<PAGE>

                                    UNITED STATES
                          SECURITIES AND EXCHANGE COMMISSION
                                Washington, D.C. 20549
                                      FORM 10-K
  [X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
            Act of 1934 For the fiscal year ended September 30, 1997.
                                           
    [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934 For the transition period from _____ to _____.
                                           
                           Commission file number 333-32195
                                 WAVETEK CORPORATION
                (Exact name of registrant as specified in its charter)
                                           
                                           
            DELAWARE                                    33-0457664
            --------                                    ----------
(State or Other Jurisdiction of            (I.R.S. Employer Identification No.)
 Incorporation or Organization)



                                           
    11995 EL CAMINO REAL, SUITE 301
    SAN DIEGO, CALIFORNIA                                 92130
    ---------------------                                 -----
    (Address of Principal Executive Offices)            (Zip Code)
 
                                           
                                    (619) 793-2300
                                    --------------
                  Registrant's Telephone Number, Including Area Code

Securities registered pursuant to 
   Section 12(b) of the Act:
      Title of each class:           Name of each exchange on which registered:
         Not applicable.                           Not applicable.
--------------------------------------------------------------------------------


    Securities pursuant to section 12(g) of the Act:
                      10 1/8% Senior Subordinated Notes Due 2007
                 ----------------------------------------------------
                                   (Title of class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.                Yes   X   No      .
                                                      -----    -----
                                           
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 299.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K [ ].

The aggregate market value of the voting stock held by non-affiliates of the
registrant as of December 22, 1997. 
NOT APPLICABLE.

The number of shares outstanding of the issuer's classes of common stock as of
December 22, 1997.
As of December 22, 1997, issuer had only one class of common stock, of which
there were 4,884,860 shares outstanding.

DOCUMENTS INCORPORATED BY REFERENCE
None.


<PAGE>

PART I

ITEM 1.  BUSINESS

GENERAL
    
    Wavetek Corporation (the "Company" or "Wavetek") was founded in San Diego in
1962 and completed its initial public offering in 1972. In June 1991, Wavetek
was acquired by an investment group led by Terence J. Gooding ("Gooding") and
reorganized under a new management team, with Gooding as Chairman and Chief
Executive Officer. The Company has been privately held since that time. The
Company is a Delaware corporation. The Company's executive offices are located
at 11995 El Camino Real, Suite 301, San Diego, California 92130 and its
telephone number is (619) 793-2300.
    
    Wavetek is a leading global designer, manufactures and distributor of a
broad range of electronic test instruments, with a primary focus on
application-specific instruments used for testing voice, video and data
communications equipment and networks ("Communications Test"). The Company also
designs, manufactures and distributes precision instruments to calibrate and
test electronic equipment ("Calibration Instruments") and provides repair,
upgrade and calibration services for its products on a worldwide basis
("Service"). The Company has increased sales from $58.1 million in fiscal 1992
to $155.3 million in fiscal 1997 and EBITDA (as defined) from $3.8 million in
fiscal 1992 to $24.0 million in fiscal 1997 by increasing its penetration of
existing markets and by entering additional markets through introductions of new
products and acquisitions. Wavetek's fiscal 1997 net income was $6.1 million
after giving effect to a one-time charge of $4.3 million, net of tax, for stock
option compensation related to the Recapitalization Transactions (as defined
herein). As of September 30, 1997, the Company had a total stockholders' deficit
of $71.6 million.

    The Company's Communications Test products, which accounted for 75% of the
Company's fiscal 1997 sales, serve the cable television ("CATV"), wireless
communications ("Wireless"), telecommunications ("Telecom"), local area network
("LAN") and general purpose hand-held electronic test tools ("Test Tools")
segments of the test instrument industry. The primary end users for the
Company's Communications Test products are service, installation and maintenance
personnel of CATV operators, wireless communications companies,
telecommunications companies and data communications equipment installers. The
Company's CATV products are used by CATV operators to diagnose and monitor CATV
systems, test cable for signal quality and leakage and ensure the proper
installation of new services such as cable modems. The Company's Wireless
products are used by wireless operators, equipment manufacturers and retailers
to test mobile phones during production, repair, or at the point-of-sale and by
wireless operators to test base stations. The Company's Telecom products are
used by telecommunications companies to install and maintain fiber optic cable.
The Company's LAN products are used by LAN installation and service
professionals to test LAN cables and connectors ("physical layer"). The
Company's Test Tools products, primarily hand-held digital multimeters ("DMMs"),
are used to test a wide variety of electronic and electrical equipment. The
Company has strong competitive positions in its target markets and believes it
is the worldwide market leader in the manufacture of CATV test equipment, the
second largest supplier of hand-held DMMs and one of the five largest
manufacturers of Wireless and physical layer LAN test equipment.

    The Company's Calibration Instruments products, which accounted for 17% of
the Company's fiscal 1997 sales, are used in metrology, engineering and
manufacturing environments worldwide to calibrate electronic equipment and
certify compliance with international standards. The Company believes it is the
second largest global manufacturer of products used for: (i) calibrating and
verifying the accuracy of voltage measuring equipment ("Calibration Sources")
and (ii) transferring the accuracy of voltage measurements from national
standards laboratories to industry calibration laboratories ("Transfer
Standards"). The Company's Calibration Instruments products also include high
precision DMMs ("Precision DMMs"). The Company successfully competes in this
market based on its technical expertise, relationships with national
laboratories and product reputation.
    
    
                                          2
<PAGE>

    The Company's Service business, which accounted for 8% of the Company's
fiscal 1997 sales, provides repair, upgrade and calibration services for the
Company's products through eight Wavetek service centers worldwide and an
international network of independent representatives. 

    Wavetek has global design, manufacturing, marketing and distribution 
capabilities through facilities located in the United States, the United 
Kingdom, France and Germany. The Company is committed to providing high 
quality manufacturing and has received or is in the process of receiving ISO 
9000 certification for each of its manufacturing facilities. In addition, 
Wavetek supports its broad international base of over 5,000 customers with 
regional sales offices in San Diego, Indianapolis, Norwich, Munich, Paris, 
Vienna, Singapore, Hong Kong, Beijing and Shanghai. The Company's products 
are sold through direct sales teams in the United States, the United Kingdom, 
France and Germany and a global network of over 250 distributors and 
independent representatives. 

THE RECAPITALIZATION TRANSACTIONS AND EXCHANGE OFFER

    On June 11, 1997, the Company completed the following transactions (the 
"Recapitalization Transactions"): (i) the Company sold an aggregate of 
2,428,470 shares of its Common Stock, representing 49.7% of the Common Stock 
outstanding following the Recapitalization Transactions, to DLJ Merchant 
Banking Partners II, L.P. and its affiliates and Green Equity Investors II, 
L.P. and its affiliates for an aggregate purchase price of $43.5 million, 
less related costs of $651,000 (the "New Equity Investment"); (ii) the 
Company issued $85 million aggregate principal amount of 10 1/8% Senior 
Subordinated Notes maturing June 15, 2007 (the "Notes"); (iii) the Company 
incurred indebtedness of $25 million under a five-year and six-month term 
loan facility and entered into a five-year and six-month revolving credit 
facility providing for borrowings of up to $20 million (the "New Credit 
Agreement"); (iv) the Company incurred aggregate debt issuance costs of $4.4 
million in connection with the issuance of the Notes and with entering the 
New Credit Agreement; (v) the Company used the net proceeds from the New 
Equity Investment, the issuance of the Notes and the New Credit Agreement to 
repurchase an aggregate of 8,513,610 shares of Common Stock from existing 
stockholders for an aggregate of $152.5 million and to make cash payments 
upon surrender of stock options by employees in an aggregate amount of $7.1 
million. Such existing stockholders retained 50.3% of the shares of Common 
Stock outstanding following the Recapitalization Transactions.

    On October 29, 1997, the Company consummated a registered exchange offer
with respect to $80 million in principal amount of the Notes.

BUSINESS STRATEGY

    Wavetek believes that it has achieved its strong position in the
Communications Test and Calibration Instruments market segments by identifying
changing industry trends and customer needs, and by successfully introducing
high-quality, cost-effective, application-specific products to meet such needs
on a timely basis. The Company's business strategy is to further enhance its
strong position in these markets and to continue to increase sales and EBITDA
through the following key initiatives:

    -   FOCUS ON THE LARGE, RAPIDLY GROWING COMMUNICATIONS TEST SEGMENT. The
        Company generated 75% of its fiscal 1997 sales from Communications Test
        products and intends to continue to focus on this segment of the test
        instrument industry. Prime Data expects sales in the Communications
        Test market to grow at approximately 10% per annum from approximately
        $2.5 billion in 1996 to approximately $4.0 billion in 2001. The Company
        believes that the drivers of this growth include: (i) rapidly changing
        communications technology; (ii) growing demand for personal
        communications services (including mobile phones, interactive CATV and
        internet access); and (iii) 
    
    
                                          3
<PAGE>

        increasing worldwide investment to build or upgrade data and
        communications infrastructure. Wavetek intends to capitalize on this
        large, rapidly growing market segment through its broad Communications
        Test product portfolio, extensive international presence and strong
        market positions in CATV, Wireless and LAN. 

    -   DEVELOP APPLICATION-SPECIFIC PRODUCTS FOR TARGET MARKETS ON A TIMELY
        BASIS. Wavetek's product development strategy is to: (i) focus on
        application-specific products that are responsive to customer needs;
        (ii) minimize development time in order to address rapidly changing
        technology; and (iii) leverage design efforts by generating multiple
        product line extensions from existing product platforms. Wavetek has a
        history of successful new product introductions, including twelve new
        products in fiscal 1997 and eight new products in fiscal 1996.

    -   MEET DEMAND FOR ENHANCED PORTABLE TEST INSTRUMENTS. The Company
        generated over 70% of its fiscal 1997 sales from portable field service
        and maintenance equipment and intends to continue to focus on these
        types of products. The increasing complexity of communications
        technology is creating demand for field test equipment that
        incorporates enhanced measurement performance. Furthermore, service,
        installation and maintenance personnel are demanding smaller, more
        portable products that enable them to service systems and equipment in
        the field rather than at a service facility. As a result of its product
        design, manufacturing and distribution strengths in portable test
        instruments, the Company believes it will continue to benefit from
        these demand trends. 
    
    -   LEVERAGE INTERNATIONAL OPERATIONS AND DISTRIBUTION. The Company
        believes that international capital investment in communications
        infrastructure has provided and will continue to provide growth in the
        worldwide Communications Test market. Wavetek believes it is
        well-positioned to capitalize on this growth with its substantial
        international operations that include: (i) three foreign manufacturing
        facilities; (ii) established international sales and distribution
        channels; and (iii) approximately 420 employees located outside of the
        United States. The Company generated 61% of its fiscal 1997 sales from
        customers outside the United States and believes its international
        operations should enable it to gain market share in existing
        international markets and successfully enter new markets, particularly
        in the Asia-Pacific, Eastern Europe and South America regions.
        Additionally, the Company believes that its strategic alliance formed
        in 1996 with Yokogawa Electric Corporation ("Yokogawa"), a leading
        Japanese process control and test and measurement company, coupled with
        the development of new products tailored for the Japanese market, will
        increase the Company's sales in Japan.

    -   ENHANCE PROFITABILITY THROUGH CONTINUED IMPROVEMENT IN ITS WIRELESS AND
        TELECOM BUSINESSES. Wavetek has taken measures to improve the
        operations of its Wireless and Telecom businesses acquired in October
        1994, including: (i) introducing new products with higher gross
        margins; (ii) rationalizing old, low margin businesses and products;
        (iii) reducing headcount; (iv) hiring new management; and (v) reducing
        marketing and selling expenses as a percentage of sales. As a result of
        these ongoing efforts, the Company has significantly improved the
        operating results of these acquired businesses. As new products with
        higher margins continue to replace older products, and as the Company
        makes additional cost improvements in its European manufacturing
        operations, the Company expects results from these businesses to
        continue to improve.
    
BUSINESS
    
    Within the test instrument industry, Wavetek has a primary focus on
Communications Test instruments. The Company also manufactures Calibration
Instruments and provides repair, upgrade and calibration services for its
products on a worldwide basis. The Company's Communications Test, Calibration
Instruments and Service businesses accounted for 75%, 17% and 8%, respectively,
of the Company's fiscal 1997 sales.
    
    
                                          4
<PAGE>

    COMMUNICATIONS TEST
    
    The Company's Communications Test business, which accounted for 75% of the
Company's fiscal 1997 sales, consists of CATV, Wireless, Telecom, LAN and Test
Tools.
    
    CATV.  The Company is the global leader in developing and manufacturing test
equipment used for commissioning new and maintaining existing CATV networks.
Major products include: sweep systems, signal level meters, leakage meters,
monitoring systems and related software. These products allow CATV operators to
test and monitor the quality of signals transmitted over a CATV network. The
Company believes that the development and deployment by CATV operators of
advanced services, including two-way data paths to provide telephony or internet
services, has created new product opportunities for Wavetek. For example,
Wavetek's close customer relationships gave the Company early indication of the
need for return path testing capability. Wavetek used this information to create
an extension to Wavetek's successful Stealth product line to assist CATV
technicians in the installation and servicing of the return path of CATV
networks. The Stealth line of products consists of a broad range of sweep
systems and related software products, the aggregate of which accounted for
approximately 16% of the Company's fiscal 1997 sales orders.
    
    One of the primary technical problems facing two-way CATV networks is
interference (noise) on the return path. If the return path is not securely
installed with tight connectors and well-maintained cable, noise from external
sources such as computers, home appliances and motors can enter the CATV system,
be amplified and interfere with data on the return path. In order to reduce the
time and difficulty in locating the source of noise, Wavetek has developed a
family of leakage meters, including the CLI 1750, that assists installers in
detecting leaks in CATV networks.
    
    Significant CATV customers of the Company include Continental Cablevision,
Inc., Deutsche Telekom A.G., Tele-Communications, Inc. ("TCI") and Time Warner
Cable. The Company's CATV business is headquartered in Indianapolis, Indiana.


                                          5
<PAGE>

    The following table lists selected CATV product offerings of the Company:
<TABLE>
<CAPTION>
 

                                                                                                      APPROXIMATE
                                                                                                       U.S. PRICE
PRODUCT NAME                         DESCRIPTION                            PRIMARY CUSTOMER             POINT  
---------------  ------------------------------------------------------   ----------------------   ------------------
<S>              <C>                                                      <C>                      <C>
MicroStealth     Hand-held unit which tests signal quality at multiple    CATV service                  $  1,200
                 points in a CATV network                                 technicians and 
                                                                          installers      

SAM 4040         Hand-held, broadband communication service monitor       CATV service                  $  2,500
                 which performs CATV network maintenance                  technicians and 
                                                                          installers      

CLI 1750         Tests for interfering signals in a CATV network          CATV service                  $  2,000
                                                                          technicians and 
                                                                          installers      

Stealth          Flexible, portable instrument for testing specific       CATV service                  $  3,600
                 segments of a CATV network                               technicians and 
                                                                          installers      

3SM              Monitors and controls signal parameters of up to 200     Network operations and        $  4,300
                 remote head ends or hub sites                            reliability managers

Benchmark 1175   Versatile sweep/scalar analyzer used to test for sweep   Radio frequency ("RF")        $ 10,000
                 response, transmission loss or gain                      amplifier manufacturers, 
                                                                          service and repair
                                                                          facilities
</TABLE>
 


    WIRELESS.  The Company's Wireless business, acquired from Schlumberger in
October 1994, is one of the world's five largest manufacturers of test
instruments for mobile phone and base station testing and service. Wavetek
manufactures instruments to test most analog and digital formats including
Groupe Speciale Mobile ("GSM"), Time Division Multiple Access ("TDMA") and Code
Division Multiple Access ("CDMA") in both standard and PCS bands. The Company's
products are used during the manufacturing process, at service facilities and at
the point-of-sale. Wavetek's point-of-sale application-specific product for the
Wireless market, the 4100 GSM Tester, was designed to address the increasing
demand for testing in the GSM market. The shift in phone repair from local
repair shops or retail stores to high volume service facilities, combined with
the high cost to process, ship and test a phone at a service facility, is
creating a need for "go/no-go" testing at retail sites to minimize the number of
properly functioning phones that are mistakenly returned to the manufacturer for
repair. The 4100 GSM Tester family provides accurate "go/no-go" testing at a
price point approximately one-third of the price of traditional service testers,
allowing economical sorting of phones at the point-of-sale. Wavetek was able to
bring the 4100 GSM Tester family to market quickly, due in part to the
application of technology from its LAN products and existing wireless products.
    
    Wavetek's 3600D CDMA Tester provides application-specific, low cost service
capability on cellular or PCS phones that use CDMA technology. In the early
phase of the deployment of a new phone technology, phones must be thoroughly
tested prior to delivery to customers, as well as during repair. This testing
can be performed with manufacturing-oriented test instruments ranging in price
from $50,000-$60,000. However, as new phones are shipped in higher volumes, a
more economical, easier to use tester is desired. The 3600D CDMA Tester is a
lower cost (approximately $28,000) solution for phone commissioning and repair.
    
    
                                          6
<PAGE>

    Significant Wireless customers of the Company include AT&T and Ericsson. The
Company's Wireless business is headquartered in Munich, Germany, with additional
engineering and marketing teams in Indianapolis, Indiana. 
    
    The following table lists selected Wireless product offerings of the
Company:
<TABLE>
<CAPTION>
 

                                                                                                                     APPROXIMATE
                                                                                                                      U.S. PRICE
PRODUCT NAME                                   DESCRIPTION                              PRIMARY CUSTOMER                POINT
--------------------   -----------------------------------------------------------  ---------------------------   ------------------
<S>                    <C>                                                          <C>                           <C>
4032 (MS)              Benchtop tester for analog and digital cellular or PCS       Phone manufacturers,               $27,000
                       phones                                                       carriers, repair
                                                                                    organizations

4032 (BTS)             Portable tester for cellular base stations in commissioning  Manufacturers of base              $34,000
                       and maintenance                                              stations, carriers

3600D CDMA Tester      Benchtop tester for analog and digital cellular or PCS       Phone manufacturers,               $28,000
                       phones                                                       carriers, repair
                                                                                    organizations

4015                   Benchtop tester for many types of analog radios              Service shops,                     $14,000
                                                                                    governments, aircraft
                                                                                    workshops

4100 GSM Tester        Hand-held, point-of-sale tester for cellular or PCS phones   Phone manufacturers,               $ 6,000
                                                                                    carriers, retail outlets
</TABLE>
 

    TELECOM.  The Company's Telecom business, also acquired from Schlumberger in
October 1994, designs and manufactures test instruments, systems and software
used for the installation, maintenance and monitoring of fiber optic cable. The
Company serves this market with both mainframe and portable optical time domain
reflectometers ("OTDRs"), remote fiber test systems ("RFTS"), light sources,
optical power meters and various other products. As Telecom operators install
more passive optical networks ("PONs") and provide fiber to the home ("FTTH"),
demand has increased for more versatile OTDRs. Wavetek's new MTS-5000 OTDR
family responds to this trend by offering a modular product that allows
installers to have specialized high resolution modules for PONs and FTTH
networks, in addition to high performance modules for long distance links. With
this family of products Wavetek combined the high performance optical knowledge
of its OTDR design team with the low cost design expertise of its CATV
engineering group, resulting in a product that offers high performance features
at a competitive cost. Wavetek intends to add multi-mode modules used for LAN
fiber measurements to its OTDR family during 1998.
    
    Significant Telecom customers of the Company include France Telecom, Russia
Telecom and Siemens A.G. The Company's Telecom business is headquartered in St.
Etienne, France.
    
    
                                          7
<PAGE>

    The following table lists selected Telecom product offerings of the Company:

<TABLE>
<CAPTION>
 

                                                                                                                     APPROXIMATE
                                                                                                                      U.S. PRICE
PRODUCT NAME                                    DESCRIPTION                                PRIMARY CUSTOMER             POINT
--------------------    -----------------------------------------------------------  --------------------------   ------------------
<S>                     <C>                                                          <C>                          <C>
Flash Mini OTDR         Hand-held, portable tester of fiber optic networks           Telecom operators, LAN             $12,000
                                                                                     fiber installers,
                                                                                     utilities, private networks

MTS-5000 OTDR           Modular portable OTDR, next generation platform              Telecom operators, CATV            $12,000
                                                                                     operators, LAN fiber
                                                                                     installers

Helios                  Mainframe, high performance OTDR, measures and               Telecom operators, fiber           $26,000
                        characterizes fiber optic networks                           manufacturers, utilities,
                                                                                     private networks

Atlas                   Fiber optic network monitoring (construction and             Telecom operators,                 $50,000
                        maintenance)                                                 utilities, private networks
</TABLE>
 


    LAN.  The Company acquired its LAN business as part of the Beckman
acquisition in October 1992, and the Company is now one of the five largest
global manufacturers of physical layer LAN test equipment. LAN testing products
include diagnostic instruments used to certify and verify the integrity of the
LAN physical layer. The Company's products are used by third party cable
installers, value added resellers of network equipment and management
information systems managers to verify the quality of cable installation. The
Company has developed its LT-8000 family of LAN cable testers to measure the
next generation of LAN cable rated to 650 MHz bandwidth, compared to the current
100 MHz standard. The Company was able to design the LT-8000, a cost effective,
high performance unit, by combining its expertise in high speed oscilloscope
calibration from its Calibration Instruments business with expertise in RF
technology from its CATV business. 

    Significant LAN customers of the Company include distributors such as
Anixter International, Inc. and Graybar Electric Company, Inc. The Company's LAN
business is headquartered in San Diego, California. 

    The following table lists selected LAN product offerings of the Company: 

<TABLE>
<CAPTION>
 

                                                                                                                    APPROXIMATE
                                                                                                                     U.S. PRICE
PRODUCT NAME                                 DESCRIPTION                                 PRIMARY CUSTOMER              POINT
------------------  -------------------------------------------------------------   --------------------------   ------------------
<S>                 <C>                                                             <C>                          <C>
LANTEKPRO-Register  Hand-held, portable unit used to certify and troubleshoot LAN   LAN technicians, network           $4,600
ed Trademark- XL    cable installation                                              managers

LT-8000             Hand-held, portable unit used to certify and troubleshoot LAN   LAN technicians, network       $2,000-$6,000
                    cable installation. Supports emerging 350 and 650 MHz LAN       managers
                    cable technologies
</TABLE>
 

    TEST TOOLS.  The Company's Test Tools business, also acquired as part of the
Beckman acquisition, develops and distributes portable measurement instruments
that are used to measure and service a broad range of electrical and electronic
equipment including wiring, appliances, computer equipment and consumer
electronics. The Company's Test Tools products are used by the electronic and
electro-mechanical installation, maintenance and service industries. Hand-held
DMMs are the primary instrument in this segment and range from hobbyist products
to tools for professional electrical and electronic technicians. The Company is
the second largest supplier of hand-held DMMs. Wavetek believes that its
shipments of over 


                                          8
<PAGE>

100,000 hand-held DMMs per year worldwide increase the Company's overall
visibility in the test instruments industry. The Company also believes that the
Test Tools business complements its other Communications Test businesses by
providing a distribution channel for certain of its LAN products and potential
new low cost Communications Test products. 
    
    Significant Test Tools customers of the Company include Newark Electronics
and W. W. Grainger. The Company's Test Tools business is headquartered in San
Diego, California.

    The following table lists selected Test Tools product offerings of the
Company: 


<TABLE>
<CAPTION>
 

                                                                                                                     APPROXIMATE
                                                                                                                      U.S. PRICE
PRODUCT NAME                                   DESCRIPTION                               PRIMARY CUSTOMER               POINT
---------------------  ----------------------------------------------------------   ---------------------------   -----------------
<S>                    <C>                                                          <C>                           <C>
Hand-held DMMs         Portable, field troubleshooting of electronic and            Electronics repair                 $20-$350
                       electrical circuits                                          personnel, electricians,
                                                                                    electronics engineers,
                                                                                    industrial plant
                                                                                    servicers, home/hobbyist

Clamp-on Multimeters   Verify and test electrical circuits                          Electricians, electrical          $100-$300
                                                                                    repair personnel, wiring
                                                                                    installers, industrial
                                                                                    plant service personnel

Component Checkers     Verify quality and sorting of electronic parts               Electronic technicians and         $70-$180
                                                                                    quality control
                                                                                    departments of electronic
                                                                                    manufacturers
</TABLE>
 

    CALIBRATION INSTRUMENTS

    The Company's Calibration Instruments products, which accounted for 17% of
the Company's fiscal 1997 sales, are used in metrology, engineering and
manufacturing environments worldwide to calibrate electronic equipment and
certify compliance with international standards. The Company believes it is the
second largest global manufacturer of Calibration Sources and Transfer
Standards. The Company also produces Precision DMMs. The Company believes that
it successfully competes in the Calibration Instruments market by capitalizing
on its technical expertise, relationships with national laboratories and product
reputation. Wavetek has recognized the needs of an increasing number of
companies to calibrate their test equipment, including oscilloscopes and DMMs,
in order to comply with international quality standards such as ISO 9000. In
response to such customer needs, Wavetek repackaged its high precision
calibration technology into more application-specific instruments, such as its
9100 Multi-function Calibrator and 9500 Oscilloscope Calibrator, replacing
expensive, manually operated equipment, with small, accurate, automated test
solutions.

    Significant Calibration Instruments customers of the Company include
Northrop Grumman Corporation, Tektronix, Inc. and the U.S. Army and Navy. The
Company's Calibration Instruments business is headquartered in Norwich, England.


                                          9
<PAGE>

    The following table lists selected Calibration Instruments product offerings
of the Company:

<TABLE>
<CAPTION>
 

                                                                                                                     APPROXIMATE
                                                                                                                      U.S. PRICE
PRODUCT NAME                                DESCRIPTION                                 PRIMARY CUSTOMER                POINT
-------------------  ----------------------------------------------------------  --------------------------------  ----------------
<S>                  <C>                                                         <C>                              <C>
1271/81 Precision    Provides accurate measurement of voltage and current up     Military forces, aerospace            $10,000
DMM                  to 8 1/2  digits                                            contractors, government
                                                                                 institutes, automated test
                                                                                 equipment manufacturers,
                                                                                 calibration/service repair
                                                                                 providers, national
                                                                                 laboratories

4800/4808            Calibrates Precision DMMs up to 8 1/2  digits               Calibration/service repair        $20,000-$34,000
Calibration Source                                                               providers, national
                                                                                 laboratories

9100 Multi-function  Universal calibrator for general purpose analog and         Calibration/service repair            $14,000
Calibrator           digital test equipment certification to ISO 9000            providers, ISO-accredited
                     standards                                                   industries, oscilloscope
                                                                                 manufacturers

9500 Oscilloscope    Calibrates oscilloscopes up to 1GHz                         Calibration/service, repair           $32,000
Calibrator                                                                       providers, ISO-accredited
                                                                                 industries, oscilloscope
                                                                                 manufacturers, national
                                                                                 laboratories
</TABLE>
 

    SERVICE
    
    Wavetek's Service business, which accounted for 8% of the Company's fiscal
1997 sales, provides repair, upgrade and calibration services for the Company's
products through eight Wavetek service centers and a network of independent
representatives worldwide. The Company believes that opportunities exist to
expand this business, and is in the process of developing a comprehensive
worldwide customer care plan ("Care Plan") for its customers. The Care Plan
program offers customers the opportunity to extend their standard warranty by
one or two years and add a package of various service and calibration options
for various fees paid at the time of purchase. 
    
CUSTOMERS
    
    The Company has a broad international base of over 5,000 customers operating
in a wide range of industries. The primary end users for the Company's
Communications Test products are service, installation and maintenance personnel
of CATV operators, wireless communications companies, telecommunications
companies and data communications equipment installers. Significant customers of
the Company's Communications Test business include AT&T, Continental
Cablevision, Inc., Deutsche Telekom A.G., Ericsson, France Telecom, Russia
Telecom, Siemens A.G., TCI and Time Warner Cable. The Company's Calibration
Instruments products are used primarily by service and quality personnel in
metrology, engineering and manufacturing environments in a wide variety of
industries. Significant Calibration Instruments customers include Northrop
Grumman Corporation, Tektronix, Inc. and the U.S. Army and Navy. For fiscal
1997, no one customer accounted for more than 3% of the Company's sales and the
top ten customers represented approximately 19% of sales.


                                          10
<PAGE>

PRODUCT DEVELOPMENT

    The Company seeks to develop and introduce application-specific products for
its target markets on a timely basis. The Company designs products for domestic
and international markets and often deploys market research and product
definition teams worldwide to meet and work with major communications and
metrology customers in order to determine and address the needs of its
customers. The Company spent $15.3 million, $12.9 million and $12.1 million on
research and development activities in fiscal 1997, 1996 and 1995, respectively.
    
    Wavetek's product development strategy is to: (i) focus on
application-specific products that are responsive to market-driven customer
needs; (ii) minimize development time in order to be responsive to shifts in
market demand and meet customer needs on a timely basis; (iii) aggressively
drive cost reductions throughout the design process; and (iv) leverage design
efforts by generating product families and product line extensions from existing
product platforms.
    
    As of September 30, 1997, the Company had approximately 145 employees
involved in its engineering activities who operate in teams based out of five
locations and generally focus on product development within a particular
business area. In addition, Wavetek's engineering teams share or apply other
teams' product designs where possible to improve use of resources. The Company
typically introduces 8 to 12 major new products or product extensions per year
and introduced 12 new products in fiscal 1997.
    
    The Company intends to continue to develop products to meet market demands
for reduced cost, size and weight, while achieving increased performance through
the use of application-specific integrated circuits ("ASICs"), digital signal
processing ("DSP") technology and increasing computing power available in
embedded processors. The Company has made a significant effort in recent years
to supplement its engineering staff with engineers skilled in these key
technology areas, as well as emerging technology areas such as digital
communications and advanced signal processing. The Company also makes selective
use of outside technical consulting companies to supplement internal
capabilities. 
    
SALES AND DISTRIBUTION
    
    Wavetek products are sold through direct sales teams in the United States,
the United Kingdom, France and Germany. The Company also utilizes a network of
over 250 distributors and independent representatives. Wavetek sales personnel
manage and provide technical support to the distributors and independent
representatives. The Company's contracts with such distributors and independent
representatives are generally short-term in nature and generally can be
terminated by either party with 30 to 90 days notice. Sales offices are located
in the United States, the United Kingdom, France, Germany, Austria, Singapore,
Hong Kong, Beijing and Shanghai. As of September 30, 1997, Wavetek had
approximately 125 employees involved in sales and customer support activities.
The Company also markets its products through advertising and participating in
trade shows. See Note 12 to the Company's financial statements for financial
information about foreign and domestic operations and export sales.
    
YOKOGAWA RELATIONSHIP
    
    In April 1996, Wavetek formed a strategic alliance with Yokogawa to jointly
develop Communications Test products for the Japanese market and to distribute
Wavetek's products in Japan. In September 1996, Yokogawa also purchased
approximately 12.0% of the Company's common stock outstanding prior to the
Recapitalization Transactions. As of the date of this report, Yokogawa owns
approximately 5.8% of the outstanding common stock of Wavetek.
    
    
                                          11
<PAGE>

    Yokogawa, based in Tokyo, Japan, is a leading supplier of process control
equipment and test and measurement equipment. It currently distributes Wavetek's
CATV, Wireless, LAN and Calibration Instruments product lines in Japan. In
fiscal 1997, Wavetek's sales through Yokogawa were approximately $2.6 million.
In addition, Wavetek and Yokogawa have joint engineering and marketing programs
for Wireless products.

BACKLOG
    
    As of September 30, 1997, the Company had a firm unfilled open order backlog
of $20.2 million (compared to $28.2 million as of September 30, 1996), nearly
all of which is expected to be filled prior to September 30, 1998. Backlog
reflects firm customer orders for products and services scheduled for shipment
within 12 months. The level of backlog at any particular time is not necessarily
indicative of the future operating performance of the Company. Delivery
schedules may be extended, and orders may be canceled at any time subject to
certain cancellation penalties.
    
MANUFACTURING
    
    Wavetek has four manufacturing facilities worldwide. All North American
designed products except Test Tools (CATV, LAN and US-designed Wireless
products) are manufactured in Indianapolis. The Company manufactures its
Calibration Instruments products in Norwich, England, its Telecom products in
St. Etienne, France and its German-designed Wireless products in Munich,
Germany. Since the Company outsources certain of its manufacturing to
subcontractors, including the printed circuit boards for its French and German
products, the manufacturing at its St. Etienne and Munich facilities consists
primarily of final assembly and test. These facilities were acquired in the
October 1994 Schlumberger acquisition, and the Company is currently evaluating
consolidation opportunities in order to improve manufacturing efficiency and
capitalize on economies of scale. The Company's Test Tools products are
manufactured by third party suppliers, primarily in Taiwan. 

    Although the Company attempts to use common, multi-sourced components
throughout its design, certain technological requirements may necessitate the
use of single-sourced, unique components. The Company attempts to minimize its
exposure on these components through careful vendor qualification and
purchasing, though risk exists that these parts may become obsolete,
necessitating redesign or withdrawal of the product from the market. 

COMPETITION

    The Company operates in markets that are highly competitive, and the Company
expects that competition will increase in the future. Some of the industries in
which the Company operates are characterized by rapid technological advances and
emerging industry standards. Failure to keep pace with technological advances
would adversely affect the Company's competitive positions and results of
operations. The Company competes primarily on the basis of technology,
performance, price, brand identity, quality, reliability, distribution and
customer service and support. To remain competitive, the Company must continue
to develop new products, periodically enhance its existing products and compete
effectively in the areas described above. Although the Company believes its
products are competitive in each of these areas, there can be no assurance that
existing or future competitors, some of which have greater financial resources
than the Company, will not introduce comparable or superior products
incorporating more advanced technology at lower prices. 
    
    The Company's competitors are numerous, ranging from some of the world's
largest corporations to many relatively small and highly specialized firms.
Although no single company competes in all of the Company's product markets,
some of the major competitors which compete in the individual product markets
include Anritsu Corporation, Fluke Corporation, 


                                          12
<PAGE>

Hewlett-Packard Company, Microtest, Inc., Rohde & Schwartz, Inc. and Tektronix,
Inc. Some of these competitors have more extensive engineering, manufacturing
and marketing capabilities and substantially greater financial, technological
and personnel resources than the Company. 

INTELLECTUAL PROPERTY

    The Company's success and ability to compete depends in part upon protecting
its proprietary technology. The Company relies upon a combination of patents,
trademark and trade secret laws, together with licenses, confidentiality
agreements and other contractual covenants, to establish and protect its
technology and other intellectual property rights.

    There can be no assurance that the steps taken by the Company to protect its
proprietary rights will be adequate to deter misappropriation or independent
third-party development of its technology, or that its intellectual property can
be successfully enforced or defended if challenged. Given the rapid development
of technology, there can be no assurance that certain aspects of the Company's
products do not or will not infringe upon the existing or future proprietary
rights of others or that, if licenses or rights are required to avoid
infringement, such licenses or rights could be obtained or obtained on terms
that would not have a material adverse effect on the Company. In any event,
because of the rapid pace of technological change in many of the Company's
product industries, the Company believes that patent protection for its products
is less significant to its success than the knowledge, ability and experience of
its employees and the frequent introduction and market acceptance of new
products and product enhancements. The Company uses a number of trademarks in
its business, including Wavetek-Registered Trademark-, LANTEK-Registered
Trademark- and Stabilock which are registered in various countries where the
Company operates. The Company currently has fourteen patents and two pending
patent applications and expects to rely on patents to a greater extent in the
future.

EMPLOYEES

    As of September 30, 1997, the Company had approximately 800 employees. Many
of the Company's employees are highly skilled and the Company's continued
success will depend in part upon its ability to attract and retain these
employees. Many of the Company's manufacturing employees in Europe are members
of standard unions. The Company believes its relationship with its employees is
good. 


                                          13
<PAGE>

ITEM 2. PROPERTIES

    The table below sets forth selected relevant statistics for Wavetek's
current facilities: 

<TABLE>
<CAPTION>
 

                                                                                                                 LEASE
LOCATION                                FACILITY TYPE/USE               SIZE OF FACILITY         TITLE         EXPIRATION
---------------  --------------------------------------------------   ----------------------  ----------   ------------------
<S>              <C>                                                  <C>                     <C>          <C>
San Diego,       Executive offices (1)                                    4,305 sq. ft.         Leased         12/31/1999
California       Headquarters for LAN and Test Tools                     70,000 sq. ft.         Leased          6/29/2006
                 businesses; U.S. distribution center for Test
                 Tools and Calibration Instruments (2)

Indianapolis,    U.S. manufacturing center; headquarters for CATV      206,000 sq. ft. (3)      Leased         10/31/2014
Indiana          business; U.S. distribution center for
                 Communications Test products

Norwich,         Headquarters for Calibration Instruments business,      40,000 sq. ft.          Owned             -
England          including manufacturing; UK sales and                   3.2 acres-land         Leased          3/31/2103
                 distribution; European distribution center for
                 Test Tools

St. Etienne,     Headquarters for Telecom business, including final      23,414 sq. ft.         Leased          9/30/2005
France           assembly and test

Munich,          Headquarters for Wireless business, including           51,067 sq. ft.         Leased         12/31/2002
Germany          final assembly and test; German sales office
</TABLE>
 

-----------

(1) Gooding has the right to take control of the lease at this facility under
    certain circumstances. See "Certain Relationships and Related
    Transactions." Wavetek has a renewal option on the lease for this facility,
    permitting it to extend the term up to an additional five years.

(2) The Company leases this facility from a company controlled by Gooding. See
    "Certain Relationships and Related Transactions."

(3) 120,739 sq. ft. of this facility are subleased to unrelated parties through
    October 31, 1999.

    The Company also leases sales offices in Paris, Vienna, Hong Kong,
Singapore, Beijing and Shanghai. 

ITEM 3. LEGAL PROCEEDINGS

    In the ordinary course of its business, the Company from time to time is
subjected to legal claims. The Company does not believe that the likely outcome
of any such claims or related lawsuits would have a material adverse effect on
the Company or its ability to develop new products.

    A matter is pending in the United States District Court for the Southern
District of Indiana, involving a claim by Trilithic, Inc. ("Trilithic") that
certain products of the Company infringe Trilithic's patent on a radio frequency
leakage detection system for a CATV system and seeks injunctive and unspecified
monetary relief. The product line potentially 


                                          14
<PAGE>

affected by this claim, and by a second patent that has been issued to Trilithic
subsequent to the filing of the lawsuit, had fiscal 1997 sales of approximately
$5.6 million. Trilithic's complaint, which was served on the Company in March
1997, was the first notice to the Company of Trilithic's patent. In the event
the outcome of the lawsuit is not favorable, the Company could be required to:
(i) redesign existing or future products so that they do not use the rights
covered by Trilithic's patent; (ii) negotiate licenses from Trilithic; or (iii)
withdraw existing products or not introduce future products that are covered by
those patent rights. The Company could also be liable to Trilithic for damages
for any infringement since March 1997. The Company does not believe that any
such damages are likely to have a material adverse impact on the Company.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

    Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

    There is no established public market for the Company's Common Stock.


                                          15
<PAGE>

ITEM 6. SELECTED FINANCIAL DATA

    The selected consolidated financial data should be read in conjunction with
the consolidated financial statements of the Company included as Item 8 herein
and the information contained in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included as Item 7 herein.

<TABLE>
<CAPTION>
 

                                                                     YEARS ENDED SEPTEMBER 30,
                                                   ------------------------------------------------------------
                                                     1997         1996         1995         1994         1993  
                                                   --------     --------     --------     --------     --------
                                                                        (DOLLARS IN THOUSANDS)
<S>                                                <C>          <C>          <C>          <C>          <C>     

STATEMENT OF INCOME DATA:
Net sales. . . . . . . . . . . . . . . . . . .     $155,279     $150,993     $133,619      $74,815      $71,891
Cost of goods sold . . . . . . . . . . . . . .       71,316       72,364       72,649       41,373       41,112
                                                   --------     --------     --------     --------     --------
Gross margin . . . . . . . . . . . . . . . . .       83,963       78,629       60,970       33,442       30,779
Operating expenses:
  Marketing and selling. . . . . . . . . . . .       37,387       36,197       32,586       16,429       15,539
  Research and development . . . . . . . . . .       15,348       12,917       12,096        5,425        5,114
  General and administrative . . . . . . . . .       10,742       11,612        9,391        6,057        5,704
  Stock option compensation related to
    recapitalization (1) . . . . . . . . . . .        7,061            -            -            -            -
  Provision for restructuring operations (2) .            -        1,832            -            -            -
                                                   --------     --------     --------     --------     --------
                                                     70,538       62,558       54,073       27,911       26,357
                                                   --------     --------     --------     --------     --------
Operating income . . . . . . . . . . . . . . .       13,425       16,071        6,897        5,531        4,422
Non-operating income (expense):
  Interest income. . . . . . . . . . . . . . .          315          167           90           33           24
  Interest expense . . . . . . . . . . . . . .       (4,008)        (762)      (1,190)        (645)        (676)
  Loss on sale and leaseback financing . . . .            -            -       (1,824)           -            -
  Other, net . . . . . . . . . . . . . . . . .         (791)      (1,036)        (288)        (387)          24
                                                   --------     --------     --------     --------     --------
                                                     (4,484)      (1,631)      (3,212)        (999)        (628)
                                                   --------     --------     --------     --------     --------
Income before provision for income taxes . . .        8,941       14,440        3,685        4,532        3,794
Provision for income taxes (3) . . . . . . . .        2,878          965          616          822          168
                                                   --------     --------     --------     --------     --------
Net income (3) . . . . . . . . . . . . . . . .     $  6,063     $ 13,475     $  3,069      $ 3,710      $ 3,626
                                                   --------     --------     --------     --------     --------
                                                   --------     --------     --------     --------     --------
OTHER FINANCIAL DATA:
EBITDA (4) . . . . . . . . . . . . . . . . . .     $ 23,966     $ 20,933     $  9,944      $ 7,141      $ 5,903
Depreciation and amortization expenses . . . .        3,480        3,030        3,047        1,610        1,481
Capital expenditures . . . . . . . . . . . . .        6,034        4,544        2,920        1,332        2,108
EBITDA as a percentage of sales. . . . . . . .         15.4%        13.9%         7.4%         9.5%         8.2%
Ratio of earnings to fixed charges (5) . . . .          2.9x         9.9x         2.8x         5.3x         4.7x
Cash flows provided by (used in):
  Operating activities . . . . . . . . . . . .        7,535       15,076       12,548        6,447        7,215
  Investing activities . . . . . . . . . . . .       (6,848)      (3,950)     (20,383)          53       (5,278)
  Financing activities . . . . . . . . . . . .         (943)      (8,634)       7,682       (6,367)      (1,862)

<CAPTION>

                                                                          AS OF SEPTEMBER 30,
                                                   ------------------------------------------------------------
                                                     1997         1996         1995         1994         1993  
                                                   --------     --------     --------     --------     --------
<S>                                                <C>          <C>          <C>          <C>          <C>     
BALANCE SHEET DATA:
Cash and cash equivalents (6). . . . . . . . .     $  6,691      $ 6,126      $ 3,689      $ 3,807      $ 3,513
Total assets . . . . . . . . . . . . . . . . .       77,353       68,852       62,578       34,705       36,755
Total debt . . . . . . . . . . . . . . . . . .      118,803        5,954       14,684        9,860        9,269
Stockholders' equity (deficit) . . . . . . . .      (71,640)      32,688       19,416       11,637       14,592
</TABLE>
                         (SEE NOTES ON FOLLOWING PAGE)


                                          16
<PAGE>

-------------
(1) In connection with the Recapitalization Transactions, the Company made cash
    payments upon the surrender of stock options by employees in an aggregate
    amount of $7.1 million. This amount is included in operating expenses for
    fiscal 1997.

(2) In fiscal 1996, the Company initiated a plan to restructure certain
    corporate management functions, its European manufacturing, service and
    sales activities and its San Diego manufacturing activities. The
    restructuring costs primarily include expenses for employee severance and
    close down of certain manufacturing operations. The restructuring was
    substantially completed during fiscal 1997.

(3) The Company's net income for fiscal 1997, 1996, 1995, 1994 and 1993 was
    favorably impacted because the Company's provisions for income taxes were
    lower in those periods than the amounts calculated using statutory rates
    due to the utilization of certain net operating loss carryforwards and
    reductions in certain valuation allowances provided in prior years due to
    uncertainties regarding the realization of certain deferred tax assets. In
    fiscal 1996, a tax benefit of $6.2 million was realized due to the
    reductions of certain valuation allowances which were recorded as of the
    end of fiscal 1995. See Note 11 to the Company's Consolidated Financial
    Statements.

(4) EBITDA is operating income plus depreciation and amortization expense,
    stock option compensation related to recapitalization and provision for
    restructuring operations. The Company's definition of EBITDA is consistent
    with the definition of Consolidated Cash Flow in the Indenture related to
    the Company's Senior Subordinated Notes ("the Indenture"). While EBITDA
    should not be construed as a substitute for income from operations, net
    income or cash flows from operating activities in analyzing the Company's
    operating performance, financial position or cash flows, the Company has
    included EBITDA because it may be viewed as an indicator of compliance with
    certain covenants in the Indenture and the New Credit Agreement and is
    commonly used by certain investors and analysts to analyze and compare
    companies on the basis of operating performance, leverage and liquidity and
    to determine a Company's ability to service debt. EBITDA as presented by
    the Company herein may not be comparable to similarly titled measures
    reported by other companies. In addition, the amount reported by the
    Company as EBITDA may not be fully available for management's discretionary
    use due to the Company's needs to conserve funds for debt service, capital
    expenditures and other commitments.

(5) For purposes of computing this ratio, earnings consist of income before
    provision for income taxes plus fixed charges. Fixed charges consist of
    interest expense, amortization of deferred debt issuance costs and
    one-third of the rent expense from operating leases, which management
    believes is a reasonable approximation of the interest factor of the rent.

(6) Cash and cash equivalents includes short-term investments, which are
    comprised primarily of U.S. Treasury securities and guaranteed obligations
    of the U.S. government or its agencies with original maturities between 3
    and 12 months. 


                                          17
<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

    The following discussion should be read in conjunction with the Company's
consolidated financial statements included as Item 8 herein.

OVERVIEW

    Wavetek is a leading global designer, manufacturer and distributor of a
broad range of electronic test instruments, with a primary focus on
application-specific instruments for testing voice, video and data
communications equipment and networks. The Company also designs, manufactures
and distributes precision instruments to calibrate and test electronic equipment
and provides repair, upgrade and calibration services for its products on a
worldwide basis.

    The Company derives its revenues primarily from the sale of its products to
a broad international base of over 5,000 customers operating in a wide range of
industries. A majority of the Company's sales come from its Communications Test
product lines which serve the CATV, Wireless, Telecom, LAN and Test Tools market
segments of the test instrument industry. The Company also sells Calibration
Instruments and provides repair, upgrade and calibration services for its
products on a worldwide basis. The Company sells products that are manufactured
at its four facilities located in: (i) Indianapolis, Indiana; (ii) Norwich,
England; (iii) St. Etienne, France; and (iv) Munich, Germany. In major markets
such as the United States, England, France and Germany, the Company sells its
products to customers in their local currencies. In the rest of the world, the
Company generally sells its products to customers or local distributors in the
functional currency of the location where the products are manufactured. During
fiscal 1997, approximately 61% of the Company's sales were generated outside of
the United States and approximately 50% of the Company's sales were made in
currencies other than the United States dollar. As a result of such foreign
currency sales, the equivalent United States dollar amount of the Company's
sales is impacted by changes in foreign currency exchange rates. The Company's
ability to maintain and grow its sales depends on a variety of factors including
its ability to maintain its competitive position in areas such as technology,
performance, price, brand identity, quality, reliability, distribution and
customer service and support, and its ability to continue to introduce new
products that respond to technological change and market demand in a timely
manner.
   
    Wavetek's cost of goods sold, and its resulting gross margin, are driven
primarily by the cost of the material in its products, the cost of the labor to
manufacture such products and the overhead expenses in its facilities. In recent
years, the Company has focused on improving its gross margin by: (i)
consolidating manufacturing operations; (ii) focusing its new product
development efforts on lower-cost, easier to manufacture designs; (iii)
controlling headcount and expenses in its manufacturing facilities; and (iv)
gaining efficiencies and economies of scale in its material and component
procurement activities. 
   
    The Company's operating expenses are substantially impacted by marketing and
selling activities and by research and development activities. Marketing and
selling expenses are primarily driven by: (i) sales volume, with respect to
sales force expenses and commission expenses; (ii) the extent of market research
activities for new product design efforts; (iii) advertising and trade show
activities; and (iv) the number of new products launched in the period. In
recent periods, the Company has increased its spending on research and
development activities. This increase has resulted from the Company's October
1994 acquisition of its Wireless and Telecom businesses, which had a higher
spending level than the Company's historical activities, and from a planned
increase in spending to accelerate the timing of new product introductions.
General and administrative expenses primarily include costs associated with the
Company's administrative employees, facilities and 


                                          18
<PAGE>

functions. The Company incurs expenses in foreign countries primarily in the
functional currencies of such locations. As a result of the Company's
substantial international operations, the United States dollar amount of its
expenses is impacted by changes in foreign currency exchange rates.
    
    In recent periods, the Company's results of operations have been
significantly impacted by the Company's efforts to improve the operating results
of its Wireless and Telecom businesses and by the rapid growth in sales and
profitability of the Company's CATV product lines.

RESULTS OF OPERATIONS
   
    The following table sets forth selected financial information as a
percentage of sales for the periods indicated:
   
                                                     YEARS ENDED SEPTEMBER 30,
                                                    --------------------------
                                                     1997      1996      1995 
                                                    ------    ------    ------
Sales. . . . . . . . . . . . . . . . . . . . .      100.0%    100.0%    100.0%
Cost of goods sold . . . . . . . . . . . . . .       45.9      47.9      54.4 
                                                    ------    ------    ------
Gross margin . . . . . . . . . . . . . . . . .       54.1      52.1      45.6 
Operating expenses . . . . . . . . . . . . . .       45.4      41.5      40.4 
                                                    ------    ------    ------
Operating income . . . . . . . . . . . . . . .        8.7      10.6       5.2 
Interest expense, net. . . . . . . . . . . . .       (2.4)     (0.4)     (0.8)
Other non-operating income (expense), net. . .       (0.5)     (0.7)     (1.6)
                                                    ------    ------    ------
Income before provision for income taxes . . .        5.8       9.5       2.8 
Provision for income taxes . . . . . . . . . .       (1.9)     (0.6)     (0.5)
                                                    ------    ------    ------
Net income . . . . . . . . . . . . . . . . . .        3.9%      8.9%      2.3%
                                                    ------    ------    ------
                                                    ------    ------    ------
EBITDA . . . . . . . . . . . . . . . . . . . .       15.4%     13.9%      7.4%

    The Company's ratio of earnings to fixed charges was as follows for the
periods indicated:
                                           
                                                     YEARS ENDED SEPTEMBER 30,
                                                    --------------------------
                                                     1997      1996      1995 
                                                    ------    ------    ------
Ratio of earnings to fixed charges . . . . . .        2.9x      9.9x      2.8x


FISCAL YEAR ENDED SEPTEMBER 30, 1997 COMPARED TO FISCAL YEAR ENDED SEPTEMBER 30,
1996

    NET SALES.  Net sales in fiscal 1997 increased $4.3 million, or 2.8%, to
$155.3 million from $151.0 million in fiscal 1996. This increase was due to an
increase in sales to international customers of $6.4 million, or 7.2%, offset by
a decrease of $2.1 million, or 3.5%, in sales to customers in the United States.
The Company's sales to customers outside the United States increased to 61.4% in
fiscal 1997 from 58.9% in fiscal 1996 and the portion of the Company's sales
which were made in currencies other than the United States dollar increased to
approximately 50% in fiscal 1997 from approximately 47% in fiscal 1996. Changes
in certain foreign exchange rates during fiscal 1997 had the effect of reducing
the United States dollar equivalent of the Company's foreign currency sales by
$5.2 million from the United States dollar equivalent amount that would have
been reported if the average exchange rates in effect during fiscal 1996 had
remained in effect during fiscal 1997. Sales of the Company's Communications
Test products increased $2.4 million, or 2.1%, from fiscal 1996 primarily as a
result of an increase in international sales partially offset by reduced
domestic sales. Sales of Calibration Instruments 


                                          19
<PAGE>



products increased $1.6 million, or 6.4%, from fiscal 1996, due partially to
changes in foreign exchange rates and partially to higher shipments in
connection with a planned reduction in the backlog of this product line. Sales
from repair, upgrade and calibration services remained relatively constant
during fiscal 1997, increasing $0.3 million, or 2.8%, from the comparable fiscal
1996 period. 
    
    Within its Communications Test product lines, sales of the Company's CATV
and Wireless products increased in fiscal 1997 from fiscal 1996, while sales of
the Company's Telecom, LAN and Test Tools products declined. The growth in CATV
sales in fiscal 1997 can be substantially attributed to the Company's continued
penetration of international markets as it continues to benefit from the
increasing international investment in CATV infrastructure. The increase in
Wireless product sales in fiscal 1997 is due primarily to the shipment of a
large order to a customer in Korea, partially offset by the impact of the
devaluation of the Deutsche mark against the United States dollar. The Company's
Telecom sales decreased during fiscal 1997 as a result of reduced sales in
France, including sales to one of the Company's largest Telecom customers.
Telecom sales in fiscal 1997 were also adversely affected by the devaluation in
the French franc against the United States dollar. Decreases in sales of LAN and
Test Tools products during fiscal 1997 were primarily attributable to pending
transitions to new LAN products which will be introduced in fiscal 1998 and the
transition to new and updated Test Tools products which were introduced in
fiscal 1997. The Company's sales were also adversely impacted in fiscal 1997 by
the discontinuance of selected other non-core Communications Test products.
   
    GROSS MARGIN.  The Company's gross margin in fiscal 1997 increased $5.3
million or 6.8%, to $84.0 million from $78.6 million in fiscal 1996. Gross
margin as a percentage of sales increased to 54.1% in fiscal 1997 from 52.1% in
fiscal 1996. The increase in the gross margin percentage during fiscal 1997
results from a higher proportion of the Company's sales coming from its higher
margin CATV products, offset by reductions in the gross margin percentage
achieved in its Wireless and Telecom product lines. The Company also experienced
higher gross margin percentages in fiscal 1997 as a result of a more favorable
geographic mix. Changes in foreign exchange rates had an unfavorable impact on
the United States dollar equivalent of gross margins related to international
sales denominated in foreign currencies in fiscal 1997. The decline in Wireless
gross margin percentages in fiscal 1997 is due primarily to a large sale of a
non-core product to a customer in Korea on which a lower than average gross
margin percentage was achieved.
   
    OPERATING EXPENSES.  Operating expenses in fiscal 1997 increased $7.9
million, or 12.8%, to $70.5 million from $62.6 million in fiscal 1996. Operating
expenses as a percentage of sales increased to 45.4% in fiscal 1997 from 41.5%
in fiscal 1996. The increase in operating expenses in fiscal 1997 was due to a
one-time charge of $7.1 million, or 4.5% of sales, for stock option compensation
related to the Recapitalization Transactions and to an increase in spending for
research and development activities of $2.4 million, to $15.3 million, or 9.9%
of sales, in fiscal 1997 from $12.9 million, or 8.6% of sales, in fiscal 1996,
in order to accelerate the timing of new product introductions. These increases
in fiscal 1997 were partially offset by reduced spending in general and
administrative activities of $0.9 million to 6.9% of sales in fiscal 1997 from
7.7% of sales in fiscal 1996, primarily reflecting the fact that the Company
incurred higher than normal charges in fiscal 1996 for executive recruitment and
relocation and provisions for potentially doubtful accounts receivable. The
increase in operating expenses in fiscal 1997 was also partially offset by a
provision recorded by the Company in fiscal 1996 of $1.8 million for certain
restructuring costs. No such provision was recorded in fiscal 1997. Changes in
foreign exchange rates also had a favorable impact on the United States dollar
equivalent of operating expenses denominated in foreign currencies in fiscal
1997.
   
   
                                          20
<PAGE>

    NON-OPERATING INCOME (EXPENSE).  Non-operating expense, net, in fiscal 1997
increased by $2.9 million over fiscal 1996 to $4.5 million. The increase was
primarily due to an increase in the Company's net interest expense to $3.7
million during fiscal 1997 from $0.6 million in fiscal 1996, reflecting
additional interest expense due to the Notes and the New Credit Agreement. The
increase in net interest expense was partially offset by a reduction of $0.2
million in other non-operating expenses.
   
    PROVISION FOR INCOME TAXES.  The Company's effective tax rate in fiscal 1997
was 32.2%. In fiscal 1996, the Company's effective tax rate was only 6.7% due to
the reduction in certain deferred tax asset valuation allowances in the amount
of $6.2 million due to the realization of such deferred tax assets becoming more
likely than not. In fiscal 1997, the net deferred tax assets were $3.7 million.
   
    NET INCOME (LOSS).  As a result of the above factors, net income was $6.1
million in fiscal 1997 as compared to $13.5 million in fiscal 1996. 
   
    EBITDA.  EBITDA was $24.0 million in fiscal 1997 as compared to $20.9
million in fiscal 1996. EBITDA as a percentage of sales increased to 15.4% in
fiscal 1997 from 13.9% in fiscal 1996.
   
    RATIO OF EARNINGS TO FIXED CHARGES.  As a result of the above factors, the
ratio of earnings to fixed charges was 2.9x for fiscal 1997 as compared to 9.9x
for fiscal 1996.
    
FISCAL YEAR ENDED SEPTEMBER 30, 1996 COMPARED TO FISCAL YEAR ENDED SEPTEMBER 30,
1995

    NET SALES.  Net sales in fiscal 1996 increased $17.4 million, or 13.0%, to
$151.0 million from $133.6 million in fiscal 1995. The Company's mix of business
in the United States versus international markets remained constant at
approximately 41% domestic and approximately 59% international in each of fiscal
1996 and 1995. Changes in foreign exchange rates did not have a material impact
on total sales in fiscal 1996 compared to fiscal 1995. Sales of the Company's
Communications Test products in fiscal 1996 increased $15.6 million, or 15.7%,
from fiscal 1995. Sales of Calibration Instruments products in fiscal 1996
increased by $0.7 million, or 2.8%, from fiscal 1995. Revenues from repair,
upgrade and calibration services increased $1.1 million in fiscal 1996, or
10.6%, over fiscal 1995 primarily due to increased service revenues for the
Company's Wireless and Telecom products in France and Germany.
   
    Within its Communications Test product lines, sales of the Company's CATV
products increased in fiscal 1996 as a result of the impact of new products
introduced in fiscal 1996 and 1995 and the positive impact of overall growth in
CATV markets due to infrastructure upgrading by United States CATV operators and
the rapid increase of cable subscribers and cable infrastructure development in
international markets. Sales of the Company's LAN products also increased in
fiscal 1996 as a result of the full-year effect of the Company's LANTEKPRO
family of products that were introduced mid-year in fiscal 1995. These CATV and
LAN increases in fiscal 1996 were offset by decreases in sales of the Company's
Test Tools products primarily due to the discontinuance of non-core product
lines and a decrease in sales of the Company's Wireless products attributable to
declines in sales of older products. The Company's Communications Test sales
were also impacted by the sale of a non-strategic product line in fiscal 1996. 


                                          21
<PAGE>

    GROSS MARGIN.  The Company's gross margin in fiscal 1996 increased $17.7
million, or 29.0% to $78.6 million from $61.0 million in fiscal 1995. Gross
margin as a percentage of sales increased to 52.1% in fiscal 1996 from 45.6% in
fiscal 1995. The increase in gross margin in fiscal 1996 was due to: (i) the
closing of the Company's San Diego manufacturing facility in fiscal 1996; (ii)
increased sales of higher gross margin Communications Test products; (iii) the
benefits of improved overhead absorption due to the significant increase in
volume of sales of CATV and LAN products; and (iv) reduced overhead spending in
the Company's Wireless and Telecom business areas, which were acquired in
October 1994.
   
    OPERATING EXPENSES.  Operating expenses in fiscal 1996 increased $8.5
million, or 15.7%, to $62.6 million from $54.1 million in fiscal 1995. Operating
expenses as a percentage of sales increased to 41.5% in fiscal 1996 from 40.4%
in fiscal 1995. The increase in operating expenses in fiscal 1996 was due to:
(i) a provision recorded by the Company of $1.8 million for the restructuring of
certain corporate management functions, its European manufacturing, service and
sales activities and San Diego manufacturing activities; and (ii) an increase in
general and administrative activities of $2.2 million, to 7.7% of sales in
fiscal 1996 from 7.0% of sales in fiscal 1995, due to higher than normal charges
in 1996 for executive recruitment and relocation and provisions for potentially
doubtful accounts receivable. Excluding the $1.8 million provision for
restructuring operations, operating expenses as a percentage of sales would have
decreased to 40.2% in fiscal 1996 from 40.4% in fiscal 1995. The increase in
fiscal 1996 was partially offset by reduced spending, as a percentage of sales,
in marketing and selling activities to 24.0% in fiscal 1996 from 24.4% in fiscal
1995 and in research and development activities to 8.6% ($12.9 million) in
fiscal 1996 from 9.1% ($12.1 million) in fiscal 1995, reflecting the Company's
efforts to reduce expenses in the Wireless and Telecom business areas it
acquired in October 1994.

    NON-OPERATING INCOME (EXPENSE).  Non-operating expense, net, in fiscal 1996
decreased to $1.6 million from $3.2 million in fiscal 1995. The Company's net
interest expense decreased to $0.6 million in fiscal 1996 from $1.1 million in
fiscal 1995, reflecting a reduction in average net borrowings. Other
non-operating expenses decreased to $1.0 million in fiscal 1996 from $2.1
million in the fiscal 1995, due primarily to a loss of $1.8 million incurred in
fiscal 1995 related to the sale and leaseback financing of the Company's
Indianapolis facility. This decrease was partially offset by an increase in
other expenses of $0.7 million in fiscal 1995 due primarily to certain
non-recurring legal expenses.
   
    PROVISION FOR INCOME TAXES.  The Company's effective tax rate in fiscal 1996
was 6.7% due to the reduction of certain deferred tax asset valuation allowances
of $6.2 million due to the realization of such deferred tax assets becoming more
likely than not, compared to a fiscal 1995 effective rate of 16.7%.
    
    NET INCOME (LOSS).  As a result of the above factors, including in
particular the tax benefit in 1996, net income was $13.5 million in fiscal 1996
as compared to $3.1 million in fiscal 1995.

    EBITDA.  EBITDA was $20.9 million in fiscal 1996 as compared to $9.9 million
in fiscal 1995. EBITDA as a percentage of sales increased to 13.9% in fiscal
1996 from 7.4% in fiscal 1995.

    RATIO OF EARNINGS TO FIXED CHARGES.  As a result of the above factors, the
ratio of earnings to fixed charges was 9.9x for fiscal 1996 as compared to 2.8x
for fiscal 1995.


                                          22
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES
   
    The Company's cash flow from operating activities was $14.6 million
(excluding a one-time charge of $7.1 million for stock option compensation
related to the Recapitalization Transactions), $15.1 million and $12.5 million,
in fiscal 1997, 1996 and 1995, respectively. The Company had cash, cash
equivalents and short-term investments at September 30, 1997 of $6.7 million.
The Company invests its excess cash in money market funds and U.S. Treasury
obligations. Historically the Company has funded its business through operating
cash flow, has not relied on sales of equity to provide cash and has used
short-term debt primarily for cash management purposes. The Company's European
subsidiaries had borrowings outstanding under their existing credit agreements
(the "Existing Credit Agreements") of $3.9 million at September 30, 1997 for
funding short-term working capital requirements, and the Company had additional
obligations outstanding totaling approximately $1.3 million in the form of
letters of credit and bank guarantees. As of September 30, 1997, the Company had
outstanding an unsecured note of approximately $0.9 million issued in the
October 1994 acquisition of the Company's Telecom business and a financing
obligation of $4.1 million recorded in connection with the sale and leaseback of
the Company's facilities in Indianapolis, Indiana.
   
    The Company's primary cash needs have been for the funding of working
capital requirements (primarily inventory and accounts receivable) and capital
expenditures. The Company's net cash used in investing activities was $6.8
million, $4.0 million and $20.4 million in fiscal 1997, 1996 and 1995,
respectively. The Company's recurring cash requirements for investing activities
are primarily for capital expenditures. The Company made capital expenditures in
fiscal 1997, 1996 and 1995 of $6.0 million, $4.5 million and $2.9 million,
respectively. In fiscal 1997 and 1996, capital expenditures reflect increasing
investment in manufacturing and engineering equipment and also include
approximately $1.1 million in 1996 and $2.1 million in 1997 related to investing
in new management information system hardware and software. Capital expenditures
in fiscal 1995 primarily reflect spending for manufacturing and engineering
equipment resulting from the increase in the size of the business and the number
of facilities following the October 1994 acquisition by the Company of its
Wireless and Telecom businesses. The Company's fiscal 1995 cash flows from
investing activities also reflect $17.7 million paid in cash for the acquisition
of the Company's Wireless and Telecom Businesses.
    
    The Company's net cash provided by (used in) financing activities was $(0.9
million), $(8.6 million) and $7.7 million in fiscal 1997, 1996 and 1995,
respectively. For 1997, the net cash used in financing activities substantially
reflects the net impact of the Recapitalization Transactions. In fiscal 1995, to
raise cash for its acquisition of the Wireless and Telecom businesses, the
Company generated cash by issuing common shares for $7.6 million and by entering
into a sale and leaseback financing transaction for $4.3 million. The Company
also repurchased common shares in fiscal 1995 for $3.2 million. The remaining
cash flows from financing activities in fiscal 1997, 1996 and 1995 reflect the
proceeds from and repayments for borrowings used to finance the Company's
operating and investing activities, or as an application of the cash generated
from these activities.
    
    As part of the Recapitalization Transactions, the Company entered into the
New Credit Agreement with Fleet National Bank, DLJ Capital Funding, Inc. and
various other lenders providing for a term loan facility of $25.0 million and a
revolving credit facility providing for borrowings up to $20.0 million, of which
the Company borrowed all $25.0 million of the term loan facility and none of the
revolving credit facility to complete the Recapitalization Transactions. In
connection with entering into the New Credit Agreement, the Company terminated
$4.0 million of United States availability under its Existing Credit Agreements,
leaving borrowing availability of approximately $9.9 million at its Foreign
Subsidiaries. The 


                                          23
<PAGE>

Company believes that its cash flow from operations, combined with the remaining
available borrowings under the Existing and New Credit Agreements will be
sufficient to fund its debt service obligations, including its obligations under
the Notes, and working capital requirements, as well as implement its growth
strategy.
   
FOREIGN OPERATIONS
   
    As discussed above, a significant portion of the Company's sales and
expenses are denominated in currencies other than the United States dollar. In
order to maintain access to such foreign currencies, the Company's subsidiaries
in the United Kingdom, France and Germany have credit facilities providing for
borrowings in British pounds, French francs and Deutsche marks, respectively.
The revolving credit facility under the New Credit Agreement provides for up to
an aggregate of $7.5 million of borrowings in British pounds, French francs and
Deutsche marks. Adjustments made in translating the balance sheet accounts of
the Foreign Subsidiaries from their respective functional currencies at
appropriate exchange rates are included as a separate component of stockholders'
equity. In addition, the Company periodically uses forward exchange contracts to
hedge certain known foreign exchange exposures. Gains or losses from such
contracts are included in the Company's statements of income to offset gains and
losses from the underlying foreign currency transactions.
   
    The Indenture and the New Credit Agreement permit the Company and its
subsidiaries to make investments in, and intercompany loans to, the Foreign
Subsidiaries. Payments to the Company or its other subsidiaries by such Foreign
Subsidiaries, including the payment of dividends, redemption of capital stock or
repayment of such intercompany loans, may be restricted by the credit agreements
of the Foreign Subsidiaries. All intercompany loans from the Company to the
Foreign Subsidiaries are pledged to the lenders under the New Credit Agreement.

PERIODIC FLUCTUATIONS

    The Company's fiscal 1997 sales occurred in the following percentages in
each of the last four quarters: 27% for the quarter ended December 31, 1996; 26%
for the quarter ended March 31, 1997; 23% for the quarter ended June 30, 1997
and 24% for the quarter ended September 30, 1997. A variety of factors may cause
period-to-period fluctuations in the operating results of the Company. Such
factors include, but are not limited to, product mix, European summer holidays
and other seasonal influences, competitive pricing pressures, materials costs,
currency fluctuations, revenues and expenses related to new products and
enhancements of existing products, as well as delays in customer purchases in
anticipation of the introduction of new products or product enhancements by the
Company or its competitors. The majority of the Company's revenues in each
quarter results from orders received in that quarter. As a result, the Company
establishes its production, inventory and operating expenditure levels based on
anticipated revenue levels. Thus, if sales do not occur when expected,
expenditures levels could be disproportionately high and operating results for
that quarter, and potentially future quarters, would be adversely affected.


                                          24
<PAGE>

ITEM 8.  FINANCIAL STATEMENTS

                      INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
 

                                                                                                          Page
                                                                                                          ----
<S>                                                                                                       <C>
Report of Ernst & Young LLP, Independent Auditors. . . . . . . . . . . . . . . . . . . . . . . . . . . .   26
Consolidated Balance Sheets as of September 30, 1997 and 1996. . . . . . . . . . . . . . . . . . . . . .   27
Consolidated Statements of Income for each of the three years in the period ended September
   30, 1997. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   28
Consolidated Statements of Stockholders' Equity (Deficit) for each of the three years in the 
   period ended September 30, 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   29
Consolidated Statements of Cash Flows for each of the three years in the period ended September
   30, 1997. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   30
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   31
</TABLE>
 


                                          25
<PAGE>

                  REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS



The Board of Directors and Stockholders
Wavetek Corporation

    We have audited the accompanying consolidated balance sheets of Wavetek
Corporation as of September 30, 1997 and 1996, and the related consolidated
statements of income, stockholders' equity and cash flows for each of the three
years in the period ended September 30, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
    
    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 provide a reasonable basis for our opinion.
    
    In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Wavetek Corporation at September 30, 1997 and 1996, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended September 30, 1997, in conformity with generally accepted accounting
principles.

                                                    ERNST & YOUNG LLP           

San Diego, California
December 2, 1997


                                          26

<PAGE>

                                 WAVETEK CORPORATION
                             CONSOLIDATED BALANCE SHEETS
               (DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)



<TABLE>
<CAPTION>


                                                                                                  SEPTEMBER 30,
                                                                                            -----------------------
                                                                                              1997           1996
                                                                                            --------       --------
<S>                                                                                         <C>            <C>
                                         ASSETS
Current assets:
  Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . . .        $  5,695       $  6,126
  Short-term investments, available for sale . . . . . . . . . . . . . . . . . . . .             996              -
  Accounts receivable (less allowance for doubtful accounts of $851 in 1997 and
    $2,023 in 1996). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          25,860         20,866
  Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          15,937         19,308
  Refundable income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             616              -
  Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           3,611          4,505
  Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           1,730          1,188
                                                                                            --------       --------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          54,445         51,993

Property and equipment, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . .          15,110         12,194
Debt issuance costs, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           4,233              -
Intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           3,281          3,867
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             101            441
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             183            357
                                                                                            --------       --------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        $ 77,353       $ 68,852
                                                                                            --------       --------
                                                                                            --------       --------

                                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
  Notes payable to banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        $  3,859         $  786
  Trade accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          13,356         12,007
  Accrued compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           6,034          7,468
  Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             522          1,427
  Other current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . .           9,847          8,747
  Current maturities of long-term obligations. . . . . . . . . . . . . . . . . . . .           1,972             95
                                                                                            --------       --------
Total current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          35,590         30,530
Long-term obligations, less current maturities . . . . . . . . . . . . . . . . . . .         112,972          5,073
Deferred income and other liabilities. . . . . . . . . . . . . . . . . . . . . . . .             431            561

Commitments and contingencies

Stockholders' equity (deficit):
  Common stock, par value $.01; authorized, 15,000 shares; issued and outstanding,
    4,885 shares in 1997 and 10,974 shares in 1996 . . . . . . . . . . . . . . . . .              49            110
  Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . .          43,741          5,538
  Retained earnings (accumulated deficit). . . . . . . . . . . . . . . . . . . . . .        (115,048)        26,746
  Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . .            (382)           294
                                                                                            --------       --------
Total stockholders' equity (deficit) . . . . . . . . . . . . . . . . . . . . . . . .         (71,640)        32,688
                                                                                            --------       --------
Total liabilities and stockholders' equity (deficit) . . . . . . . . . . . . . . . .        $ 77,353       $ 68,852
                                                                                            --------       --------
                                                                                            --------       --------
</TABLE>


                               See accompanying notes.


                                          27
<PAGE>


                                 WAVETEK CORPORATION
                          CONSOLIDATED STATEMENTS OF INCOME
               (DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)



<TABLE>
<CAPTION>


                                                                                   YEARS ENDED SEPTEMBER 30,
                                                                           ----------------------------------------
                                                                              1997           1996           1995
                                                                           ----------     ----------     ----------
<S>                                                                        <C>            <C>            <C>
Net sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     $  155,279     $  150,993     $  133,619
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . .         71,316         72,364         72,649
                                                                           ----------     ----------     ----------
Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         83,963         78,629         60,970

Operating expenses:
  Marketing and selling. . . . . . . . . . . . . . . . . . . . . . . .         37,387         36,197         32,586
  Research and development . . . . . . . . . . . . . . . . . . . . . .         15,348         12,917         12,096
  General and administrative . . . . . . . . . . . . . . . . . . . . .         10,742         11,612          9,391
  Stock option compensation related to recapitalization. . . . . . . .          7,061              -              -
  Provision for restructuring operations . . . . . . . . . . . . . . .              -          1,832              -
                                                                           ----------     ----------     ----------
                                                                               70,538         62,558         54,073
                                                                           ----------     ----------     ----------
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . .         13,425         16,071          6,897

Non-operating income (expense):
  Interest income. . . . . . . . . . . . . . . . . . . . . . . . . . .            315            167             90
  Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . .         (4,008)          (762)        (1,190)
  Loss on sale and leaseback financing . . . . . . . . . . . . . . . .              -              -         (1,824)
  Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           (791)        (1,036)          (288)
                                                                           ----------     ----------     ----------
                                                                               (4,484)        (1,631)        (3,212)
                                                                           ----------     ----------     ----------
Income before provision for income taxes . . . . . . . . . . . . . . .          8,941         14,440          3,685
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . .          2,878            965            616
                                                                           ----------     ----------     ----------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     $    6,063    $    13,475     $    3,069
                                                                           ----------     ----------     ----------
                                                                           ----------     ----------     ----------
Net income per share . . . . . . . . . . . . . . . . . . . . . . . . .     $      .63    $      1.17     $      .27
                                                                           ----------     ----------     ----------
                                                                           ----------     ----------     ----------
Shares used in computation . . . . . . . . . . . . . . . . . . . . . .          9,612         11,520         11,540
                                                                           ----------     ----------     ----------
                                                                           ----------     ----------     ----------
</TABLE>


                               See accompanying notes.


                                          28
<PAGE>


                                 WAVETEK CORPORATION
              CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                    YEARS ENDED SEPTEMBER 30, 1995, 1996 AND 1997
                          (DOLLARS AND SHARES IN THOUSANDS)





<TABLE>
<CAPTION>

 
                                           COMMON STOCK                           RETAINED      FOREIGN          TOTAL
                                    ------------------------      ADDITIONAL      EARNINGS      CURRENCY     STOCKHOLDERS'
                                                                   PAID-IN      (ACCUMULATED   TRANSLATION      EQUITY
                                      SHARES         AMOUNT        CAPITAL         DEFICIT)    ADJUSTMENTS     (DEFICIT)
                                    ---------      ---------      ---------     ------------   -----------     ---------
<S>                                 <C>            <C>            <C>           <C>            <C>            <C>
Balance, September 30, 1994. .          9,940            $99      $   1,121      $  10,202       $    215      $  11,637
  Shares issued for cash . . .          1,570             16          7,529            -              -            7,545
  Shares repurchased for cash.           (576)            (6)        (3,194)           -              -           (3,200)
  Stock options exercised. . .             40              1             49            -              -               50
  Net income . . . . . . . . .            -              -              -            3,069            -            3,069
  Foreign currency translation
    adjustments. . . . . . . .            -              -              -              -              315            315
                                    ---------      ---------      ---------      ---------      ---------      ---------
Balance, September 30, 1995. .         10,974            110          5,505         13,271            530         19,416
  Income tax benefit from stock
    options exercised. . . . .            -              -               33            -              -               33
  Net income . . . . . . . . .            -              -              -           13,475            -           13,475
  Foreign currency translation
    adjustments. . . . . . . .            -              -              -              -             (236)          (236)
                                    ---------      ---------      ---------      ---------      ---------      ---------
Balance, September 30, 1996. .         10,974            110          5,538         26,746            294         32,688
  Shares repurchased for cash.         (8,517)           (85)        (4,608)      (147,857)           -         (152,550)
  Shares issued for cash, net of
    related costs of $651. . .          2,428             24         42,825            -              -           42,849
  Stock options repurchased for
    cash, net of income tax
    benefit. . . . . . . . . .            -              -              (14)           -              -              (14)
  Net income . . . . . . . . .            -              -              -            6,063            -            6,063
  Foreign currency translation
    adjustments. . . . . . . .            -              -              -              -             (676)          (676)
                                    ---------      ---------      ---------      ---------      ---------      ---------
Balance, September 30, 1997. .          4,885            $49      $  43,741      $(115,048)     $    (382)     $ (71,640)
                                    ---------      ---------      ---------      ---------      ---------      ---------
                                    ---------      ---------      ---------      ---------      ---------      ---------
</TABLE>


                               See accompanying notes.


                                          29
<PAGE>



                                  WAVETEK CORPORATION
                        CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (DOLLARS IN THOUSANDS)


<TABLE>
<CAPTION>


                                                                                        YEARS ENDED SEPTEMBER 30,
                                                                                 ---------------------------------------
                                                                                   1997           1996           1995
                                                                                 ---------      ---------      ---------
<S>                                                                              <C>            <C>            <C>
OPERATING ACTIVITIES
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          $6,063        $13,475         $3,069
Adjustments to reconcile net income to net cash provided by operating
 activities:
 Depreciation expense. . . . . . . . . . . . . . . . . . . . . . . . . . .           2,905          2,453          2,493
 Amortization expense. . . . . . . . . . . . . . . . . . . . . . . . . . .             575            577            554
 Amortization of debt issuance costs . . . . . . . . . . . . . . . . . . .             184              -              -
 Provision for losses on accounts receivable . . . . . . . . . . . . . . .             259          1,542            561
 Loss on sale and leaseback financing. . . . . . . . . . . . . . . . . . .               -              -          1,824
 Loss on disposal of property and equipment. . . . . . . . . . . . . . . .              29             78             71
 Deferred income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             (97)           (99)           (98)
 Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . .           1,234         (3,843)        (1,103)
 Changes in operating assets and liabilities, net of effect of purchased
  businesses:
  Accounts receivable. . . . . . . . . . . . . . . . . . . . . . . . . . .          (7,853)          (405)           183
  Inventories and other assets . . . . . . . . . . . . . . . . . . . . . .           1,558         (2,166)         1,003
  Accounts payable and accrued expenses. . . . . . . . . . . . . . . . . .           3,623          2,809          4,059
  Income taxes payable, net. . . . . . . . . . . . . . . . . . . . . . . .            (945)           655            (68)
                                                                                 ---------      ---------      ---------
Net cash provided by operating activities. . . . . . . . . . . . . . . . .           7,535         15,076         12,548

INVESTING ACTIVITIES
Purchase of business, net of seller financing. . . . . . . . . . . . . . .               -              -        (17,685)
Proceeds from sale of businesses . . . . . . . . . . . . . . . . . . . . .               -            338              -
Purchase of property and equipment . . . . . . . . . . . . . . . . . . . .          (6,034)        (4,544)        (2,920)
Proceeds from sale of property and equipment . . . . . . . . . . . . . . .              13             91            306
Purchase of short-term investments . . . . . . . . . . . . . . . . . . . .          (3,000)             -              -
Sale of short-term investments . . . . . . . . . . . . . . . . . . . . . .           2,004              -              -
Payments received on notes receivable. . . . . . . . . . . . . . . . . . .             169            255             33
Issuance of notes receivable . . . . . . . . . . . . . . . . . . . . . . .               -            (90)          (117)
                                                                                 ---------      ---------      ---------
Net cash used in investing activities. . . . . . . . . . . . . . . . . . .          (6,848)        (3,950)       (20,383)

FINANCING ACTIVITIES
Net proceeds from issuance of common shares. . . . . . . . . . . . . . . .          42,849              -          7,595
Repurchase of common shares and stock options for cash . . . . . . . . . .        (152,564)             -         (3,200)
Proceeds from sale and leaseback financing . . . . . . . . . . . . . . . .               -              -          4,321
Proceeds from revolving lines of credit and long-term obligations. . . . .         115,030         14,932         31,455
Principal payments on revolving lines of credit and long-term obligations.          (1,841)       (23,575)       (32,129)
Debt issuance costs. . . . . . . . . . . . . . . . . . . . . . . . . . . .          (4,417)             -              -
Repayment of loans from stockholders . . . . . . . . . . . . . . . . . . .               -              -           (360)
                                                                                 ---------      ---------      ---------
Net cash provided by (used in) financing activities. . . . . . . . . . . .            (943)        (8,643)         7,682

Effect of exchange rate changes on cash and cash equivalents . . . . . . .            (175)           (46)            35
                                                                                 ---------      ---------      ---------
Increase (decrease) in cash and cash equivalents . . . . . . . . . . . . .            (431)         2,437           (118)

Cash and cash equivalents at beginning of year . . . . . . . . . . . . . .           6,126          3,689          3,807
                                                                                 ---------      ---------      ---------
Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . .          $5,695        $ 6,126         $3,689
                                                                                 ---------      ---------      ---------
                                                                                 ---------      ---------      ---------

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest . . . . . . . . . . . . . . . . . . . . . . . . . .          $1,138        $   753         $1,392
                                                                                 ---------      ---------      ---------
                                                                                 ---------      ---------      ---------

Cash paid for income taxes . . . . . . . . . . . . . . . . . . . . . . . .          $3,316        $ 4,133         $1,949
                                                                                 ---------      ---------      ---------
                                                                                 ---------      ---------      ---------
</TABLE>


                               See accompanying notes.


                                          30
<PAGE>


                                 WAVETEK CORPORATION
                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

     ORGANIZATION

     Wavetek Corporation ("the Company") is a leading global designer,
manufacturer and distributor of a broad range of electronic test instruments,
with a primary focus on application-specific instruments for testing voice,
video and data communications equipment and networks. The Company also designs,
manufactures and distributes precision instruments to calibrate and test
electronic equipment and provides repair, upgrade and calibration services for
its products on a worldwide basis. The accompanying consolidated financial
statements include the operations of the Company and its wholly-owned
subsidiaries. All significant intercompany accounts and transactions have been
eliminated in consolidation.

     The Company's fiscal year ends on the Saturday closest to September 30.
Fiscal 1997, 1996 and 1995 each consisted of 52 weeks.

     FOREIGN CURRENCY

     The accounts of foreign subsidiaries consolidated herein have been
translated from their respective functional currencies into U.S. dollars at
appropriate exchange rates. Cumulative translation adjustments are included as a
separate component of stockholders' equity. Exchange gains and losses from
foreign currency transactions are included in "Other, net" in the accompanying
consolidated statements of income.

     USE OF ESTIMATES

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

     CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS, AVAILABLE FOR SALE

     The carrying amounts reported in the consolidated balance sheet for cash,
cash equivalents and short-term investments approximate their fair values. It is
the Company's policy to invest excess funds in highly liquid, short-term
investments. Such investments are comprised primarily of U.S. Treasury
securities, guaranteed obligations of the U.S. government or its agencies and
mutual funds which invest in U.S Treasury securities, with maturity dates
through February 1998. For purposes of financial statement presentation, the
Company considers all highly liquid investments with maturities of three months
or less from the date of purchase to be cash equivalents. Included in cash and
cash equivalents at September 30, 1997 and 1996 are investments totaling $3.4
million and $3.5 million, respectively. The amortized cost of short-term
investments, available for sale, approximates fair market value. There were no
realized gains or losses related to such investments for fiscal 1997, 1996 or
1995. The Company evaluates the financial strength of the institutions in which
significant investments are made and believes that related credit risk is
limited to an acceptable level.

     INVENTORIES

     Inventories are valued at cost determined on the first-in, first-out basis,
not in excess of market.


                                          31
<PAGE>

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     PROPERTY AND EQUIPMENT

     Property and equipment are recorded at cost. Depreciation for financial
statement purposes is computed using the straight-line method based upon the
estimated useful lives of the various classes of assets which range from 3 to 35
years for buildings and improvements and from 3 to 10 years for fixtures and
equipment.

     DEBT ISSUANCE COSTS

     Costs associated with the issuance of long-term debt have been deferred and
are being amortized over the term of the related debt using the interest method.
Amortization expense for these costs is included in interest expense in the
accompanying consolidated statements of income.

     INTANGIBLE ASSETS

     Intangible assets consist of covenants not to compete and the excess of
purchase price over net tangible assets of businesses acquired (goodwill) and
are recorded at cost. Intangible assets are amortized over their estimated lives
ranging from 5 to 15 years.

     LONG-TERM OBLIGATIONS

     The carrying amounts of the Company's long-term obligations approximate
their fair values.

     REVENUE AND CREDIT RISK

     Sales are recognized at the time of shipment. The Company grants credit to
its customers based on an evaluation of the customers' financial condition and
generally collateral is not required. Credit losses have traditionally been
minimal and within management's expectations.

     NET INCOME PER SHARE

     Net income per share has been computed using the weighted average number of
common shares and dilutive common stock equivalents outstanding during the
periods presented. Common stock equivalents result from outstanding options to
purchase common stock.

     In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, EARNINGS PER SHARE ("SFAS 128"),
which is required to be initially adopted by the Company for its reporting
period ending December 31, 1997. At that time, the Company will be required to
change the method currently used to compute net income per share and to restate
all prior periods. Under the new requirements for calculating primary net income
per share, the dilutive effect of stock options will be excluded. The impact is
expected to result in an increase in primary net income per share for fiscal
1997, 1996 and 1995 of $.04, $.05 and $.01 per share, respectively.

     STOCK-BASED COMPENSATION

     Effective October 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION ("SFAS
123"). SFAS 123 allows companies to either account for stock-based compensation


                                          32
<PAGE>


1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

under the new provisions of SFAS 123 or under the provisions of Accounting
Principles Board Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES ("APB
25"), but requires pro forma disclosure in the footnotes to the financial
statements as if the measurement provisions of SFAS 123 had been adopted. The
Company has continued accounting for its stock-based compensation in accordance
with the provisions of APB 25.

     FINANCIAL INSTRUMENTS

     The Company periodically uses forward exchange contracts to hedge certain
transactions denominated in foreign currencies. Unrealized gains and losses on
forward contracts are deferred and offset against foreign exchange gains or
losses on the underlying hedged item. At September 30, 1997, the Company had no
material forward exchange contracts outstanding.

     RECENTLY ISSUED ACCOUNTING STANDARDS

     In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, REPORTING COMPREHENSIVE INCOME ("SFAS
130"), and Statement of Financial Accounting Standards No. 131, SEGMENT
INFORMATION ("SFAS 131"). Both of these standards are effective for fiscal years
beginning after December 15, 1997. SFAS No. 130 requires that all components of
comprehensive income, including net income, be reported in the financial
statements in the period in which they are recognized. Comprehensive income is
defined as the change in equity during a period from transactions and other
events and circumstances from non-owner sources. Net income and other
comprehensive income, including foreign currency translation adjustment, minimum
pension accrual, and unrealized gains and losses on investments, shall be
reported, net of their related tax effect, to arrive at comprehensive income.
The Company intends to adopt SFAS 130 in fiscal 1999 and operating results of
prior periods will be reclassified. The Company's only component of other
comprehensive income is the foreign currency translation adjustment which is
currently reported as part of stockholders' equity. Historically, the Company
has operated in one business segment; however, SFAS 131 redefines segments and
in the future, the Company will be required to disclose certain financial
information about operating segments, products, services and geographic areas in
which they operate. The Company has not determined how operating segments will
be defined for disclosure purposes or which segments will meet the quantitative
requirements for disclosure. The adoption of SFAS 131 will have no impact on the
Company's future results of operations or financial position.

2. FINANCIAL STATEMENT DETAILS

          Inventories consist of the following:

                                                  SEPTEMBER 30,
                                               ------------------
                                                 1997      1996
                                               --------  --------
                                             (DOLLARS IN THOUSANDS)
               Finished goods. . . . . . . .   $  6,451  $  7,852
               Work-in-progress. . . . . . .      3,612     5,639
               Materials . . . . . . . . . .      5,874     5,817
                                               --------  --------
                                               $ 15,937  $ 19,308
                                               --------  --------
                                               --------  --------


                                          33
<PAGE>




2. FINANCIAL STATEMENT DETAILS (CONTINUED)

     Property and equipment consists of the following:

                                                  SEPTEMBER 30,
                                               ------------------
                                                 1997      1996
                                               --------  --------
                                             (DOLLARS IN THOUSANDS)
           Building and improvements . . . .    $ 5,748   $ 5,324
           Fixtures and equipment. . . . . .     18,990    13,684
                                               --------  --------
                                                 24,738    19,008
           Less: accumulated depreciation. .     (9,628)   (6,814)
                                               --------  --------
                                                $15,110   $12,194
                                               --------  --------
                                               --------  --------


     Intangible assets consist of the following:


                                                  SEPTEMBER 30,
                                               ------------------
                                                 1997      1996
                                               --------  --------
                                             (DOLLARS IN THOUSANDS)
           Goodwill. . . . . . . . . . . . .     $4,171    $4,171
           Covenant not to compete . . . . .      1,390     1,390
                                               --------  --------
                                                  5,561     5,561
           Less: accumulated amortization. .     (2,280)   (1,694)
                                               --------  --------
                                                 $3,281    $3,867
                                               --------  --------
                                               --------  --------


     Other current liabilities consist of the following:


                                                  SEPTEMBER 30,
                                               ------------------
                                                 1997      1996
                                               --------  --------
                                             (DOLLARS IN THOUSANDS)
           Other . . . . . . . . . . . . . .     $6,451    $6,553
           Accrued interest. . . . . . . . .      2,694         -
           Customer deposits . . . . . . . .        702     2,194
                                               --------  --------
                                                 $9,847    $8,747
                                               --------  --------
                                               --------  --------


3. RECAPITALIZATION TRANSACTIONS

     On June 11, 1997, the Company completed the following transactions (the 
"Recapitalization Transactions"): (i) the Company sold an aggregate of 
2,428,470 shares of its Common Stock, representing 49.7% of the Common Stock 
outstanding following the Recapitalization Transactions, to DLJ Merchant 
Banking Partners II, L.P. and its affiliates and to Green Equity Investors 
II, L.P. and its affiliates for an aggregate purchase price of $43.5 million, 
less related costs of $651,000 (the "New Equity Investment"); (ii) the 
Company issued $85 million aggregate principal amount of 10 1/8% Senior 
Subordinated Notes maturing June 15, 2007 (the "Notes") (Note 6); (iii) the 
Company incurred indebtedness of $25 million under a five-year and six-month 
term loan facility and entered into a five-year and six-month revolving 
credit facility providing for borrowings of up to $20 million (the "New 
Credit Agreement") (Note 6); (iv) the Company incurred aggregate debt 
issuance costs of $4.4 million in connection with the issuance of the Notes 
and with entering the New Credit Agreement; (v) the Company used the net 
proceeds from the New Equity Investment, the issuance of the Notes and the 
New Credit Agreement to repurchase an

                                          34
<PAGE>



3. RECAPITALIZATION TRANSACTIONS (CONTINUED)

aggregate of 8,513,610 shares of common stock from existing stockholders for an
aggregate of $152.5 million and to make cash payments upon surrender of stock
options by employees in an aggregate amount of $7.1 million (Note 9). Such
existing stockholders retained 50.3% of the shares of common stock outstanding
following the Recapitalization Transactions.

4. STRATEGIC ALLIANCE AND PURCHASE AND SALE OF BUSINESSES

     In April 1996, the Company entered into a Strategic Alliance with Yokogawa
Electric Corporation ("Yokogawa"), a leading Japanese process control and test
and measurement company. Under terms of the Strategic Alliance, Yokogawa
acquired all of the outstanding shares of the Company's Japanese subsidiary for
10 million Japanese yen (approximately $93,000) and 12% of the Company's common
stock from certain of the Company's stockholders. There was no significant gain
or loss on the sale of the Japanese subsidiary. Additionally, Yokogawa will
distribute the Company's products in Japan and Yokogawa and the Company will
collaborate to develop new products for communications test markets worldwide.
In connection with the June 1997 Recapitalization Transactions (Note 3), the
Company repurchased a portion of the common stock owned by Yokogawa, reducing
Yokogawa's ownership of the outstanding common stock to 5.8%.

     In October 1995, the Company sold its Industrial Measurement Instruments
("IMI") product line to a third party for $502,000, resulting in a gain of
$56,000. The Company received $310,000 cash on the closing date. The remaining
proceeds were being paid under the terms of two promissory notes which were
fully repaid in June 1997. Under the terms of the sale agreement, the Company is
entitled to receive royalties from the buyer based on its sales of IMI products
for four years following the closing date. The Company received royalties
aggregating $47,000 and $92,000 in fiscal 1997 and 1996, respectively.

     In October 1994, the Company acquired certain worldwide assets and
liabilities of the Communications Test Division of Schlumberger for local
currency amounts approximating $16.1 million (the "Schlumberger Acquisition").
Of the total purchase price, $13.0 million was paid in cash on the closing date
and an additional $2.1 million was paid in cash in April 1995. The remaining
balance of 5,167,000 French francs (approximately $875,000 at September 30,
1997) will be paid under the terms of an unsecured promissory note due in
January 1998 (Note 6). The acquisition was accounted for as a purchase and the
assets and liabilities of the acquired business were recorded at their estimated
fair values, including goodwill of $4.2 million. Additionally, $4.2 million was
accrued as an estimate of the costs that would be incurred to restructure and
integrate the acquired business into the Company. Such restructuring and
integration was completed in fiscal 1997. In connection with this transaction,
Schlumberger purchased 576,000 shares of the Company's Common Stock for $3.0
million in cash. The Company repurchased these shares in September 1995 for $3.2
million in cash.

5. SALE AND LEASEBACK FINANCING

     To raise funds for the Schlumberger Acquisition, in October 1994, the
Company entered into a sale and leaseback financing whereby it sold its facility
in Indianapolis to a third party investor for $4.5 million, resulting in a
charge to income of $1.8 million, representing the excess of the net book value
of the property over the net proceeds received. The Company simultaneously
entered a Master Lease Agreement with the buyer, under which the Company leased
back the facility for a period of 20 years for an annual rental $473,000,
subject to annual adjustments based on the change in the consumer price index,
not to exceed 3.0% per annum. In December 1994, the Company subleased a portion
of this facility to a third party for five years for an annual base rental and
common area expense reimbursement of $387,000. Because of the significance of
the


                                          35
<PAGE>


5. SALE AND LEASEBACK FINANCING (CONTINUED)

sublease in relation to the Company's master lease of the facility, generally
accepted accounting principles require that the transaction be recorded as a
financing transaction, whereby the building remains on the Company's balance
sheet in an amount equal to the net proceeds from the sale and an offsetting
long-term financing obligation has been recorded. In February 1998 the sublease
will no longer be significant in relation to the Company's master lease of the
facility. Accordingly, at that time, both the building asset and the long-term
financing obligation will be removed from the Company's balance sheet and the
master lease will be accounted for as an operating lease, with monthly rental
payments recorded as operating expenses.

6. CREDIT AGREEMENTS AND LONG-TERM OBLIGATIONS

     The Company's subsidiaries in the United Kingdom, France, Germany and
Austria have agreements with banks providing for short-term revolving advances
and overdraft facilities in an aggregate total amount of approximately $6.7
million. In addition, the bank agreements with such subsidiaries also provide
for issuance of letters of credit and bank guarantees in an aggregate additional
total amount of approximately $3.2 million. At September 30, 1997, aggregate
amounts of $3.9 million had been borrowed under these facilities. Revolving
borrowings under these agreements bear interest at variable rates ranging from
4.7% to 8.5% as of September 30, 1997. These bank agreements also provide for
long-term borrowings and are generally secured by the assets of the local
subsidiary and the guarantee of the Company. Most of these agreements do not
have stated expiration dates, but are cancelable by the banks at any time. At
September 30, 1997, the Company was contingently liable for outstanding letters
of credit and bank guarantees aggregating $1.3 million. Borrowings under the
Company's revolving bank agreements have been classified as "Notes payable to
banks" in the accompanying consolidated balance sheets due to the short-term
nature of the revolving advances taken under these agreements.

     The Company's U.S. subsidiary had a Business Loan Agreement with a bank
providing for revolving line of credit borrowings of up to $4.0 million. This
agreement was terminated in June 1997.


                                          36
<PAGE>


6. CREDIT AGREEMENTS AND LONG-TERM OBLIGATIONS (CONTINUED)

     Long-term obligations are as follows:
<TABLE>
<CAPTION>


                                                                                                     SEPTEMBER 30,
                                                                                               -------------------------
                                                                                                  1997           1996
                                                                                               ----------     ----------
                                                                                                 (DOLLARS IN THOUSANDS)
<S>                                                                                            <C>            <C>
          Senior Subordinated Notes issued in connection with Recapitalization
            Transactions (Note 3); total principal balance due June 15, 2007; interest
            payable semiannually on June 15 and December 15 at 10 1/8%; guaranteed by
            the Company's U.S. subsidiaries. . . . . . . . . . . . . . . . . . . . . . . .     $   85,000     $        -

          Term Loan payable to banks obtained in connection with Recapitalization
            Transactions (Note 3); payable in quarterly installments ranging from $1
            million to $1.8 million commencing September 15, 1998 to December 15,
            2002; interest payable at optional rates (8.1875% at September 30, 1997);
            secured by the Company's U.S. assets and a pledge of 100% of the stock of its
            subsidiaries in the U.S. and 65% of the stock of the Company's foreign
            subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         25,000              -

          Unsecured promissory note issued in connection with Schlumberger Acquisition
            (Note 4); total principal balance due January 1998; interest payable quarterly
            at PIBOR plus 0.5% (3.94% at September 30, 1997) . . . . . . . . . . . . . . .            875          1,003

          Financing obligation recorded in connection with sale and leaseback of real
            property (Note 5); payable in monthly installments of $39,000 including
            interest at 9.30%, through October 2014; secured by Master Lease Agreement
            of manufacturing facility. . . . . . . . . . . . . . . . . . . . . . . . . . .          4,069          4,165
                                                                                               ----------      ---------
                                                                                                  114,944          5,168
          Less current maturities. . . . . . . . . . . . . . . . . . . . . . . . . . . . .         (1,972)           (95)
                                                                                               ----------      ---------
          Long-term obligations, less current maturities . . . . . . . . . . . . . . . . .     $  112,972      $   5,073
                                                                                               ----------      ---------
                                                                                               ----------      ---------
</TABLE>





     As of September 30, 1997, the future annual principal payments on long-term
obligations outstanding at September 30, 1997 were as follows: 1998 -
$1,972,000; 1999 - $4,359,000; 2000 - $5,369,000; 2001 - $6,381,000; 2002 -
$6,895,000 and thereafter - $89,968,000.

     In connection with the Recapitalization Transactions (Note 3), the Company
issued $85 million in aggregate principal amount of Senior Subordinated Notes
(the "Notes") pursuant to an Indenture (the "Indenture") between the Company and
the Bank of New York, as trustee. The Notes bear interest at 10 1/8%, payable
semi-annually on each June 15 and December 15 commencing December 15, 1997. The
total principal balance of the Notes is due June 15, 2007. On or after June 15,
2002, the Notes will be redeemable at the option of the Company, in whole or in
part, at the following redemption prices (expressed as percentages of principal
amount) plus accrued and unpaid interest and liquidated damages, if any:
105.063% if redeemed during the twelve-month period beginning on June 15, 2002;
103.375% if redeemed during the twelve-month period beginning on June 15, 2003;
101.688% if redeemed during the twelve-month period beginning on June 15, 2004;
and 100% thereafter. Notwithstanding the foregoing, during the first three years
following the issue date of the Notes, the Company may redeem up to 33 1/3% of
the aggregate principal amount of the Notes with the proceeds of one or more
Public Equity


                                          37
<PAGE>


6. CREDIT AGREEMENTS AND LONG-TERM OBLIGATIONS (CONTINUED)

Offerings (as defined in the Indenture) at a redemption price of 110.125% of the
principal amount thereof, in each case plus accrued and unpaid interest and
liquidated damages, if any. The Notes are guaranteed on a senior subordinated
basis by the Company's current and future subsidiaries in the United States. The
Indenture requires the Company to comply with various affirmative and negative
covenants. The Company was in compliance with all such covenants at September
30, 1997.

     Also in connection with the Recapitalization Transactions, the Company
entered into a New Credit Agreement (the "New Credit Agreement") with a group of
five lending banks (the "Lenders") including DLJ Capital Funding, Inc. as
Syndication Agent and Fleet National Bank as Administrative Agent. The New
Credit Agreement provided for a $25 million five-year and six-month term loan
(the "Term Loan") borrowed by the Company on June 11, 1997. The Term Loan is
repayable in quarterly installments on the 15th day of each September, December,
March and June commencing September 15, 1998. Total principal payments due in
each future fiscal year are as follows: 1998 - $1,000,000; 1999 - $4,250,000;
2000 - $5,250,000; 2001 - $6,250,000; 2002 - $6,750,000 and; 2003 - $1,500,000.
The Term Loan may be prepaid at any time and is subject to mandatory prepayments
if the Company generates Excess Cash Flow (as defined in the New Credit
Agreement) in fiscal years after fiscal 1997. The New Credit Agreement also
provides for a five-year and six-month revolving credit facility in the amount
of $20 million, of which up to $7.5 million may be borrowed in British pounds,
French francs or Deutsche marks. The Company had no borrowings outstanding under
the revolving credit facility at September 30, 1997. All borrowings under the
New Credit Agreement bear interest, at the option of the Company, at either (i)
the Base Rate (as defined in the New Credit Agreement) plus 1.5%, or (ii) at the
reserve adjusted Euro-Dollar Rate (as defined in the New Credit Agreement) plus
2.50%, subject to reduction upon the achievement of certain performance levels
and/or credit ratios. The Term Loan currently bears interest at 8.1875% through
December 1997, with interest payable at the end of each one-month period. The
New Credit Agreement is secured by all of the Company's assets in the United
States (approximately $46.7 million at September 30, 1997) and the pledge of
100% of the stock of its subsidiaries in the United States and 65% of the stock
of its foreign subsidiaries. The New Credit Agreement requires the Company to
comply with various affirmative, negative and financial covenants. The Company
was in compliance with all such covenants at September 30, 1997.

     The Company incurred aggregate debt issuance costs of $4.4 million in
connection with the issuance of the Notes and with entering into the New Credit
Agreement. Such costs have been deferred and are being amortized over the term
of the related debt using the interest method.

7. EMPLOYEE RETIREMENT SAVINGS PLAN

     The Company has a tax deferred retirement savings plan (the "Plan") under
Section 401(k) of the Internal Revenue Code whereby U.S. employees may defer a
portion of their compensation through payroll deductions as contributions to the
Plan. The Company may match a portion of the savings contribution as prescribed
in the Plan. The Company's contributions may be made each year out of
accumulated profits in cash, and are at the discretion of the Board of
Directors. Contributions by the Company to the Plan were $358,000, $215,000 and
$221,000 for the years ended September 30, 1997, 1996 and 1995, respectively.

8. LEASE COMMITMENTS

     The Company rents certain office and plant facilities under operating
leases which expire at various dates through 2006, except for a land lease in
the U.K. extending to 2103. The leases generally provide that the Company pay
the taxes,


                                          38
<PAGE>


8. LEASE COMMITMENTS (CONTINUED)

insurance and maintenance expenses related to the leased property. Certain
leases include renewal options and/or options to purchase the leased property.
The Company also rents equipment and other facilities on a month-to-month basis.
Total rent expense was $2.2 million for fiscal 1997 and $2.6 million for fiscal
1996 and 1995.

     In 1991, the Company entered into a sale/leaseback arrangement for its San
Diego manufacturing facility with an affiliate of a major stockholder. The lease
runs through June 2006 with the minimum annual rental of $570,000, subject to
annual CPI adjustments. The Company's gain on the transaction was deferred and
is being amortized over the original ten-year lease term.

     At September 30, 1997, the annual future minimum lease payments under
noncancelable operating leases and the future minimum annual lease receipts
under noncancelable subleases are as follows:

                                                       LEASE        LEASE
                                                    PAYMENTS       RECEIPTS
                                                    --------       --------
                                                     (DOLLARS IN THOUSANDS)
          1998 . . . . . . . . . . . . . . .          $2,027           $345
          1999 . . . . . . . . . . . . . . .           1,549            345
          2000 . . . . . . . . . . . . . . .           1,398             58
          2001 . . . . . . . . . . . . . . .           1,181              -
          2002 . . . . . . . . . . . . . . .              64              -
          Later years. . . . . . . . . . . .           3,755              -
                                                    --------       --------
          Total minimum lease payments . . .          $9,974           $748
                                                    --------       --------
                                                    --------       --------


9. STOCKHOLDERS' EQUITY (DEFICIT)

     Prior to June 11, 1997, the Company had two classes of common stock
outstanding, Common Stock and Class B Common Stock. The rights and preferences
of both classes of common stock were identical, except that holders of Common
Stock were entitled to one vote per share and holders of Class B Common Stock
were entitled to ten votes per share. The Class B Common Stock was convertible,
at the holder's option, into shares of Common Stock on a share for share basis.
Total common stock authorized and issued and outstanding in each period
presented in the accompanying consolidated financial statements included two
million shares of Class B Common Stock through June 11, 1997. In connection with
the Recapitalization Transactions (Note 3), all shares of Class B Common Stock
were repurchased by the Company and the Company's Certificate of Incorporation
was amended to eliminate the Class B Common Stock. The Company's Certificate of
Incorporation was also amended effective June 11, 1997 to effect a ten-for-one
stock split of its common stock, which was authorized by the Company's Board of
Directors on May 30, 1997. All share and per share amounts and stock option data
in the accompanying consolidated financial statements have been restated to
retroactively reflect the stock split.

     In connection with Yokogawa's purchase of shares of the Company's common
stock (Note 4), the Company and its stockholders entered into certain agreements
with Yokogawa which provided Yokogawa with certain rights of first refusal
through April 1999 if shares of the Company's common stock were offered for sale
in certain circumstances defined by the agreements. Yokogawa was also granted
the right to appoint one member to the Company's Board of Directors. In
connection with the Recapitalization Transactions (Note 3), all such
preferential rights of Yokogawa were terminated effective June 11, 1997.


                                          39
<PAGE>


9. STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)

     In accordance with the Company's 1992 Nonqualified Stock Option Plan (the
"Stock Option Plan"), options to purchase an aggregate of up to one million
shares of Common Stock may be issued at an exercise price equal to the fair
value of the shares on the date of grant. Options generally vest and become
exercisable over a period not to exceed five years.

     Prior to the Recapitalization Transactions (Note 3), options to purchase
805,000 common shares had been issued and were outstanding. In connection with
the Recapitalization Transactions, the Company accelerated the vesting of these
outstanding options such that 75% of each option holders' options became fully
vested and the Company offered to make cash payments to each option holder as
compensation for the surrender of all or a portion of such vested options in a
per share amount equal to the price paid to the selling stockholders in the
Recapitalization Transactions. Such surrendering option holders were also
required to pay a pro rata portion of the expenses incurred by the selling
stockholders. Holders of vested options to purchase 472,100 common shares
elected to surrender such options in exchange for payments aggregating
approximately $6.8 million. The amount of such payments, and related employer
expenses of $237,000, were recorded as compensation expense in the accompanying
consolidated statement of income for the year ended September 30, 1997.

     A summary of stock option transactions is as follows:

                                                                    WEIGHTED
                                                                     AVERAGE
                                                     SHARES      EXERCISE PRICE
                                                    --------     --------------
Outstanding at September 30, 1994. . . . . .         560,000        $  1.80
    Granted. . . . . . . . . . . . . . . . .         308,000           5.21
    Canceled . . . . . . . . . . . . . . . .         (42,000)          1.25
    Exercised. . . . . . . . . . . . . . . .         (40,000)          1.25
                                                    --------
Outstanding at September 30, 1995. . . . . .         786,000           3.19
    Granted. . . . . . . . . . . . . . . . .         175,000           6.96
    Canceled . . . . . . . . . . . . . . . .        (118,000)          2.12
    Exercised. . . . . . . . . . . . . . . .             -              -
                                                    --------
Outstanding at September 30, 1996. . . . . .         843,000           4.12
    Granted. . . . . . . . . . . . . . . . .         141,788          17.91
    Canceled . . . . . . . . . . . . . . . .        (525,600)          4.08
    Exercised. . . . . . . . . . . . . . . .             -              -
                                                    --------
Outstanding at September 30, 1997. . . . . .         459,188           8.43
                                                    --------
                                                    --------


     As of September 30, 1997 and 1996, options to purchase 144,149 and 116,000
shares, respectively, were exercisable and at September 30, 1997, 500,812 shares
are available for future grant under the Stock Option Plan.


                                          40
<PAGE>


9. STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)

     Exercise prices and weighted average remaining contractual lives for the
options outstanding under the Stock Option Plan as of September 30, 1997 are as
follows:
<TABLE>
<CAPTION>


                    OPTIONS OUTSTANDING                             OPTIONS EXERCISABLE
----------------------------------------------------------------  ------------------------------
                                    WEIGHTED
                                     AVERAGE
                     NUMBER OF      REMAINING       WEIGHTED       NUMBER OF       WEIGHTED
                      OPTIONS      CONTRACTUAL       AVERAGE        OPTIONS         AVERAGE
  EXERCISE PRICES   OUTSTANDING    LIFE (YEARS)   EXERCISE PRICE  EXERCISABLE    EXERCISE PRICE
------------------ -------------- -------------- ---------------- ------------- ----------------
<S>                <C>            <C>            <C>              <C>           <C>
   $  1.25              87,750            4.6        $  1.25         62,500           1.25
      2.57              63,000            4.6           2.57         16,500           2.57
      5.21             140,650            4.6           5.21         43,400           5.21
     12.50 - 17.91     167,788            4.6          17.07         21,749          13.74
                   --------------                                 -------------
                       459,188                                      144,149
                   --------------                                 -------------
                   --------------                                 -------------
</TABLE>



     The weighted average fair value per share of options granted in fiscal 1997
and 1996 is $4.30 and $1.90, respectively. SFAS 123 requires pro forma
information to be disclosed regarding the amount of net income determined as if
the Company had accounted for its employee stock options under the fair value
method prescribed by SFAS 123. For the purpose of determining such pro forma net
income, the fair value of these options was estimated as of the date of grant
using the minimum value method provided for in SFAS 123 with the following
assumptions for 1997 and 1996: risk-free interest rate of 6%, no annual
dividends and an expected option life of five years. The effect of applying the
minimum value method of SFAS 123 to options granted in 1997 and 1996 did not
result in pro forma net income amounts that are materially different from
amounts reported. Accordingly, no such pro forma information is presented
herein.

10. PROVISION FOR RESTRUCTURING OPERATIONS

     In fiscal year 1996, the Company initiated a plan to restructure certain
corporate management functions, its European manufacturing, service and sales
activities and its San Diego manufacturing activities. The restructuring costs
primarily include expenses for employee severance and the transition of certain
manufacturing operations. A provision for the restructuring of $1.8 million is
included in the accompanying consolidated statement of income for fiscal 1996.
The restructuring plan was substantially completed during fiscal 1997.


                                          41
<PAGE>


11. INCOME TAXES

     The provision for income taxes is comprised as follows:

                                                  YEARS ENDED SEPTEMBER 30,
                                                 --------------------------
                                                   1997      1996      1995
                                                 ------    ------    ------
                                                   (DOLLARS IN THOUSANDS)
          Federal:
            Current. . . . . . . . . . . . .     $  755    $2,677      $910
            Deferred . . . . . . . . . . . .      1,304    (1,945)     (910)
                                                 ------    ------    ------
                                                  2,059       732         -
                                                 ------    ------    ------
          State:
            Current. . . . . . . . . . . . .        235     1,015       196
            Deferred . . . . . . . . . . . .        215      (498)     (196)
                                                 ------    ------    ------
                                                    450       517         -
                                                 ------    ------    ------
          Foreign:
            Current. . . . . . . . . . . . .        652     1,117       613
            Deferred . . . . . . . . . . . .       (283)   (1,401)        3
                                                 ------    ------    ------
                                                    369      (284)      616
                                                 ------    ------    ------
                                                 $2,878    $  965      $616
                                                 ------    ------    ------
                                                 ------    ------    ------


    The reconciliation of income taxes computed at the U.S. federal statutory
tax rate to income tax expense is as follows:
<TABLE>
<CAPTION>


                                                                           YEARS ENDED SEPTEMBER 30,
                                                                          --------------------------
                                                                           1997      1996      1995
                                                                          ------    ------    ------
<S>                                                                       <C>      <C>        <C>
          Federal income tax at statutory rate . . . . . . . . . . . .      34.0%     34.0%     34.0%
          State income taxes, net of federal tax benefit . . . . . . .       3.3       4.8       3.5
          Foreign tax rate below federal statutory rate. . . . . . . .      (1.2)     (1.4)        -
          Benefit from foreign sales corporation . . . . . . . . . . .      (3.6)     (1.0)     (4.1)
          Amortization of goodwill . . . . . . . . . . . . . . . . . .       1.2       0.8       2.5
          Other, net . . . . . . . . . . . . . . . . . . . . . . . . .      (1.5)      0.3       0.5
          Utilization of previously unbenefited loss carryforwards . .         -         -      (3.0)
                                                                          ------    ------    ------
                                                                            32.2      37.5      33.4
          Decrease in valuation allowance. . . . . . . . . . . . . . .         -     (30.8)    (16.7)
                                                                          ------    ------    ------
          Effective income tax rate. . . . . . . . . . . . . . . . . .      32.2%      6.7%     16.7%
                                                                          ------    ------    ------
                                                                          ------    ------    ------
</TABLE>



     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 liabilities as of September 30, 1997 and
1996 are set forth in the following table. A valuation allowance of $6.2 million
was recognized at September 30, 1995 as an offset to certain of the deferred tax
assets, as realization of such assets was uncertain. The valuation allowance was
fully removed as of September 30, 1996, since it is more likely than not that
the deferred tax assets will be realized.


                                          42
<PAGE>


11. INCOME TAXES (CONTINUED)

     The significant components of deferred tax assets and liabilities at
September 30, result from:
<TABLE>
<CAPTION>


                                                                1997          1996
                                                              ----------    ---------
                                                              (DOLLARS IN THOUSANDS)
<S>                                                           <C>              <C>
          Deferred tax assets:
            Inventories. . . . . . . . . . . . . . . . . . .    $  777         $1,634
            Accrued and unpaid expenses. . . . . . . . . . .       983          1,521
            Deferred income. . . . . . . . . . . . . . . . .       189            217
            State taxes. . . . . . . . . . . . . . . . . . .       130            345
            Foreign net operating loss carryforwards . . . .     1,683          1,400
                                                              --------       --------
          Total deferred tax assets. . . . . . . . . . . . .     3,762          5,117
          Deferred tax liability - depreciation differences.       (50)          (171)
                                                              --------       --------
          Net deferred tax assets. . . . . . . . . . . . . .    $3,712         $4,946
                                                              --------       --------
                                                              --------       --------
</TABLE>



     As of September 30, 1997, the Company's French and German subsidiaries had
net operating loss carryforwards of approximately $1.9 million each. The French
carryforward will expire in 2000 if not previously utilized and the German
carryforward can be used indefinitely.


                                          43
<PAGE>


12. GEOGRAPHIC INFORMATION

     The Company operates in a single industry segment: the design, manufacture
and distribution of electronic test equipment and measurement tools. In the
table below, sales, income before provision for income taxes and total assets
are reported based on the location of the Company's facilities. Intercompany
transfers are made at arm's length between the various geographic areas.
<TABLE>
<CAPTION>


                                                                           YEARS ENDED SEPTEMBER 30,
                                                                  ---------------------------------------
                                                                     1997           1996           1995
                                                                  ---------      ----------     ---------
                                                                           (DOLLARS IN THOUSANDS)
<S>                                                               <C>            <C>            <C>
Sales:
United States:
  Sales to unaffiliated domestic customers . . . . . . . . .      $  59,921      $  62,069      $  54,175
  Export sales . . . . . . . . . . . . . . . . . . . . . . .         16,810         16,876         11,584
  Interarea transfers. . . . . . . . . . . . . . . . . . . .          8,923          6,809          3,942
                                                                  ---------      ---------      ---------
                                                                     85,654         85,754         69,701
Europe:
  Sales to unaffiliated customers. . . . . . . . . . . . . .         77,107         70,141         67,580
  Interarea transfers. . . . . . . . . . . . . . . . . . . .         25,548         24,519         19,929
                                                                  ---------      ---------      ---------
                                                                    102,655         94,660         87,509
Asia:
  Sales to unaffiliated customers. . . . . . . . . . . . . .          1,441          1,907            280
  Interarea transfers. . . . . . . . . . . . . . . . . . . .             90             24             54
                                                                  ---------      ---------      ---------
                                                                      1,531          1,931            334
Eliminations . . . . . . . . . . . . . . . . . . . . . . . .        (34,561)       (31,352)       (23,925)
                                                                  ---------      ---------      ---------
Consolidated sales . . . . . . . . . . . . . . . . . . . . .      $ 155,279      $ 150,993      $ 133,619
                                                                  ---------      ---------      ---------
                                                                  ---------      ---------      ---------

Income before provision for income taxes:
  United States. . . . . . . . . . . . . . . . . . . . . . .      $  14,688      $  17,711      $   6,021
  Europe . . . . . . . . . . . . . . . . . . . . . . . . . .          1,778          3,033         (2,162)
  Asia . . . . . . . . . . . . . . . . . . . . . . . . . . .           (375)           724           (224)
  Corporate expenses and eliminations. . . . . . . . . . . .         (7,150)        (7,028)            50
                                                                  ---------      ---------      ---------
Consolidated income before provision for income taxes. . . .      $   8,941      $  14,440      $   3,685
                                                                  ---------      ---------      ---------
                                                                  ---------      ---------      ---------

Total Assets:
  United States. . . . . . . . . . . . . . . . . . . . . . .      $  86,968      $  82,415      $  51,609
  Europe . . . . . . . . . . . . . . . . . . . . . . . . . .         33,741         34,958         34,595
  Asia . . . . . . . . . . . . . . . . . . . . . . . . . . .          1,310          1,258            935
  Eliminations . . . . . . . . . . . . . . . . . . . . . . .        (44,666)       (49,779)       (24,561)
                                                                  ---------      ---------      ---------
Consolidated total assets. . . . . . . . . . . . . . . . . .      $  77,353      $  68,852      $  62,578
                                                                  ---------      ---------      ---------
                                                                  ---------      ---------      ---------
</TABLE>



                                          44
<PAGE>


13. LITIGATION AND OTHER CLAIMS

     The Company is subject to legal proceedings and claims which arise in the
ordinary course of its business. It is management's opinion that the likely
outcome of any such proceedings and claims would not have a material adverse
effect on the Company's future results of operations or financial position.

     The Company was notified in fiscal 1997 by a competitor that it believed
that certain products of the Company infringed on a patent issued to the
competitor. In November 1997, the Company entered into a License Agreement with
the competitor under which the Company obtained a retroactive and prospective
license to the patent for a licensing fee of $3 million, payable $1 million on
January 1, 1998, and $667,000, $667,000 and $666,000 on or before the first
business day of calendar years 1999, 2000 and 2001, respectively. The Company
will record the licensing fee as expense in proportion to the revenue generated
from the products effected by the patent. Accordingly, the Company has accrued,
in "other current liabilities," $850,000 through September 30, 1997, of which a
significant amount was provided in prior years, representing the estimated
portion of the license fee that relates to revenue recognized through September
30, 1997. The remaining $2,150,000 will be recorded to expense over the future
estimated life of the product, in proportion to the revenue received.

14. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL DATA

     The Company's payment obligations under the Notes issued in the
Recapitalization Transactions are guaranteed by all of the Company's current and
future domestic subsidiaries (collectively, the "Subsidiary Guarantors").
Wavetek U.S. Inc. is the only current Subsidiary Gurantor. Such guarantee is
full and unconditional and future guarantees will be joint and several. Separate
financial statements of the Subsidiary Guarantor are not presented because the
Company's management has deemed that they would not be material to investors.
The following supplemental condensed consolidating financial data sets forth, on
an unconsolidated basis, balance sheets, statements of income and statements of
cash flows data for (i) the Company ("Wavetek Corporation"), (ii) the current
Subsidiary Guarantor and (iii) the Company's current foreign subsidiaries (the
"Foreign Subsidiaries"). The supplemental financial data reflects the
investments of Wavetek Corporation in the Subsidiary Guarantor and the Foreign
Subsidiaries using the equity method of accounting.


                                          45

<PAGE>

14. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL DATA (CONTINUED)

                             CONSOLIDATING BALANCE SHEETS
                               AS OF SEPTEMBER 30, 1997
               (DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
 

                                                       WAVETEK      SUBSIDIARY      FOREIGN   
                                                     CORPORATION    GUARANTOR     SUBSIDIARIES   ELIMINATIONS   CONSOLIDATED
                                                     -----------    ----------    ------------   ------------   ------------
<S>                                                  <C>            <C>           <C>            <C>            <C>         
                                     ASSETS
Current assets:
  Cash and cash equivalents. . . . . . . . . . .       $   -          $ 4,575        $ 1,120       $    -          $ 5,695
  Short-term investments, available for sale . .           -              996            -              -              996
  Accounts receivable (less allowance for  
    doubtful accounts of $851) . . . . . . . . .          (103)        20,202         16,230        (10,469)        25,860
  Inventories. . . . . . . . . . . . . . . . . .           -            5,758         11,084           (905)        15,937
  Refundable income taxes. . . . . . . . . . . .         4,134         (3,521)             3            -              616
  Deferred income taxes. . . . . . . . . . . . .         2,301          1,310            -              -            3,611
  Other current assets . . . . . . . . . . . . .            63            246          1,421            -            1,730
                                                     -----------    ----------    ------------   ------------   ------------
Total current assets . . . . . . . . . . . . . .         6,395         29,566         29,858        (11,374)        54,445
Property and equipment, net. . . . . . . . . . .         5,690          4,428          5,015            (23)        15,110
Debt issuance costs, net . . . . . . . . . . . .         4,233            -              -              -            4,233
Intangible assets, net . . . . . . . . . . . . .         3,224            -               57            -            3,281
Deferred income taxes. . . . . . . . . . . . . .            (4)           105            -              -              101
Other assets . . . . . . . . . . . . . . . . . .           226             46             96           (185)           183
Investment in subsidiaries . . . . . . . . . . .        33,059            -               25        (33,084)           -  
                                                     -----------    ----------    ------------   ------------   ------------
Total assets . . . . . . . . . . . . . . . . . .       $52,823        $34,145        $35,051       $(44,666)       $77,353
                                                     -----------    ----------    ------------   ------------   ------------
                                                     -----------    ----------    ------------   ------------   ------------

                  LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
  Notes payable to banks . . . . . . . . . . . .       $   -          $   -          $ 3,859       $    -          $ 3,859
  Trade accounts payable . . . . . . . . . . . .         5,215          5,795         12,817        (10,471)        13,356
  Accrued compensation . . . . . . . . . . . . .           418          1,486          4,130            -            6,034
  Income taxes payable . . . . . . . . . . . . .           -                -            522            -              522
  Other current liabilities. . . . . . . . . . .         4,727          3,042          2,077              1          9,847
  Current maturities of long-term obligations. .         1,097            -              875            -            1,972
                                                     -----------    ----------    ------------   ------------   ------------
Total current liabilities. . . . . . . . . . . .        11,457         10,323         24,280        (10,470)        35,590
Long-term obligations, less current maturities .       112,971            -              186           (185)       112,972
Deferred income and other liabilities. . . . . .            35            369             27            -              431
Commitments and contingencies. . . . . . . . . .
Stockholders' equity (deficit):
  Common stock, par value $.01; authorized,
    15,000 shares; issued and outstanding, 
    4,885 shares . . . . . . . . . . . . . . . .            49            -              -              -               49
  Additional paid-in capital . . . . . . . . . .        43,741          2,137         15,064        (17,201)        43,741
  Retained earnings (accumulated deficit). . . .      (115,048)        21,316         (4,124)       (17,192)      (115,048)
  Foreign currency translation adjustments . . .          (382)           -             (382)           382           (382)
                                                     -----------    ----------    ------------   ------------   ------------
Total stockholders' equity (deficit) . . . . . .       (71,640)        23,453         10,558        (34,011)       (71,640)
                                                     -----------    ----------    ------------   ------------   ------------
Total liabilities and stockholders' equity (deficit)   $52,823        $34,145        $35,051       $(44,666)       $77,353
                                                     -----------    ----------    ------------   ------------   ------------
                                                     -----------    ----------    ------------   ------------   ------------
</TABLE>


                                      46
<PAGE>


14. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL DATA (CONTINUED)

                         CONSOLIDATING BALANCE SHEETS
                           AS OF SEPTEMBER 30, 1996
            (DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>

                                                       WAVETEK      SUBSIDIARY      FOREIGN   
                                                     CORPORATION    GUARANTOR     SUBSIDIARIES   ELIMINATIONS   CONSOLIDATED
                                                     -----------    ----------    ------------   ------------   ------------
<S>                                                  <C>            <C>           <C>            <C>            <C>         
                                     ASSETS
Current assets:
  Cash and cash equivalents. . . . . . . . . . .       $   -          $ 4,845        $ 1,281       $    -          $ 6,126
  Accounts receivable (less allowance for  
    doubtful accounts of $2,023) . . . . . . . .         3,042         18,657         15,123        (15,956)        20,866
  Inventories. . . . . . . . . . . . . . . . . .          (479)         6,277         14,496           (986)        19,308
  Deferred income taxes. . . . . . . . . . . . .         2,660          1,845            -              -            4,505
  Other current assets . . . . . . . . . . . . .             6            148          1,034            -            1,188
                                                     -----------    ----------    ------------   ------------   ------------
Total current assets . . . . . . . . . . . . . .         5,229         31,772         31,934        (16,942)        51,993
Property and equipment, net. . . . . . . . . . .         4,495          3,731          4,075           (107)        12,194
Intangible assets, net . . . . . . . . . . . . .         3,490            288             99            (10)         3,867
Deferred income taxes. . . . . . . . . . . . . .           430            182            -             (171)           441
Other assets . . . . . . . . . . . . . . . . . .           281            196             83           (203)           357
Investment in subsidiaries . . . . . . . . . . .        32,492            -               25        (32,517)           -  
                                                     -----------    ----------    ------------   ------------   ------------
Total assets . . . . . . . . . . . . . . . . . .       $46,417        $36,169        $36,216       $(49,950)       $68,852
                                                     -----------    ----------    ------------   ------------   ------------
                                                     -----------    ----------    ------------   ------------   ------------

                       LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Notes payable to banks . . . . . . . . . . . .       $   -          $   -          $   786       $    -          $   786
  Trade accounts payable . . . . . . . . . . . .         6,168          7,027         14,701        (15,889)        12,007
  Accrued compensation . . . . . . . . . . . . .         1,454          1,827          4,187            -            7,468
  Income taxes payable . . . . . . . . . . . . .           -              460            967            -            1,427
  Other current liabilities. . . . . . . . . . .         1,883          1,884          5,047            (67)         8,747
  Current maturities of long-term obligations. .            93            -                2            -               95
                                                     -----------    ----------    ------------   ------------   ------------
Total current liabilities. . . . . . . . . . . .         9,598         11,198         25,690        (15,956)        30,530
Long-term obligations, less current maturities .         4,069            -            1,207           (203)         5,073
Deferred income and other liabilities. . . . . .            62            625             45           (171)           561
Commitments and contingencies. . . . . . . . . .
Stockholders' equity:
  Common stock, par value $.01; authorized, 
    15,000 shares; issued and outstanding,
    10,974 shares. . . . . . . . . . . . . . . .           110            -              -              -              110
  Additional paid-in capital . . . . . . . . . .         5,538          2,137         12,468        (14,605)         5,538
  Retained earnings. . . . . . . . . . . . . . .        26,746         22,209         (3,488)       (18,721)        26,746
  Foreign currency translation adjustments . . .           294            -              294           (294)           294
                                                     -----------    ----------    ------------   ------------   ------------
Total stockholders' equity . . . . . . . . . . .        32,688         24,346          9,274        (33,620)        32,688
                                                     -----------    ----------    ------------   ------------   ------------
Total liabilities and stockholders' equity . . .       $46,417        $36,169        $36,216       $(49,950)       $68,852
                                                     -----------    ----------    ------------   ------------   ------------
                                                     -----------    ----------    ------------   ------------   ------------
</TABLE>


                                      47
<PAGE>

14. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL DATA (CONTINUED)

                      CONSOLIDATING STATEMENTS OF INCOME
                     FOR THE YEAR ENDED SEPTEMBER 30, 1997
                            (DOLLARS IN THOUSANDS)
                                                                      

<TABLE>
<CAPTION>

                                                       WAVETEK      SUBSIDIARY      FOREIGN   
                                                     CORPORATION    GUARANTOR     SUBSIDIARIES   ELIMINATIONS   CONSOLIDATED
                                                     -----------    ----------    ------------   ------------   ------------
<S>                                                  <C>            <C>           <C>            <C>            <C>         
Net sales. . . . . . . . . . . . . . . . . . . .       $   -          $85,654       $104,186       $(34,561)      $155,279
Cost of goods sold . . . . . . . . . . . . . . .          (551)        37,992         68,599        (34,724)        71,316
                                                     -----------    ----------    ------------   ------------   ------------
Gross margin . . . . . . . . . . . . . . . . . .           551         47,662         35,587            163         83,963
Operating expenses:
  Marketing and selling. . . . . . . . . . . . .         1,123         17,912         18,352            -           37,387
  Research and development . . . . . . . . . . .           (47)         9,533          5,862            -           15,348
  General and administrative . . . . . . . . . .         2,608          3,757          4,387            (10)        10,742
  Stock option compensation related to 
    recapitalization . . . . . . . . . . . . . .         1,926          2,318          2,817            -            7,061
                                                     -----------    ----------    ------------   ------------   ------------
                                                         5,610         33,520         31,418            (10)        70,538
                                                     -----------    ----------    ------------   ------------   ------------
Operating income (loss). . . . . . . . . . . . .        (5,059)        14,142          4,169            173         13,425
Non-operating income (expense):
  Interest income. . . . . . . . . . . . . . . .            76            282             32            (75)           315
  Interest expense . . . . . . . . . . . . . . .        (3,842)           -             (241)            75         (4,008)
  Equity in net income of subsidiaries . . . . .         9,948            -              -           (9,948)           -  
  Other, net . . . . . . . . . . . . . . . . . .         1,502            264         (2,557)           -             (791)
                                                     -----------    ----------    ------------   ------------   ------------
                                                         7,684            546         (2,766)        (9,948)        (4,484)
                                                     -----------    ----------    ------------   ------------   ------------
Income before provision for income taxes . . . .         2,625         14,688          1,403         (9,775)         8,941
Provision for income taxes . . . . . . . . . . .        (3,438)         5,581            735            -            2,878
                                                     -----------    ----------    ------------   ------------   ------------
Net income . . . . . . . . . . . . . . . . . . .       $ 6,063        $ 9,107       $    668        $(9,775)      $  6,063
                                                     -----------    ----------    ------------   ------------   ------------
                                                     -----------    ----------    ------------   ------------   ------------
</TABLE>


                                      48
<PAGE>

14. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL DATA (CONTINUED)

                      CONSOLIDATING STATEMENTS OF INCOME
                 FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996
                            (DOLLARS IN THOUSANDS)
                                                                      

<TABLE>
<CAPTION>

                                                       WAVETEK      SUBSIDIARY      FOREIGN   
                                                     CORPORATION    GUARANTOR     SUBSIDIARIES   ELIMINATIONS   CONSOLIDATED
                                                     -----------    ----------    ------------   ------------   ------------
<S>                                                  <C>            <C>           <C>            <C>            <C>         
Net sales. . . . . . . . . . . . . . . . . . . .       $   -          $85,754        $96,592       $(31,353)      $150,993
Cost of goods sold . . . . . . . . . . . . . . .           616         42,141         60,774        (31,167)        72,364
                                                     -----------    ----------    ------------   ------------   ------------
Gross margin . . . . . . . . . . . . . . . . . .          (616)        43,613         35,818           (186)        78,629

Operating expenses:
  Marketing and selling. . . . . . . . . . . . .           959         16,215         19,023            -           36,197
  Research and development . . . . . . . . . . .           (52)         5,451          7,518            -           12,917
  General and administrative . . . . . . . . . .         3,374          4,323          3,927            (12)        11,612
  Provision for restructuring operations . . . .         1,832            -              -              -            1,832
                                                     -----------    ----------    ------------   ------------   ------------
                                                         6,113         25,989         30,468            (12)        62,558
                                                     -----------    ----------    ------------   ------------   ------------
Operating income (loss). . . . . . . . . . . . .        (6,729)        17,624          5,350           (174)        16,071
Non-operating income (expense):
  Interest income. . . . . . . . . . . . . . . .           142             76             83           (134)           167
  Interest expense . . . . . . . . . . . . . . .          (388)           (77)          (431)           134           (762)
  Equity in net income of subsidiaries . . . . .        17,952            -              -          (17,952)           -  
  Other, net . . . . . . . . . . . . . . . . . .           483             88         (1,245)          (362)        (1,036)
                                                     -----------    ----------    ------------   ------------   ------------
                                                        18,189             87         (1,593)       (18,314)        (1,631)
                                                     -----------    ----------    ------------   ------------   ------------
Income before provision for income taxes . . . .        11,460         17,711          3,757        (18,488)        14,440
Provision for income taxes . . . . . . . . . . .        (2,015)         1,863          1,117            -              965
                                                     -----------    ----------    ------------   ------------   ------------
Net income . . . . . . . . . . . . . . . . . . .       $13,475        $15,848        $ 2,640       $(18,488)      $ 13,475
                                                     -----------    ----------    ------------   ------------   ------------
                                                     -----------    ----------    ------------   ------------   ------------
</TABLE>


                                       49
<PAGE>

14. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL DATA (CONTINUED)

                       CONSOLIDATING STATEMENTS OF INCOME
                  FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1995
                             (DOLLARS IN THOUSANDS)
                                                                      
<TABLE>
<CAPTION>

                                                       WAVETEK      SUBSIDIARY      FOREIGN   
                                                     CORPORATION    GUARANTOR     SUBSIDIARIES   ELIMINATIONS   CONSOLIDATED
                                                     -----------    ----------    ------------   ------------   ------------
<S>                                                  <C>            <C>           <C>            <C>            <C>         
Net sales. . . . . . . . . . . . . . . . . . . .       $   -          $69,701        $87,843       $(23,925)      $133,619
Cost of goods sold . . . . . . . . . . . . . . .          (301)        40,090         56,741        (23,881)        72,649
                                                     -----------    ----------    ------------   ------------   ------------
Gross margin . . . . . . . . . . . . . . . . . .           301         29,611         31,102            (44)        60,970

Operating expenses:
  Marketing and selling. . . . . . . . . . . . .           (56)        14,092         18,550            -           32,586
  Research and development . . . . . . . . . . .           (43)         4,193          7,946            -           12,096
  General and administrative . . . . . . . . . .         2,066          3,192          4,143            (10)         9,391
                                                     -----------    ----------    ------------   ------------   ------------
                                                         1,967         21,477         30,639            (10)        54,073
                                                     -----------    ----------    ------------   ------------   ------------
Operating income (loss). . . . . . . . . . . . .        (1,666)         8,134            463            (34)         6,897
Non-operating income (expense):
  Interest income. . . . . . . . . . . . . . . .           147             11            191           (259)            90
  Interest expense . . . . . . . . . . . . . . .          (495)          (232)          (722)           259         (1,190)
  Loss on sale and leaseback financing . . . . .           -           (1,824)           -              -           (1,824)
  Equity in net income of subsidiaries . . . . .         1,137            -              -           (1,137)           -  
  Other, net . . . . . . . . . . . . . . . . . .         2,159            (68)        (2,318)           (61)          (288)
                                                     -----------    ----------    ------------   ------------   ------------
                                                         2,948         (2,113)        (2,849)        (1,198)        (3,212)
                                                     -----------    ----------    ------------   ------------   ------------
Income (loss) before provision for income
   taxes . . . . . . . . . . . . . . . . . . . .         1,282          6,021         (2,386)        (1,232)         3,685
Provision for income taxes . . . . . . . . . . .        (1,837)         1,597            856            -              616
                                                     -----------    ----------    ------------   ------------   ------------
Net income (loss). . . . . . . . . . . . . . . .       $ 3,119        $ 4,424        $(3,242)      $ (1,232)      $  3,069
                                                     -----------    ----------    ------------   ------------   ------------
                                                     -----------    ----------    ------------   ------------   ------------
</TABLE>


                                       50
<PAGE>

14. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL DATA (CONTINUED)

                 CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOW
                     FOR THE YEAR ENDED SEPTEMBER 30, 1997
                            (DOLLARS IN THOUSANDS)
                                                                      
<TABLE>
<CAPTION>

                                                       WAVETEK      SUBSIDIARY      FOREIGN   
                                                     CORPORATION    GUARANTOR     SUBSIDIARIES   ELIMINATIONS   CONSOLIDATED
                                                     -----------    ----------    ------------   ------------   ------------
<S>                                                  <C>            <C>           <C>            <C>            <C>         
Net cash provided by (used in) operating 
  activities . . . . . . . . . . . . . . . . . .       $(6,832)       $12,469        $ 1,898        $   -          $ 7,535
INVESTING ACTIVITIES
Purchase of short-term investments . . . . . . .           -           (3,000)           -              -           (3,000)
Proceeds from sale of short-term investments . .           -            2,004            -              -            2,004
Purchase of property and equipment . . . . . . .        (1,532)        (1,896)        (2,606)           -           (6,034)
Other investing activities . . . . . . . . . . .            27            153              2            -              182
                                                     -----------    ----------    ------------   ------------   ------------
Net cash used in investing activities. . . . . .        (1,505)        (2,739)        (2,604)           -           (6,848)
FINANCING ACTIVITIES
Issuance of common shares for cash . . . . . . .        42,849            -              -              -           42,849
Repurchase of common shares and stock options
  for cash . . . . . . . . . . . . . . . . . . .      (152,564)           -              -              -         (152,564)
Proceeds from revolving lines of credit and  
  long-term obligations. . . . . . . . . . . . .       110,000            -            5,030            -          115,030
Principal payments on revolving lines of credit 
  and long-term obligations. . . . . . . . . . .           (94)           -           (1,747)           -           (1,841)
Debt issuance costs. . . . . . . . . . . . . . .        (4,417)           -              -                          (4,417)
Dividends from subsidiaries to Wavetek 
  Corporation. . . . . . . . . . . . . . . . . .        11,304        (10,000)        (1,304)           -              -  
Capital contributions from Wavetek  
  Corporation to subsidiaries. . . . . . . . . .        (2,578)           -            2,578            -              -  
Repayment of loans from Wavetek Corporation
  to subsidiaries. . . . . . . . . . . . . . . .         3,837            -           (3,837)           -              -  
                                                     -----------    ----------    ------------   ------------   ------------
Net cash provided by (used in) financing 
  activities . . . . . . . . . . . . . . . . . .         8,337        (10,000)           720            -             (943)
Effect of exchange rate changes on cash and 
  cash equivalents . . . . . . . . . . . . . . .           -              -             (175)           -             (175)
                                                     -----------    ----------    ------------   ------------   ------------
Decrease in cash and cash equivalents. . . . . .           -             (270)          (161)           -             (431)
Cash and cash equivalents at beginning of year .           -            4,845          1,281            -            6,126
                                                     -----------    ----------    ------------   ------------   ------------
Cash and cash equivalents at end of year . . . .       $   -          $ 4,575        $ 1,120        $   -          $ 5,695
                                                     -----------    ----------    ------------   ------------   ------------
                                                     -----------    ----------    ------------   ------------   ------------
</TABLE>


                                      51
<PAGE>

14. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL DATA (CONTINUED)

                 CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOW
                     FOR THE YEAR ENDED SEPTEMBER 30, 1996
                            (DOLLARS IN THOUSANDS)
                                                                      
<TABLE>
<CAPTION>

                                                       WAVETEK      SUBSIDIARY      FOREIGN   
                                                     CORPORATION    GUARANTOR     SUBSIDIARIES   ELIMINATIONS   CONSOLIDATED
                                                     -----------    ----------    ------------   ------------   ------------
<S>                                                  <C>            <C>           <C>            <C>            <C>         
Net cash provided by operating activities. . . .       $ 1,285        $ 9,252        $ 4,539        $   -          $15,076
INVESTING ACTIVITIES
Proceeds from sale of business . . . . . . . . .            93            310            (65)           -              338
Purchase of property and equipment . . . . . . .          (236)        (2,631)        (1,677)           -           (4,544)
Other investing activities . . . . . . . . . . .           107            191            (42)           -              256
                                                     -----------    ----------    ------------   ------------   ------------
Net cash used in investing activities. . . . . .           (36)        (2,130)        (1,784)           -           (3,950)
FINANCING ACTIVITIES
Proceeds from revolving lines of credit and  
  long-term obligations. . . . . . . . . . . . .           -           11,713          3,219            -           14,932
Principal payments on revolving lines of credit 
  and long-term obligations. . . . . . . . . . .           (85)       (16,246)        (7,244)           -          (23,575)
Dividends from subsidiaries to Wavetek 
  Corporation. . . . . . . . . . . . . . . . . .           553            -             (553)           -              -  
Loans from Wavetek Corporation to  
  subsidiaries . . . . . . . . . . . . . . . . .        (3,819)           -            3,819            -              -  
Repayment of loans from Wavetek Corporation
  to subsidiaries. . . . . . . . . . . . . . . .         2,102            -           (2,102)           -              -  
                                                     -----------    ----------    ------------   ------------   ------------
Net cash used in financing activities. . . . . .        (1,249)        (4,533)        (2,861)           -           (8,643)
Effect of exchange rate changes on cash and cash 
  equivalents. . . . . . . . . . . . . . . . . .           -              -              (46)           -              (46)
                                                     -----------    ----------    ------------   ------------   ------------
Increase (decrease) in cash and cash equivalents           -            2,589           (152)           -            2,437
Cash and cash equivalents at beginning of year .           -            2,256          1,433            -            3,689
                                                     -----------    ----------    ------------   ------------   ------------
Cash and cash equivalents at end of year . . . .       $   -          $ 4,845        $ 1,281        $   -          $ 6,126
                                                     -----------    ----------    ------------   ------------   ------------
                                                     -----------    ----------    ------------   ------------   ------------
</TABLE>


                                       52
<PAGE>

14. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL DATA (CONTINUED)

                 CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOW
                     FOR THE YEAR ENDED SEPTEMBER 30, 1995
                            (DOLLARS IN THOUSANDS)
                                                                      
<TABLE>
<CAPTION>

                                                       WAVETEK      SUBSIDIARY      FOREIGN   
                                                     CORPORATION    GUARANTOR     SUBSIDIARIES   ELIMINATIONS   CONSOLIDATED
                                                     -----------    ----------    ------------   ------------   ------------
<S>                                                  <C>            <C>           <C>            <C>            <C>         
Net cash provided by operating activities. . . .       $ 2,248        $ 6,675        $ 3,625        $   -         $ 12,548
INVESTING ACTIVITIES
Purchase of business, net of seller financing. .        (2,057)        (1,114)       (14,514)           -          (17,685)
Purchase of property and equipment . . . . . . .          (132)        (1,547)        (1,241)           -           (2,920)
Other investing activities . . . . . . . . . . .           (89)            30            281            -              222
                                                     -----------    ----------    ------------   ------------   ------------
Net cash used in investing activities. . . . . .        (2,278)        (2,631)       (15,474)           -          (20,383)
FINANCING ACTIVITIES
Issuance of common shares for cash . . . . . . .         7,595            -              -              -            7,595
Repurchase of common shares for cash . . . . . .        (3,200)           -              -              -           (3,200)
Proceeds from sale and leaseback financing . . .           -            4,321            -              -            4,321
Proceeds from revolving lines of credit and 
  long-term obligations. . . . . . . . . . . . .           -           24,428          7,027            -           31,455
Principal payments on revolving lines of credit
  and long-term obligations. . . . . . . . . . .           (71)       (29,395)        (2,663)           -          (32,129)
Dividends from subsidiaries to Wavetek
  Corporation. . . . . . . . . . . . . . . . . .         7,497         (4,000)        (3,497)           -              -  
Repayment of loans from stockholders . . . . . .          (360)           -              -              -             (360)
Loans from Wavetek Corporation to  
  subsidiaries . . . . . . . . . . . . . . . . .        (2,305)           -            2,305            -              -  
Repayment of loans from subsidiaries to
  Wavetek Corporation. . . . . . . . . . . . . .        (2,540)         2,540            -              -              -  
Capital contributions from Wavetek  
  Corporation to subsidiaries. . . . . . . . . .        (6,568)           -            6,568            -              -  
                                                     -----------    ----------    ------------   ------------   ------------
Net cash provided by (used in) financing
  activities . . . . . . . . . . . . . . . . . .            48         (2,106)         9,740            -            7,682
Effect of exchange rate changes on cash and 
  cash equivalents . . . . . . . . . . . . . . .           -              -               35            -               35
                                                     -----------    ----------    ------------   ------------   ------------
Increase (decrease) in cash and cash equivalents            18          1,938         (2,074)           -             (118)
Cash and cash equivalents at beginning of year .           (18)           318          3,507            -            3,807
                                                     -----------    ----------    ------------   ------------   ------------
Cash and cash equivalents at end of year . . . .       $   -          $ 2,256        $ 1,433        $   -          $ 3,689
                                                     -----------    ----------    ------------   ------------   ------------
                                                     -----------    ----------    ------------   ------------   ------------
</TABLE>


                                      53
<PAGE>

ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND 
          FINANCIAL DISCLOSURES

    None.
    
PART III

ITEM 10.  DIRECTORS AND OFFICERS OF THE REGISTRANT

    Set forth below is certain information regarding each director and 
executive officer of the Company:
<TABLE>
<CAPTION>

    NAME                          AGE       POSITION
    --------------------------    ---       ----------------------------------------------------------
<S>                               <C>       <C>
    Terence J. Gooding (1)(3)     63        Chairman of the Board and Chief Executive Officer
    Derek T. Morikawa (1)         42        President, Chief Operating Officer and Director
    Ben J. Constantini            54        Executive Vice President, Sales and Director
    Joseph A. Budano              36        Senior Vice President, North American Operations
    Vickie L. Capps               36        Treasurer, Secretary, Vice President and Chief Financial
                                              Officer
    Kenneth Baker (2)             63        Director
    Malcolm R. Bates (1)(3)       63        Director
    Kenneth D. Moelis (1)         38        Director
    Peter J. Nolan (1)(2)(3)      38        Director
    David B. Wilson (2)(3)        38        Director
</TABLE>

-----------

(1) Member of the Executive Committee
(2) Member of the Audit Committee
(3) Member of the Compensation Committee
 

    The following are biographies of the Company's executive officers and
directors:

    TERENCE J. GOODING, CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER.  In
June 1991, Terence J. Gooding formed a holding company to acquire Wavetek
Corporation. Dr. Gooding has been involved in the management of technology
companies since 1965 when he formed Maxwell Laboratories, which today is a
successful defense contractor. He was President of Kratos (1971-1979), Chairman
of the Board of Cambridge Instruments and Leica plc (1979-1990), and President
of Picker International (1981-1986).

    DEREK T. MORIKAWA, PRESIDENT, CHIEF OPERATING OFFICER AND DIRECTOR. Derek
Morikawa has been with Wavetek for 11 years, and was promoted to President and
Chief Operating Officer in October 1996. Prior to that he was Executive Vice
President of Operations, managing Wavetek's Operating Divisions and integrating
the Wireless and Telecom businesses acquired from Schlumberger in October 1994.
Mr. Morikawa has been Vice President and General Manager of the Indianapolis
CATV Division, the San Diego LAN Division, and the former Microwave Division of
Wavetek. Prior to joining Wavetek, Mr. Morikawa spent seven years with the
Microwave Instrumentation Division of Hewlett-Packard where he managed the
Product Marketing Department.
    
    
                                          54
<PAGE>

    BEN J. CONSTANTINI, EXECUTIVE VICE PRESIDENT, SALES AND DIRECTOR. Ben J.
Constantini joined Wavetek in June 1991 with responsibility for worldwide sales
and customer service.  Prior to joining Wavetek, Mr. Constantini was President
of North American Operations for Leica, plc. He has also been Senior Vice
President, Sales for Picker International and District Sales Manager for Seimens
Medical Systems, Inc. Prior to that, he spent ten years with General Motors in
various management positions.
    
    JOSEPH A. BUDANO, SENIOR VICE PRESIDENT, NORTH AMERICAN OPERATIONS. Joseph
A. Budano joined Wavetek in April 1994 as the General Manger of the CATV
Division. Mr. Budano has since been promoted to his current position of Senior
Vice President, North American Operations with responsibility for Wavetek's
CATV, LAN and Test Tools Divisions. Prior to joining Wavetek, Mr. Budano worked
at the Boston Consulting Group as a Management Consultant and held several
positions in Development Engineering and Manufacturing at Motorola's Paging
Products and Land Mobile Products Divisions.
    
    VICKIE L. CAPPS, TREASURER, SECRETARY, VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER. Vickie L. Capps joined Wavetek in October 1992 as Group Controller -
North America and was later promoted to Vice President, Corporate Finance and in
October 1996 to her current position as Chief Financial Officer. Ms. Capps is
also the Secretary and Treasurer of the Company. Prior to joining Wavetek, Ms.
Capps was a Senior Manager at Ernst & Young LLP where she specialized in
providing audit and consulting services, for over ten years, to both publicly
and privately owned corporations in technology and other industries. Ms. Capps
is a Certified Public Accountant.

    KENNETH BAKER, DIRECTOR.  Kenneth Baker has served as a director of Wavetek
since 1992. Lord Baker has served as a member of Parliament in the United
Kingdom since 1968. In the early 1980's he was the Minister of Information
Technology and later was promoted to Margaret Thatcher's Cabinet and served as
Environment Secretary, Education Secretary and Home Secretary. He served as
Chairman of the Conservative Party from 1989 to 1990 and was introduced to the
House of Lords in June 1997. Lord Baker serves on the board of directors of
Hanson plc, Bell Cablemedia Inc. and Millenium Chemicals Inc.
    
    MALCOLM R. BATES, DIRECTOR.  Malcolm R. Bates became a director of the
Company on July 21, 1997. Mr. Bates has been Chairman of Pearl Group PLC since
March 1996 and Chairman of Premier Farnell plc since January 1997. Until March
31, 1997, Mr. Bates was the Deputy Managing Director of The General Electric
Company, p.l.c. (GEC), a position he held for twelve years, having joined GEC as
Senior Commercial Director in January 1976. He serves on the board of directors
of several companies, including BICC plc and is a member of the Advisory Board
of Phoenix Equity Partners II. Mr. Bates is also a member of the United Kingdom
Government's Industrial Development Advisory Board, Chairman of the Business in
the Arts and a Governor of The University of Westminster.
    
    KENNETH D. MOELIS, DIRECTOR.  Kenneth D. Moelis became a director of the
Company upon consummation of the Recapitalization Transactions. Mr. Moelis is a
Managing Director and is in charge of Corporate Finance at DLJ and has been with
DLJ since 1990. Mr. Moelis is also a director of Levitz Furniture Corporation.
    
    PETER J. NOLAN, DIRECTOR.  Peter J. Nolan became a director of the Company
upon consummation of the Recapitalization Transactions. He has been an executive
officer and partner of Leonard Green & Partners, L.P., a merchant banking firm
which manages GEI, since April 1997. Mr. Nolan had previously been a Managing
Director of DLJ since 1990 and Co-Head of DLJ's Los Angeles Investment Banking
Division.  Mr. Nolan had also previously been a First Vice President in
corporate finance at Drexel and a Vice President at Prudential Securities Inc.
Mr. Nolan is also a director of M2 Automotive, Inc. and serves on the
Supervisory Board of adidas AG. Inc.
    
    
                                          55
<PAGE>

    DAVID B. WILSON, DIRECTOR.  David B. Wilson became a director of the Company
upon consummation of the Recapitalization Transactions. Mr. Wilson is a
Principal at DLJMB and has been with DLJMB since 1992. From 1989 to 1991, he was
a Vice President at Grauer & Wheat, Inc. Mr. Wilson is also a director of
Manufacturers' Services Limited.
    
BOARD OF DIRECTORS
    
    Members of the Board of Directors serve until the next annual meeting of
Stockholders and until a successor has been elected and qualified. Pursuant to
the Stockholders Agreement, the members are designated as follows: (i) two (or
three if an additional director is designated as described in this paragraph) of
such members shall be persons designated by DLJMB for as long as DLJMB and/or
their Permitted Transferees own at least 20% of the outstanding Common Stock of
the Company; (ii) one of such members shall be a person designated by GEI for so
long as GEI and/or its Permitted Transferees shall own at least 5% of the
outstanding Common Stock of the Company; (iii) three (or four if an additional
director is designated as described in this paragraph) of such members will be
persons designated by Gooding for as long as Gooding and/or his Permitted
Transferees own at least 10% of the outstanding Common Stock of the Company; and
(iv) one of such members shall be a person designated by Gooding for as long as
Gooding and/or his Permitted Transferees own at least 10% of the outstanding
Common Stock of the Company, subject to approval by DLJMB for as long as DLJMB
and/or their Permitted Transferees own at least 20% of the outstanding Common
Stock of the Company. In the event DLJMB and/or their Permitted Transferees own
at least 10% but less than 20% of the outstanding Common Stock of the Company,
DLJMB shall have the right to appoint only two directors. In the event DLJMB and
/or their Permitted Transferees own at least 5% but less than 10% of the
outstanding Common Stock of the Company, DLJMB shall have the right to appoint
only one director. In the event Gooding and/or his Permitted Transferees own at
least 5% but less than 10% of the outstanding Common Stock of the Company,
Gooding shall have the right to appoint only two directors. Prior to a Qualified
IPO (as defined in the Stockholders Agreement), each of DLJMB and Gooding may
designate an additional director. There are currently eight directors of the
Company, each of whom is named herein.

    The Company's Certificate of Incorporation contains a provision permitted
under the Delaware General Corporation Law (the "DGCL") eliminating each
director's personal liability for monetary damages for breach of fiduciary duty
as a director, except to the extent that such exemption from liability or
limitation thereof is not permitted under the DGCL as currently in effect at the
time. The Company's Bylaws authorize the Company to indemnify its present and
former directors, officers and employees against expenses, judgments, fines and
amounts paid in settlement if such person is made a party, or is threatened to
be made a party, to a legal proceeding by reason of the fact that such person is
or was a director, officer, employee or agent of the Company, or was serving in
such position at another company at the request of Wavetek. Such indemnification
is mandatory in certain circumstances and permissive in others, subject to
authorization by the Company's Board of Directors. In addition, the Bylaws
authorize the Company to advance litigation expenses to such person prior to the
final disposition of the legal proceeding.

BOARD COMMITTEES

    The Board of Directors has three standing committees: an Executive
Committee, an Audit Committee and a Compensation Committee (together, the
"Committees"). The Executive Committee, currently consisting of Messrs. Bates,
Gooding, Moelis, Morikawa and Nolan, has the power to exercise all of the powers
and authority of the Board of Directors in the management of the business of the
Company, with certain exceptions. The Audit Committee, currently consisting of
Messrs. Baker, Nolan and Wilson, meets with the Company's financial management
and its independent auditors at various times during each year, reviews internal
control conditions, audit plans and results, and makes recommendations to the
Board 


                                          56
<PAGE>

of Directors concerning the Company's engagement of independent auditors. The
Compensation Committee, currently consisting of Messrs. Bates, Gooding, Nolan
and Wilson, reviews and proposes to the Board of Directors compensation
arrangements for directors and officers of the Company.

ITEM 11. EXECUTIVE COMPENSATION

    The following table sets forth the compensation paid in fiscal 1997 to the
Company's Chief Executive Officer and the Company's four other most highly
compensated executive officers (the "Named Executive Officers").

                              SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>

                                                                         ANNUAL COMPENSATION                          
                                              ----------------------------------------------------------------------      TOTAL
                                                                               AUTO         401 (k)         OTHER         ANNUAL
NAME AND PRINCIPAL POSITION                    SALARY          BONUS         ALLOWANCE       MATCH      COMPENSATION*  COMPENSATION
------------------------------------------    --------        -------        ---------      -------     ------------   ------------
<S>                                           <C>             <C>            <C>            <C>         <C>            <C>
Terence J. Gooding . . . . . . . . . .        $348,089        $   -          $   -          $ 3,692        $   -        $ 351,781
   Chairman of the Board and
   Chief Executive Officer
Derek T. Morikawa. . . . . . . . . . .         223,462         50,625          5,820          5,575        916,923      1,202,405
   President and Chief
   Operating Officer
Ben J. Constantini . . . . . . . . . .         184,616         37,000          5,820          5,018        511,468        743,922
   Executive Vice President, Sales
Joseph A. Budano . . . . . . . . . . .         150,000         26,250          5,820          4,800        226,332        413,202
   Senior Vice President, North
   American Operations
Vickie L. Capps. . . . . . . . . . . .         134,231         23,625          5,820          6,470        229,653        399,799
   Treasurer, Secretary, Vice President
   and Chief Financial Officer
</TABLE>

*   Other compensation reflects payments to stock option holders as 
    compensation for the surrender of all or a portion of vested stock 
    options related to the Recapitalization Transactions.

    The following table sets forth information concerning individual grants of 
stock options made during the fiscal year ended September 30, 1997 to the Named
Executive Officers.

                      OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>

                                          PERCENT OF                                  POTENTIAL REALIZABLE  
                           NUMBER OF        TOTAL                                       VALUE AT ASSUMED    
                         SECURITIES OF     OPTION                                        ANNUAL RATES OF    
                           UNDERLYING     GRANTS IN       EXERCISE                   STOCK PRICE APPRECIATION
                            OPTIONS        FISCAL        PRICE PER    EXPIRATION     ------------------------
NAME                        GRANTED         YEAR           SHARE         DATE            5%             10%  
-----------------------  -------------    ---------      ---------    ----------     ---------       --------
<S>                      <C>              <C>            <C>          <C>            <C>             <C> 
Terence J. Gooding . . .       -              -              -              -              -              -  
Derek T. Morikawa. . . .    33,750          23.8%         $17.91        4/28/02       $157,613       $346,275
Ben J. Constantini . . .    33,250          23.5%          17.91        4/28/02        155,278        341,145
Joseph A. Budano . . . .    17,900          12.6%          17.91        4/28/02         83,593        183,654
Vickie L. Capps. . . . .    22,900          16.2%          17.91        4/28/02        106,943        234,954
</TABLE>


                                       57
<PAGE>

    The following table sets forth information with respect to each of the Named
Executive Officers concerning the exercise of stock options and unexercised
stock options held at September 30, 1997.
    
AGGREGATED OPTION EXERCISES IN THE LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES

<TABLE>
<CAPTION>

                                                            NUMBER OF SECURITIES          VALUE OF UNEXERCISED
                             NUMBER OF                     UNDERLYING UNEXERCISED         IN-THE-MONEY OPTIONS
                              SHARES                     OPTIONS AT FISCAL YEAR-END        AT FISCAL YEAR-END*
                              ACQUIRED        VALUE      ---------------------------   ---------------------------
NAME                        ON EXERCISE      REALIZED    EXERCISABLE   UNEXERCISABLE   EXERCISABLE   UNEXERCISABLE
--------------------------  -----------      --------    -----------   -------------   -----------   -------------
<S>                         <C>              <C>         <C>           <C>             <C>           <C>          
Terence J. Gooding . . .         -               -              -                  -             -             -
Derek T. Morikawa. . . .         -               -         45,000             68,750      $749,700      $492,020
Ben J. Constantini . . .         -               -              -             45,250             -       168,240
Joseph A. Budano . . . .         -               -         30,000             32,900       420,600       216,900
Vickie L. Capps. . . . .         -               -         16,000             32,900       258,640       134,920

</TABLE>


*   The value of $17.91 per share is used representing the purchase price per
    share for the New Equity Investment in the Recapitalization Transactions

EMPLOYMENT AGREEMENTS

    The Company does not currently have any employment agreements with any of
its directors or executive officers. In connection with the Recapitalization
Transactions, the Company entered into executive severance agreements with each
of the Named Executive Officers, except Gooding, providing for a specified level
of U.S. benefits and for a lump sum payment upon termination other than for
cause equal to twenty four months salary if termination occurred in the first
month following June 11, 1997, the date on which the Recapitalization
Transactions were consummated, declining by one month for each month thereafter
until the twelfth month following June 11, 1997, after which the lump sum
payment will equal to twelve months salary.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

    The Board of Directors established a Compensation Committee in July 1997.
Messrs. Bates, Gooding, Nolan and Wilson are the members of the Compensation
Committee. Other than Mr. Gooding, none of the members of the Compensation
Committee has served as an officer or employee of the Company. Prior to the
establishment of the Compensation Committee, all decisions relating to
compensation of executive officers were made by the Company's Board of
Directors. For a description of the transactions between the Company and members
of the Compensation Committee and entities affiliated with such members, see
"Certain Relationships and Related Transactions" included as Item 13 herein. No
executive officer of the Company serves as a member of the board of directors or
compensation committee of any entity which has one or more members of the
Company's Board of Directors or Compensation Committee.

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

    The Compensation Committee is responsible for recommending salaries,
incentives and benefits for the Company's senior officers, awarding all employee
stock options, reviewing overall compensation policies and evaluating the
performance of management. The Compensation Committee reviews with the Board of
Directors in detail all aspects of compensation for senior officers.


                                          58
<PAGE>

    The Company's executive compensation package is comprised of three
components: base compensation, annual cash bonus and stock options.

    Base compensation consists of fixed salaries and employee benefits. Base
salaries and benefits for each of the Company's executive officers are based on
industry norms and an individual's experience. Annual cash bonuses are based on
the Company's overall orders, operating profit, cash flow and on meeting the
Company's business objectives and goals. In reviewing 1997 compensation and
making recommendations for 1998, the Compensation Committee reviewed a report
prepared by the Company's Human Resources Manager, which compared the base
salary and total cash compensation package for each of the Company's five
highest paid officers and the top sales executive with data compiled from five
independent compensation surveys providing general and industry-specific ranges
and averages. The Compensation Committee also took into account the Company's
performance during the period and such individual's contribution to the
Company's performance. The Compensation Committee has generally proposed
moderate increases in base salary and target bonuses for the Company's executive
officers for 1998.

    The Compensation Committee recommended a modest bonus and no stock option
grant to the Company's chief executive officer for 1997 and a moderate decrease
in base salary for 1998. Such compensation reflects the significant ownership
that such officer has in the Company.

    Stock options are utilized as an important component of executive
compensation to motivate executives to improve the long-term performance and
value of the Company and to promote loyalty and equity ownership in the Company
by such individuals. The Compensation Committee bases awards of stock options
principally on an individual's job grade, performance and length of service.
Option grants are made annually at the fair market value of the Company's Common
Stock, as determined by the Board of Directors, and vest over a four year
period. A total of 107,800 options were granted to the top five executive
officers in 1997.

    The Compensation Committee report was completed by Messrs. Bates, Gooding,
Nolan and Wilson on November 10, 1997.

COMPENSATION OF DIRECTORS

    Executive officers of the Company and representatives of the New Equity
Investors who serve on the Board of Directors do not receive any compensation
for such services. Other directors receive $10,000 per year, plus a fee of
$2,500 per Board meeting attended and are reimbursed for their expenses incurred
in connection with attendance of meetings of, and other activities relating to
serving on, the Board of Directors. Members of the Committees of the Board of
Directors receive no additional compensation for their membership in, or
participation in the meetings of, such Committees.


                                          59
<PAGE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

    The following table sets forth certain information about persons known to
the Company to own beneficially more than 5% of the outstanding Common Stock,
each director of the Company, each named executive officer and all directors and
executive officers of the Company as a group, in each case as of the date of
this report. There are 4,884,860 shares of Common Stock outstanding.

                                                     SHARES        PERCENTAGE 
                                                  BENEFICIALLY    BENEFICIALLY
NAME AND ADDRESS                                    OWNED (1)         OWNED   
------------------------------------------------  ------------    ------------

Terence J. Gooding (2)(3). . . . . . . . . . .     1,526,780          31.3%
DLJ Merchant Banking Partners II, L.P. (4) . .     1,674,810          34.3
   277 Park Avenue
   New York, NY 10172
Green Equity Investors II, L.P.. . . . . . . .       753,660          15.4
   11111 Santa Monica Boulevard
   Suite 2000
   Los Angeles, CA 90025
Schroder UK Venture Fund III L.P. (5). . . . .       431,690           8.8
   c/o Peter L. Everson, Director
   Schroder Venture Managers Ltd.
   22 Church Street
   Hamilton HM 11, Bermuda
Yokogawa Electric Corporation. . . . . . . . .       284,240           5.8
   2-9-2 Nakacho
   Musashino-shi, Tokyo 180
   Japan
Derek T. Morikawa (3)(6) . . . . . . . . . . .       155,000           3.1
Ben J. Constantini (3) . . . . . . . . . . . .        35,000             *
Joseph A. Budano (3) . . . . . . . . . . . . .        30,000             *
Vickie L. Capps (3). . . . . . . . . . . . . .        16,000             *
Kenneth Baker (7). . . . . . . . . . . . . . .        31,667             *
Malcolm R. Bates (8) . . . . . . . . . . . . .         3,333             *
Kenneth D. Moelis (9). . . . . . . . . . . . .           -             -  
Peter J. Nolan (10). . . . . . . . . . . . . .       753,660          15.4
David B. Wilson (11) . . . . . . . . . . . . .           -             -  
All directors and executive officers as a
   group (12). . . . . . . . . . . . . . . . .     4,226,250          84.8

*        Less than 1%.
___________
(1)  Computed in accordance with Rule 13d-3(d)(1) of the Securities Exchange Act
     of 1934, as amended.


                                          60
<PAGE>

(2)  Includes 1,050,000 shares held by Gooding's spouse, children and 
     grandchildren and trusts for the benefit thereof over which Gooding has 
     investment and voting control.

(3)  Address is c/o Wavetek Corporation, 11995 El Camino Real, Suite 301, San 
     Diego, CA 92130.

(4)  Consists of shares held directly by the following investors related to 
     DLJ Merchant Banking Partners II, L.P.: DLJ Diversified Partners, L.P. 
     ("DLJ Diversified"), DLJ Offshore Partners II, C.V. ("DLJOP"), DLJMB 
     Funding II, Inc. ("DLJ Funding"), DLJ EAB Partners, L.P. ("DLJ EAB"), 
     DLJ First ESC LLC ("DLJ ESC") and UK Investment Plan 1997 Partners ("UK 
     Investment"). The address of each of DLJMB, DLJ Diversified, DLJ 
     Funding, DLJ EAB and DLJ ESC is 277 Park Avenue, New York, New York 
     10172. The address of DLJOP is John B. Gorsiraweg, 14 Willemstad, 
     Curacao, Netherlands Antilles. The address of UK Investment is 2121 
     Avenue of the Stars, Los Angeles, California 90067.

(5)  Includes shares owned by Schroder UK Venture Fund III L.P. 2 and Schoder 
     UK Venture Fund III Trust.

(6)  Includes 40,000 shares held in two trusts for the benefit of his 
     children. Morikawa is the trustee of one of the trusts and his wife is 
     the trustee of the other.

(7)  The address of the registered stockholder is Snow Hill Trustees - 
     Account SH, Snow Hill Trustees Limited, 1 Snow Hill, London EC1A 2EN. 
     The beneficial owners of the Common Stock (and number of shares owned) 
     are: (i) Kenneth Baker (18,000); (ii) Mary Baker (9,000); (iii) Sophia 
     Baker (1,500); and (iv) Oswin Baker (1,500).

(8)  Address is Flat 10, 71 Upper Berkeley St., London, England, WIH 7BD

(9)  Address is c/o Donaldson, Lufkin & Jenerette Securities Corporation, 
     2121 Avenue of the Stars, Los Angeles, CA 90067. Mr. Moelis is a 
     Managing Director of DLJ. Share data for Mr. Moelis excludes shares 
     shown as held by DLJMB and its affiliates, as to which Mr. Moelis 
     disclaims beneficial ownership.

(10) Address is c/o Green Equity Investors II, L.P., 11111 Santa Monica 
     Boulevard, Suite 2000, Los Angeles, CA 90025. The shares shown as 
     beneficially owned by Mr. Nolan include all of the shares owned of 
     record by GEI. GEI is a Delaware limited partnership managed by Leonard 
     Green & Partners, L.P. ("LGP"), which is an affiliate of the general 
     partner of GEI. Mr. Nolan, either directly (whether through ownership 
     interest or position) or through one or more intermediaries, may be 
     deemed to control LGP and such general partner. LGP and such general 
     partner may be deemed to control the voting and disposition of the 
     shares of Common Stock of the Company owned by GEI. As such, Mr. Nolan 
     may be deemed to have shared voting and investment power with respect to 
     all shares held by GEI. However, Mr. Nolan disclaims beneficial 
     ownership of the securities held by GEI except to the extent of his 
     respective pecuniary interests therein.

(11) Address is c/o DLJ Merchant Banking Partners II, L.P., 277 Park Avenue, 
     New York, NY 10172. Mr. Wilson is a Principal at DLJ Merchant Banking 
     II, Inc., the general partner of DLJMB and an affiliate of DLJ. Share 
     data for Mr. Wilson excludes shares shown as held by DLJMB and its 
     affiliates, as to which Mr. Wilson disclaims beneficial ownership.

(12) There are currently ten individuals in this group, including eight 
     directors. Includes the shares referred to in Note 10 above.

                                          61
<PAGE>

STOCK OPTION PLAN

    From time to time, the Company issues stock options to employees of the
Company in order to attract, retain and provide equity incentives to key
employees and to stimulate the efforts of such employees. One quarter of each
grant of stock options becomes exercisable on each anniversary date of their
issuance, so that after four years, all of the options are vested.
    
    Pursuant to the Recapitalization Transactions, 75% of the stock options
existing prior to the Recapitalization Transactions, representing 805,000
shares, were vested and the holders thereof had the right to surrender such
options to the Company for a cash payment equal to the difference between the
purchase price per share of the New Equity Investment and the exercise price of
the options, less a pro rata portion of certain fees payable to DLJ.
Approximately 59% of the stock options existing prior to the Recapitalization
Transactions were surrendered for a cash payment. The aggregate pre-tax cost to
the Company was approximately $7.1 million ($4.3 million net of a related income
tax benefit).
    
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

    In September 1995, the Board of Directors of the Company resolved that in
the event Gooding's shareholdings in the Company are reduced to less than 50% of
the outstanding shares, and/or if Gooding's employment as Chief Executive
Officer of the Company is terminated for any reason, Gooding or his nominee
shall have the right, but not the obligation, to take over the lease and
occupancy of the Company's executive offices at 11995 El Camino Real, Suite 301,
San Diego, CA 92130, and to purchase all of the leasehold improvements and fixed
assets (including furniture, fixtures, paintings and office equipment) located
in such offices at such time, at depreciated net book value. See "Item 2.
-- Properties."
    
    The Company leases its headquarters for its LAN and Test Tools business in
San Diego from a corporation controlled by Gooding for an annual rent of
$585,000, plus annual consumer price index adjustments, not to exceed 3% per
annum. The lease expires in June 2006. See "Item 2.-- Properties."
    
    The Company and Gooding were parties to shareholders agreements with
Yokogawa and Schroder, which were terminated as part of the Recapitalization
Transactions. The Company, Gooding, Yokogawa and Schroder entered into the
Stockholders Agreement with the New Equity Investors, which contains provisions
relating to the election of directors. See "Item 10. -- Directors and Officers
of the Registrant -- Board of Directors." The Stockholders Agreement also
provides for transfer restrictions on the shares of Common Stock held by such
stockholders, rights of first offer, tag-along rights, preemptive rights and
certain other matters relating to the ownership and sales of Common Stock of the
Company.

    The Company is a party to a distribution agreement with Yokogawa pursuant to
which Yokogawa has the right to distribute the Company's products in Japan and a
technical collaboration agreement pursuant to which Wavetek and Yokogawa develop
joint engineering and marketing programs for Wireless products, both of which
were entered into in connection with the purchase by Yokogawa of Common Stock of
the Company in April 1996. See "Item 1. Business -- Yokogawa Relationship."


                                          62
<PAGE>

PART IV
    
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM 8-K

    (a)  The following documents are filed as part of this report:
    
         (1)  Financial Statements
    
              The following financial statements and other documents are
              included in Item 8 of this report:
    
              Report of Ernst & Young LLP, Independent Auditors
              Consolidated Balance Sheets as of September 30, 1997 and 1996
              Consolidated Statements of Income for each of the three years in
                the period ended September 30, 1997
              Consolidated Statements of Stockholders' Equity (Deficit) for 
                each of the three years in the period ended September 30, 1997
              Consolidated Statements of Cash Flows for each of the three years
                in the period ended September  30, 1997
              Notes to Consolidated Financial Statements
    
         (2)  Financial Statement Schedules
    
              No financial statement schedules are required to be filed by this
              form.
    
         (3)  Index to Exhibits
    
    Exhibit No.    Description of Exhibit
    -----------    ----------------------
       3.1         Certificate of Incorporation of Torrey Investments Inc.
                   (Incorporated by reference from exhibit 3.1 to Registration
                   Statement of Wavetek Corporation on Form S-4, file number
                   333-32195).
    
       3.2         Certificate of Amendment of Certificate of Incorporation of
                   Torrey Investments Inc. dated June 25, 1991 (Incorporated by
                   reference from exhibit 3.2 to Registration Statement of
                   Wavetek Corporation on Form S-4, file number 333-32195).
    
       3.3         Certificate of Amendment of Certificate of Incorporation of
                   Torrey Investments Inc. dated January 27, 1993 (Incorporated
                   by reference from exhibit 3.3 to Registration Statement of
                   Wavetek Corporation on Form S-4, file number 333-32195).
    
       3.4         Certificate of Amendment of Certificate of Incorporation of
                   Torrey Investments Inc. dated September 21, 1995
                   (Incorporated by reference from exhibit 3.4 to Registration
                   Statement of Wavetek Corporation on Form S-4, file number
                   333-32195).
    
       3.5         Certificate of Ownership and Merger of Wavetek Corporation
                   into Torrey Investments Inc. dated September 21, 1995
                   (changing name of Torrey Investments Inc. to Wavetek
                   Corporation) (Incorporated by reference from exhibit 3.5 to
                   Registration Statement of Wavetek Corporation on Form S-4,
                   file number 333-32195).


                                          63
<PAGE>

       3.6         Certificate of Amendment of Certificate of Incorporation of
                   Wavetek Corporation dated June 9, 1997 (Incorporated by
                   reference from exhibit 3.6 to Registration Statement of
                   Wavetek Corporation on Form S-4, file number 333-32195).
    
       3.7         By-laws of Wavetek Corporation (Incorporated by reference
                   from exhibit 3.7 to Registration Statement of Wavetek
                   Corporation on Form S-4, file number 333-32195).
    
       4.1         Indenture, dated as of June 11, 1997, among Wavetek
                   Corporation, Wavetek U.S. Inc. and The Bank of New York, as
                   Trustee (Incorporated by reference from exhibit 4.1 to
                   Registration Statement of Wavetek Corporation on Form S-4,
                   file number 333-32195).
    
       4.2         Form of Notes (see Exhibit 4.1) (Incorporated by reference
                   from exhibit 4.2 to Registration Statement of Wavetek
                   Corporation on Form S-4, file number 333-32195).
    
       4.3         Form of Subsidiary Guarantee (see Exhibit 4.1) (Incorporated
                   by reference from exhibit 4.3 to Registration Statement of
                   Wavetek Corporation on Form S-4, file number 333-32195).
    
      10.1         Credit Agreement, dated as of June 11, 1997, among Wavetek
                   Corporation, DLJ Capital Funding, Inc., as Syndication
                   Agent, Fleet National Bank, as administrative Agent, and the
                   lenders named therein (Incorporated by reference from
                   exhibit 10.1 to Registration Statement of Wavetek
                   Corporation on Form S-4, file number 333-32195).
    
      10.2         Stockholders Agreement, dated as of June 11, 1997
                   (Incorporated by reference from exhibit 10.2 to Registration
                   Statement of Wavetek Corporation on Form S-4, file number
                   333-32195).
    
      10.3         Stock Registration Rights Agreement, dated as of June 11,
                   1997 (Incorporated by reference from exhibit 10.3 to
                   Registration Statement of Wavetek Corporation on Form S-4,
                   file number 333-32195).
    
      10.4         Extraordinary Severance Agreement, dated May 23, 1997
                   between Wavetek Corporation and Joseph A. Budano
                   (Incorporated by reference from exhibit 10.4 to Registration
                   Statement of Wavetek Corporation on Form S-4, file number
                   333-32195).
    
      10.5         Extraordinary Severance Agreement, dated May 23, 1997
                   between Wavetek Corporation and Vickie L. Capps
                   (Incorporated by reference from exhibit 10.5 to Registration
                   Statement of Wavetek Corporation on Form S-4, file number
                   333-32195).
    
      10.6         Extraordinary Severance Agreement, dated May 23, 1997
                   between Wavetek Corporation and Ben J. Constantini
                   (Incorporated by reference from exhibit 10.6 to Registration
                   Statement of Wavetek Corporation on Form S-4, file number
                   333-32195).
    
      10.7         Extraordinary Severance Agreement, dated May 23, 1997
                   between Wavetek Corporation and Derek T. Morikawa
                   (Incorporated by reference from exhibit 10.7 to Registration
                   Statement of Wavetek Corporation on Form S-4, file number
                   333-32195).


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<PAGE>

      10.8         Wavetek Corporation Executive Benefits Plan dated June 1,
                   1997 (Incorporated by reference from exhibit 10.8 to
                   Registration Statement of Wavetek Corporation on Form S-4,
                   file number 333-32195).
    
      12.1         Schedule Re: Computation of Ratio of Earnings to Fixed
                   Charges.
    
      21.1         Subsidiaries of Registrant.
    
      27.1         Financial Data Schedule.
    
    (b)  Reports on Form 8-K
    
         None.
    
    (c)  All required exhibits have been filed or incorporated by reference in
         this form.
    
    (d)  No financial schedules are required to be filed by this form.


                                          65
<PAGE>

    SIGNATURES

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

                                       WAVETEK CORPORATION

                                             /s/ VICKIE L. CAPPS
                                       --------------------------------------
                                       Vickie L. Capps
                                       Treasurer, Secretary, Vice 
                                       President and Chief Financial Officer
                                       Dated: December 23,1997

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

         SIGNATURE                                      DATE
         ---------                                      ----


  /s/ TERENCE J. GOODING                         December 23, 1997
--------------------------------------
Terence J. Gooding
Chairman of the Board, Chief
Executive Officer of Wavetek
Corporation; Chairman of the Board of
Wavetek, U.S. Inc.

  /s/ DEREK T. MORIKAWA                          December 23, 1997
--------------------------------------
Derek T. Morikawa
President, Chief Operating Officer and
Director of Wavetek Corporation

  /s/ BEN J. CONSTANTINI                         December 23, 1997
--------------------------------------
Ben J. Constantini
Executive Vice President, Sales and
Director of Wavetek Corporation


  /s/ VICKIE L. CAPPS                            December 23, 1997
--------------------------------------
Vickie L. Capps
Treasurer, Secretary, Vice President and
Chief Financial Officer

  /s/ DAVID B. WILSON                            December 23, 1997
--------------------------------------
David B. Wilson
Director of Wavetek Corporation

  /s/ PETER J. NOLAN                             December 23, 1997
--------------------------------------
Peter J. Nolan
Director of Wavetek Corporation


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