FIVE-YEAR FINANCIAL HISTORY
For the Years Ended on the Friday Nearest December 31
(Dollars in Thousands Except Per Share Data)
<TABLE>
<CAPTION>

                                                                      1998         1997        1996        1995        1994
                                                                ----------- ------------ ----------- ----------- -----------
RESULTS OF OPERATIONS
<S>                                                               <C>          <C>         <C>         <C>         <C>     
Sales                                                             $532,392     $527,236    $435,731    $344,969    $264,334
Income from continuing operations                                   27,044       31,882      29,555      16,483       7,658
     Per share - basic                                                0.70         0.87        0.84        0.50        0.24
     Per share - diluted                                              0.67         0.80        0.78        0.49        0.23
Net income                                                          27,044       29,820      30,059      17,598       9,423
     Per share - basic                                                0.70         0.81        0.85        0.53        0.30
     Per share - diluted                                              0.67         0.75        0.79        0.52        0.28

FINANCIAL POSITION

Working capital                                                   $120,970     $115,822    $ 92,029    $ 66,449    $ 54,526
Property, plant & equipment, net                                    75,032       61,581      48,671      38,491      32,567
Total assets                                                       325,392      322,177     239,487     202,858     159,871
Long-term debt and capital lease obligations                        50,283       52,949      43,945      33,590      45,296
Total debt                                                          52,990       68,547      57,097      50,251      53,928
Shareholders' equity                                               181,088      162,676     117,006      82,889      57,071
Total capitalization                                               234,078      231,223     174,103     133,140     110,999

FINANCIAL STATISTICS

Selling, general and administrative expenses                      $ 54,548     $ 52,058    $ 42,232     $36,353     $35,485
   - as a % of sales                                                 10.2%         9.9%        9.7%       10.5%       13.4%
Research and development expenses                                   33,401       30,032      23,612      21,085      14,950
   - as a % of sales                                                  6.3%         5.7%        5.4%        6.1%        5.7%
Operating income                                                    41,981       52,443      41,077      26,776      15,865
   - as a % of sales                                                  7.9%         9.9%        9.4%        7.8%        6.0%
Total debt as a % of total capitalization                              23%          30%         33%         38%         49%
Debt to equity ratio                                                   29%          42%         49%         61%         94%
Interest coverage ratio                                              11.06        11.00        9.21        6.48        3.64

OTHER DATA

Capital expenditures                                               $26,795      $22,231      $9,387     $10,046      $7,300
Depreciation and amortization                                      $16,898      $13,561     $10,287      $7,606      $6,768
Common shares outstanding (000's)                                   37,882       38,381      36,042      34,607      31,581
Employees                                                            4,290        4,219       3,519       2,870       2,628
Temporary employees and contractors                                  2,326        2,663       1,670       1,923         874

</TABLE>


Data for fiscal  years  1994,  1995 and 1996 have been  restated  to reflect the
merger of Computer Products,  Inc. and Zytec Corporation  effective December 29,
1997, which was accounted for as a pooling-of-interests.

Data for fiscal years 1994,  1995 and 1996 have been  restated to give effect to
the  discontinued  operations  of RTP Corp.  substantially  all of the assets of
which were sold on July 5, 1997.


<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF 
OPERATIONS

BUSINESS COMBINATIONS

Zytec -- On December 29,  1997,  Computer  Products,  Inc.  ("CPI")  completed a
merger with Zytec  Corporation  ("Zytec")  whereby  Zytec became a  wholly-owned
subsidiary  of CPI.  As a result of the  merger,  each share of  Zytec's  common
stock, no par value,  outstanding  immediately prior to the merger was converted
into 1.33 shares of CPI's common stock,  $0.01 par value.  The Zytec shares were
exchanged  for a total of  approximately  14.1  million  shares of CPI's  common
stock. The acquisition was accounted for as a pooling-of-interests; accordingly,
consolidated  financial  statements  presented  herein for periods  prior to the
merger  have been  restated  to include  the  combined  results  of  operations,
financial  position  and cash flows of Zytec as though it had always been a part
of CPI.  Hereafter,  the merged entity will be  collectively  referred to as the
Company.

The Company received shareholder  approval at its annual  shareholders'  meeting
held in May 1998 to legally  change the Company's  corporate  name from Computer
Products,  Inc. to Artesyn  Technologies,  Inc.  Since that date,  the Company's
common stock has been trading under The Nasdaq Stock MarketSM symbol ATSN.

The restatement of the consolidated financial information combines the financial
information of CPI and Zytec giving  retroactive  effect to the merger as if the
two  companies  had  operated as a single  company  for all  periods  presented.
However, the two companies actually operated  independently prior to the merger,
and the historical changes and trends in the financial  condition and results of
operations  of  these  two  companies  resulted  from  independent   activities.
Nonetheless,  the following  management's  discussion  and analysis of financial
condition  and results of  operations  attempts to relate the  activities  which
resulted in the changes in financial  condition and results of operations of the
combined  company,  taking  into  consideration  that a trend or  change  in the
historical  results of the combined  entity was caused by many events related to
each individual  company operating  independently as competitors.  The financial
information  presented  on  a  historical  restated  basis  is  not  necessarily
indicative  of the financial  condition and results of operations  that may have
been  achieved in the past or will be  achieved in the future had the  companies
operated as a single entity for the periods presented.  The following discussion
of the consolidated  operations and financial condition of the Company should be
read in conjunction  with the Company's  consolidated  financial  statements and
related notes thereto included elsewhere herein.

The Elba  Group -- On July 22,  1997,  pursuant  to an  Agreement  on the  Sale,
Purchase  and  Transfer of Shares,  the  Company  acquired  all the  outstanding
capital stock of the following  affiliated  companies:  Elba Electric GmbH, Elba
Modul GmbH, Elba Elektronik AG, Elba Electronics Ltd.,  Elba-electric-produktion
s.r.o.,  Elba  Electronique  S.A.R.L.,  and KRP Power Source B.V.,  collectively
referred to as the Elba Group.

The Elba Group is engaged in the design,  manufacture  and  marketing  of a wide
range of both  AC/DC and DC/DC  power  conversion  products  in  Europe.  Elba's
fastest  growing  product  line is its medium  power AC/DC  converters  (150-750
watts) sold to Original Equipment Manufacturer ("OEM") communications  customers
under the Elba and KRP Power Source labels.  The Elba Group's  customers include
major multinational  corporations such as Ericsson,  Kodak, Krone AG and Siemens
among others.

The purchase price of 52 million  Deutsche marks  (approximately  $28.5 million)
was paid in cash with proceeds from two  seven-year  term loans from First Union
National Bank, London Branch. The loans bear interest at LIBOR plus .75%.

Effective  December 11, 1998, the Company sold  Elba-electric-produktion  s.r.o.
(its Czech Republic division) to a third party for 20,000 Deutsche marks and the
repayment of the balance of an intercompany loan of approximately  $400,000.  In
addition, the sales offices of the Elba Group located in Pfaffikon, Switzerland;
Vaulx-Milieu,  France; and Chesterfield, United Kingdom were closed during 1998.
Costs related to such  facilities  closures  were included in the  restructuring
charge described in Note 6 of the Notes to Consolidated Financial Statements.

BUSINESS ENVIRONMENT AND RISK FACTORS

The following  discussion  should be read in conjunction  with the  consolidated
financial  statements and related notes as well as the section under the heading
"Risk Factors that May Affect Future  Results." With the exception of historical
information,   the  matters   discussed   below  may  include   "forward-looking
statements" within the meaning of the Private  Securities  Litigation Reform Act
of 1995 that  involve  risks and  uncertainties.  The Company  wishes to caution
readers that a number of important  factors,  including those  identified in the
section  entitled  "Risk  Factors  that May Affect  Future  Results"  as well as
factors  discussed in the Company's  other reports filed with the Securities and
Exchange Commission, could affect the Company's actual results and cause them to
differ materially from those in the forward-looking statements.

RESULTS OF OPERATIONS

For 1998,  income from  continuing  operations was $27.0  million,  or $0.67 per
diluted share,  compared to $31.9 million,  or $0.80 per diluted share, in 1997.
Such amounts include $9.6 million restructuring and related inventory charges in
1998 and a $3.0 million merger-related charge in 1997.

1998 COMPARED TO 1997

Sales for 1998 improved modestly to $532.4 million compared to $527.2 million in
1997.  Lower demand from OEM  customers as a result of economic  turmoil in Asia
and South America, as well as widespread customer inventory reductions, hampered
growth in the Company's primary market sectors: networking,  telecommunications,
computing and wireless infrastructure.

On January 1, 1999,  the Company's  order backlog was $98.3 million  compared to
$103.1  million on January 2, 1998.  Despite an  increase  in orders  during the
fourth  quarter of 1998  which  supports  management's  belief  that  demand for
product in the end use markets is gradually  improving,  the Company still has a
cautious demand outlook for 1999.

Gross profit margin for 1998 was 25.8%  compared to 26.1% in 1997  primarily due
to the $2.4 million charge for the write-off of duplicate  product lines between
the merged companies  related to the Company's 1998  restructuring  plan further
described below. In addition,  material cost and plant  rationalization  savings
following the merger were offset by new product direct start-up costs.  Although
the Company  continues to focus on reducing  manufacturing  costs and  improving
overall  processes,  the Company does not  anticipate  that gross profit margins
will vary  significantly  from the current level due to  continuing  competitive
pricing pressures and changes in product mix.

Operating  expenses  increased to approximately  17.9% of sales in 1998 from the
16.1%  reported in 1997.  Operating  expenses  for 1998  include a $7.2  million
non-recurring charge related to the Company's 1998 restructuring plan. Excluding
the restructuring charge, operating expenses were 16.5% of sales in 1998.

Operating  income  decreased to 7.9% of sales from 9.9% in 1997,  as a result of
lower gross profit margins,  increased operating expenses, and restructuring and
related inventory charges.

Selling, general and administrative expenses were $54.5 million in 1998 compared
to $52.1 million in 1997  reflecting  the inclusion of a full year of operations
for Elba, which was acquired mid-year 1997, and various  integration  activities
following the merger.  Certain of these  additional costs were incurred to begin
implementation  of a  new  company-wide  Enterprise  Resource  Planning  ("ERP")
information  system  and to  familiarize  the  Company's  employees,  customers,
suppliers and investors with the resources of the new combined company,  Artesyn
Technologies.  The Company has been taking  aggressive  steps to curb  operating
expenses and to  eliminate  excess  manufacturing  resources  wherever  prudent.
However, the Company expects to incur the following additional expenses in 1999:
higher new product start-up costs,  expenses associated with Year 2000 readiness
and compliance, and costs related to the implementation of the ERP system.

Research and development  expenses  totaled $33.4 million,  or 6.3% of sales, in
1998  compared  to $30.0  million,  or 5.7% of  sales,  in 1997  reflecting  the
Company's  continued  investment  in new  product  development  for  its  global
communications  customers.  The Company believes that the timely introduction of
new  technology  and  products  is an  important  component  of its  competitive
strategy and anticipates future research and development  spending will continue
at or near the same spending levels as a percentage of sales.

RESTRUCTURING CHARGE -- During the first quarter of 1998, the Company recorded a
$9.6 million pre-tax charge in connection with the Company's  restructuring plan
following  its merger with Zytec.  This amount is allocated in the  accompanying
Consolidated  Statements of Operations as follows: $7.2 million to Restructuring
Charge,  as further  described below,  and $2.4 million to Cost of Sales,  which
relates  principally to inventory  write-offs of duplicate  product  development
programs  which  were  underway  at CPI  and  Zytec  prior  to the  merger.  The
restructuring   charge  relates   primarily  to  the  elimination  of  duplicate
facilities in an effort to reduce costs  pursuant to the  Company's  integration
plan.  Specific  restructuring  actions included the closure of certain domestic
and foreign  manufacturing  and other  facilities  through the  consolidation of
manufacturing   operations  with   corresponding   personnel   reductions,   the
realignment  of  the  Company's   workforce  to  eliminate  duplicate  functions
particularly in administrative areas, and other related cost-savings actions.

The following  table  includes the  components of the  restructuring  charge and
related  charge for  inventory  write-offs,  the current year payments and other
activities,  and the remaining  restructuring  reserve balance of  approximately
$2.8  million  which is  included in accrued  liabilities  as of January 1, 1999
($000s):
<TABLE>
<CAPTION>
                                           Employee
                                          Termination         Asset         Facility       Product Line
                                            Benefits       Write-offs       Closures      Rationalization
                                         -------------     ------------    ----------     --------------
<S>                                           <C>              <C>           <C>                 <C>   
Restructuring provision /write-offs           $3,956           $1,231        $2,002              $2,411
Cash payments                                 (2,806)               -          (357)                  -
Non-cash activities                                -           (1,231)            -              (2,411)
                                         -------------     ------------    ----------     --------------
Reserve balance at January 1, 1999            $1,150       $        -        $1,645          $        -
                                         =============     ============    ==========     ==============
</TABLE>
                           
Employee  termination  benefits  primarily  represent  severance  pay and  other
benefits   associated  with  the  elimination  of  approximately  360  positions
worldwide,  with  more  than 70% of the  eliminated  positions  coming  from the
rationalization of certain duplicate  manufacturing  locations and sales offices
in  Europe  and  the  remaining  30%  relating  to  duplicate   management   and
administrative  personnel. In the latter part of 1998, the Company's revised its
initial  estimate of  positions  to be  eliminated  from 400 to 360. The revised
estimated  charges for employee  termination  benefits  approximate  the initial
estimate.  As of January  1,  1999,  approximately  300 of the  anticipated  360
positions had been eliminated worldwide.

The provision for the facility closures includes leasehold termination payments,
service contracts  obligations,  and other exit costs associated with facilities
closures discussed above.

As a result of such facilities  closures,  the Company evaluated whether related
fixed assets (including  duplicate  management  information systems and unusable
manufacturing  and testing  equipment) had become impaired.  The Company used an
estimate of the related  undiscounted cash flows over the remaining life of such
machinery and equipment in measuring  their  recoverability  and determined that
such assets were  permanently  impaired.  As a result,  these fixed  assets were
written down to their net realizable value.

Total  expected  cash  expenditures  related  to the  restructuring  charge  are
estimated  to be  approximately  $6.0  million.  With the  exception  of certain
lease-related  cash  requirements,  the remaining  anticipated  cash payments of
approximately  $2.8  million  are  expected  to be paid during the first half of
1999.

Provision  for income  taxes  decreased  to 33.0% of pretax  income in 1998 from
35.5% in 1997.  The effective tax rate was lower in 1998  primarily due to lower
state income taxes following the merger.  For additional  information  regarding
income  taxes,  refer to  pages  35  through  36 of the  Notes  to  Consolidated
Financial Statements.

ADOPTION OF RECENT ACCOUNTING PRONOUNCEMENTS

In 1998,  the  Company  adopted  Statement  of  Financial  Accounting  Standards
("SFAS") No. 130, "Reporting  Comprehensive  Income" which requires companies to
report all  changes  in equity  during a period,  except  those  resulting  from
investment by owners and distributions to owners,  in a financial  statement for
the period in which they are  recognized.  The  Company  has chosen to  disclose
Comprehensive   Income,  which  encompasses  net  income  and  foreign  currency
translation adjustments,  in the Consolidated Statements of Shareholders' Equity
and Comprehensive  Income.  Prior years have been reclassified to conform to the
SFAS 130 requirements.

In June 1997, the Financial  Accounting Standards Board ("FASB") issued SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information" which
was adopted by the Company in 1998. SFAS 131 establishes standards for reporting
information about operating segments and related  disclosures about products and
services,   geographic  areas  and  major  customers.   Prior  years  have  been
reclassified to conform to the SFAS 131 requirements.

In March 1998, the Accounting  Standards  Executive Committee released Statement
of Position 98-1,  (SOP 98-1),  "Accounting  for the Costs of Computer  Software
Developed  or  Obtained  for  Internal  Use."  SOP 98-1  requires  companies  to
capitalize certain costs of computer software developed or obtained for internal
use,  provided that those costs are not research and  development.  In 1998, the
Company  adopted the  guidelines  established  by SOP 98-1 in accounting for the
costs of computer software  developed or obtained for internal use in connection
with its implementation of the ERP system.

1997 COMPARED TO 1996

Sales  increased  from $435.7 million in 1996 to $527.2 million in 1997. The 21%
growth  primarily  resulted from a wider range of product  offerings,  continued
foreign expansion and the increase of service and support programs.

Gross profit in 1997 increased by $30.6 million compared to 1996 on higher sales
volume and improved  margins.  The Company's gross margin  increased to 26.1% of
sales in 1997 from 24.5% in 1996 due to cost  reductions  in both  materials and
labor as well as higher overhead absorption due to increased production volume.

Operating  expenses  increased to approximately  16.1% of sales in 1997 from the
15.1% reported in the prior year. In connection  with the merger,  in the fourth
quarter of 1997,  the Company  recorded a charge to  operating  expenses of $3.0
million for direct merger  transaction  costs  consisting  primarily of fees for
investment bankers, attorneys, accountants, financial printing and other related
charges.  Operating  income rose to 9.9% of sales from 9.4% in 1996, as a result
of higher gross profit partially offset by the increase in operating expenses.

Selling,  general and administrative expenses in 1997 increased to 9.9% of sales
versus 9.7% in 1996. Sales and marketing  expenses increased $5.4 million or 24%
due  to  increased  commission  expense  resulting  from  higher  sales  levels,
additional marketing programs to support the launch of new products,  entry into
new markets  worldwide  and  expansion  of  distribution  channels.  General and
administrative  ("G&A") expenses increased $4.4 million,  or 22%, as a result of
the  Company's  business  development  activities  and the inclusion of the Elba
Group acquired in July 1997. As a percentage of sales, G&A expenses increased to
4.6% from 4.5% in 1996.

Research and development  (R&D) expenses in 1997 increased $6.4 million or 27.2%
from 1996. As a percentage of sales,  R&D expenses were 5.7% in 1997 versus 5.4%
in 1996.  The higher  expense  level was primarily  attributable  to the cost of
developing  new products  consistent  with the Company's  ongoing  commitment to
develop  and  produce   high-quality,   innovative   products  targeted  to  the
communications industry.

Provision  for income  taxes  increased  to 35.5% of pretax  income in 1997 from
21.4% in 1996.  The  effective  tax rate was lower in 1996  primarily due to the
recognition  of an  income  tax  benefit  related  to  the  net  operating  loss
carryforwards in the Company's Austrian operations.

DISCONTINUED OPERATIONS--On April 17, 1997, the Company  announced its intention
to sell its Industrial  Automation  division,  RTP Corp. ("RTP"),  pursuant to a
plan of disposal approved by the Company's Board of Directors.  Accordingly, the
Company  classified  RTP as a  discontinued  operation and recorded an after-tax
non-recurring charge of $2.1 million, or $0.05 per share, against 1997 earnings.
Effective July 5, 1997, the Company sold  substantially all of the assets of RTP
Corp.  to RT  Acquisition  Florida  Corp.  Proceeds  from the sale included $2.0
million cash, a subordinated  unsecured one-year note in the aggregate principal
amount of approximately $2.2 million bearing interest at the prime rate, and the
assumption of certain of RTP's liabilities.

LIQUIDITY AND CAPITAL RESOURCES

As of January 1, 1999,  the  Company's  cash balance  decreased to $41.5 million
from $55.4  million at January 2, 1998  primarily due to $19.4 million spent for
repurchases  of the  Company's  common stock,  $19.0 million for principal  debt
repayments and $26.8 million for capital  expenditures in 1998. These activities
were funded  primarily with cash on hand,  cash from operations and $4.6 million
proceeds from exercises of stock options.

Cash  provided by  operations  increased  to $44.1  million in 1998 versus $38.8
million in 1997 and $30.2  million in 1996.  The increase in 1998 was  primarily
due to income from operations,  excluding the $7.2 million pre-tax restructuring
charge,  and smaller  increases  in accounts  receivable  and  inventories.  The
increase in 1997 is mainly the result of a decrease in prepaid  expenses  and an
increase  in  accounts  payable  and  accrued  liabilities  partially  offset by
increases in accounts receivable and inventory.

Accounts  receivable  increased  to $88.8  million at January 1, 1999 from $84.4
million at January 2, 1998  partially due to higher sales volume but also due to
a change in payment  terms  extended  to certain  OEMs from 35 to 45 days.  Days
sales outstanding in receivables increased to 55 days for 1998 compared to 51 in
1997. The increase in inventory levels was primarily  attributable to production
planning to meet  manufacturing  lead times,  expansion of  inventory  depots to
better service customers, and anticipated demand for new product introductions.

Capital  expenditures  for fiscal year 1998 totaled $26.8 million  primarily for
the  continued  maintenance  of  facilities  and  equipment  in  support  of the
Company's current  operating  activities with an additional $7.7 million related
to the  implementation  of the new  enterprise-wide  ERP  system.  Such  capital
expenditures  were financed with cash generated from  operations.  The Company's
current  commitment to implement the ERP system is approximately  $25 million to
be  incurred  over a  three-year  period of which  approximately  $22 million is
expected  to be  capitalized  and  amortized  and  approximately  $3  million is
expected to be expensed as incurred.

Accounts  payable  increased  $5.2 million,  or 14%, from January 2, 1998 due to
increases  in  capital  expenditures  including  the  implementation  of the ERP
system,  operating  expenses,  and material  purchases to support the  Company's
growth in sales.

On July 22, 1998, the Company's Board of Directors authorized a share repurchase
program to purchase up to 4.0 million  shares of the  Company's  common stock in
the open market or in  privately-negotiated  transactions,  depending  on market
conditions and other factors. As of January 1, 1999, the Company repurchased and
retired 1,211,500 shares of its common stock for a total of approximately  $19.4
million in cash.

The Company  used $24.6  million, $44.7 million  and $20.9  million in investing
activities in fiscal years 1998, 1997 and 1996, respectively. The use of cash in
fiscal 1998 reflects capital  expenditures of $26.8 million  partially offset by
$2.2 million  proceeds from the sale of  substantially  all of the assets of RTP
Corp.  The use of cash in fiscal 1997 was due mainly to the  acquisition  of the
Elba Group for $26.2 million (net of cash  acquired) and increased  purchases of
property,  plant and  equipment  in line  with the  continued  upgrading  of the
Company's overseas manufacturing facilities.  The major investing activities for
fiscal  1996 were  capital  additions  to support  business  operations  and the
acquisition of Jeta for $9.6 million (net of cash acquired).

Cash used in financing activities in fiscal 1998 of $33.7 million reflects:  (1)
long-term  debt  principal  repayments  including  $4.4 million on the Company's
seven-year term loan, $3.2 million on its 6.9% mortgage note, approximately $7.6
million  on the  Company's  Austrian  subsidiary's  revolving  loans  and  notes
payable, and $3.5 million in capital lease principal payments and (2) repurchase
and  retirement  of  1,211,500  shares of the  Company's  common stock for $19.4
million,  partially  offset  by $4.6  million  in  proceeds  from  stock  option
exercises.

Cash provided by financing  activities in fiscal 1997 of $27.1 million reflected
borrowings  under the 52 million  Deutsche mark term loans, net of debt issuance
costs,  and $5.5 million  proceeds  from  exercises of stock  options  partially
offset by $14.2 million  long-term debt and capital lease  principal  repayments
including  $3.7  million  on  the  Company's  seven-year  term  loan.  Financing
activities  used $1.5 million in fiscal 1996 for the repurchase of the Company's
common  stock  and for the  repayment  of  long-term  debt  partially  offset by
proceeds from issuance of debt and exercises of options.

Effective  December 31, 1998, the Company entered into a credit agreement with a
syndicate of banks which provides a new three-year,  multi-currency $200 million
credit facility. The new revolving facility, which expires on December 31, 2001,
replaces the Company's  previous $20 million credit line. The agreement provides
for various  interest  rate  options on the facility  based on London  Interbank
Offering Rates plus .625% and includes a fee of .20% on the unused balance, both
payable quarterly.  The agreement contains certain  restrictive  covenants that,
among other things, require the Company to maintain certain financial ratios and
limit the purchase,  transfer or distribution of the Company's assets. The funds
are to be used for the  repayment of the Company's  existing  $46.4 million term
loans and for other  general  corporate  purposes.  As of January  1, 1999,  the
Company had made no borrowings  under the revolving  credit  facility and was in
compliance with the agreement's covenants. On January 8, 1999, the existing term
loans were repaid from borrowings under the new revolving  credit facility.  Any
amounts outstanding under the revolver are due on December 31, 2001.

Based on current plans and business  conditions,  the Company  believes that its
cash and equivalents, its available credit line, cash generated from operations,
and other  financing  activities  are  expected to be  adequate to meet  capital
expenditures,  working capital requirements,  debt and capital lease obligations
and operating lease commitments through 1999.

QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

The  Company is  exposed to the impact of  interest  rate  changes  and  foreign
currency  fluctuations.  In the normal course of business,  the Company  employs
established  policies  and  procedures  to manage  its  exposure  to  changes in
interest  rates and  fluctuations  in the value of  foreign  currencies  using a
variety of financial instruments.

The Company utilizes derivative financial instruments to reduce financial market
risks.  The Company  manages its interest  rate risk on its  variable  rate debt
instruments  through  use of interest  rate swaps  pursuant to which the Company
exchanges its floating rate interest  obligations for fixed rates. The fixing of
the interest rates offsets the Company's exposure to the uncertainty of floating
interest rates during the term of the loans.

The Company has  significant  assets and operations in Europe and Asia and, as a
result, its financial performance could be affected by significant  fluctuations
in foreign exchange rates. To mitigate  potential adverse trends,  the Company's
operating  strategy  takes into  account  changes in  exchange  rates over time.
Accordingly,  the Company enters into various  forward  contracts that change in
value as foreign  exchange  rates  change to protect  the value of its  existing
foreign  currency  assets,  liabilities,  commitments  and  anticipated  foreign
currency  revenues.  The principal  currencies  hedged are the Japanese yen, the
Deutsche mark, and the Irish punt. For additional information,  refer to Note 17
of the Notes to Consolidated Financial Statements.

It is the  Company's  policy to enter into foreign  currency  and interest  rate
transactions only to the extent  considered  necessary to meet its objectives as
stated above.  The Company does not enter into foreign currency or interest rate
transactions for speculative purposes.

Given the current  economic  situation in Asia, there is a risk that the current
pegging of the Hong Kong dollar to the US dollar will be removed.  The Company's
management  has  assessed  the  potential  exposure  in  the  event  the  peg is
removed/changed  and if there was a devaluation  in the Hong Kong dollar.  Since
the Company's  sales are in US dollars and purchases are either in US dollars or
Hong Kong dollars,  the potential  effect would be to the carrying  value of the
Hong Kong building which currently approximates $6.7 million.

RECENT ACCOUNTING PRONOUNCEMENT

In June  1998,  the  FASB  issued  SFAS  No.  133,  "Accounting  for  Derivative
Instruments  and  Hedging  Activities".  SFAS  133  establishes  accounting  and
reporting standards for derivative instruments and for hedging activities, which
the  Company is  required  to adopt  effective  January  1, 2000.  SFAS 133 will
require the Company to record all derivatives as either assets or liabilities in
the Consolidated  Statement of Financial  Position and measure those instruments
at fair  value.  The  accounting  for  changes in the fair value  depends on the
intended use of the derivative and the resulting designation. The impact of SFAS
133 on the Company's  financial  statements will depend on a variety of factors,
including  future  interpretative  guidance  from the FASB,  the future level of
forecasted and actual foreign currency transactions, the extent of the Company's
hedging activities,  the types of hedging instruments used and the effectiveness
of such instruments. However, given the Company's current use of derivatives and
hedging activities, the Company does not believe the effect of adopting SFAS 133
will be material to its consolidated financial statements.

YEAR 2000 INITIATIVES AND EFFECTS

The Company has formed an internal  Year 2000  compliance  team and  developed a
compliance   plan  to  evaluate  its  internal   facilities,   engineering   and
manufacturing  processes,  and business information systems with respect to Year
2000  readiness and  compliance.  Included in this  evaluation are the Company's
products and systems and potential impact of the Company's significant suppliers
and  customers.  The  Company  is in  the  process  of  communicating  with  its
significant  suppliers and large  customers to determine the extent to which the
Company  might be vulnerable  to those third  parties'  failures to remedy their
Year 2000 issues.  The Company  does not believe  that it has material  exposure
related to the Year 2000 issue for the products it has sold.

There are five phases that describe the Company's  process in becoming Year 2000
compliant.  Phase 1, the awareness  phase,  encompasses  developing a budget and
project plan. Phase 2, the assessment phase, identifies mission-critical systems
to check for  compliance.  Phase 3, the remediation  phase,  includes the actual
corrective  activities for non-compliant  systems and processes.  The Company is
currently  involved in some phase 3 remediation  activities while completing the
final  assessment  of  internal  applications  and  infrastructure.  The initial
inventory is complete with final  assessments of Year 2000 issues  scheduled for
completion  by the end of the first  quarter in 1999.  The remaining two phases,
validation  and  implementation,  are expected to start at the  beginning of the
second quarter of 1999 and be completed later in 1999.

The Company's current primary business  information  systems, in both the United
States and its foreign  locations,  are known to be non-compliant.  Upgrades for
the  Company's  Asia-Pacific  locations  are  complete.  European  locations are
scheduled for upgrade in the first quarter of 1999. In addition,  the Company is
proceeding with a phased installation of a new Year 2000 compliant ERP system to
replace its  existing  legacy  application  systems.  The  Company's  goal is to
complete the ERP implementation  within all North American Artesyn facilities by
mid-1999.  In case of unexpected delays in the implementation of the ERP systems
in North America, the Company's contingency plan will include the upgrade of its
current  business  information  systems to be Year 2000  compliant.  The Company
believes that it will have  sufficient  time to upgrade these systems in case of
such a delay.  The cost to upgrade these systems is not expected to be material.
The implementation of the ERP system for the Company's European and Asia-Pacific
locations is scheduled for completion by mid-year 2000. The  implementation  and
installation  of the new ERP system was a planned  system  change  following the
merger with Zytec to integrate the merged companies,  and such implementation is
not deemed undertaken solely for the Company to become Year 2000 compliant.

The Company has not completed  its  assessment of the total costs to address and
remedy  Year 2000  issues.  The  Company  anticipates  that it will  complete  a
detailed  breakdown of estimated costs shortly after completion of the Company's
risk assessment.  These costs will include time and effort of internal staff and
consultants  for  renovation,  validation and  implementation,  and computer and
embedded technology systems enhancements and/or  replacements.  The total costs,
excluding  the  implementation  of the ERP  systems,  for  achieving  Year  2000
compliance  is  currently  estimated  at $3.5  million,  of which  approximately
$700,000 has been incurred in 1998. Of the total estimated amount, approximately
$2.5 million is expected to be  capitalized  and  approximately  $1.0 million is
expected to be expensed as incurred.  The total  estimated cost to implement the
new ERP systems is  approximately  $25 million to be incurred  over a three-year
period of which  approximately  $22 million is expected  to be  capitalized  and
amortized and  approximately  $3 million is expected to be expensed as incurred.
ERP system costs incurred in 1998 totaled  approximately $7.9 million,  of which
$7.7 million was  capitalized  and $200,000 was  expensed.  The Company  expects
these expenditures to be financed through operating cash flows or borrowings, as
applicable.

The Company  believes  that its Year 2000 plan is  sufficient  and that the Year
2000 issue will not pose significant operational problems.  However, the Company
has  identified  the  following  potential  Year  2000  risks at this  time:  1)
suppliers and/or  customers may not be Year 2000 compliant;  2) ERP installation
may not be completed on time;  and 3) new  systems/upgrades  have  incomplete or
inadequate  testing.   The  risk  posed  by  suppliers  to  the  Company  is  an
interruption  of material  flow,  which would  impact  shipments  and  resultant
revenue.  The risk posed by  customers is a  cancellation  or delay in orders of
products by customers  who are not Year 2000 ready or whose costs to remedy Year
2000 issues are so significant that they cancel or delay orders. The risk of ERP
installation  not being  complete  is  mitigated  by the  Company's  anticipated
ability to be able to upgrade  current  business  information  systems with Year
2000  upgrades,  as  applicable,  for an amount not deemed by the  Company to be
material.  In addition,  Year 2000 issues would have a significant impact on the
Company's  operations  and its  financial  results if:  modifications  cannot be
completed on a timely basis;  unforeseen  needs or problems arise; or if systems
operated by third parties are not Year 2000 compliant.

A "worse case scenario" Year 2000  contingency plan is scheduled to be completed
by the  beginning  of the second  quarter  of 1999.  The  contingency  plan will
address plans to minimize any potential impact on Company operations in the case
of unplanned  Year 2000 related  failures.  The plan will include the upgrade of
current  information  systems  to  Year  2000  compliant  versions  as  well  as
management  of  materials  and  inventory  to  cover  potential  supplier-missed
shipments.

The Company has not been  required to, and does not  anticipate,  deferring  any
projects as a result of its Year 2000 preparation.

The estimates and  conclusions  set forth herein  regarding Year 2000 compliance
contain  forward-looking  statements and are based on management's  estimates of
future  events  and  information  provided  by third  parties.  There  can be no
assurance that such estimates and information  will prove to be accurate.  Risks
to completing the Year 2000 project include the  availability of resources,  the
Company's  ability to discover and correct  potential Year 2000 problems and the
ability of  suppliers,  customers and other third parties to bring their systems
into Year 2000 compliance.

CONVERSION TO THE EURO CURRENCY

On January 1, 1999, certain member countries of the European Union are scheduled
to establish fixed  conversion  rates between their existing  currencies and the
European  Union's common currency  ("Euro").  The Company  conducts  business in
member countries. The transition period for the introduction of the Euro will be
between  January 1, 1999 and June 30, 2002. The Company is addressing the issues
involved with the introduction of the Euro. The more important issues facing the
Company include: converting information technology systems; reassessing currency
risk;   negotiating  and  amending  licensing  agreements  and  contracts;   and
processing tax and accounting records.

The company does not presently expect that introduction and use of the Euro will
materially affect the Company's  foreign exchange and hedging  activities or the
Company's use of  derivative  instruments.  Management  does not expect that the
introduction  of the Euro will result in any  material  increase in costs to the
Company. All costs associated with the introduction of the Euro will be expensed
to  operations  as  incurred.  While the Company  will  continue to evaluate the
impact  of the  Euro  introduction  over  time,  based  on  currently  available
information,  management  does not  believe  that the  introduction  of the Euro
currency  will  have  a  material  adverse  impact  on the  Company's  financial
condition or overall trends in results of operations.
<PAGE>

CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended on the Friday Nearest December 31
(Amounts in Thousands Except Per Share Data)
<TABLE>
<CAPTION>

                                                                      1998          1997        1996
                                                                   -----------    ---------   ----------
<S>                                                                 <C>           <C>         <C>     
Sales                                                               $532,392      $527,236    $435,731
Cost of Sales                                                        395,273       389,703     328,810
                                                                   -----------    ---------   ----------           
Gross Profit                                                         137,119       137,533     106,921
                                                                   -----------    ---------   ----------
Expenses
  Selling, general and administrative                                 54,548        52,058      42,232
  Research and development                                            33,401        30,032      23,612
  Restructuring charge                                                 7,189             -           -
  Merger-related charges                                                   -         3,000           -
                                                                   -----------    ---------   ----------
                                                                      95,138        85,090      65,844
                                                                   -----------    ---------   ----------
Operating Income                                                      41,981        52,443      41,077
                                                                   -----------    ---------   ----------
Other Income (Expense)
  Interest expense                                                    (4,013)       (4,945)     (4,576)
  Interest income                                                      2,396         1,943       1,087
                                                                   -----------    ---------   ----------   
                                                                      (1,617)       (3,002)     (3,489)
                                                                   -----------    ---------   ----------
Income from Continuing Operations before Income Taxes                 40,364        49,441      37,588
Provision for Income Taxes                                            13,320        17,559       8,033
                                                                   -----------    ---------   ----------
Income from Continuing Operations                                     27,044        31,882      29,555
Discontinued Operations
  Profit  (loss) from  operations,  net of income taxes                      
     of $(222) and $177, respectively                                      -          (333)        504    
  Loss on disposal of RTP (including provision of $1,000 for                                            
    operating losses during phase-out period),                        
    net of tax benefit of $1,152                                           -        (1,729)          -
                                                                   -----------    ---------   ----------

Net Income                                                         $   27,044     $ 29,820    $ 30,059      
                                                                   ===========    =========   ==========            
Earnings per Share
Basic
 Income from Continuing Operations                                 $     0.70      $  0.87    $   0.84
                                                                                          
  Discontinued Operations                                                  -         (0.06)       0.01
                                                                   -----------    ---------   ----------
  Net Income                                                       $     0.70      $  0.81    $   0.85   
                                                                   ===========    =========   ==========

Diluted
                                
  Income from Continuing Operations                                 $    0.67     $    0.80   $   0.78
  Discontinued Operations                                                   -         (0.05)      0.01
                                                                   -----------    ---------   ----------      
    Net Income                                                      $    0.67     $    0.75   $   0.79
                                                                   ===========    =========   ==========
Common and Common Equivalent Shares Outstanding
  Basic                                                                38,369        36,650     35,375
  Diluted                                                              40,635        40,654     37,870
</TABLE>

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


<PAGE>

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
As of the Friday Nearest December 31
(Amounts in Thousands Except Share Data)
<TABLE>
<CAPTION>

                                                                               1998              1997
                                                                         -------------     -------------
ASSETS
Current Assets
<S>                                                                         <C>               <C>      
   Cash and equivalents                                                     $  41,525         $  55,392
   Accounts receivable, net of allowance for doubtful accounts of
     $1,875 at January 1, 1999 and $1,736 at January 2, 1998                   88,828            84,479
   Inventories                                                                 62,460            59,663
   Prepaid expenses and other                                                   4,832             8,522
   Deferred income taxes, net                                                   7,685             5,293
                                                                          -------------     -------------
     Total current assets                                                     205,330           213,349
                                                                          -------------     -------------
Property, Plant & Equipment, Net                                               75,032            61,581
                                                                          -------------     -------------
Other Assets
   Goodwill, net                                                               40,039            40,704
   Deferred income taxes, net                                                   2,682             4,509
   Other assets, net                                                            2,309             2,034
                                                                          -------------     -------------
     Total other assets                                                        45,030            47,247
                                                                          -------------     -------------
                                                                             $325,392          $322,177
                                                                          =============     =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
   Current maturities of long-term debt and capital leases                 $    2,707         $  15,598
   Accounts payable and accrued liabilities                                    81,653            81,929
                                                                          -------------     -------------
     Total current liabilities                                                 84,360            97,527
                                                                          -------------     -------------
Long-Term Liabilities
   Long-term debt and capital leases                                           50,283            52,949
   Other long-term liabilities                                                  4,974             5,785
   Deferred tax liabilities                                                     4,687             3,240
                                                                          -------------     -------------
     Total long-term liabilities                                               59,944            61,974
                                                                          -------------     -------------
     Total liabilities                                                        144,304           159,501
                                                                          -------------     -------------

Commitments and Contingencies (see Notes 8, 10 and 13)

Shareholders' Equity
   Preferred stock, par value $0.01; 1,000,000 shares authorized;
      none issued or outstanding                                                    -                 -
   Common stock, par value $0.01; 80,000,000 shares authorized;
     37,882,248 shares issued and outstanding at January 1, 1999
     (38,380,964 at January 2, 1998)                                              379               384
   Additional paid-in capital                                                  85,018            78,056
   Retained earnings                                                           99,128            88,769
   Foreign currency translation adjustment                                     (3,437)           (4,533)
                                                                          -------------     ------------    
     Total shareholders' equity                                               181,088           162,676
                                                                          -------------     -------------
                                                                             $325,392          $322,177
                                                                          =============     =============
</TABLE>

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


<PAGE>

CONSOLIDATED  STATEMENTS OF CASH FLOWS
For the Years Ended on the Friday Nearest December 31 
(Amounts in Thousands)
<TABLE>
<CAPTION>
                                                                                   1998               1997            1996
                                                                                ------------       -----------     -----------
OPERATING ACTIVITIES
<S>                                                                                <C>                <C>              <C>    
   Net income                                                                      $27,044            $29,820          $30,059
   Adjustments to reconcile net income to net cash
    provided by operating activities:

     Depreciation and amortization                                                  16,898             13,561           10,287
     Deferred income taxes                                                           1,042             (3,395)          (2,088)
     Provision for inventory writedown                                               6,407              4,963            1,988
     Provision for restructuring charge                                              7,189                  -                -
     Other non-cash charges                                                            720              2,473             (383)
   Changes in operating assets and liabilities:
     Increase in accounts receivable                                                (1,032)           (22,264)          (8,730)
     (Increase) decrease in inventories                                             (6,466)           (14,489)           2,860
     (Increase) decrease in prepaid expenses and other                                  (1)             8,683               24
     Increase (decrease) in accounts payable and accrued liabilities                (7,659)            18,037           (2,617)
   Net cash provided by (used in) discontinued operations                                -              1,423           (1,220)
                                                                                -----------        -----------     ----------- 
Net Cash Provided by Operating Activities                                           44,142             38,812           30,180
                                                                                ------------       -----------     -----------
INVESTING ACTIVITIES
   Purchases of property, plant & equipment                                        (26,795)           (22,231)          (9,387)
   Proceeds from sale of property, plant & equipment                                    54              1,656                -
   Purchase of the Elba Group, net of cash acquired                                      -            (26,186)               -
   Purchase of Jeta Power Systems, Inc., net of cash acquired                            -                  -           (9,577)
   Purchase of Zytec Hungary Elektronikai Kft.                                           -                  -             (830)
   Proceeds from sale of RTP Corp.                                                   2,150              2,000                -
   (Increase) decrease in other assets                                                   -                 96             (206)
   Investing activities of discontinued operations                                       -                (32)            (897)
                                                                                ------------       -----------     ----------- 
Net Cash Used in Investing Activities                                              (24,591)           (44,697)         (20,897)
                                                                                ------------       -----------     -----------
FINANCING ACTIVITIES
   Proceeds from issuances of long-term debt                                             -             35,796           20,086
   Principal payments on debt and capital leases                                   (18,968)           (14,163)         (14,899)
   Proceeds from revolving credit loans                                                  -             14,726          144,806
   Payments on revolving credit loans                                                    -            (14,726)        (152,104)
   Decrease in bank overdrafts                                                           -                  -           (1,220)
   Proceeds from exercises of stock options                                          4,640              5,511            3,888
   Repurchases of common stock                                                     (19,379)                 -           (2,032)
                                                                                ------------       -----------     -----------
Net Cash Provided by (Used in) Financing Activities                                (33,707)            27,144           (1,475)
                                                                                ------------       -----------     -----------
Effect of Exchange Rate Changes on Cash and Equivalents                                289               (543)             216
                                                                                ------------       -----------     -----------
Increase (Decrease) in Cash and Equivalents                                        (13,867)            20,716            8,024
Cash and Equivalents, Beginning of Year                                             55,392             34,676           26,652
                                                                                ------------       -----------     ----------- 
Cash and Equivalents, End of Year                                                  $41,525            $55,392          $34,676
                                                                                ============       ===========     ===========
Supplemental Cash Flow Disclosures
   Cash paid during the year for:
   Interest                                                                        $ 3,511            $ 4,754          $ 4,627
   Income taxes                                                                     12,442              9,213            5,139

   Noncash investing and financing activities:
   Fair value of assets acquired in connection with purchase acquisitions                -             35,000           14,055
   Liabilities assumed in connection with purchase acquisitions                          -              6,600            1,916
   Goodwill reduction from utilization of loss carryforwards                             -                  -              606
   Common stock issued from conversion of note (including debt
     issuance costs written off)                                                         -             11,386                -
   Tax benefit from exercises of stock options                                       5,011              3,163            1,934
   Equipment acquired through issuance of debt                                           -                736            1,423
   Property and equipment acquired through capital lease obligations                 1,222              1,505            7,372
   Note receivable from sale of RTP Corp.                                                -              2,150                -


</TABLE>

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

<PAGE>

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME 
For the Years Ended on the Friday Nearest December 31
(Amounts in Thousands)
<TABLE>
<CAPTION>

                                                                                           Foreign
                                                                Additional                 Currency
                                            Common Stock         Paid-in      Retained   Translation  Comprehensive
                                         Shares      Amount      Capital      Earnings    Adjustment      Income
                                         --------    -------    ----------    ---------   ----------   -----------


<S>                                     <C>            <C>        <C>         <C>         <C>           <C>
Balance, December 29, 1995               28,830         $288       $52,375     $30,571      $  (345)
  Additional shares issued in
   two-for-one stock split                5,982           60           (60)          -            -
  Issuance of common stock                    8            -           100           -            -
  Issuance of common  stock under stock
   option and employee purchase plans     1,419           14         3,874           -            -
  Tax benefit  from  exercises of stock      
   options                                    -            -         1,934           -            -
  Repurchases and retirement of            
   common stock                            (197)          (2)         (349)     (1,681)           -
  Net income                                  -            -             -      30,059            -      $30,059
  Other comprehensive income - foreign
   currency translation adjustment, net
   of tax of $46                              -            -             -           -          168          168
                                                                                                       -----------
  Comprehensive income                                                                                   $30,227
                                         --------    -------    ----------    ---------   ----------   ===========                 
Balance, January 3, 1997                 36,042          360        57,874      58,949         (177)
  Issuance of common stock                   21            -           146           -            -
  Issuance of common  stock under stock
   option and employee purchase plans     1,151           12         5,499           -            -
  Tax benefit  from  exercises of stock       
   options                                    -            -         3,163           -            -
  Conversion of convertible subordinated
   note (including debt issuance costs 
   written off)                           1,167           12        11,374           -            -
  Net income                                  -            -             -      29,820            -     $29,820
  Other comprehensive income - foreign
   currency translation adjustment, net
   of tax of $2,397                           -            -             -           -      (4,356)      (4,356)
                                                                                                      -----------
  Comprehensive income                                                                                  $25,464
                                         --------    -------    ----------    ---------   ----------  =========== 
Balance, January 2, 1998                 38,381          384        78,056      88,769      (4,533)
  Issuance of common  stock under stock
   option and employee purchase plans       713            7         4,633           -           -
  Tax benefit  from  exercises of stock       
   options                                    -            -         5,011           -           -
  Repurchases and retirement of         
    common stock                         (1,212)         (12)       (2,682)    (16,685)          -
  Net income                                  -            -             -      27,044           -      $27,044
  Other comprehensive income - foreign
    currency  translation  adjustment, 
    net of tax of $539                        -            -             -           -       1,096        1,096
                                                                                                       -----------
  Comprehensive income                                                                                  $28,140
                                         --------    -------    ----------    ---------   ----------   ===========
Balance, January 1, 1999                 37,882         $379       $85,018     $99,128     $(3,437)
                                         ========    =======    ==========    =========   ==========
</TABLE>



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


<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION The consolidated financial statements include the accounts
of Artesyn Technologies,  Inc. (formerly named Computer Products,  Inc.) and its
subsidiaries (collectively referred to as the "Company").  Intercompany accounts
and transactions  have been eliminated in  consolidation.  On December 29, 1997,
Computer  Products,  Inc.  completed a merger with Zytec  Corporation  ("Zytec")
whereby  Zytec  became a  wholly-owned  subsidiary  of  Computer  Products  (the
"merger"). The consolidated financial statements for all periods presented prior
to the merger have been restated as if the Company  operated as one entity since
inception.  The  merger  has been  accounted  for as a  pooling-of-interests  as
discussed in Note 5.

The Company received shareholder  approval at its annual  shareholders'  meeting
held in May 1998 to legally  change the Company's  corporate  name from Computer
Products, Inc. to Artesyn Technologies,  Inc. Since that date, the Company began
trading under The Nasdaq Stock MarketSM symbol ATSN.

FISCAL YEAR The Company's  fiscal year ends on the Friday  nearest  December 31,
which results in a 52- or 53-week year.  The fiscal years ended January 1, 1999,
January 2, 1998 and January, 3, 1997 comprise 52, 52 and 53 weeks, respectively.

CASH AND EQUIVALENTS Only highly liquid investments with original  maturities of
90 days or less are classified as cash and  equivalents.  These  investments are
carried at cost, which approximates market value.

INVENTORIES  Inventories  are  stated  at the  lower  of  cost,  on a  first-in,
first-out basis, or market.

PROPERTY,  PLANT & EQUIPMENT  Property,  plant and  equipment is stated at cost.
Depreciation  is provided  for on the  straight-line  method over the  estimated
useful lives of the assets ranging from three to 30 years or the lease terms, if
shorter. Leasehold improvements are recorded at cost and are amortized using the
straight-line  method over the remaining lease term or the economic useful life,
whichever is shorter.  Major renewals and improvements  are  capitalized,  while
maintenance,  repairs and minor  renewals  not expected to extend the life of an
asset  beyond its normal  useful  life are  expensed  as  incurred.  The Company
periodically  evaluates whether events and circumstances  have occurred that may
warrant  revision  of the  estimated  useful  life of its  property,  plant  and
equipment  or whether the  remaining  balance of property,  plant and  equipment
should be evaluated for possible impairment. The Company uses an estimate of the
related  undiscounted cash flows over the remaining life of the property,  plant
and equipment in measuring their recoverability.

GOODWILL  The excess of  purchase  price over net assets of  companies  acquired
(goodwill),  which are accounted for under the purchase  method,  is capitalized
and amortized on a straight-line basis over periods ranging from 20 to 40 years.
Related  accumulated  amortization  was  $9,701,000 and $7,322,000 at January 1,
1999 and January 2, 1998,  respectively.  Amortization  expense was  $2,257,000,
$1,550,000 and $837,000 in fiscal years 1998, 1997 and 1996,  respectively.  The
Company  periodically  evaluates whether events and circumstances  have occurred
that may warrant  revision of the  estimated  useful life of goodwill or whether
the remaining  balance of goodwill should be evaluated for possible  impairment.
The Company  uses an estimate  of the related  undiscounted  cash flows over the
remaining life of the goodwill in measuring its recoverability.

FOREIGN CURRENCY  TRANSLATION The functional  currency of the Company's European
subsidiaries is each foreign subsidiary's local currency. Assets and liabilities
are  translated  from their  functional  currency into US dollars using exchange
rates in  effect  at the  balance  sheet  date.  Income  and  expense  items are
translated using average  exchange rates for the period.  The effect of exchange
rate fluctuations on translating foreign currency assets and liabilities into US
dollars is included in shareholders' equity.  Foreign exchange transaction gains
and losses are included in the results of operations. The functional currency of
the Company's Asian  subsidiaries is the US dollar,  as their  transactions  are
substantially denominated in US dollars.  Financial exposure may result from the
timing of transactions and the movement of exchange rates.

REVENUE  RECOGNITION The Company  recognizes revenue as products are shipped and
title is passed to the customer or as services are rendered by the Company.

PRODUCT  WARRANTY The Company records  estimated  product  warranty costs in the
period in which the related sales are recognized.

INCOME TAXES Income taxes reflect the current and deferred tax  consequences  of
events that have been  recognized in the Company's  financial  statements or tax
returns.  The  realization  of deferred  tax assets is based on  historical  tax
positions and expectations about future taxable income.

EARNINGS PER SHARE Basic  earnings per share  ("EPS") is  calculated by dividing
income available to common shareholders by the weighted-average number of common
shares outstanding  during each period.  Diluted earnings per share includes the
potential impact of convertible securities and dilutive common stock equivalents
using  the  treasury  stock  method of  accounting.  The  reconciliation  of the
numerator and denominator of the EPS calculation is presented in Note 12.

COMPREHENSIVE  INCOME  In 1998,  the  Company  adopted  Statement  of  Financial
Accounting  Standards ("SFAS") No. 130, "Reporting  Comprehensive  Income" which
requires companies to report all changes in equity in a financial  statement for
the period in which they are recognized,  except those resulting from investment
by owners  and  distributions  to owners.  The  Company  has chosen to  disclose
Comprehensive   Income,  which  encompasses  net  income  and  foreign  currency
translation adjustments,  in the Consolidated Statements of Shareholders' Equity
and Comprehensive  Income.  Prior years have been reclassified to conform to the
SFAS 130 requirements.

STOCK SPLIT In April 1996,  Zytec's board of directors  authorized a two-for-one
stock split in the form of a 100% stock dividend  distributed on June 3, 1996 to
shareholders of record on May 20, 1996. Applicable per share and number of share
data have been retroactively restated to reflect the stock split, except for the
Consolidated Statements of Shareholders' Equity and Comprehensive Income.

USE OF ESTIMATES IN THE  PREPARATION OF FINANCIAL  STATEMENTS The preparation of
financial statements in conformity with generally accepted accounting principles
requires  management to make estimates and  assumptions  that affect the amounts
reported in the consolidated  financial  statements and accompanying  notes. The
more significant estimates made by management include the provision for doubtful
accounts  receivable,  inventory  write-downs for potentially excess or obsolete
inventory, restructuring charges, warranty reserves, and the amortization period
for  intangible  assets.  Actual  results  could  differ  from those  estimates.
Management  periodically  evaluates  estimates  used in the  preparation  of the
financial statements for continued reasonableness.  Appropriate adjustments,  if
any,  to the  estimates  used are  made  prospectively  based  on such  periodic
evaluation.

ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board
("FASB") issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities".  SFAS  133  establishes  accounting  and  reporting  standards  for
derivative instruments and for hedging activities, which the Company is required
to adopt effective  January 1, 2000. SFAS 133 will require the Company to record
all derivatives as either assets or liabilities in the Consolidated Statement of
Financial  Position and measure those  instruments at fair value. The accounting
for changes in the fair value depends on the intended use of the  derivative and
the resulting  designation.  The impact of SFAS 133 on the  Company's  financial
statements will depend on a variety of factors,  including future interpretative
guidance  from the FASB,  the future  level of  forecasted  and  actual  foreign
currency transactions, the extent of the Company's hedging activities, the types
of hedging instruments used and the effectiveness of such instruments.  However,
given the  Company's  current use of  derivatives  and hedging  activities,  the
Company does not believe the effect of adopting SFAS 133 will be material to its
consolidated financial statements.

In March 1998, the Accounting  Standards  Executive Committee released Statement
of Position 98-1, ("SOP 98-1"),  "Accounting for the Costs of Computer  Software
Developed  or  Obtained  for  Internal  Use".  SOP 98-1  requires  companies  to
capitalize certain costs of computer software developed or obtained for internal
use,  provided that those costs are not research and  development.  In 1998, the
Company  adopted the  guidelines  established  by SOP 98-1 in accounting for the
costs of computer software  developed or obtained for internal use in connection
with its implementation of the ERP system.

RECLASSIFICATIONS Certain prior years' amounts have been reclassified to conform
with the current year's presentation.

2. INVENTORIES

   The components of inventories are as follows ($000s):

                                                           1998        1997
                                                       ---------   ---------
      Raw materials                                     $30,737     $31,181
      Work in process                                    10,097      12,582
      Finished goods                                     21,626      15,900
                                                       ---------   ---------
      Inventories                                       $62,460     $59,663
                                                       =========   =========


3. PROPERTY, PLANT & EQUIPMENT

   Property, plant & equipment is comprised of the following ($000s):

                                                           1998        1997
                                                       ---------   ---------
    Land                                                 $2,509      $2,423
    Buildings and fixtures                               18,136      18,227
    Machinery and equipment                             105,950      77,812
    Leasehold improvements                                4,816       1,763
    Equipment,  furniture and  leasehold  
     improvements under capital leases                   13,400      12,214
                                                       ---------   ---------
                                                        144,811     112,439

    Less accumulated depreciation and amortization       69,779      50,858
                                                       ---------   ---------
    Property, plant & equipment, net                    $75,032     $61,581
                                                       =========   =========

   Depreciation  and  amortization  expense  was  $14,407,000,  $11,525,000  and
   $8,840,000 in fiscal years 1998, 1997 and 1996, respectively.

4. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

   The  components of accounts  payable and accrued  liabilities  are as follows
($000s):

                                                           1998        1997
                                                       ---------   ---------
      Accounts payable                                  $42,025     $36,790
      Accrued liabilities:
            Compensation and benefits                    13,543      14,875
            Income taxes payable                          8,296      14,071
            Warranty reserve                              4,897       3,457
            Restructuring reserve                         2,795           -
            Other                                        10,097      12,736
                                                       ---------   ---------
                                                        $81,653     $81,929
                                                       =========   =========

At January 1, 1999 and  January 2, 1998,  other  accrued  liabilities  consisted
primarily of accruals for commissions, advertising, professional fees, and other
taxes.


5. BUSINESS COMBINATIONS

Zytec -- On December 29, 1997, Computer Products completed the merger with Zytec
by exchanging  approximately 14.1 million shares of its common stock for all the
outstanding  common stock of Zytec.  Each share of Zytec was  exchanged for 1.33
shares of the Company's  common stock. In addition,  outstanding  Zytec employee
stock  options  were  converted  at the same  exchange  factor  into  options to
purchase up to  approximately  3.9 million shares of the Company's common stock.
All applicable share data have been  retroactively  restated in the consolidated
financial statements.  The merger constituted a tax-free  reorganization and has
been accounted for as a  pooling-of-interests  under Accounting Principles Board
Opinion ("APB") No. 16. Accordingly, consolidated financial statements presented
herein  for  periods  prior to the merger  have been  restated  to  include  the
combined results of operations,  financial position and cash flows of the merged
companies.

There were no  transactions  between  Computer  Products  and Zytec prior to the
combination  and certain  adjustments  were recorded in 1997 to conform  Zytec's
accounting policies to the Company's accounting  policies.  Differences in these
practices  prior  to  1997  were  deemed  not to be  material  to the  Company's
financial statements. Certain reclassifications were made to the Zytec financial
statements to conform to the Company's presentation.

Sales and earnings data for the separate  companies and the combined  amounts as
presented in the  consolidated  financial  statements are displayed in the table
below  ($000s).  Since the merger was effective on December 29, 1997,  the table
reflects sales and earnings data for the entire 1997.  Operations  from December
29,  1997 to January  2, 1998  would not have had a material  impact on the data
presented for fiscal year 1997.

                               1997         1996
                            ----------   ----------
Sales
   Computer Products         $262,774     $207,563
   Zytec                      264,462      228,168
                            ----------   ----------
   Combined                  $527,236     $435,731
                            ==========   ==========
Net Income
   Computer Products          $20,089      $19,578
   Zytec                        9,731       10,481
                            ----------   ----------
   Combined                   $29,820      $30,059
                            ==========   ==========

In  connection  with the  merger,  in the fourth  quarter of 1997,  the  Company
recorded a charge to operating  expenses of $3.0 million for direct  transaction
costs  consisting   primarily  of  fees  for  investment   bankers,   attorneys,
accountants, financial printing and other related charges.

The  ELBA  Group  -- On July 22,  1997,  the  Company  acquired  the Elba  Group
("Elba"), a European designer, manufacturer and marketer of a wide range of both
AC/DC and DC/DC power  conversion  products.  The Company  purchased Elba for 52
million  Deutsche  marks  (approximately  $28.5 million) in cash provided by two
seven-year term loans from a financial  institution.  At the  acquisition  date,
Elba had  design,  sales  and  manufacturing  organizations  in  Oberhausen  and
Einsiedel, Germany; Chomutov, Czech Republic; and Etten-Leur,  Netherlands. Elba
also had sales  offices in Pfaffikon,  Switzerland;  Vaulx-Milieu,  France;  and
Chesterfield, United Kingdom.

The  acquisition  was  accounted  for under the purchase  method of  accounting.
Accordingly,  the excess of the purchase  price over the estimated fair value of
the net assets  acquired,  or  approximately  $21.5  million,  was  recorded  as
goodwill which is being amortized on a  straight-line  basis over a period of 20
years.  Elba's  results  of  operations  have  been  included  in the  Company's
consolidated  financial  statements from the date of acquisition.  The following
unaudited pro forma information  combines the consolidated results of operations
of the Company and Elba as if the  acquisition  had occurred at the beginning of
the periods presented.

                         Unaudited Combined Pro Forma Information
                              ($000s Except per Share Data)

                                           1997           1996
                                       -------------  -------------
Sales                                     $540,545      $462,366

Income from Continuing Operations           32,556        31,312
   Per share - basic                          0.89          0.89
   Per share - diluted                        0.81          0.83

Net Income                                  30,494        31,816
   Per share - basic                          0.83          0.90
   Per share - diluted                        0.76          0.84

The unaudited pro forma results have been prepared for comparative purposes only
and include certain  adjustments,  such as additional  amortization expense as a
result of goodwill,  increased  interest  expense on the  acquisition  debt, and
related  income  tax  effects.  The  pro  forma  results  do not  purport  to be
indicative  of results  that would have  occurred  had the  combination  been in
effect for the periods  presented,  nor do they purport to be  indicative of the
results that will be obtained in the future.

Effective  December 11, 1998, the Company sold  Elba-electric-produktion  s.r.o.
(its Czech Republic division) to a third party for 20,000 Deutsche marks and the
repayment of an intercompany loan with a balance of approximately  $400,000. The
results of operations of such division were not  significant  in relation to the
Company's consolidated  financial statements;  accordingly pro forma disclosures
have not been  presented.  In addition,  the sales offices located in Pfaffikon,
Switzerland;  Vaulx-Milieu, France; and Chesterfield, United Kingdom were closed
during 1998.  Costs  related to such  facilities  closures  were included in the
restructuring charge described in Note 6.

Jeta Power  Systems --  Effective  August 23,  1996,  the Company  acquired  the
remaining  90% of the  outstanding  capital  stock of Jeta Power  Systems,  Inc.
("Jeta") for  approximately  $11.25 million in cash. Jeta designs,  manufactures
and markets medium-to-high power systems in the 400 watt to 4 kilowatt range for
applications in  telecommunications,  networking,  computing and instrumentation
markets. The Company had purchased an initial 10% of Jeta's capital stock during
1984 for  approximately  $433,000.  The Company used cash on hand to pay for the
acquisition.

The  acquisition  was  accounted  for under the purchase  method of  accounting.
Accordingly,  $7.9 million,  representing  the excess of the purchase price over
the  estimated  fair  value of the net assets  acquired,  has been  recorded  as
goodwill  and is being  amortized on a  straight-line  basis over a period of 20
years.  Jeta's  results  of  operations  have  been  included  in the  Company's
consolidated  financial  statements  from  the date of  acquisition  and are not
significant  in relation to the  Company's  consolidated  financial  statements.
Accordingly, pro forma financial disclosures have not been presented.

Artesyn Hungary Electronics -- In March 1996, Zytec completed the acquisition of
the outstanding stock of BHG Tatabanya  Alkatrezsgyarto  Kft. (formerly known as
Zytec Hungary  Elektronikai  Kft). The $830,000 purchase price was paid in cash.
This  acquisition  has been recorded  using the purchase  method of  accounting.
Artesyn  Hungary's  results of  operations  have been  included in the Company's
consolidated  financial  statements  from  the date of  acquisition  and are not
significant  in relation to the  Company's  consolidated  financial  statements.
Accordingly, pro forma financial disclosures have not been presented.

6. RESTRUCTURING

During the first quarter of 1998,  the Company  recorded a $9.6 million  pre-tax
charge in connection with the Company's  restructuring plan following its merger
with Zytec. This amount is allocated in the accompanying Consolidated Statements
of  Operations  as follows:  $7.2 million to  Restructuring  Charge,  as further
described below, and $2.4 million to Cost of Sales, which relates principally to
inventory  write-offs  of  duplicate  product  development  programs  which were
underway at CPI and Zytec prior to the merger. The restructuring  charge relates
primarily  to the  elimination  of duplicate  facilities  in an effort to reduce
costs pursuant to the Company's integration plan. Specific restructuring actions
included  the closure of certain  domestic and foreign  manufacturing  and other
facilities   through  the   consolidation  of   manufacturing   operations  with
corresponding  personnel reductions,  the realignment of the Company's workforce
to eliminate duplicate functions particularly in administrative areas, and other
related cost-savings actions.
<PAGE>
The following  table  includes the  components of the  restructuring  charge and
related  charge for  inventory  write-offs,  the current year payments and other
activities,  and the remaining  restructuring  reserve balance of  approximately
$2.8  million  which is  included in accrued  liabilities  as of January 1, 1999
($000s):
<TABLE>
<CAPTION>
                                           Employee
                                          Termination         Asset         Facility       Product Line
                                            Benefits       Write-offs       Closures      Rationalization
                                         -------------     ------------    ----------     --------------
<S>                                           <C>              <C>           <C>                 <C>   
Restructuring provision /write-offs           $3,956           $1,231        $2,002              $2,411
Cash payments                                 (2,806)               -          (357)                  -
Non-cash activities                                -           (1,231)            -              (2,411)
                                         -------------     ------------    ----------     --------------
Reserve balance at January 1, 1999            $1,150       $        -        $1,645          $        -
                                         =============     ============    ==========     ==============
</TABLE>


Employee  termination  benefits  primarily  represent  severance  pay and  other
benefits   associated  with  the  elimination  of  approximately  360  positions
worldwide,  with  more  than 70% of the  eliminated  positions  coming  from the
rationalization of certain duplicate  manufacturing  locations and sales offices
in  Europe  and  the  remaining  30%  relating  to  duplicate   management   and
administrative  personnel. In the latter part of 1998, the Company's revised its
initial  estimate of  positions  to be  eliminated  from 400 to 360. The revised
estimated  charges for employee  termination  benefits  approximate  the initial
estimate.  As of January  1,  1999,  approximately  300 of the  anticipated  360
positions had been eliminated worldwide.

The provision for the facility closures includes leasehold termination payments,
service contracts  obligations,  and other exit costs associated with facilities
closures discussed above.

As a result of such facilities  closures,  the Company evaluated whether related
fixed assets (including  duplicate  management  information systems and unusable
manufacturing  and testing  equipment) had become impaired.  The Company used an
estimate of the related  undiscounted cash flows over the remaining life of such
machinery and equipment in measuring  their  recoverability  and determined that
such assets were  permanently  impaired.  As a result,  these fixed  assets were
written down to their net realizable value.

Total  expected  cash  expenditures  related  to the  restructuring  charge  are
estimated  to be  approximately  $6.0  million.  With the  exception  of certain
lease-related  cash  requirements,  the remaining  anticipated  cash payments of
approximately  $2.8  million  are  expected  to be paid during the first half of
1999.

7.  DISCONTINUED OPERATIONS

On April 17, 1997,  the Company  announced its intention to sell its  Industrial
Automation division, RTP Corp. ("RTP"),  pursuant to a plan of disposal approved
by  the  Board  of  Directors.   Effective   July  5,  1997,  the  Company  sold
substantially all of the assets of RTP to RT Acquisition  Florida Corp. Proceeds
from the sale included $2.0 million cash, a subordinated unsecured one-year note
in the aggregate principal amount of approximately $2.2 million bearing interest
at the prime  rate,  and the  assumption  of  certain of RTP's  liabilities.  An
estimated  after-tax  loss on the sale of  approximately  $1.7  million  (net of
income tax benefit of  $1,152,000)  was  recorded  in the first  quarter of 1997
representing  the  estimated  loss on the  disposal  of RTP's net  assets  and a
pre-tax  provision  of  $1,000,000  for  expected  operating  losses  during the
phase-out period.  The actual loss on disposal  approximated the amount recorded
in the first quarter of 1997.

RTP's sales from January 4, 1997 through its disposal date were $4,793,000.  RTP
sales in 1996 were $14,922,000.  RTP's operating results are shown separately as
discontinued   operations  in  the  accompanying   Consolidated   Statements  of
Operations.

8. LINE OF CREDIT

Effective  December 31, 1998, the Company entered into a credit agreement with a
syndicate of banks which provides a new three-year,  multi-currency $200 million
credit facility. The new revolving facility, which expires on December, 31 2001,
replaces the Company's  previous $20 million credit line. The agreement provides
for various  interest  rate  options on the facility  based on London  Interbank
Offering Rates plus .625% and includes a fee of .20% on the unused balance, both
payable quarterly.  The agreement contains certain  restrictive  covenants that,
among other things, require the Company to maintain certain financial ratios and
limit the purchase,  transfer or distribution of the Company's assets. The funds
are to be used for the  repayment of the Company's  existing  $46.4 million term
loans and for other  general  corporate  purposes.  As of January  1, 1999,  the
Company had made no borrowings  under the revolving  credit  facility and was in
compliance with the agreement's covenants. On January 8, 1999, the existing term
loans were repaid from borrowings under the new revolving  credit facility.  Any
amounts outstanding under the revolver are due on December 31, 2001.
<PAGE>
9. LONG-TERM DEBT AND CAPITAL LEASES

Long-term and capital lease obligations consist of the following ($000s):
<TABLE>
<CAPTION>

                                                                            1998         1997
                                                                         --------     --------

  <S>                                                                  <C>          <C>    
    5.58% interest-bearing note (a)                                      $31,023      $28,921

    8.25% interest-bearing note (b)                                       15,400       19,800

    4.875% long-term investment loan due July 1, 2002 (c)                    611          713

    3.50% revolving credit loan (d)                                            -        3,562

    6.9% mortgage note (e)                                                     -        3,286

    3.875% notes payable (f)                                                   -        2,414

    Loan payable to bank (g)                                                   -        1,618

    Variable rate demand industrial development revenue bonds (h)              -          820

    Capital lease obligations (see Note 10)                                5,956        7,413
                                                                         --------     --------
                                                                          52,990       68,547
    Less current maturities                                                2,707       15,598
                                                                         --------     --------
    Long-term debt and capital leases                                    $50,283      $52,949
                                                                        ========     ========
</TABLE>


(a)      On July 15, 1997, the Company and one of its subsidiaries  entered into
         two separate  unsecured  seven-year term loans with a bank providing an
         aggregate of 52 million Deutsche marks. The term loans bear interest at
         LIBOR plus .75% (see Note 17).  Proceeds  from the term loans were used
         to finance the Elba Group acquisition on July 22, 1997 (see Note 5). On
         January 8, 1999, the term loans were repaid from  borrowings  under the
         Company's new revolving credit facility (see Note 8).

(b)      On  April  4,  1995,  the  Company  entered  into an  unsecured  credit
         agreement with a bank that provided for a $25 million  seven-year  term
         loan.  Proceeds  from the term loan were used to redeem  the  Company's
         Debentures.  The term loan bears  interest at LIBOR plus .75% (see Note
         17). On January 8, 1999, the term loan was repaid from borrowings under
         the Company's new revolving credit facility (see Note 8).

(c)      Interest is payable at 4.875% through June 30, 1999 after which it will
         be renegotiated.  Principal  payments are as follows:  900,000 Austrian
         Schillings due semi-annually on January 1 and July 1 of each year, with
         interest payable annually.

(d)      The Company's  Austrian  subsidiary had a revolving  credit loan with a
         bank for financing export sales. The agreement was renewable  quarterly
         and bore interest at 3.5%.  This  revolving  credit loan was repaid and
         terminated during 1998.

(e)      On  June  28,  1994,  the  Company  obtained  a  $3,600,000  seven-year
         commercial  mortgage loan from a bank at a fixed  interest rate of 6.9%
         for the first three years, repriced thereafter at 250 basis points over
         the then prevailing  four-year U.S.  Treasury Index.  The loan proceeds
         were used to provide  additional  working  capital.  Effective  July 1,
         1997,  the loan  agreement  was amended to extend the interest  rate of
         6.9% through June 30, 1998. The note was repaid in June of 1998.

(f)      Notes payable  include various notes which matured and were repaid from
         January  to April  1998.  The  interest  rate on each of the  notes was
         3.875% during 1998.

(g)      Loan payable to bank bore  interest at rates  ranging from 5% to 6.3%
         and was repaid during 1998.
         
(h)      The interest rate on demand  industrial  revenue bonds was  established
         weekly  based on market  conditions  such that the market  value of the
         bonds  would  remain  equal to their  principal  value.  The bonds were
         repaid during 1998.

Maturities of long-term  debt,  including  amounts  borrowed  under the revolver
(which has a  mandatory  repayment  date of  December  31,  2001) and  excluding
capital lease obligations,  are as follows:  $153,000 in 1999, $153,000 in 2000,
$46,576,000 in 2001, and $152,000 in 2002.

The fair value of the debt and capital  leases,  based upon discounted cash flow
analysis using current market interest rates, approximates its carrying value at
January 1, 1999.

<PAGE>
10.   LEASE OBLIGATIONS

Items under capital leases include  certain  equipment,  furniture and leasehold
improvements. The Company is also obligated under noncancelable operating leases
for  facilities  and  equipment  that expire at various  dates  through 2005 and
contain  renewal  options at  favorable  terms.  Future  minimum  annual  rental
obligations and noncancelable sublease income are as follows ($000s):

                                       Capital     Operating     Sublease
   Year                                Leases       Leases        Income
------------------------------------------------   ----------   -----------

   1999                                  $3,022       $8,706        $2,432    
   2000                                   2,046        8,284         2,432
   2001                                   1,453        7,469         2,432
   2002                                     100        7,037         2,432
   2003                                      64        6,064           396
   Thereafter                                61       12,924             -
                                     -----------   ----------   -----------
                                          6,746      $50,484       $10,124
                                                   ==========   ===========
  Less amount representing interest        (790)
                                     -----------
  Present   value  of  net  minimum   
    lease payments                       $5,956
                                     ===========

Rental expense under  operating  leases  amounted to $8,269,000,  $6,133,000 and
$6,395,000 in fiscal years 1998,  1997 and 1996,  respectively.  Sublease income
was $2,257,000,  $1,941,000 and $1,941,000 for fiscal years 1998, 1997 and 1996,
respectively.

A lease  liability  has been  recorded  for a leased  manufacturing  facility no
longer  deployed in the  Company's  operations.  Although  the facility is being
subleased,  the future lease obligations exceed future sublease income,  thereby
creating a loss contract.  The aggregate  minimum annual rental  obligations and
sublease  income  under this lease have been  included in the lease  commitments
table  presented  above.  The lease  liability  is  estimated  based on contract
provisions  and  historical  and current  market  rates.  This  estimate  can be
materially  affected by changes in market  conditions.  This lease  liability is
included in "other  long-term  liabilities"  in the  Consolidated  Statements of
Financial Condition and amounted to $4.4 million as of January 1, 1999.


11.   INCOME TAXES

The  components  of the  provision  for income  taxes on income from  continuing
operations consist of the following ($000s):

                                       1998       1997         1996
                                     ---------   --------    -------
      Currently payable:
         Federal                      $8,872     $12,979      $4,410
         State                         2,173       2,129       2,424
         Foreign                       1,233       5,846       3,287
                                     ---------   --------    -------
      Total current                   12,278      20,954      10,121
                                     ---------   --------    -------
      Deferred provision:
         Federal                      (2,252)     (3,019)        612
         State                          (251)        140         134
         Foreign                       3,545        (516)     (2,834)
                                     ---------   --------    -------
      Total deferred                   1,042      (3,395)     (2,088)
                                     ---------   --------    -------
      Total provision for  
       income taxes                  $13,320     $17,559      $8,033
                                     =========   ========    ========

The exercise of nonqualified  stock options resulted in state and federal income
tax benefits to the Company  related to the  difference  between the fair market
price of the stock at the date of exercise  and the  exercise  price.  In fiscal
1998,  1997 and 1996,  the  provision  for income  taxes  excludes  current  tax
benefits of $5,011,000, $3,163,000 and $1,934,000,  respectively, related to the
exercise of stock options credited directly to additional paid-in capital.

During fiscal 1996, the Company  utilized tax loss  carryforwards  obtained in a
prior business  combination.  The effect of utilizing these carryforwards was to
reduce goodwill by approximately $606,000 in 1996.

Income  taxes  have not  been  provided  on the  undistributed  earnings  of the
Company's foreign  subsidiaries,  which approximated $68.3 million as of January
1, 1999, as the Company does not intend to repatriate such earnings.
<PAGE>
The  components  of the  Company's  income  from  continuing  operations  before
provision for income taxes consist of the following ($000s):

                                               1998         1997         1996
                                              -------      -------      -------

        U.S.                                  $25,240      $28,626      $25,157
        Foreign                                15,124       20,815       12,431
                                              -------      -------      -------
        Total income from continuing
          operations before income taxes      $40,364      $49,441      $37,588
                                              =======      =======      =======



The Company's  effective tax rate differs from the U.S. statutory federal income
tax rate due to the following:

                                                1998         1997         1996
                                              -------      -------      -------

        U.S. federal statutory tax rate         35.0%        35.0%        35.0%
        Foreign tax effects                     (1.3)        (2.3)        (1.8)
        Recognition  of deferred tax benefit
          of NOL carryforward                      -            -         (8.4)
        Permanent items -non-deductible          0.8          2.7          0.3
        Change in the valuation allowance       (4.2)        (5.2)       (10.8)
        Effect of AMT and state income taxes     2.2          5.1          6.9
        Other                                    0.5          0.2          0.2
                                              -------      -------      -------
        Effective income tax rate               33.0%        35.5%        21.4%
                                              =======      =======      =======

In May 1996, the Austrian government changed the treatment of net operating loss
("NOL")  carryforwards  by (a)  suspending the use of NOLs during the years 1996
and 1997  retroactively to January 1, 1996 and (b) removing the time limitations
on the use of the NOLs.  In light of this new statute and based on the Company's
assessment  of the strong  financial  results of the  Austrian  operations,  the
Company  recognized the deferred  income tax benefit related to the Austrian NOL
carryforwards.  This  resulted in a $2,626,000  net reduction of income taxes in
the second quarter of 1996, comprised of a tax benefit of $3,175,000 relating to
recognition of the deferred tax benefit offset by $549,000 in income tax expense
resulting from the  retroactive  application of this tax law change to first and
second quarter Austrian operations.

Deferred  income  taxes  reflect  the net tax effects of  temporary  differences
between the carrying  amounts of assets and liabilities for financial  reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's  deferred tax assets and deferred tax liabilities as of January 1,
1999 and January 2, 1998 are as follows ($000s):

                                                              1998         1997
                                                           --------    ---------
      DEFERRED TAX ASSETS
      Net operating loss carryforwards                     $     -      $1,118
      Tax credit carryforwards                                   -       2,086
      Foreign net operating loss carryforwards                   -       2,665
      Lease liabilities                                      1,751       1,799
      Inventory reserves                                     2,604       2,558
      Other accrued liabilities                              5,283       3,430
      Allowance for bad debt                                   696         595
      Other                                                     33         402
                                                           --------    ---------
      Gross deferred tax assets                             10,367      14,653
      Valuation allowance                                        -      (4,851)
                                                           -------     --------
            Net deferred tax assets                        $10,367      $9,802
                                                           ========    =========
      DEFERRED TAX LIABILITIES
      Depreciation                                         $(1,708)    $(1,300)
      Amortization of goodwill                                (481)       (412)
      Other                                                 (2,498)     (1,528)
                                                           --------    ---------
            Deferred tax liabilities                       $(4,687)    $(3,240)
                                                           ========    =========

The valuation  allowance at January 2, 1998 included  approximately $3.2 million
related to the exercise of stock  options,  which was  recognized  during fiscal
1998 and was credited  directly to additional  paid-in capital.  During the year
ended  January  1,  1999,   the  valuation   allowance  was  eliminated  due  to
management's  belief that it is more likely than not that future  taxable income
will be  sufficient  to  utilize  deferred  tax  assets of  approximately  $10.4
million.  In assessing the likelihood of  utilization  of existing  deferred tax
assets,  management has considered the historical  results of operations and the
current operating environment.

12. EARNINGS PER SHARE

The following data show the amounts used in computing earnings per share and the
effects  on income  and the  weighted-average  number  of shares of  potentially
dilutive  common stock.  The number of shares used in the  calculation  for 1996
reflects a two-for-one  stock split of Zytec's shares occurring on June 3, 1996.
Also,  the number of shares used in the  calculation  for fiscal  years 1997 and
1996 was adjusted to reflect the additional shares issued pursuant to the merger
with Zytec at a conversion  ratio of 1.33. The  reconciliation  of the numerator
and denominator of the EPS calculation is presented below (000s except per share
data):
<PAGE>
<TABLE>
<CAPTION>


                                           1998            1997             1996
                                        -----------     -----------      -----------
Basic EPS
<S>                                       <C>            <C>              <C>    
  Income from continuing operations       $27,044        $31,882          $29,555
                                        -----------     -----------      -----------
  Weighted average shares                  38,369         36,650           35,375
                                        -----------     -----------      -----------
  Per share - basic                       $  0.70        $  0.87          $  0.84
                                        ===========     ===========      ===========

Diluted EPS
  Income from continuing operations       $27,044        $31,882          $29,555
  Add: after-tax interest on                   
        convertible note                        -            548                -
                                         ---------      ----------        ----------
                                          $27,044        $32,430          $29,555
                                        ----------     -----------      -----------

  Weighted average shares                  38,369         36,650           35,375
  Effect of dilutive items:
    Stock options                           2,266          2,837            2,495
    Convertible note                            -          1,167                -
                                        -----------     -----------      -----------
                                           40,635         40,654           37,870
                                        -----------     -----------      -----------
  Per share- diluted                      $  0.67        $  0.80         $   0.78
                                        ===========     ===========      ==========
Antidilutive weighted options                 723            167              433
                                        ===========     ===========      ===========
</TABLE>

The above antidilutive  weighted options to purchase shares of common stock were
not included in computing  diluted earnings per share because their effects were
antidilutive for the respective periods.

13.   COMMITMENTS AND CONTINGENCIES

Grant Agreements

In prior years, the Company received grant  assistance,  under grant agreements,
from the Industrial Development Authority (" IDA") of Ireland in connection with
the Company's  establishment of its Irish  manufacturing  operations.  The funds
received reduced the cost of the facility and equipment and operating  expenses.
In October 1997, the Company entered into a new grant agreement  whereby the IDA
granted the sum of  approximately  $3.0 million to the Company in  consideration
for the Company providing employment for a given number of Irish citizens,  over
a  three-year   period.  As  of  January  1,  1999,  the  Company  had  received
approximately  $230,000 of the $3.0 million grant.  The funds reduced  operating
expenses  incurred in connection with the expansion of the Company's  operations
in Ireland.  In the event of noncompliance  with certain terms and conditions of
the  above-mentioned  grant  agreements,  the  Company  may be required to repay
approximately  $2.7  million  of  funds  received  to date  from  prior  grants.
Management believes that noncompliance with the agreements is unlikely.

Legal Proceedings

The  Company is a party to various  legal  proceedings  which have arisen in the
ordinary  course of  business.  While the  results  of these  matters  cannot be
predicted with certainty,  the Company believes that losses,  if any,  resulting
from the ultimate  resolution of these matters will not have a material  adverse
effect on the  Company's  consolidated  results  of  operations,  cash  flows or
financial position.

Purchase Commitments

The Company has  long-term  relationships  pertaining to the purchase of certain
raw materials with various  suppliers  through December 31, 1999. These purchase
commitments are not expected to exceed usage requirements.

14.   STOCK REPURCHASES

On July 22, 1998, the Company's Board of Directors authorized a share repurchase
program to purchase up to 4.0 million  shares of the  Company's  common stock in
the open market or in  privately-negotiated  transactions,  depending  on market
conditions and other factors. As of January 1, 1999, the Company repurchased and
retired 1,211,500 shares of its common stock for a total of approximately  $19.4
million in cash. The excess of the cost of shares repurchased over par value was
allocated to  additional  paid-in  capital based on the pro rata share amount of
additional  paid-in  capital  for all  shares  with the  difference  charged  to
retained earnings.

During  fiscal  1996,  the  Company  repurchased  and retired a total of 197,000
shares of its common stock  pursuant to a share  buy-back plan  announced in May
1995.  The Company did not  repurchase any shares during 1997. The excess of the
cost of shares  repurchased  over par value was allocated to additional  paid-in
capital based on the pro rata share amount of additional paid-in capital for all
shares with the difference charged to retained earnings.  In September 1997, the
Company terminated such stock repurchase program.

15.   STOCK-BASED COMPENSATION PLANS

EMPLOYEE  STOCK OPTION PLANS Under the  Company's  1981  Incentive  Stock Option
Plan,  options were granted to purchase up to 2,000,000  shares of the Company's
common stock at prices not less than the fair market value at date of grant. The
options  generally  vest at the rate of 25% per year beginning one year from the
date of  grant.  The  options  expire  10 years  from the date of grant or three
months after  termination of employment,  if earlier.  This plan was replaced by
the 1990 Performance Equity Plan ("PEP").

The  Company  established  the PEP  plan in 1990  under  which  it had  reserved
3,000,000   shares  of  common  stock  for  granting  of  either   incentive  or
nonqualified stock options to key employees and officers.  The Company increased
authorized  shares under the PEP plan to 5,950,000  in 1997.  Both  incentive or
nonqualified  stock  options  have been granted at prices not less than the fair
market  value  on the  date of grant as  determined  by the  Company's  Board of
Directors.  The maximum term of the options is 10 years,  although  some options
have been granted with a five-year term. Beginning with grants made in 1995, the
majority  of the options  become  exercisable  after the price of the  Company's
common stock achieves  certain levels for specified  periods of time or upon the
passage  of a certain  number of years from the date of grant.  For grants  made
prior to 1995,  options vest at the rate of 25% per year beginning one year from
the date of grant.  As of January 1, 1999,  842,262  stock options were reserved
for future grants.

The Zytec stock options  outstanding at the date of the merger were converted to
the Company's  stock  options.  The Zytec option  activity and share prices have
been restated,  for all years presented,  to the Company's equivalents using the
exchange  ratio of 1.33  shares of the  Company's  common  stock to one share of
Zytec common stock.  Zytec existing options  generally expire six years from the
date of grant,  or three months after  termination  of  employment,  if earlier.
Options  vest at the rate of 20% per year  beginning  one year  from the date of
grant.  No  additional  grants from the Zytec plans are allowed to be made after
December 29, 1997.

OUTSIDE  DIRECTORS  STOCK  OPTION  PLANS  The  Company  established  an  Outside
Directors  Stock  Option Plan in 1986 under  which it  authorized  and  reserved
250,000  shares of common stock for granting of  nonqualified  stock  options to
directors of the Company who are not employees of the Company at exercise prices
not less than the fair market value on the date of grant.  The plan was replaced
by the 1990  Outside  Directors  Stock  Option  Plan  under  which  the  Company
initially   authorized  and  reserved  250,000  shares.  The  Company  increased
authorized  shares under such plan to 500,000 in 1996.  Effective in 1996,  upon
initial  election  or  appointment  to the  Board of  Directors  and  each  year
thereafter,  outside directors shall receive an option to purchase 10,000 shares
of common stock  provided that they own a given number of shares of common stock
of the Company  based on a formula as defined in the plan.  The options  granted
under both Outside Directors plans fully vest on the one-year anniversary of the
date of grant.  As of January 1, 1999,  20,000 stock  options were  reserved for
future grants.  Management is requesting shareholder approval at its next annual
shareholders'  meeting  in May 1999 to  increase  the  number  of stock  options
authorized under the Outside Directors Stock Option Plan.

The Company  applies APB No. 25,  "Accounting for Stock Issued to Employees" and
related   Interpretations  with  supplemental   disclosures  in  accounting  for
stock-based  compensation.  In accordance  with APB 25, as the exercise price of
the Company's  stock options equals the market price of the underlying  stock on
the date of grant, no compensation  cost has been recognized for its fixed stock
option plans. Pro forma information  regarding net income and earnings per share
is required by SFAS 123 "Accounting for Stock-Based  Compensation"  and has been
determined  as if the  Company  had  accounted  for  its  employee  and  outside
directors  stock-based  compensation plans under the fair value method. The fair
value  of each  option  grant  was  estimated  at the date of  grant  using  the
Black-Scholes   option-pricing   model  with  the   following   weighted-average
assumptions:

                                      1998          1997            1996
                                -----------     ---------     -----------

Risk-free interest rate               5.3%          6.2%            6.0%
Dividend yield                           -             -               -
Expected volatility                    70%           63%             52%
Expected life                    2.7 years     3.2 years       3.4 years

The Company's pro forma information follows ($000s except per share data):

                                           1998          1997           1996
                                       ---------     ---------     ----------

 Net Income          As reported        $27,044       $29,820        $30,059
                                       =========     =========     ==========
                     Pro forma          $19,993       $24,028        $27,354
                                       =========     =========     ==========

EPS - Basic          As reported         $ 0.70       $  0.81        $  0.85
                                       =========     =========     ==========
                     Pro forma           $ 0.52       $  0.66        $  0.77
                                       =========     =========     ==========

EPS- Diluted         As reported         $ 0.67        $ 0.75         $ 0.79
                                        =========     =========     ==========
                     Pro forma           $ 0.50        $ 0.61         $ 0.72
                                        =========     =========     ==========


The  effects  of  applying  SFAS  123 in  this  pro  forma  disclosure  are  not
necessarily  indicative  of  future  results.  SFAS 123 does not apply to awards
prior to 1995.

The  following  table  summarizes  activity  under all plans for the years ended
1998, 1997 and 1996:
<TABLE>
<CAPTION>

                                                 1998                       1997                      1996
                                        ------------------------    ----------------------    ----------------------
                                                      Weighted-                 Weighted-                 Weighted-
                                                       Average                   Average                   Average
                                                      Exercise                  Exercise                  Exercise
                                          Options       Price        Options      Price        Options      Price
                                        ------------- ----------    ----------- ----------    ----------- ----------
<S>                                     <C>            <C>          <C>         <C>           <C>         <C>    
Options outstanding, beginning of year  6,178,804      $10.53        4,808,247   $  6.51       4,163,603   $  2.77
       Options granted                  1,266,000       16.61        2,876,493     14.99       2,345,771     10.81
       Options exercised                 (712,784)       6.49       (1,055,662)     4.43      (1,403,047)     2.70
       Options canceled                  (345,823)      13.91         (450,274)    10.36        (298,080)     6.08
                                        ----------  ----------      ----------- ---------    -----------  ---------

Options outstanding, end of year        6,386,197      $12.01        6,178,804    $10.53       4,808,247   $  6.51
                                        ==========                  ===========               ===========

Options exercisable, end of year        2,763,093                    1,947,762                 1,787,520
                                        ==========                  ===========               ===========

Weighted-average fair value of                                                                 
 options granted during the year             $7.88                       $6.87                      $4.42
                                        ===========                 ===========               ===========

</TABLE>


The following table summarizes  information  about stock options  outstanding at
January 1, 1999:
<TABLE>
<CAPTION>

                                          Options Outstanding                                 Options Exercisable
                        --------------------------------------------------------      ----------------------------------
                                                Weighted-
                                                 Average
                                                Remaining           Weighted-                                Weighted-
     Range of               Number          Contractual Life         Average               Number             Average
     Exercise            Outstanding             (Years)            Exercise            Exercisable        Exercise Price
      Prices              at 1/1/99                                   Price              at 1/1/99
-------------------    -----------------    ------------------    --------------       ---------------     ---------------
<S>         <C>              <C>                  <C>                 <C>                 <C>    
    $0.75 -   4.32            1,316,071           3.01                    $ 3.12              851,798             $  2.77
     4.38 -   9.59            1,547,659           4.30                      8.51              552,834                6.96
     10.38 - 15.75            1,085,963           4.99                     13.02              326,087               12.99
     16.00 - 16.00            1,172,940           5.44                     16.00              373,350               16.00
     16.44 - 27.50            1,077,354           7.48                     19.49              622,582               18.28
     29.50 - 29.56              186,210           4.90                     29.56               36,442               29.56
                       -----------------                                               ---------------
    $ 0.75 - 29.56            6,386,197           4.91                   $ 12.01            2,763,093             $ 10.45
                       =================                                               ===============

</TABLE>

EMPLOYEE  STOCK  PURCHASE  PLANS In May 1996,  the Company's  Board of Directors
established  an employee  stock purchase plan effective July 1, 1996 that allows
substantially  all employees to purchase  shares of the Company's  common stock.
Under the terms of the plan,  eligible  employees may purchase  shares of common
stock through the accumulation of payroll deductions of at least 2% and up to 6%
of their base salary. The purchase price is an amount equal to 85% of the market
price  determined on the tenth trading day following each  three-month  offering
period.  The Company's  policy is to purchase  these shares on the market rather
than issue them from treasury; therefore, the 15% employee discount is currently
being recognized as compensation  expense.  Such amounts were not significant in
fiscal years 1998, 1997 and 1996.  Employees purchased 51,997,  17,864 and 8,707
shares in 1998, 1997 and 1996, respectively.

On October 9, 1996, Zytec's shareholders approved a stock purchase plan allowing
substantially all of Zytec's employees to purchase,  through payroll deductions,
newly issued shares of Zytec's common stock. The plan allowed Zytec's  employees
to purchase  common stock on a quarterly basis at the lower of 85% of the market
price at the  beginning or end of each  calendar  quarter.  Employees  purchased
71,742 shares in 1997 at purchase prices ranging from $9.03 to $22.41. No shares
were issued in 1996. The plan was terminated  effective December 29, 1997. Under
SFAS 123, compensation cost of approximately $286,000 was recognized in 1997 for
the fair value of the employees' purchase rights,  which was estimated using the
Black-Scholes  model with the following  weighted-average  assumptions for 1997:
risk-free interest rate of 5.73%,  dividend yield of 0%, expected  volatility of
69% and  expected  life of .25  years.  The  weighted-average  fair value of the
purchase rights granted in 1997 was $5.03.

16.   EMPLOYEE BENEFIT PLANS

The Company provides  retirement  benefits to its employees through the Computer
Products Inc.  Employees' Thrift and Savings Plan (the "Plan"). As allowed under
Section  401(k) of the Internal  Revenue  Code,  the Plan  provides tax deferred
salary  deductions for eligible  employees.  The Plan permits  substantially all
United States  employees to contribute up to 15% of their base  compensation (as
defined) to the Plan, limited to a maximum amount as set by the Internal Revenue
Service.  The Company may, at the  discretion of the Board of Directors,  make a
matching  contribution  to the Plan.  Costs charged to  operations  for matching
contributions were approximately $580,000, $444,000, and $400,000, respectively,
for fiscal 1998,  1997, and 1996.  Effective  January 1, 1999, the Plan name was
changed to Artesyn Technologies, Inc. Employees' Thrift and Savings Plan.

The Company also had a defined  contribution 401(k) plan covering  substantially
all domestic employees of the former Zytec. The Company's matching contributions
to the plan were based on employee  contributions  to the plan. Costs charged to
operations were $835,000, $657,000, and $424,000, respectively, for fiscal 1998,
1997, and 1996.  Effective December 31, 1998, this plan was terminated and funds
were transferred into the Company's Employees' Thrift and Savings Plan.

During 1998,  the Company  established  a  noncontributory  profit-sharing  plan
covering  substantially  all North America  employees.  The Company  contributed
approximately $157,000 to such plan in 1998.

In  April  1996,  Zytec's  board  of  directors  established  a  noncontributory
profit-sharing  plan covering  substantially  all Zytec employees.  The plan was
effective  July 1, 1996.  The Company  contributed  $1.3 million to such plan in
1997. No contributions  were made to such plan in 1996.  Effective  December 29,
1997, this plan was terminated.

Substantially all employees of the Company's Austrian subsidiary are entitled to
benefit  payments  under a  severance  plan.  The  benefit  payments  are  based
primarily on the employees'  salaries and the number of years of service and are
paid upon the employees' voluntary retirement. At January 1, 1999 and January 2,
1998,   the  Company  had  recorded  a  liability  of  $924,000  and   $681,000,
respectively,  related to this severance  plan. The Company  recorded  $261,000,
$260,000  and  $106,000  in  severance  expense  during  1998,  1997,  and 1996,
respectively.  The Company  has  invested  in  Austrian  bonds of  $344,000  and
$294,000 at January 1, 1999 and January 2, 1998, respectively, to partially fund
the severance plan as required by Austrian law.

17.  DERIVATIVE  FINANCIAL  INSTRUMENTS AND FAIR VALUE OF FINANCIAL  INSTRUMENTS
Foreign  Exchange   Instruments  The  Company  utilizes   derivative   financial
instruments to reduce  financial  market risks.  These  instruments  are used to
hedge foreign  currency market  exposures of underlying  assets and liabilities.
The Company does not use derivative  financial  instruments  for  speculative or
trading purposes.  The Company's  accounting  policies for these instruments are
based on the Company's  designation of such instruments as hedging transactions.
The criteria the Company uses for  designating  an instrument as a hedge include
the  instrument's  effectiveness  in risk reduction and  one-to-one  matching of
derivative instruments to underlying transactions.  Gains and losses on currency
forward  contracts  that are  designated  and effective as hedges of anticipated
transactions,  for which a firm  commitment has been attained,  are deferred and
recognized  in income in the same period that the  underlying  transactions  are
settled.  Gains and losses on currency forward contracts that are designated and
effective as hedges of existing  transactions  are  recognized  in income in the
same period as losses and gains on the  underlying  transactions  are recognized
and generally offset.  Gains and losses on any instruments not meeting the above
criteria would be recognized in income in the applicable period.

The Company transacts  business in various foreign  currencies,  primarily Irish
punt,  Deutsche  mark,  Austrian  schilling,  Japanese  yen and  other  European
currencies.  The Company  has  established  balance  sheet  hedging  programs to
protect  against  reductions in value and volatility of future cash flows caused
by changes in  foreign  exchange  rates.  At  January  1,  1999,  the  Company's
outstanding  notional amount for currency  forward  contracts was  approximately
$12.8 million  maturing in three to six months.  At January 2, 1998, the Company
held $6.6 million of forward currency exchange contracts. The amount of any gain
or loss on  these  contracts  for  fiscal  years  1998,  1997  and  1996 was not
material.  Deferred  gains  or  losses  attributable  to  the  foreign  currency
instruments are not material.

Interest  Rate  Instruments  -- On July 14, 1997,  the Company  entered into two
interest  rate swap  agreements  with a bank  pursuant to which it exchanged its
floating rate interest  obligations  on the aggregate 52 million  Deutsche marks
notional  principal loan amount for a fixed rate payment obligation of 5.58% per
annum for a  seven-year  period  beginning  August 1,  1997.  The  fixing of the
interest  rates  for  these  periods  offsets  the  Company's  exposure  to  the
uncertainty  of  floating  interest  rates  during  the term of the  loans.  The
differential  paid or received on these  interest rate swaps is recognized as an
adjustment to interest  expense.  Pursuant to the Company entering into the $200
million  credit  agreement with a syndicate of banks,  on January 8, 1999,  such
swaps were amended to apply to $31.0 million of the current  outstanding balance
under the new agreement (see Note 8).

In May 1995, the Company  entered into an Interest Rate Collar  Agreement with a
bank,  which set  boundaries  for the interest  payment terms on its $25 million
term loan.  The agreement  placed a ceiling of 9.75% on the  Company's  floating
rate option in exchange  for the bank's  ability to elect a fixed rate option of
8.25%.  In June 1995, the bank  exercised its option to receive  interest at the
fixed rate for the remaining term of the loan. The differential paid or received
on these interest rate swaps is recognized as an adjustment to interest expense.
Pursuant to the Company  entering into the $200 million credit  agreement with a
syndicate of banks,  on January 8, 1999, such swap was amended to apply to $15.4
million of the current outstanding balance under the new agreement (see Note 8).

The Company  enters into  various  other types of financial  instruments  in the
normal course of business.  Fair values for certain  financial  instruments  are
based on quoted market prices. For other financial instruments,  fair values are
based on the appropriate pricing models,  using current market information.  The
amounts ultimately realized upon settlement of these financial  instruments will
depend on actual market conditions during the remaining life of the instruments.
Fair values of cash and  equivalents,  accounts  receivable,  accounts  payable,
other current  liabilities and debt reflected in the January 1, 1999 and January
2, 1998  Consolidated  Statements of Financial  Condition  approximate  carrying
value at those dates.

CONCENTRATION OF CREDIT RISK Financial  instruments that potentially subject the
Company  to  concentrations  of  credit  risk  consist  principally  of cash and
equivalents, trade accounts receivable and financial instruments used in hedging
activities.  The Company's  cash  management and  investment  policies  restrict
investments  to low-risk,  highly-liquid  securities,  and the Company  performs
periodic  evaluations of the credit standing of the financial  institutions with
which it  deals.  The  Company  sells  its  products  to  customers  in  various
geographical  areas.  The Company  performs  ongoing  credit  evaluations of its
customers'  financial condition and generally does not require  collateral.  The
Company  maintains  reserves  for  potential  credit  losses,  and  such  losses
traditionally  have  been  within  management's  expectations  and have not been
material  in any year.  As of  January 1, 1999 and  January 2, 1998,  management
believes the Company had no significant concentrations of credit risk.

18.   BUSINESS SEGMENT AND GEOGRAPHIC INFORMATION

In June 1997,  the FASB  issued  SFAS 131,  "Disclosures  about  Segments  of an
Enterprise  and Related  Information"  which was adopted by the Company in 1998.
SFAS  131  establishes  standards  for  reporting  information  about  operating
segments and related  disclosures about products and services,  geographic areas
and major customers.

The  Company  operates  in  one  industry   segment   encompassing  the  design,
development, manufacture, sale and service of electronic products and subsystems
The  Company  sells  its  products  directly  to OEMs and also to a  network  of
industrial and retail distributors throughout the world. The Company's principal
markets  are in the  United  States,  Europe and  Asia-Pacific,  with the United
States and Europe  being the largest  based on sales.  The  Company's  principal
market  focus is on the  communications  industry.  Sales are in US dollars  and
certain European currencies.  Intercompany sales are in US dollars and are based
on cost plus a reasonable profit.

As the Company operates and tracks its results in one operating segment, certain
disclosure  requirements  are not  applicable.  Information  about the Company's
operations  in  different   geographical  regions  is  shown  below.  Sales  are
attributed  to  geographical  areas based on selling  location,  and  long-lived
assets consist of property, plant and equipment ($000s):

                                           1998          1997           1996
                                         ----------    ----------     ---------
   SALES
      United States                      $356,922      $339,506       $296,299
      Austria                              83,261        80,136         58,240
      Ireland                              40,045        57,165         47,183
      Hong Kong/PRC                        31,443        39,753         34,009
      Other foreign countries              20,721        10,676              -
                                         ----------    ----------     ---------
         Total sales                     $532,392      $527,236       $435,731
                                         ==========    ==========     =========

   LONG-LIVED ASSETS
      United States                       $36,841       $27,894        $24,277
      Austria                               9,172         6,829          4,098
      Ireland                               6,157         6,309          6,147
      Hong Kong/PRC                        20,025        17,509         14,149
      Other foreign countries               2,837         3,040              -
                                         ----------    ----------     ---------
         Total long-lived assets          $75,032       $61,581        $48,671
                                        ==========    ==========     =========


The following table includes sales to customers in excess of 10% of total sales:

                                           1998          1997           1996
                                         ----------    ----------     ---------

             Customer  A                    17%           15%            14%
             Customer  B                    11%            9%             2%
             Customer  C                    10%            6%             4%





<PAGE>


19.SELECTED  CONSOLIDATED  QUARTERLY  DATA  (UNAUDITED)  
($000s Except Per Share Data)
 
<TABLE>
<CAPTION>
                                              FIRST      SECOND       THIRD      FOURTH
                                            QUARTER     QUARTER     QUARTER     QUARTER
                                          ----------  ----------  ----------  ----------
FISCAL 1998

<S>                                        <C>         <C>         <C>         <C>     
Sales                                      $147,178    $121,824    $124,582    $138,808
Gross profit                                 35,810      32,422      34,033      34,854
Net income                                    3,236       6,175       8,000       9,633
   Per share  - basic                          0.08        0.16        0.21        0.25
           - diluted                           0.08        0.15        0.20        0.24

Stock price per common share

   High                                       26.63       26.88       19.25       19.63
   Low                                        18.88       12.88       13.75       11.75

FISCAL 1997

Sales                                      $114,463    $130,878    $133,744    $148,151
Gross profit                                 29,556      35,798      36,292      35,887
Income from continuing operations             7,076      10,437      10,383       3,986
   Per share  - basic                          0.20        0.29        0.28        0.11
          - diluted                            0.19        0.26        0.25        0.10
Net income                                    5,014      10,437      10,383       3,986
   Per share  - basic                          0.14        0.29        0.28        0.11
          - diluted                            0.13        0.26        0.25        0.10

Stock price per common share

   High                                       18.75       25.25       33.44       30.88
   Low                                        13.75       13.75       23.25       14.56

</TABLE>

Net  income  for the first  quarter  of 1998  includes  a $7.2  million  pre-tax
restructuring  charge  and a $2.4  million  charge  to  cost  of  sales  related
principally to inventory  write-offs of duplicate product  development  programs
following  the merger  with  Zytec.  Net  income for the fourth  quarter of 1997
includes direct merger costs of $3.0 million.

Quarterly  sales and gross profit amounts exclude sales and gross profits of RTP
Corp.,  which the Company  classified  as  discontinued  operations in the first
quarter of 1997.

Data in the above table are presented on a 13-week period.

The sum of the quarterly earnings per share amounts differs from those reflected
in the Company's  consolidated  statements of operations due to the weighting of
common and common  equivalent shares  outstanding  during each of the respective
periods.

The  Company's  common  stock is traded on The Nasdaq Stock  MarketSM  under the
symbol ATSN. As of January 1, 1999, there were approximately 14,400 shareholders
consisting of record holders and individual  participants  in security  position
listings.  To date,  the Company has not paid any cash  dividends on its capital
stock. The Board of Directors  presently  intends to retain all earnings for use
in the Company's  business and does not anticipate  paying cash dividends in the
foreseeable future.


<PAGE>



REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors and Shareholders of Artesyn Technologies, Inc. :

We have audited the accompanying  consolidated statements of financial condition
of Artesyn  Technologies,  Inc. (a Florida corporation,  formerly named Computer
Products,  Inc.) and subsidiaries as of January 1, 1999 and January 2, 1998, and
the related  consolidated  statements of  operations,  shareholders'  equity and
comprehensive  income and cash flows for each of the three  fiscal  years in the
fiscal  period  ended  January  1,  1999.  These  financial  statements  are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial  statements based on our audits. We did not audit the
statements  of  operations,  shareholders'  equity and cash flows for the fiscal
year ended January 3, 1997 of Zytec Corporation,  a company acquired on December
29, 1997 in a transaction accounted for under the pooling-of-interests method of
accounting,  as  discussed  in Note  5.  Such  statements  are  included  in the
consolidated  financial  statements  of Artesyn  Technologies,  Inc. and reflect
total  sales of 52% in fiscal  1996 of the related  consolidated  totals.  Those
statements were audited by other auditors whose report has been furnished to us,
and  our  opinion,   insofar  as  it  relates  to  amounts  included  for  Zytec
Corporation, is based solely upon the report of the other auditors.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We  believe  that our  audits  and the  report of the other  auditors  provide a
reasonable basis for our opinion.

In our opinion,  based on our audits and the report of the other  auditors,  the
consolidated  financial  statements  referred to above  present  fairly,  in all
material  respects,  the financial  position of Artesyn  Technologies,  Inc. and
subsidiaries as of January 1, 1999 and January 2, 1998, and the results of their
operations and their cash flows for each of the three fiscal years in the fiscal
period ended January 1, 1999 in conformity  with generally  accepted  accounting
principles.

ARTHUR ANDERSEN LLP

Fort Lauderdale, Florida,
January 22, 1999.


STATEMENT OF MANAGEMENT RESPONSIBILITY

The  Company's  management is  responsible  for the  preparation,  integrity and
objectivity  of  the  consolidated  financial  statements  and  other  financial
information presented in this report. The accompanying financial statements have
been prepared in conformity with generally  accepted  accounting  principles and
reflect the effects of certain estimates and judgments made by management.

The Company's  management maintains an effective system of internal control that
is designed to provide  reasonable  assurance  that assets are  safeguarded  and
transactions are properly  recorded and executed in accordance with management's
authorization.  The system is continuously monitored by direct management review
and by internal  auditors who conduct an extensive  program of audits throughout
the company.  The Company selects and trains  qualified  people who are provided
with and  expected to adhere to the  Company's  standards  of business  conduct.
These standards,  which set forth the highest  principles of business ethics and
conduct,  are a key element of the Company's control system.  Additionally,  our
independent  certified  public  accountants,   Arthur  Andersen  LLP,  obtain  a
sufficient  understanding of the internal control structure in order to plan and
complete the annual audit of the Company's consolidated financial statements.

The Audit  Committee of the Board of  Directors,  which  consists of six outside
directors,  meets  regularly  with  management,  the  internal  auditors and the
independent  certified  public  accountants  to  review  accounting,  reporting,
auditing and internal  control  matters.  The  Committee  has direct and private
access to both internal and external auditors.

JOSEPH M. O'DONNELL
Co-Chairman of the Board, President and Chief Executive Officer

RICHARD J. THOMPSON
Vice President, Finance and Chief Financial Officer


<PAGE>


RISK FACTORS THAT MAY AFFECT FUTURE RESULTS

As noted above,  the foregoing  discussion  and the letter to  shareholders  may
include  forward-looking  statements which involve risks and  uncertainties.  In
addition,  the Company  identified  the following risk factors that could affect
its  actual  results  and cause  them to  differ  materially  from  those in the
forward-looking statements.

RISKS  RELATED TO NEW  PRODUCTS  The  markets  for the  Company's  products  are
characterized by rapidly changing  technologies,  increasing  customer  demands,
evolving industry  standards,  frequent new product  introductions  and, in some
cases,  short  product  life cycles.  The  development  of new,  technologically
advanced  products is a complex and uncertain  process  requiring high levels of
innovation and cost, as well as the accurate  anticipation of technological  and
market  trends.  There can be no assurance  that the Company  will  successfully
develop,  introduce or manage the transition of new products.  The failure of or
the delay in  anticipating  technological  advances or developing  and marketing
product   enhancements   or  new  products  that  respond  to  any   significant
technological  change  could have a  material  adverse  effect on the  business,
operating results and financial condition of the Company.

RELIANCE ON CUSTOMERS Sales to three customers  accounted for approximately 17%,
11% and 10%,  respectively,  of sales in 1998.  Decisions  by a small  number of
customers to defer their purchasing  decisions or to purchase products elsewhere
could have a material adverse effect on the business,  results of operations and
financial condition of the Company.

FLUCTUATIONS IN QUARTERLY  OPERATING RESULTS The Company has experienced erratic
quarterly  growth in sales as a result  of  economic  turmoil  in Asia and South
America, as well as widespread customer inventory reductions. Due to the rapidly
changing  nature of the markets for its products,  as well as the  likelihood of
increased  competition,  there can be no assurance that the Company's  sales and
operating  results  will  resume  their past  growth  rates.  If sales are below
expectations  in any given  quarter,  the adverse impact of any shortfall on the
operating  results of the Company may be  magnified to the extent the Company is
unable to adjust  spending to compensate for the shortfall.  Accordingly,  there
can be no assurance  that the Company will be able to sustain  profitability  in
the future, particularly on a quarter-to-quarter basis.

COMPETITION; INCREASED COMPETITION DUE TO INDUSTRY CONSOLIDATION The industry in
which the Company competes is highly competitive and characterized by increasing
customer demands for product performance, shorter manufacturing cycles and lower
prices. These trends result in frequent introductions of new products with added
capabilities   and  features  and  continuous   improvements   in  the  relative
price/performance of the products.  Increased  competition could result in price
reductions, reduced profit margins and loss of market share, each of which could
adversely  affect the Company's  results of operations and financial  condition.
The Company's principal  competitors include Lucent Technologies,  Delta Product
and Astec (BSR) plc.  Certain of the Company's major  competitors have also been
engaged  in  merger  and  acquisition   transactions.   Such  consolidations  by
competitors are likely to create entities with increased market share,  customer
bases, technology and marketing expertise,  sales force size, and/or proprietary
technology.  These  developments may adversely  affect the Company's  ability to
compete in such markets.

RISKS  RELATED TO GROSS  MARGIN  The  Company's  gross  margin  percentage  is a
function  of the  product mix sold in any  period.  Other  factors  such as unit
volumes,  heightened  price  competition,  changes in channels of  distribution,
shortages in components due to timely  supplies of parts from vendors or ability
to obtain items at reasonable  prices,  and availability of skilled labor,  also
may  continue to affect the cost of sales and the  fluctuation  in gross  margin
percentages in future periods.

RISKS  RELATED  TO BACKLOG  The  Company  has  attempted  to reduce its  product
manufacturing  lead times and its backlog of orders.  To the extent that backlog
is reduced during any particular period, it could result in more variability and
less  predictability  in the  Company's  quarter-to-quarter  sales and operating
results.  If manufacturing lead times are not reduced,  the Company's  customers
may cancel, or not place,  orders if shorter lead times are available from other
manufacturers

RISKS RELATED TO INTELLECTUAL  PROPERTY RIGHTS The Company currently relies upon
a  combination  of  patents,  copyrights,  trademarks  and trade  secret laws to
establish and protect its  proprietary  rights in its products.  There can be no
assurance that the steps taken by the Company in this regard will be adequate to
prevent  misappropriation  of its  technology or that the Company's  competitors
will not independently develop technologies that are substantially equivalent or
superior to the  Company's  technology.  In  addition,  the laws of some foreign
countries do not protect the Company's proprietary rights to the same extent, as
do the laws of the United States. Although the Company continues to evaluate and
implement protective measures, there can be no assurance that these efforts will
be  successful  or that  third  parties  will not assert  intellectual  property
infringement claims against the Company.

RISKS RELATED TO  ACQUISITIONS  Acquisitions  of  complementary  businesses  and
technologies,  including technologies and products under development,  have been
an important  part of the  Company's  business  strategy.  Acquisitions  require
significant  financial  and  management  resources  both  at  the  time  of  the
transaction  and during the process of integrating  the newly acquired  business
into  the  Company's  operations.  The  Company's  operating  results  could  be
adversely affected if it is unable to successfully  integrate such new companies
into its  operations.  Future  acquisitions  by the Company could also result in
issuances  of  equity  securities  or the  rights  associated  with  the  equity
securities,  which could  potentially  dilute  earnings per share.  In addition,
future acquisitions could result in the incurrence of additional debt, taxes, or
contingent liabilities,  and amortization expenses related to goodwill and other
intangible  assets.  These factors could adversely  affect the Company's  future
operating results and financial position.

DEPENDENCE ON SOLE SOURCE  SUPPLIERS As a result of the custom nature of certain
of the Company's  manufactured  products,  components used in the manufacture of
these  products  are  currently  obtained  from a limited  number of  suppliers.
Although  there are a limited  number of  manufacturers  of certain  components,
management  believes that other suppliers  could provide  similar  components on
comparable  terms.  A  change  in  suppliers,  however,  could  cause a delay in
manufacturing  and a  possible  loss of sales that  could  adversely  affect the
Company's future operating results and financial position.

RISKS RELATED TO  INTERNATIONAL  SALES  International  sales have been,  and are
expected to continue to be, an  increasingly  important  contributor to sales of
the  Company.  International  sales  are  subject  to  certain  inherent  risks,
including   unexpected   changes  in   regulatory   requirements   and  tariffs,
difficulties in staffing and managing foreign operations, longer payment cycles,
problems  in  collecting   accounts   receivable  and  potentially  adverse  tax
consequences.  Other risks of  international  sales include  changes in economic
conditions  in the  international  markets  in  which  the  products  are  sold,
political and economic  instability,  fluctuations  in currency  exchange rates,
import and export controls, and the burden and expense of complying with foreign
laws. In addition, sales in developing nations may fluctuate to a greater extent
than  sales  to  customers  in  developed  nations,  as those  markets  are only
beginning to adopt new technologies and establish  purchasing  practices.  These
risks may adversely affect the operating results and financial  condition of the
Company.

RISKS RELATED TO GOVERNMENT  REGULATIONS AND PRODUCT CERTIFICATION The Company's
operations  are subject to laws,  regulations,  government  policies and product
certification  requirements  worldwide.   Changes  in  such  laws,  regulations,
policies or requirements  could affect the demand for the Company's  products or
result in the need to modify products,  which may involve  substantial  costs or
delays  in sales and  could  have an  adverse  effect  on the  Company's  future
operating results.

RISKS RELATED TO FOREIGN  MANUFACTURING  OPERATIONS  The Company  manufactures a
significant  amount of its products in foreign  locations.  Approximately 30% of
the Company's 1998 sales were from products  manufactured in  Asia-Pacific,  28%
from  products  manufactured  in  Europe  and the  remaining  42% from  domestic
operations.

The supply and cost of these  products  can be adversely  affected,  among other
reasons, by changes in foreign currency exchange rates, increased import duties,
imposition of tariffs, imposition of import quotas,  interruptions in sea or air
transportation and political or economic changes. From time to time, the Company
explores  opportunities  to diversify its sourcing and/or  production of certain
products to other low cost  locations or with other third  parties to reduce its
dependence on production in any one location. In addition, the Company has taken
necessary  measures,  including  insuring against certain risks, to mitigate its
exposure to potential  political and economic changes in Hong Kong and China. In
the  event of  confiscation,  expropriation,  nationalization,  or  governmental
restrictions in the above mentioned  foreign or other locations,  earnings could
be adversely  affected  from  business  disruption  resulting  in delays  and/or
increased costs in the production and delivery of products.

VOLATILITY  OF STOCK PRICE The market  price of the  Company's  common stock has
been, and, may continue to be, relatively volatile.  Factors such as new product
announcements  by the  Company,  its  customers  or its  competitors,  quarterly
fluctuations in operating  results,  challenges  associated with  integration of
businesses and general  conditions in the markets in which the Company competes,
such as a decline in industry growth rates, may have a significant impact on the
market price of the Company's common stock. These conditions, as well as factors
which  generally  affect the market for stocks of  technology  companies,  could
cause the price of the Company's  common stock to  significantly  fluctuate over
relatively short periods.