<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, 1999.

[ ] 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 WANDEL GOLTERMANN, INC.
            ------------------------------------------------------
            (Exact name of registrant as specified in its charter)

                DELAWARE                                      33-0457664
   -------------------------------                       -------------------
   (State or Other Jurisdiction of                        (I.R.S. Employer
    Incorporation or Organization)                       Identification No.)

          1030 SWABIA COURT
      RESEARCH TRIANGLE PARK, NC                             27709-3585
----------------------------------------                     ----------
(Address of Principal Executive Offices)                     (Zip Code)

                               (919) 941-5730
              --------------------------------------------------
              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 registered pursuant to section 12(g) of the Act:

                   10.125% 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 [ ].

Aggregate market value of the voting and non-voting common equity held by
non-affiliates of the registrant as of December 20, 1999:
Not applicable.

As of December 20, 1999, issuer had only one class of common stock, of which
there were 13,268,323 shares outstanding.

DOCUMENTS INCORPORATED BY REFERENCE
None.

<PAGE>

PART I.

ITEM 1. BUSINESS

HISTORICAL DEVELOPMENT OF BUSINESS

On September 30, 1998, Wavetek Corporation, a Delaware corporation
("Wavetek"), and Wandel & Goltermann Management Holding GmbH, a German
limited liability company ("WG"), consummated an exchange transaction whereby
the stockholders of WG became stockholders of Wavetek, and WG became a
subsidiary of Wavetek (the "Exchange Transaction"). Following the Exchange
Transaction, Wavetek was ultimately renamed Wavetek Wandel Goltermann, Inc.
(the "Company").

Wavetek was founded in San Diego, California in 1962, and was acquired by an
investment group led by Dr. Terence J. Gooding in 1991.  After Dr. Gooding
acquired Wavetek, and prior to the consummation of the Exchange Transaction,
Wavetek completed two strategic acquisitions:  (1) the instrumentation
products division of Beckman Industrial in 1992 and (2) the wireless and
fiber optics test businesses of Schlumberger S.A. in 1994.  In June 1997,
Wavetek completed a recapitalization of the Company involving the repurchase
of equity from existing investors, the issuance of equity to new investors
and the incurrence of debt.

WG was founded in Eningen, Germany in 1923.  Prior to entering into the
Exchange Transaction, WG was majority owned by the families of the founders.
In October 1997, WG completed a phased acquisition of Switching Test
Solutions AG, a Swiss joint venture formed by WG and Alcatel, a telephone
switch testing company.  Also, in September 1998, WG completed the
acquisition of the shares of its U.S. subsidiary, Wandel & Goltermann
Technologies, Inc., that it did not previously own.

Although WG became a subsidiary of Wavetek, the Exchange Transaction was
treated, for accounting and financial reporting purposes, as a purchase of
Wavetek by WG. Accordingly, the consolidated financial statements of the
Company as of any date or for any period prior to September 30, 1998, are the
historical consolidated financial statements of WG.

The executive offices of the Company are located at 1030 Swabia Court,
Research Triangle Park, North Carolina 27709-3585, and its telephone number
is (919) 941-5730.

BUSINESS

The Company is a leading global designer, manufacturer and marketer of a
broad range of communications test instruments used to develop, manufacture,
install and maintain communications networks and equipment.  The Company's
products provide comprehensive testing solutions to a wide range of end
users.  The Company's high-end instruments are used during the product
development phase to stress test product functionality and performance.
Other products are used during the production process to verify conformance
to manufacturing specifications, while the Company's enhanced portable field
service tools enable field technicians to quickly install, repair and
maintain complex network infrastructure as well as validate service levels.
The Company also provides distributed remote test systems to many of its
service provider customers, which allow such customers to more efficiently
utilize their network engineers to monitor and test service levels. The
Company conducts its business in two principal business areas, communications
test business and other test products.

COMMUNICATIONS TEST BUSINESS - The Company's communications test business,
which addresses most sectors of the communications test market, primarily
operates in four product areas: (1) Telecom Networks (traditional voice/data
transmissions and new multi-service networks), (2) Enterprise Networks
(local and wide-area network infrastructures), (3)

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Multimedia (cable television and digital video broadcast) and (4) Wireless
(mobile telephony and data).  The business also includes a small group of
other non-test products, including value-added professional services such as
consulting, training and rental services on a worldwide basis. The Company's
communications test business accounted for approximately 94% of the Company's
consolidated sales in fiscal 1999.

TELECOM NETWORKS - The Company is a leading global designer and manufacturer
of test solutions for use in the development, manufacture, installation and
maintenance of public voice, data and image communications systems worldwide.
Specific testing applications for the Company's Telecom Networks products
address the local loop, switches and the backbone transport network, as
described below. The Company provides a comprehensive range of portable test
products for all three testing applications as well as dedicated test
instruments for product development, systems for manufacturing test and
distributed remote test systems for operations and maintenance.

The local loop provides the "final mile" of the network for traditional
voice-line services such as voice, data over modem, leased lines, and newer
digital services such as Integrated Services Digital Network ("ISDN"), Frame
Relay and Asynchronous Transfer Mode ("ATM") packet switching. Technology is
constantly evolving in this field, as exemplified by new high-speed data
access to the Internet, which is being introduced using Digital Subscriber
Loop ("xDSL") technology. The Company's test products help customers
economically install and verify copper and fiber cabling, test the
multi-service network equipment that connects the customer premises with the
central office and verify service availability and performance to the service
end-user. An example is the Company's PA/PF/PFA-x family, a market leader in
handheld multi-technology, multi-protocol testers. Remote operation software
products for certain test instruments allow remote test systems to be
constructed using the Company's existing test products.

Switches send communications to a desired location and provide an increasing
array of intelligent services such as Call Waiting and Caller ID. Switches
also provide packet and internet routing and work with wireless and cable
network telephony equipment for seamless communication services. All of these
applications require functional and performance testing as well as monitoring
operational Quality of Service. The Company's switching test products include
testing systems and portable equipment used in the development, manufacture,
installation and verification of switches.

The backbone transport network provides high bandwidth connectivity for the
multiple services offered by telecommunications service providers.  Specific
applications of the Company's transport products test fiber optic systems,
including Dense Wavelength Divisional Multiplex ("DWDM") systems, as well as
SDH/Synchronous Optical Network ("SONET")/ATM digital transport systems, and
the Telecommunications Management Network ("TMN") systems. The Company
believes its ANT-20 product family is the worldwide market leader in SDH
field testing. The ANT-20, the seventh generation of digital transport
testers, exemplifies the Company's extensive experience and long-term
commitment to this market.

The Company's Telecom Networks customers include Alcatel, AT&T, Deutsche
Telecom, Lucent Technologies, and Siemens.

ENTERPRISE NETWORKS - The Company is a global designer and manufacturer of
test instruments for the Enterprise Networks market. The Company's Enterprise
Networks products are used to develop, install, and maintain local area
networks ("LAN") and wide area networks ("WAN") and to evaluate the
performance and functionality of complex internetworks and the
internetworking devices that connect them. The Company's products also can be
used to maintain the business applications that use the LAN/WAN
infrastructure as well as test the integrity of the LAN physical layer. The
Company's Enterprise Networks products are used by manufacturers of LAN
communications equipment, value-added resellers of network

                                       3

<PAGE>

equipment, information systems departments of companies and governmental
entities, and providers of public Internet access, ISDN and Frame Relay
services.

The Company seeks to develop new products in the Enterprise Networks market
by anticipating the future needs of its customers. For example, the Company
believes it has developed the industry's first product family of LAN cable
testers which are fully upgradable to anticipated future standards and higher
frequencies.  The Company had introduced platform extensions to the Domino
family of protocol analyzers including a test solution for Gigabit Ethernet
and the Mentor expert analysis system.

The Company's Enterprise Networks customers include BellSouth, Boeing, 3Com,
Cisco Systems, DaimlerChrysler, IBM, NCR Corporation and the U.S. Navy, and
the Company's LAN cable test products are marketed through its worldwide
network of distributors.

MULTIMEDIA - The Company manufacturers test instruments for the Multimedia
market and is the global leader in developing and manufacturing test
equipment used for commissioning and maintaining broadband cable networks.
Major cable network products include: sweep systems, signal level meters,
leakage meters, network monitoring systems and related software. These
products test and monitor the quality of signals transmitted over a cable
network and monitor network availability. The Company also believes that the
deployment by cable network operators of advanced services, including two-way
data paths to provide telephony or Internet services, has created new product
opportunities for the Company. For example, the Company's close customer
relationships gave the Company early indication of the need for return path
testing capability. The Company used this information to create the world's
first two-way sweep system designed to assist cable network technicians in
the installation and servicing of the return path of two-way cable networks.

One of the primary technical problems inhibiting deployment of two-way cable
networks is interference (noise commonly know as ingress) on the return path.
If the return path is not securely installed with tight connectors and
well-maintained cable, ingress from external sources such as computers, home
appliances and motors can enter the cable network system and interfere with
customer data on the return path. In order to reduce the time and difficulty
in locating the source of noise, the Company has developed a family of
leakage meters including the CLI 1750, 1450 and 950, a return path ingress
monitoring system, the PathTrak, and an advanced ingress capable sweep system
known as StealthTrak. These products are specifically designed to assist
installers in detecting ingress in cable networks.

The Company entered the digital video broadcast ("DVB") test market in 1997
by introducing the DTS-A transport stream analyzer, and subsequently a
companion test generator, the DTS-G, for product development, installation
and operation of Moving Picture Expert Group ("MPEG-2")/DVB systems.

Significant Multimedia customers of the Company include Continental
Cablevision, Deutsche Telekom, AT&T/TCI and Time Warner Cable.

WIRELESS - The Company is a significant supplier of test instruments for
mobile phones, base stations and mobile radio network switches. The Company
manufactures instruments to test wireless systems at the Radio Frequency
("RF") interface between cellular base stations and mobile phones, the
land-lines of cellular base stations and telephony switching systems and the
switching systems that provide mobile services. The Company's products
address most analog and digital formats used worldwide, including PCS,
Digital Enhanced Cordless Telecommunications ("DECT"), Groupe Speciale Mobile
("GSM"), Time Division Multiple Access ("TDMA") and Code Division Multiple
Access ("CDMA"). The Company's mobile phone test products are used during the
manufacturing process, at service facilities and at the point-of-sale for
cellular and cordless phones. Test tools for cellular base station RF and
land-line interfaces are used by base station manufacturers for product


                                       4

<PAGE>

development, manufacturing test and are also used in the field by wireless
service providers for installation and maintenance. The Company also produces
a distributed remote test system for continuous monitoring and testing of
basic services and roaming functionality for telephony switches that support
mobile services.

The Company's point-of-sale, application-specific product for the Wireless
market, the 4100 GSM Tester, was designed to address the increasing demand
for testing GSM telephones. 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 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 testing at a price point
substantially lower than traditional service testers, allowing economical
sorting of phones at the point--of-sale. The Company was able to bring the
4100 GSM Tester family to market quickly, innovating the repair process, due
in part to the application of technology from its LAN products and existing
Wireless products.

Significant Wireless customers of the Company include AT&T, Ericsson, Lucent
Technologies, Motorola, Nortel, Nokia and Siemens.

SERVICE - The Company's service business provides traditional product-based
technical service as well as value-added professional services. The Company
provides traditional services such as repair, calibration and upgrade through
service centers and a network of independent representatives worldwide. The
Company's products are generally sold with warranties included in the product
price. In addition, the Company offers extended warranties and software
update subscriptions on certain of its products for additional charges. The
Company's professional services, such as consulting, training and rental, are
generally offered at the regional or local level through the Company's own
sales companies. Customized products and test systems are available from the
Company's product design and manufacturing units.

To complement its support services, the Company sponsors both free and
for-fee educational programs in various countries to train its customers in
advanced communications technologies and the application of its products to
solve communication network problems. These programs not only provide product
training but also serve as a forum for user suggestions for product
development and enhancements.

OTHER TEST PRODUCTS - The Company's other test products consist primarily of
portable electronic testing tools ("Test Tools"), instruments used to
calibrate electronic equipment ("Precision Measurement Instruments"), and
electromagnetic measurement instruments.  The Company's other test products
business accounted for approximately 6% of the Company's consolidated sales
in fiscal 1999.

TEST TOOLS - The Company's Test Tools business 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 maintenance and
service industries. Hand-held digital multi-meters ("DMMs") are a key
instrument in this market and range from simple volt meters to advanced tools
for professional electrical and electronic technicians, as well as wire and
cable installers. The Test Tools business also provides a wide range of
low-cost communications test products, from tone generators and optical fault
finders to cable verifiers.

Significant Test Tools customers of the Company include Farnell/Newark
Electronics, RS Components and W.W. Grainger.

PRECISION MEASUREMENT INSTRUMENTS - The Company's Precision Measurement
Instruments products are used in metrology, engineering and manufacturing
environments worldwide to calibrate electronic equipment and certify
compliance with


                                      5

<PAGE>

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 Precision Measurement Instruments market by capitalizing on its
technical expertise, relationships with national laboratories and product
reputation.

Because the need to calibrate electronic equipment is universal across a wide
range of industries, the list of customers includes a large number of well
known names in aerospace, defense, communications, semiconductor, automotive,
industrial electronic and instrumentation industries. Examples of Precision
Measurement Instruments customers of the Company include Kodak, Nokia,
Northrop Grumman Corporation, Samsung, Tektronix, the U.K. and German
military, the U.S. Army and Navy and Yokogawa Electric Corporation.

ELECTROMAGNETIC MEASUREMENT INSTRUMENTS - The Company's electromagnetic
measurement instruments, which the Company created to leverage its
competencies in high frequency radio frequency testing to address the
environmental test market, represent a family of hand-held products that
measure electric and magnetic fields produced by most electronic and radio
devices.  Due to increased worldwide regulation of permissible levels of
electromagnetic radiation, these products have application in the servicing
of high power lines, high electric power consumption equipment such as
melting machines, telecommunications equipment, radar, radio and television
broadcasting, cellular base stations and many others, including microwave
cooking equipment.

GEOGRAPHIC AND SEGMENT INFORMATION

Based on its organizational structure, the Company operates in two reportable
segments: communications test and other test products.  The Company's
reportable segments represent business units that primarily offer similar
products and services.  The Company's communications test business includes
Telecom Networks, Enterprise Networks, Multimedia, Wireless and the service
business.  Other Test Products include Test Tools, Precision Measurement
Instruments and electromagnetic measurement instruments.


                                     6

<PAGE>

Information about the Company's operating segments for the fiscal year ended
September 30, 1999 is as follows (in thousands):

<TABLE>
<CAPTION>
                                                           COMMUNICATIONS    OTHER TEST
                                                                TEST          PRODUCTS     CORPORATE      TOTAL
                                                          -----------------  -----------  -----------  ------------
<S>                                                       <C>                <C>          <C>          <C>
REVENUES:
  Revenues from external customers......................    $     468,231     $  29,011    $      16   $    497,258
  Intersegment revenues.................................          225,662        32,282           --        257,944
  Elimination of intersegment revenues..................         (225,662)      (32,282)          --       (257,944)
                                                            -------------     ---------    ---------   ------------
    Total revenues......................................    $     468,231     $  29,011    $      16   $    497,258
                                                            =============     =========    =========   ============
OPERATING INCOME (LOSS):
  Operating income (loss) on reportable segments(1).....    $      36,486     $   2,261    $  (5,837)  $     32,910
  Amortization of intangible assets.....................            2,488           154       17,325         19,967
  Restructuring and other non-recurring charges.........               --            --        2,379          2,379
  Elimination of intersegment profits...................               --            --          285            285
                                                            -------------     ---------    ---------   ------------
    Operating income (loss) (2).........................           33,998         2,107      (25,826)        10,279
  Net interest expense:
    Interest (revenue)..................................             (615)          (38)         (24)          (677)
    Interest expense....................................            4,682           290       15,993         20,965
                                                            -------------     ---------    ---------   ------------
      Net interest expense..............................            4,067           252       15,969         20,288
  Other expense, net....................................               --         1,368         (299)         1,069
                                                            -------------     ---------    ---------   ------------
Income (loss) before provision (benefit) for income
  taxes and minority interest in income (loss)..........    $      29,931     $     487    $ (41,496)  $    (11,078)
                                                            =============     =========    =========   ============

ASSETS:
  Total assets from reportable segments.................    $     187,502     $  10,351    $ 154,905   $    352,758
  Elimination of receivables from corporate.............          (58,076)       (3,602)          --        (61,678)
                                                            -------------     ---------    ---------   ------------
                                                                  129,426         6,749      154,905        291,080
  Unallocated goodwill..................................               --            --       53,860         53,860
  Unallocated acquired core technologies................               --            --       74,290         74,290
  Unallocated other intangibles.........................               --            --       15,503         15,503
                                                            -------------     ---------    ---------   ------------
    Total assets........................................    $     129,426     $   6,749    $ 298,558   $    434,733
                                                            =============     =========    =========   ============
</TABLE>
------------------------
Notes:

(1) Operating income (loss) on reportable segments is defined by management as
    operating income (loss), including intersegment profits, and excluding
    amortization of intangible assets and restructuring and other non-recurring
    charges.

(2) Per consolidated statement of operations.


                                       7

<PAGE>

Information about the Company's operating segments for the fiscal year ended
September 30, 1998 is as follows (in thousands):

<TABLE>
<CAPTION>
                                                           COMMUNICATIONS    OTHER TEST
                                                                TEST          PRODUCTS     CORPORATE      TOTAL
                                                          -----------------  -----------  -----------  ------------
<S>                                                       <C>                <C>          <C>          <C>
REVENUES:
  Revenues from external customers......................    $     318,745     $   9,061    $      82   $    327,888
  Intersegment revenues.................................           37,289            --           --         37,289
  Elimination of intersegment revenues..................          (37,289)           --           --        (37,289)
                                                            -------------     ---------    ---------   ------------
    Total revenues......................................    $     318,745     $   9,061    $      82   $    327,888
                                                            =============     =========    =========   ============

OPERATING INCOME (LOSS):
  Operating income (loss) on reportable segments(1).....    $      28,464     $    (200)   $   1,972   $     30,236
  Amortization of intangible assets.....................            1,182            --           --          1,182
  Acquired in-process research and development..........           21,125            --       11,800         32,925
  Restructuring and other non-recurring charges.........            9,369            --           --          9,369
  Elimination of intersegment profits...................               --            --        1,116          1,116
                                                            -------------     ---------    ---------   ------------
    Operating income (loss) (2).........................           (3,212)         (200)     (10,944)       (14,356)
  Net interest expense:
    Interest (revenue)..................................             (580)          (16)        (381)          (977)
    Interest expense....................................            3,938           112        3,579          7,629
                                                            -------------     ---------    ---------   ------------
      Net interest expense..............................            3,358            96        3,198          6,652
  Other (income) expense, net...........................           (1,969)         (126)       6,909          4,814
                                                            -------------     ---------    ---------   ------------
Income (loss) before provision (benefit) for income
  taxes and minority interest in income (loss)..........    $      (4,601)    $    (170)   $ (21,051)  $    (25,822)
                                                            =============     =========    =========   ============

ASSETS:
  Total assets from reportable segments.................    $     218,421     $   9,856    $ 145,335   $    373,612
  Elimination of receivables from corporate.............          (43,759)       (1,242)          --        (45,001)
                                                            -------------     ---------    ---------   ------------
                                                                  174,662         8,614      145,335        328,611
  Unallocated goodwill..................................               --            --       56,789         56,789
  Unallocated acquired core technologies................               --            --       84,100         84,100
  Unallocated other intangibles.........................               --            --       15,024         15,024
                                                            -------------     ---------    ---------   ------------
    Total assets........................................    $     174,662     $   8,614    $ 301,248   $    484,524
                                                            =============     =========    =========   ============
</TABLE>
------------------------
Notes:

(1) Operating income (loss) on reportable segments is defined by management as
    operating income (loss), including intersegment profits, and excluding
    amortization of intangible assets, acquired in-process research and
    development and restructuring and other non-recurring charges.

(2) Per consolidated statement of operations.

                                      8

<PAGE>

Information about the Company's operating segments for the fiscal year ended
September 30, 1997 is as follows (in thousands):

<TABLE>
<CAPTION>
                                                                        COMMUNICATIONS    OTHER TEST
                                                                             TEST          PRODUCTS       TOTAL
                                                                       -----------------  -----------  -----------
<S>                                                                    <C>                <C>          <C>
REVENUES:
  Revenues from external customers...................................    $     274,135     $   7,752   $   281,887
  Intersegment revenues..............................................           29,944           847        30,791
  Elimination of intersegment revenues...............................          (29,944)         (847)      (30,791)
                                                                         -------------     ---------   -----------
    Total revenues...................................................    $     274,135     $   7,752   $   281,887
                                                                         =============     =========   ===========
OPERATING INCOME (LOSS):
  Operating income (loss) on reportable segments(1)..................    $      23,233     $     570   $    23,803
  Amortization of intangible assets..................................            1,346            --         1,346
  Acquired in-process research and development.......................            1,743            --         1,743
                                                                         -------------     ---------   -----------
    Operating income (loss) (2)......................................           20,144           570        20,714
  Net interest expense:
    Interest (revenue)...............................................           (1,566)          (44)       (1,610)
    Interest expense.................................................            8,275           234         8,509
                                                                         -------------     ---------   -----------
      Net interest expense...........................................            6,709           190         6,899
  Other (income) expense, net........................................             (768)          (22)         (790)
                                                                         -------------     ---------   -----------
Income (loss) before provision (benefit) for income taxes and
  minority interest in income (loss).................................    $      14,203     $     402   $    14,605
                                                                         =============     =========   ===========

ASSETS:
  Total assets from reportable segments..............................    $     211,752     $   5,988   $   217,740
  Unallocated goodwill...............................................               --            --         4,468
                                                                         -------------     ---------   -----------
    Total assets.....................................................    $     211,752     $   5,988   $   222,208
                                                                         =============     =========   ===========
</TABLE>
------------------------
Notes:

(1) Operating income (loss) on reportable segments is defined by management as
    operating income (loss), including intersegment profits, and excluding
    amortization of intangible assets and acquired in-process research and
    development.

(2) Per consolidated statement of operations.

                                       9

<PAGE>

Information about the Company's operations by geographic areas is shown in the
table below. The Company manages its operations in two primary geographic areas:
(i) North American operations which includes the United States, Canada, Mexico,
Central and South America, and (ii) European Operations which includes Europe
and Asia-Pacific.

Net sales represents the locations of sales to the Company's customers. Income
(loss) before provision (benefit) for income taxes and total assets is 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,
                                                                           ---------------------------------------
                                                                               1999         1998          1997
                                                                           ------------  -----------  ------------
                                                                                       (IN THOUSANDS)
<S>                                                                        <C>           <C>          <C>
Net sales:
  Europe.................................................................  $    231,494  $   176,437  $    148,037
  Canada, Mexico, Central and South America..............................        76,281       69,725        62,922
  Asia-Pacific...........................................................        71,933       44,258        40,417
  United States..........................................................       117,550       37,468        30,511
                                                                           ------------  -----------  ------------
Consolidated net sales...................................................  $    497,258  $   327,888  $    281,887
                                                                           ============  ===========  ============
  Income (loss) before provision (benefit) for income taxes and minority
    interest in income (loss):
  Europe.................................................................  $     17,361  $    14,871  $     28,056
  Canada, Mexico, Central and South America..............................          (232)         131         1,668
  Asia-Pacific...........................................................           726          864          (203)
  United States..........................................................       (28,090)     (38,495)       (1,329)
  Eliminations...........................................................          (843)      (3,193)      (13,587)
                                                                           ------------  -----------  ------------
  Consolidated income (loss) before provision (benefit) for income taxes
    and minority interest in income (loss)...............................  $    (11,078) $   (25,822) $     14,605
                                                                           ============  ===========  ============
Total assets:
  Europe.................................................................  $    421,078  $   515,203  $    364,722
  Canada, Mexico, Central and South America..............................        24,927       26,174        12,786
  Asia-Pacific...........................................................        21,493       14,341        14,095
  United States..........................................................       424,741      263,101        42,432
  Eliminations...........................................................      (457,506)    (334,295)     (211,827)
                                                                           ------------  -----------  ------------
Consolidated total assets................................................  $    434,733  $   484,524  $    222,208
                                                                           ============  ===========  ============
</TABLE>

CUSTOMERS

The Company sells its products to a broad base of over 5,000 customers
worldwide. The largest group of users of the Company's products are
communications equipment manufacturers, public network operators and information
service departments of corporations and government entities. The Company's
customers include (1) global communications equipment manufacturers such as
Alcatel, Cisco Systems, Ericsson, IBM, Lucent Technologies, Motorola, Nortel,
NCR and Siemens, (2) communications service providers such as AT&T, TCI,
Deutsche Telekom, France Telecom, Embratel, China Telecom and Time Warner Cable
and (3) the information service departments of corporations and governmental
entities such as Boeing, DaimlerChrysler and the U.S. Navy.

For fiscal 1999, no one customer accounted for more than 5% of the Company's
sales, and the top ten customers, each of which is a global company with global
affiliates, represented approximately 18% of the Company's sales.


                                       10
<PAGE>

SALES AND MARKETING

The Company sells its products through (1) its global sales and service
organization of approximately 850 employees in over 30 countries and (2) a
global network of over 250 distributors, resellers and independent
representatives, which together provide the Company with a sales and service
presence in over 85 countries.  The Company has design and manufacturing
capabilities through 11 major facilities located in the United States,
Germany, France, the United Kingdom, Switzerland and Brazil.

The Company leverages its comprehensive product offering and global
distribution capabilities with a global key account program which targets
many of the world's largest equipment vendors and service providers. The
Company believes these customers seek to form strategic alliances with those
communications test equipment vendors that can provide total life cycle
solutions for a wide range of communications networks and equipment. The
global key account program offers these customers a high level of service in
order to help pre-determine their testing requirements. In addition, the key
account representatives coordinate with the Company's worldwide design,
manufacturing, sales and service resources to offer a package of
comprehensive testing solutions.

Other customers with application-specific testing needs are addressed by a
broad network of technical distributors and independent representatives,
which are supported by the Company's own indirect sales management
organization.  The Company's contracts with these distributors and
independent representatives are generally short-term in nature and typically
can be terminated by either party with 30 to 90 days notice.  The
multipurpose Test Tools and certain LAN products are marketed by a dedicated
general distribution sales force working with a large network of specialized
distributors and catalog sales companies.

The Company markets its products through advertisements, direct mail,
seminars, the Internet, participation in trade shows and the publication of
quarterly newsletters for customers highlighting the Company's products and
describing industry trends.  The Company engages in worldwide marketing
activities, and tailors its marketing message to meet the distinct needs of
region and culture.  The Company believes its products have developed high
visibility, including favorable recognition in several significant trade
publications.

PRODUCT DEVELOPMENT

The Company seeks to develop and introduce products that are responsive to
market needs on a timely basis. The Company designs products for global
markets and often deploys market research and product definition teams
worldwide to meet and work with major customers in order to determine and
address their needs.  The Company invested $71.4 in fiscal 1999 in research
and development activities.  As of September 30, 1999, the Company had
approximately 530 research and development employees, many of whom have
advanced degrees in electrical engineering, computer engineering or computer
science.  The Company has made a significant effort in recent years to
supplement its engineering staff with engineers skilled in 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.

In order to access information about new technologies and standards in the
communications industry, the Company is an active member of several
international standards bodies, such as American National Standards Institute
("ANSI"), European Telecommunications Standards Institute ("ETSI"),
International Telecommunications Union-Telecommunications Standardization
Sector ("ITU-T"), Internet Engineering Task Force ("IETF"), Institute of
Electrical and Electronic Engineers ("IEEE"), Frame Relay Forum and ATM Forum.

                                     11

<PAGE>

MANUFACTURING AND SUPPLIERS

The Company has five manufacturing facilities worldwide: Indianapolis,
Indiana; Research Triangle Park, North Carolina; Eningen, Germany; Norwich,
United Kingdom and Plymouth, United Kingdom. In addition, the Company has
final assembly and testing facilities in St. Etienne, France; Munich, Germany
and Sao Paulo, Brazil. The Company has product design facilities at each of
its manufacturing and assembly facilities, as well as in San Diego,
California; Rennes, France and Zurich, Switzerland. The Company outsources
certain of its manufacturing to subcontractors, including certain printed
circuit boards and total manufacturing for its Test Tools products, which are
primarily manufactured by third party suppliers 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. Although
the Company has not experienced any significant problems in obtaining
sole-sourced components, it may experience certain problems from time to time
and typically carries extra inventory of critical sole-sourced components.
The inability to develop alternative sources, if required, or a reduction or
interruption in supply or a significant increase in the price of one or more
sole-sourced components would adversely affect the Company's business,
financial condition and results of operations.

All of the Company's manufacturing and final assembly facilities are
certified under ISO 9002, and five of the Company's facilities have received
certification under ISO 9001, the highest available certification for a
development and manufacturing company. The Company's certifications under ISO
9001 and 9002 certify that its product development, manufacturing,
installation and maintenance practices meet certain predetermined standards.
In addition, the Company received certification under ISO 14001, which
relates to environmental compliance for Germany, in 1996.

BACKLOG

As of September 30, 1999 and 1998, the Company had a firm order backlog of
$89.2 million and $76.9 million.  Backlog reflects firm customer orders for
products and services, a majority of which is scheduled for shipment within
12 months.  The level of backlog at any particular time is not necessarily
indicative of future operating performance of the Company. Delivery schedules
may be extended, and orders may be cancelled at any time; subject to certain
cancellation penalties.

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
position 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.
The Company believes that Agilent Technologies (formerly a part of Hewlett
Packard) is the

                                      12

<PAGE>

only company other than the Company that offers a comprehensive
communications test product line with global sales coverage. Major
competitors which compete in individual product markets or geographic areas
include Anritsu, Dynatech Microtest, Network Associates, Rohde & Schwarz, IFR
Systems, GN Nettest and Tektronix. 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 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.

EMPLOYEES

As of September 30, 1999, the Company employed approximately 2,700 people, of
which approximately 530 were engaged in product development activities, 650
in manufacturing operations and quality control, 310 in marketing, 850 in
sales and service, and the remainder in management and administrative
capacities. Most 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 highly skilled employees. Certain of the Company's employees in
Europe are members of standard unions.  The Company believes its relationship
with its employees is good.

                                      13

<PAGE>

ITEM 2. PROPERTIES

The information included below reflects the Company's current operating and
administrative facilities:

<TABLE>
<CAPTION>
                                                                                                             LEASE
LOCATION                            FACILITY TYPE/USE                       SIZE OF FACILITY      TITLE     EXPIRATION
---------------------      ------------------------------------------       ----------------      -----     ----------
<S>                        <C>                                              <C>                   <C>       <C>
Eningen, Germany           Corporate offices; German sales/service           779,000 sq. ft.      Owned         N/A
                           headquarters; design, manufacturing and
                           marketing for Telecom Networks transport
                           products and certain Wireless test products

Research Triangle          Corporate offices; US sales/service                50,800 sq. ft.      Leased      9/30/2005
Park, North Carolina       headquarters; design, manufacturing and            93,100 sq. ft.      Leased      9/30/2010
                           marketing for Enterprise Networks products (1)

Indianapolis, Indiana      Design, manufacturing and marketing for           206,000 sq. ft. (2)  Leased     10/21/2014
                           Multimedia and certain Wireless
                           products; manufacturing for certain Enterprise
                           Networks products

Plymouth, United           Design, manufacturing and marketing for            86,400 sq. ft.      Owned         N/A
Kingdom                    Telecom Networks local loop products

San Diego, California      U.S. distribution center for Test Tools;           70,000 sq. ft.      Leased      6/30/2006
                           design and marketing for Enterprise
                           Networks LAN cable products and certain
                           Multimedia products (3)

Munich, Germany            Design, final assembly and marketing for           51,000 sq. ft.      Leased     12/31/2001
                           certain Wireless products

Norwich, United            Design, manufacturing and marketing for            40,000 sq. ft.      Owned         N/A
Kingdom                    Precision Measurement Instruments;                 3.2 acres-land      Leased      3/17/2103
                           European distribution center for Test Tools

Sao Paulo, Brazil          Manufacturing and design for the Brazilian         32,400 sq. ft.      Owned         N/A
                           market, service

St. Etienne, France        Design, final assembly and marketing for           23,400 sq. ft.      Leased      9/30/2005
                           Telecom Networks fiber optics products

Rennes, France             Design and marketing for Multimedia digital        16,200 sq. ft.      Owned         N/A
                           video and Telecom Network ISDN products

Zurich, Switzerland        Design and marketing for Telecom Networks          15,700 sq. ft.      Leased      9/30/2000
                           switching products

Milan, Italy               Sales/Service office                               11,200 sq. ft.      Owned         N/A

Baden, Austria             Sales/Service office                               10,800 sq. ft.      Owned         N/A

Bern, Switzerland          Sales/Service office                                9,800 sq. ft.      Owned         N/A

Scarborough, Ontario,      Sales/Service office                                8,200 sq. ft.      Owned         N/A
Canada

Buenos Aires,              Sales/Service office                                3,400 sq. ft.      Owned         N/A
Argentina

</TABLE>

                       (SEE NOTES ON THE FOLLOWING PAGE)

                                       14

<PAGE>

------------------
Notes:

(1)  The Company leases this facility from a partnership owned by the
     Goltermann family. The Company has a right of first refusal to purchase
     this property in the event the lessor proposes to sell it during the
     initial or any renewal term.

(2)  120,739 sq. ft. of this facility are subleased to unrelated parties
     through October 31, 2004.

(3)  The Company leases this facility from a company controlled by Terence J.
     Gooding, Co-Chairman of the Company.

The Company also leases sales/service offices in 33 countries: Argentina,
Australia, Austria, Brazil (two small offices are owned), Canada, China,
Colombia, France, Germany, Guatemala, Hungary, India, Indonesia, Italy,
Japan, Malaysia, Mexico, Netherlands, New Zealand, Pakistan, Philippines,
Poland, Russia, Singapore, Slovakia, South Korea, Spain, Sweden (own building
on leasehold), Switzerland, Turkey, United Kingdom, United States and
Venezuela.

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 known claims or related lawsuits would have a material
adverse effect on the Company's results of operations, financial condition,
cash flows or its ability to develop new products.

The Company hired a new chief financial officer as of October 1, 1999 and
terminated his employment on December 14, 1999.  The individual has disputed
the basis for his termination and is claiming that he is entitled to his
compensation for the remainder of the two year term of his employment
contract.  The Company does not believe the magnitude of this dispute is
material to the Company.

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

None.

PART II

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

There is no established market for the Company's common stock.  The Company
currently has no restrictions on the payment of dividends.  Dividends of $3.6
million were paid during fiscal year ended September 30, 1998.  No dividends
were paid during the fiscal year ended September 30, 1999 and the Company
does not plan to pay any dividends in the foreseeable future.

As of December 20, 1999, there were approximately 40 holders of record.

                                     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 in Item 8
herein and the information contained in "Management's Discussion and Analysis
of Financial Condition and Results of Operations" included in Item 7 herein.
Although WG became a subsidiary of Wavetek, the Exchange Transaction was
treated, for accounting and reporting purposes, as a purchase of Wavetek by
WG. Accordingly, the selected consolidated financial data of the Company as
of any date or for any period prior to September 30, 1998, are the historical
consolidated selected financial data of WG.

<TABLE>
<CAPTION>
                                                                          YEARS ENDED SEPTEMBER 30,
                                                            -----------------------------------------------------
                                                              1999       1998       1997       1996       1995
                                                            ---------  ---------  ---------  ---------  ---------
                                                                           (DOLLARS IN THOUSANDS)
<S>                                                         <C>        <C>        <C>        <C>        <C>
STATEMENT OF OPERATIONS DATA:
Net sales.................................................  $ 497,258  $ 327,888  $ 281,887  $ 242,984  $ 227,455
Cost of goods sold........................................    204,733    130,863    113,812     98,466     92,336
                                                            ---------  ---------  ---------  ---------  ---------
Gross margin..............................................    292,525    197,025    168,075    144,518    135,119
Operating expenses:
  Marketing and selling...................................    146,387     95,338     82,687     68,938     70,815
  Research and development................................     71,439     47,730     37,322     34,528     37,044
  General and administrative..............................     42,074     24,837     24,263     27,003     27,287
  Amortization of intangible assets.......................     19,967      1,182      1,346         --         --
  Acquired in-process research and development (1)........         --     32,925      1,743        362         --
  Provisions for restructuring operations and other non-
    recurring charges (2).................................      2,379      9,369         --         --      6,855
                                                            ---------  ---------  ---------  ---------  ---------
                                                              282,246    211,381    147,361    130,831    142,001
                                                            ---------  ---------  ---------  ---------  ---------
Operating income (loss)...................................     10,279    (14,356)    20,714     13,687     (6,882)
Other (income) expense, net:
  Interest income.........................................       (677)      (977)    (1,610)    (1,172)    (1,332)
  Interest expense........................................     20,965      7,629      8,509      9,340     10,591
  Other, net..............................................      1,069      4,814       (790)      (861)       602
                                                            ---------  ---------  ---------  ---------  ---------
    Other (income) expense, net...........................     21,357     11,466      6,109      7,307      9,861
                                                            ---------  ---------  ---------  ---------  ---------
Income (loss) before provision (benefit) for income
  taxes...................................................    (11,078)   (25,822)    14,605      6,380    (16,743)
Provision (benefit) for income taxes......................     (3,082)     6,541      7,362       (250)   (10,667)
Minority interest in income (loss)........................         --     (5,096)       185      2,273        536
                                                            ---------  ---------  ---------  ---------  ---------
Net income (loss).........................................  $  (7,996) $ (27,267) $   7,058  $   4,357  $  (6,612)
                                                            =========  =========  =========  =========  =========

Basic and diluted earnings (loss) per share...............  $   (0.61) $   (3.28) $    0.85  $    0.52  $   (0.79)

OTHER FINANCIAL DATA:
EBITDA (3)................................................  $  50,826  $  38,152  $  32,161  $  23,366  $   9,288
Depreciation and amortization expenses....................     35,468     10,214      9,704      9,317      9,315
EBITDA as a percentage of sales...........................       10.2%      11.6%      11.4%       9.6%       4.1%
Ratio of earnings to fixed charges (4)....................        0.5x      (1.7)x      2.5x       1.6x      (0.2)x

BALANCE SHEET DATA (5):
Cash and cash equivalents (6).............................  $  17,089  $   6,635  $   9,400  $  14,416  $   8,857
Total assets..............................................    434,733    484,524    222,208    235,935    232,395
Total debt (7)............................................    262,516    248,328     93,901    116,232    123,540
Stockholders' equity......................................     17,937     25,414     18,607      9,408      2,225
Dividends paid (8)........................................         --      3,593      1,987         --         --
Dividends paid per share..................................         --       0.43       0.24         --         --
</TABLE>

                         (SEE NOTES ON FOLLOWING PAGE)

                                      16

<PAGE>

------------------------
Notes:

(1) In connection with the Exchange Transaction and its acquisitions of Wandel &
    Goltermann Technologies, Inc. ("WGTI"), Switching Test Solutions AG, Tinwald
    Networking Technologies Inc., and Network Intelligence, Inc., the Company
    recorded acquired in-process research and development of $32.9 million in
    fiscal 1998, $1.7 million in fiscal 1997 and $0.4 million in fiscal 1996.

(2) In fiscal 1999, the Company implemented a restructuring program to reduce
    expenses and recorded provisions for restructuring of $2.4 million,
    primarily for severance costs. In connection with the Exchange Transaction,
    the acquisition of WGTI and related restructuring activities, the Company
    recorded provisions for restructuring operations and other non-recurring
    charges of $9.4 million in fiscal 1998. In fiscal 1995, the Company
    initiated activities to restructure certain German and U.S. manufacturing,
    research and development and marketing activities in order to reduce the
    level of expenses in relation to net sales. As a result, the Company
    recorded provisions for restructuring of $6.9 million in fiscal 1995,
    primarily for employee severance and inventory write-offs. These
    restructuring activities were completed during fiscal 1996.

(3) EBITDA, as defined in the Indenture related to the Company's 10.125% Senior
    Subordinated Notes due June 15, 2007 (the "Indenture"), is operating income
    plus depreciation and amortization expense, acquired in-process research and
    development and provisions for restructuring operations and other
    non-recurring charges. 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 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.

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

(5) The consolidated balance sheet data of the Company as of September 30, 1998
    reflects the Exchange Transaction.

(6) Cash and cash equivalents includes short-term investments, which are
    comprised primarily of investment grade commercial paper, U.S. Treasury
    securities and guaranteed obligations of the U.S. government or its agencies
    with original maturities of less than 90 days. In fiscal 1998, cash and cash
    equivalents was reduced by $28.9 million, received on September 30, 1998,
    for the purpose of repaying in full on October 2, 1998, the debt outstanding
    under the Wavetek New Credit Agreement. This was an 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"), which was also acquired through the Exchange
    Transaction.

(7) Total debt includes notes payable to banks, long-term obligations including
    current maturities and long-term obligations to related parties including
    current maturities. Total debt at September 30, 1998 has been reduced by
    $28.9 million which was received on September 30, 1998, for the purpose of
    repaying in full on October 2, 1998, the debt outstanding under the Wavetek
    New Credit Agreement.

                                      17

<PAGE>

(8) Dividends in fiscal 1998 were comprised of cash dividends paid of $2.0
    million, a decrease in notes receivable from related parties of $0.7
    million, and an increase in long-term obligations to related parties of
    $0.9 million. Dividends in fiscal 1997 were comprised of cash dividends
    paid of $1.2 million, a decrease in notes receivable from related parties
    of $0.4 million, and an increase in long-term obligations to related
    parties of $0.4 million.

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 in Item 8 herein.

OVERVIEW

On September 30, 1998, Wavetek and WG consummated the Exchange Transaction
whereby the stockholders of WG became stockholders of Wavetek, and WG became a
subsidiary of Wavetek. Following the Exchange Transaction, Wavetek was renamed
Wavetek Wandel Goltermann, Inc. Although WG became a subsidiary of Wavetek, the
Exchange Transaction was treated, for accounting and financial reporting
purposes, as a purchase of Wavetek by WG. Accordingly, the consolidated
financial statements of the Company and the results of operations of the Company
as of any date or for any period prior to September 30, 1998, are the historical
consolidated financial statements of WG. The consolidated balance sheets of the
Company as of September 30, 1999 and 1998 reflect the Exchange Transaction and
the related purchase accounting adjustments. The Company's net sales, cost of
goods sold, gross margin, operating expenses and interest expense have increased
significantly in fiscal 1999 as a result of the Exchange Transaction. The
Company's operating expenses also have increased as a result of Wavetek's
acquisition of Digital Transport Systems Inc., effective September 30, 1998. In
the following discussion, all references to "pro forma" financial information
mean the combined historical results of operations of Wavetek and WG for the
period indicated, as if the Exchange Transaction had been consummated as of
October 1, 1997.

GENERAL

The Company is a leading global designer, manufacturer and marketer of a broad
range of communications test instruments used to develop, manufacture, install
and maintain communications networks and equipment. The Company conducts its
communications test business, which addresses most sectors of the communications
test market, in four product areas: (1) Telecom Networks (traditional voice/data
transmissions and new multi-service networks), (2) Enterprise Networks (local
and wide-area network infrastructures), (3) Multimedia (cable television and
digital video broadcast) and (4) Wireless (mobile telephony and data). These
products provide comprehensive testing solutions to a wide range of end users.
The Company's high-end instruments are used during the product development phase
to stress test product functionality and performance. Other products are used
during the production process to verify conformance to manufacturing
specifications, while the Company's enhanced portable field service tools enable
field technicians to quickly install, repair and maintain complex network
infrastructure as well as validate service levels. The Company also provides
distributed remote test systems to many of its service provider customers, which
allow such customers to more efficiently utilize their network engineers to
monitor and test service levels, and designs, manufactures and sells precision
measurement instruments and general-purpose handheld test tools. In addition,
the Company provides repair, upgrade and calibration services, as well as
value-added professional services such as consulting, training and rental
services on a worldwide basis.

The Company's operating expenses are substantially impacted by marketing and
selling activities as well as by research and development activities. Marketing
and selling expenses are primarily driven by: (1) sales volume, with respect to
sales force expenses and commission expenses; (2) the extent of market research
activities for new product design efforts; (3) advertising

                                      18

<PAGE>

and trade show activities and (4) the number of new products launched in the
period. In recent periods, the Company has increased its spending on research
and development activities primarily to accelerate the timing of new product
introductions. General and administrative expenses primarily include costs
associated with the Company's administrative employees, facilities and
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. 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.

RESULTS OF OPERATIONS

The following table sets forth selected financial information as a percentage of
net sales for the periods indicated:

<TABLE>
<CAPTION>
                                                 YEARS ENDED SEPTEMBER 30,
                                              -------------------------------
                                                1999       1998       1997
                                              ---------  ---------  ---------
<S>                                           <C>        <C>        <C>
Net sales...................................  100.0%      100.0%     100.0%
Cost of goods sold..........................   41.2        39.9       40.4
                                              -----       -----      -----
  Gross margin..............................   58.8        60.1       59.6
Operating expenses..........................   56.7        64.5       52.3
                                              -----       -----      -----
  Operating income (loss)...................    2.1        (4.4)       7.3
Other (income) expense, net.................    4.3         3.5        2.2
Provision (benefit) for income taxes........   (0.6)        2.0        2.6
Minority interest in income (loss)..........     --        (1.6)        --
                                              -----       -----      -----
Net income (loss)...........................   (1.6)%      (8.3)%      2.5%
                                              =====       =====      =====
</TABLE>

FISCAL YEAR ENDED SEPTEMBER 30, 1999 COMPARED TO FISCAL YEAR ENDED SEPTEMBER 30,
1998

NET SALES.  Net sales in fiscal 1999 increased $169.4 million, or 51.7%, to
$497.3 million from $327.9 million in the comparable fiscal 1998 period. This
reflects an increase primarily due to the addition of sales from Wavetek
following the Exchange Transaction. As a result, there was an increase in sales
in all geographical areas, including an increase of $55.0 million, or 31.2% in
European sales and an increase of $80.1 million, or 213.7% in sales to customers
in the United States. Sales to international customers increased $89.3 million,
or 30.7%, to $379.7 million and sales to customers in the United States
increased $80.1 million, or 213.7%, to $117.6 million. The Company's sales to
customers outside the United States decreased to 76.4% of total sales in fiscal
1999 from 88.6% in the comparable fiscal 1998 period. Changes in certain foreign
exchange rates had a $12 million or 2.4% unfavorable impact on the United States
dollar equivalent of the Company's sales denominated in foreign currencies
during fiscal 1999. Sales of the Company's communications test products in
fiscal 1999 increased $149.5 million, or 46.9%, from the comparable fiscal 1998
period to $468.2 million also primarily due to the addition of sales from
Wavetek following the Exchange Transaction. Sales for the year for Other Test
products increased $20.0 million, or 222.2%, from the comparable fiscal 1998
period to $29.0 million.

The Company's net sales in fiscal 1999 increased $27.6 million, or 5.9%, to
$497.3 million from pro forma net sales of $469.7 million in the comparable
fiscal 1998 period. Sales of Communication Test products on a pro forma basis
increased by $35.9 million. Sales increased primarily in the Cable TV,
Optical Fiber and Switching Test product lines. The increase in CATV occurred
primarily in the U.S. market as a result of strong infrastructure investment
by CATV operators. The increase in Optical Fiber and Switching test equipment
can be attributed to new product introductions, such as the MTS 5000 Series
OTDR and the SS7 switching tester for mobile operators. The increases were
offset by Local Loop and Transport test products due to decreased sales of
primarily older products. Sales of the ANT-20 remained high due to the
introduction of

                                      19


<PAGE>

new software and hardware options, and although sales decreased because to the
timing of shipments, orders remained stable. Sales of Other Test products on a
pro forma basis decreased by $8.2 million.

GROSS MARGIN.  The Company's gross margin in fiscal 1999 increased $95.5
million, or 48.5%, to $292.5 million from $197.0 million in the comparable
fiscal 1998 period due to the added gross margin on the Wavetek sales following
the Exchange Transaction. Gross margin for Communication Test products, on a pro
forma basis, marginally decreased from 60.0% to 58.5%. The decrease in the gross
margin percentage during fiscal 1999 resulted primarily from increased price
competition in certain markets in which the Company sells and from the impact of
the change in the mix of products sold. Gross margin in fiscal 1999 was also
impacted by a one-time increase in cost of goods sold resulting from the
adjustment of inventories to fair value in connection with the Exchange
Transaction. Changes in foreign exchange rates had a small unfavorable impact on
the United States dollar equivalent of gross margins related to international
sales denominated in foreign currencies in fiscal 1999. On a pro forma basis,
the gross margin for Other Test products increased from 46.2% in fiscal 1998 to
64.5% in fiscal 1999, primarily due to an increased gross margin in precision
measurement and EMF products.

OPERATING EXPENSES.  Operating expenses in fiscal 1999 increased $70.9
million, or 33.5%, to $282.2 million from $211.4 million in the comparable
fiscal 1998 period due primarily to the addition of expenses from Wavetek
following the Exchange Transaction. In addition, the increase is also
attributable to $2.4 million restructuring and non-recurring costs primarily
related to the reorganization of the sales organizations in South America and
Europe. Operating expenses as a percentage of sales decreased to 56.7% in fiscal
1999 from 64.5% in the comparable fiscal 1998 period. Marketing and selling
expenses increased $51.1 million, or 53.6%, to $146.4 million (29.4% of sales)
in fiscal 1999 from $95.3 million (29.1% of sales) in the comparable fiscal 1998
period due primarily to the addition of marketing and selling expenses from
Wavetek following the Exchange Transaction. On a pro forma basis, marketing and
selling expenses increased from 27.1% to 29.4% of sales. Increases resulted from
strategic investments in the sales organization, such as the establishment of a
marketing development organization, the development of indirect sales channels
and increased technical support for the systems business. In addition, Wavetek
invested in the establishment of a business development organization for their
specific operations. Spending for research and development activities increased
$23.7 million, or 49.7%, to $71.4 million (14.4% of sales) in fiscal 1999 from
$47.7 million (14.6% of sales) in the comparable fiscal 1998 period due
primarily to the addition of research and development expenses from Wavetek
following the Exchange Transaction and from the acquisition of Digital Transport
Systems, Inc., effective September 30, 1998. On a pro forma basis, research and
development expenses increased from $64.7 million in fiscal 1998 to $71.4
million in fiscal 1999. The Company increased research and development spending
in order to accelerate the timing and number of new product introductions,
primarily in the areas of Transport, Local Loop and Switching products. General
and administrative expenses increased $17.3 million, or 69.8%, to $42.1 million
(8.5% of sales) in fiscal 1999 from $24.8 million (7.6 % of sales) in the
comparable fiscal 1998 period due to the addition of general and administrative
expenses from Wavetek following the Exchange Transaction and from the
acquisition of Digital Transport Systems, Inc., effective September 30, 1998. On
a pro forma basis, general and administrative expenses increased from $40.3
million in fiscal 1998 to $42.1 in fiscal 1999. This increase was attributed to
certain retention expenses and other acquisition compensation expenses related
to the Exchange Transaction. In addition, during fiscal 1999 the Company
increased its general and administrative spending related to its management
information systems and certain other fixed administrative costs. Operating
expenses for fiscal 1999 also reflect an increase in amortization of intangible
assets of $18.8 million, due primarily to the Exchange Transaction. In addition,
expenses for acquired in-process research and development and provisions for
non-recurring charges aggregating $42.3 million in fiscal 1998 that arose in
relation to the Exchange Transaction, were lower by $39.9 million in fiscal
1999. Changes in foreign exchange rates had a small favorable impact on the
United States dollar equivalent of operating expenses denominated in foreign
currencies in fiscal 1999.

OTHER (INCOME) EXPENSE, NET.  Other (income) expense, net, in fiscal 1999
increased by $9.9 million over the comparable fiscal 1998 period to $21.4
million. The increase was primarily due to an increase in the Company's net
interest expense to $20.3 million during fiscal 1999 from $6.7 million in the
comparable fiscal 1998 period, reflecting the addition of Wavetek's

                                       20


<PAGE>

interest expense because of the Exchange Transaction. On a pro forma basis,
net interest expense increased $1.7 million from fiscal 1998 to fiscal 1999
due to an increase in the Company's outstanding debt. Additionally, on a pro
forma basis, other net expenses decreased by $4.1 million, primarily due to
lower foreign currency exchange losses in fiscal 1999 as compared to fiscal
1998.

PROVISION (BENEFIT) FOR INCOME TAXES.  The Company's effective tax rate
takes into account the expected annual mix of income and related tax rates by
taxing jurisdictions. Such effective rate also reflects the non-deductibility of
the amortization expense related to certain intangible assets and other expenses
related to the Exchange Transaction and other acquisitions that occurred during
fiscal 1998. The Company's effective tax rate of 27.8% (as compared to the
statutory tax rate of 35%) in fiscal 1999, or a benefit of $3.1 million, is due
to the recognition of tax loss carryforward benefits of $2.2 million related to
the write-down of stock, the amortization of non-deductible goodwill for tax
purposes of $3.2 million, and foreign and state tax rate differentials. In
fiscal 1998, although the Company incurred a loss before income taxes and
minority interest of $25.8 million, the Company recorded a provision for income
taxes of $6.5 million since $32.9 million of the pre-tax loss was related to
write-offs of acquired in-process research and development, which is not
deductible for income tax purposes. Additionally, in fiscal 1998 the Company
recorded certain valuation allowances against certain credits for income taxes
which would otherwise have reduced the Company's provision for income taxes.

MINORITY INTEREST IN INCOME (LOSS).  There was no loss from minority interest
in fiscal 1999 due to the purchase of the portion of the shares of WGTI in
September 1998 that was not previously owned by WG. Loss from minority
interest in WGTI was $5.1 million in fiscal 1998 as a result of losses
related to the portion of WGTI that was not owned by WG for the majority of
fiscal 1998.

NET INCOME (LOSS).  As a result of the above factors, the net loss was $8.0
million in fiscal 1999 as compared to a net loss of $27.3 million in the
comparable fiscal 1998 period. On a comparative basis, the net loss was $8.0
million in fiscal 1999 compared to a pro forma loss of $35.6 million in fiscal
1998.

FISCAL YEAR ENDED SEPTEMBER 30, 1998 COMPARED TO FISCAL YEAR ENDED SEPTEMBER 30,
1997

NET SALES.  Net sales in fiscal 1998 increased $46.0 million, or 16.3%, to
$327.9 million from $281.9 million in fiscal 1997. This reflects an increase
in sales in all geographic areas, including an increase of $28.4 million, or
19.2%, in European sales and an increase of $7.0 million, or 22.8%, in sales
to customers in the United States. Changes in certain foreign exchange rates
during fiscal 1998 had the effect of reducing the U.S. dollar equivalent of
the Company's foreign currency sales by $19.3 million from the U.S. dollar
equivalent amount that would have been reported if the average exchange rates
in effect for fiscal 1997 had remained in effect for fiscal 1998. Sales of
the Company's communications test products increased $44.7 million, or 16.4%,
from fiscal 1997 primarily due to the acquisition of Switching Test Solutions
AG ('STS'), increased revenues from sales of the Company's ANT-20 product and
continued growth in the markets for the Company's products.

Sales from repair, upgrade and other services increased $1.3 million, or 13.4%,
from fiscal 1997 primarily due to an emphasis on value-added services in
addition to traditional repair and calibration services, increases in the
installed base of the Company's products and growth in the markets for the
Company's products.

GROSS MARGIN.  The Company's gross margin in fiscal 1998 increased $28.9
million, or 17.2%, to $197.0 million from $168.1 million in fiscal 1997.
Gross margin as a percentage of net sales increased slightly to 60.1% in
fiscal 1998 as compared to 59.6% in fiscal 1997 primarily due to increased
sales of products with higher software content or unique product features
that generate higher margins and cost reduction programs in the Company's
manufacturing operations, partially offset by competitive pressures on
pricing. Changes in certain exchange rates had an unfavorable impact of $9.0
million on the U.S.

                                     21

<PAGE>

dollar equivalent of gross margin in fiscal 1998 from the U.S. dollar
equivalent amount that would have been reported if the average exchange rates
in effect for fiscal 1997 had remained in effect for fiscal 1998.

OPERATING EXPENSES.  Operating expenses in fiscal 1998 increased $64.0
million, or 43.4%, to $211.4 million from $147.4 million in fiscal 1997.
Operating expenses as a percentage of sales increased to 64.5% in fiscal 1998
from 52.3% in fiscal 1997. The increase in operating expenses in fiscal 1998
was primarily due to charges for acquired in-process research and development
and provisions for restructuring and other non-recurring charges. In 1998,
the Company recorded charges for acquired in-process research and development
of $11.8 million related to the Exchange Transaction and $21.1 million
related to acquisitions of Wandel & Goltermann Technologies, Inc. ("WGTI"),
STS, Tinwald Networking Technologies, Inc. ("Tinwald") and Network
Intelligence, Inc. ("NI"). The Company also recorded provisions of $4.5
million for restructuring and other non-recurring charges related to the
Exchange Transaction and related restructuring activities and provisions of
$4.8 million in connection with the acquisition of WGTI and related
restructuring activities.

Spending for marketing and selling activities increased $12.6 million to $95.3
million, or 29.1% of net sales, in fiscal 1998 from $82.7 million, or 29.3% of
net sales, in fiscal 1997 primarily due to increased personnel costs to support
higher net sales levels and the acquisition of STS, partially offset by the
favorable impact of changes in foreign exchange rates on the U.S. dollar
equivalent of selling and marketing expenses denominated in foreign currencies.
Spending for research and development activities increased $10.4 million to
$47.7 million, or 14.6% of net sales, in fiscal 1998 from $37.3 million, or
13.2% of net sales, in fiscal 1997 reflecting increases resulting from the
acquisition of STS, Tinwald and NI partially offset by the favorable impact of
changes in foreign exchange rates on the U.S. dollar equivalent of research and
development expenses dominated in foreign currencies. Spending for general and
administrative activities increased $0.4 million, to 7.9% of net sales in fiscal
1998 from 9.1% of net sales in fiscal 1997. General and administrative spending
increased to support higher net sales levels but decreased as a percentage of
net sales primarily reflecting the Company's efforts to spread certain fixed
administrative costs over a higher level of net sales.

OTHER (INCOME) EXPENSE, NET.  Other non-operating expense, net, in fiscal
1998 increased by $5.4 million over fiscal 1997 to $11.5 million. The
increase was primarily due to foreign currency losses recognized on certain
forward exchange contracts as the U.S. dollar weakened significantly against
the German Deutsche mark during fiscal 1998. Interest expense decreased to
$7.6 million in fiscal 1998 compared to $8.5 million in fiscal 1997
reflecting lower average outstanding debt balances. Interest income decreased
to $1.0 million in 1998 from $1.6 million in fiscal 1997 reflecting lower
average cash balances for the year.

PROVISION (BENEFIT) FOR INCOME TAXES.  In fiscal 1998, although the Company
incurred a loss before income taxes and minority interest of $25.8 million, the
Company recorded a provision for income taxes of $6.5 million since $32.9
million of the pre-tax loss was related to write-offs of acquired in-process
research and development, which is not deductible for income tax purposes.
Additionally, in fiscal 1998 the Company recorded certain valuation allowances
against certain credits for income taxes which would otherwise have reduced the
Company's provision for income taxes. In fiscal 1997, the Company recorded a
provision for income taxes of $7.4 million, or 50.4%, of income before provision
for income taxes and minority interest.

MINORITY INTEREST IN INCOME (LOSS).  Loss from minority interest in WGTI was
$5.1 million in fiscal 1998 compared to income of $0.2 million in fiscal 1997.
In September 1998, the portion of WGTI that was not previously owned by WG was
purchased by WG. In fiscal 1998, prior to the acquisition of the minority
interest, WGTI incurred losses which resulted in a loss from minority interest
for the portion of WGTI that was not owned by WG for the majority of fiscal
1998.

NET INCOME (LOSS).  As a result of the above factors, net loss was $27.3
million in fiscal 1998 as compared to net income of $7.1 million in fiscal 1997.

                                     22
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

The Company had cash and cash equivalents at September 30, 1999 of $17.1
million.

The Company's cash provided by operating activities of $5.3 million in fiscal
1999 included a net loss of $8.0 million, increased by non-cash charges of
$35.5 million in depreciation and amortization expense and $2.4 million in
accrued restructuring and other non-recurring charges, and decreased by $12.4
million in deferred income taxes.  In addition, the changes in operating
assets and liabilities between fiscal 1999 and fiscal 1998 produced a
negative cash flow of $12.1 million.  This was primarily due to a substantial
increase in receivables during the last quarter of fiscal 1999 because of the
increase in revenue during this quarter and a decrease in accounts payable
and accrued expenses, only partly compensated by positive cash flow from
reduced inventory levels.

The Company's net cash used in investing activities was $14.8 million in
fiscal 1999, which included $16.8 million in capital expenditures and was
offset by proceeds from the sale of property, plant and equipment of $2.0
million.  On a pro forma basis, capital expenditures increased by $0.8
million from fiscal 1998 to fiscal 1999 which was primarily due to the
introduction of new information technology equipment and the refurbishment of
the Company's facility in Eningen, Germany.

The Company's net cash used in financing activities was $6.6 million in
fiscal 1999, of which $5.9 million was the net effect of payments on
borrowings of $218.7 million and new borrowings of $212.7 million under the
Bank Pooling Agreement, the New Credit Agreement and the Credit Facility, as
defined in Note 5 of the Notes to Consolidated Financial Statements.

The Company invests its excess cash in highly liquid money market funds, U.S.
Treasury obligations and investment grade commercial paper.  In recent years,
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 had borrowings
outstanding of $166.8 million at September 30, 1999, including amounts
borrowed for working capital requirements, of which $17.5 million was
classified as short-term.  The Company also has contingent obligations
outstanding totaling approximately $7.4 million in the form of letters of
credit and bank guarantees.  The Company's total credit lines provide for
total availability of $200.0 million.  At September 30, 1999, the Company had
approximately $33.2 million available under these facilities.

The Company believes that its cash and cash equivalents of $17.1 million,
cash flow from operations, as well as the remaining borrowings under its
existing credit agreements and the Credit Facility will be sufficient to fund
the Company's debt service obligations and working capital requirements, as
well as implement the Company's growth strategy over the next twelve months.

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 and certain of its
foreign subsidiaries have credit facilities providing for borrowings in local
currency.  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 and collars to hedge certain known foreign exchange
exposures.  Gains or losses from such contracts are included in the Company's
consolidated statements of operations to offset gains and losses from the
underlying foreign currency transactions.

                                     23

<PAGE>

The Indenture under which the Company's 10.125% Senior Subordinated Notes,
due June 15, 2007, were issued permits the Company and its subsidiaries to
make investments in, and intercompany loans to, its 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.

On January 1, 1999, eleven of the fifteen member countries of the European
Union established fixed conversion rates between their existing currencies
and a new common currency (the "EURO"). The participating countries have
adopted the EURO as their common legal currency on that date. The Company is
assessing the potential impact from the EURO conversion in a number of areas,
including the competitive impact of cross--border price transparency, which
may make it more difficult for businesses to charge different prices for the
same products on a country--by--country basis, and the impact on currency
exchange costs and currency exchange rate risk.  At this stage of its
assessment, the Company believes most of the impact has been absorbed in the
Company's pricing and currency policies.

PERIODIC FLUCTUATIONS

The Company's fiscal 1999 net sales occurred in the following percentages in
each of the last four quarters: 25% for the quarter ended December 31, 1998,
23% for the quarter ended March 31, 1999, 23% for the quarter ended June 30,
1999 and 29% for the quarter ended September 30, 1999.  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, expenditure levels could be
disproportionately high and operating results for that quarter, and
potentially future quarters, would be adversely affected.

RESTRUCTURING OF OPERATIONS AND SUBSIDIARIES

To improve the Company's competitive position in the marketplace, the Company
implemented a restructuring program in fiscal 1999 to reduce costs and
streamline operations.  During fiscal 1999, the Company recorded
approximately $2.4 million in restructuring charges. The Company expects to
continue its restructuring program, and incur additional restructuring
charges during fiscal 2000.

IMPACT OF YEAR 2000

Many computer programs and applications define the applicable year using two
digits rather than four in order to save memory and enhance the speed of
repeated date-based calculations.  The "Year 2000 Issue" refers to the
inability of these computer programs on and after January 1, 2000 to
recognize that "00" refers to "2000" rather than "1900." The term "Year
2000-compliant" means a computer or a computer system that has been designed
or modified to recognize dates on and after January 1, 2000.  Many of the
Company's computer programs that have time-sensitive software may not be Year
2000-compliant. If the Company's systems are not Year 2000-compliant, they
could malfunction or fail altogether, causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities.

WG and Wavetek, prior to the Exchange Transaction, independently addressed
the issues involved in the Year 2000 Issue.  The Company determined that it
was required to modify or replace significant portions of its hardware and
software so that those systems would properly utilize dates beyond December
31, 1999.  The Company has modified or replaced existing

                                      24

<PAGE>

hardware and software to mitigate the Year 2000 Issue.  Management believes
there will be no material impact on the operations of the Company.

THE COMPANY'S STATE OF READINESS - The Company established programs to
coordinate its year 2000 ("Y2K") compliance efforts across all business
functions and geographic areas. Starting in 1995, both WG and Wavetek began
to evaluate their internal business and information systems for Year 2000
compliance.  The scope of the programs included addressing the risks
associated with the Company's (i) information technology (IT) systems
(including the Company's products and services), (ii) non-IT systems that
include embedded technology (e.g., equipment and other infrastructure), (iii)
products, and (iv) significant vendors and their Y2K readiness.  The Company
utilized the following steps in executing its Y2K compliance program: (1)
awareness, (2) assessment, (3) remediation and renovation, (4) validation and
testing, and (5) implementation.

IT SYSTEMS. The Company's most significant renovation effort involved the
upgrading or replacing certain hardware, embedded chips and software programs
it employs in the normal course of business, including its manufacturing,
accounting applications and certain other administrative hardware and
software systems.  The Company believes it has completed its validation,
testing and implementation for all IT Systems as of September 30, 1999 and
that there will not be any material impact on the Company's ability to
deliver products and services.

NON-IT SYSTEMS. The Company believes that all of its mission critical non-IT
systems are Y2K compliant. The Company is performing final testing for its
mission critical non-IT systems to validate the Company's compliance.

PRODUCTS - All Company products now being delivered are Year 2000 compliant.
Information has also been provided to address customer inquiries concerning
previously delivered products, including those no longer manufactured.
Nearly all expenditures for product correction have been incurred.

SIGNIFICANT VENDORS - As part of the Company's Y2K compliance program, the
Company has contacted its significant vendors to assess their Y2K readiness.
For all mission critical third party software embedded in or specified for
use in conjunction with the Company's IT systems and products, the Company's
communications with the vendors indicates that the vendors believe they are
substantially Y2K compliant.  Such third party software has been tested in
conjunction with the testing of the IT systems and products discussed above.
There can be no assurance that (i) the Company's significant vendors will
succeed in their Y2K compliance efforts, or (ii) the failure of vendors to
address year 2000 compliance will not have a material adverse effect on the
Company's business or results of operations.

THE COSTS TO ADDRESS THE COMPANY'S YEAR 2000 ISSUES - Since inception of its
program through September 30, 1999, the costs related to the Company's Y2K
compliance efforts totaled approximately $2.0 million, substantially all of
which has already been incurred, including costs associated with the
implementation of certain new core information systems.  Much of this
expenditure would have been necessary in any case as part of the regular
process of maintaining and updating systems.  In some instances, the
expenditures have been accelerated in order to comply with Year 2000
requirements.  The total estimated costs to complete the Company's Y2K
compliance effort are approximately $2.2 million.

THE RISKS OF THE COMPANY'S YEAR 2000 ISSUES - The Company's failure to
adequately resolve the Y2K risks could result in system failures, the
generation of erroneous information, and other significant disruptions of
business activities.  Although the Company believes it will be successful in
its Y2K compliance efforts, there can be no assurance that the Company's
systems and products contain all necessary date code changes.  In addition,
the Company's operations may be at risk if its vendors and other third
parties fail to adequately address the Y2K issue or if software conversions
result in system incompatibilities with these third parties.  To the extent
that either the Company or a third-party vendor or service provider on which
the Company relies does not achieve Y2K compliance, the Company's results of
operations could be materially adversely affected.

                                      25

<PAGE>

Furthermore, it has been widely reported that a significant amount of
litigation surrounding business interruption will arise out of Y2K issues. It
is uncertain whether, or to what extent, the Company may be affected by such
litigation.

THE COMPANY'S CONTINGENCY PLAN - The Company has not developed a
comprehensive contingency plan to address the situation that may result if
the Company or its vendors are unable to achieve Y2K compliance for its
critical operations. The Company is aware of the potential risks associated
with the failure to adequately resolve any Y2K disruptions that may affect
future results of operations.

The Company is relying upon suppliers to provide Year 2000 compliant upgrades
in a timely manner.  The Company has a program in place to assess the extent
to which the Company's systems or business processes may be vulnerable to
third party non-compliance and the ability of its suppliers and business
partners to continue normal operations beyond Year 2000. However, there can
be no assurance that the systems of other companies on which the Company's
systems rely will be timely converted and will not have an adverse effect on
the Company's systems.

CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS - Except for
statements of existing or historical facts, the foregoing discussion of Y2K
consists of forward-looking statements and assumptions relating to
forward-looking statements, including without limitation the statements
relating to future costs, the timetable for completion of Y2K compliance
efforts, potential problems relating to Y2K, the Company's state of
readiness, third party representations, and the Company's plans and
objectives for addressing Y2K problems. Certain factors could cause actual
results to differ materially from the Company's expectations, including
without limitation (i) the failure of vendors and service providers to timely
achieve Y2K compliance, (ii) system incompatibilities with third parties
resulting from software conversions, (iii) the Company's systems and products
not containing all necessary date code changes, (iv) the failure of existing
or future clients to achieve Y2K compliance, (v) potential litigation arising
out of Y2K issues, the risk of which may be greater for information
technology based service providers such as the Company, (vi) the failure of
the Company's validation and testing phase to detect operational problems
internal to the Company, in the Company's products or services or in the
Company's interface with service providers, vendors or clients, whether such
failure results from the technical inadequacy of the Company's validation and
testing efforts, the technological infeasibility of testing certain non-IT
systems, the perceived cost-benefit constraints against conducting all
available testing, or the unavailability of third parties to participate in
testing, or (vii) the failure to timely implement a contingency plan to the
extent Y2K compliance is not achieved.

CAUTIONARY STATEMENTS

Certain of the information contained herein may contain "forward-looking
statements" within the meaning of the Private Securities Litigation Reform
Act of 1995, as the same may be amended from time to time ("the Act") and in
releases made by the Securities and Exchange Commission ("SEC") from time to
time. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results,
performance, or achievements expressed or implied by such forward-looking
statements. The words "estimate," "believes," "project," "intend," "expect"
and similar expressions when used in connection with the Company, are
intended to identify forward-looking statements. Any such forward-looking
statements are based on various factors and derived utilizing numerous
important assumptions and other important factors that could cause actual
results to differ materially from those on the forward-looking statements.
These cautionary statements are being made pursuant to the Act, with the
intention of obtaining benefits of the "Safe Harbor" provisions of the Act.
The Company cautions investors that any forward-looking statements made by
the Company are not guarantees of future performance and that actual results
may differ materially from those in the forward-looking statements as a
result of various factors, including but not limited to those set forth
below. Important assumptions and other important

                                      26

<PAGE>

factors that could cause actual results to differ materially from those in
the forward-looking statements include, but are not limited to: (i) risks
associated with leverage, including cost increases due to rising interest
rates; (ii) risks associated with the possibility of the Company not meeting
its debt covenant requirements, including financial covenants,  in accordance
with various debt agreements; (iii) risks associated with changes in domestic
and/or foreign laws and regulations, including changes in tax laws,
accounting standards, environmental laws, occupational, health and safety
laws; (iv) risks associated with access to foreign markets together with
foreign economic conditions, including currency fluctuations and trade,
monetary and/or tax policies; (v) risks associated with the Company's ability
to continue its strategy of increasing market share of existing business,
incremental market penetration, and growth through acquisitions; (vi) the
Company's ability to make effective acquisitions in the future and to
successfully integrate newly acquired businesses into existing operations and
the risks associated with such newly acquired businesses; (vii) uncertainty
as to the effect of competition in existing and potential future lines of
business; (viii) risks associated with the failure of the Company to properly
address Year 2000 issues; (ix) risk associated with the failure of the
Company's vendors,  customers or other parties with which the Company
transacts business to timely complete the remediation of computer systems to
effectively process Year 2000 information; (x) effective implementation of
the Company's restructuring programs; (xi) economic uncertainty in various
countries throughout the world; (xii) changes in laws and regulations,
including changes in tax rates, accounting standards, environmental laws,
occupational, health and safety laws; (xiii) access to foreign markets
together with foreign economic conditions, including currency fluctuations;
(xiv) the effect of, or changes in, general economic conditions; and (xv) the
outcome of litigation, claims and assessments involving the Company.  Other
factors and assumptions not identified above may also be involved in the
derivation of forward-looking statements, and the failure of such other
assumptions to be realized as well as other factors may also cause actual
results to differ materially from those projected.  The Company assumes no
obligation to update these forward-looking statements to reflect actual
results, changes in assumptions or changes in other factors affecting such
forward-looking statements.

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company uses financial instruments, including fixed and variable rate
debt, to finance its operations. The information below summarizes the
Company's market risks associated with debt obligations outstanding as of
September 30, 1999.  The following table presents principal cash flows and
related weighted average interest rates by fiscal year of maturity. Variable
interest rate obligations under the Credit Facility and other revolving bank
credit agreements, capital lease obligations and notes payable to related
parties are not included in the table.  The information is presented in U.S.
dollar equivalents, which is the Company's reporting currency. The actual
cash flows of the instruments are denominated in U.S. dollars ("US$"), German
Deutsche marks ("DM") and other currencies ("other") as indicated.

<TABLE>
<CAPTION>

                                                         Expected Maturity Date
                                   ----------------------------------------------------------------------------------
                                     2000       2001       2002       2003       2004       Thereafter       Total
                                   --------   --------   --------   --------   --------   --------------   ----------
                                                     (US$ equivalent in thousands)
<S>                                <C>        <C>        <C>        <C>        <C>        <C>              <C>
Long-term Obligations:
  Fixed Rate (US$)..............   $    685   $    633   $    585   $    541   $    500   $    85,000      $   87,944
    Average interest rate              8.2%       8.2%       8.2%       8.2%       8.2%         10.1%           10.1%
  Fixed Rate (DM)                  $  5,077   $  4,152   $  3,550   $  3,551   $  2,353   $    10,424      $   29,107
    Average interest rate.......       5.9%       5.9%       5.9%       5.9%       5.5%          5.9%            5.9%
  Fixed Rate (other)               $    362   $     97   $    100   $     70   $     74   $     2,136      $    2,839
    Average interest rate.......       9.4%       6.1%       6.2%       6.6%       6.6%          5.5%            6.1%
</TABLE>

The carrying amounts of the Company's debt instruments approximate their fair
values. At September 30, 1999, the Company had interest rate cap agreements and
swap agreements in an aggregate notional amount of $10.9 million to limit its
exposure


                                      27

<PAGE>

on interest rate changes related to certain variable interest rate debt
instruments. The carrying values of the interest rate caps and swaps
approximate fair value.

The Company uses forward exchange contracts and collars in the ordinary
course of business to mitigate its exposure to changes in foreign currency
exchange rates relating to cash, accounts receivable, accounts payable,
significant transactions and anticipated future sales denominated in foreign
currencies. The terms of these contracts are generally less than one year.
The Company's risk management policies do not provide for the utilization of
financial instruments for trading purposes.

Gains and losses on financial instruments that qualify as hedges of existing
assets or liabilities or firm commitments are recognized in income or as
adjustments of carrying amounts when the hedged transaction occurs.
Financial instruments which are not designated as hedges of specific assets,
liabilities, firm commitments or anticipated transactions are marked to
market and any resulting unrealized gains or losses are recorded in "Other
(Income) Expense, net" in the accompanying consolidated statements of
operations.  At September 30, 1999, the Company had foreign exchange
contracts outstanding in an aggregate notional amount of $18.4 million.
While it is not the Company's intention to terminate any of these contracts,
the estimated fair value of these contracts indicated that termination of the
forward currency exchange contracts at September 30, 1999 would have resulted
in a gain of $0.1 million.  Due to the volatility of currency exchange rates,
these estimated results may or may not be realized.

ITEM 8.    FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF WAVETEK WANDEL GOLTERMANN, INC.

                                                                                                PAGE
<S>                                                                                             <C>
Report of Independent Public Accountants...................................................      29
Consolidated Balance Sheets as of September 30, 1999 and 1998..............................      30
Consolidated Statements of Operations for each of the three years in the period ended
    September 30, 1999.....................................................................      31
Consolidated Statements of Stockholders' Equity for each of the three years in the period
    ended September 30, 1999...............................................................      32
Consolidated Statements of Cash Flows for each of the three years in the period ended
    September  30, 1999....................................................................      33
Notes to Consolidated Financial Statements.................................................      34
</TABLE>


                                      28

<PAGE>

                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders
Wavetek Wandel Goltermann, Inc.

       We have audited the accompanying consolidated balance sheets of
Wavetek Wandel Goltermann, Inc. (a Delaware corporation) and subsidiaries as
of September 30, 1999 and 1998, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the three years
in the period ended September 30, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

       We 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 financial statements referred to above present
fairly, in all material respects, the financial position of Wavetek Wandel
Goltermann, Inc. and subsidiaries as of September 30, 1999 and 1998, and the
results of their operations and their cash flows for each of the three years
in the period ended September 30, 1999, in conformity with generally accepted
accounting principles.

                                               /S/ ARTHUR ANDERSEN LLP

Raleigh, North Carolina,
December 2, 1999.


                                      29

<PAGE>

                       WAVETEK WANDEL GOLTERMANN, INC.

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



<TABLE>
<CAPTION>
                                                                 SEPTEMBER 30,
                                                              -------------------
                                                                1999       1998
                                                              --------   --------
<S>                                                           <C>        <C>
                           ASSETS
Current assets:
  Cash and cash equivalents.................................  $ 17,089   $ 35,544
  Accounts receivable (less allowance for doubtful accounts
    of $4,608 in 1999 and $4,432 in 1998)...................   102,532     92,281
  Inventories...............................................    62,515     74,886
  Deferred income taxes.....................................     8,922     17,095
  Other current assets......................................    13,636     12,736
                                                              --------   --------
Total current assets........................................   204,694    232,542
Property, plant and equipment, net..........................    60,575     66,597
Intangible assets, net......................................   162,482    178,675
Other non-current assets....................................     6,982      6,710
                                                              --------   --------
Total assets................................................  $434,733   $484,524
                                                              ========   ========
           LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Notes payable.............................................  $ 17,510   $113,085
  Current portion of long--term obligations.................     6,202     30,222
  Current portion of long--term obligations to related
    parties.................................................    10,721     11,746
  Trade payables............................................    31,549     37,612
  Accrued compensation......................................    26,626     25,907
  Income taxes payable......................................     4,250      5,956
  Other current liabilities.................................    38,838     41,848
                                                              --------   --------
Total current liabilities...................................   135,696    266,376
Long-term obligations, net of current portion...............   228,083    121,595
Pension liabilities.........................................    35,671     35,511
Deferred income taxes.......................................     7,957     25,582
Other non-current liabilities...............................     9,389     10,046
                                                              --------   --------
Total liabilities...........................................   416,796    459,110
                                                              --------   --------
Commitments and contingencies (Notes 1, 3, 4, 5, 6, and 11)
Stockholders' equity:
  Common stock, par value $.01, 50,000 shares authorized,
    13,202 shares issued and outstanding....................       132        132
  Additional paid--in capital...............................    72,948     72,948
  Accumulated deficit.......................................   (65,641)   (57,645)
  Other comprehensive income................................    10,498      9,979
                                                              --------   --------
Total stockholders' equity..................................    17,937     25,414
                                                              --------   --------
Total liabilities and stockholders' equity..................  $434,733   $484,524
                                                              ========   ========
</TABLE>

                See Notes to Consolidated Financial Statements.


                                      30

<PAGE>

                        WAVETEK WANDEL GOLTERMANN, INC.

                        CONSOLIDATED DBALANCE SHEETS
           (DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)


<TABLE>
<CAPTION>
                                                                 YEARS ENDED SEPTEMBER 30,
                                                              ------------------------------
                                                                1999       1998       1997
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
Net sales...................................................  $497,258   $327,888   $281,887
Cost of goods sold..........................................   204,733    130,863    113,812
                                                              --------   --------   --------
Gross margin................................................   292,525    197,025    168,075

Operating expenses:
  Marketing and selling.....................................   146,387     95,338     82,687
  Research and development..................................    71,439     47,730     37,322
  General and administrative................................    42,074     24,837     24,263
  Amortization of intangible assets.........................    19,967      1,182      1,346
  Acquired in--process research and development.............        --     32,925      1,743
  Provisions for restructuring operations and other
    non--recurring charges..................................     2,379      9,369         --
                                                              --------   --------   --------
        Total operating expenses............................   282,246    211,381    147,361
                                                              --------   --------   --------
  Operating income (loss)...................................    10,279    (14,356)    20,714
  Other (income) expense, net:
   Interest income..........................................     (677)      (977)    (1,610)
   Interest expense.........................................   20,965      7,629      8,509
   Other, net...............................................    1,069      4,814       (790)
                                                              --------   --------   --------
       Other (income) expense, net...........................   21,357     11,466      6,109
                                                              --------   --------   --------
 Income (loss) before provision (benefit) for income taxes
  and minority interest in income (loss)....................   (11,078)   (25,822)    14,605
 Provision (benefit) for income taxes........................   (3,082)     6,541      7,362
 Minority interest in income (loss)..........................        --    (5,096)       185
                                                              --------   --------   --------
 Net income (loss)........................................... $ (7,996)  $(27,267)  $  7,058
                                                              ========   ========   ========
 Basic and diluted earnings (loss) per share................. $  (0.61)  $  (3.28)  $   0.85
                                                              ========   ========   ========
 Weighted average number of shares outstanding...............   13,202      8,317      8,317
                                                              ========   ========   ========
</TABLE>


                See Notes to Consolidated Financial Statements.


                                      31

<PAGE>

                        WAVETEK WANDEL GOLTERMANN, INC.

               CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                YEARS ENDED SEPTEMBER 30, 1997, 1998 AND 1999
                      (DOLLARS AND SHARES IN THOUSANDS)

<TABLE>
<CAPTION>

                                   Common Stock       Additional                     Other           Total
                                -------------------    Paid-in     Accumulated   Comprehensive   Stockholders'
                                 Shares     Amount     Capital       Deficit        Income          Equity
                                --------   --------   ----------   -----------   -------------   -------------
<S>                             <C>        <C>        <C>          <C>           <C>             <C>
Balance, September 30, 1996...    8,317      $ 83       $32,930      $(31,856)      $ 8,251         $ 9,408
  Sales of stock by
    subsidiaries..............       --        --           505            --            --             505
  Dividends...................       --        --            --        (1,987)           --          (1,987)
  Net income..................       --        --            --         7,058            --           7,058
  Foreign currency translation
    adjustments...............       --        --            --            --         3,623           3,623
                                 ------      ----       -------      --------       -------         -------
Balance, September 30, 1997...    8,317        83        33,435       (26,785)       11,874          18,607
  Sales of stock by
    subsidiaries..............       --        --           662            --            --             662
  Shares issued in connection
    with the Exchange
    Transaction with Wavetek
    Corporation...............    4,885        49        38,851            --            --          38,900
  Dividends...................       --        --            --        (3,593)           --          (3,593)
  Net loss....................       --        --            --       (27,267)           --         (27,267)
  Foreign currency translation
    adjustments...............       --        --            --            --        (1,895)         (1,895)
                                 ------      ----       -------      --------       -------         -------
Balance, September 30, 1998...   13,202       132        72,948       (57,645)        9,979          25,414
  Net loss....................       --        --            --        (7,996)           --          (7,996)
  Foreign currency translation
    adjustments...............       --        --            --            --           519             519
                                 ------      ----       -------      --------       -------         -------
Balance, September 30, 1999...   13,202      $132       $72,948      $(65,641)      $10,498         $17,937
                                 ======      ====       =======      ========       =======         =======
</TABLE>

                See Notes to Consolidated Financial Statements.

                                      32

<PAGE>

                       WAVETEK WANDEL GOLTERMANN, INC.

                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                YEARS ENDED SEPTEMBER 30,
                                                              ------------------------------
                                                                1999       1998       1997
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
OPERATING ACTIVITIES:
  Net income (loss).........................................  $(7,996)   $(27,267)  $ 7,058
  Adjustments to reconcile net income (loss) to net cash
    provided by operating activities:
    Minority interest in net income (loss)..................       --      (5,096)      185
    Depreciation and amortization expense...................   35,468      10,214     9,704
    Acquired in-process research and development...........        --      32,925     1,743
    Restructuring and other non-recurring charges...........    2,379       2,937        --
    Deferred income taxes...................................  (12,985)      1,978     4,600
    Changes in operating assets and liabilities, net of
      effect of purchased businesses:
      Accounts receivable...................................  (14,083)     (4,415)   (6,520)
      Inventories...........................................   16,995       2,282    (8,239)
      Other current assets..................................   (1,610)      1,876    (3,643)
      Accounts payable and accrued expenses.................  (15,024)      2,174     10,051
      Income taxes payable, net.............................   (2,342)      1,572     2,383
      Pension liabilities...................................      484       3,180       698
      Other, net............................................    3,025        (438)     (507)
                                                              -------    --------   -------
        Net cash provided by operating activities...........    4,311      21,922    17,513

INVESTING ACTIVITIES:
   Purchase of businesses, net of cash acquired of $1,363 and
    $1,312 in 1998 and 1997, respectively...................        --     (45,207)   (6,658)
   Cash acquired in connection with Exchange Transaction....        --      31,329        --
   Proceeds from sale of investments in affiliates...........       --       1,757     1,890
   Purchase of property, equipment, and intangibles..........  (16,760)    (10,416)   (9,356)
   Proceeds from sale of property, plant and equipment.......    1,977          --     3,999
   Purchase of short-term investments, available for sale...        --     (41,100)  (76,160)
   Sale of short-term investments, available for sale.......        --      41,100    76,160
   Payments received for notes receivable from related
    parties..................................................       --       6,042       740
   Increases in notes receivable from related parties........       --      (1,081)   (1,607)
                                                               -------    --------   -------
        Net cash used in investing activities................  (14,783)    (17,576)  (10,992)

FINANCING ACTIVITIES:
   Proceeds from revolving lines of credit and long-term
    obligations.............................................   212,711      56,241     1,961
   Principal payments on revolving lines of credit and
    long-term obligations...................................  (218,659)   (35,647)  (12,084)
   Cash dividends paid to stockholders......................       --      (2,043)   (1,188)
   Proceeds from long-term obligations to related parties..        --       3,364        63
   Principal payments on long-term obligations to related
    parties.................................................       --        (258)       --
   Other, net...............................................      (672)        --        --
                                                               -------    --------   -------
        Net cash provided by (used in) financing
          activities........................................    (6,620)     21,657   (11,248)
   Effect of exchange rate changes on cash and cash
    equivalents.............................................    (1,363)        141      (289)
                                                               -------    --------   -------
   Increase (decrease) in cash and cash equivalents..........  (18,455)     26,144    (5,016)
   Cash and cash equivalents at beginning of year............   35,544       9,400    14,416
                                                               -------    --------   -------
   Cash and cash equivalents at end of year..................  $17,089    $ 35,544   $ 9,400
                                                               =======    ========   =======

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
   Cash paid for interest....................................  $14,028    $  7,103   $ 8,314
                                                               =======    ========   =======
   Cash paid for income taxes, net of income tax refunds
    received................................................. $  5,444    $  2,038   $ 3,346
                                                              ========    ========   =======
</TABLE>

                See Notes to Consolidated Financial Statements.

                                       33
<PAGE>

                      WAVETEK WANDEL GOLTERMANN, INC.

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND BASIS OF PRESENTATION

On September 30, 1998, Wavetek Corporation, a Delaware corporation
("Wavetek"), and Wandel & Goltermann Management Holding GmbH, a German
limited liability company ("WG"), consummated an exchange transaction whereby
the stockholders of WG became stockholders of Wavetek, and WG became a
subsidiary of Wavetek (the "Exchange Transaction").  Following the Exchange
Transaction, Wavetek was ultimately renamed Wavetek Wandel Goltermann, Inc.
(the "Company").  The Exchange Transaction was accounted for as a purchase of
Wavetek by WG in accordance with Accounting Principles Board Opinion ("APB")
No. 16, Business Combinations.  Accordingly, the financial statements of the
Company included herein as of any date or for any period prior to September
30, 1998, are the historical financial statements of WG.

The Company is a leading global designer, manufacturer and marketer of a
broad range of communications test instruments used to develop, manufacture,
install and maintain communications networks and equipment. The Company
conducts its business in two principle business areas, communications test
business and other test products. The Company conducts its communications
test business, which addresses most sectors of the communications test
market, in four product areas:  (1) Telecom Networks (traditional voice/data
transmissions and new multi-service networks), (2) Enterprise Networks (local
and wide-area network infrastructures), (3) Multimedia (cable television and
digital video broadcast) and (4) Wireless (mobile telephony and data).  These
products provide comprehensive testing solutions to a wide range of end
users.  The Company's high-end instruments are used during the product
development phase to stress test product functionality and performance.
Other products are used during the production process to verify conformance
to manufacturing specifications, while the Company's enhanced portable field
service tools enable field technicians to quickly install, repair and
maintain complex network infrastructure as well as validate service levels.
The Company also provides distributed remote test systems to many of its
service provider customers, which allow such customers to more efficiently
utilize their network engineers to monitor and test service levels, and
designs, manufactures and sells precision measurement instruments and
general-purpose handheld test tools. In addition, the Company provides
repair, upgrade and calibration services, as well as value-added professional
services such as consulting, training and rental services on a worldwide
basis.

The Company's operating expenses are substantially impacted by marketing and
selling activities as well as by research and development activities.
Marketing and selling expenses are primarily driven by: (1) sales volume,
with respect to sales force expenses and commission expenses; (2) the extent
of market research activities for new product design efforts; (3) advertising
and trade show activities and (4) the number of new products launched in the
period. In recent periods, the Company has increased its spending on research
and development activities primarily to accelerate the timing of new product
introductions. General and administrative expenses primarily include costs
associated with the Company's administrative employees, facilities and
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. 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.

                                      34

<PAGE>

                      WAVETEK WANDEL GOLTERMANN, INC.

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


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.  Certain
items in the prior years have been reclassified to conform with the current
year presentation.

FOREIGN CURRENCY

The accounts of foreign subsidiaries consolidated herein have been translated
from their respective functional currencies into U.S. dollars based on the
current exchange rates at the end of the period for the balance sheet and an
average rate for the period on the statements of operations. Cumulative
translation adjustments are included as a separate component of stockholders'
equity as "Other Comprehensive Income."  Exchange gains and losses from
foreign currency transactions are included in "Other (income) expense, net"
in the accompanying consolidated statements of operations.

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. These estimates include, among other things, assessing the
collectibility of accounts receivable, the use and recoverability of
inventory, costs of future product returns under warranty and provisions for
contingencies expected to be incurred.  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 sheets for cash and
cash equivalents approximate their fair values.  As part of the Company's
cash management program, the Company invests in highly liquid investments,
primarily investment grade commercial paper, U.S. Treasury Securities,
guaranteed obligations of the U.S. government or its agencies, mutual funds
which invest in U.S. Treasury Securities, preferred stock and municipal
bonds.  The interest and dividend rates on these securities are reset on a
frequent basis. In accordance with Statement of Financial Accounting
Standards ("SFAS") No. 115, ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND
EQUITY SECURITIES, these securities are classified as "available-for-sale"
securities.  The Company held no available-for-sale securities as of
September 30, 1999 and 1998.  For purposes of financial statement
presentation, the Company considers all highly liquid investments with
original maturities of three months or less to be cash equivalents.  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. Costs include direct material, labor and
manufacturing overhead.

Inventories consist of the following:

<TABLE>
<CAPTION>

                                              SEPTEMBER 30,
                                       ---------------------------
                                           1999             1998
                                       ----------         --------
                                             (IN THOUSANDS)
    <S>                                <C>                <C>
    Materials.......................    $13,997            $19,217
    Work-in-progress................     18,172             21,469
    Finished goods..................     30,346             34,200
                                        -------            -------
                                        $62,515            $74,886
                                        =======            =======
</TABLE>

                                      35

<PAGE>


                      WAVETEK WANDEL GOLTERMANN, INC.

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



PROPERTY, PLANT AND EQUIPMENT

Property, plant 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 50 years for buildings and improvements and from 3 to 10 years for
fixtures and equipment.

Property, plant and equipment consists of the following:

<TABLE>
<CAPTION>

                                              SEPTEMBER 30,
                                       ---------------------------
                                           1999             1998
                                       ----------         --------
                                             (IN THOUSANDS)
    <S>                                <C>                <C>
    Land...........................    $  4,750           $  6,073
    Building and improvements......      47,468             52,699
    Fixtures and equipment.........     104,178            107,626
                                       --------           --------
                                        156,396            166,398
    Less: accumulated depreciation
     and amortization..............     (95,821)           (99,801)
                                       --------            -------
                                       $ 60,575           $ 66,597
                                       ========           ========
</TABLE>

INTANGIBLE ASSETS

The Company has various intangible assets which include the excess of
purchase price over net tangible assets of businesses acquired (goodwill),
acquired core technologies, as well as other intangible assets.  All the
values and lives were based on independent appraisals.

Goodwill represents the amount by which the purchase price of businesses
acquired exceeds the fair market value of the net tangible and identifiable
intangible assets acquired under the purchase method of accounting associated
with three acquisitions: the Exchange Transaction, WGTI (See Note 3), and STS
(See Note 3).  Goodwill associated with these acquisitions is being amortized
on a straight-line basis over fifteen (15) years for the Exchange Transaction
and five (5) years for WGTI and STS.

Acquired core technologies was recorded in connection with the acquisitions
of WGTI ($3.3 million) and STS ($2.6 million) as well as the Exchange
Transaction ($84.1 million).  The amortization period in connection with the
acquisitions of WGTI and STS is five (5) years and for the Exchange
Transaction is ten (10) years.

Other intangible assets include assembled work force associated with the
Exchange Transaction and WGTI, deferred financing costs associated with the
multi-currency and senior subordinated notes described in Note 5, and a
patent license.   These intangible assets are being amortized over five (5)
to fifteen (15) years.

                                      36

<PAGE>


                      WAVETEK WANDEL GOLTERMANN, INC.

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Intangible assets consist of the following:

<TABLE>
<CAPTION>

                                                  SEPTEMBER 30,
                                            ---------------------------
                                               1999             1998
                                            ----------         --------
                                                (IN THOUSANDS)
    <S>                                     <C>                <C>
    Goodwill............................     $ 71,016           $ 69,802
     Less accumulated amortization......       (7,187)              (739)
    Acquired core technologies..........       90,032             90,032
     Less accumulated amortization......      (10,277)              (660)
    Other...............................       36,648             29,537
     Less accumulated amortization......      (17,750)            (9,297)
                                            ---------          ---------
                                             $162,482           $178,675
                                            =========          =========
</TABLE>

The Company, at each balance sheet date, evaluates the recoverability of the
carrying amount of its intangible assets if circumstances suggest that it has
been impaired.  If this review indicates that the value of the intangible
assets is not recoverable, as principally determined based on the estimated
undiscounted cash flows of the entity which gave rise to the intangible
asset, over the remaining amortization period, then the Company's carrying
value of the intangible asset would be reduced by the estimated shortfall in
cash flows.

IMPAIRMENT OF LONG-LIVED ASSETS

The Company, at each balance sheet date, evaluates the recoverability of the
carrying amount of its long-lived assets in accordance with SFAS no. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed of."  If this review indicates that the value of such assets
is not recoverable over the remaining amortization period, then the Company's
carrying value of the asset would be reduced based upon the estimated fair
value.

DEBT INSTRUMENTS

The carrying amounts of the Company's debt instruments approximate their fair
values.  The fair value of the Company's debt instruments is estimated using
discounted cash flow analyses, based on the Company's current incremental
borrowing rates for similar types of borrowing arrangements.

REVENUE AND CREDIT RISK

The Company recognizes revenues when the following four criteria are met as
specified in the AICPA's Statement of Position No. 97-2, "Software Revenue
Recognition": (1) Persuasive evidence of an arrangement exists, (2) Delivery
has occurred, (3) The vendor's fee is fixed or determinable, and (4)
Collectibility is probable.  These criteria are normally met at the time of
shipment to the customer.  Service revenues are recognized as services are
performed.  The Company accrues related product return reserves and warranty
expenditures, as products shipped include a one-year warranty, at the time of
sale.

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.


                                      37

<PAGE>


                      WAVETEK WANDEL GOLTERMANN, INC.

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NET INCOME (LOSS) PER SHARE

Effective October 1, 1997 the Company adopted SFAS No. 128, EARNINGS PER
SHARE.  SFAS No. 128 replaced the calculation of primary and fully diluted
net income (loss) per share with basic and diluted net income (loss) per
share. Net income (loss) per share - basic is based only on net income (loss)
of the Company and the weighted average number of common shares outstanding.
Net income (loss) per share - diluted includes the dilutive effect of the
Company's outstanding stock options in the calculation of the number of
weighted average number of common shares outstanding.  The Company has a
simple capital structure and, accordingly, the only difference in the
Company's computations of basic and diluted net income (loss) per share is
the dilutive effect of outstanding stock options.  For the fiscal year ended
September 30, 1999, the effect of outstanding stock options would have been
anti-dilutive and, therefore, was not considered in the computation of
diluted loss per share for such periods.  All net income (loss) per share
amounts for all periods have been presented, and where necessary, restated to
conform to the requirements of SFAS No. 128.

STOCK-BASED COMPENSATION

In 1996, the Company adopted SFAS No. 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION, which allows companies to either account for stock-based
compensation under the new provisions of SFAS No. 123 or under the provisions
of APB No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, but requires pro
forma disclosure in the footnotes to the consolidated financial statements as
if the measurement provisions of SFAS No. 123 had been adopted. The Company
has continued accounting for its stock-based compensation in accordance with
the provisions of APB 25.  See Note 6 for discussion of SFAS No. 123
disclosures.

DERIVATIVE FINANCIAL INSTRUMENTS

The Company uses derivative financial instruments, primarily forward exchange
contracts and collars, in the ordinary course of business to mitigate its
exposure to changes in foreign currency exchange rates relating to cash,
accounts receivable, accounts payable, significant transactions and
anticipated future sales denominated in foreign currencies.  The terms of
these contracts are generally less than one year.  The Company also uses
interest rate cap agreements to mitigate its exposure to changes in interest
rates on variable interest rate debt instruments.  The terms of such
agreements are generally in excess of one year.  The Company's risk
management policies prohibit financial instruments to be used for trading
purposes. Gains and losses on financial instruments that qualify as hedges of
existing assets or liabilities or firm commitments are recognized in income
as adjustments of carrying amounts when the hedged transaction occurs.
Financial instruments that are not designated as hedges of specific assets,
liabilities, firm commitments or anticipated transactions are marked to
market and any resulting unrealized gains or losses are recorded in "other
(income) expense, net" in the accompanying consolidated statements of
operations.  At September 30, 1999 and 1998, the Company had foreign exchange
contracts outstanding in an aggregate notional amount of $18.4 million and
$25.8 million, respectively.  While it is not the Company's intention to
terminate any of these contracts, the estimated fair value of these contracts
indicated that termination of the forward currency exchange contracts at
September 30, 1999 and 1998 would have resulted in a gain of $0.1 million and
a loss of $0.6 million, respectively.  Due to the volatility of currency
exchange rates, these estimated results may or may not be realized.  At
September 30, 1999 and 1998, the Company had interest rate cap agreements
outstanding with notional values of $10.9 million and $8.9 million,
respectively, which had carrying values that approximated fair value.


                                      38

<PAGE>


                      WAVETEK WANDEL GOLTERMANN, INC.

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


RECENTLY ISSUED ACCOUNTING STANDARDS

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, as amended by
SFAS No. 137, an amendment to SFAS No. 133.  This statement requires
companies to record derivatives on the balance sheet as assets and
liabilities, measured at fair value.  Gains or losses resulting from changes
in the values of those derivatives would be accounted for depending on the
use of the derivative and whether it qualifies for hedge accounting.  These
statements are not expected to have a material impact on the Company's
consolidated financial statements. This statement is effective for fiscal
years beginning after June 15, 2000, with earlier adoption encouraged. The
Company will adopt this accounting standard in fiscal 2001.

2.  EXCHANGE TRANSACTION

On September 30, 1998, Wavetek and WG consummated the Exchange Transaction
whereby the stockholders of WG received 8,317,463 shares of Common Stock of
Wavetek valued by an independent appraisal at $38.7 million plus cash of 2.0
million Deutsche marks ($1.2 million) and WG became a subsidiary of Wavetek.
Following the Exchange Transaction, Wavetek was ultimately renamed Wavetek
Wandel Goltermann, Inc. The Exchange Transaction was accounted for as a
purchase of Wavetek by WG. Accordingly, the financial statements of the
Company included herein as of any date or for any period prior to September
30, 1998, are the historical financial statements of WG. In addition, the
historical stockholders' equity of the Company has been retroactively
restated to reflect the equivalent number of shares issued in connection with
the Exchange Transaction.

The purchase price of Wavetek, including expenses of the transaction, was
deemed to be $41.5 million and was allocated to the assets acquired and
liabilities assumed, based on their estimated fair values as determined by an
independent valuation. The fair value of assets acquired was $271.1 million,
including $56.7 million of goodwill which is being amortized over 15 years,
and liabilities assumed was $229.6 million. The Company allocated $11.8
million of the purchase price to in-process research and development projects
that had not reached technological feasibility, which the Company expensed at
the date of the Exchange Transaction.

In connection with the Exchange Transaction and related restructuring
activities, the Company recorded approximately $4.5 million of restructuring
and other non-recurring charges in fiscal 1998. This expense included
elimination of one duplicate product line, costs of consolidation of certain
sales and service operations, accounting and tax consulting charges and
severance payments.

3.  ACQUISITIONS

PURCHASE OF THE MINORITY INTEREST IN WANDEL & GOLTERMANN TECHNOLOGIES, INC.

During fiscal 1997, the Company's ownership interests in its then
publicly-traded U.S. subsidiary, Wandel & Goltermann Technologies, Inc.
("WGTI"), was increased by the repurchases of common shares of WGTI on the
open market. The Company's ownership interest was increased from 57% as of
September 30, 1996, to 62% as of September 30, 1997. The total purchase cost
of shares acquired was $4.5 million and was accounted for as a purchase. The
Company allocated $1.4 million of the purchase price to in-process research
and development projects that had not reached technological feasibility,
which the Company expensed at the date of acquisition. In addition, $1.2
million of the purchase price was allocated to goodwill and other intangibles
and is being amortized over five years.


                                       39

<PAGE>

                      WAVETEK WANDEL GOLTERMANN, INC.

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


On September 18, 1998, the Company purchased the remaining outstanding
minority interest in WGTI for $15.90 per share, or $32.3 million. The Company
allocated $14.3 million of the purchase price to in-process research and
development projects that had not reached technological feasibility, which
the Company expensed at the date of acquisition. In addition, $11.5 million
of the purchase price was allocated to goodwill and other intangibles and is
being amortized over five years. In connection with the acquisition of WGTI,
the Company incurred non-recurring charges of $4.8 million in fiscal 1998.
These costs included $3.4 million of stock option compensation, $0.9 million
of severance expenses and $0.5 million of legal and consulting expenses
incurred by WGTI.

PURCHASE OF DIGITAL TRANSPORT SYSTEMS, INC.

On September 30, 1998, Wavetek U.S. Inc., a U.S. subsidiary of the Company,
acquired privately-held Digital Transport Systems, Inc. ("DTS"), a digital
broadcast test equipment company based in San Diego, California.  Under the
terms of the acquisition, Wavetek U.S. Inc. acquired all of the outstanding
stock of DTS for an initial payment of $1.1 million, plus subsequent fixed
and contingent payments for four years after the acquisition. The Company
accounted for the transaction as a purchase and the assets acquired and the
liabilities assumed were recorded at their estimated fair values aggregating
$0.5 million and $0.9 million, respectively.  In addition, $1.5 million of
the purchase price was allocated to in-process research and development
projects that had not reached technological feasibility, which the Company
charged to expense on the acquisition date.  Fixed payments are due November
15, 1999, 2000, 2001 and 2002 of $0.5 million, $0.4 million, $0.4 million and
$0.4 million, respectively.  Contingent payments, based upon future annual
sales of DTS, are also due annually for the next four years in amounts
between $0.2 million and $0.5 million.  All subsequent payments are being
expensed as incurred and are not material to the Company.

PURCHASE OF SWITCHING TEST SOLUTIONS AG

In fiscal 1997, the Company purchased 40% of the outstanding capital stock of
Switching Test Solutions AG, ("STS") for $2.0 million. The Company allocated
$0.3 million of the purchase price to in-process research and development
projects that had not reached technological feasibility, which the Company
expensed at the date of acquisition. In addition, $0.6 million of the
purchase price was allocated to goodwill and other intangibles and is being
amortized over five years. This investment was accounted for using the equity
method of accounting in fiscal 1997.

At the beginning of fiscal 1998, the Company purchased the remaining 60%
interest in STS for a purchase price of $6.5 million. The Company allocated
$1.4 million of the purchase price to in-process research and development
projects that had not reached technological feasibility, which the Company
expensed at the date of acquisition. In addition, $3.3 million of the
purchase price was allocated to goodwill and other intangibles and is being
amortized over five years. The accounts and results of STS have been included
in the Company's consolidated financial statements from the date of the
acquisition of the remaining 60% interest.

In February 1998, the Company sold 400 shares, or 10%, of the common stock of
STS to the new CEO of the Company for a purchase price of $0.8 million, which
was paid in April 1998. In connection with this transaction, the CEO and two
principal owners and directors of the Company entered into put and call
options related to the shares sold to the CEO. In September 1998, the two
shareholders exercised the call options and purchased the shares of common
stock of STS held by the CEO. Subsequently, the Company purchased these
shares from the two principal owners for $0.8 million in cash. The Company
allocated $0.1 million of the purchase price to in-process research and
development projects that had not reached


                                      40

<PAGE>

                      WAVETEK WANDEL GOLTERMANN, INC.

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


technological feasibility, which the Company expensed at the date of
acquisition. In addition, $0.3 million of the purchase price has been
allocated to goodwill and other intangibles and is being amortized over five
years.

OTHER ACQUISITIONS

In January 1998, the Company acquired privately-held Tinwald Networking
Technologies Inc. ("Tinwald"), an Ontario Canada-based developer of software
analysis tools. Under the terms of the transaction, the Company acquired all
of the outstanding common stock of Tinwald for an initial payment of
approximately $5.0 million, plus the possibility of contingent payments for
up to three years after the acquisition. The Company accounted for the
transaction as a purchase. The purchase price was allocated to the assets
acquired and liabilities assumed based on their estimated fair values as
determined by an independent valuation. The fair value of tangible assets
acquired was approximately $1.6 million and liabilities assumed was
approximately $0.3 million. In addition, approximately $3.9 million of the
purchase price was allocated to in-process research and development projects
that had not reached technological feasibility, which the Company expensed at
the date of the acquisition. The remainder of the purchase price, including
expenses related to the purchase, of $0.3 million has been allocated to
goodwill and is being amortized over five years.

In March 1998, the Company acquired the assets of privately held Network
Intelligence, Inc. ("NI"), a California-based developer of network
performance management software. Under the terms of the transaction, the
Company acquired all of the assets of NI for an initial payment of $1.3
million. The Company accounted for the transaction as a purchase. The total
purchase price of approximately $1.5 million, including expenses related to
the purchase, was allocated to in-process research and development projects
that had not reached technological feasibility, which the Company expensed at
the date of the acquisition.

The following unaudited pro forma information presents a summary of
consolidated results of operations as if the Exchange Transaction and the
acquisitions of WGTI, STS, Tinwald and NI had all occurred as of the
beginning of each period presented:

<TABLE>
<CAPTION>

                                                  FOR THE YEAR ENDED
                                                     SEPTEMBER 30,
                                                  -------------------
                                                   1998         1997
                                                  -------     -------
                                                    (IN THOUSANDS)
        <S>                                      <C>          <C>
        Revenues...............................  $469,773     $437,485
        Loss before extraordinary items........   (51,542)     (45,781)
        Net loss...............................   (56,053)     (50,292)
        Net loss per share.....................  $  (4.25)    $  (3.81)
</TABLE>

The unaudited pro forma results have been prepared for comparative purposes
only and include certain adjustments, such as additional amortization expense
as a result of goodwill and other intangible assets.  They do not purport to
be indicative of the results of operations which would have resulted had the
combinations been consummated on the first day of each period presented.  In
addition, the pro forma results are not intended to be a projection of future
results of operations of the consolidated entities.


                                      41

<PAGE>

                      WAVETEK WANDEL GOLTERMANN, INC.

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


4.  NOTES PAYABLE

Notes payable are as follows:

<TABLE>
<CAPTION>
                                                     SEPTEMBER 30,
                                                ---------------------
                                                  1998         1997
                                                -------       -------
                                                (DOLLARS IN THOUSANDS)
        <S>                                      <C>          <C>
        Notes payable - banks...............     $17,148      $112,685
        Notes payable - other...............         362           400
                                                 -------      --------
          Total.............................     $17,510      $113,085
                                                 =======      ========
</TABLE>

At September 30, 1998, $59.6 million of the notes payable to banks was
outstanding, as described in Note 5 below, in connection with the Bank
Pooling Agreement.  These amounts were repaid in January 1999.

On September 30, 1998, the Company borrowed money from two German banks,
aggregating $29.7 million, at interest rates ranging from 5.0625% to 6.7%, on
an unsecured basis in order to repay the New Credit Agreement, as defined
below.  These amounts were repaid on January 4, 1999.

Certain of the Company's foreign subsidiaries have agreements with banks
providing for short-term revolving advances and overdraft facilities in an
aggregate total amount of approximately $17.9 million.  At September 30, 1999
and 1998, aggregate amounts of $6.0 million and $19.0 million, respectively,
had been borrowed under these facilities.  Revolving borrowings under these
agreements bear interest at variable rates ranging from 2.1875% to 7.0% as of
September 30, 1999.  Certain of 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, 1999, the Company was contingently liable for outstanding
letters of credit and bank guarantees aggregating $7.4 million.


                                     42

<PAGE>

                      WAVETEK WANDEL GOLTERMANN, INC.

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


5.  LONG-TERM BORROWINGS

Long-term obligations are as follows:

<TABLE>
<CAPTION>
                                                            SEPTEMBER 30,
                                                       ---------------------
                                                         1998         1997
                                                       -------       -------
                                                       (DOLLARS IN THOUSANDS)
<S>                                                    <C>          <C>
Senior Subordinated Notes; total principal
balance due June 15, 2007; interest payable
semi-annually on June 15 and December 15
at 10.125%.........................................    $ 85,000     $ 85,000

Multi-Currency Revolving Credit Facility and
Bilateral Ancillary Facilities due December 2000;
interest payable over variable periods at LIBOR
plus 1.5% (7.58% and 7.46% for three and six
month loans, respectively, at September 30,
1999)...............................................    118,352            -

Term loan payable to banks, interest was payable
at LIBOR plus 2.5% (8.125%).........................          -       24,000

Term loans payable to banks under Bank Pooling
Agreement; payable in quarterly installments
through 2011; interest payable at rates set on
dates of  borrowing ranging from 5.5% to 7.75%;
secured by certain inventories, trade
Receivables, fixed assets and other assets of
the Company and the share capital of certain
subsidiaries..........................................        -       20,906

Term loans payable to banks; payable in semi-annual
installments through 2007; interest ranging from
3.5% to 6.95%; secured by mortgages on certain
facilities............................................   23,840       12,617

Credit facilities with banks with various maturity
dates; interest rates ranging from 4.12% to 10.5%
payable semi-annually.................................    3,524        4,735

Unsecured non-interest bearing promissory note
recorded at present value on issuance date at
implied interest rate of 8.1875%; issued in
connection with license of technology; payable in
six annual installments of $0.8 million commencing
January 1999..........................................    2,944        3,685

Other obligations.....................................      625          874
                                                       --------     --------
Total long-term obligations...........................  234,285      151,817
Less: current maturities..............................   (6,202)     (30,222)
                                                       --------     --------
Long-term obligations, less current maturities........ $228,083     $121,595
                                                       ========     ========
</TABLE>

                                      43
<PAGE>
                        WAVETEK WANDEL GOLTERMANN, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



As of September 30, 1999, the future annual principal payments on long-term
obligations outstanding at September 30, 1999, were as follows (in thousands):

<TABLE>
<CAPTION>

<S>                                                           <C>
2000........................................................  $  6,202
2001........................................................   118,049
2002........................................................     4,326
2003........................................................     4,259
2004........................................................     3,029
Thereafter..................................................    98,422
                                                              --------
Total long-term obligations.................................   234,285
Less: current portion.......................................    (6,202)
                                                              --------
                                                              $228,083
                                                              ========
</TABLE>

On June 11, 1997, Wavetek issued $85.0 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 10.125%, payable semi-annually on each June 15 and December 15.
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 of 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 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 believes it was in compliance
with all such covenants at September 30, 1999.  The fair market value of the
Notes was $71.0 million as of December 20, 1999.

In June 1997, Wavetek also entered into a 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 Company had $24.0
million outstanding under the term facility and $4.8 million outstanding under
the revolving credit facility at September 30, 1998; which was repaid on October
2, 1998 with the proceeds from the proceeds of unsecured short-term loans from
two German banks (see Note 4). Accordingly, all such amounts were classified as
current liabilities in the accompanying consolidated balance sheet as of
September 30, 1998. This facility was superceded by the Credit Facility
described below.

In November 1997, WG and one of its German subsidiaries entered into a
collateral pooling agreement with six banks (the "Bank Pooling Agreement"). The
collateral pooling agreement had an indefinite term, however, it could be
terminated by either party with a notice period of three months prior to the end
of any calendar quarter, but not before December 31, 1998. In January 1999, the
Company repaid the outstanding amounts with proceeds from the issuance of the
Credit Facility, defined below. The Bank Pooling Agreement provided for term
loans and revolving credit facilities up to a maximum of approximately $116
million at terms and interest rates negotiated at the date of each borrowing.
Under the Bank Pooling Agreement, the Company had short-term borrowings
outstanding of $59.6 million at September 30, 1998 which has been classified as
"Notes payable to banks." The short-term borrowings bore interest rates ranging
from 5.5% to 7.75% at


                                      44

<PAGE>

                        WAVETEK WANDEL GOLTERMANN, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



September 30, 1998. The Bank Pooling Agreement was secured by certain
inventories, trade receivables, fixed assets and other assets of WG and the
share capital of certain of its subsidiaries. This facility was superceded by
the Credit Facility described below.

In December 1998, the Company entered into a Facilities Agreement, due December
2000, in relation to a Multi-Currency Revolving Credit Facility and Bilateral
Ancillary Facilities (the "Credit Facility") with a syndicate of four German
banks, providing for revolving borrowings, letters of credit and bank guarantees
aggregating up to a maximum amount of 280 million Deutsche marks ($152.7 million
at September 30, 1999). The Credit Facility, which was amended on May 28, 1999
to reduce the interest coverage ratio, as defined in the Credit Facility,
includes a commitment fee of 0.25% of the daily average unutilized portion of
the Credit Facility, and requires proceeds from certain transactions to repay
the Exceeding Amount, as defined in the Credit Facility. The Credit Facility has
a two-year term and all borrowings thereunder bear interest at LIBOR plus 0.9%
through May 31, 1999 and at LIBOR plus 1.5% thereafter. Borrowings under the
Credit Facility are secured by the pledge of 65% of the shares of Wavetek Wandel
Goltermann GmbH, a subsidiary of the Company. In addition, a $45.0 million
tranche of the Credit Facility, which refinanced and replaced the previously
existing bank credit facility of Wavetek, is guaranteed by a U.S. subsidiary of
the Company. The Credit Facility, as amended, requires the Company to comply
with certain covenants and maintain certain minimum financial ratios. The
Company was in compliance with all requirements of the Credit Facility, as
amended, at September 30, 1999. The Company pledged 65% of WG shares and $45.0
million related to WGTI as guarantees. At September 30, 1999, the Company had
drawn $118.3 million under the Credit Facility, as amended, and $33.2 million
was available for future borrowings. In January 1999, additional amounts were
borrowed under the Credit Facility to refinance certain bank debt at the
Company's subsidiaries, and certain bank guarantees were provided under the
Credit Facility to secure other subsidiary bank borrowings.

6.        STOCKHOLDERS' EQUITY

In September 1998, the Company increased its authorized capital stock to 55
million shares, of which 50 million shares were designated as Common Stock and 5
million shares were designated as Preferred Stock. Previously, the Company had
authorized capital stock of 15 million shares, all of which was designated as
Common Stock. All authorized shares have a par value of $.01 per share. No
preferred stock has been issued by the Company.

No dividends were declared or paid in fiscal 1999. In fiscal 1998, the Company
declared dividends of $3.6 million of which $2.0 million was paid in cash, $0.7
million was paid as a decrease to notes receivable from related parties and $0.9
million was paid as an increase to long-term obligations to related parties. In
fiscal 1997, the Company declared dividends of $2.0 million of which $1.2
million was paid in cash, $0.4 million was paid as a decrease to notes
receivable from related parties and $0.4 million was paid as an increase to
long-term obligations to related parties.

Prior to the Exchange Transaction, Wavetek had, and immediately following the
Exchange Transaction, the Company had 513,298 options outstanding under the
Company's Amended and Restated Stock Option Plan ("the Stock Option Plan") at
prices ranging from $1.25 to $17.91 per share and which expire through 2009.
Under the Stock Option Plan, options to purchase an aggregate of up to 1,320,232
shares of Common Stock may be issued at an exercise price equal to the fair
value of the shares at the date of grant. The Stock Option Plan provides for the
issuance of both incentive and non-qualified stock options. Options may be
granted under the Stock Option Plan through August 1, 2008, generally vest and
become exercisable over three to four years, and have a ten (10) year term.


                                      45

<PAGE>

                        WAVETEK WANDEL GOLTERMANN, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


A summary of stock option activity is as follows:

<TABLE>
<CAPTION>
                                                                            WEIGHTED
                                                                            AVERAGE
                                                               SHARES    EXERCISE PRICE
                                                              --------   --------------
<S>                                                           <C>        <C>
Outstanding at September 30, 1997...........................        --           --
Options of Wavetek..........................................   513,298       $10.48
Grants......................................................        --           --
Exercises...................................................        --           --
Cancellations...............................................        --           --
                                                              -------
Outstanding at September 30, 1998...........................   513,298        10.48
Grants......................................................   477,263        14.50
Exercises...................................................        --           --
Cancellations...............................................  (110,352)       13.51
                                                              -------
Outstanding at September 30, 1999...........................   880,209        12.28
                                                              =======
Weighted average fair value of options granted during
  1999......................................................  $   2.92
</TABLE>

Exercise prices and weighted average remaining contractual lives for the options
outstanding under the Stock Option Plan as of September 30, 1999 are as follows:

<TABLE>
<CAPTION>

                            OPTIONS OUTSTANDING                                OPTIONS EXERCISABLE
---------------------------------------------------------------------------   ---------------------
                                                WEIGHTED
                                                 AVERAGE       WEIGHTED                 WEIGHTED
                                  NUMBER OF     REMAINING       AVERAGE     NUMBER OF    AVERAGE
                                   OPTIONS     CONTRACTUAL     EXERCISE      OPTIONS    EXERCISE
        EXERCISABLE PRICES       OUTSTANDING   LIFE (YEARS)     PRICE     EXERCISABLE    PRICE
-----------------------------   ------------   ------------   ---------   -----------   --------
<S>                             <C>            <C>            <C>         <C>           <C>
$1.25  --  $2.57                   121,750         3.86        $ 1.71      121,750      $ 1.71
$5.21                              105,750         5.77        $ 5.21       60,500      $ 5.21
$12.50 -- $14.50                   472,493         9.24        $14.44       82,752      $14.31
$17.91                             180,216         7.95        $17.91       93,658      $17.91
                                -----------                               -----------
$1.25  -- $17.91                   880,209         7.82        $12.28      358,660      $ 9.44
                                ===========                               ===========
</TABLE>

As of September 30, 1999, options have a weighted average remaining contractual
life of approximately 7.82 years. Options to purchase 358,660 shares were
exercisable and 420,023 shares are available for future grant under the Stock
Option Plan.

The Company uses APB Opinion No. 25 to account for all stock-based employee
compensation arrangements, however, SFAS No. 123 requires pro forma
information to be disclosed regarding the amount of net income (loss)
determined as if the Company had accounted for its employee stock options
under the fair value method prescribed by SFAS No. 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 Black-Scholes option pricing
model with the following assumptions for 1999: risk-free interest rate of
4.49%, no annual dividends and an expected option life of five years. The pro
forma effects of applying SFAS No. 123 to options granted in fiscal 1999 on
the Company's net loss and basic and diluted net loss per share, are $(0.3)
million and $(0.02), respectively. There are no pro forma effects of applying
SFAS No. 123 to net income (loss) and net income (loss) per share in fiscal
1998 and 1997.

                                      46

<PAGE>

                        WAVETEK WANDEL GOLTERMANN, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



7.        OTHER COMPREHENSIVE INCOME (LOSS)

On October 1, 1998, the Company adopted SFAS No. 130, REPORTING COMPREHENSIVE
INCOME, which established standards for reporting and displaying comprehensive
loss and its components in a financial statement that is displayed with the same
prominence as other financial statements. Comprehensive loss includes net loss
and other comprehensive income (loss). The Company's current and accumulated
other comprehensive income (loss) as of the year ended September 30, 1999, 1998
and 1997 is comprised solely of foreign currency translation adjustments and is
included in the Statements of Stockholders' Equity.

Comprehensive income (loss) is as follows:

<TABLE>
<CAPTION>
                                                                YEARS ENDED SEPTEMBER 30,
                                                              ------------------------------
                                                                1999       1998       1997
                                                              --------   --------   --------
                                                                      (IN THOUSANDS)

<S>                                                           <C>        <C>        <C>
Net income (loss)...........................................  $(7,996)   $(27,267)  $ 7,058
Foreign currency translation adjustments....................      519      (1,895)    3,623
                                                              -------    --------    -------
Comprehensive income (loss).................................  $(7,477)   $(29,162)  $10,681
                                                              =======    ========   ========
</TABLE>


8.        INCOME TAXES

The provision (benefit) for income taxes is comprised as follows:

<TABLE>
<CAPTION>
                                                                YEARS ENDED SEPTEMBER 30,
                                                              ------------------------------
                                                                1999       1998       1997
                                                              --------   --------   --------
                                                                      (IN THOUSANDS)

<S>                                                           <C>        <C>        <C>
Federal:
  Current...................................................  $     -     $ (866)    $ (123)
  Deferred..................................................   (3,818)    (2,151)        57
                                                              -------     ------     ------
                                                               (3,818)    (3,017)       (66)
                                                              -------     ------     ------

State:
   Current..................................................      191         --         73
   Deferred.................................................      132         --         (7)
                                                              -------     ------     ------
                                                                  323         --         66
                                                              -------     ------     ------

Foreign:
  Current...................................................    6,179      5,429      2,812
  Deferred..................................................   (5,766)     4,129      4,550
                                                              -------     ------     ------
                                                                  413      9,558      7,362
                                                              -------     ------     ------

Total provision (benefit) for income taxes..................  $(3,082)    $6,541     $7,362
                                                              =======     ======     ======
</TABLE>


                                      47

<PAGE>

                        WAVETEK WANDEL GOLTERMANN, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



The reconciliation of income taxes computed at the U.S. federal statutory tax
rate to income tax provision (benefit) is as follows:

<TABLE>
<CAPTION>
                                                                  YEARS ENDED SEPTEMBER
                                                                           30,
                                                              ------------------------------
                                                                1999       1998       1997
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
Federal income tax at statutory rate........................   (35.0)%    (35.0)%    35.0%
State income taxes, net of federal tax benefit..............     7.8         --       0.5
Foreign tax rate differential...............................   (10.2)       6.3      10.3
Benefit from foreign sales corporation......................      --         --      (1.1)
Acquired in--process research and development and
  amortization of goodwill..................................    28.5       45.8        --
Recognition of tax loss carryforwards.......................   (19.8)        --        --
Other, net..................................................     4.3       (1.6)     (0.5)
                                                               -----      -----     -----
                                                               (24.4)      15.5      44.2
Changes in valuation allowance..............................    (3.4)       9.8       6.2
                                                               -----      -----     -----
Effective income tax rate...................................   (27.8)%     25.3%     50.4%
                                                               =====      =====     =====
</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, 1999 and
1998 are set forth in the following table.

The significant components of deferred tax assets and liabilities at September
30, 1999 and 1998 result from:

<TABLE>
<CAPTION>
                                                                1999       1998
                                                              --------   --------
                                                                (IN THOUSANDS)

<S>                                                           <C>        <C>
Deferred tax assets:
  Inventories...............................................  $ 5,908    $ 6,845
  Accrued and unpaid expenses...............................    2,426      6,508
  Property, plant and equipment.............................    2,641      1,138
  Intangible assets.........................................    1,870      3,089
  Pension plans.............................................    2,414      3,253
  Tax credit carryforwards..................................    3,562      3,179
  Net operating loss carryforwards..........................   32,543     24,707
  Other.....................................................      377        946
                                                              -------    -------
Total deferred tax assets...................................   51,741     49,665
Deferred tax liabilities:
  Intangible assets.........................................  (34,847)   (39,736)
  Property, plant and equipment.............................   (1,157)    (1,480)
  Pension plans.............................................       --     (1,551)
  Other.....................................................       --       (233)
                                                              -------    -------
Total deferred tax liabilities..............................  (36,004)   (43,000)
                                                              -------    -------
Valuation allowance.........................................  (14,772)   (15,152)
                                                              -------    -------
Net deferred tax assets (liabilities).......................  $   965    $(8,487)
                                                              =======    =======
</TABLE>


                                      48

<PAGE>

                        WAVETEK WANDEL GOLTERMANN, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



As of September 30, 1999, the Company's German subsidiaries had net operating
loss carryforwards of approximately $56.2 million, which can be used
indefinitely. The Company's U.S. subsidiaries had net operating loss
carryforwards of approximately $16.2 million and tax credit carryforwards of
approximately $2.6 million which can be used through 2019, subject to certain
restrictions on amounts which may be used in each year. The Company's French
subsidiaries had net operating loss carryforwards of approximately $4.4 million
which expire on various dates during the next five years. The Company's other
various worldwide subsidiaries have net operating loss carryforwards of
approximately $8.6 million which expire on various dates beyond the next five
years.

The Company establishes valuation allowances in accordance with the provisions
of SFAS No. 109, ACCOUNTING FOR INCOME TAXES. Management believes sufficient
uncertainty exists regarding the realizability of deferred tax assets that a
valuation allowance is required. The Company continually reviews the adequacy of
the valuation allowance and is recognizing these benefits only as reassessment
indicates that it is more likely than not that the benefits will be realized.

9.        RETIREMENT BENEFITS

DEFINED BENEFIT PLANS

The Company sponsors several qualified and non-qualified pension plans for its
employees. For those Company employees participating in defined benefit plans,
benefits are generally based upon years of service and compensation or stated
amounts for each year of service. Assets of the various pension plans consist
primarily of managed funds that have underlying investments in stocks and bonds.
The Company's policy for funded plans is to make contributions equal to or
greater than the requirements prescribed by law in each country.

The following table provides a reconciliation of the changes in the plans'
benefits obligations for the years ended September 30, 1999 and 1998:

<TABLE>
<CAPTION>
                                                                 SEPTEMBER 30,
                                                              -------------------
                                                                1999       1998
                                                              --------   --------
                                                             (DOLLARS IN THOUSANDS)

  <S>                                                         <C>        <C>
  Obligation at October 1...................................  $49,743    $40,557
  Service cost..............................................    1,688      3,116
  Interest cost.............................................    3,024      2,739
  Actuarial gain/loss.......................................    2,656        912
  Foreign currency exchange rate changes....................      111      2,466
  Benefits paid.............................................   (2,204)    (1,785)
  Plan amendments...........................................       --      1,738
  Business combinations.....................................       72         --
                                                              -------    -------
  Obligation at September 30................................  $55,090    $49,743
                                                              =======    =======
</TABLE>


                                      49

<PAGE>

                        WAVETEK WANDEL GOLTERMANN, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



The following table provides a reconciliation of the changes in the fair value
of assets under the benefits plans for the years ended September 30, 1999 and
1998:

<TABLE>
<CAPTION>
                                                                   SEPTEMBER 30,
                                                              -----------------------
                                                                 1999         1998
                                                              ----------   ----------
                                                               (DOLLARS IN THOUSANDS)
  <S>                                                         <C>          <C>
  Fair value of plan assets at October 1....................   $10 ,984     $ 11,603
  Actual return on plan assets..............................      3,462         (623)
  Foreign currency exchange rate changes....................        113         (384)
  Employer contributions....................................        775          640
  Benefits paid.............................................       (347)        (252)
  Business combinations.....................................         73           --
  Divestitures..............................................       (101)          --
                                                               --------     --------
  Fair value of plan assets at September 30.................   $ 14,959     $ 10,984
                                                               ========     ========
</TABLE>

The following table represents a statement of the funded status for the years
ended September 30, 1999 and 1998:

<TABLE>
<CAPTION>
                                                                   SEPTEMBER 30,
                                                              -----------------------
                                                                 1999         1998
                                                              ----------   ----------
                                                               (DOLLARS IN THOUSANDS)
  <S>                                                         <C>          <C>
  Net amount recognized.....................................   $(35,671)    $(35,511)
  Unrecognized net gain/loss................................     (4,459)      (3,248)
                                                              ----------   ----------
  Funded status.............................................   $(40,130)    $(38,759)
                                                              ==========   ==========
</TABLE>

The following table provides the amounts recognized in the consolidated balance
sheets as of September 30, 1999 and 1998:

<TABLE>
<CAPTION>
                                                                   SEPTEMBER 30,
                                                              -----------------------
                                                                 1999         1998
                                                              ----------   ----------
                                                               (DOLLARS IN THOUSANDS)
  <S>                                                         <C>          <C>
  Prepaid benefit cost......................................   $    805     $    736
  Accrued benefit liability.................................    (36,476)     (36,247)
                                                               --------     --------
  Net amount recognized.....................................   $(35,671)    $(35,511)
                                                               ========     ========
</TABLE>

The following table provides the components of the net periodic benefit cost for
the plans for the years ended September 30, 1999 and 1998:

<TABLE>
<CAPTION>
                                                                   SEPTEMBER 30,
                                                              -----------------------
                                                                 1999         1998
                                                              ----------   ----------
                                                               (DOLLARS IN THOUSANDS)
  <S>                                                           <C>          <C>
  Service cost..............................................   $  1,688     $  3,116
  Interest cost.............................................      3,024        2,739
  Expected return of plan assets............................     (1,097)        (623)
  Amortization of net gain/loss.............................        179           --
                                                               --------     --------
  Net periodic pension cost.................................   $  3,794     $  5,232
                                                               ========     ========
</TABLE>


                                      50

<PAGE>

                        WAVETEK WANDEL GOLTERMANN, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



The assumptions used in the measurement of the Company's benefit obligation are
shown in the following table as of September 30, 1999 and 1998:

    Weighted average assumptions as of:

<TABLE>
<CAPTION>
                                                                 SEPTEMBER 30,
                                                              -------------------
                                                                1999       1998
                                                              --------   --------
                                                             (DOLLARS IN THOUSANDS)
<S>                                                           <C>        <C>
  Discount rate.............................................    6.5%       6.3%
  Expected return on plan assets............................    7.5        7.5
  Rate of compensation increase.............................    1.0        3.9
</TABLE>

DEFINED CONTRIBUTION PLANS

In certain countries, the Company's employees participate in Company sponsored
defined contribution plans. Contributions by the Company to these plans were
$1.4 million, $0.8 million and $0.7 million in fiscal 1999, 1998 and 1997,
respectively.

10.        SEGMENT AND GEOGRAPHIC INFORMATION

The Company adopted SFAS No. 131, "DISCLOSURE ABOUT SEGMENTS OF AN ENTERPRISE
AND RELATED INFORMATION," as of September 30, 1999. SFAS No. 131 establishes
annual and interim reporting standards for an enterprise's operating segment and
related disclosures about its products, services, geographic areas and major
customers.

Based on its organizational structure, the Company operates in two reportable
segments: communications test and other test products. The Company's reportable
segments represent business units that primarily offer similar products and
services. The Company's communications test business includes Telecom Networks,
Enterprise Networks, Multimedia, Wireless and the Service business. Other test
products include Test Tools, Precision Measurement Instruments and
electromagnetic measurement instruments.

The Company's chief operating decision makers utilize revenue and operating
income (loss) information, as defined below, in assessing performance and making
overall operating decisions and resource allocations.

The accounting policies of the segments are the same as those described in the
summary of significant accounting policies.


                                      51
<PAGE>

                        WAVETEK WANDEL GOLTERMANN, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Information about the Company's operating segments for the fiscal year ended
September 30, 1999 is as follows (in thousands):

<TABLE>
<CAPTION>
                                                             COMMUNICATIONS    OTHER TEST
                                                                  TEST          PRODUCTS     CORPORATE     TOTAL
                                                            -----------------  -----------  -----------  ---------
<S>                                                         <C>                <C>          <C>          <C>
REVENUES:
  Revenues from external customers........................     $   468,231      $  29,011    $      16   $ 497,258
  Intersegment revenues...................................         225,662         32,282           --     257,944
  Elimination of intersegment revenues....................        (225,662)       (32,282)          --    (257,944)
                                                               -----------      ---------    ---------   ---------
    Total revenues........................................     $   468,231      $  29,011    $      16   $ 497,258
                                                               ===========      =========    =========   =========
OPERATING INCOME (LOSS):
  Operating income (loss) on reportable segments(1).......     $    36,486      $   2,261    $  (5,837)  $  32,910
  Amortization of intangible assets.......................           2,488            154       17,325      19,967
  Restructuring and other non-recurring charges...........              --             --        2,379       2,379
  Elimination of intersegment profits.....................              --             --          285         285
                                                               -----------      ---------    ---------   ---------
    Operating income (loss) (2)...........................          33,998          2,107      (25,826)     10,279
  Net interest expense:
    Interest (revenue)....................................            (615)           (38)         (24)       (677)
    Interest expense......................................           4,682            290       15,993      20,965
                                                               -----------      ---------    ---------   ---------
      Net interest expense................................           4,067            252       15,969      20,288
  Other expense, net......................................              --          1,368         (299)      1,069
                                                               -----------      ---------    ---------   ---------
Income (loss) before provision (benefit) for income taxes
  and minority interest in income (loss)..................     $    29,931      $     487    $ (41,496)  $ (11,078)
                                                               ===========      =========    =========   =========

ASSETS:
  Total assets from reportable segments...................     $   187,502      $  10,351    $ 154,905   $ 352,758
  Elimination of receivables from corporate...............         (58,076)        (3,602)          --     (61,678)
                                                               -----------      ---------    ---------   ---------
                                                                   129,426          6,749      154,905     291,080
  Unallocated goodwill....................................              --             --       53,860      53,860
  Unallocated acquired core technologies..................              --             --       74,290      74,290
  Unallocated other intangibles...........................              --             --       15,503      15,503
                                                               -----------      ---------    ---------   ---------
    Total assets..........................................     $   129,426      $   6,749    $ 298,558   $ 434,733
                                                               ===========      =========    =========   =========
Capital expenditures......................................     $    15,382      $     954    $     424   $  16,760

DEPRECIATION AND AMORTIZATION:
  Depreciation............................................          11,596            719          686      13,002
  Amortization of intangible assets.......................           5,306            329       16,830      22,466
</TABLE>

------------------------
Notes:

(1) Operating income (loss) on reportable segments is defined by management as
    operating income (loss), including intersegment profits, and excluding
    amortization of intangible assets and restructuring and other non-recurring
    charges.

(2) Per consolidated statement of operations.

                                       52
<PAGE>

                        WAVETEK WANDEL GOLTERMANN, INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Information about the Company's operating segments for the fiscal year ended
September 30, 1998 is as follows (in thousands):

<TABLE>
<CAPTION>
                                                             COMMUNICATIONS    OTHER TEST
                                                                  TEST          PRODUCTS     CORPORATE     TOTAL
                                                            -----------------  -----------  -----------  ---------
<S>                                                         <C>                <C>          <C>          <C>
REVENUES:
  Revenues from external customers........................     $   318,745      $   9,061    $      82   $ 327,888
  Intersegment revenues...................................          37,289             --           --      37,289
  Elimination of intersegment revenues....................         (37,289)            --           --     (37,289)
                                                               -----------      ---------    ---------   ---------
    Total revenues........................................     $   318,745      $   9,061    $      82   $ 327,888
                                                               ===========      =========    =========   =========
OPERATING INCOME (LOSS):
  Operating income (loss) on reportable segments(1).......     $    28,464      $    (200)   $   1,972   $  30,236
  Amortization of intangible assets.......................           1,182             --           --       1,182
  Acquired in-process research and development............          21,125             --       11,800      32,925
  Restructuring and other non-recurring charges...........           9,369             --           --       9,369
  Elimination of intersegment profits.....................              --             --        1,116       1,116
                                                               -----------      ---------    ---------   ---------
    Operating income (loss) (2)...........................          (3,212)          (200)     (10,944)    (14,356)
  Net interest expense:
    Interest (revenue)....................................            (580)           (16)        (381)       (977)
    Interest expense......................................           3,938            112        3,579       7,629
                                                               -----------      ---------    ---------   ---------
    Net interest expense..................................           3,358             96        3,198       6,652
  Other (income) expense, net.............................          (1,969)          (126)       6,909       4,814
                                                               -----------      ---------    ---------   ---------
Income (loss) before provision (benefit) for income taxes
  and minority interest in income (loss)..................     $    (4,601)     $    (170)   $ (21,051)  $ (25,822)
                                                               ===========      =========    =========   =========
ASSETS:
  Total assets from reportable segments...................     $   218,421      $   9,856    $ 145,335   $ 373,612
  Elimination of receivables from corporate...............         (43,759)        (1,242)          --     (45,001)
                                                               -----------      ---------    ---------   ---------
                                                                   174,662          8,614      145,335     328,611
  Unallocated goodwill....................................              --             --       56,789      56,789
  Unallocated acquired core technologies..................              --             --       84,100      84,100
  Unallocated other intangibles...........................              --             --       15,024      15,024
                                                               -----------      ---------    ---------   ---------
    Total assets..........................................     $   174,662      $   8,614    $ 301,248   $ 484,524
                                                               ===========      =========    =========   =========
Capital expenditures......................................     $     9,902      $     514    $      --   $  10,207

DEPRECIATION AND AMORTIZATION:
  Depreciation............................................           7,434            211           --       7,645
  Amortization of intangible assets.......................           1,182             --           --       1,182
</TABLE>

------------------------
Notes:

(1) Operating income (loss) on reportable segments is defined by management as
    operating income (loss), including intersegment profits, and excluding
    amortization of intangible assets, acquired in-process research and
    development and restructuring and other non-recurring charges.

(2) Per consolidated statement of operations.

                                       53

<PAGE>

                        WAVETEK WANDEL GOLTERMANN, INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Information about the Company's operating segments for the fiscal year ended
September 30, 1997 is as follows (in thousands):

<TABLE>
<CAPTION>
                                                                          COMMUNICATIONS    OTHER TEST
                                                                               TEST          PRODUCTS      TOTAL
                                                                         -----------------  -----------  ---------
<S>                                                                      <C>                <C>          <C>
REVENUES:
  Revenues from external customers.....................................     $   274,135      $   7,752   $ 281,887
  Intersegment revenues................................................          29,944            847      30,791
  Elimination of intersegment revenues.................................         (29,944)          (847)    (30,791)
                                                                            -----------      ---------   ---------
    Total revenues.....................................................     $   274,135      $   7,752   $ 281,887
                                                                            ===========      =========   =========

OPERATING INCOME (LOSS):
  Operating income (loss) on reportable segments(1)....................     $    23,233      $     570   $  23,803
  Amortization of intangible assets....................................           1,346             --       1,346
  Acquired in-process research and development.........................           1,743             --       1,743
                                                                            -----------      ---------   ---------
    Operating income (loss) (2)........................................          20,144            570      20,714
  Net interest expense:
    Interest (revenue).................................................          (1,566)           (44)     (1,610)
    Interest expense...................................................           8,275            234       8,509
                                                                            -----------      ---------   ---------
      Net interest expense.............................................           6,709            190       6,899
  Other (income) expense, net..........................................            (768)           (22)       (790)
                                                                            -----------      ---------   ---------
Income (loss) before provision (benefit) for income taxes and minority
  interest in income (loss)............................................     $    14,203      $     402   $  14,605
                                                                            ===========      =========   =========

ASSETS:
  Total assets from reportable segments................................     $   211,752      $   5,988   $ 217,740
  Unallocated goodwill.................................................              --             --       4,468
                                                                            -----------      ---------   ---------
    Total assets.......................................................     $   211,752      $   5,988   $ 222,208
                                                                            ===========      =========   =========
Capital expenditures...................................................     $     9,099      $     257   $   9,356

DEPRECIATION AND AMORTIZATION:
  Depreciation.........................................................           8,689            246       8,935
  Amortization of intangible assets....................................           1,346             --       1,346
</TABLE>

------------------------
Notes:

(1) Operating income (loss) on reportable segments is defined by management as
    operating income (loss), excluding amortization of intangible assets and
    acquired in-process research and development.

(2) Per consolidated statement of operations.

                                       54

<PAGE>

                        WAVETEK WANDEL GOLTERMANN, INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Information about the Company's operations by geographic areas is shown in the
table below. The Company manages its operations in two primary geographic areas:
(i) North American operations which includes the United States, Canada, Mexico,
Central and South America, and (ii) European Operations which includes Europe
and Asia-Pacific.

Net sales represents the locations of sales to the Company's customers. Income
(loss) before provision (benefit) for income taxes and total assets is 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,
                                                                          ----------------------------------------
                                                                              1999          1998          1997
                                                                          ------------  ------------  ------------
                                                                                   (DOLLARS IN THOUSANDS)
<S>                                                                       <C>           <C>           <C>
Net sales:
  Europe................................................................  $    231,494  $    176,437  $    148,037
  Canada, Mexico, Central and South America.............................        76,281        69,725        62,922
  Asia-Pacific..........................................................        71,933        44,258        40,417
  United States.........................................................       117,550        37,468        30,511
                                                                          ------------  ------------  ------------
Consolidated net sales..................................................  $    497,258  $    327,888  $    281,887
                                                                          ============  ============  ============
  Income (loss) before provision (benefit) for income taxes and
    minority interest in income (loss):
  Europe................................................................  $     17,361  $     14,871  $     28,056
  Canada, Mexico, Central and South America.............................          (232)          131         1,668
  Asia-Pacific..........................................................           726           864          (203)
  United States.........................................................       (28,090)      (38,495)       (1,329)
  Eliminations..........................................................          (843)       (3,193)      (13,587)
                                                                          ------------  ------------  ------------
  Consolidated income (loss) before provision (benefit) for income
    taxes and minority interest in income (loss)........................  $    (11,078) $    (25,822) $     14,605
                                                                          ============  ============  ============
Total assets:
  Europe................................................................  $    421,078  $    515,203  $    364,722
  Canada, Mexico, Central and South America.............................        24,927        26,174        12,786
  Asia-Pacific..........................................................        21,493        14,341        14,095
  United States.........................................................       424,741       263,101        42,432
  Eliminations..........................................................      (457,506)     (334,295)     (211,827)
                                                                          ------------  ------------  ------------
Consolidated total assets...............................................  $    434,733  $    484,524  $    222,208
                                                                          ============  ============  ============
</TABLE>

For fiscal 1999, no one customer accounted for more than 5% of the Company's
sales, and the top ten customers, each of which is a global company with global
affiliates, represented approximately 18% of the Company's sales.

                                       55

<PAGE>

                        WAVETEK WANDEL GOLTERMANN, INC.

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11. COMMITMENTS AND CONTINGENCIES

LEASE COMMITMENTS

The Company rents certain facilities under operating leases. The leases
generally provide that the Company pay the taxes, 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 $8.2
million, $5.8 million, and $4.4 million for fiscal 1999, 1998 and 1997,
respectively.

In 1991, Wavetek 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 $0.6 million, subject to
annual consumer price index adjustments. The original gain on the transaction
was deferred and is being amortized over the original ten-year lease term.

The Company's U.S. corporate headquarters located in North Carolina and the
office and manufacturing facilities of two of the Company's U.S. subsidiaries
are leased from a partnership affiliated with certain major stockholders of the
Company. Under these leases, which expire on September 30, 2005 and 2010, annual
rent of $1.2 million is payable in monthly installments and is adjusted annually
for changes in the consumer price index.

At September 30, 1999, the annual future minimum lease payments under
noncancelable operating leases and the future minimum annual lease receipts
under noncancelable subleases are as follows:

<TABLE>
<CAPTION>
                                             LEASE        LEASE
                                           PAYMENTS     RECEIPTS
                                          -----------  -----------
                                               (IN THOUSANDS)
<S>                                       <C>          <C>
2000....................................   $   8,989    $     484
2001....................................       7,890          492
2002....................................       5,084          492
2003....................................       4,420          492
2004....................................       4,306          492
Later years.............................      18,872           82
                                           ---------    ---------
Total minimum lease payments............   $  49,561    $   2,534
                                           =========    =========
</TABLE>

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.

In May 1999, the Company resolved its dispute with certain beneficial owners of
the Company's 10.125% Senior Subordinated Notes due 2007 arising from the
Exchange Transaction. The Company made a cash payment to the holders of the
Notes and entered into a supplemental indenture with the Trustee providing for
amendments to the Indenture under which the Notes were issued. In connection
with such agreement, the Company will become obligated to pay $2.125 million to

                                       56

<PAGE>

                        WAVETEK WANDEL GOLTERMANN, INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


certain holders of the Notes on June 30, 2000, in cash or additional notes, in
the event that the Company does not consummate an initial public offering
producing gross cash proceeds in excess of $75 million by such date.

The Company hired a new chief financial officer as of October 1, 1999 and
terminated his employment on December 14, 1999. The individual has disputed
the basis for his termination and is claiming that he is entitled to his
compensation for the remainder of the two year term of his employment
contract. The Company does not believe the magnitude of this dispute is
material to the Company.

12. RELATED PARTY TRANSACTIONS

At September 30, 1999 and 1998, the Company had unsecured notes payable to
stockholders of $10.7 million and $12.3 million, respectively. These
obligations bear interest at 7.75%, payable quarterly, and are due at the
earlier of an initial public offering of the Company's Common Stock or
December 2000. The Company recorded interest expense related to these
obligations of $0.8 million, $0.8 million and $0.9 million, in 1999, 1998 and
1997, respectively.

The Company leases its facility in Research Triangle Park, North Carolina,
including its corporate headquarters and the facilities of its subsidiaries
Wandel & Goltermann Technologies, Inc. and Wandel & Goltermann ATE Systems,
Inc., from a partnership which is owned by a member of the Company's board of
directors and his children, who are all also shareholders of the Company, and
certain other family members. Under the leases, which expire in September
2005 and September 2010, annual rent of $1.5 million is payable in monthly
installments and is adjusted annually for changes in the consumer price index.

The Company leases its headquarters for its local area network and Test Tools
business in San Diego, California from a corporation controlled by the
co-chairman of the Company's board of directors for an annual rent of $0.6
million, plus annual consumer price index adjustments, not to exceed 3% per
annum. The lease expires in June 2006.

The Company leases certain offices and manufacturing facilities in Eningen,
Germany for one of its German subsidiaries from the mother of the co-chairman
of the Company's board of directors. The Company paid annual rent of $0.3
million under the lease, which was terminated in July 1999.

In February 1998, the Company sold 400 shares, or 10%, of the common stock of
its then wholly-owned subsidiary Switching Test Solutions AG ("STS") to the
Company's president and chief executive officer for a purchase price of $0.8
million, which was paid in April 1998. In connection with this transaction,
the president and chief executive officer, a member of the Company's board of
directors, and a co-chairman of the Company's board of directors and
shareholder, entered into put and call options related to the shares sold to
the president and chief executive officer. In September 1998, a member of the
Company's board of directors and a co-chairman of the Company's board of
directors exercised the call options and purchased the shares of STS held by
the Company's president and chief executive officer. Subsequently, the
Company purchased these shares from a member of the Company's board of
directors and a co-chairman of the Company's board of directors for $0.8
million.

                                       57

<PAGE>

                        WAVETEK WANDEL GOLTERMANN, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL DATA

The Company's payment obligations under the Notes are guaranteed by all of the
Company's current and future domestic subsidiaries (collectively, the
"Subsidiary Guarantors"). WGTI and Wandel & Goltermann ATE Systems, Inc., which
became Subsidiary Guarantors upon completion of the Exchange Transaction, are
shown as Subsidiary Guarantors for all periods presented. Wavetek U.S. Inc. and
its subsidiary, Digital Transport Systems, Inc., are also Subsidiary Guarantors.
Such guarantees are full and unconditional and joint and several. Separate
financial statements of the Subsidiary Guarantors 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 operations and statements
of cash flows data for (i) the Company (Wavetek Wandel Goltermann, Inc.,
formerly Wavetek Corporation, issuer of the Notes), (ii) the current Subsidiary
Guarantors and (iii) the Company's foreign subsidiaries (the "Foreign
Subsidiaries"). The supplemental financial data reflects the investments of the
Company in the Subsidiary Guarantors and the Foreign Subsidiaries using the
equity method of accounting.

                                       58
<PAGE>
                        WAVETEK WANDEL GOLTERMANN, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                          CONSOLIDATING BALANCE SHEETS
                            AS OF SEPTEMBER 30, 1999
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                             WAVETEK
                                              WANDEL
                                           GOLTERMANN,   SUBSIDIARY     FOREIGN
                                               INC.      GUARANTORS   SUBSIDIARIES  ELIMINATIONS  CONSOLIDATED
                                           ------------  -----------  ------------  ------------  -------------
<S>                                        <C>           <C>          <C>           <C>           <C>
                                                    ASSETS
Current assets:
  Cash and cash equivalents..............   $       11    $   4,578    $   12,500    $       --     $  17,089
  Accounts receivable (less allowance for
    doubtful accounts of $4,608).........       42,956       46,715        87,312       (74,451)      102,532
  Inventories............................           --       13,884        52,388        (3,757)       62,515
  Deferred income taxes..................          561        4,482         3,879            --         8,922
  Other current assets...................          156        1,917        11,563            --        13,636
                                            ----------    ---------    ----------    ----------     ---------
Total current assets.....................       43,684       71,576       167,642       (78,208)      204,694
Property, plant and equipment, net.......        1,361        8,013        51,201            --        60,575
Intangible assets, net...................        5,617      110,170        46,695            --       162,482
Investment in subsidiaries...............      167,992           --            --      (167,992)           --
Other non-current assets.................            6        1,988         4,988            --         6,982
                                            ----------    ---------    ----------    ----------     ---------
Total assets.............................   $  218,660    $ 191,747    $  270,526    $ (246,200)    $ 434,733
                                            ==========    =========    ==========    ==========     =========

                                     LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Notes payable..........................   $       --    $      --    $   17,510    $       --     $  17,510
  Long-term obligations - current........           --          685         5,517            --         6,202
  Long-term obligations to related
    parties - current....................           --           --        10,721            --        10,721
  Trade payables.........................       17,236       17,322        61,873       (64,882)       31,549
  Accrued compensation...................          396        6,734        19,496            --        26,626
  Income taxes payable...................      (18,986)      18,978         4,258            --         4,250
  Other current liabilities..............        4,516        5,786        28,536            --        38,838
                                            ----------    ---------    ----------    ----------     ---------
Total current liabilities................        3,162       49,505       147,911       (64,882)      135,696
Long-term obligations - non-current......      198,080        7,784        31,695        (9,476)      228,083
Pension liabilities......................           --           --        35,671            --        35,671
Deferred income taxes....................         (519)      19,953       (11,477)           --         7,957
Other non-current liabilities............           --        4,088         5,301            --         9,389
                                            ----------    ---------    ----------    ----------     ---------
Total liabilities........................      200,723       81,330       209,101       (74,358)      416,796
                                            ----------    ---------    ----------    ----------     ---------
Commitments and contingencies
Stockholders' equity:
  Common stock...........................          132           --            --            --           132
  Additional paid-in capital.............       72,948      171,121        87,187      (258,308)       72,948
  Accumulated deficit....................      (65,641)     (60,682)      (36,282)       96,964       (65,641)
  Other comprehensive income (loss)......       10,498          (22)       10,520       (10,498)       10,498
                                            ----------    ---------    ----------    ----------     ---------
Total stockholders' equity...............       17,937      110,417        61,425      (171,842)       17,937
                                            ----------    ---------    ----------    ----------     ---------
Total liabilities and stockholders'
  equity.................................   $  218,660    $ 191,747    $  270,526    $ (246,200)    $ 434,733
                                            ==========    =========    ==========    ==========     =========
</TABLE>

                                       59
<PAGE>
                        WAVETEK WANDEL GOLTERMANN, INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                          CONSOLIDATING BALANCE SHEETS
                            AS OF SEPTEMBER 30, 1998
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                             WAVETEK
                                              WANDEL
                                           GOLTERMANN,   SUBSIDIARY     FOREIGN
                                               INC.      GUARANTORS   SUBSIDIARIES  ELIMINATIONS  CONSOLIDATED
                                           ------------  -----------  ------------  ------------  -------------
<S>                                        <C>           <C>          <C>           <C>           <C>
                                                    ASSETS
Current assets:
  Cash and cash equivalents..............   $       19    $  31,143    $    4,382    $       --     $  35,544
  Accounts receivable (less allowance for
    doubtful accounts of $4,432).........        8,710       27,364        81,907       (25,700)       92,281
  Inventories............................           --       18,033        59,942        (3,089)       74,886
  Deferred income taxes..................        3,592        4,408         9,095            --        17,095
  Other current assets...................        1,244        1,884         9,608            --        12,736
                                            ----------    ---------    ----------    ----------     ---------
Total current assets.....................       13,565       82,832       164,934       (28,789)      232,542
Property, plant and equipment, net.......        1,611        8,015        56,971            --        66,597
Intangible assets, net...................        7,953      120,428        50,294            --       178,675
Investment in subsidiaries...............      143,579           --        29,932      (173,511)           --
Other assets.............................          213        2,763         3,794           (60)        6,710
                                            ----------    ---------    ----------    ----------     ---------
Total assets.............................   $  166,921    $ 214,038    $  305,925    $ (202,360)    $ 484,524
                                            ==========    =========    ==========    ==========     =========

                                     LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Notes payable..........................   $   34,463    $     373    $   78,249    $       --     $ 113,085
  Long-term obligations - current........       24,000          741         5,481            --        30,222
  Long-term obligations to related
    parties - current....................           --           --        11,746            --        11,746
  Trade payables.........................        4,003       20,322        35,845       (22,558)       37,612
  Accrued compensation...................          714        5,478        19,715            --        25,907
  Income taxes payable...................      (10,839)       9,978         6,817            --         5,956
  Other current liabilities..............        3,683        8,967        30,986        (1,788)       41,848
                                            ----------    ---------    ----------    ----------     ---------
Total current liabilities................       56,024       45,859       188,839       (24,346)      266,376
Long-term obligations - non-current......       85,000        4,299        33,711        (1,415)      121,595
Pension liabilities......................           --           --        35,511            --        35,511
Deferred income taxes....................          238       25,156           188             -        25,582
Other non-current liabilities............          245        2,142         7,659             -        10,046
                                            ----------    ---------    ----------    ----------     ---------
Total liabilities........................      141,507       77,456       265,908       (25,761)      459,110
                                            ----------    ---------    ----------    ----------     ---------
Commitments and contingencies
Stockholders' equity:
  Common stock...........................          132           --            --            --           132
  Additional paid-in capital.............       72,948      168,071        85,153      (253,224)       72,948
  Accumulated deficit....................      (57,645)     (31,463)      (55,115)       86,578       (57,645)
  Other comprehensive income (loss)......        9,979          (26)        9,979        (9,953)        9,979
                                            ----------    ---------    ----------    ----------     ---------
Total stockholders' equity...............       25,414      136,582        40,017      (176,599)       25,414
                                            ----------    ---------    ----------    ----------     ---------
Total liabilities and stockholders'
  equity.................................   $  166,921    $ 214,038    $  305,925    $ (202,360)    $ 484,524
                                            ==========    =========    ==========    ==========     =========
</TABLE>

                                       60
<PAGE>
                        WAVETEK WANDEL GOLTERMANN, INC.

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     CONSOLIDATING STATEMENTS OF OPERATIONS
                     FOR THE YEAR ENDED SEPTEMBER 30, 1999
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                             WAVETEK
                                              WANDEL
                                           GOLTERMANN,   SUBSIDIARY     FOREIGN
                                               INC.      GUARANTORS   SUBSIDIARIES  ELIMINATIONS  CONSOLIDATED
                                           ------------  -----------  ------------  ------------  -------------
<S>                                        <C>           <C>          <C>           <C>           <C>
Net sales................................   $       --    $ 158,576    $  392,999    $  (54,317)    $ 497,258
Cost of goods sold.......................           39       76,419       181,924       (53,649)      204,733
                                            ----------    ---------    ----------    ----------     ---------
Gross margin.............................          (39)      82,157       211,075          (668)      292,525
Operating expenses:
  Marketing and selling..................        1,801       38,574       106,012            --       146,387
  Research and development...............           --       22,506        48,933            --        71,439
  General and administrative.............        2,809       11,218        28,047            --        42,074
  Amortization of intangible assets......          136       12,189         7,642            --        19,967
  Provisions for restructuring and other
    non-recurring charges................          286          296         1,797            --         2,379
                                            ----------    ---------    ----------    ----------     ---------
    Total operating expenses.............        5,032       84,783       192,431            --       282,246
                                            ----------    ---------    ----------    ----------     ---------
Operating income (loss)..................       (5,071)      (2,626)       18,644          (668)       10,279
Other (income) expense, net:
  Interest income........................       (1,187)        (227)         (450)        1,187          (677)
  Interest expense.......................       14,468          737         6,947        (1,187)       20,965
  Equity in net income (loss) of
    subsidiaries.........................       (4,866)          --            --         4,866            --
  Other, net.............................         (563)          79         1,553            --         1,069
                                            ----------    ---------    ----------    ----------     ---------
    Total other (income) expense, net            7,852          589         8,050         4,866        21,357
                                            ----------    ---------    ----------    ----------     ---------
  Income (loss) before provision
    (benefit) for income taxes...........      (12,923)      (3,215)       10,594        (5,534)      (11,078)
Provision (benefit) for income taxes.....       (4,927)       3,745        (1,633)         (267)       (3,082)
                                            ----------    ---------    ----------    ----------     ---------
Net income (loss)........................   $   (7,996)   $  (6,960)   $   12,227    $   (5,267)    $  (7,996)
                                            ==========    =========    ==========    ==========     =========
</TABLE>

                                       61
<PAGE>
                        WAVETEK WANDEL GOLTERMANN, INC.

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     CONSOLIDATING STATEMENTS OF OPERATIONS
                     FOR THE YEAR ENDED SEPTEMBER 30, 1998
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                            WAVETEK WANDEL    SUBSIDIARY     FOREIGN
                                           GOLTERMANN, INC.   GUARANTORS   SUBSIDIARIES  ELIMINATIONS  CONSOLIDATED
                                           -----------------  -----------  ------------  ------------  -------------
<S>                                        <C>                <C>          <C>           <C>           <C>
Net sales................................      $      --       $  59,261    $  305,916    $  (37,289)    $ 327,888
Cost of goods sold.......................             --          32,278       137,680       (39,095)      130,863
                                               ---------       ---------    ----------    ----------     ---------
Gross margin.............................             --          26,983       168,236         1,806       197,025
Operating expenses:
  Marketing and selling..................             --          17,181        78,157            --        95,338
  Research and development...............             --          13,891        33,839            --        47,730
  General and administrative.............             --           5,281        19,556            --        24,837
  Amortization of intangible assets......             --              --         1,182            --         1,182
  Acquired in-process research and
    development..........................             --          24,342         8,583            --        32,925
  Provisions for restructuring and other
    non-recurring charges................             --           4,820         4,549            --         9,369
                                               ---------       ---------    ----------    ----------     ---------
    Total operating expenses.............             --          65,515       145,866            --       211,381
                                               ---------       ---------    ----------    ----------     ---------
Operating income (loss)..................             --         (38,532)       22,370         1,806       (14,356)
Other (income) expense, net:                          --
  Interest income........................             --            (351)         (807)          181          (977)
  Interest expense.......................             --             181         7,629          (181)        7,629
  Other, net.............................             --             133         4,681            --         4,814
                                               ---------       ---------    ----------    ----------     ---------
    Total other (income) expense, net                 --             (37)       11,503            --        11,466
                                               ---------       ---------    ----------    ----------     ---------
  Income (loss) before provision
    (benefit) for income taxes and
    minority interest in income (loss)...             --         (38,495)       10,867         1,806       (25,822)
Provision (benefit) for income taxes.....             --          (3,017)        9,558            --         6,541
Minority interest in income (loss).......             --              --           124        (5,220)       (5,096)
                                               ---------       ---------    ----------    ----------     ---------
Net income (loss)........................      $      --       $ (35,478)   $    1,185    $    7,026     $ (27,267)
                                               =========       =========    ==========    ==========     =========
</TABLE>

                                       62
<PAGE>
                        WAVETEK WANDEL GOLTERMANN, INC.

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

<TABLE>
<CAPTION>
                                            WAVETEK WANDEL    SUBSIDIARY     FOREIGN
                                           GOLTERMANN, INC.   GUARANTORS   SUBSIDIARIES  ELIMINATIONS  CONSOLIDATED
                                           -----------------  -----------  ------------  ------------  -------------
<S>                                        <C>                <C>          <C>           <C>           <C>
Net sales................................      $      --       $  61,302    $  258,945    $  (38,360)    $ 281,887
Cost of goods sold.......................             --          27,311       125,944       (39,443)      113,812
                                               ---------       ---------    ----------    ----------     ---------
Gross margin.............................             --          33,991       133,001         1,083       168,075
Operating expenses:
  Marketing and selling..................             --          15,870        66,817            --        82,687
  Research and development...............             --          12,510        24,812            --        37,322
  General and administrative.............             --           5,324        18,939            --        24,263
  Amortization of intangible assets......             --              --         1,346            --         1,346
  Acquired in-process research and
    development..........................             --           1,401           342            --         1,743
                                               ---------       ---------    ----------    ----------     ---------
    Total operating income...............             --          35,105       112,256            --       147,361
                                               ---------       ---------    ----------    ----------     ---------
Operating income (loss)..................             --          (1,114)       20,745         1,083        20,714
Other (income) expense, net:
  Interest income........................             --            (639)       (1,094)          123        (1,610)
  Interest expense.......................             --             123         8,509          (123)        8,509
  Other, net.............................             --             217        (1,007)           --          (790)
                                               ---------       ---------    ----------    ----------     ---------
    Total other (income) expense, net....             --            (299)        6,408            --         6,109
                                               ---------       ---------    ----------    ----------     ---------
  Income (loss) before provision for
    income taxes and minority interest in
    income...............................             --            (815)       14,337         1,083        14,605
Provision for income taxes...............             --              --         7,362            --         7,362
Minority interest in income..............             --              --            --           185           185
                                               ---------       ---------    ----------    ----------     ---------
Net income (loss)........................      $      --       $    (815)   $    6,975    $      898     $   7,058
                                               =========       =========    ==========    ==========     =========
</TABLE>

                                       63
<PAGE>
                        WAVETEK WANDEL GOLTERMANN, INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
                     FOR THE YEAR ENDED SEPTEMBER 30, 1999
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                             WAVETEK
                                              WANDEL
                                           GOLTERMANN,   SUBSIDIARY     FOREIGN
                                               INC.      GUARANTORS   SUBSIDIARIES    ELIMINATIONS     CONSOLIDATED
                                           ------------  -----------  ------------  -----------------  -------------
<S>                                        <C>           <C>          <C>           <C>                <C>
NET CASH PROVIDED BY (USED IN) OPERATING
  ACTIVITIES.............................   $  (26,343)   $  20,955    $    9,700       $      --       $     4,311
INVESTING ACTIVITIES
  Purchase of property, plant and
    equipment............................         (483)      (3,928)      (12,349)             --           (16,760)
  Proceeds from sale of property, plant
    and equipment........................           --           --         1,977              --             1,977
  Transfer of subsidiaries...............      (28,536)          --        28,536              --                --
                                            ----------    ---------    ----------       ---------       -----------
    Net cash provided by (used in)
      investing activities...............      (29,019)      (3,928)       18,164              --           (14,783)
FINANCING ACTIVITIES
  Proceeds from revolving lines of credit
    and long-term obligations............      126,475        6,464        79,772              --           212,711
  Principal payments on revolving lines
    of credit and long-term
    obligations..........................      (71,859)      (6,837)     (139,963)             --          (218,659)
  Dividend from subsidiary to Wavetek
    Wandel Goltermann, Inc...............       22,000      (22,000)           --              --                --
  Capital contribution from Wavetek
    Wandel Goltermann, Inc. to
    subsidiary...........................       (4,215)          --         4,215              --                --
  Loans to subsidiaries from Wavetek
    Wandel Goltermann, Inc...............      (62,195)       8,738        53,457              --                --
  Repayment of loan from subsidiary to
    Wavetek Wandel Goltermann, Inc.......       53,320      (29,196)      (24,124)             --                --
  Repayment of loans from subsidiaries...       (7,500)      (1,818)        9,318              --                --
  Other, net.............................         (672)       1,057        (1,057)             --              (672)
                                            ----------    ---------    ----------       ---------       -----------
    Net cash provided by (used in)
      financing activities...............       55,354      (43,592)      (18,382)             --            (6,620)
Effect of exchange rate changes on cash
  and cash equivalents...................           --           --        (1,363)             --            (1,363)
                                            ----------    ---------    ----------       ---------       -----------
Increase (decrease) in cash and cash
  equivalents............................           (8)     (26,565)        8,118              --           (18,455)
Cash and cash equivalents at beginning of
  period.................................           19       31,143         4,382              --            35,544
                                            ----------    ---------    ----------       ---------       -----------
Cash and cash equivalents at end of
  period.................................   $       11    $   4,578    $   12,500       $      --       $    17,089
                                            ==========    =========    ==========       =========       ===========
</TABLE>

                                       64
<PAGE>
                        WAVETEK WANDEL GOLTERMANN, INC.

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
                     FOR THE YEAR ENDED SEPTEMBER 30, 1998
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                            WAVETEK WANDEL    SUBSIDIARY      FOREIGN
                                           GOLTERMANN, INC.   GUARANTORS   SUBSIDIARIES   ELIMINATIONS   CONSOLIDATED
                                           -----------------  -----------  -------------  -------------  -------------
<S>                                        <C>                <C>          <C>            <C>            <C>
NET CASH PROVIDED BY (USED IN) OPERATING
  ACTIVITIES.............................      $      --       $  (7,100)    $  20,522      $   8,500      $  21,922
INVESTING ACTIVITIES:
  Purchases of businesses, net of cash
    acquired.............................             --         (39,182)       (6,025)            --        (45,207)
  Cash acquired in connection with the
    Exchange Transaction.................             19          30,438           872             --         31,329
  Purchase of short-term investments.....             --         (41,100)           --             --        (41,100)
  Proceeds from sale of short-term
    investments..........................             --          41,100            --             --         41,100
  Purchase of property, plant and
    equipment............................             --          (1,779)       (8,637)            --        (10,416)
  Other, net.............................             --             302         6,416             --          6,718
                                               ---------       ---------     ---------      ---------      ---------
    Net cash provided by (used in)
      investing activities...............             19         (10,221)       (7,374)            --        (17,576)
FINANCING ACTIVITIES:
  Proceeds from revolving lines of credit
    and long-term obligations............             --           1,455        54,786             --         56,241
  Principal payments on revolving lines
    of credit and long-term
    obligations..........................             --          (1,087)      (34,560)            --        (35,647)
  Capital contributions from the Company
    to subsidiaries......................             --          34,695       (34,695)            --             --
  Cash dividends paid to stockholders....             --              --        (2,043)            --         (2,043)
  Other, net.............................             --              --         3,106             --          3,106
                                               ---------       ---------     ---------      ---------      ---------
    Net cash provided by (used in)
      financing activities...............             --          35,063       (13,406)            --         21,657
  Effect of exchange rate changes on cash
    and cash equivalents.................             --              --           141             --            141
                                               ---------       ---------     ---------      ---------      ---------
  Increase (decrease) in cash and cash
    equivalents..........................             19          17,742          (117)         8,500         26,144
  Cash and cash equivalents at beginning
    of year..............................             --          13,401         4,499         (8,500)         9,400
                                               ---------       ---------     ---------      ---------      ---------
  Cash and cash equivalents at end
    of year..............................      $      19       $  31,143     $   4,382      $      --      $  35,544
                                               =========       =========     =========      =========      =========
</TABLE>

                                       65
<PAGE>
                        WAVETEK WANDEL GOLTERMANN, INC.

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

<TABLE>
<CAPTION>
                                            WAVETEK WANDEL    SUBSIDIARY      FOREIGN
                                           GOLTERMANN, INC.   GUARANTORS   SUBSIDIARIES   ELIMINATIONS   CONSOLIDATED
                                           -----------------  -----------  -------------  -------------  -------------
<S>                                        <C>                <C>          <C>            <C>            <C>
NET CASH PROVIDED BY OPERATING
  ACTIVITIES.............................      $      --       $   3,411     $  22,602      $  (8,500)     $  17,513
INVESTING ACTIVITIES:
  Purchase of businesses, net of cash
    acquired.............................                                       (6,658)                       (6,658)
  Purchase of short-term investments.....             --         (76,160)           --             --        (76,160)
  Proceeds from sale of short-term
    investments..........................             --          76,160            --             --         76,160
  Purchase of property, plant and
    equipment............................             --          (1,728)       (7,628)            --         (9,356)
  Other, net.............................             --           1,413         3,609             --          5,022
                                               ---------       ---------     ---------      ---------      ---------
    Net cash used in investing
      activities.........................             --            (315)      (10,677)            --        (10,992)
FINANCING ACTIVITIES:
  Proceeds from revolving lines of credit
    and long-term obligations............             --              --         1,961             --          1,961
  Principal payments on revolving lines
    of credit and long-term
    obligations..........................             --              --       (12,084)            --        (12,084)
  Cash dividends paid to stockholders....                             --        (1,188)            --         (1,188)
  Other, net.............................             --              --            63             --             63
                                               ---------       ---------     ---------      ---------      ---------
    Net cash used in financing
      activities.........................             --              --       (11,248)            --        (11,248)
Effect of exchange rate changes on cash
  and cash equivalents...................             --              --          (289)            --           (289)
                                               ---------       ---------     ---------      ---------      ---------
Increase (decrease) in cash and cash
  equivalents............................             --           3,096           388         (8,500)        (5,016)
Cash and cash equivalents at beginning of
  year...................................             --          10,305         4,111             --         14,416
                                               ---------       ---------     ---------      ---------      ---------
Cash and cash equivalents at end of
  year...................................      $      --       $  13,401     $   4,499      $  (8,500)     $   9,400
                                               =========       =========     =========      =========      =========
</TABLE>

                                       66
<PAGE>

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

There were no changes in and disagreements with Accountants on Accounting and
Financial Disclosures during the fiscal year ended September 30, 1999.


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)         65      Co-Chairman of the Board
Albrecht Wandel (1)(2)(3)         55      Co-Chairman of the Board
Peter M. Wagner (1)               46      President, Chief Executive Officer and Director
Ben J. Constantini                56      Executive Vice President, Sales
Joseph A. Budano                  38      Senior Vice President - North American Operations
Wolfgang Schuster                 49      Senior Vice President - European Operations
Jean-Philippe Dara                44      Senior Vice President - Human Resources
Karl-Heinz Eisemann               49      Executive Vice President, Chief Financial Officer, Treasurer and Secretary
Sir Malcolm Bates (2)             65      Director
Frank Goltermann                  71      Director
Peter J. Nolan (3)                41      Director
Susan C. Schnabel (2)             37      Director
Joachim Simmross                  58      Director
Gerhard Zeidler                   63      Director
</TABLE>

----------------
Notes:
(1)     Member of the Executive Committee; Mr. Gooding is Chairman of this
        committee
(2)     Member of the Audit Committee;  Sir Malcolm Bates is Chairman of this
        committee.
(3)     Member of the Compensation Committee; Mr. Wandel is Chairman of this
        committee

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

TERENCE J. GOODING, CO-CHAIRMAN OF THE BOARD.  In June 1991, Dr. Gooding
formed a holding company to acquire Wavetek.  Dr. Gooding served as Chairman
and Chief Executive Officer of Wavetek until September 30, 1998.  Dr. Gooding
became Co--Chairman of the Company following the completion of the Exchange
Transaction on September 30, 1998.  Dr. Gooding is also Chairman and Chief
Executive Officer of Grass Valley Group, Inc., a video production equipment
company since September 1999.  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.  Dr. Gooding
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).

                                      67

<PAGE>

ALBRECHT WANDEL, CO-CHAIRMAN OF THE BOARD.  Albrecht Wandel became a director
and Co--Chairman of the Company on September 30, 1998.  Mr. Wandel served as
a Managing Director of WG from October 1974 to September 1998 and as
President and Chief Executive Officer from October 1990 to February 1998.
Mr. Wandel has been a member of the Supervisory Board of WG since March 1998.

PETER M. WAGNER, PRESIDENT, CHIEF EXECUTIVE OFFICER AND DIRECTOR.  Peter M.
Wagner was named President, Chief Executive Officer and director of the
Company on September 30, 1998.  Mr. Wagner served as President, Chief
Executive Officer and Managing Director of WG from February 1998 to September
1998, as Executive Vice President, Chief Operating Officer and Managing
Director of WG from October 1995 to February 1998 and as Vice President,
Sales and Marketing from March 1995 to October 1995. From January 1990 to
February 1995, Mr. Wagner was General Manager of the Line Transmission
Systems Division of Alcatel SEL AG in Stuttgart, Germany.

BEN J. CONSTANTINI, EXECUTIVE VICE PRESIDENT, SALES.  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.  Mr. Constantini was also Senior
Vice President, Sales for Picker International, District Sales Manager for
Siemens Medical Systems, Inc. and spent ten years with General Motors in
various management positions.

JOSEPH A. BUDANO, SENIOR VICE PRESIDENT - NORTH AMERICAN OPERATIONS - Joseph
A. Budano was named Vice-President - North American Operations of the Company
on August 1, 1999.  Mr. Budano joined Wavetek in April 1994 as the General
Manager of the Cable TV Division in Indianapolis.  In June 1996, Mr. Budano
was promoted to Senior Vice-President, North American Operations with
responsibility for Wavetek's Cable TV, LAN and Test Tools Division.  Prior to
joining Wavetek, Mr. Budano worked at The Boston Consulting Group as a
Management Consultant (1991-1994) and Motorola in engineering and
engineering management for the Land Mobile Products Sector (1983-1990).

WOLFGANG SCHUSTER, SENIOR VICE PRESIDENT - EUROPEAN OPERATIONS - Wolfgang
Schuster was named Vice-President - European Operations on August 1, 1999.
Beginning in October 1995 to the present, Wolfgang Schuster is also the
Managing Director of the Commercial Center Eningen and the General Manager
for the Transport Division for the Company.  From October 1992 to September
1995, Mr. Schuster was the Managing Director of Schiemann & Ruwel in
Pfullingen, Germany.  Prior to that date, Mr. Schuster held various
management positions within WG, including the areas of engineering and
manufacturing.

JEAN-PHILIPPE DARA, SENIOR VICE PRESIDENT - HUMAN RESOURCES - Jean-Philippe
Dara joined WWG in February 1999.  From September 1994 to January 1999, Mr.
Jean-Philippe Dara was employed by Disney Consumer Products, Europe Middle
East and Africa, first a Director, Human Resources (September 1994-October
1995) and then as Vice President, Human Resources.

KARL-HEINZ EISEMANN, EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL OFFICER,
TREASURER AND SECRETARY.  Mr. Eisemann was appointed Executive Vice President
and Chief Financial Officer in December 1999. Prior to that he was Senior
Vice-President - Controlling, Logistics and Information Technology,
Treasurer, Secretary and acting Chief Financial Officer since July 1999.
From September 1998 to July 1999, Mr. Eisemann was Senior Vice
President--Finance and Assistant Secretary.  Mr. Eisemann served as Vice
President and Managing Director, Controlling, Logistics and Information
Technologies of WG from October 1997 through September 1998.  From October
1995 to September 1997, Mr. Eisemann was the Chief Financial Officer of the
German division of WG.  Prior to joining WG, Mr. Eisemann spent 22 years with
Alcatel SEL AG in Stuttgart, Germany serving in various financial positions.

SIR MALCOLM BATES, DIRECTOR.  Sir Malcolm Bates became a director of the
Company in July 1997.  Sir Malcolm Bates has been Chairman of Pearl Group
Ltd., an insurance company, since March 1996, Chairman of Premier Farnell
plc, a distributor of electronic components, since January 1997, and Chairman
of London Transport, a public transport business, since February

                                      68

<PAGE>

1999.  Sir Malcolm Bates was Deputy Managing Director of The General Electric
Company, p.l.c. ("GEC"), a position he held for twelve years until his
retirement in March 1997, having joined GEC as Senior Commercial Director in
January 1976.  Sir Malcolm Bates serves on the board of directors of several
companies and is a member of the Advisory Board of Phoenix Equity Partners II
and III.  Sir Malcolm Bates is also Deputy Chairman and Governor of The
University of Westminster.

FRANK GOLTERMANN, DIRECTOR.  Frank Goltermann became a director of the
Company on September 30, 1998.  Mr. Goltermann joined WG in 1966 and served
as a Managing Director of WG from 1980 until 1990, at which time he became
Chairman of the Advisory Board of WG.  From October 1995 to February 1998,
Mr. Goltermann served as Vice--Chairman of the Supervisory Board of WG.

PETER J. NOLAN, DIRECTOR.  Peter J. Nolan became a director of the Company in
June 1997.  Mr. Nolan has been an executive officer and partner of Leonard
Green & Partners, L.P., a merchant banking firm which manages Green Equity
Investors, since April 1997.  Since 1990, Mr. Nolan had previously been a
Managing Director of Donaldson, Lufkin & Jenrette Securities Corporation
("DLJ") and Co--Head of DLJ's Los Angeles Investment Banking Division.  Prior
to that date, Mr. Nolan was a First Vice President in corporate finance at
Drexel Burnham Lambert and a Vice President at Prudential Securities Inc.
Mr. Nolan is also a director of M2 Automotive, Inc. and Liberty Group
Publishing, Inc.

SUSAN C. SCHNABEL, DIRECTOR.  Susan C. Schnabel became a director of the
Company on September 30, 1998. Ms. Schnabel has served as a Managing Director
of DLJ Merchant Banking Partners in the Los Angeles office of Donaldson,
Lufkin & Jenrette Securities Corporation since January 1998.  From February
1997 to December 1997, Ms. Schnabel served as Chief Financial Officer of
PETsMART, a high growth specialty retailer of pet products and supplies.
From February 1990 to January 1997, Ms. Schnabel served in various capacities
at DLJ, including as a Managing Director of DLJ Securities Corporation.  Ms.
Schnabel also serves as a Director of Dick's Clothing and Sporting Goods,
DeCrane Aircraft Holdings and Environmental Systems Products Holdings.

JOACHIM SIMMROSS, DIRECTOR.  Joachim Simmross became a director of the
Company on September 30, 1998.  Mr. Simmross has served as a director of
Hannover Finanz GmbH since 1984 and has served as a member of the Supervisory
Board of WG since October 1995.  Mr. Simmross has also served as a director
of Hannover Finanz W&G Beteiligungsgesellschaft mbH since October 1995.

GERHARD ZEIDLER, DIRECTOR.  Gerhard Zeidler became a director of the Company
on September 30, 1998.  Prof. Zeidler has been Chairman and Chief Executive
Officer of DEKRA e.V. and DEKRA Holding AG, engineering service companies,
since January 1996. Since December 1995, Prof. Zeidler has served as Chairman
and Chief Executive Officer of Perot Systems Corp. Central Europe, an
information technology company.  From 1989 to December 1995, Prof. Zeidler
was President and Chairman of the Board of Management of Alcatel SEL AG in
Stuttgart, Germany and a Vice President and Member of the Executive Committee
of Alcatel N.V.

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)
one Director shall be appointed by the Wandel Stockholders (initially Mr.
Wandel);  (ii) one Director shall be appointed by the Goltermann Stockholders
(initially Mr. Goltermann); (iii) one Director shall be appointed by Hannover
Finanz (initially Mr. Simmross); provided that if Hannover Finanz
beneficially owns less than 4% of the outstanding shares of Common Stock and
the Wandel Stockholders and the Goltermann Stockholders collectively
beneficially own at least 12% of the outstanding shares of Common Stock, such
Director shall be appointed jointly by the Wandel Stockholders and the
Goltermann Stockholders; (iv) one Independent Director shall be appointed
jointly by the Wandel Stockholders, the Goltermann Stockholders and Hannover
Finanz so long as either the Wandel Stockholders or the Goltermann
Stockholders beneficially own at least 4% of the outstanding shares of Common
Stock (initially Mr. Zeidler); (v) one Director and one Independent Director
shall be appointed by Dr. Gooding (initially Dr. Gooding and Mr. Bates); (vi)
one Director shall be appointed by DLJMB (initially Ms. Schnabel); (vii) one
Director shall be appointed by GEI (initially Mr. Nolan); and (viii) one
Director shall be the Chief Executive Officer (initially Mr. Wagner). There
are currently nine directors of the Company, each of whom is named under
"--Executive Officers and Directors."

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,
judgements, fines and amounts paid in settlement if 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 the Company.  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.

Pursuant to the Stockholders Agreement, Hannover Finanz is entitled to have a
non-voting observer at each Board of Directors meeting and Messrs. Wagner,
Goltermann, Simmross, Wandel and Zeidler are entitled to have an attorney
present.

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. Gooding (Chairman),
Wandel and Wagner, 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.
Bates (Chairman) and Wandel and Ms. Schnabel 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 of Directors concerning the Company's
engagement of independent auditors. The Compensation Committee,

                                      69

<PAGE>

currently consisting of Messrs. Gooding, Nolan and Wandel (Chairman), 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 1999, 1998 and
1997 to the Company's Chief Executive Officer, the Company's four other most
highly compensated executive officers (the "Named Executive Officers"), as well
as one additional individual, who left the Company prior to September 30, 1999,
who would have been a Named Executive Officer based upon his compensation:

                                  SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>

                                                          ANNUAL COMPENSATION
                                                   -----------------------------------   SECURITIES
                                                                              OTHER      UNDERLYING
                                                                              ANNUAL      OPTIONS/      ALL  OTHER
NAME AND PRINCIPAL POSITION                          SALARY       BONUS    COMPENSATION    SARS (#)    COMPENSATION(1)
-------------------------------------------        ----------   ---------  ------------  ----------   ---------------
<S>                                                <C>          <C>        <C>           <C>          <C>
Peter M. Wagner............................  1999  $  376,800   $ 177,351  $   7,898        132,023   $      171
  President and Chief Executive Officer      1998     247,614     153,767      6,337             --       42,626
  Officer                                    1997     214,567     115,651      8,248             --       41,935

Ben J. Constantini.........................  1999     245,000     124,250     25,038             --       50,067
  Executive Vice President, Sales            1998     191,692          --      5,820             --        8,551
                                             1997     184,616      37,000      5,820         33,250      521,597

Joseph A. Budano...........................  1999     176,000      61,600      9,000         12,350       12,856
  Senior Vice President - North              1998     160,000      56,000      5,820             --       11,760
  American Operations                        1997     150,000      26,250      5,820         17,900      237,780

Wolfgang Schuster..........................  1999     176,668      87,000      7,725         32,900          171
  Senior Vice President -European            1998     152,353     109,196      7,953             --          176
  Operations                                 1997     178,621     177,736      7,851             --          207

Karl-Heinz Eisemann(2).....................  1999     205,714      48,857     12,360         19,740          171
  Executive Vice President, Chief            1998     168,190      52,223     13,008             --          176
  Financial Officer, Treasurer and Secretary 1997     126,336      72,540     13,829             --          103

Derek T. Morikawa(3).......................  1999     285,600         --      11,400             --      302,633
  Former Chief Operating Officer             1998     244,231         --       5,820             --       13,814
                                             1997     223,462      50,625      5,820         33,750      931,109
</TABLE>

(1) In fiscal 1998 and 1997, other compensation for Mr. Wagner includes fees
received in connection with his participation on the boards of directors of
the Company's subsidiaries in the U.S. and the United Kingdom.  In fiscal
1999, other compensation for Mr. Constantini includes an expatriate cost of
living adjustment of $21,057 and $16,218 in moving costs.  In fiscal 1999,
1998 and 1997, other compensation for Mr. Constantini includes employer
contributions for the Company's defined contribution plan of $6,600, $3,201
and $5,018, respectively.  In fiscal 1997, other compensation for Mr.
Constantini includes $511,468 in payments to stock option holders as
compensation for the surrender of all or a portion of vested stock options
related to certain recapitalization transactions of Wavetek consummated in
June 1997. In fiscal 1999, 1998 and 1997, other compensation for Mr. Budano
includes employer contributions for the Company's defined contribution plan
of $4,800, $4,800 and $4,800, respectively.   In fiscal 1997, other
compensation for Mr. Budano also includes payments to stock option holders as
compensation for the surrender of all or a portion of vested

                                      70

<PAGE>

stock options related to certain recapitalization transactions of Wavetek
consummated in June 1997 of $226,331.  In fiscal 1999, other compensation
for Mr. Morikawa includes a severance payment of $292,200. In fiscal 1999,
1998 and 1997, other compensation for Mr. Morikawa includes employer
contributions for the Company's defined contribution plan of $6,600, $4,800
and $5,575, respectively.  In fiscal 1997, other compensation to Mr.
Morikawa includes payments to stock option holders as compensation for the
surrender of all or a portion of vested stock options related to certain
recapitalization transactions of Wavetek consummated in June 1997.

(2) Mr. Eisemann was appointed Executive Vice President and Chief Financial
Officer in December 1999.

(3) The Company terminated Mr. Morikawa's employment as of September 30, 1999.

The following table sets forth information concerning individual grants of
stock options made during the fiscal year ended September 30, 1999 to the
Named Executive Officers:

<TABLE>
<CAPTION>



                                    OPTIONS GRANTED IN LAST FISCAL YEAR
                              --------------------------------------------------
                                            PERCENT OF                                POTENTIAL REALIZABLE
                               NUMBER OF      TOTAL                                     VALUE AT ASSUMED
                              SECURITIES     OPTIONS      EXERCISE                 ANNUAL RATES OF STOCK PRICE
                              UNDERLYING    GRANTED TO     OR BASE                 APPRECIATION FOR OPTION TERM
                                OPTIONS    EMPLOYEES IN   PRICE PER   EXPIRATION   ---------------------------
NAME                          GRANTED (#)   FISCAL YEAR     SHARE        DATE           5%             10%
---------------------------   -----------  ------------   ---------   ----------   ------------   ------------
<S>                           <C>           <C>           <C>         <C>          <C>            <C>
Peter M. Wagner............      132,023         36.19%   $  14.50      1/1/09     $ 1,203,914    $ 3,050,955
Joseph A. Budano...........       12,350          3.39    $  14.50      8/1/09         112,619        285,399
Wolfgang Schuster..........       13,160          3.61    $  14.50      1/1/09         120,006        304,118
Wolfgang Schuster..........       19,740          5.41    $  14.50      8/1/09         180,009        456,177
Karl-Heinz Eisemann........       19,740          5.41    $  14.50      1/1/09         180,009        456,177
</TABLE>

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, 1999.

<TABLE>
<CAPTION>

             AGGREGATED OPTION EXERCISES IN THE LAST FISCAL YEAR AND FISCAL YEAR--END OPTION VALUES

                                                                   NUMBER OF SECURITIES             VALUE OF UNEXERCISED
                                NUMBER OF                         UNDERLYING UNEXERCISED            IN-THE-MONEY OPTIONS
                                  SHARES                       OPTIONS AT FISCAL YEAR-END (#)      AT FISCAL YEAR-END (S)
                                 ACQUIRED          VALUE       -----------------------------   -----------------------------
NAME                          ON EXERCISE (#)   REALIZED ($)   EXERCISABLE     UNEXERCISABLE    EXERCISABLE    UNEXERCISABLE*
---------------------------   ---------------   ------------   -----------     -------------   -------------   -------------
<S>                           <C>               <C>            <C>             <C>             <C>             <C>
Peter M. Wagner............             --             --              --           132,023    $        --     $        --
Ben J. Constantini.........             --             --          22,624            22,626         71,580          55,740
Joseph A. Budano...........             --             --          48,950            26,300        437,600          46,450
Wolfgang Schuster..........             --             --          32,900                --             --              --
Karl-Heinz Eisemann........             --             --             --             19,740             --              --
Derek T. Morikawa..........             --             --          96,874                --        968,920              --
</TABLE>

       * The value of the unexercised in--the--money options is based on a fair
       value of the Company's Common Stock on September 30, 1999, of $14.50 per
       share for those options which are "in-the-money."

EMPLOYMENT AGREEMENTS

The Company has employment agreements with each of its Named Executive
Officers other than Derek Morikawa, whose employment with the Company was
terminated in September 1999. The Company's executive employment agreements
typically provide for total compensation, including base salary and bonus
compensation. In the event the Company terminates an executive without cause,
the Company's employment agreements generally provide for the payment of lump
sum termination benefits equal to the greater of the base salary payable
during the period of employment

                                      71

<PAGE>

remaining under the employment agreement or one year's base salary. The
Company's executive employment agreements generally contain noncompetition
agreements and confidentiality agreements.

Mr. Wagner's employment agreement provides for Mr. Wagner to serve as an
employee of the Company through September 29, 2001, with current target total
compensation at an annual rate of 990,000 Deutsche marks (approximately
$540,000 as of September 30, 1999), of which 66-2/3% is base salary and
33-1/3% is target bonus compensation, payable in accordance with the
Company's annual bonus plan. Mr. Wagner is also entitled to receive certain
special pension benefits from the Company.

Mr. Constantini's employment agreement provides for Mr. Constantini to serve
as an employee of the Company through September 29, 2000, with current target
total compensation at an annual rate of $350,000, of which 70% is base salary
and 30% is target bonus compensation, payable in accordance with the
Company's annual bonus plan. In addition to standard termination payment
benefits, in exchange for continuing his employment though September 28,
2000, Mr. Constantini is entitled to receive a special bonus equal to one
year's base salary on September 28, 2000 or such earlier date as the Company
terminates his employment without cause. In addition, if the Company
terminates his employment without cause, certain stock options held by Mr.
Constantini would become immediately and fully vested on such termination
date.

Mr. Eisemann's employment agreement provides for Mr. Eisemann to serve as an
employee of the Company through September 30, 2000, with current target total
compensation at an annual rate of 450,000 Deutsche marks (approximately
$245,000 as of September 30, 1999), of which 80% is base salary and 20% is
target bonus compensation, payable in accordance with the Company's annual
bonus plan.

Mr. Budano's employment agreement provides for Mr. Budano to serve as an
employee of the Company through July 31, 2000, with current target total
compensation at an annual rate of $300,000, of which 70% is base salary and
30% is target bonus compensation, payable in accordance with the Company's
annual bonus plan.

Mr. Dara's employment agreement provides for Mr. Dara to serve as an employee
of the Company through February 14, 2002, with current target total
compensation at an annual rate of 420,000 Deutsche marks (approximately
$229,000 as of September 30, 1999), of which approximately 70% is base salary
and 30% is target bonus compensation, payable in accordance with the
Company's annual bonus plan.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

As of September 30, 1999, Messrs. Gooding, Nolan and Wandel 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 employs 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.

                                      72

<PAGE>

The Company's executive compensation package is typically 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.

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.

In reviewing 1999 executive compensation and making recommendations for 2000,
the Compensation Committee reviewed reports prepared by the Company's Human
Resources Managers, which compared the base salary and total cash
compensation package for each of the Company's Named Executive Officers and
other senior officers of the Company with data compiled from 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 2000.

The Compensation Committee report was completed by Messrs. Gooding, Nolan and
Wandel during a series of telephone meetings in October, November and
December 1999.

COMPENSATION OF DIRECTORS

The Co-Chairmen of the Board of Directors receive $60,000 per year. As an
executive officer of the Company, Mr. Wagner does not receive any
compensation for serving on the Board of Directors. Other directors receive
$20,000 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. Such other directors who are Members of the Committees of the
Board of Directors also receive $10,000 per year for their membership and
participation in the meetings of such Committees.

The Company also instituted a stock option plan for its directors in fiscal
year 1999. In fiscal 1999, all directors other than Mr. Wagner, Mr. Bates and
Mr. Zeidler were granted options with respect to 15,000 shares under the
directors' stock option plan. All options vest by September 30, 2000 and will
automatically vest if a director is asked to step down.

The Company also established an Advisory Committee, made up of three members
who receive $10,000 per annum plus an option to purchase 7,500 shares of the
Company's common stock.  Members of the Advisory Committee are also eligible
for additional compensation with respect to extraordinary or unusual
activities that are agreed upon in advance by the chief executive officer.

                                     73

<PAGE>

ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information known to the Company with respect
to the beneficial ownership of the common stock of the Company as of December
20, 1999, in each case as of such date, by (i) each of the current Directors
of the Company, (ii) each Executive Officer, (iii) all Directors and
executive officers as a group,  and (iv) each person known by the Company to
be the "beneficial owner" of more than five percent (5%) of such common
stock.  "Beneficial ownership" is a technical term broadly defined by the
Securities and Exchange Commission to mean more than ownership in the usual
sense.  For example, you "beneficially" own common stock not only if you hold
it directly, but also if you indirectly (through a relationship, a position
as a director or trustee, or a contract or understanding) have (or share the
power to vote the stock, or sell it) the right to acquire it within 60 days.
Except as disclosed in the footnotes below, each of the Directors and
executive officers listed have sole voting and investment power over his or
her shares. As of December 20, 1999, there were 13,268,323 shares of common
stock outstanding and approximately 40 holders of record.

<TABLE>
<CAPTION>

                                                                       SHARES        PERCENTAGE
                                                                    BENEFICIALLY    BENEFICIALLY
NAME AND ADDRESS                                                      OWNED (1)       OWNED
-----------------------------------------------------------------   -------------   ------------
<S>                                                                 <C>             <C>
Hannover Finanz W&G Beteiligungsgesellschaft mbH (2).............      2,524,350           19.0%
DLJ Merchant Banking Partners II, L.P. (3).......................      1,681,476           12.7
Terence J. Gooding (4)(5)........................................      1,530,811           11.5
Burkhard Goltermann (6)(7).......................................      1,508,580           11.4
Albrecht Wandel (7)..............................................      1,301,570            9.8
Renate Wandel (7)................................................      1,052,430            7.9
Frank Goltermann (7).............................................        972,719            7.3
Ulrike Goltermann (7)............................................        787,622            5.9
Green Equity Investors II, L.P (8)...............................        760,326            5.7
Peter J. Nolan (9)...............................................        760,326            5.7
Peter M. Wagner (7)..............................................        282,529            2.1
Ben J. Constantini (7)...........................................        63,624              *
Joseph A. Budano (10)............................................        53,950              *
Sir Malcolm Bates (11)...........................................        20,000              *
Gerhard Zeidler (14).............................................        10,000              *
Joachim Simmross (13)............................................         6,666              *
Jean-Philippe Dara (7)...........................................         5,000              *
Karl--Heinz Eisemann (7).........................................         4,935              *
Wolfgang Schuster (7)............................................         3,290              *
Susan C. Schnabel (12)...........................................            --              --

    All directors and executive officers as a group (15).........     5,015,420            37.3
</TABLE>

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

(2)    Address is Gunter-Wagner-Allee 13, D-30177 Hannover, Federal Republic of
Germany.

(3)    Consists of shares pursuant to 6,666 vested options to be assigned to
DLJ Merchant Banking II, Inc. from Ms. Schnabel and shares held directly by
the following investors related to DLJ Merchant Banking Partners II, L.P.

                                      74

<PAGE>

("DLJMB"); DLJ Merchant Banking Partners II - A ("DLJMB-A"); DLJ Diversified
Partners, L.P. ("DLJ Diversified"); DLJ Diversified Partners - A, L.P. ("DLJ
Diversified - A"); DLJ Offshore Partners II, C.V. ("DLJOP"); DLJMB Funding II,
Inc. ("DLJ Funding"); DLJ EAB Partners, L.P. ("DLJ EAB"); DLJ First ESC L.P.
("DLJ ESC"); DLJ Millenium Partners ("Millenium"); DLJ Millenium Partners - A,
("Millenium - A") and UK Investment Plan 1997 Partners ("UK Investment"). The
address of each of DLJMB, DLJMB - A, DLJ Diversified, DLJ Diversified - A, DLJ
Funding, DLJ EAB, DLJ ESC, Millenium and Millenium - A is 277 Park Avenue, New
York, New York 10172. The address of DLJOP is c/o John B. Gorsiraweg, 14
Willemstad, Curacao, Netherlands Antilles. The address of UK Investment is 2121
Avenue of the Stars, Los Angeles, California 90067.

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

(5)    Address is P.O. Box 675517, Rancho Santa Fe, CA 92067

(6)    Includes 189,222 shares held by his spouse.

(7)    Address is c/o Wavetek Wandel Goltermann GmbH, Box 1262, D--72795 Eningen
u.A., Federal Republic of Germany.

(8)    Address is 11111 Santa Monica Boulevard, Suite 2000, Los Angeles, CA
90025.

(9)    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
Green Equity Investors ("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.

(10)   Address is c/o Wavetek U.S. Inc., 5808 Churchman Bypass, Indianapolis,
IN  46203.

(11)   Address is Mulberry Close, Croft Road, Goring--on--Thames, RG8 9ES,
England, U.K.

(12)   Address is c/o Donaldson, Lufkin & Jenrette Securities Corporation,
2121 Avenue of the Stars, Los Angeles, CA 90067.  Ms. Schnabel is a Managing
Director of DLJ.  Beneficial ownership for Ms. Schnabel excludes shares shown
as held by DLJMB and its affiliates, as to which Ms. Schnabel disclaims
beneficial ownership.

(13)   Address is c/o Hannover Finanz W&G Beteiligungsgesellschaft mbH,
Gunter-Wagner -Allee 13, D-30177 Hannover, Federal Republic of Germany.
Share data for Mr. Simmross excludes shares shown as held by Hannover Finanz,
as to which Mr. Simmross disclaims beneficial ownership.

(14)   Address is c/o Dekra e.V., Handwerkerstr. 15, D-70565 Stuttgart,
Federal Republic of Germany.

(15)   Consists of 13 persons.


                                      75

<PAGE>

ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Company leases its headquarters for its LAN and Test Tools business in
San Diego from a corporation controlled by Dr. Gooding for an annual rent of
$586,000, plus annual consumer price index adjustments, not to exceed 3% per
annum. The lease expires in June 2006. See "Item 2. - Properties."

The Company leases its facility in Research Triangle Park, North Carolina,
including its corporate headquarters and the facilities of its subsidiaries
Wandel & Goltermann Technologies, Inc. and Wandel & Goltermann ATE Systems,
Inc., from a partnership which is owned by Burkhard Goltermann, Frank
Goltermann, Ulrike Goltermann and certain other family members. Under the
leases, which expire in September 2005 and September 2010, annual rent of
$1,203,000 is payable in monthly installments and is adjusted annually for
changes in the consumer price index. See "Item 2. - Properties."

The Company leases certain offices and manufacturing facilities in Eningen,
Germany for one of its German subsidiaries from Else Wandel, the mother of
Albrecht Wandel and Renate Wandel. The Company pays annual rent of $262,000
under the lease, which was terminated in July 1999.

In February 1998, the Company sold 400 shares, or 10%, of the common stock of
its then wholly-owned subsidiary Switching Test Solutions AG ("STS") to Peter
Wagner for a purchase price of $817,000, which was paid in April 1998. In
connection with this transaction, Mr. Wagner, Frank Goltermann and Albrecht
Wandel entered into put and call options related to the shares sold to Mr.
Wagner. In September 1998, Messrs. Goltermann and Wandel exercised the call
options and purchased the shares of STS held by Mr. Wagner.  Subsequently,
the Company purchased these shares from Messrs. Goltermann and Wandel for
$840,000.

The Company has unsecured notes payable to stockholders at September 30, 1999
as follows: Frank Goltermann - $3,933,045; Hannover Finanz - $2,726,727;
Albrecht Wandel - $1,636,036; Renate Wandel - $1,636,036; Burkhard Goltermann
- $508,197 and Ulrike Goltermann - $280,488.  On September 30, 1999, interest
was payable on these notes at 7.75%, payable quarterly.  The notes are due at
the earlier of an initial public offering of the Company's common stock or
December 31, 2000.  The Company recorded interest expense related to these
obligations of $0.8 million, $0.8 million and $0.9 million, in 1999, 1998 and
1997, respectively.

On October 1, 1998, the Company entered into a consulting agreement with Mr.
Wandel under which Mr. Wandel received fees of approximately $27,000, plus
certain expenses. The consulting agreement was terminated on March 31, 1999.

Burkhard Goltermann is employed by the Company as Director of Corporate
Treasury and received employment compensation from the Company in the amount
of $84,000 in 1999.

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


                                      76

<PAGE>

     The following consolidated financial statements of Wavetek Wandel
     Goltermann, Inc. are included in Item 8 of this report:

     Report of Arthur Andersen LLP, Independent Public Accountants
     Consolidated Balance Sheets as of September 30, 1999 and 1998
     Consolidated Statements of Operations for each of the three years in the
       period ended September 30, 1999
     Consolidated Statements of Stockholders' Equity for each of the three years
       in the period ended September 30, 1999
     Consolidated Statements of Cash Flows for each of the three years in the
       period ended September 30, 1999
     Notes to Consolidated Financial Statements

      (2)    Financial Statement Schedules

             Schedule II, Valuation and Qualifying Accounts, is included
             herein.

      (3)    Index to Exhibits

<TABLE>
<CAPTION>

       EXHIBIT NO.       DESCRIPTION OF EXHIBIT
       <S>               <C>
         2.1             Exchange and Merger Agreement, dated as of June 12, 1998, by and among Wavetek
                         Corporation, Wandel & Goltermann Management Holding GmbH and the Stockholders
                         listed on the signature pages thereto (1)

         2.2             First Amendment to Exchange and Merger Agreement and Stockholders Agreement
                         dated September 25, 1998 (2)

         2.3             Agreement and Plan of Merger by and among Wandel & Goltermann Technologies,
                         Inc., Wandel & Goltermann Management Holding, GmbH and WG Merger Corp. dated
                         March 28, 1998 (3)

         3.1             Restated Certificate of Incorporation of Wavetek Wandel Goltermann, Inc. (2)

         3.2             Bylaws of Wavetek Corporation (4)

         3.3             Amendment No. 1 to the Bylaws of Wavetek Wandel & Goltermann, Inc., dated
                         September 30, 1998 (2)

         4.1             Indenture, dated as of June 11, 1997, among Wavetek Corporation, Wavetek U.S.
                         Inc. and The Bank of New York, as Trustee (5)

         4.2             Form of Notes (see Exhibit 4.1) (6)

         4.3             Form of Subsidiary Guarantee (see Exhibit 4.1) (7)

         4.4             First Supplemental Indenture, dated as of September 30, 1998, among Wandel &
                         Goltermann Technologies, Inc., Wandel & Goltermann A.T.E. Systems, Inc., Wandel
                         & Goltermann, Inc., W&G Equities, Inc. and The Bank of New York. (8)

         4.5             Second Supplemental Indenture, dated as of October 30, 1998, among Wavetek
                         Wandel Goltermann, Inc., Digital Transport Systems, Inc. and The Bank of New
                         York. (8)


                                      77

<PAGE>

       <S>               <C>
         4.6             Stockholders Agreement, dated as of June 12, 1998 and effective as of the
                         effective time by and among Wavetek Corporation and the Stockholders listed on
                         the signature pages thereto.

         4.7             Third Supplemental Indenture, dated as of May 25, 1999, among Wavetek Wandel
                         Goltermann, Inc. and The Bank of New York.

         4.8             Wavetek Corporation Executive Benefits Plan, dated June 1, 1997.

         4.9             Wavetek Wandel Goltermann, Inc. Amended and Restated Stock Option Plan.

        10.1             Facilities Agreement in relation to a Multi-Currency Revolving Credit Facility
                         and Bilateral Ancillary Facilities between Wavetek Wandel & Goltermann, Inc. as
                         Borrower, Wandel & Goltermann Technologies, Inc., as Guarantor, Commerzbank
                         Aktiengesellschaft and Deutsche Bank AG as Joint-Arrangers, Commerzbank
                         International S.A. as Agent and Others, dated December 23, 1998.

        10.2             Amendment Agreement, dated May 28, 1999, to a DEM 280,000,000 Facilities
                         Agreement in relation to a Multi-Currency Revolving Credit Facility and
                         Bilateral Ancillary Facilities, dated December 23, 1998, between Wavetek Wandel
                         Goltermann, Inc., as borrower, and Wandel & Goltermann Technologies, Inc., as
                         guarantor, and Commerzbank Aktiengesellschaft and Deutsche Bank AG, as joint
                         arrangers, and Commerzbank International S.A., as Agent, and Others (11)

        10.8             Employment Agreement, dated as of September 30, 1998, by and between Wavetek
                         Wandel Goltermann, Inc. and Peter Wagner. (8)

        10.9             Employment Agreement, dated as of September 30, 1998, by and between Wavetek
                         Wandel Goltermann, Inc. and Ben Constantini. (8)

        10.11            Contract of Employment, dated as of October 1, 1997, between Wandel & Goltermann
                         Management Holding GmbH and Karl-Heinz Eisemann. (8)

        10.15            Lease Agreement, dated October 1, 1984, between W&G Associates and W&G
                         Instruments, Incorporated (9)

        10.16            Lease Agreement, dated May 18, 1994, between W&G Associates and Wandel &
                         Goltermann Technologies, Inc. (10)

        10.17            Employment Agreement dated as of August 1, 1999, by and between Wavetek Wandel
                         Goltermann, Inc. and Joe Budano.

        10.18            Employment Agreement dated as of January 14, 1999, by and between Wavetek Wandel
                         & Goltermann Management Holding GmbH and Jean-Philippe Dara.

         12              Schedule Re: Computation of Ratio of Earnings to Fixed Charges

         21              Subsidiaries of Registrant

         27              Financial Data Schedule
</TABLE>

                                      78

<PAGE>

______________________
Notes:
       (1)    Incorporated by reference from Exhibit 10.1 to Wavetek
              Corporation's Quarterly Report on Form 10-Q for the quarter ended
              June 30, 1998 filed with the Commission on August 14, 1998.

       (2)    Incorporated by reference from the Company's Current Report on
              Form 8-K dated October 6, 1998 filed with the Commission on
              October 6, 1998.

       (3)    Incorporated by reference from Appendix A of Exhibit (d) (3) of
              Schedule 13E-3 of Wandel & Goltermann Technologies, Inc. and
              Wandel & Goltermann Management Holding, GmbH, file number 0-25176
              filed with the Commission on June 1, 1999.

       (4)    Incorporated by reference from exhibit 3-7 to Registration
              Statement of Wavetek Corporation on Form S-4 filed with the
              Commission on July 27, 1997.

       (5)    Incorporated by reference from exhibit 4.1 to Registration
              Statement of Wavetek Corporation on Form S-4 filed with the
              Commission on July 27, 1997.

       (6)    Incorporated by reference from exhibit 4.2 to Registration
              Statement of Wavetek Corporation on Form S-4 filed with the
              Commission on July 27, 1997.

       (7)    Incorporated by reference from exhibit 4.3 to Registration
              Statement of Wavetek Corporation on Form S-4 filed with the
              Commission on July 27, 1997.

       (8)    Incorporated by reference from the Company's Annual Report on Form
              10-K filed with the Securities and Exchange Commission on
              December 14, 1998.

       (9)    Incorporated by reference from exhibit 10.3 to Registration
              Statement of Wandel & Goltermann Technologies, Inc. on Form S-1,
              file number 33-74564.

      (10)    Incorporated by reference from Quarterly Report of Wandel &
              Goltermann Technologies, Inc. on Form 10-Q for the quarter ended
              June 30, 1994, file  number 0-23742.

      (11)    Incorporated by reference from Quarterly Report on Form 10-Q of
              the Company filed with the Commission on August 13, 1999.

    (b)  Reports on Form 8-K

           None.

    (c)  All required exhibits have been filed or incorporated by reference in
         this form.

    (d)  Schedule II, Valuation and Qualifying Accounts, is included herein.


                                      79

<PAGE>

                        WAVETEK WANDEL GOLTERMANN, INC.
                SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
                                (IN THOUSANDS)

<TABLE>
<CAPTION>

                                      Balance at          Fiscal          Balance at          Fiscal          Balance at
                                     September 30,         1998          September 30,         1999          September 30,
     Description                         1997            activity            1998            activity            1999
     -----------                         ----            --------            ----            --------            ----
<S>                                    <C>               <C>               <C>               <C>               <C>
Allowances for doubtful accounts         1,938             2,494             4,432               176               4,608
                                        ------             -----            ------            ------              ------
Warranty reserves                        1,306             2,833             4,139               (98)              4,041
                                        ------             -----            ------            ------              ------
Valuation allowance                     10,889             4,263            15,152              (380)             14,772
                                        ------             -----            ------            ------              ------
Restructuring reserves                      --             2,937             2,937            (2,253)                684
                                        ------             -----            ------            ------              ------
</TABLE>

Note: All reserves are reflected as a reduction of the balance in the
corresponding asset or liability accounts on the Consolidated Balance Sheet.




                                        80

<PAGE>

SIGNATURES

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

                                   WAVETEK WANDEL GOLTERMANN, INC.

                                  /S/  Karl-Heinz  Eisemann
                                  --------------------------------
                                  Karl-Heinz Eisemann
                                  Executive Vice President, Chief
                                  Financial Officer, Treasurer and
                                  Secretary (principal financial
                                  officer and principal accounting
                                  officer)
                                  Dated:  December 23, 1999

Pursuant to the requirements of the Securities and 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/ Peter Wagner                                              December 23, 1999
------------------------------------------------
Peter Wagner, President, Chief Executive Officer
and Director

/S/ Terence J. Gooding                                        December 23, 1999
------------------------------------------------
Terence J. Gooding, Co-Chairman of the Board

/S/ Albrecht Wandel                                           December 23, 1999
------------------------------------------------
Albrecht Wandel, Co-Chairman of the Board

/S/ Karl-Heinz Eisemann                                       December 23, 1999
------------------------------------------------
Karl-Heinz Eisemann, Executive Vice President,
Chief Financial Officer, Treasurer and Secretary



/S/ Malcolm Bates                                             December 23, 1999
------------------------------------------------
Sir Malcolm Bates, Director

/S/ Susan C. Schnabel                                         December 23, 1999
------------------------------------------------
Susan C. Schnabel, Director


                                      81