peter H. Ingram.Mr. Ingram has served as our President of European
Operations since 2000. From 1994 to 2000, he served as our Vice
President of European Operations. From 1989 to 1995, he served
as our Director of Wafer Fab Operations. Mr. Ingram worked
with the semiconductor operations of ABB from 1982 until we
acquired those operations in 1989. Mr. Ingram received an
Honors degree in Chemistry from the University of Nottingham.

Kevin McDonough.Mr. McDonough has served as our President of
U.S. Operations since 2001. From 1999 to 2000, he served as
our Vice President of U.S. Operations. From 1998 to 1999,
he served as our Director of Quality Assurance and Product
Engineering, and from 1990 to 1994, he served as our Director of
Operations and Quality Assurance. From 1995 to 1998,
Mr. McDonough served as Manager of Wafer Fab Foundries for
Advanced Micro Devices. Mr. McDonough received his B.S. in
Zoology from the University of California at Davis and his
M.B.A. from Oregon State University.

Section 16(a) Beneficial Ownership
Reporting Compliance

Section 16(a) of the Securities and Exchange
Act of 1934 requires our directors and executive officers and
persons who own more than ten percent of a registered class of
our equity securities to file with the SEC initial reports of
ownership and reports of changes in ownership of common stock
and other of our equity securities. Officers, directors and
greater than ten percent stockholders are required by SEC
regulation to furnish us with copies of all Section 16(a)
forms they file.

To our knowledge, based solely on a review of the
copies of such reports furnished to us during or with respect to
the fiscal year ended March 31, 2003, all
Section 16(a) filing requirements applicable to our
officers, directors and greater than ten percent beneficial
owners were complied with, except that
(i)  Messrs. Agbayani, Feucht, Kory and Lee each did
not file on a timely basis a Form 4 reporting a single
grant of an option to purchase shares of our common stock,
(ii) Dr. Zommer did not file on a timely basis a
Form 4 reporting a single grant of an option and a single
exercise of an option to purchase our common stock and
(iii) Mr. Ingram did not file on a timely basis a
Form 4 reporting a single grant of an option and two
exercises of options to purchase our common stock.
Messrs. Zommer, Agbayani, Ingram, Feucht, Kory and Lee each
have filed the required Form 4.

Item 11.     Executive
Compensation

The following table presents a summary of the
compensation paid by IXYS during the fiscal years ended
March 31, 2003, March 31, 2002 and March 31, 2001
to our President and Chief Executive Officer and to our

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##### Table of Contents



other executive officers whose annual salary and
bonus exceeded $100,000 for services rendered to us in all
capacities during such years.


|                            |                            |      |      |           |  |          |         |              |  |            |         |                 |  |  |        |        |  |  |         |         |  |  |       |        | 
|--------------------------- | -------------------------- | ---- | ---- | --------- |  | -------- | ------- | ------------ |  | ---------- | ------- | --------------- |  |  | ------ | ------ |  |  | ------- | ------- |  |  | ----- | ------ | 
|                            |                            |      |      |           |  |          |         | Other Annual |  | Securities |         |                
|                            |                            |      |      |           |  |          |         | Compensation |  | Underlying |         | All Other      
|Name and Principal Position |                            | Year |      | Salary($) |  | Bonus($) |         | ($)(2)       |  | Options(#) |         | Compensation($)
|                            |                            |      |      |           |  |          |         |              |  |            |         |                
|Nathan Zommer               |                            |      | 2003 |           |  |          | 400,000 |              |  |            | 160,000 | (1)             |  |  | 24,946 |        |  |  | 280,000 |         |  |  | 9,260 | (3)   
|                            | President and Chief        |      |      | 2002      |  |          |         | 315,962      |  |            |         | 300,000         |  |  |        | 32,217 |  |  |         | 160,000 |  |  |       | 13,083 | 
|                            | Executive Officer          |      |      | 2001      |  |          |         | 285,000      |  |            |         | 114,000         |  |  |        | 16,038 |  |  |         | 20,000  |  |  |       | 2,110  | 
|Arnold P. Agbayani          |                            |      | 2003 |           |  |          | 220,000 |              |  |            | 66,000  | (1)             |  |  | 28,875 |        |  |  | 125,000 |         |  |  | 2,830 | (4)   
|                            | Senior Vice President,     |      |      | 2002      |  |          |         | 176,154      |  |            |         | 110,000         |  |  |        | 32,217 |  |  |         | 95,000  |  |  |       | 2,830  | 
|                            | Finance, and Chief         |      |      | 2001      |  |          |         | 160,000      |  |            |         | 48,000          |  |  |        | 17,083 |  |  |         | 10,000  |  |  |       | 2,830  | 
|                            | Financial Officer          |      |      |           |  |          |         |              |  |            |         |                 |  |  |        |        |  |  |         |         |  |  |       |        | 
|Peter H. Ingram             |                            |      | 2003 |           |  |          | 178,895 |              |  |            |        |                 |  |  | 5,260  |        |  |  | 100,000 |         |  |  |      |       
|                            | President, European        |      |      | 2002      |  |          |         | 159,253      |  |            |         | 34,502          |  |  |        | 4,444  |  |  |         | 10,000  |  |  |       |       | 
|                            | Operations                 |      |      | 2001      |  |          |         | 161,466      |  |            |         | 22,240          |  |  |        | 4,560  |  |  |         |        |  |  |       |       | 
|Kevin McDonough             |                            |      | 2003 |           |  |          | 168,031 |              |  |            | 270     |                 |  |  | 7,200  |        |  |  | 40,000  |         |  |  | 8,426 | (5)   
|                            | President, U.S. Operations |      |      | 2002      |  |          |         | 146,454      |  |            |         |                |  |  |        | 7,200  |  |  |         | 50,000  |  |  |       | 7,893  | 
|                            |                            |      |      | 2001      |  |          |         | 127,000      |  |            |         | 15,000          |  |  |        | 7,200  |  |  |         |        |  |  |       |       | 



---



|    |                                                                                                                                      
|--- | -------------------------------------------------------------------------------------------------------------------------------------
|(1) | The discretionary portions of
    Dr. Zommers and Mr. Agbayanis bonuses for
    fiscal 2003 have yet to be determined.             
|   
|(2) | Includes car allowance, and for Dr. Zommer
    and Mr. Agbayani, tax equalization payments and tax
    planning and preparation fees.
|   
|(3) | Includes $7,150 in 401(k) matching contributions
    and $2,110 in premiums paid for term life insurance.                            
|   
|(4) | Represents premiums paid for term life insurance.                                                                                    
|   
|(5) | Represents 401(k) matching contributions.                                                                                            

Option Grants in Last Fiscal Year

The following table presents information for the
fiscal year ended March 31, 2003 with respect to each grant
of stock options to the executive officers named in the summary
compensation table above.

|                   |                        |                 |         |                |  |           |      |            |  |                               |      |      |  |  |          |          |  |   |           |         |  |   |           |         | 
|------------------ | ---------------------- | --------------- | ------- | -------------- |  | --------- | ---- | ---------- |  | ----------------------------- | ---- | ---- |  |  | -------- | -------- |  | - | --------- | ------- |  | - | --------- | ------- | 
|                   |                        |                 |         |                |  |           |      |            |  |                              
|                   |                        |                 |         |                |  |           |      |            |  | Potential Realizable Value at
|                   |                        |                 |         |                |  |           |      |            |  | Assumed Annual Rates of      
|                   |                        | # of Securities |         | % of Total     |  |           |      |            |  | Stock Price Appreciation     
|                   |                        | Underlying      |         | Options        |  | Exercise  |      |            |  | for Term(3)                  
|                   |                        | Options         |         | Granted in     |  | Price Per |      | Expiration |  |                              
|Name               |                        | Granted(1)      |         | Fiscal Year(2) |  | Share($)  |      | Date       |  | 5%                            |      | 10% 
|                   |                        |                 |         |                |  |           |      |            |  |                               |      |     
|Nathan Zommer      |                        |                 | 267,164 |                |  |           | 30.1 |            |  |                               | 7.79 |      |  |  | 11/14/12 |          |  | $ | 1,308,859 |         |  | $ | 3,316,908 |        
|                   | President and Chief    |                 |         | 12,836         |  |           |      | 1.4        |  |                               |      | 7.79 |  |  |          | 11/14/12 |  |   |           | 62,885  |  |   |           | 159,362 | 
|                   | Executive Officer      |                 |         |                |  |           |      |            |  |                               |      |      |  |  |          |          |  |   |           |         |  |   |           |         | 
|Arnold P. Agbayani |                        |                 | 33,000  |                |  |           | 3.7  |            |  |                               | 4.64 |      |  |  | 07/21/12 |          |  |   | 96,296    |         |  |   | 244,034   |        
|                   | Senior Vice President, |                 |         | 7,000          |  |           |      | 0.8        |  |                               |      | 4.64 |  |  |          | 07/21/12 |  |   |           | 20,426  |  |   |           | 51,765  | 
|                   | Finance, and Chief     |                 |         | 75,464         |  |           |      | 8.5        |  |                               |      | 7.08 |  |  |          | 11/14/12 |  |   |           | 336,009 |  |   |           | 851,513 | 
|                   | Financial Officer      |                 |         | 9,536          |  |           |      | 1.1        |  |                               |      | 7.08 |  |  |          | 11/14/12 |  |   |           | 42,460  |  |   |           | 107,601 | 
|Peter H. Ingram    |                        |                 | 43,081  |                |  |           | 4.8  |            |  |                               | 4.64 |      |  |  | 07/21/12 |          |  |   | 125,713   |         |  |   | 486,113   |        
|                   | President, European    |                 |         | 16,919         |  |           |      | 1.9        |  |                               |      | 4.64 |  |  |          | 07/21/12 |  |   |           | 49,371  |  |   |           | 190,909 | 
|                   | Operations             |                 |         | 32,758         |  |           |      | 3.7        |  |                               |      | 7.08 |  |  |          | 11/14/12 |  |   |           | 145,857 |  |   |           | 369,631 | 
|                   |                        |                 | 7,242   |                |  |           | 0.8  |            |  |                               | 7.08 |      |  |  | 11/14/12 |          |  |   | 32,246    |         |  |   | 81,717    |        
|Kevin McDonough    |                        |                 | 31,007  |                |  |           | 3.5  |            |  |                               | 4.64 |      |  |  | 07/21/12 |          |  |   | 90,481    |         |  |   | 229,296   |        
|                   | President, U.S.        |                 |         | 8,993          |  |           |      | 1.0        |  |                               |      | 4.64 |  |  |          | 07/21/12 |  |   |           | 26,242  |  |   |           | 66,503  | 
|                   | Operations             |                 |         |                |  |           |      |            |  |                               |      |      |  |  |          |          |  |   |           |         |  |   |           |         | 



---



|    |                                                                                                                                                                                                                           
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Options granted to each individual were granted
    pursuant to the IXYS 1999 Equity Incentive Plan and are subject
    to the terms of such plan. Exercise prices for these options are
    equal to the closing price of

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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | IXYSs common stock on the Nasdaq National
    Market on the date of grant, except Dr. Zommers
    options were priced 10% above such closing price.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   
|(2) | Based on an aggregate of 888,750 options granted
    to employees and consultants of IXYS in fiscal year 2003
    including the named executive officers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   
|(3) | The potential realizable value is calculated
    based on the term of the option at its time of grant
    (10) years and is calculated by assuming that the stock
    price on the date of grant appreciates at the indicated annual
    rate compounded annually for the entire term of the option and
    that the option is exercised and sold on the last day of its
    term for the appreciated price. The 5% and 10% assumed rates of
    appreciation are derived from the rules of the Securities and
    Exchange Commission and do not represent IXYSs estimate or
    projection of the future price of its common stock.

Aggregated Option Exercises in Last Fiscal
Year and Last Fiscal Year-End Option Values

The following table sets forth information with
respect to the number of securities underlying unexercised
options held by the named executive officers as of
March 31, 2003 and the value of unexercised in-the-money
options as of March 31, 2003.

|                   |                                                                |           |   |          |  |                        |   |                             |  |             |         |               |  |  |         |  |  |  |           |  |  |  |         |  | 
|------------------ | -------------------------------------------------------------- | --------- | - | -------- |  | ---------------------- | - | --------------------------- |  | ----------- | ------- | ------------- |  |  | ------- |  |  |  | --------- |  |  |  | ------- |  | 
|                   |                                                                |           |   |          |  |                        |   |                             |  |            
|                   |                                                                |           |   |          |  | Number of Securities   |   |                            
|                   |                                                                | Number    |   |          |  | Underlying Unexercised |   | Value of Unexercised In The
|                   |                                                                | of Shares |   |          |  | Options at March 31,   |   | Money Options at March 31, 
|                   |                                                                | Acquired  |   | Value    |  | 2003(#)                |   | 2003($)(2)                 
|                   |                                                                | on        |   | Realized |  |                        |   |                            
|Name               |                                                                | Exercise  |   | ($)(1)   |  | Exercisable            |   | Unexercisable               |  | Exercisable |         | Unexercisable
|                   |                                                                |           |   |          |  |                        |   |                             |  |             |         |              
|Nathan Zommer      |                                                                |           |  |          |  |                        |  |                             |  |             | 733,626 |               |  |  | 442,500 |  |  |  | 1,819,223 |  |  |  | 70,860  | 
|                   | President and Chief Executive Officer                          |           |   |          |  |                        |   |                             |  |             |         |               |  |  |         |  |  |  |           |  |  |  |         |  | 
|Arnold P. Agbayani |                                                                |           |  |          |  |                        |  |                             |  |             | 160,176 |               |  |  | 208,250 |  |  |  | 362,232   |  |  |  | 32,330  | 
|                   | Senior Vice President, Finance and Chief
    Financial Officer |           |   |          |  |                        |   |                             |  |             |         |               |  |  |         |  |  |  |           |  |  |  |         |  | 
|Peter H. Ingram    |                                                                |           |  |          |  |                        |  |                             |  |             | 189,226 |               |  |  | 141,000 |  |  |  | 421,935   |  |  |  | 98,445  | 
|                   | President, European Operations                                 |           |   |          |  |                        |   |                             |  |             |         |               |  |  |         |  |  |  |           |  |  |  |         |  | 
|Kevin McDonough    |                                                                |           |  |          |  |                        |  |                             |  |             | 212,600 |               |  |  | 126,000 |  |  |  | 453,742   |  |  |  | 107,840 | 
|                   | President, U.S. Operations                                     |           |   |          |  |                        |   |                             |  |             |         |               |  |  |         |  |  |  |           |  |  |  |         |  | 



---



|    |                                                                                                                                                     
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The value realized is based on the fair market
    value of IXYSs common stock on the date of exercise minus
    the exercise price.               
|   
|(2) | The valuations are based on the fair market value
    of IXYSs common stock on March 31, 2003 of $5.29
    minus the exercise price of the options.

Director Compensation

Each of our non-employee directors except for
Mr. Hartmann receives an annual retainer of $10,000 as well
as $1,000 for each meeting of the board he attends and $600 for
each committee meeting he attends. In fiscal 2003, the total
compensation paid to non-employee directors was $64,100.
Additionally, each of our directors except for Mr. Hartmann
is reimbursed for certain expenses in connection with attendance
at our board and committee meetings and is reimbursed for
expenses incurred in preparing their personal income tax returns
and estate planning matters. Mr. Hartmann serves on our
board of directors in accord with a consulting agreement between
ABB and us and does not receive compensation from us for his
service.

Our 1999 Non-Employee Directors Equity
Incentive Plan provides for the grant of options to non-employee
directors pursuant to a discretionary grant mechanism
administered by our board. These options vest over a period of
time, to be determined in each case by the board, so long as the
optionee remains a non-employee director. Each director
currently receives an option to acquire 30,000 shares upon
becoming a member of our board of directors. Prior to
July 29, 2002, each director could receive a loan from us
for up to

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$100,000, payable in three years from the date of
issuance, for use in exercising his options or paying taxes in
connection with such exercise of options.


During the last fiscal year, we granted options
covering 10,000 shares to each of Messrs. Feucht, Kory and
Lee, at an exercise price per share of $7.08. Each option had an
exercise price equal to the fair market value of such common
stock on the date of grant (based on the closing sales price
reported on the Nasdaq National Market for the date of grant).
As of March 31, 2003, options had been exercised under the
Directors Plan to purchase 8,250 shares of Common Stock.

Employment Contracts and Change-in-Control
Arrangements

We entered into an employment agreement, dated as
of January 1, 1995, with Dr. Nathan Zommer, our Chief
Executive Officer. The agreement provides for, among other
things, salaries, bonuses and car allowances as determined by
our board of directors. Under the terms of the agreement, we
agree to maintain term life insurance in the amount of
$1,000,000. In addition, the agreement provides that if we
terminate Dr. Zommers employment without cause,
Dr. Zommer shall be entitled to receive as severance his
monthly salary, incremented one month per year of service to us,
to a maximum of twelve months. The agreement also provides
Dr. Zommer with a paid annual physical exam and the limited
services of a financial advisor.

Dr. Zommers employment agreement was
amended on July 1, 1998 to extend its term to
January 31, 2004. In the amended agreement,
Dr. Zommers annual bonus is 40% of his base salary,
which was increased to $285,000. In addition, he is eligible for
an incentive bonus of three times his base annual salary in the
event of certain transactions significantly affecting us,
including a reorganization, consolidation, merger and sale of
our stock or assets. If his employment terminates within a year
after a change of control event, Dr. Zommer is entitled to
receive severance equal to three times his average annual
compensation, continued benefits for 18 months and
accelerated vesting of all option shares. Effective
January 1, 2002, Dr. Zommers base salary was
increased to $400,000.

We entered into an employment agreement, dated as
of January 1, 1995, with Mr. Arnold P. Agbayani, our
Chief Financial Officer. The agreement provides for, among other
things, salaries, bonuses and car allowances as determined by
our board of directors. Under the terms of the agreement, we
agree to maintain term life insurance in the amount of
$1,000,000. In addition, the agreement provides that if we
terminate Mr. Agbayanis employment without cause, Mr.
Agbayani shall be entitled to receive as severance his monthly
salary, incremented one month per year of service to us, to a
maximum of twelve months. The agreement also provides
Mr. Agbayani with a paid annual physical exam and the
limited services of a financial advisor.

Mr. Agbayanis employment agreement was
amended on July 1, 1998 to extend its term to
January 31, 2004. In the amended agreement,
Mr. Agbayanis annual bonus is 30% of his base salary,
which was increased to $160,000. In addition, he is eligible for
an incentive bonus of three times his annual base salary in the
event of certain transactions significantly affecting us,
including a reorganization, consolidation, merger and sale of
our stock or assets. If his employment terminates within a year
after a change of control event, Mr. Agbayani is entitled
to receive severance equal to three times his average annual
compensation, continued benefits for 18 months and
accelerated vesting of all option shares. Effective
January 1, 2002, Mr. Agbayanis base salary was
increased to $220,000.

Compensation Committee Interlocks and Insider
Participation

The members of the Compensation Committee for the
fiscal year ended March 31, 2003 were Messrs. Feucht,
Kory and Hartmann. None of the members of the Compensation
Committee is an employee or officer of IXYS. Mr. Kory was,
during the early 1980s, a Vice President of a predecessor of
IXYS. None of our executive officers serves as a member of the
board of directors or compensation committee of any other entity
that has one or more executive officers serving on our Board or
Compensation Committee.

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

The following table presents, as of May 15,
2003, certain information known to IXYS regarding the beneficial
ownership of our common stock by:



| |   |                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------
| |  | each person who is known by us to be the
    beneficial owner of more than five percent of our outstanding
    shares of common stock;
|
| |  | each of our directors;                                                                                                                
|
| |  | each of the named executive officers; and                                                                                             
|
| |  | directors and executive officers as a group.                                                                                          

Beneficial ownership has been determined in
accordance with Rule 13d-3 under the Securities Exchange
Act of 1934. Under this rule, certain shares may be deemed to be
beneficially owned by more than one person, if, for example,
persons share the power to vote or the power to dispose of the
shares. In addition, shares are deemed to be beneficially owned
by a person if the person has the right to acquire shares, for
example, upon exercise of an option or warrant, within
60 days of May 15, 2003. In computing the percentage
ownership of any person, the amount of shares is deemed to
include the amount of shares beneficially owned by such person,
and only such person, by reason of such acquisition rights. As a
result, the percentage of outstanding shares of any person as
shown in the following table does not necessarily reflect the
persons actual voting power at any particular date.

The percentage of beneficial ownership for the
following table is based on the 31,865,135 shares of our
common stock outstanding as of May 15, 2003. Unless
otherwise indicated, the address for each listed stockholder is:
c/o IXYS Corporation, 3540 Bassett Street, Santa Clara,
California 95054. To our knowledge, except as otherwise
indicated in the footnotes to this table and pursuant to
applicable community property laws, the persons named in the
table have sole voting and investment power with respect to all
shares of common stock.

|                                                                    |                                  |              |           |          |  |  |      |   | 
|------------------------------------------------------------------- | -------------------------------- | ------------ | --------- | -------- |  |  | ---- | - | 
|                                                                    |                                  |             
|                                                                    |                                  | Beneficial  
|                                                                    |                                  | Ownership(1)
|                                                                    |                                  |             
|                                                                    |                                  | Number of    |           | Percent 
|Name and Address of Beneficial Owner                                |                                  | Shares       |           | of Total
|                                                                    |                                  |              |           |         
|Directors and Executive Officers                                    |                                  |              |           |          |  |  |      |  
|Nathan Zommer(2)                                                    |                                  |              | 7,470,226 |          |  |  | 22.9 | %
|Arnold P. Agbayani(3)                                               |                                  |              | 697,047   |          |  |  | 2.2  |  
|Peter H. Ingram(4)                                                  |                                  |              | 573,630   |          |  |  | 1.8  |  
|Kevin McDonough(5)                                                  |                                  |              | 238,843   |          |  |  | *    |  
|Donald L. Feucht(6)                                                 |                                  |              | 38,250    |          |  |  | *    |  
|Andreas Hartmann(7)                                                 |                                  |              |          |          |  |  | *    |  
|Samuel Kory(8)                                                      |                                  |              | 40,200    |          |  |  | *    |  
|S. Joon Lee(9)                                                      |                                  |              | 38,250    |          |  |  | *    |  
|All directors and executive officers as a group
    (8 persons)(10) |                                  |              | 9,096,446 |          |  |  | 27.3 |  
|5% Stockholders                                                     |                                  |              |           |          |  |  |      |  
|ABB, Ltd. (11)                                                      |                                  |              | 6,068,281 |          |  |  | 19.0 |  
|                                                                    | Gottlieb-Daimler Strasse 8       |              |           |          |  |  |      |   | 
|                                                                    | 68165 Mannheim, Germany          |              |           |          |  |  |      |   | 
|Kern Capital Management, LLC(12)                                    |                                  |              | 3,293,200 |          |  |  | 10.3 |  
|                                                                    | 114 West 47th Street, Suite 1926 |              |           |          |  |  |      |   | 
|                                                                    | New York, NY 10036               |              |           |          |  |  |      |   | 



---



|  |                         
|- | ------------------------
|* | Represents less than 1%.

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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | This table is based upon information supplied by
    officers, directors and principal stockholders and Schedules 13D
    and 13G filed with the Securities and Exchange Commission.
    Unless otherwise indicated in the footnotes to this table and
    subject to community property laws where applicable, we believe
    that each of the stockholders named in this table has sole
    voting and investment power with respect to the shares indicated
    as beneficially owned.
|   
|(2) | Includes an aggregate of 5,200 shares held
    by or on behalf of Dr. Zommers children. Also
    includes 771,626 shares Dr. Zommer has the right to
    acquire pursuant to options exercisable within 60 days of
    May 15, 2003.                                                                                                                                                                                                                                                    
|   
|(3) | Includes 173,301 shares Mr. Agbayani
    has the right to acquire pursuant to options exercisable within
    60 days of May 15, 2003.                                                                                                                                                                                                                                                                                                                                                    
|   
|(4) | Includes 206,476 shares Mr. Ingram has
    the right to acquire pursuant to options exercisable within
    60 days of May 15, 2003.                                                                                                                                                                                                                                                                                                                                                      
|   
|(5) | Includes 235,600 shares Mr. McDonough
    has the right to acquire pursuant to options exercisable within
    60 days of May 15, 2003.                                                                                                                                                                                                                                                                                                                                                   
|   
|(6) | Consists of shares Mr. Feucht has the right
    to acquire pursuant to options exercisable within 60 days
    of May 15, 2003.                                                                                                                                                                                                                                                                                                                                                           
|   
|(7) | Mr. Hartmann is a Vice President of Asea
    Brown Boveri AG. Mr. Hartmann disclaims beneficial
    ownership of the ABB shares and does not have voting or
    investment power with respect to the ABB shares.                                                                                                                                                                                                                                                                         
|   
|(8) | Includes 31,950 shares Mr. Kory has the
    right to acquire pursuant to options exercisable within
    60 days of May 15, 2003.                                                                                                                                                                                                                                                                                                                                                         
|   
|(9) | Consists of shares Mr. Lee has the right to
    acquire pursuant to options exercisable within 60 days of
    May 15, 2003.                                                                                                                                                                                                                                                                                                                                                              



|     |                                                                                                                                                                                                                                                                                                                                                                                                           
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(10) | See footnotes 1 through 9 above.                                                                                                                                                                                                                                                                                                                                                                          
|    
|(11) | Based on a Schedule 13D/ A filed by ABB,
    Ltd. and Asea Brown Boveri AG on October 17, 2002. The
    shares are held by ABB, Ltd.s wholly owned subsidiary,
    Asea Brown Boveri AG. Mr. Hartmann is a Vice President of
    Asea Brown Boveri AG. Mr. Hartmann disclaims beneficial
    ownership of the ABB shares and does not have voting or
    investment power with respect to the ABB shares.
|    
|(12) | Based on a Schedule 13G/ A filed by Kern
    Capital Management LLC on May 9, 2003. Robert E.
    Kern, Jr. and David G. Kern as controlling members of such
    entity may be deemed the beneficial owner of the shares. They
    disclaim beneficial ownership of the shares.                                                                                                                           






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

Related Party Transactions

CEO Transactions.Dr. Zommer travels extensively on
our behalf in his work. As a consequence, he is often away from
home when personal bills become due. As an accommodation, we
have paid his personal expenses using our funds and generally
deducted such amounts from his pay. During fiscal year 2003, the
amount due to Dr. Zommer in accrued but unpaid bonuses
exceeded the unresolved amount for his personal expenses.
Although the aggregate amount of such transactions during fiscal
2003 was approximately $222,484, the unresolved amount did not
exceed $40,000 at any one time. In recognition of the heightened
sensitivity regarding transactions involving executive officers,
this accommodation has been discontinued and there is currently
no amount unresolved.

Stock Purchase Notes.On November 18, 1995,
Dr. Zommer and Mr. Agbayani purchased shares of common
stock. The shares were paid for with recourse promissory notes
in principal amount of $707,238.83 for Dr. Zommer and
$51,331.85 for Mr. Agbayani. The note terms provide that
between September 15, 2003 and September 15, 2005,
quarterly installments of principal and accrued interest are
due, and all principal of the notes, plus accrued interest, is
due and payable September 15, 2005. The notes bear interest
at a rate of 6.25% per annum compounded annually. In the event
that either Dr. Zommer or Mr. Agbayani sell shares of

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our common stock currently held by him, a
mandatory prepayment in an amount equal to 30.0% of the net sale
proceeds is due from him. In the event of termination of
employment, any unpaid principal and interest become due and
payable. In the event of a change of control, as defined in the
notes, the notes mature within 12 months, provided the
change in control occurs before September 15, 2004.


Business Relationships with Principal
Stockholders.ABB is one of our
principal stockholders. In fiscal year 2003, we generated
revenues of $2.7 million from sales of products to ABB and
to ABBs affiliates for use as components in their products.

Indemnification Agreements of Directors and
Executive Officers.We have entered
into indemnity agreements with our executive officers and
directors containing provisions that may require us, among other
things, to indemnify them against certain liabilities that may
arise by reason of their status or services as officers or
directors.






|         |                        
|-------- | -----------------------
|Item 14. | Controls and Procedures

Within the 90-day period immediately preceding
the filing of this Form 10-K, an evaluation was carried out
under the supervision and with the participation of our Chief
Executive Officer and our Chief Financial Officer of the
effectiveness of the design and operation of our disclosure
controls and procedures (as defined in Rule 13a-14(c) under
the Exchange Act). This evaluation included various processes
that were carried out in an effort to ensure that information
required to be disclosed in our SEC reports is recorded,
processed, summarized and reported within the time periods
specified by the SEC. This evaluation also included
consideration of our internal controls and procedures for the
preparation of our financial statements.

In evaluating these internal controls we sought
to determine whether there were any significant
deficiencies and in particular whether there were any
material weaknesses. Under the applicable accounting
literature, significant deficiencies are referred to
as reportable conditions, which are control issues
that could have a significant adverse effect on our ability to
record, process, summarize and report financial data in the
financial statements. A material weakness is defined
as a particularly serious reportable condition where the
internal control does not reduce to a relatively low level the
risk that misstatements caused by the error may occur in amounts
that would be material in relation to the financial statements
and that such misstatements would not be detected timely by
employees in the normal course of performing their assigned
functions.

Our audit committee has been made aware of three
specific reportable conditions relating to our operations which
were considered to be material weaknesses for the
year ended March 31, 2003 under standards established by
the American Institute of Certified Public Accountants, and a
fourth material weakness resulting from the effect of a number
of reportable conditions taken together or in combination.

Our auditors, PricewaterhouseCoopers LLP, or PwC,
as a result of their annual financial statement audit procedures
for the fiscal year March 31, 2003 have informed us of
certain material weaknesses and reportable conditions. In the
planning and performance of the audit, PwC considered the
internal controls in order to determine the auditing procedures
for the purpose of expressing PwCs opinion on the
financial statements and not to provide assurance on internal
controls. Had PwC performed an attestation engagement of the
internal controls as of March 31, 2003, other reportable
conditions and/or material weaknesses may have come to the
attention of PwC. The identified material weaknesses as a result
of the PwC audit procedures are as follows:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | financial statement consolidations that place a
    great strain on the limited personnel resources of our finance
    organization, resulting in inadequate time for management to
    perform its financial review on a timely basis;                                                                                                                                                                                                                                      
|
| |  | deficiencies in our inventory accounting,
    including the need to establish, compute and adequately update
    standard inventory costs, completely eliminate intercompany
    profits, track inventory variances and establish a formal policy
    to reconcile and review inventory balances, as well as
    inadequate monthly reconciliations of the general ledger with
    the inventory subsystem and insufficient review by management of
    such reconciliations;

71



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| |   |                                                                                                                                                                                                                                                                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | problems with the monthly close at Clare,
    particularly in its timing, procedures and the content of the
    reports prepared, and limited personnel resources at Clare,
    resulting in inadequate time for review by our finance
    management and for adjustment prior to the audit; and                                                               
|
| |  | several additional conditions relating to the
    Companys internal accounting and disclosure controls that,
    in the context of the overall control environment and the
    current lack of accounting personnel resources, are considered
    reportable conditions and that, when taken together, represent a
    material weakness in internal controls.

The Companys Chief Executive Officer, Chief
Financial Officer, and Audit Committee are aware of these
conditions. The following factors contributed to the
aforementioned control conditions:



| |   |                                                                                 
| | - | --------------------------------------------------------------------------------
| |  | rapid growth of the Company through acquisitions;                               
|
| |  | significant turnover and other issues related to
    key finance personnel; and,
|
| |  | integration of legacy accounting and information
    systems.                   

In connection with our announcement of
May 13, 2003, regarding certain errors discovered in our
accounting for inventories at our Santa Clara, California
location, as of June 30, 2002, September 30, 2002, and
December 31, 2002, the audit committee engaged an
independent accounting firm other than PwC to review among
other items, our inventory system and its impact on the
financial statements. The independent accounting firm has
completed their assignment and has reported to the audit
committee. Their observations regarding the problems in our
inventory accounting and related internal controls largely
paralleled those of PwC.

Certain of the material weaknesses and reportable
conditions may also constitute deficiencies in our disclosure
controls. In light of these material weaknesses and reportable
conditions and the requirements enacted in the Sarbanes-Oxley
Act of 2002 and the related rules and regulations adopted by the
SEC, our Chief Executive Officer and Chief Financial Officer
concluded, as of the date of the evaluation, that our disclosure
controls and procedures needed improvement and were not
adequately effective. We have performed additional procedures
designed to limit the risk that these material weaknesses and
reportable conditions would lead to inaccuracies in our
financial statements and to enable the completion of PwCs
audit of the year ended March 31, 2003. Management believes
there are no material inaccuracies or omissions in this
Form 10-K.

We have taken the following steps to address our
material weaknesses:



| |   |                                                                                      
| | - | -------------------------------------------------------------------------------------
| |  | we employed a controller at Clare and                                                
|
| |  | designed and implemented additional procedures
    for the accounting of inventories.

We intend to implement additional changes to our
internal controls in the future to address the material
weaknesses and reportable conditions. We will consider
implementation of the following, as well as other additional
procedures:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | employing additional finance and accounting
    personnel;                                                                                                                                                                                                                                                                                                                                                          
|
| |  | designing and implementing procedures to
    strengthen our internal controls;                                                                                                                                                                                                                                                                                                                                      
|
| |  | reviewing our accounting systems with a view
    towards upgrading them; and                                                                                                                                                                                                                                                                                                                                        
|
| |  | developing a strategy for formalizing the
    consolidated enterprises internal controls and procedures
    for financial reporting in accordance with the SECs
    proposed rules to implement the internal control report
    requirements included in Section 404 of the Sarbanes-Oxley
    Act. It is possible that additional changes will be made to our
    internal controls as a result of these efforts.

We have committed significant resources to
address the internal control deficiencies identified to date.
However, many of the salutary procedures and actions deemed
desirable by management have not been implemented to date. It
will take additional time to complete implementation and realize
the benefits of our actions.

72



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##### Table of Contents



We are committed to ongoing periodic reviews of
our controls and their effectiveness. Controls are improving and
we have no reason to believe that the financial statements
included in this report are not fairly stated in all material
respects. However, new problems could be identified in the
future. We expect to continue to improve controls during each
quarter in a multi-period effort to achieve disclosure controls
and procedures and internal controls satisfactory for a company
of our size in the semiconductor industry.






PART IV







|         |                                                                     
|-------- | --------------------------------------------------------------------
|Item 15. | Exhibits, Financial Statement Schedules,
    and Reports on Form 8-K

(a) The following documents are filed as
part of this report:

(1) Financial Statements

|                                                                                                            |  |      |    | 
|----------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                                                                                            |  | Page
|                                                                                                            |  |     
|Report of PricewaterhouseCoopers LLP, Independent
    Accountants                                           |  |      | 35 | 
|Consolidated Balance Sheets as of March 31,
    2003 and 2002                                               |  |      | 36 | 
|Consolidated Statement of Operations for the
    years ended March 31, 2003, 2002 and 2001                  |  |      | 37 | 
|Consolidated Statement of Comprehensive Income
    (Loss) for the years ended March 31, 2003, 2002 and 2001 |  |      | 38 | 
|Consolidated Statement of Stockholders
    Equity for the years ended March 31, 2003, 2002 and 2001        |  |      | 39 | 
|Consolidated Statements of Cash Flows for the
    years ended March 31, 2003, 2002 and 2001                 |  |      | 40 | 
|Notes to Consolidated Financial Statements                                                                  |  |      | 41 | 



| |     |                                                                                                                                                                                                                                                        
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (2) | Financial statements schedules. The schedules
    required pursuant to this item are included elsewhere in this
    Annual Report on Form 10-K as part of the Notes to
    Consolidated Financial Statements under
    Item 8  Financial Statements.
|
| | (3) | Exhibits.                                                                                                                                                                                                                                              

|      |  |                                                                                                                                                                                                                                                                                                                                                                                                               
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |  | Exhibit Title                                                                                                                                                                                                                                                                                                                                                                                                 
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                               
|2.1   |  | Agreement and Plan of Merger and Reorganization,
    dated as of April 22, 2002, among IXYS Corporation
    (IXYS), Teacup Acquisition Corp. and Clare, Inc.
    (included as Annex A to the Joint Proxy Statement/ Prospectus
    which forms part of the Registration Statement on Form S-4
    of IXYS, as amended (333-87758)(the IXYS S-4)
    and incorporated herein by reference).                
|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* |  | First Amended Executive Employment Agreement,
    dated as of July 1, 1998, by and between IXYS and Nathan
    Zommer (filed on July 7, 1998 as Exhibit 10.1 to
    Amendment No. 2 to the Registration Statement on
    Form S-4 of Paradigm Technology, Inc., (No. 333-57003)
    (Amendment No. 2 to the Paradigm S-4) and
    incorporated herein by reference).                                        
|10.2* |  | First Amended Executive Employment Agreement,
    dated as of July 1, 1998, by and between IXYS and Arnold
    Agbayani (filed on July 7, 1998 as Exhibit 10.2 to
    Amendment No. 2 to the Paradigm S-4 and incorporated
    herein by reference).                                                                                                                                                          
|10.3  |  | 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).
|10.4  |  | Lampertheim Contractual Purchase Deed and
    Conveyance, dated as of February 26, 1997 (filed on
    June 29, 1998 as Exhibit 10.4 to Amendment No. 1
    to the Paradigm S-4 and incorporated herein by reference).                                                                                                                                                                                         
|10.5  |  | Loan Agreement, dated as of February 27,
    1997, by and between IXYS and Commerzbank, Aktiengesellschaft,
    Mannheim Branch (filed on June 29, 1998 as
    Exhibit 10.5 to Amendment No. 1 to the
    Paradigm S-4 and incorporated herein by reference).                                                                                                                                                 

73



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|       |  |                                                                                                                                                                                                                                                                                                                                                       
|------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |  | Exhibit Title                                                                                                                                                                                                                                                                                                                                         
|       |  |                                                                                                                                                                                                                                                                                                                                                       
|10.6   |  | Loan and Security Agreement, dated as of
    December 24, 1997, by and between IXYS and Bank of the West
    (filed on June 29, 1998 as Exhibit 10.6 to Amendment
    No. 1 to the Paradigm S-4 and incorporated herein by
    reference).                                                                                                            
|10.7*  |  | 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).                                                                                                                  
|10.8*  |  | 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).                                                                                                                
|10.9*  |  | Indemnity Agreement, dated November 20,
    1999, by and between IXYS and Andreas Hartmann (filed on
    June 28, 2001 as Exhibit 10.9 to the Annual Report on
    Form 10-K (No. 000-26124) and incorporated herein by
    reference).                                                                                                               
|10.10* |  | 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).                                                                                                                   
|10.11* |  | 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).                                                                                                               
|10.12* |  | 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).                                                                                                                  
|10.13* |  | 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).                                                                                                                 
|10.14* |  | 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).                                                                                                                      
|10.15* |  | 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).                                                                                                                                                   
|10.16* |  | 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).                                                                                                                                                                      
|10.17* |  | 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).                                                                                                                                                               
|10.18* |  | 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).                                                                                                                                              
|10.19  |  | Amendment of Lease by and between Mission West
    Properties, L.P. and IXYS Corporation, dated as of
    September 30, 1998 (filed on July 8, 1999 as
    Exhibit 10.13 to the Annual Report on Form 10-K
    (No. 000-26124) and incorporated herein by reference).                                                                                 
|10.20  |  | Registration and Stockholder Rights Agreement, by
    and between IXYS, Asea Brown Boveri AG, and Asea Brown Boveri,
    Inc., dated September 23, 1998 (filed on November 16,
    1998 as Exhibit 10 to the Quarterly Report on
    Form 10-Q (No. 000-26124) and incorporated herein by
    reference).                                             
|10.21* |  | 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).
|10.22* |  | 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).                                                                                 

74



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|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |  | Exhibit Title                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|10.23* |  | 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).                                                                                                                                                                                                                                                                                                                                                 
|10.24* |  | 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).                                                                                                                                                                                                                                                                                                                                   
|10.25  |  | Commitment Letter from Commerzbank,
    Aktiengesellschaft, Mannheim Branch to IXYS Semiconductor GmbH,
    dated July 28, 2000, with English language translation
    (filed on October 23, 2000 as Exhibit 10.5 to
    Amendment No. 3 to the S-3 and incorporated herein by
    reference).                                                                                                                                                                                                                                                                                                           
|10.26  |  | General Business Conditions with regard to
    Commitment Letter from Commerzbank, Aktiengesellschaft, Mannheim
    Branch to IXYS Semiconductor GmbH, dated July 28, 2000,
    with English language translation (filed on October 23,
    2000 as Exhibit 10.6 to Amendment No. 3 to the S-3 and
    incorporated herein by reference).                                                                                                                                                                                                                                                                
|10.27  |  | General Business Conditions with regard to Loan
    Agreement, dated as of February 27, 1997, by and between
    IXYS and Commerzbank, Aktiengesellschaft, Mannheim Branch, with
    English language translation (filed on October 23, 2000 as
    Exhibit 10.7 to Amendment No. 3 to the S-3 and
    incorporated herein by reference).                                                                                                                                                                                                                                                                
|10.28* |  | Noncompetition Agreement, by and between IXYS and
    Larry Mihalchik, dated May 13, 2002 (filed as
    Exhibit 10.8 to Amendment No. 1 to the IXYS S-4
    and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                       
|10.29* |  | Recourse Promissory Note issued to IXYS by
    Samuel J. Kory, effective as of August 30, 2001 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).                                                                                                                                                                                                                                                                                                                             
|10.30* |  | 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).                                                                                                                                                                                                                                                                                                                             
|10.31* |  | Indemnity Agreement by and between IXYS and Larry
    Mihalchik, dated as of June 27, 2002 (filed on
    August 14, 2002 as Exhibit 10.31 to the Quarterly
    Report on Form 10-Q (No. 000-26124) and incorporated
    herein by reference).                                                                                                                                                                                                                                                                                                                                                            
|10.32* |  | CP Clare Corporation 1995 Stock Option and
    Incentive Plan (filed on July 10, 2002 as Exhibit 99.1
    to the Registration Statement on Form S-8 (333-92204) and
    incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                               
|10.33* |  | C.P. Clare Corporation Non-Qualified Stock Option
    Plan (filed on July 10, 2002 as Exhibit 99.2 to the
    Registration Statement on Form S-8 (333-92204) and
    incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                  
|23.1   |  | Consent of PricewaterhouseCoopers LLP.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|24.1   |  | Power of Attorney (included on the signature page)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|99.1   |  | Certification pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002 (this certification
    accompanies the Annual Report on Form 10-K to
    which it relates, pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002, and is not deemed filed with the
    Securities and Exchange Commission and is not to be incorporated
    by reference into any of our filings under the Securities Act or
    the Exchange Act (whether made before or after the date of the
    Annual Report on Form 10-K), irrespective of any general
    incorporation language contained in such filing).



---



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

(b) Reports on Form 8-K

No report on Form 8-K was filed during the
quarter ended March 31, 2003.

(c) Exhibits

See Item 15(a) above.

(d) Financial Statement Schedules

See Item 15(a) above.

75



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##### Table of Contents



SIGNATURES

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



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



| |     |                  
| | --- | -----------------
| | By: | /s/ NATHAN ZOMMER

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

Dated: July 14, 2003

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each
person whose signature appears below constitutes and appoints
Nathan Zommer and Arnold P. Agbayani, and each or any one of
them, his true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this
Report, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and
perform each and every act and thing requisite and necessary to
be done in connection therewith, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of
them, or their or his substitutes or substitute, may lawfully do
or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the Registrant and in the
capacities and on the dates indicated.

|                                         |  |                                                                                                                                    |  |               |  | 
|---------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------- |  | ------------- |  | 
|                                         |  |                                                                                                                                    |  |              
|Signature                                |  | Title                                                                                                                              |  | Date         
|                                         |  |                                                                                                                                    |  |              
|/s/ NATHAN ZOMMERNathan Zommer           |  | President, Chief Executive Officer and Chairman
    (Principal Executive Officer) and Director                                     |  | July 14, 2003
|                                        
|/s/ ARNOLD P. AGBAYANIArnold P. Agbayani |  | Senior Vice President, Finance and Administration
    and Chief Financial Officer (Principal Financial and Accounting
    Officer) |  | July 14, 2003
|                                        
|/s/ SAMUEL KORYSamuel Kory               |  | Director                                                                                                                           |  | July 14, 2003
|                                        
|/s/ ANDREAS HARTMANNAndreas Hartmann     |  | Director                                                                                                                           |  | July 14, 2003
|                                        
|/s/ DONALD L. FEUCHTDonald L. Feucht     |  | Director                                                                                                                           |  | July 14, 2003
|                                        
|/s/ S. JOON LEES. Joon Lee               |  | Director                                                                                                                           |  | July 14, 2003

76



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##### Table of Contents



CERTIFICATIONS

I, Nathan Zommer, certify that:



| |                                                                                                                                                                                                                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. I have reviewed this annual report on
    Form 10-K of IXYS Corporation;                                                                                                                                                                                                                                                                    
|
| | 2. Based on my knowledge, this annual report
    does not contain any untrue statement of a material fact or omit
    to state a material fact necessary to make the statements made,
    in light of the circumstances under which such statements were
    made, not misleading with respect to the period covered by this
    annual report;
|
| | 3. Based on my knowledge, the financial
    statements, and other financial information included in this
    annual report, fairly present in all material respects the
    financial condition, results of operations and cash flows of the
    registrant as of, and for, the periods presented in this annual
    report;                   
|
| | 4. The registrants other certifying
    officers and I are responsible for establishing and maintaining
    disclosure controls and procedures (as defined in Exchange Act
    Rule 13a-14 and 15d-14) for the registrant and we have:                                                                                                        



| |                                                                                                                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) designed such disclosure controls and
    procedures to ensure that material information relating to the
    registrant, including its consolidated subsidiaries, is made
    known to us by others within those entities, particularly during
    the period in which this annual report is being prepared;
|
| | b) evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and                                                                                                      
|
| | c) presented in this annual report our
    conclusions about the effectiveness of the disclosure controls
    and procedures based on our evaluation as of the Evaluation Date;                                                                                                                                



| |                                                                                                                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 5. The registrants other certifying
    officers and I have disclosed, based on our most recent
    evaluation, to the registrants auditors and the audit
    committee of registrants board of directors (or persons
    performing the equivalent function):



| |                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) all significant deficiencies in the
    design or operation of internal controls which could adversely
    affect the registrants ability to record, process,
    summarize and report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | b) any fraud, whether or not material, that
    involves management or other employees who have a significant
    role in the registrants internal controls; and                                                                                                                                                    



| |                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 6. The registrants other certifying
    officers and I have indicated in this annual report whether or
    not there were significant changes in internal controls or in
    other factors that could significantly affect internal controls
    subsequent to the date of our most recent evaluation, including
    any corrective actions with regard to significant deficiencies
    and material weaknesses.



| |                                                    
| | ---------------------------------------------------
| | /s/ NATHAN ZOMMER                                  
| |                                                    
| | Nathan Zommer                                      
| | President, Chief Executive Officer and
    Chairman
| | (Principal Executive Officer)                      

Date: July 14, 2003

77



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##### Table of Contents



I, Arnold P. Agbayani, certify that:



| |                                                                                                                                                                                                                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. I have reviewed this annual report on
    Form 10-K of IXYS Corporation;                                                                                                                                                                                                                                                                    
|
| | 2. Based on my knowledge, this annual report
    does not contain any untrue statement of a material fact or omit
    to state a material fact necessary to make the statements made,
    in light of the circumstances under which such statements were
    made, not misleading with respect to the period covered by this
    annual report;
|
| | 3. Based on my knowledge, the financial
    statements, and other financial information included in this
    annual report, fairly present in all material respects the
    financial condition, results of operations and cash flows of the
    registrant as of, and for, the periods presented in this annual
    report;                   
|
| | 4. The registrants other certifying
    officers and I are responsible for establishing and maintaining
    disclosure controls and procedures (as defined in Exchange Act
    Rule 13a-14 and 15d-14) for the registrant and we have:                                                                                                        



| |                                                                                                                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) designed such disclosure controls and
    procedures to ensure that material information relating to the
    registrant, including its consolidated subsidiaries, is made
    known to us by others within those entities, particularly during
    the period in which this annual report is being prepared;
|
| | b) evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and                                                                                                      
|
| | c) presented in this annual report our
    conclusions about the effectiveness of the disclosure controls
    and procedures based on our evaluation as of the Evaluation Date;                                                                                                                                



| |                                                                                                                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 5. The registrants other certifying
    officers and I have disclosed, based on our most recent
    evaluation, to the registrants auditors and the audit
    committee of registrants board of directors (or persons
    performing the equivalent function):



| |                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) all significant deficiencies in the
    design or operation of internal controls which could adversely
    affect the registrants ability to record, process,
    summarize and report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | b) any fraud, whether or not material, that
    involves management or other employees who have a significant
    role in the registrants internal controls; and                                                                                                                                                    



| |                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 6. The registrants other certifying
    officers and I have indicated in this annual report whether or
    not there were significant changes in internal controls or in
    other factors that could significantly affect internal controls
    subsequent to the date of our most recent evaluation, including
    any corrective actions with regard to significant deficiencies
    and material weaknesses.



| |                               
| | ------------------------------
| | /s/ ARNOLD P. AGBAYANI        
| |                               
| | Arnold P. Agbayani            
| | Senior Vice President,        
| | Finance and Administration and
| | Chief Financial Officer       
| | (Principal Financial Officer) 

Date: July 14, 2003

78



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##### Table of Contents






EXHIBIT INDEX

| |    |               |  |                                                                                                                                                                                                                                                                                                                                                                                                               
| | -- | ------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    | Exhibit Title
| |    |              
| | 2  | .1            |  | Agreement and Plan of Merger and Reorganization,
    dated as of April 22, 2002, among IXYS Corporation
    (IXYS), Teacup Acquisition Corp. and Clare, Inc.
    (included as Annex A to the Joint Proxy Statement/ Prospectus
    which forms part of the Registration Statement on Form S-4
    of IXYS, as amended (333-87758)(the IXYS S-4) and
    incorporated herein by reference).                
| | 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*           |  | First Amended Executive Employment Agreement,
    dated as of July 1, 1998, by and between IXYS and Nathan
    Zommer (filed on July 7, 1998 as Exhibit 10.1 to
    Amendment No. 2 to the Registration Statement on
    Form S-4 of Paradigm Technology, Inc., (No. 333-57003)
    (Amendment No. 2 to the Paradigm S-4) and
    incorporated herein by reference).                                        
| | 10 | .2*           |  | First Amended Executive Employment Agreement,
    dated as of July 1, 1998, by and between IXYS and Arnold
    Agbayani (filed on July 7, 1998 as Exhibit 10.2 to
    Amendment No. 2 to the Paradigm S-4 and incorporated
    herein by reference).                                                                                                                                                          
| | 10 | .3            |  | 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 | .4            |  | Lampertheim Contractual Purchase Deed and
    Conveyance, dated as of February 26, 1997 (filed on
    June 29, 1998 as Exhibit 10.4 to Amendment No. 1
    to the Paradigm S-4 and incorporated herein by reference).                                                                                                                                                                                         
| | 10 | .5            |  | Loan Agreement, dated as of February 27,
    1997, by and between IXYS and Commerzbank, Aktiengesellschaft,
    Mannheim Branch (filed on June 29, 1998 as Exhibit 10.5 to
    Amendment No. 1 to the Paradigm S-4 and incorporated herein
    by reference).                                                                                                                                                 
| | 10 | .6            |  | Loan and Security Agreement, dated as of
    December 24, 1997, by and between IXYS and Bank of the West
    (filed on June 29, 1998 as Exhibit 10.6 to Amendment
    No. 1 to the Paradigm S-4 and incorporated herein by
    reference).                                                                                                                                                                    
| | 10 | .7*           |  | 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 | .8*           |  | 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 | .9*           |  | Indemnity Agreement, dated November 20,
    1999, by and between IXYS and Andreas Hartmann (filed on
    June 28, 2001 as Exhibit 10.9 to the Annual Report on
    Form 10-K (No. 000-26124) and incorporated herein by
    reference).                                                                                                                                                                       
| | 10 | .10*          |  | 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 | .11*          |  | 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 | .12*          |  | 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 | .13*          |  | 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).                                                                                                                                                                         



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##### Table of Contents



| |    |               |  |                                                                                                                                                                                                                                                                                                                                                       
| | -- | ------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    | Exhibit Title
| |    |              
| | 10 | .14*          |  | 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 | .15*          |  | 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 | .16*          |  | 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 | .17*          |  | 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 | .18*          |  | 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 | .19           |  | Amendment of Lease by and between Mission West
    Properties, L.P. and IXYS Corporation, dated as of
    September 30, 1998 (filed on July 8, 1999 as
    Exhibit 10.13 to the Annual Report on Form 10-K (No.
    000-26124) and incorporated herein by reference).                                                                                 
| | 10 | .20           |  | Registration and Stockholder Rights Agreement, by
    and between IXYS, Asea Brown Boveri AG, and Asea Brown Boveri,
    Inc., dated September 23, 1998 (filed on November 16, 1998
    as Exhibit 10 to the Quarterly Report on Form 10-Q
    (No. 000-26124) and incorporated herein by reference).                                                 
| | 10 | .21*          |  | 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 | .22*          |  | 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 | .23*          |  | 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 | .24*          |  | 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 | .25           |  | Commitment Letter from Commerzbank,
    Aktiengesellschaft, Mannheim Branch to IXYS Semiconductor GmbH,
    dated July 28, 2000, with English language translation
    (filed on October 23, 2000 as Exhibit 10.5 to Amendment
    No. 3 to the S-3 and incorporated herein by reference).                                                            
| | 10 | .26           |  | General Business Conditions with regard to
    Commitment Letter from Commerzbank, Aktiengesellschaft, Mannheim
    Branch to IXYS Semiconductor GmbH, dated July 28, 2000,
    with English language translation (filed on October 23,
    2000 as Exhibit 10.6 to Amendment No. 3 to the S-3 and
    incorporated herein by reference).             
| | 10 | .27           |  | General Business Conditions with regard to Loan
    Agreement, dated as of February 27, 1997, by and between
    IXYS and Commerzbank, Aktiengesellschaft, Mannheim Branch, with
    English language translation (filed on October 23, 2000 as
    Exhibit 10.7 to Amendment No. 3 to the S-3 and
    incorporated herein by reference).             
| | 10 | .28*          |  | Noncompetition Agreement, by and between IXYS and
    Larry Mihalchik, dated May 13, 2002 (filed as
    Exhibit 10.8 to Amendment No. 1 to the IXYS S-4 and
    incorporated herein by reference).                                                                                                                                                    
| | 10 | .29*          |  | Recourse Promissory Note issued to IXYS by Samuel
    J. Kory, effective as of August 30, 2001 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 | .30*          |  | 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 | .31*          |  | Indemnity Agreement by and between IXYS and Larry
    Mihalchik, dated as of June 27, 2002 (filed on
    August 14, 2002 as Exhibit 10.31 to the Quarterly
    Report on Form 10-Q (No. 000-26124) and incorporated
    herein by reference).                                                                                                         



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##### Table of Contents



| |    |               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | -- | ------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    | Exhibit Title
| |    |              
| | 10 | .32*          |  | CP Clare Corporation 1995 Stock Option and
    Incentive Plan (filed on July 10, 2002 as Exhibit 99.1
    to the Registration Statement on Form S-8 (333-92204) and
    incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                               
| | 10 | .33*          |  | C.P. Clare Corporation Non-Qualified Stock Option
    Plan (filed on July 10, 2002 as Exhibit 99.2 to the
    Registration Statement on Form S-8 (333-92204) and incorporated
    herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                  
| | 23 | .1            |  | Consent of PricewaterhouseCoopers LLP.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | 24 | .1            |  | Power of Attorney (included on the signature page)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | 99 | .1            |  | Certification pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002 (this certification
    accompanies the Annual Report on Form 10-K to which
    it relates, pursuant to Section 906 of the Sarbanes-Oxley
    Act of 2002, and is not deemed filed with the Securities and
    Exchange Commission and is not to be incorporated by reference
    into any of our filings under the Securities Act or the Exchange
    Act (whether made before or after the date of the Annual Report
    on Form 10-K), irrespective of any general incorporation
    language contained in such filing).



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|* | Management contract or compensation plan or
    arrangement.