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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                            ------------------------

                                   FORM 10-K

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<C>        <S>
   /X/     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
           SECURITIES AND EXCHANGE ACT OF 1934
</TABLE>

                   FOR THE FISCAL YEAR ENDED JANUARY 2, 2000

                                       OR

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<C>        <S>
   / /     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
           SECURITIES AND EXCHANGE ACT OF 1934
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        FOR THE TRANSITION PERIOD FROM ______________ TO ______________

                          COMMISSION FILE NO. 0-29454

                            ------------------------

                                POWER-ONE, INC.
             (Exact name of registrant as specified in its charter)

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<S>                                            <C>
                  DELAWARE                                      77-0420182
       (State or other jurisdiction of                       (I.R.S. Employer
       incorporation or organization)                       Identification No.)

               740 CALLE PLANO                                     93012
            CAMARILLO, CALIFORNIA                               (Zip code)
  (Address of principal executive offices)
</TABLE>

       Registrant's telephone number, including area code (805) 987-8741

        Securities registered pursuant to Section 12(b) of the Act: NONE

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

                         COMMON STOCK, $0.001 PAR VALUE
                                (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 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. /X/

    The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of March 24, 2000 was approximately $1.1 billion.

    As of March 24, 2000, 24,301,289 shares of the Registrant's $0.001 par value
common stock were outstanding.

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                               TABLE OF CONTENTS

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PART I

Item 1.       Business....................................................      3

Item 2.       Properties..................................................     17

Item 3.       Legal Proceedings...........................................     17

Item 4.       Submission of Matters to a Vote of Security Holder..........     17

PART II

Item 5.       Market for Registrant's Common Equity and Related                19
                Stockholder Matters.......................................

Item 6.       Selected Financial Data.....................................     19

Item 7.       Management's Discussion and Analysis of Financial Condition      23
                and Results of Operation..................................

Item 7A.      Quantitative and Qualitative Disclosures about Market            30
                Risk......................................................

Item 8.       Financial Statements and Supplementary Data.................     31

Item 9.       Changes in and Disagreements with Accountants on Accounting      31
                and Financial Disclosures.................................

PART III

Item 10.      Directors and Executive Officers of the Company.............     31

Item 11.      Executive Compensation......................................     31

Item 12.      Security Ownership of Certain Beneficial Owners and              32
                Management................................................

Item 13.      Certain Relationships and Related Transactions..............     32

PART IV

Item 14.      Exhibits, Financial Statement Schedules and Reports on Form      32
                8-K.......................................................

Signatures................................................................     34

Index to Financial Statements.............................................    F-1

Financial Statement Schedule..............................................    S-1

Index to Exhibits.........................................................    S-2
</TABLE>
<PAGE>
    UNLESS THE CONTEXT INDICATES OTHERWISE, ALL REFERENCES HEREIN TO THE COMPANY
OR POWER-ONE REFER COLLECTIVELY TO POWER-ONE, INC. AND ITS SUBSIDIARIES.

    THIS ANNUAL REPORT CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 THAT CAN BE IDENTIFIED BY
THE USE OF FORWARD-LOOKING TERMINOLOGY SUCH AS "MAY," "WILL," "SHOULD,"
"EXPECT," "ANTICIPATE," "ESTIMATE" OR "CONTINUE" OR THE NEGATIVE THEREOF OR
OTHER VARIATIONS THEREON OR COMPARABLE TERMINOLOGY. WE CAUTION THAT THE MATTERS
SET FORTH UNDER "RISK FACTORS," CONSTITUTE CAUTIONARY STATEMENTS IDENTIFYING
IMPORTANT FACTORS WITH RESPECT TO SUCH FORWARD-LOOKING STATEMENTS, INCLUDING
CERTAIN RISKS AND UNCERTAINTIES, THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THOSE IN SUCH FORWARD-LOOKING STATEMENTS.

DOCUMENTS INCORPORATED BY REFERENCE

    Portions of our definitive proxy statement to be filed with the Securities
and Exchange Commission pursuant to Regulation 14A and relating to our 2000
annual meeting of stockholders are incorporated by reference into Part III.

                                     PART I

ITEM 1--BUSINESS

THE COMPANY

    We are a leading designer and manufacturer of more than 2,500 high-quality
brand name power supplies. Our power supplies are designed to meet the power
needs of various subsystems and components within electronic equipment. Power
supplies:

    - primarily supply, regulate and distribute electrical power within
      electronic equipment;

    - either convert alternating current to direct current, an AC/DC power
      supply, or modify direct current into other levels of direct current, a
      DC/DC power supply;

    - provide electronic components with a precise and constant supply of
      electrical power at one or more voltage levels;

    - regulate and monitor voltages to protect electronic components within
      equipment from surges or drops in voltage, to prevent electronic equipment
      from being damaged by its own malfunction and to provide back-up power if
      a primary power source fails; and

    - are typically classified as standard, modified standard and custom. While
      we manufacture and sell all three product classifications, we focus on
      standard and modified standard products.

    We sell our products both to OEMs and distributors who value quality,
reliability, technology and service. While we have more than 10,000 customers in
the communications, industrial, automatic/ semiconductor test equipment,
transportation, medical equipment, and other electronic equipment industries, we
are focusing more on the faster-growing data telecommunications and
automatic/semiconductor test equipment markets. Our OEM customers include
industry leaders such as Cisco, Nortel, Teradyne, Lucent Technologies, Newbridge
Networks, Alcatel, Hewlett-Packard, Siemens and Ericsson. We are also a leading
provider of power supplies to domestic distributors, including Pioneer Standard
Electronics, Avnet Electronics, Arrow, Kent Electronics and Future Electronics.

    We were founded in 1973 as a manufacturer of AC/DC power supplies and until
1981 operated solely from our Southern California facility. During the 1980's,
we established additional operations in Puerto Rico and Mexico to take advantage
of certain labor, manufacturing and, in Puerto Rico, tax efficiencies. Between
1994 and 1996, we moved most of our Puerto Rico manufacturing operations to the
Dominican Republic to capitalize on certain labor benefits. In September 1995,
Stephens Group Inc., an affiliate of Stephens Inc., and our management purchased
Power-One from its previous owners and formulated a more aggressive growth
strategy, which included a plan to grow through acquisitions. Between
August 1998 and January 1999, we substantially expanded our product offerings,

                                       3
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scale and geographic breadth through two significant acquisitions. Our net sales
have increased from $75.4 million in 1996 to net sales of $205.4 million in
1999, a compound annual growth rate of 39.6%. We believe that we are one of the
largest power supply companies in the world that specializes in standard and
modified standard power supplies. We also believe that our gross margins are
among the highest in the industry. Our gross profit margin has been
approximately 40% during the past three years.

RECENT ACQUISITIONS

    In August 1998, we increased our international presence and our portfolio of
products by acquiring Melcher Holding AG ("Melcher") for $53 million, including
debt assumed. Located in Uster, Switzerland, Melcher primarily designs and
manufactures high-reliability DC/DC and AC/DC power supplies which it sells to
leading OEMs throughout Europe and North America, including Ericsson, Daimler-
Chrysler and Siemens. High-reliability power supplies are designed for rugged
use in heavy-duty equipment in industries such as transportation and
telecommunications. Melcher has manufacturing operations in three European
locations and sales and application engineering offices in six European
countries. By acquiring Melcher, we added approximately 750 products to our
portfolio and gained better access to the $4 billion European power supply
market. In addition, we are now able to use Melcher's direct sales force and its
marketing channels to sell Power-One's portfolio of products both to new
customers and Melcher's existing customers in Europe.

    In January 1999, we further broadened our portfolio of DC/DC products by
acquiring International Power Devices, Inc. ("IPD"). We acquired IPD for
$32 million including capitalized lease obligations and other indebtedness of
IPD, or a total capital outlay of $28.3 million plus approximately $1.2 million
of transaction related costs. In addition, we are paying $13 million to IPD's
former shareholders, since IPD attained certain defined operational performance
objectives in the 13 month period ending on March 31, 2000. We subsequently
acquired IPD's facility in Boston, Massachusetts for approximately
$4.3 million. IPD is a leading supplier of high-density DC/DC power supplies,
which it distributes primarily in North America. High-density DC/DC power
technology is preferred in applications using high-speed/low-voltage logic,
including the fast growing voice and data communications industries. IPD sells
over 90 models of high-density DC/DC products to leading OEMs, including Cisco,
Newbridge Networks and Nortel. As part of the acquisition, we also acquired
IPD's 49% ownership position in Shenzhen SED-IPD International Electronic Device
Co., Ltd., a joint-venture based in Shenzhen, China. We are continuing the
process of moving the production of IPD's higher volume products from our Boston
facility to our lower cost manufacturing facility in Mexico. Our acquisition of
IPD has given us greater access to the $2.9 billion worldwide merchant market
for DC/DC power supplies. It has also made us a leader in distributed power
architecture, which distributes DC/DC power supplies throughout the electronic
infrastructure of the end product. The worldwide market for DC/DC products is
expected to grow faster during the next five years than the overall power supply
market.

SUBSEQUENT EVENT

    On February 29, 2000, we acquired HC Power, Inc. ("HCP") in a
stock-for-stock transaction, in which the former shareholders of HCP received a
total of 2,121,207 shares of Power-One's common stock for all shares of common
stock of HCP outstanding on the effective date of the merger. Of the total
shares issued, 212,117 shares were placed in an escrow to fund possible
indemnification claims under the merger agreement. The merger is being accounted
for as a pooling of interests.

    HCP is based in Irvine, CA and is a leading supplier of power systems for
telecommunications and Internet service providers and OEM equipment
manufacturers. HCP's major service providers include Williams Communications,
CEA Telecom, Qwest, and Nextel, and its key OEMs include Motorola and Nortel
Networks. HCP is shipping at an annualized rate of approximately $45 million
based on its fourth quarter 1999 shipments.

                                       4
<PAGE>
    On March 31, 2000, we agreed to acquire Norwegian-based Powec AS for
$78 million. The consideration to be paid consists of approximately $70 million
in cash and 140,340 shares of our common stock. Additionally, we will assume
approximately $8 million in debt. Certain additional payments may be made to
Powec shareholders based on the attainment of defined operational performance
through 2001. The acquisition will be accounted for using the purchase method of
accounting.

    Powec is a leading supplier of power systems for major service providers and
equipment manufacturers in the telecomunications industry. Powec's customers
include Nokia, Vodafone, Ericsson, Eircom, Telia, Hong Kong Telecom, Telenor,
Sonera and TeleDanmark.

    We also agreed to acquire a telecommunications product line from Crane Co.
for approximately $14 million in cash. This product line has the exclusive
distribution rights for Powec's products in North, South and Central America and
extensive relationships with telecommunication equipment manufactures such as
Motorola, Ericsson and Nokia US.

    Our discussion in the rest of this Report, does not include any information
regarding HCP, Powec AS and the product line acquired from Crane Co.

INDUSTRY AND MARKET OVERVIEW

    We operate primarily in one industry segment which includes the design,
development and manufacturing of AC/DC and DC/DC power supplies for the
electronics equipment industry. The two primary types of power supplies are
AC/DC and DC/DC power supplies. AC/DC power supplies convert alternating current
from a primary power source, such as a wall outlet, into a precisely controlled
direct current. Virtually every electronic device that plugs into an AC wall
socket requires some type of AC/ DC power supply. DC/DC power supplies modify an
existing DC voltage level to other DC levels to meet the power needs of various
subsystems and components within electronic equipment.

    Power supplies are configured using both linear and switching technology.
Linear power supplies offer low noise and precise voltage regulation
specifications, which are characteristics required for specialized applications
such as analog-to-digital converters and operational amplifiers used in the
instrumentation industry. Switching power supplies utilize energy more
efficiently, are smaller and weigh less than linear power supplies. The market
for switching power supplies is estimated to be the fastest growing segment of
the power supply market. Switching power supplies comprise most of our product
line.

    Power supplies are typically classified as standard, modified standard or
custom. Standard power supplies are not typically industry-wide standards.
Rather, they are power supplies that a particular company, such as Power-One,
manufactures as its own standard catalog products that customers can use for
many different applications. Modified standard products are standard products
that are modified slightly to meet a customer's specific design requirements.
Because they have already been designed and manufactured, standard and modified
standard products allow end customers to reduce their time-to-market and
minimize costs for new product introductions. Custom power supplies are designed
for a specific customer to meet the specifications for a unique application. It
typically takes four to six months to produce a custom product and requires the
expenditure of significant up-front engineering costs. In addition, users of
custom products frequently have high-volume production requirements and operate
in more price sensitive industries. As a result, profit margins on custom
products are typically lower than margins on standard products. Unlike some
technology products, power supplies, whether standard, modified standard, or
custom, can be difficult to match exactly or replace with products manufactured
by another supplier without considerable investment. Thus, once a power supply
has been designed into a customer's product, it is normally difficult and costly
for the customer to change suppliers during that product's life cycle. However,
customers who manufacture their products in high volumes typically require two
sources for power supplies.

    For information regarding revenues and long-lived assets by geographical
location, see Note 13 in Notes to the Consolidated Financial Statements
presented in Item 8 of this Report.

                                       5
<PAGE>
MARKET SIZE AND TRENDS

    The power supply industry is highly fragmented, which, at the end of 1999,
consisted of over 1,000 companies worldwide, including about 250 in North
America. Only sixteen power supply companies in the world, some of which
specialize in custom products, had merchant market sales greater than
$200 million in 1999. The average power supply company is estimated to have
annual sales of approximately $20 million. In 1999, the worldwide market for
power supplies was estimated to be approximately $22 billion, including
approximately $9 billion in North America. The worldwide market is expected to
grow to approximately $34 billion in 2004, and the North American market is
expected to grow to approximately $14 billion by 2004.

    We see the significant trends in the power supply industry as:

    USE OF DISTRIBUTED POWER ARCHITECTURE.  The communications and networking
industries are utilizing lower voltage semiconductors that require the power
supply to be located closer to the specific application. As a result, many new
products are designed with distributed power architecture, or DPA, that
distributes high-density switching DC/DC power supplies throughout the
electronic infrastructure of the end product. This DPA segment of the power
supply industry is expected to grow faster than the overall market for the next
several years.

    SHORTENED TIME-TO-MARKET.  To compete successfully in their industries,
OEMs must bring products with a wider variety of features to market as quickly
as possible. We believe that as OEMs face greater competition to accelerate the
time-to-market for their new products, they are increasingly incorporating
standard and modified standard power supplies into their products.

    RELIANCE ON FEWER SUPPLIERS.  In the past, customers typically purchased
power supplies from multiple suppliers. However, in order to lower costs and
accelerate delivery schedules, OEMs and electronic distributors are increasingly
reducing their supplier base to include only vendors who can offer a broad range
of products and service most of their needs. In addition, OEMs who purchase
power supplies have merged with or acquired other companies as part of
consolidation trends in their own industries. These larger OEM customers
increasingly rely on suppliers with greater financial resources and broader
product lines.

    OUTSOURCING TO MERCHANT MANUFACTURERS.  Captive power supply manufacturers
design and manufacture power supplies primarily for use in their own products.
Merchant power supply manufacturers design and manufacture power supplies for
use by OEMs. The merchant segment of the worldwide power supply market was
estimated to be approximately 57% of the total power supply market in 1999. The
merchant segment is expected to grow to approximately 62% of the overall market
by 2004 as OEMs increasingly focus on core competencies and outsource the
manufacturing of power supplies to more efficient suppliers. We believe that as
this outsourcing occurs, many OEMs will divest their power supply businesses.

BUSINESS STRATEGY

    Power-One is primarily focused on high growth markets, such as the data
telecommunications and automated/semiconductor test power supply markets. Our
customers value quality, reliability, technology and service. Our goal is to be
the leading manufacturer of standard and modified standard power supplies to
these markets. To accomplish our goal, we plan to:

    BROADEN OUR STANDARD PRODUCT LINE.  We believe that we offer customers one
of the broadest ranges of AC/DC and DC/DC standard and modified standard power
supplies in the world. Our standard product line includes over 2,500 different
models that are available from 1 to 4,000 watts. We are a leader in power supply
design, innovation and new product introduction. We plan to continue to develop
and expand our standard and modified standard product lines. We believe this
expansion,

                                       6
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together with our highly flexible and quick changeover manufacturing process,
will allow us to meet the requirements of our customers to bring new products to
market more rapidly and cost effectively.

    EXPAND RELATIONSHIPS WITH KEY OEMS.  We focus on maintaining and
establishing long-term relationships with leading OEMs in our focused markets
high growth industries. As part of our efforts to develop and expand these key
relationships, we continue to execute our Strategic National Accounts Program,
or SNAP. As part of SNAP, we have professionals who are assigned directly to key
OEM accounts. In addition, our recent acquisitions have significantly expanded
our OEM customer base, and we are implementing programs to aggressively
cross-sell our broad range of products to these new customers.

    STRENGTHEN OUR POSITION AS A LEADER IN DC/DC POWER SUPPLIES AND, IN
PARTICULAR, DISTRIBUTED POWER ARCHITECTURE PRODUCTS.  We have become a leading
supplier of DC/DC power supplies with over 1,750 products. In addition, we
believe that our acquisition of IPD, a technological leader in high-density DC/
DC products, has positioned us to better fulfill our customers' DPA
requirements. We intend to continue expanding our DC/DC product offerings.

    PURSUE ACQUISITIONS.  We plan to pursue growth opportunities by continuing
to acquire other power supply companies. We believe the fragmentation of the
power supply market, supply base consolidation driven by our customers, and
relative undercapitalization of most of our smaller competitors will present
opportunities for further consolidation in our industry. We also believe that an
acquisition in Asia will significantly lower our materials and labor costs.

    MAINTAIN STRONG RELATIONSHIPS WITH DISTRIBUTORS.  We believe that we were
one of the first manufacturers to sell power supplies through distributors.
Additionally, as a result of Power-One's strong brand name for quality and
service, we have developed one of the largest networks of distributors in the
U.S. We believe that our large network of distributors enables us to efficiently
sell our products to significantly more customers than we could using a direct
sales force. In addition, our relationships with our distributors provide us
with readily available shelf-space for our new products that we develop and
acquire.

PRODUCTS

    Our products are divided primarily into the following categories:

    LOW-POWER AC/DC PRODUCTS.  Most of our low-power AC/DC power supplies use a
universal input voltage circuit, which automatically detects if the AC line is
110 or 220 volts, allowing the products to be used worldwide without
modification. In 1997, we introduced a new generation of low-range power
supplies targeted to our higher volume customers and the communications markets.
In addition, we have designed a line of low-power, high-reliability AC/DC
products that are specifically designed for our customers in the transportation
and high-reliability industrial markets.

    MID-POWER AC/DC PRODUCTS.  Most of our mid-power AC/DC products have the
universal input voltage circuit described above. We offer a range of products
that provide our customers a variety of features and options within the
mid-range power area. In 1999, we added a new line of 250-watt power supplies to
address the needs of customers in the communications market.

    HIGH-POWER AC/DC PRODUCTS.  Our high-power AC/DC power supplies are based
upon a modular configuration. We have approximately 10 platforms and 80 modules
that we have sold in more than 1,400 configurations. Additionally, through our
acquisition of Melcher, we have a non-modular line of high-power
telecommunications power supplies that are designed for use in rugged
applications.

    LOW-POWER/LOW-DENSITY DC/DC PRODUCTS.  We manufacture over 500 different
types of low-power DC/DC power supplies. Unlike AC/DC products, DC/DC power
supplies are typically more compatible with power supplies manufactured by
others and can often replace competitors' DC/DC products.

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    HIGH-POWER/HIGH-DENSITY DC/DC PRODUCTS.  We manufacture high-density DC/DC
products, which are best suited for DPA. These products are essentially the same
size as low-density DC/DC products but have significantly greater output power.
We also manufacture a line of DC/DC products specifically for use by OEMs in the
transportation and high-reliability industrial markets, as well as sectors of
the communications industry that require rugged, high-reliability products.

    LINEAR PRODUCTS.  We are an industry leader in and have manufactured
standard linear AC/DC products since our founding in 1973. Linear power supplies
are larger, heavier and less efficient than switching power supplies. However,
linear products are better suited for equipment with low electrical noise
requirements, such as high precision medical and industrial equipment. We expect
that net sales of our linear products, which accounted for 17% of our revenues
in 1998 and 7% in 1999, will continue to decline in both dollar volume and as a
percentage of our net sales in the coming years, as end-users redesign their
products to use switching power supplies.

    In addition to the standard and modified standard products described above,
we design and manufacture AC/DC and DC/DC custom products for select OEM
customers to meet unique requirements in size, wattage or configuration. We
believe that we can use our large base of standard products and standard circuit
designs as platforms to address the custom needs of our customers quickly and
effectively.

CUSTOMERS

    We sell our power supplies to over 10,000 OEMs either directly or indirectly
through our distributors. Teradyne and Cisco are the only OEM customers who have
accounted for more than 10% of our net sales in any year since 1995. Teradyne
accounted for 13% of our net sales in 1998. Cisco accounted for 16% of net sales
in 1999.

    Our top 25 OEM customers accounted for 53% of net sales in 1999, up from 41%
in 1998, and included Cisco, Nortel, Teradyne, Lucent, Newbridge Networks,
Alcatel, Hewlett-Packard, Siemens and Ericsson.

    Net sales in 1997, 1998 and 1999 were to the following markets:

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                                                                   FISCAL YEARS ENDED
                                                                      DECEMBER 31,
                                                             ------------------------------
                                                               1997       1998       1999
                                                             --------   --------   --------
<S>                                                          <C>        <C>        <C>
Communications.............................................     30%        21%        49%
Industrial.................................................      9%        27%        18%
Automatic/Semiconductor Test Equipment.....................     32%        19%        11%
Medical Equipment..........................................     12%        11%         6%
Transportation.............................................      0%         4%         7%
Computer, Retail and Other.................................     17%        18%         9%
Total......................................................    100%       100%       100%
</TABLE>

SALES AND MARKETING

    We market our power supplies in North America directly to OEMs through our
own direct sales force and through independent manufacturers' representative
organizations, as well as through sales to distributors. Our North American
sales and marketing organization consists of over 50 professionals comprised of
salespeople, regional sales managers, product line managers, strategic account
managers, and a comprehensive technical support and service staff. Our European
sales and marketing effort is managed by approximately 60 sales professionals
located in six sales offices in Switzerland, Germany, France, England, Italy,
and the Netherlands, as well as independent manufacturers' representatives and
distributors. Various product managers and a technical and service staff located
in Europe support the

                                       8
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European customers. Additionally, we sell products in China through a joint
venture in Shenzhen and through one of our distributors.

    The percentage break-down of products that we sold to OEMs and distributors
in 1997, 1998 and 1999 is as follows:

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<CAPTION>
                                                                   FISCAL YEARS ENDED
                                                                      DECEMBER 31,
                                                             ------------------------------
                                                               1997       1998       1999
                                                             --------   --------   --------
<S>                                                          <C>        <C>        <C>
OEMs.......................................................     56%        60%        77%
Distributors...............................................     44%        40%        23%
</TABLE>

    Although the dollar volume of net sales to distributors has remained
relatively constant, net sales to distributors has decreased as a percentage of
our total net sales because our acquisitions and strategic account program have
increased net sales to OEMs.

    OEM AND STRATEGIC ACCOUNT SALES.  In North America, we use our direct sales
force and manufacturers' representatives to sell our products to OEMs. In
Europe, we primarily use our direct sales force but also utilize some
manufacturers' representatives and distributors. Our manufacturers'
representatives cover North America, Eastern Europe, Northern Europe, the Middle
East, Asia, Africa and Australia. In 1997, we formed SNAP (Strategic National
Account Program) to target existing and potential OEM customers who are leaders
in high-growth industries and who we believe could order over $3 million of
power supplies annually. We expect that our net sales to OEMs will increase in
the future as we increasingly emphasize sales to strategic accounts.

    SMALL ACCOUNT SALES BY DISTRIBUTORS.  We have one of the largest domestic
distribution networks in the power supply industry. We have relationships with
over 60 distributors with locations in approximately 500 cities worldwide.
Approximately 60% of our distributors are headquartered in the U.S. with branch
offices throughout the U.S. and Canada. Many of these distributors have been
selling our products for over ten years. We believe that customer loyalty to the
Power-One brand and our wide range of standard products enhances our
distribution network. Pioneer Standard Electronics accounted for 12% of net
sales in 1997. No other distributor accounted for more than 10% of our annual
net sales during the last three years. Pioneer has distributed our products for
more than ten years.

RESEARCH AND DEVELOPMENT/ENGINEERING

    Our research and development group consists of approximately 20 design teams
and approximately 120 full-time employees located in California, Massachusetts,
Switzerland and Ireland. We invested over 7% of our 1999 revenues in
engineering. Our research and development department primarily develops new
standard power supply products, as well as modifications and improvements for
existing products. Within our target markets, we strive to expand applications
that use our power supplies by approaching current and potential customers and
discussing their future product directions and requirements. We also direct a
limited amount of our engineering activities toward creating custom products.
Additionally, we focus our research activities on improving power conversion
efficiency, reducing product and component costs, improving manufacturability,
reducing product size, and implementing new manufacturing processes.

MANUFACTURING PROCESS AND QUALITY CONTROL

    A typical power supply consists primarily of a printed circuit board,
electronic components, transformers and other electromagnetic components, and a
sheet metal chassis. Production of our power supplies entails the assembly of
structural hardware combined with a sophisticated assembly of circuit boards. In
response to market demands for increased quality and reliability, design
complexity, and

                                       9
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sophisticated technology, we automated many electronic assembly and testing
processes that we previously performed manually. We also standardized our
manufacturing processes to utilize our resources efficiently and optimize our
capacities.

    Our manufacturing process is designed to quickly produce a wide variety of
quality products at a low cost. We use many techniques such as cell-based
manufacturing, common componentry in our product designs and state-of-the-art
production equipment to achieve this goal. In 1999, we installed three
additional surface mount technology, or SMT, assembly lines bringing our
installed base to three SMT lines in Mexico and one in our Dominican Republic
facility. Three additional SMT lines have been ordered and are targeted to be
installed by the end of the second quarter in 2000. These SMT lines are capable
of changeovers in under five minutes and up to 56,000 component placements per
hour. SMT permits us to reduce board size by eliminating the need for holes in
the printed circuit boards and by allowing us to use smaller components. We
believe our substantial investment in SMT technology will significantly increase
throughput and capacity while also increasing product quality.

    Many of our customers and other end-users increasingly require that their
power supplies meet or exceed established international safety and quality
standards as their operations expand internationally. In response to this need,
we design and manufacture power supplies in accordance with the certification
requirements of many international agencies. These agencies include Underwriters
Laboratories (UL) in the U.S.; the Canadian Standards Association (CSA) in
Canada; Technischer Uberwachungs-Verein (TUV) and Verband Deutscher
Electrotechniker (VDE) in Germany; the British Approval Board for
Telecommunications (BABT) in the United Kingdom; and International
Electrotechnical Committee (IEC), a European standards organization.

    Quality products and responsiveness to the customer's needs are of critical
importance in our efforts to compete successfully. Given their importance, we
emphasize quality and reliability in both the design and manufacture of our
products. In addition to testing throughout the design and manufacturing
process, we test and burn-in 100% of all products using automated equipment and
customer-approved processes. We perform an additional out-of-box test or
pre-ship audit on randomly selected units before shipment, further ensuring
manufacturing quality and integrity.

    We manufacture and assemble our products primarily at our facilities in the
Dominican Republic, Mexico, Switzerland, Slovakia and Massachusetts. All of our
facilities are ISO 9000 certified. We are currently in the process of moving
much of our high volume IPD business to our lower cost facilities in Mexico and
the Dominican Republic and our high volume Melcher business to Slovakia, the
Dominican Republic and Mexico.

SUPPLIERS

    We typically design products using components readily available from several
sources and attempt to minimize our use of components that we can obtain through
only one source. Raw materials are generally available in large quantities from
a number of different suppliers who provide electronic bonding and safety stock
programs to ensure availability. We have a number of volume purchase agreements,
or VPA's, with selected suppliers of key items such as wire, fuses, resistors,
connectors, capacitors, sheet metal and semiconductors. We use VPA's, which
typically have 12 to 18 month terms, to ensure that we have a constant source
for required supplies. This practice enables us to reduce inventory expense and
produce substantial cost savings through volume purchase discounts. We have not
had a supply shortage that had a material adverse effect on our business.
However, this does not preclude the possibility that continued significant
growth in the electronic equipment industry could cause shortages of key
components in the future, thereby causing a delay in shipments leading to a
substantial loss of business, or causing price increases which could lead to
lower profit margins.

                                       10
<PAGE>
MANAGEMENT INFORMATION TECHNOLOGY

    In April 1999, we installed an Oracle ERP system. The Oracle ERP system
enables us to better organize and share critical information for our management
team. The web-based system allows for the input and access of important
information from any location. The system is capable of supporting a much larger
business and will allow us to more easily integrate future acquisitions into our
operations. The system is fully operational in our Camarillo and Mexico
locations. Additional fine tuning and enhancements will continue, concurrent
with the rollout of Oracle to our remaining locations in the future.

YEAR 2000 ISSUE

    The Year 2000 issue arose from many existing computer systems and software
programs being coded to accept two digit entries rather than four digits to
define the applicable year. These systems might, for example, recognize the year
"00" as 1900 instead of 2000. We experienced no significant year 2000-related
issues over the year 2000 transition, and we do not currently expect that we
will incur material costs or experience material disruptions in our business due
to the Year 2000 issue.

EURO CURRENCY CONVERSION

    On January 1, 1999, eleven of the fifteen member countries of the European
Union adopted the euro as their common legal currency. The euro trades on
currency exchanges and is available for non-cash transactions. From January 1,
1999 through January 1, 2002, participating countries can also maintain their
national ("legacy") currencies as legal tender for goods and services. Beginning
January 1, 2002, new euro-denominated bills and coins will be issued, and legacy
currencies will be withdrawn from circulation no later than July 1, 2002.
Melcher's operating subsidiaries in Europe have been affected by the euro
conversion and have established plans to address any business issues raised,
including the competitive impact of cross-border price transparency. It is not
anticipated that there will be any near term business ramifications; however,
the long-term implications, including any changes or modifications that will
need to be made to business and financial strategies, are still being reviewed.
From an accounting, treasury and computer system standpoint, the impact from the
euro currency conversion is not expected to have a material impact on our
financial position or results of operations.

BACKLOG

    We sell our products pursuant to purchase orders rather than long-term
contracts. Backlog consists of purchase orders on-hand having delivery dates
scheduled within the next six months. The table below illustrates our backlog at
December 31, 1998 and 1999:

<TABLE>
<CAPTION>
                                              DECEMBER 31, 1998   DECEMBER 31, 1999
                                              -----------------   -----------------
<S>                                           <C>                 <C>
Backlog.....................................     $26 million         $58 million
</TABLE>

    Customers may cancel or reschedule most deliveries without penalty. Our
backlog has historically been a reliable indicator of future financial results;
however, backlog may not be as reliable an indicator in the future as customers
switch more orders to just-in-time deliveries. As a result, backlog may decrease
even if net sales increase.

COMPETITION

    The merchant power supply manufacturing industry is highly fragmented and
characterized by intense competition. As of December 1999, there were estimated
to be over 1,000 power supply manufacturers worldwide, including over 250
participating in North America, of which more than 50% had annual revenues of
less than $10.0 million in the North American market. No single company
dominates the overall power supply market, and our competitors vary depending
upon the power range of the product. Our competition includes companies located
throughout the world including Artesyn,

                                       11
<PAGE>
Astec and Lucent Technologies. We believe that the principal bases of
competition in our targeted markets are breadth of product line, quality,
reliability, technical knowledge, flexibility, readily available products and a
competitive price. In times of an economic downturn, or when dealing with high
volume orders, we believe that price becomes a more important competitive
factor. Moreover, we believe price will become a more important competitive
factor in the future as the power supply industry consolidates, OEMs become
larger and more entrants from Asia begin to compete with us. Many of our
competitors are larger than us, and they may be able to obtain materials at
significantly lower prices. Depending on the location of our plants, we may not
be able to procure materials at costs as low as the materials costs of some of
our competitors.

INTELLECTUAL PROPERTY MATTERS

    We regard certain equipment, processes, information and knowledge that we
have developed and use to design and manufacture our products as proprietary. We
rely on a combination of trade secret and other intellectual property laws,
confidentiality agreements executed by most of our Camarillo employees and other
measures to protect our proprietary rights. We currently hold 20 issued patents,
most of which are protected in more than one country. The remaining terms of
these patents vary with the earliest expiring in 2003. We also have various
patents pending as well as nine trademarks.

EMPLOYEES

    At December 31, 1999, we employed 3,244 employees at our facilities in the
following functions:

<TABLE>
<CAPTION>
                                                              NUMBER OF
CAPACITY                                                      EMPLOYEES
--------                                                      ---------
<S>                                                           <C>
Manufacturing...............................................    2,427
Engineering.................................................      254
General and administrative..................................      314
Sales and marketing.........................................      117
Quality assurance...........................................      132
                                                                -----
  Total.....................................................    3,244
</TABLE>

    We believe that our continued success depends, in part, on our ability to
attract and retain qualified personnel. We consider our relations with our
employees to be good. None of our employees are represented by a union.

                                       12
<PAGE>
                                  RISK FACTORS

OUR BUSINESS IS CYCLICAL.

    In recent years, the power supply industry has experienced dramatic shifts
in demand and has become more cyclical. As a result, our quarterly results of
operations have fluctuated in the past and may continue to fluctuate in the
future. These fluctuations have significantly affected our net sales, which has
had a negative effect on our operating results. Any such fluctuations in the
future could have a material adverse effect on our operating results.

INTERRUPTIONS OR DELAYS IN OBTAINING COMPONENTS FOR OUR PRODUCTS COULD IMPAIR
OUR BUSINESS.

    We depend on suppliers of the components that we use in our products to make
timely shipments. We typically use a primary source of supply for each
component. It could take a long time to establish alternate sources of supply,
and we could experience supply shortages. In cases where we source several
components from only one manufacturer, any interruption in supply could
seriously impair our business. Any shortages or price increases of particular
components could increase product delivery times and manufacturing costs and
reduce our gross margins. We could also lose a substantial amount of business
due to product shipment delays caused by supply shortages. In either case, our
financial condition would be adversely affected. The electronic equipment
industry has been experiencing significant growth. If the electronic equipment
industry continues to realize increased growth in the future, causing a shortage
of components and price increases, our operating results could be adversely
affected.

IF WE FAIL TO MANAGE OUR GROWTH EFFECTIVELY, WE MAY LOSE BUSINESS AND EXPERIENCE
REDUCED PROFITABILITY.

    We have significantly increased our business within a short period of time
through our acquisitions of Melcher and IPD. As a result of these acquisitions,
internal growth and the transfer of production to our Mexico and Dominican
Republic factories, the number of our employees has grown from 1,841 as of
December 31, 1998 to 3,244 as of December 31, 1999. If we are to grow
successfully, we must:

    - train our new employees;

    - effectively manage increases in our production levels and transfers of
      production;

    - attract and retain qualified management and technical personnel;

    - improve our operational, administrative and financial systems;

    - implement our Oracle Enterprise Resource Planning, or ERP, system in our
      operations; and

    - manage multiple relationships with various customers and suppliers.

    We may not be able to accomplish any of these requirements, and our failure
to do so would have a material adverse effect on our operating results. In
addition, our inability to manage our growth could lead to delayed shipment and
cancellation of customer orders.

CANCELLATIONS, REDUCTIONS OR DELAYS IN PURCHASES COULD CAUSE OUR QUARTERLY
RESULTS TO FLUCTUATE.

    We do not obtain long-term purchase orders or commitments from our
customers, and customers may cancel, reduce or postpone orders without penalty.
Cancellations, reductions or delays in orders could substantially reduce our
backlog and adversely affect our net sales, gross profit and operating results,
especially if we are unable to replace such orders. Our expense levels are
based, in part, on expected future revenues and are relatively fixed once set.
Therefore, fluctuations in net sales (particularly if customers cancel, postpone
or delay sales or sales fail to meet our expectations) may adversely impact our
operating results. Fluctuations in net sales and customer needs may also affect
our mix of products and volume of orders, which in turn affect our gross margin
and operating results.

                                       13
<PAGE>
High-volume orders, especially custom orders, if cancelled, may substantially
increase the risk of inventory obsolescence, write-offs due to excess
manufacturing capacity and collection problems. These factors have caused our
quarterly results to fluctuate in the past and may continue to do so in the
future, which could have a material adverse effect on our operating results.

WE RELY ON A FEW MAJOR CUSTOMERS FOR A MATERIAL PORTION OF OUR BUSINESS.

    A few customers account for a material portion of our net sales each year.
During 1999, our top three customers accounted for approximately 31% of our net
sales. If we lose one of these customers, or if one of them reduces or cancels a
significant order, our net income and operating results could decrease
significantly.

FAILURE TO ANTICIPATE TRENDS IN THE ELECTRONIC EQUIPMENT INDUSTRY AND PRICE
EROSION MAY ADVERSELY AFFECT OUR BUSINESS.

    Because we have many customers in the electronic equipment industry, the
factors and economic trends that affect these companies also affect our
business. Companies in the electronic equipment industry must continuously
develop new products to respond to rapid changes in technology. In addition,
because consumer demand for electronic equipment fluctuates frequently and the
industry is highly competitive, these companies must continuously develop and
produce higher-performance products at lower prices. To respond to the needs of
our customers in the electronic equipment industry, we must also continuously
develop new and more advanced products at lower prices. Our inability to
properly assess developments in the electronic equipment industry or to
anticipate the needs of our customers could cause us to lose some or all of
these customers and prevent us from obtaining new customers. Moreover, the power
supply industry has experienced significant price erosion in order to meet the
electronic equipment industry's demand for lower costs. Future downward pressure
on prices could have a material adverse effect on our operating results.

WE MAY ENCOUNTER PROBLEMS IN INTEGRATING THE OPERATIONS OF COMPANIES THAT WE
ACQUIRE.

    To implement our strategy of growing through acquisitions, we need to:

    - retain key management members and technical personnel of an acquired
      company;

    - successfully merge corporate cultures and business processes;

    - realize sales and cost reduction synergies; and

    - possibly operate in areas of the world in which we have little or no prior
      experience.

    In addition, after we have completed an acquisition, our management must be
able to assume significantly greater responsibilities, and this in turn may
cause them to divert their attention from our existing operations. We acquired
Melcher in August of 1998 and IPD in January of 1999. We are in the process of
transferring production to our Mexico and Dominican Republic facilities. We
expect to begin installing our Oracle ERP system in IPD's and Melcher's
operations in the middle of 2001. If we are unable to completely integrate
Melcher's and IPD's businesses and operations into our business, including the
completion of planned transfers of production to our Dominican Republic and
Mexico facilities and implementation of our Oracle ERP system at Melcher and
IPD, our results of operations and financial condition would be adversely
affected.

MUCH OF OUR BUSINESS IS SUBJECT TO RISKS ASSOCIATED WITH OPERATIONS IN FOREIGN
COUNTRIES.

    Many of our operations are located outside of the U.S. and consequently, are
vulnerable to:

    - imposition of tariffs, quotas, taxes and other market barriers;

                                       14
<PAGE>
    - restrictions on the export or import of technology;

    - political and economic instability and work stoppages;

    - difficulties in staffing and managing international operations; and

    - fluctuations in the value of the U.S. dollar relative to foreign
      currencies.

    Historically, we have not hedged against any currency exchange rate risks.
The occurrence of any of these factors may adversely affect our operating
results.

WE MAY NOT BE ABLE TO GROW BY ACQUIRING OTHER COMPANIES.

    We will not be able to acquire other companies if we cannot identify
acquisition opportunities or obtain acceptable financing. We may have to incur
debt to acquire other companies. If our cash flow and existing working capital
are not sufficient to fund our general working capital requirements and debt
service needs, we will have to raise additional funds by selling equity,
refinancing some or all of our existing debt or selling assets or subsidiaries.
None of these alternatives to raise additional funds may be available on
acceptable terms to us or in amounts sufficient for us to meet our requirements.

OUR SUCCESS DEPENDS ON OUR ABILITY TO RETAIN OUR SENIOR MANAGEMENT AND TO
ATTRACT AND RETAIN KEY TECHNICAL PERSONNEL.

    If we lose one or more members of our senior management or if we cannot
attract and retain qualified management or highly technical personnel, our
operating results could be adversely affected. Our capacity to develop and
implement new technologies depends on our ability to employ personnel with
highly technical skills. Competition for such qualified technical personnel is
intense due to the relatively limited number of power supply engineers
worldwide.

WE MAY NOT BE ABLE TO COMPETE WITH COMPETITORS WHO ARE SIGNIFICANTLY LARGER AND
MAY HAVE SUBSTANTIALLY LOWER MATERIALS COSTS.

    The merchant power supply manufacturing industry is characterized by intense
competition. We believe that the principal bases of competition in our targeted
markets are breadth of product line, quality, reliability, technical knowledge,
flexibility, readily available products and competitive price. In times of an
economic downturn, or when dealing with high volume orders, we believe that
price becomes a more important competitive factor. Moreover, we believe price
will become a more important competitive factor in the future as the power
supply industry consolidates, OEMs become larger and more entrants from Asia
begin to compete with us. Many of our competitors are larger than us, and they
may be able to obtain materials at significantly lower prices. Depending on the
location of our plants, we may not be able to procure materials at costs as low
as the materials costs of some of our competitors. This may have a material
adverse effect on our operating results.

WE WILL BE REQUIRED TO PAY SUBSTANTIAL UNITED STATES INCOME TAX IF WE REPATRIATE
EARNINGS FROM OUR PUERTO RICO AND MELCHER OPERATIONS.

    We do not pay U.S. federal or state income taxes on earnings from our Puerto
Rico and Melcher operations as long as we do not repatriate the earnings. As of
December 31, 1999, our Puerto Rico and Melcher subsidiaries had accumulated
unremitted earnings of approximately $18.1 million and $3.1 million,
respectively. If we decide to bring these funds into the U.S., we will have to
pay U.S. taxes on them at the normal rates. The resulting increase in income tax
expense would decrease our net income.

                                       15
<PAGE>
OUR INABILITY TO PROTECT OUR INTELLECTUAL PROPERTY COULD SERIOUSLY DAMAGE OUR
BUSINESS.

    We rely upon a combination of patents, trademarks and trade secret laws to
protect our proprietary rights in certain of our products. Our competitors may,
however, misappropriate our technology or independently develop technologies
that are as good as or better than ours. Additionally, the laws of some foreign
countries do not protect our proprietary rights as much as U.S. laws. We
currently have several patents and may apply for additional patents, but the
U.S. Patent and Trademark Office may reject some or all of our patent
applications. The patents that the U.S. government issues to us may not provide
us with a competitive advantage or create a sufficiently broad claim to protect
the technology that we develop. Furthermore, our competitors may challenge or
circumvent our patents, and some of our patents may be invalidated. If we have
to initiate or defend against a patent infringement claim in the future to
protect our proprietary rights, the litigation over such claims could be
time-consuming and costly to us, adversely affecting our operating results.

STEPHENS GROUP, INC. MAY BE ABLE TO CONTROL OUR MANAGEMENT, OPERATIONS AND
AFFAIRS.

    Stephens Group,Inc., and certain of its affiliates ("Stephens Investors")
have contributed their shares of our common stock to a voting trust, which owns
approximately 23.4% of our outstanding common stock. The voting trust must vote
the shares "for" or "against" proposals submitted to our stockholders in the
same proportion as votes cast "for" and "against" such shares by all other
stockholders. As long as these shares are held in the voting trust, Stephens
Group, Inc. cannot control our business. If Stephens Group, Inc., however,
decides to terminate the voting trust agreement, which it can do at its sole
option, depending on the number of shares voted on a particular matter, Stephens
Group, Inc. could effectively be able to elect our entire Board of Directors,
approve any action requiring stockholder approval (except as provided by law)
and control our management, operations and affairs. If Stephens Group, Inc.
terminates the voting trust, Stephens Inc. would no longer be able to make a
market in our common stock.

OUR CHARTER CONTAINS PROVISIONS THAT MAY HINDER OR PREVENT A CHANGE IN CONTROL
OF OUR COMPANY.

    Certain provisions of our Certificate of Incorporation could make it more
difficult for a third party to acquire control of us, even if such a change in
control would benefit our stockholders. We have a staggered Board of Directors,
which means that our stockholders can only elect approximately one third of the
board at each annual meeting of stockholders. Stockholders must inform our
corporate secretary before a stockholders' meeting of any business they wish to
discuss and any directors they wish to nominate. Our Certificate of
Incorporation also requires approval of 75% of our voting stock to amend certain
provisions. Finally, our Board of Directors can issue preferred stock without
stockholder approval. Your rights could be adversely affected by the rights of
holders of preferred stock that we issue in the future. Any one of the
provisions discussed above could discourage third parties from taking over
control of the Company. Such provisions may also impede a transaction in which
you could receive a premium over then current market prices and your ability to
approve transactions that you consider in your best interests.

                                       16
<PAGE>
ITEM 2--PROPERTIES

    The table below lists our principal manufacturing and research and
development facilities.

<TABLE>
<CAPTION>
                                       APPROXIMATE SIZE
LOCATION                                (SQUARE FEET)     EMPLOYEES             PRIMARY ACTIVITY
--------                               ----------------   ---------   ------------------------------------
<S>                                    <C>                <C>         <C>
San Luis, Mexico.....................      110,000          1,080     Manufacturing and Assembly

Santo Domingo, Dominican Republic....      100,000          1,054     Manufacturing andAssembly,
                                                                      Warehousing

Camarillo, California................       98,000            243     Administration, Research and
                                                                        Development, Manufacturing, Sheet
                                                                        Metal Fabrication, Warehousing,
                                                                        Marketing and Sales

Boston, Massachusetts................       60,000            456     Administration, Research and
                                                                        Development, Manufacturing,
                                                                        Warehousing, Marketing and Sales

Uster, Switzerland...................       55,000            203     Administration, Research and
                                                                        Development, Manufacturing,
                                                                        Warehousing, Marketing and Sales

Isabela, Puerto Rico.................       46,000             27     Sub-assembly

Dubnica Nad Vahom, Slovakia..........       36,000            129     Manufacturing and Assembly

Limerick, Ireland....................       10,000             22     Research and Development, Small-
                                                                        volume Manufacturing and Assembly
</TABLE>

We own our facilities in Mexico, Massachusetts, Slovakia and one 29,000 square
foot facility in Uster, Switzerland included in the facilities listed above. We
lease the rest of our facilities pursuant to lease agreements with expiration
dates through 2008 in North America and 2005 in Europe.

    We believe that our existing facilities are adequate to meet current
requirements and that suitable additional or alternative space will be available
as needed on commercially reasonable terms.

ITEM 3--LEGAL PROCEEDINGS

    We are involved in routine litigation arising in the ordinary course of its
business. While the outcome of lawsuits against us cannot be predicted with
certainty, in our opinion, none of the pending litigation will have a material
adverse effect on our consolidated financial condition or results of operations.

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

    None

                                       17
<PAGE>
ITEM 4(a)--EXECUTIVE OFFICERS

    Set forth below is certain information concerning our executive officers.

<TABLE>
<CAPTION>
NAME                                         AGE(1)                        POSITION
----                                        --------   -------------------------------------------------
<S>                                         <C>        <C>
Steven J. Goldman.........................     42      Chief Executive Officer and Chairman of the Board

Bill Yeates...............................     39      President and Chief Operating Officer

Eddie K. Schnopp..........................     41      Sr. Vice President--Finance, Chief Financial
                                                       Officer and Secretary

Dennis R. Roark...........................     53      Executive Vice President and Chief Technology
                                                       Officer
</TABLE>

------------------------

(1) As of March 31, 2000

    STEVEN J. GOLDMAN.  Mr. Goldman, who joined us in 1982, became our President
and Chief Executive Officer in 1990 and was named Chairman of the Board in
February 1997. In January, 2000, he relinquished the responsibilities of
President to Mr. Bill Yeates, who has since assumed the role of President and
COO of Power-One, Inc. He received his B.S. degree in electrical engineering
from the University of Bridgeport and his M.B.A. degree from Pepperdine
University's Executive program. Mr. Goldman is a contributing member and
Co-Membership Chairman of the San Fernando Valley Chapter of the Young
President's Organization.

    BILL YEATES.  Mr. Yeates joined us in January 2000 as President and Chief
Operating Officer. Before joining us, Mr. Yeates held various positions of
increasing responsibility at Lucent Technologies, including Vice President and
General Manager of the Titania Power Division. He received his B.S. degree in
electrical engineering and his M.B.A degree in Finance from Louisiana Tech
University.

    EDDIE K. SCHNOPP.  Mr. Schnopp, who joined us in 1981, was appointed Vice
President of Finance and Logistics in 1993 and Secretary and Chief Financial
Officer in 1995. He was appointed Sr. Vice President, Finance, Chief Financial
Officer and Secretary in February 1999. He received his B.S. degree in
Accounting from California State University Northridge. Mr. Schnopp is married
to Ms. Koep.

    DENNIS R. ROARK.  Mr. Roark, who joined us in 1988, was appointed Executive
Vice President of the Company in 1990. He was appointed Chief Technology Officer
in February 1999. Before joining us, Mr. Roark co-owned and managed California
D.C. Power Supplies, Inc., a designer and manufacturer of power supplies. He
received his B.S. degree in Engineering from California Polytechnic University-
Pomona.

    Our officers serve at the discretion of the Board.

                                       18
<PAGE>
                                    PART II

ITEM 5-- MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

    Our Common Stock is listed on the National Market System of the National
Association of Securities Dealers Automated Quotation ("NASDAQ") System and is
traded under the symbol "PWER." The following table sets forth, for the
quarterly periods indicated, the range of high and low closing sale prices for
the Common Stock as reported by NASDAQ since October 1, 1997, the date on which
our shares first became publicly traded. Before October 1, 1997, there was no
established public trading market for our Common Stock.

<TABLE>
<CAPTION>
                                                                  HIGH            LOW
                                                              -------------   -----------
<S>                                                           <C>             <C>
1997
Fourth Quarter..............................................  $19 5/8         $13 7/8

1998
First Quarter...............................................   16 3/4          13
Second Quarter..............................................   17               7 3/4
Third Quarter...............................................   10               6 7/16
Fourth Quarter..............................................    7 1/2           5 1/2

1999
First Quarter...............................................   12 1/4           6 1/4
Second Quarter..............................................   19 1/2           6 1/2
Third Quarter...............................................   31 21/32        19 1/4
Fourth Quarter..............................................   45 13/16        18 1/4
</TABLE>

    The number of holders of record of our Common Stock as of March 24, 2000,
was 82.

DIVIDEND POLICY

    We have not paid cash dividends for the last three years. We anticipate that
all future earnings will be retained to finance the continuing development of
our business and we do not anticipate paying cash dividends on the Common Stock
in the foreseeable future. The payment of any future cash dividends will be at
the discretion of the Board and will depend upon, among other things, future
earnings, capital requirements, our general financial condition and general
business conditions. In addition, our credit facility restricts the ability to
pay dividends. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources."

    Our subsidiary, Power-Electronics, Inc., a Puerto Rico corporation ("P-E"),
does not currently intend to declare any dividends. If P-E does declare and pay
a dividend to us, then we may be forced to pay taxes at the statutory rates on
such amount.

ITEM 6--SELECTED FINANCIAL DATA

GENERAL

    Before September 27, 1995, Power-One, Inc., a California corporation ("Power
CA"), P-E, and Poder Uno de Mexico, S.A. de C.V., a Mexican corporation ("Poder
Uno"), collectively referred to for the period prior to September 30, 1995 as
the "Predecessor Company", were owned by a small group of investors, including
management, each in similar ownership percentages, and were operated
collectively by management located primarily in California. On September 27,
1995, Power-One LLC, a Delaware limited liability company ("Power-One LLC"),
acquired the assets of Power CA and the stock of P-E and Poder Uno in an
arms-length transaction that was negotiated between the Stephens

                                       19
<PAGE>
Investors and our previous owners. The Stephens Investors acquired approximately
65% of the membership interests of Power-One LLC, with the remainder being
acquired by our senior management. The aggregate amount of consideration paid by
the Stephens Investors and by our senior management was approximately
$15 million as well as the deferral of approximately $5.3 million that was owed
to our senior management. After the total consideration was determined, our
senior management participated on the same pricing as the Stephens Investors. As
of February 1, 1996, Power-One LLC was reorganized when it was merged with and
into Power-Merger, Inc., a Delaware corporation, which changed its name to
Power-One, Inc. When this merger occurred, there was no change in the ownership
percentages.

    In the table below, we provide you with selected consolidated historical
financial and operating data. We have prepared this information using financial
statements for the fiscal years ended December 31, 1995, 1996, 1997, 1998 and
1999 which have been audited by Deloitte & Touche LLP, independent auditors.
When you read this selected historical financial and operating data, it is
important that you read along with it the section titled "Management's
Discussion and Analysis of Financial Condition and Operating Results" included
elsewhere in this Annual Report. Historical results are not necessarily
indicative of future results.

                                       20
<PAGE>
                     SELECTED FINANCIAL AND OPERATING DATA
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                      PREDECESSOR
                                     COMPANY(1)(2)                                   COMPANY(1)
                                     --------------   -------------------------------------------------------------------------
                                      NINE MONTHS     THREE MONTHS
                                         ENDED            ENDED        YEAR ENDED     YEAR ENDED     YEAR ENDED     YEAR ENDED
                                     SEPTEMBER 30,    DECEMBER 31,    DECEMBER 31,   DECEMBER 31,   DECEMBER 31,   DECEMBER 31,
                                          1995            1995            1996           1997         1998(5)        1999(6)
                                     --------------   -------------   ------------   ------------   ------------   ------------
<S>                                  <C>              <C>             <C>            <C>            <C>            <C>
STATEMENT OF OPERATIONS DATA:
  Net sales........................     $53,216         $ 20,854        $75,434        $93,068        $102,519       $205,402
  Cost of goods sold...............      31,525           14,348         45,305         55,481          63,446        120,196
                                        -------         --------        -------        -------        --------       --------
  Gross profit.....................      21,691            6,506         30,129         37,587          39,073         85,206
  Selling expense..................       5,995            1,938          7,537          8,199          11,771         21,946
  General and administrative
    expense........................       3,985            1,760          5,873          6,778           8,311         17,012
  Engineering expense..............       2,538            1,078          4,215          3,937           6,257         14,473
  Quality assurance expense........       1,310              355          1,886          2,027           2,007          3,781
  Amortization of intangibles......                          472          2,003          2,029           2,625          6,212
  In process research and
    development....................                                                                                     3,300
  Other expense....................                                         613
                                        -------         --------        -------        -------        --------       --------
  Total expense....................      13,828            5,603         22,127         22,970          30,971         66,724
  Income from operations...........       7,863              903          8,002         14,617           8,102         18,482
  Interest income..................          65               24             28            358           1,387            798
  Interest expense.................        (494)          (1,026)        (4,222)        (3,181)           (806)        (3,086)
  Other income (expense)...........         (32)             (60)           (16)           (18)           (627)           307
                                        -------         --------        -------        -------        --------       --------
  Income (loss) before income
    taxes..........................       7,402             (159)         3,792         11,776           8,056         16,501
  Income taxes(3)..................         155               12            396          3,542           2,326          6,454
                                        -------         --------        -------        -------        --------       --------
  Net income (loss)................     $ 7,247             (171)         3,396          8,234           5,730         10,047
                                        =======
  Less: Preferred stock accretion
    and dividends..................                                       1,415          1,514
                                                        --------        -------        -------        --------       --------
  Net income (loss) attributable to
    common stockholders............                     $   (171)       $ 1,981        $ 6,720        $  5,730       $ 10,047
                                                        ========        =======        =======        ========       ========
  Basic earnings (loss) per common
    share..........................                     $  (0.02)       $  0.20        $  0.58        $   0.34       $   0.55
                                                        ========        =======        =======        ========       ========
  Diluted earnings (loss) per
    common share...................                     $  (0.02)       $  0.20        $  0.56        $   0.33       $   0.53
                                                        ========        =======        =======        ========       ========
Pro forma amounts:(3)
  Income (loss) before income taxes
    as reported....................     $ 7,402         $   (159)       $ 3,792        $11,776        $  8,056       $ 16,501
  Pro forma income tax (benefit)
    provision......................       2,767             (121)           923          3,542           2,326          6,454
                                        -------         --------        -------        -------        --------       --------
  Pro forma net income (loss)......     $ 4,635         $    (38)       $ 2,869        $ 8,234        $  5,730       $ 10,047
                                        =======         ========        =======        =======        ========       ========

SELECTED OPERATING DATA:
  Gross profit margin..............        40.8%            31.2%          39.9%          40.4%           38.1%          41.5%
  EBITDA(4)........................     $ 8,564         $  1,718        $12,215        $18,833        $ 14,466       $ 36,123
  Cash flows from (used in):
    Operating activities...........       6,420           (2,152)         4,249          8,481          21,836            503
    Investing activities...........      (1,945)         (49,840)        (3,457)        (5,332)        (52,954)       (56,999)
    Financing activities...........        (688)          55,743         (2,859)        27,185           9,291        109,720
</TABLE>

                                                   (FOOTNOTES ON FOLLOWING PAGE)

                                       21
<PAGE>

<TABLE>
<CAPTION>
                                  AT DECEMBER 31,    AT DECEMBER 31,    AT DECEMBER 31,    AT DECEMBER 31,    AT DECEMBER 31,
                                        1995               1996               1997             1998(5)            1999(6)
                                  ----------------   ----------------   ----------------   ----------------   ----------------
<S>                               <C>                <C>                <C>                <C>                <C>
BALANCE SHEET DATA:
  Working capital...............      $ 8,076            $ 9,511            $ 61,363           $ 32,270           $121,847
  Total assets..................       72,845             72,705             112,637            153,979            283,033
  Total long-term debt
    (including current
    portion)....................       35,399             36,178                 326             10,877              8,754
  Total debt....................       46,599             46,578                 326             25,557             12,833
  Redeemable preferred stock....            0             16,287                   0                  0                  0
  Total stockholders' equity....       14,596              1,125             100,214            108,262            231,683
</TABLE>

------------------------------

(1) Our fiscal year is the 52- or 53-week period ending on the Sunday nearest to
    December 31. For clarity of presentation we have described year-ends
    presented as if the year ended on December 31. As such, the years ended
    December 31, 1995 through 1998 represent 52-week years and the year ended
    December 31, 1999 represents a 53-week year.

(2) Effective September 27, 1995, we acquired substantially all of the assets
    and liabilities of the Predecessor Company. For financial reporting
    purposes, this acquisition has been treated as if it were effective on
    October 1, 1995, the beginning of our fourth quarter.

(3) Pro forma information reflects the provision for U.S. federal and state
    income taxes as if we and the Predecessor Company had been subject to
    federal and state income taxation as a C corporation, prior to January 29,
    1996, the date we converted from a limited liability company to a C
    corporation. Prior to January 29, 1996, our net income and the Predecessor
    Company's net income flowed through to the stockholders/members. For
    presentation purposes, U.S. federal and state income taxes have not been
    provided on earnings of P-E as there is no intention to remit these
    earnings. See "Management's Discussion and Analysis of Financial Condition
    and Results of Operations-Certain Income Tax Matters," and Notes 2 and 14 of
    Notes to Consolidated Financial Statements.

(4) EBITDA, which we calculate as income from operations before depreciation,
    amortization, and compensation charges for stock option plans, is a
    supplemental financial measurement used by us in the evaluation of our
    business and by many analysts in our industry. However, EBITDA should only
    be read in conjunction with all of our financial data summarized above and
    the financial statements prepared in accordance with generally accepted
    accounting principles appearing elsewhere herein, and should not be
    construed as an alternative either to income from operations (as determined
    in accordance with generally accepted accounting principles) as an indicator
    of our operating performance or to cash flows from operating activities (as
    determined in accordance with generally accepted accounting principles) as a
    measure of our liquidity. The calculation of EBITDA varies among companies.

(5) On August 31, 1998, we acquired Melcher for a purchase price of
    $53 million, including $11.2 million of debt assumed. In addition, we
    incurred transactions costs of approximately $1.6 million. We accounted for
    the acquisition using the purchase method of accounting. See Note 3 of Notes
    to Consolidated Financial Statements.

(6) On January 29, 1999, we purchased IPD for $32 million, including certain
    capitalized lease obligations and other indebtedness of IPD. In addition, we
    incurred approximately $1.2 million of transaction costs. We accounted for
    the acquisition using the purchase method of accounting. See Note 3 of Notes
    to Consolidated Financial Statements.

                                       22
<PAGE>
ITEM 7-- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

    YOU SHOULD READ THE FOLLOWING DISCUSSION IN CONJUNCTION WITH OUR FINANCIAL
STATEMENTS AND THE RELATED NOTES. IN ADDITION TO HISTORICAL INFORMATION, THE
FOLLOWING DISCUSSION AND OTHER PARTS OF THIS ANNUAL REPORT CONTAIN
FORWARD-LOOKING INFORMATION THAT INVOLVES RISKS AND UNCERTAINTIES. OUR ACTUAL
RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED BY FORWARD-LOOKING
INFORMATION DUE TO FACTORS DISCUSSED UNDER "RISK FACTORS," "BUSINESS" AND
ELSEWHERE IN THIS ANNUAL REPORT.

    GENERAL

    We are a leading designer and manufacturer of more than 2,500 high-quality
brand name power supplies. We sell our products both to OEMs and distributors
who value quality, reliability, technology and service. We have more than 10,000
customers in the communications, industrial, automatic/semiconductor test
equipment, transportation, medical equipment and other electronic equipment
industries.

    We were founded in 1973 as a manufacturer of AC/DC power supplies and until
1981 operated solely from our Southern California facility. During the 1980s, we
established additional operations in Puerto Rico and Mexico to take advantage of
certain labor, manufacturing and, in Puerto Rico, tax efficiencies. Between 1994
and 1996, we moved most of our Puerto Rico manufacturing operations to the
Dominican Republic to capitalize on certain labor benefits. In September 1995,
Stephens Group, Inc., an affiliate of Stephens Inc., and our management
purchased Power-One from its previous owners and formulated a more aggressive
growth strategy, which included a plan to grow through acquisitions.

    In August 1998, we increased our international presence and our product
offerings by acquiring Melcher for $53 million, including debt assumed. In
January 1999, we further broadened our DC/DC product offerings by acquiring IPD
for $32 million, including certain capitalized lease obligations and other
indebtedness of IPD.

    All references herein to Power-One and to operating data for 1998, include
four months of Melcher's operations. For 1999, financial results are
consolidated to include both Melcher and, for 11 months, IPD.

                                       23
<PAGE>
    The years ended December 31, 1997 and 1998 represent 52-week years and the
year end December 31, 1999 represents a 53-week year. The following table sets
forth, for the periods indicated, certain Consolidated Statements of Operations
data as a percentage of net sales for the periods presented:

<TABLE>
<CAPTION>
                                                           1997       1998       1999
                                                         --------   --------   --------
<S>                                                      <C>        <C>        <C>
Net sales..............................................   100.0%     100.0%     100.0%
Cost of goods sold.....................................    59.6       61.9       58.5
                                                          -----      -----      -----
Gross profit...........................................    40.4       38.1       41.5
Selling expense........................................     8.8       11.5       10.7
General and administrative.............................     7.3        8.1        8.3
Engineering expense....................................     4.2        6.1        7.1
Quality assurance expense..............................     2.2        1.9        1.8
Amortization of intangibles............................     2.2        2.6        3.0
In process research and development....................     0.0        0.0        1.6
                                                          -----      -----      -----
Income from operations.................................    15.7        7.9        9.0
Interest income........................................     0.4        1.4        0.4
Interest expense.......................................    (3.4)      (0.8)      (1.5)
Other income (expense).................................    (0.0)      (0.6)       0.1
                                                          -----      -----      -----
Income before income taxes.............................    12.7        7.9        8.0
Income taxes...........................................     3.8        2.3        3.1
                                                          -----      -----      -----
Net income.............................................     8.9        5.6        4.9
Preferred stock accretion and dividends................     1.7        0.0        0.0
                                                          -----      -----      -----
Net income to common stockholders......................     7.2%       5.6%       4.9%
                                                          =====      =====      =====
</TABLE>

YEARS ENDED DECEMBER 31, 1999 AND DECEMBER 31, 1998.

    NET SALES.  Net sales increased $102.9 million, or 100.4%, to
$205.4 million for 1999 from $102.5 million for 1998. Included in net sales for
1999 are $43.6 million from Melcher, and $61.3 million from IPD. The main
contributors to the $102.9 million increase in net sales were DC/DC power
supplies which contributed $85.0 million, low-range power supplies, which
contributed $12.2 million, custom power supplies, which contributed
$5.2 million, and high-range power supplies, which contributed $3.9 million.
These increases were partially offset by declines in our linear power supplies
of $4.0 million. Most of the growth in the DC/DC business was derived from
strong order flow from the communications market, which includes
datacommunications and network equipment manufacturers such as Cisco, Nortel,
Lucent Technologies and Newbridge Networks who are among our top customers. On
the AC/DC side, the automatic/semiconductor test equipment market continued to
expand with key customers such as Teradyne rebounding during 1999. We also
experienced solid growth in other key markets such as industrial and
transportation.

    Net sales to OEMs for 1999 were $159.1 million, or 77.5% of net sales, an
increase of $97.3 million or 157.4% over the comparable period in 1998, when net
sales to OEMs represented 60.3% of net sales. Net sales to Cisco represented
16.0% of net sales in 1999. Cisco was the only customer that exceeded 10% of net
sales in 1999. Net sales through distributors for 1999 were $46.3 million, or
22.5% of net sales, an increase of $5.6 million or 13.8% compared to the same
period in 1998, when such net sales represented 39.7% of net sales. The lower
percentage of net sales through distributors in 1999 is primarily due to the
change in the mix of our customer base which, compared to last year, has shifted
more toward OEM customers in the communications market.

    Our recent acquisition of IPD has significantly broadened our customer base
by increasing net sales to key OEMs and adding new OEMs in the communications
market.

                                       24
<PAGE>
    Net sales by markets for the years ended December 31, 1998 and 1999 were:

<TABLE>
<CAPTION>
                                                                1998       1999
                                                              --------   --------
<S>                                                           <C>        <C>
Communications..............................................     21%        49%
Industrial..................................................     27%        18%
Automatic/Semiconductor test equipment......................     19%        11%
Transportation..............................................      4%         7%
Medical equipment...........................................     11%         6%
Computer, Retail and Other..................................     18%         9%
                                                                ---        ---
Total.......................................................    100%       100%
</TABLE>

    The changes in the percentage of our net sales by market are primarily due
to a significantly larger concentration of net sales to the communications and
transportation markets.

    During 1999, demand for our products increased significantly, especially in
the second half of the year. Our combined backlog on December 31, 1999 was
$58.0 million, an increase of 125.0%, compared to backlog of $25.8 million on
December 31, 1998. Pro forma backlog, which assumes IPD's backlog was in place
at December 31, 1998, increased 90.8% at the end of December 1999 as compared to
year-end 1998. For the quarter ended December 31, 1999 we experienced a strong
bookings trend with $62.9 million in new orders taken. Much of this growth comes
from strong demand in the communications market, which is primarily driven by
datacommunications and network equipment manufacturers, as well as increased
demand of our high-power product line, which are typically sold to the
automatic/ semiconductor test equipment market.

    GROSS PROFIT.  Gross profit increased $46.1 million, or 118.1%, to
$85.2 million for 1999 from $39.1 million for 1998. As a percent of net sales,
gross profit increased to 41.5% for 1999 from 38.1% for the same period in 1998.
The increase in gross profit margin primarily resulted from the inventory
write-up related purchase accounting adjustments due to the Melcher acquisition
which negatively impacted the prior year period. Excluding the non-recurring
adjustments related to our acquisitions of IPD in 1999 and Melcher in 1998, our
gross profit margin would have been approximately 41.8% in 1999 and 40.9% in
1998. The improved profit margin in 1999 is primarily due to the increase in net
sales which allowed us to better leverage our fixed manufacturing expenses.

    SELLING EXPENSE.  Selling expense increased $10.2 million, or 86.4%, to
$21.9 million for 1999 from $11.8 million for 1998. As a percent of net sales,
selling expense decreased slightly from 11.5% in 1998 to 10.7% in 1999. The
increase of $10.2 million was primarily due to the additional selling expense
related to Melcher and IPD of $3.9 million and $4.9 million, respectively.
Excluding Melcher and IPD, Power-One's core selling expense increased
$1.4 million primarily due to higher employee costs of $322,000, and increased
freight and travel expense aggregating $693,000, to support the increase in
business growth during 1999.

    GENERAL AND ADMINISTRATIVE EXPENSE.  General and administrative expense
increased $8.7 million, or 104.7%, to $17.0 million for 1999 from $8.3 million
for 1998. As a percent of net sales, general and administrative expense
increased slightly to 8.3% in 1999 from 8.1% in 1998. The increase of
$8.7 million was due to additional administrative expense related to Melcher and
IPD of $1.9 million and $2.5 million, respectively, as well as an increase of
$4.3 million in our core administrative expense. The increase in our core
administrative expense of $4.3 million was primarily due to higher employee
costs of $1.8 million related to an increase in staff, employee performance
bonuses and temporary help; increased depreciation expense of $835,000 primarily
related to the Oracle ERP project and other capital expenditures; higher
professional fees of $521,000; increased insurance expense of $242,000; and
increases in other general operating expenses such as travel, utilities and
office supplies expenses.

                                       25
<PAGE>
    ENGINEERING EXPENSE.  Engineering expense increased $8.2 million, or 131.3%,
to $14.5 million for 1999 from $6.3 million for 1998. The increase of
$8.2 million was primarily due to Melcher's and IPD's additional engineering
expense of $3.0 million and $4.2 million, respectively. In addition, Power-One's
core engineering expenses increased $1.0 million primarily due to a $751,000
increase in employee costs and a $108,000 increase in product development
expenses. As a percent of net sales, engineering expense increased to 7.1% for
1999 from 6.1% for 1998. This increase is directly attributable to our
commitment to make strategic investments in support of our future growth.

    QUALITY ASSURANCE EXPENSE.  Quality assurance expense increased
$1.8 million, or 88.4%, to $3.8 million for 1999 from $2.0 million for 1998. As
a percent of net sales, quality assurance expense decreased slightly from 1.9%
in 1998 to 1.8% in 1999. The increase of $1.8 million was primarily due to
additional quality assurance expense related to Melcher and IPD of $378,000 and
$710,000, respectively, as well as an increase of $687,000 in our core quality
assurance expense primarily related to increased employee costs.

    AMORTIZATION EXPENSE.  The amortization of intangibles increased
$3.6 million, or 136.6%, to $6.2 million for 1999 from $2.6 million for 1998. As
a percent of net sales, amortization of intangibles increased to 3.0% for 1999
from 2.6% for 1998. The increase is attributable to a $1.0 million charge taken
to write-off the unamortized balance of the intangible asset value of a
technology and licensee agreement related to substantially similar product
technology acquired as a result of the IPD acquisition. The balance of the
increase is due to 11 months of amortization of intangibles initially recorded
upon the acquisition of IPD on January 29, 1999 totaling approximately
$1.6 million, as well as an additional $1.1 million of amortization of
intangibles related to the Melcher acquisition.

    IN-PROCESS RESEARCH & DEVELOPMENT.  In connection with the IPD acquisition,
we recorded a one time charge of $3.3 million for purchased in-process
technology that had not reached technological feasibility.

    INCOME FROM OPERATIONS.  As a result of the above factors, income from
operations increased $10.4 million, or 128.1%, to $18.5 million, or 9.0% of net
sales, for 1999 from $8.1 million, or 7.9% of net sales, for 1998. Excluding
non-recurring items totaling approximately $5.1 million in 1999 consisting of
inventory fair market value write-up of $0.8 million, in-process research and
development charge of $3.3 million and write-off of $1.0 million technology and
license agreement, all of which were related to the IPD acquisition, and
$2.9 million in 1998 for the inventory fair market value write-up related to the
Melcher acquisition, income from operations would have been $23.5 million, or
11.5% of net sales, in 1999 and $11.0 million, or 10.7% of net sales, in 1998.

    INTEREST INCOME.  Interest income decreased $0.6 million, or 42.5%, to
$0.8 million for 1999 from $1.4 million for 1998. This decrease was primarily
related to the reduction in short-term, interest bearing financial instruments
as a result of the available cash used for the Melcher acquisition in the third
quarter of 1998. This decrease was partially offset by interest earned on
proceeds from the sale of our stock in September and October 1999 which were
invested in short-term, interest bearing financial instruments.

    INTEREST EXPENSE.  Interest expense increased $2.3 million, or 282.9%, to
$3.1 million for 1999 from $0.8 million for 1998. The increase was primarily due
to advances under our credit facilities to finance the IPD acquisition, as well
as additional investments in facilities and capital equipment to increase our
capacity to support the rapid growth of our business. This increase was
partially offset by the repayment of $54.1 million of outstanding debt under our
credit agreement with Bank of America, N.A. using the proceeds from the sale of
our stock in September and October 1999.

                                       26
<PAGE>
    OTHER INCOME (EXPENSE), NET.  Other income increased $934,000, to $307,000
for 1999, from other expense of $627,000 for 1998, and is primarily due to gains
on foreign currency transactions partly offset by net losses on disposals of
fixed assets.

    INCOME TAXES.  The provision for income taxes increased $4.1 million, to
$6.5 million for 1999, from $2.3 million for 1998. The effective tax rate of
39.1% in 1999 is significantly higher than the 28.9% in 1998. This is primarily
attributable to the $3.3 million charge for in-process research and development
and $1.6 million amortization of goodwill related to the IPD acquisition, both
of which are not deductible for tax purposes.

YEARS ENDED DECEMBER 31, 1998 AND DECEMBER 31, 1997.

    NET SALES.  Net sales increased $9.5 million, or 10.2%, to $102.5 million
for 1998 from $93.1 million for 1997. The increase in net sales resulted
primarily from a $18.8 million contribution from Melcher since the date of
acquisition, as well as strong growth in unit shipments of standard and modified
standard power supplies, particularly in high-range power configurations, during
the first half of 1998. Including Melcher's results, the principal contributors
to the $9.5 million increase in net sales were DC/DC power products, which
contributed $14.1 million in net sales, and low-range power products, which
contributed $4.4 million. These increases were offset by declines in linear and
custom power products of $3.4 million and $3.9 million, respectively, and
decreases in all other product lines of $1.7 million, net. Excluding Melcher,
our net sales decreased $9.4 million, or 10.1%, to $83.7 million in 1998 from
$93.1 million in 1997. This was primarily due to the general slowdown in demand
for products within the electronics industry, as well as domestic inventory
reductions at OEMs, including some of our customers, in the second half of 1998.

    Net sales to OEMs for 1998 were $61.8 million, or 60% of net sales, an
increase of $9.9 million or 19.0% over the comparable period in 1997, when net
sales to OEMs represented 56% of net sales. Net sales through distributors for
1998 were $40.7 million, or 40% of net sales, a decrease of $0.4 million or 1.0%
compared to the same period in 1997, when such net sales represented 44% of net
sales. As a result of the Melcher acquisition, our OEM net sales to the
communications and transportation markets increased $7.1 million and
$3.6 million, respectively.

    Our total backlog on December 31, 1998 was $25.8 million, which is comprised
of Power-One's backlog of $13.4 million and Melcher's backlog of $12.4 million.
Power-One's backlog stood at $32.2 million on December 31, 1997.

    Beginning in the three month period ended June 30, 1998, demand for products
slowed significantly within the electronics industry. This was the result of a
softening trend in capital equipment markets, which in turn has been negatively
influenced by weak demand due to the business recessions in various Asian
economies, as well as an overall slowing in global economic activities. Demand
for our products was further weakened by domestic inventory reduction
initiatives at OEMs and distributors, including some of our customers. The
contribution of Melcher, which sells primarily into the European market, more
than offset the decline in our North American business. We expect that the
Melcher acquisition will continue to have a positive impact on our overall
business growth, particularly in data communications and telecommunications.

    To counter the impact of the soft business climate in 1998, management
pursued action steps to position us for increased growth in 1999. Some of these
initiatives included actively pursuing new business synergies with Melcher in
the areas of sales and cost reductions; aggressively pursuing acquisitions which
culminated in the acquisition of IPD on January 29, 1999; and providing for
additional investment in research and development. Additionally, we made
significant progress to further upgrade our core business systems with the
implementation of a new Oracle ERP system. Although this fully integrated Oracle
ERP system is Year 2000 certified, the key reasons for implementing the new
system are to further enhance our technical infrastructure by providing to
management the tools available in a

                                       27
<PAGE>
new generation of systems and software to speed information retrieval; to
position us for business growth; to facilitate business integration of acquired
companies; and to provide a clearer audit trail for the source of information.

    GROSS PROFIT.  Gross profit increased $1.5 million, or 4.0%, to
$39.1 million for 1998 from $37.6 million for 1997, which is primarily due to
the inclusion of Melcher's gross profit since the date of the acquisition. As a
percent of net sales, gross profit decreased to 38.1% for 1998 from 40.4% for
the same period in 1997. The decline in gross profit margin primarily resulted
from the inventory write-up related purchase accounting adjustments related to
the Melcher acquisition. Excluding the Melcher related inventory fair market
value purchase write-up adjustments, gross profit margin would have been 40.9%
in 1998 and 40.4% in 1997.

    SELLING EXPENSE.  Selling expense increased $3.6 million, or 43.6%, to
$11.8 million for 1998 from $8.2 million for 1997. The increase of $3.6 million
is primarily due to the inclusion of Melcher's selling expense of $3.6 million
since the date of acquisition. Excluding Melcher, selling expense was unchanged
at $8.2 million compared to the prior year. As a percent of net sales, selling
expense increased to 11.5% in 1998 from 8.8% for 1997, which is primarily due to
our decision to maintain our sales resources intact during the business downturn
in the latter portion of 1998, and due to the addition of Melcher which had
proportionately higher selling expense on a stand-alone basis.

    GENERAL AND ADMINISTRATIVE EXPENSE.  General and administrative expense
increased $1.5 million, or 22.6%, to $8.3 million for 1998 from $6.8 million for
1997. As a percent of net sales, general and administrative expense increased to
8.1% in 1998 from 7.3% in 1997. The increase of $1.5 million is primarily due to
higher public company expenses of $268,000, higher travel costs primarily
related to pursuing other acquisitions of $149,000, higher depreciation expense
of $244,000, higher general office expenses of $291,000, other expenses
aggregating $385,000 and the inclusion of Melcher's general and administrative
expenses of $748,000 since the date of acquisition. These increases are
partially offset by decreases in salaries of $270,000 and bad debt expense of
$315,000.

    ENGINEERING EXPENSE.  Engineering expense increased $2.3 million, or 58.9%,
to $6.3 million for 1998 from $3.9 million for 1997. As a percent of net sales,
engineering expense increased to 6.1% for 1998 from 4.2% for 1997. The increase
is primarily due to higher employee costs of $484,000, increased product
development expense of $109,000, and the inclusion of Melcher's engineering
expenses of $1.7 million since the date of acquisition.

    QUALITY ASSURANCE EXPENSE.  Quality assurance expense remained flat at
$2.0 million for both 1998 and 1997. As a percent of net sales, quality
assurance expense decreased to 1.9% for 1998 from 2.2% from 1997. Excluding
Melcher, quality assurance expense decreased $153,000, or 7.5%, to $1.9 million
in 1998 compared to $2.0 million in 1997. This decrease is primarily
attributable to a decrease in salary expense.

    AMORTIZATION EXPENSE.  The amortization of intangibles increased $596,000,
or 29.4%, to $2.6 million for 1998 from $2.0 million for 1997. As a percent of
net sales, amortization of intangibles increased to 2.6% for 1998 from 2.2% for
1997. The increase is directly attributable to four months of amortization of
intangibles initially recorded upon the acquisition of Melcher on August 31,
1998.

    INCOME FROM OPERATIONS.  As a result of the above factors, income from
operations decreased $6.5 million, or 44.6%, to $8.1 million for 1998 from
$14.6 million for 1997. As a percent of net sales, income from operations
decreased to 7.9% for 1998 from 15.7% for 1997. Excluding the charge to cost of
sales of $2.9 million for the Melcher-related inventory fair market value
purchase write-up adjustments, income from operations would have been
$11.0 million in 1998 compared to $14.6 million in 1997.

                                       28
<PAGE>
    INTEREST INCOME.  Interest income increased $1.0 million, or 287.4%, to
$1.4 million for 1998 from $0.4 million for 1997. This increase is primarily due
to the interest income derived from investment of a portion of the net proceeds
from our initial public offering, or IPO, in short-term, interest-bearing
investment-grade financial instruments.

    INTEREST EXPENSE.  Interest expense decreased $2.4 million, or 74.7%, to
$0.8 million for 1998 from $3.2 million for 1997. This decrease is primarily the
result of the repayment of all bank borrowings under our existing bank credit
facility using the net proceeds from our IPO completed in the fourth quarter of
1997.

    OTHER INCOME (EXPENSE), NET.  Other expense increased $609,000, to $627,000
for 1998, from $18,000 for 1997, and is primarily due to foreign currency
translation losses of $455,000 related to Melcher since the date of acquisition
and other expenses aggregating $154,000.

    INCOME TAXES.  The provision for income taxes decreased $1.2 million, to
$2.3 million for 1998, from $3.5 million for 1997. Income taxes as a percent of
net sales decreased to 2.3% in 1998 from 3.8% in 1997. The decrease is due to a
$721,000 reduction in tax provision related to the $7.2 million write-up of
assets to fair value as a result of purchase accounting adjustments made for the
Melcher acquisition. The remainder is attributable to a $122,000 tax credit
related to a pre-tax loss incurred by our U.S. operations in the third quarter
of 1998, as well as a decrease in the overall effective tax rate due to a
relatively lower portion of operating income generated in the second half of
1998, primarily as a result of lower net sales of high-power products.

LIQUIDITY AND CAPITAL RESOURCES

    Our cash and cash equivalents balance increased $52.8 million, or 489.8%
from $10.8 million at December 31, 1998 to $63.6 million at December 31, 1999.
This increase in cash is primarily due to $118.3 million in net proceeds from
our sale of 4,975,000 shares of common stock in September and October 1999.
Prior to the sale of our stock, our primary source of cash, other than cash from
operations, consisted of borrowings from credit facilities of $55.8 million. The
primary uses of cash in 1999 consisted of $67.0 million for repayment of credit
facility borrowings, $28.3 million for the purchase of IPD and $1.2 million of
related transaction costs, and $27.1 million for the acquisition of property and
equipment.

    Cash provided by operating activities in 1999 was $0.5 million and was
primarily attributable to cash earnings from operations of $27.9 million (net
income plus depreciation, amortization, in-process research and development
charge and loss on disposal of fixed assets) offset by $27.4 million used for
working capital. The $27.4 million use of working capital was primarily due to
an increase in accounts receivable and inventories of $18.9 million and
$18.5 million, respectively, offset by an increase in accounts payable and
accrued expense of $3.8 million and $6.3 million, respectively.

    The $27.1 million to acquire property and equipment included approximately
$5.6 million for hardware, software and implementation support related to our
Oracle ERP system conversion, $4.3 million to purchase IPD's manufacturing
facility, $5.9 million to acquire surface-mount technology equipment, and the
balance for additional property, plant and capital equipment expenditures
consistent to support our growth plans.

    In 1999 we restructured our credit agreement to provide for more flexibility
and to increase our credit limits. We now have a $65 million revolving line of
credit, which bears interest on amounts outstanding payable quarterly based on
our leverage ratio and one of the following rates as selected by us: LIBOR plus
1.25% to 2.50%, or the bank's base rate plus 0% to 1.25%. The credit agreement
(a) provides for restrictions on additional borrowings, leases and capital
expenditures; (b) prohibits us, without prior approval, from paying dividends,
liquidating, merging, consolidating or selling our assets or business; and
(c) requires us to maintain a specified net worth, minimum working capital and
certain

                                       29
<PAGE>
ratios of current liabilities and total debt to net worth. At December 31, 1999,
amounts outstanding under our line of credit were $2.5 million all of which was
borrowed by Melcher. Borrowings are collateralized by substantially all of our
assets.

    As a result of the Melcher acquisition, we have various credit facilities
with banks in Switzerland and Germany which can be drawn upon in the form of
term loans. The aggregate credit limit for all such credit facilities is
approximately $13.2 million. Melcher's credit facilities in Switzerland bear
interest on amounts outstanding payable at various time intervals and market
rates based on Swiss LIBOR plus a margin ranging from 1.25% to 2.00%. Some of
Melcher's credit agreements require Melcher to maintain certain financial
covenants and to provide certain financial reports to the lenders, none of which
materially restricts Melcher. At December 31, 1999, short-term (including
current portion of long-term debt) and long-term amounts outstanding under
Melcher's credit facilities were $5.5 million and $3.1 million, respectively.

    At December 31, 1999, short-term (including current portion of long-term
debt) and long-term amounts outstanding under all credit facilities with banks
were $8.0 million and $3.1 million, respectively.

    We currently anticipate that our total capital expenditures for 2000 will be
approximately $23.1 million, of which approximately $1.9 million represents
costs related to the implementation of our Oracle ERP system at P-E, as well as
continued enhancements and upgrades at our Camarillo and Mexico locations,
approximately $7.3 million represents investments in surface-mount technology
automation and approximately $9.6 million represents investments in
manufacturing improvements. The amount of these anticipated capital expenditures
will frequently change during the year based on changes in expected revenues,
our financial condition and general economic conditions.

    In addition, we are paying $13 million to IPD's former shareholders in the
first half of 2000, since IPD attained certain defined operational performance
objections in the 13 month period ending March 31, 2000.

    Based on current plans and business conditions, we believe our existing
working capital and borrowing capacity, coupled with the funds generated from
our operations, will be sufficient to fund our anticipated working capital,
capital expenditures and debt payment requirements for the next twelve months.
However, if we make a large acquisition, it may be necessary to raise debt or
equity in the private or public securities markets.

ITEM 7A--QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

    Market risks relating to our operations result primarily from changes in
interest rates and changes in foreign currency exchange rates. Our exposure to
interest rate risk results from the financial debt instruments which arise from
transactions entered into during the normal course of business. We may enter
into derivative financial instrument transactions, such as swaps, in order to
manage or reduce our exposure to interest rate changes related to our portfolio
of borrowings. Under no circumstances do we enter into derivative or other
financial instrument transactions for speculative purposes.

    DEBT.  We are exposed to cash flow risk due to changes in market interest
rates related to our outstanding debt. For example, in Europe our credit
facilities bear interest on borrowings outstanding at various time intervals and
market rates based on Swiss LIBOR, an offshore rate that is similar to the
London Interbank Offered Rate ("LIBOR") plus a margin ranging from 1.25% to
2.00%. Our principal risk with respect to our long-term debt is changes in these
market rates.

    The table below presents principal cash flows and related weighted average
interest rates for our credit facilities and Swiss franc denominated long-term
debt obligations at December 31, 1999 by expected maturity dates. The
information is presented in U.S. dollar equivalents, our reporting currency, and
parenthetically in Swiss francs, where applicable. Additionally, the U.S. dollar
equivalent

                                       30
<PAGE>
carrying value of Swiss franc denominated debt is sensitive to foreign currency
exchange rates. However, a 10% change in the U.S. dollar exchange rate against
the Swiss franc would not have a significant effect on our future earnings.

<TABLE>
<CAPTION>
                                                                EXPECTED MATURITY DATE
                                            ---------------------------------------------------------------
                                                                                                    THERE-                 FAIR
                                              2000       2001       2002       2003       2004      AFTER      TOTAL      VALUE
                                            --------   --------   --------   --------   --------   --------   --------   --------
                                                                (AMOUNTS IN THOUSANDS EXCEPT FOR PERCENTAGES)
<S>                                         <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>
Credit facilities:
  Variable Rate ($US).....................      --                                                                --         --
    Average Interest Rate.................
  Fixed Rate (CHF 6,500)..................   4,079                                                             4,079      4,079
    Average Interest Rate.................    3.5%                                                              3.5%
Long-term Debt:
  Fixed Rate (CHF 11,250).................   3,922      2,200        938          --         --        --      7,060      7,060
    Average Interest Rate.................    3.9%       4.0%       5.0%                                        4.1%
</TABLE>

    FOREIGN CURRENCY.  A significant portion of our business operations are
conducted in various countries in Europe. As a result, we have a certain degree
of market risk with respect to our cash flows due to changes in foreign currency
exchange rates when transactions are denominated in currencies other than our
functional currency. Historically, we have not actively engaged in substantial
exchange rate hedging activities, and at December 31, 1999, we had not entered
into any significant foreign exchange contracts.

ITEM 8--FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

    The financial statements and supplementary data listed in Item 14(a)(1)
hereof are incorporated herein by reference and are filed as part of this Annual
Report on Form 10-K beginning on page F-1.

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

    None.

ITEM 10--DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

    The information relating to directors required by this item will be
contained under the captions "Board of Directors" and "Election of Directors" in
our definitive proxy statement for the Annual Meeting of Stockholders to be
filed with the Securities and Exchange Commission not later than 120 days after
the close of the fiscal year ended December 31, 1999 (the "Proxy Statement"),
and is incorporated herein by reference.

    The information relating to executive officers required by this item is
included in Part I under the caption "Executive Officers."

    The information required by Item 405 will be contained under the caption
"Section 16(a) Beneficial Ownership Reporting Compliance" in our Proxy Statement
and is incorporated herein by reference.

ITEM 11--EXECUTIVE COMPENSATION

    The information called for by this item will be contained under the caption
"Executive Compensation" in our Proxy Statement and is incorporated herein by
reference.

                                       31
<PAGE>
ITEM 12--SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

    The information called for by this item will be contained under the caption
"Security Ownership of Certain Beneficial Owners and Management" in our Proxy
Statement and is incorporated herein by reference.

ITEM 13--CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

    The information called for by this item will be contained under the caption
"Certain Relationships and Related Transactions" in our Proxy Statement and is
incorporated herein by reference.

ITEM 14--EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8K

(A)(1) FINANCIAL STATEMENTS

    The following financial statements are filed as a part of this Report:

<TABLE>
<CAPTION>
POWER-ONE, INC.                                                 PAGE
---------------                                               --------
<S>                                                           <C>
Independent Auditors' Report................................     F-2
Consolidated Balance Sheets.................................     F-3
Consolidated Statements of Operations.......................     F-4
Consolidated Statements of Comprehensive Income (Loss)......     F-5
Consolidated Statements of Redeemable Preferred Stock and
  Stockholders' Equity......................................     F-6
Consolidated Statements of Cash Flows.......................     F-7
Notes to Consolidated Financial Statements..................     F-9
Quarterly Financial Data for the 1998 and 1999 Quarters
  (unaudited)...............................................    F-25
</TABLE>

(A)(2) SCHEDULES

    The following financial statement schedule is filed as a part of this
Report.

<TABLE>
<CAPTION>
POWER-ONE, INC.                                                 PAGE
---------------                                               --------
<S>                                                           <C>
Schedule II: Valuation and Qualifying Accounts..............    S-1
</TABLE>

(B) REPORTS ON FORM 8-K

    We filed four Current Reports on Form 8-K during the year ended
December 31, 1999.

    A Current Report on Form 8-K dated February 9, 1999, was filed to report
under Item 2 the January 29, 1999 closing of our acquisition of all of the
issued and outstanding capital stock of IPD for $32 million, including certain
capitalized lease obligations and other indebtedness.

    A Current Report on Form 8-K/A dated April 14, 1999, was filed to provide
under Item 7 financial statements and the pro forma financial information for
the IPD acquisition.

    A Current Report on Form 8-K/A dated August 17, 1999, was filed to provide
under Item 7 certain updates related to Melcher and non-recurring items to the
pro forma financial information for the IPD acquisition.

    A Current Report on Form 8-K/A dated August 19, 1999, was filed to provide
under Item 7 certain updates related to cost of goods sold and operating
expenses to the pro forma financial information for the IPD acquisition.

                                       32
<PAGE>
(C) EXHIBITS

    The exhibits listed below are filed as part of, or incorporated by
reference, into this Report.

<TABLE>
<CAPTION>
           DESCRIPTION
           -----------
<C>        <S>
  2.1(a)   Stock and Loan Purchase Agreement effective August 31, 1998
           between SBC Equity Partners Ltd., Defi Holding SA,
           Elektrowatt AG, Dr. Hans Grueter, Dr. Martin Schnider,
           Johann Milavec and Power-One, Inc. regarding the sale and
           purchase of shares in and certain convertible loans to
           Melcher Holding AG

  2.2(b)   Agreement and Plan of Merger dated as of January 7, 1999, by
           and among Power-One, Inc., Power-One Acquisition
           Corporation, and International Power Devices, Inc.

  3.1(c)   Restated Certificate of Incorporation of the Company

  3.2(c)   Amended and Restated Bylaws of the Company

  4.1(c)   Specimen Common Stock Certificate

 10.1(c)   Form of Indemnification Agreement between the Company and
           its directors, executive officers and certain other officers

 10.2(d)   Amended and Restated 1996 Stock Incentive Plan, dated
           May 4, 1999

 10.3(c)   Management Bonus Plan

 10.4(c)   P-E Tax Exemption Grant dated January 4, 1995

 10.5(e)   Employee Stock Purchase Plan

 10.6(f)   Second Amended and Restated Credit Agreement among the
           Company, NationsBank of Texas, N.A. and certain lenders,
           dated August 12, 1999

 10.7      First Amendment to Second Amended and Restated Credit
           Agreement

 10.8      Letter of Agreement between the Company and the Chief
           Operating Officer of Power-One, Inc.

   21      List of Subsidiaries

   23      Independent Auditors' Consent

   24      Power of Attorney (Contained on Signature Page)

   27      Financial Data Schedule
</TABLE>

------------------------

(a) Previously filed as an exhibit to Form 8-K dated August 31, 1998 and filed
    on September 15, 1998 (File No. 0-29454)

(b) Previously filed as an exhibit to Form 8-K dated January 29, 1999 and filed
    on February 9, 1999 (File No. 0-29454)

(c) Previously filed as an exhibit to the Registration Statement on Form S-1 of
    Power-One, Inc. (File No. 333-32889)

(d) Previously filed as an exhibit to the Registration Statement on form S-8 of
    Power-One, Inc. (File No. 333-87879)

(e) Previously filed as an exhibit to the Registration Statement on Form S-8 of
    Power-One, Inc. (File No. 333-42079)

(f) Previously filed as an exhibit to Amendment No. 1 to the Registration
    Statement on Form S-3 of Power-One, Inc. (File No. 333-84285)

                                       33
<PAGE>
                                   SIGNATURES

    Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of
1934, as amended, the registrant has duly caused this Annual Report on Form 10-K
to be signed on its behalf by the undersigned, thereunto duly authorized.

<TABLE>
<S>                                               <C>  <C>
                                                  POWER-ONE, INC.

Date: April 3, 2000                               By:               /s/ STEVEN J. GOLDMAN
                                                       ----------------------------------------------
                                                                      Steven J. Goldman
                                                          CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE
                                                                           OFFICER
</TABLE>

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

    We the undersigned directors and officers of Power-One, Inc. hereby
constitute and appoint Steven J. Goldman and Eddie K. Schnopp, or any of them,
our true and lawful attorneys and agents, to do any and all acts and things in
our name and behalf in our capacities as directors and officers and to execute
any and all instruments for us and in our names in the capacities indicated
below, that said attorneys and agents, or either of them, may deem necessary or
advisable to enable said corporation to comply with the Securities and Exchange
Act of 1934, as amended, any rules, regulations, and requirements of the SEC, in
connection with this Report, including specifically, but not limited to, power
and authority to sign for us or any of us in our names and in the capacities
indicated below, any and all amendments and supplements to this Report, and we
hereby ratify and confirm all that the said attorneys and agents, or any of
them, shall do or cause to be done by virtue hereof.

<TABLE>
<CAPTION>
                   SIGNATURE                                     TITLE                      DATE
                   ---------                                     -----                      ----
<C>                                               <S>                                  <C>
             /s/ STEVEN J. GOLDMAN                Chairman of the Board and Chief
     --------------------------------------         Executive Officer (Principal       April 3, 2000
              (Steven J. Goldman)                   Executive Officer)

                                                  Sr. Vice President, Finance, Chief
              /s/ EDDIE K. SCHNOPP                  Financial Officer and Secretary
     --------------------------------------         (Principal Financial and           April 3, 2000
               (Eddie K. Schnopp)                   Accounting Officer)

              /s/ JON E. M. JACOBY
     --------------------------------------       Director                             April 3, 2000
               (Jon E. M. Jacoby)

           /s/ DR. HANSPETER BRANDLI
     --------------------------------------       Director                             April 3, 2000
            (Dr. Hanspeter Brandli)

                /s/ JAY WALTERS
     --------------------------------------       Director                             April 3, 2000
                 (Jay Walters)
</TABLE>

                                       34
<PAGE>
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
                                POWER-ONE, INC.

<TABLE>
<CAPTION>
                                                                PAGE
                                                              --------
<S>                                                           <C>
Independent Auditors' Report................................     F-2

Consolidated Balance Sheets.................................     F-3

Consolidated Statements of Operations.......................     F-4

Consolidated Statements of Comprehensive Income (Loss)......     F-5

Consolidated Statements of Redeemable Preferred Stock and
  Stockholders' Equity......................................     F-6

Consolidated Statements of Cash Flows.......................     F-7

Notes to Consolidated Financial Statements..................     F-9

Quarterly Financial Data for the 1998 and 1999 Quarters
  (unaudited)...............................................    F-26
</TABLE>

                                      F-1
<PAGE>
                          INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
  Power-One, Inc.:

    We have audited the accompanying consolidated balance sheets of
Power-One, Inc. and its subsidiaries (the "Company") as of December 31, 1998 and
1999 and the related consolidated statements of operations, comprehensive
income, redeemable preferred stock and stockholders' equity, and of cash flows
for each of the three years in the period ended December 31, 1999. Our audits
also included the consolidated financial statement schedule listed at Item 14.
These financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial statement schedule based on
our audits.

    We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audits 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, such consolidated financial statements present fairly, in
all material respects, the consolidated financial position of the Company as of
December 31, 1998 and 1999, and the consolidated results of operations and cash
flows for each of the three years in the period ended December 31, 1999 in
conformity with accounting principles generally accepted in the United States of
America. Also, in our opinion, such financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly in all material respects the information set forth
therein.

Deloitte & Touche LLP
Los Angeles, California
February 18, 2000, except for Note 16, as to which the date is March 31, 2000

                                      F-2
<PAGE>
                                POWER-ONE, INC.

                          CONSOLIDATED BALANCE SHEETS

                (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                              -------------------
                                                                1998       1999
                                                              --------   --------
<S>                                                           <C>        <C>
                                     ASSETS
CURRENT ASSETS:
  Cash and cash equivalents.................................  $ 10,781   $ 63,583
  Accounts receivable:
    Trade, less allowance for doubtful accounts:
      $1,402--1998; $1,797--1999............................    17,865     40,569
    Other...................................................     2,184      1,914
  Inventories...............................................    32,396     55,440
  Deferred income tax asset--current........................     1,845      3,094
  Prepaid expenses and other current assets.................     1,366      1,773
                                                              --------   --------
      Total current assets..................................    66,437    166,373
PROPERTY AND EQUIPMENT, net.................................    34,608     54,359
INTANGIBLE ASSETS, net......................................    51,019     59,217
OTHER ASSETS................................................     1,915      3,084
                                                              --------   --------
TOTAL.......................................................  $153,979   $283,033
                                                              ========   ========

                      LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
  Bank credit facilities....................................  $ 14,680   $  4,079
  Current portion of long-term debt.........................     2,912      3,922
  Current portion of long-term capital leases...............       114        877
  Bank overdraft............................................                5,804
  Accounts payable..........................................     6,273     10,987
  Accrued payroll and related expenses......................     1,297      2,282
  Other accrued expenses....................................     7,582     15,359
  Deferred income tax liability--current....................     1,309      1,216
                                                              --------   --------
      Total current liabilities.............................    34,167     44,526
                                                              --------   --------
LONG-TERM DEBT, less current portion........................     7,645      3,138
LONG-TERM CAPITAL LEASES, less current portion..............       206        817
DEFERRED INCOME TAX LIABILITY, non-current..................     3,585      2,757
OTHER LIABILITIES...........................................       114        112
COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
  Common stock, par value $0.001; 60,000,000 shares
    authorized; 17,093,227 shares issued and outstanding at
    December 31, 1998 and 22,137,176 issued and outstanding
    at December 31, 1999....................................        17         22
  Additional paid-in capital................................    92,368    211,390
  Accumulated other comprehensive income (loss).............     2,177     (3,476)
  Retained earnings.........................................    13,700     23,747
                                                              --------   --------
      Total stockholders' equity............................   108,262    231,683
                                                              --------   --------
TOTAL.......................................................  $153,979   $283,033
                                                              ========   ========
</TABLE>

                See notes to consolidated financial statements.

                                      F-3
<PAGE>
                                POWER-ONE, INC.

                     CONSOLIDATED STATEMENTS OF OPERATIONS

                     (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                        YEAR ENDED
                                                                       DECEMBER 31,
                                                              ------------------------------
                                                                1997       1998       1999
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
NET SALES...................................................  $93,068    $102,519   $205,402

COST OF GOODS SOLD..........................................   55,481      63,446    120,196
                                                              -------    --------   --------

GROSS PROFIT................................................   37,587      39,073     85,206
                                                              -------    --------   --------

EXPENSES:
  Selling...................................................    8,199      11,771     21,946
  General and administrative................................    6,778       8,311     17,012
  Engineering...............................................    3,937       6,257     14,473
  Quality assurance.........................................    2,027       2,007      3,781
  Amortization of intangible assets.........................    2,029       2,625      6,212
  In process research and development.......................                           3,300
                                                              -------    --------   --------
    Total expenses..........................................   22,970      30,971     66,724
                                                              -------    --------   --------

INCOME FROM OPERATIONS......................................   14,617       8,102     18,482
                                                              -------    --------   --------

OTHER INCOME (EXPENSE):
  Interest income...........................................      358       1,387        798
  Interest expense..........................................   (3,181)       (806)    (3,086)
  Other income (expense)....................................      (18)       (627)       307
                                                              -------    --------   --------
    Total other expense.....................................   (2,841)        (46)    (1,981)
                                                              -------    --------   --------

INCOME BEFORE INCOME TAXES..................................   11,776       8,056     16,501

INCOME TAXES................................................    3,542       2,326      6,454
                                                              -------    --------   --------

NET INCOME..................................................    8,234       5,730     10,047

PREFERRED STOCK ACCRETION AND DIVIDENDS.....................    1,514          --         --
                                                              -------    --------   --------

NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS..............  $ 6,720    $  5,730   $ 10,047
                                                              =======    ========   ========

BASIC EARNINGS PER COMMON SHARE.............................  $  0.58    $   0.34   $   0.55
                                                              =======    ========   ========

DILUTED EARNINGS PER COMMON SHARE...........................  $  0.56    $   0.33   $   0.53
                                                              =======    ========   ========

BASIC SHARES OUTSTANDING....................................   11,659      17,073     18,387
                                                              =======    ========   ========

DILUTED SHARES OUTSTANDING..................................   11,934      17,325     19,013
                                                              =======    ========   ========
</TABLE>

                See notes to consolidated financial statements.

                                      F-4
<PAGE>
                                POWER-ONE, INC.

             CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                        YEAR ENDED
                                                                       DECEMBER 31,
                                                              ------------------------------
                                                                1997       1998       1999
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
NET INCOME..................................................   $8,234     $5,730    $10,047

OTHER COMPREHENSIVE INCOME (LOSS)
  Foreign currency translation adjustment...................       --      2,177     (5,653)
                                                               ------     ------    -------

COMPREHENSIVE INCOME........................................   $8,234     $7,907    $ 4,394
                                                               ======     ======    =======
</TABLE>

                See notes to consolidated financial statements.

                                      F-5
<PAGE>
                                POWER-ONE, INC.

             CONSOLIDATED STATEMENTS OF REDEEMABLE PREFERRED STOCK
                            AND STOCKHOLDERS' EQUITY

                             (DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
                                      REDEEMABLE                                                  NOTES        ACCUMULATED
                                   PREFERRED STOCK            COMMON STOCK        ADDITIONAL    RECEIVABLE        OTHER
                                ----------------------   ----------------------    PAID-IN         FROM       COMPREHENSIVE
                                  SHARES       AMOUNT      SHARES       AMOUNT     CAPITAL     STOCKHOLDERS   INCOME/(LOSS)
                                -----------   --------   -----------   --------   ----------   ------------   -------------
<S>                             <C>           <C>        <C>           <C>        <C>          <C>            <C>
BALANCE, DECEMBER 31, 1996....   15,153,698   $16,287     10,000,000     $10       $     90       $ (225)        $    --
Interest on notes receivable
  from stockholders...........                                                                       (15)
Accrual of preferred stock
  dividend....................                  1,258
Accretion of preferred stock
  to redemption value.........                    256
Stock option compensation
  expense.....................                                                           16
Conversion of other
  liabilities to common
  stock.......................                                55,408                    776
Conversion of preferred stock
  to common stock.............  (14,950,848)  (17,559)     1,254,177       1         17,558
Repurchase of preferred
  stock.......................     (202,850)     (242)
Payment on notes receivable
  from stockholders...........                                                                       240
Stock issuance to public......                             5,750,000       6         80,494
Stock issuance costs..........                                                       (6,707)
Net income....................
                                -----------   -------    -----------     ---       --------       ------         -------

BALANCE, DECEMBER 31, 1997....      --          --        17,059,585      17         92,227       --                  --
Stock option compensation
  expense.....................                                                           27
Issuance of common stock under
  stock option and purchase
  plans.......................                                33,642                     27
Income tax benefit for
  employee stock option
  transactions................                                                           87
Cumulative translation
  adjustment..................                                                                                     2,177
Net income....................
                                -----------   -------    -----------     ---       --------       ------         -------

BALANCE, DECEMBER 31, 1998....      --          --        17,093,227      17         92,368       --               2,177
Stock option compensation
  expense.....................                                                           27
Issuance of common stock under
  stock option and purchase
  plans.......................                                68,949                    464
Income tax benefit for
  employee stock option
  transactions................                                                          207
Stock issuance to public......                             4,975,000       5        124,370
Stock issuance costs..........                                                       (6,046)
Cumulative translation
  adjustment..................                                                                                    (5,653)
Net income....................
                                -----------   -------    -----------     ---       --------       ------         -------

BALANCE, DECEMBER 31, 1999....      --        $ --        22,137,176     $22       $211,390       $--            $(3,476)
                                ===========   =======    ===========     ===       ========       ======         =======

<CAPTION>

                                RETAINED
                                EARNINGS    TOTAL
                                --------   --------
<S>                             <C>        <C>
BALANCE, DECEMBER 31, 1996....  $ 1,250    $  1,125
Interest on notes receivable
  from stockholders...........                  (15)
Accrual of preferred stock
  dividend....................   (1,258)     (1,258)
Accretion of preferred stock
  to redemption value.........     (256)       (256)
Stock option compensation
  expense.....................                   16
Conversion of other
  liabilities to common
  stock.......................                  776
Conversion of preferred stock
  to common stock.............               17,559
Repurchase of preferred
  stock.......................
Payment on notes receivable
  from stockholders...........                  240
Stock issuance to public......               80,500
Stock issuance costs..........               (6,707)
Net income....................    8,234       8,234
                                -------    --------
BALANCE, DECEMBER 31, 1997....    7,970     100,214
Stock option compensation
  expense.....................                   27
Issuance of common stock under
  stock option and purchase
  plans.......................                   27
Income tax benefit for
  employee stock option
  transactions................                   87
Cumulative translation
  adjustment..................                2,177
Net income....................    5,730       5,730
                                -------    --------
BALANCE, DECEMBER 31, 1998....   13,700     108,262
Stock option compensation
  expense.....................                   27
Issuance of common stock under
  stock option and purchase
  plans.......................                  464
Income tax benefit for
  employee stock option
  transactions................                  207
Stock issuance to public......              124,375
Stock issuance costs..........               (6,046)
Cumulative translation
  adjustment..................               (5,653)
Net income....................   10,047      10,047
                                -------    --------
BALANCE, DECEMBER 31, 1999....  $23,747    $231,683
                                =======    ========
</TABLE>

                See notes to consolidated financial statements.

                                      F-6
<PAGE>
                                POWER-ONE, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

                 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                 YEAR ENDED DECEMBER 31,
                                                              ------------------------------
                                                                1997       1998       1999
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income................................................  $ 8,234    $  5,730   $ 10,047
  Adjustments to reconcile net income to net cash provided
    by operating activities:
    Depreciation and amortization...........................    4,216       6,337     14,314
    Purchased in process research and development...........                           3,300
    Net loss on disposal of property and equipment..........                             283
    Deferred income taxes...................................    2,289      (2,132)      (464)
  Changes in operating assets and liabilities:
    Accounts receivable, net................................   (2,808)      4,161    (18,933)
    Inventories.............................................   (3,529)      7,263    (18,459)
    Refundable income taxes.................................   (2,382)      2,411        426
    Prepaid expenses and other current assets...............      (87)        214       (307)
    Accounts payable........................................    1,573        (230)     3,813
    Accrued expenses........................................      516      (1,916)     6,310
    Other liabilities.......................................      459          (2)       173
                                                              -------    --------   --------

      Net cash provided by operating activities.............    8,481      21,836        503
                                                              -------    --------   --------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Acquisition of property and equipment.....................   (5,185)    (11,569)   (27,131)
  Proceeds from sale of property and equipment..............                             112
  Payments for purchased technology.........................                 (326)
  Other assets..............................................     (147)       (360)    (1,241)
  Investment in Melcher, net of cash acquired...............              (40,699)
  Investment in IPD, net of cash acquired...................                         (28,739)
                                                              -------    --------   --------

    Net cash used in investing activities...................   (5,332)    (52,954)   (56,999)
                                                              -------    --------   --------
</TABLE>

                See notes to consolidated financial statements.

                                      F-7
<PAGE>
                                POWER-ONE, INC.

               CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

                 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                 YEAR ENDED DECEMBER 31,
                                                              ------------------------------
                                                                1997       1998       1999
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from borrowings on bank credit facilities........  $          $10,000    $ 55,806
  Repayments of borrowings on bank credit facilities........                         (67,011)
  Repayments of note payable to bank........................   (10,400)
  Bank overdraft............................................      (656)                5,804
  Proceeds from borrowings on long-term debt................               2,051         499
  Repayments of long-term debt..............................   (29,929)   (2,901)     (3,492)
  Principal payments under capital lease obligations........                            (912)
  Sale and issuance of common stock--net....................    73,793       141     119,026
  Proceeds from notes receivable from stockholders..........       225
  Repurchase of preferred stock.............................      (242)
  Payment of other liabilities..............................    (5,606)
                                                              --------   -------    --------
    Net cash provided by financing activities...............    27,185     9,291     109,720
                                                              --------   -------    --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH
  EQUIVALENTS...............................................                 590        (422)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............    30,334   (21,237)     52,802
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD..............     1,684    32,018      10,781
                                                              --------   -------    --------
CASH AND CASH EQUIVALENTS, END OF PERIOD....................  $ 32,018   $10,781    $ 63,583
                                                              ========   =======    ========
SUPPLEMENTAL CASH FLOW INFORMATION:
  Cash paid for:
    Interest................................................  $  3,181   $   592    $  2,841
    Income taxes............................................  $  4,340   $ 2,968    $  3,508
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES:
  On October 6, 1997, the Company converted 14,950,848
    shares of redeemable preferred stock to 1,254,177 shares
    of common stock at the initial public offering price of
    $14 per share, a value of $17,559.
  On October 6, 1997, the Company issued 55,408 shares of
    common stock to extinguish $776 in other liabilities.
  On August 31, 1998, the Company purchased all of the
    capital stock of Melcher for $43.4 million (see Note 3).
  In conjunction with the acquisition, liabilities were
    assumed as follows:
    Fair value of tangible assets acquired..................  $ 45,159
    Fair value of goodwill and other identifiable intangible
      assets................................................    25,210
    Cash paid for capital stock.............................   (43,421)
                                                              --------
    Liabilities assumed.....................................  $ 26,948
                                                              ========
  On January 29, 1999, the Company purchased all of the
    capital stock of International Power Devices, Inc.
    ("IPD") for $29.5 million (See Note 3).
  In conjunction with the acquisition, liabilities were
    assumed as follows:
    Fair value of tangible assets acquired..................  $ 21,248
    Fair value of goodwill and other identifiable intangible
      assets................................................    17,454
    Cash paid for capital stock.............................   (29,500)
                                                              --------
    Liabilities assumed.....................................  $  9,202
                                                              ========
  A capital lease obligation of $230 was incurred in the
    first quarter of 1999 when the Company entered into a
    lease for new equipment.
</TABLE>

                See notes to consolidated financial statements.

                                      F-8
<PAGE>
                                POWER-ONE, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999

1. GENERAL INFORMATION

    The accompanying consolidated financial statements of Power-One, Inc. (the
"Company") reflect the consolidated results of its operations for the years
ended December 31, 1997, 1998 and 1999 and include the accounts of
Power-One, Inc. ("Power-One"), located in Camarillo, California, and its wholly
owned subsidiaries, Power-Electronics, Inc. ("P-E") in Puerto Rico and its
Division located in the Dominican Republic, Poder Uno de Mexico, S.A. de C.V.
("Poder Uno"), a company located in Mexico under the MAQUILADORA program,
Melcher Holding AG ("Melcher"), a company located in Uster, Switzerland, and
International Power Devices, Inc., or ("IPD"), a company located in Boston,
Massachusetts.

    Substantially all of the Company's products are manufactured in the
Dominican Republic, Mexico, Switzerland, Slovakia and Massachusetts. These
operations represent captive manufacturing facilities of the Company. The
Company's reporting period coincides with the 52- or 53-week period ending on
the Sunday closest to December 31 and its fiscal quarters are the 13- or 14-
week periods ending on the Sunday nearest to March 31, June 30, September 30 and
December 31. The years ended December 31, 1997 and 1998 represent 52-week years.
The year ended December 31, 1999 represents a 53-week year. For simplicity of
presentation, the Company has described year-ends presented as of December 31.

    ORGANIZATION--Power-One, Inc., formerly Power-One, LLC, converted from a
limited liability company to a C-corporation on January 29, 1996. To effect the
conversion, the Company formed a new corporation and transferred all of the
assets and liabilities into the newly formed entity. The new corporation,
Power-One, Inc., simultaneously issued 10,000,000 shares of common stock, with a
par value of $0.001 per share, and 15,153,698 shares of Series A redeemable
preferred stock in exchange for each existing member's respective percentage
ownership interest in Power-One LLC. The exchange has been recorded at the
Company's historical carrying values on the date of conversion (see Note 10).

    OPERATIONS--The Company operates primarily in one industry segment which
includes the design, development and manufacture of AC/DC and DC/DC power
supplies for the electronics equipment industry. The Company sells its products
and grants credit to customers in this industry, primarily in the United States
and Europe. Net sales to the Company's largest customers amounted to 15%, 12%
and 11% each to three customers in 1997, 13% to a single customer in 1998 and
16% to a single customer in 1999. At December 31, 1998 and 1999, no single
customer represented greater than 10% of the consolidated trade accounts
receivable balance.

2. SIGNIFICANT ACCOUNTING POLICIES

    PRINCIPLES OF CONSOLIDATION--The accompanying financial statements include
the consolidated accounts of the Company and its wholly owned subsidiaries. The
majority of P-E's and all of Poder Uno's sales are to Power-One. There were
intercompany sales between Melcher, IPD and Power-One in 1999. There were no
significant intercompany sales between Melcher and Power-One in 1998. All
intercompany accounts and transactions have been eliminated in the accompanying
financial statements.

    CASH AND CASH EQUIVALENTS--The Company considers all highly liquid
instruments with an original maturity of three months or less to be cash
equivalents.

    INVENTORIES--Inventories are stated at the lower of cost (first-in,
first-out method) or market.

                                      F-9
<PAGE>
                                POWER-ONE, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
    PROPERTY AND EQUIPMENT--Property and equipment are recorded at cost.
Provision for depreciation has been made based upon the estimated useful lives
of the assets, which range from three to twenty years, using principally the
double declining balance and straight-line methods. Provision for amortization
of leasehold improvements is made based upon the estimated lives of the assets
or terms of the leases, whichever is shorter.

    INTANGIBLE ASSETS--Intangible assets include cost in excess of net assets
acquired in connection with the acquisition of the Company in 1995, of Melcher
in 1998 and of IPD in 1999 (see Note 3) which have been allocated among certain
intangible items determined by management to have value, such as the company
name, distribution network and product lines. Provision for amortization has
been made based upon the estimated useful lives of the intangible asset
categories, which range from five to 25 years, using the straight-line method.

    Intangible assets at December 31, 1998 also included purchased technology
related to a technology and license agreement (the "Agreement") with a company
entered on April 2, 1996. The Agreement called for total cash payments of
$1,500,000 over approximately two years in return for exclusive rights to
specified technical information. The obligation and asset were recorded at
present value using an implicit interest rate of 8.5%. The asset was being
amortized over the 10 year term of the Agreement using the straight-line method.
Since the technology acquired as a result of the Agreement is substantially
similar to the product lines acquired as a result of the IPD acquisition, the
Company recorded a charge of approximately $1.0 million, in 1999, for the
unamortized balance of the intangible asset value related to the Agreement.
Accumulated amortization for the license agreement was $384,000 at December 31,
1998.

    Intangible assets consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                               DECEMBER 31,
                                                            -------------------
                                                              1998       1999
                                                            --------   --------
<S>                                                         <C>        <C>
Goodwill and trade name...................................  $39,121    $40,093
Distribution network......................................    5,207      5,207
Sales force...............................................      790        681
Product technology........................................   11,632     19,500
Assembled workforce.......................................       --        800
Customer relationships....................................       --      4,700
License agreement.........................................    1,396         --
                                                            -------    -------
                                                             58,146     70,981
Less accumulated amortization.............................    7,127     11,764
                                                            -------    -------
                                                            $51,019    $59,217
                                                            =======    =======
</TABLE>

    IMPAIRMENT OF LONG-LIVED ASSETS--The Company evaluates long-lived assets for
impairment whenever events or changes in circumstances indicate that the
carrying value of an asset may not be recoverable. If the estimated future cash
flows (undiscounted and without interest charges) from the use of an asset are
less than the carrying value, a write-down would be recorded to reduce the
related asset to its estimated fair value.

                                      F-10
<PAGE>
                                POWER-ONE, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
    INCOME TAXES--Until January 29, 1996, Power-One, LLC was a limited liability
company, and accordingly, the taxable income or loss until that date was
allocated to members in accordance with their respective percentage ownership.

    Income taxes for Power-One, Inc. are provided for taxes currently payable or
refundable, and deferred income taxes arising from future tax consequences of
events that have been recognized in the Company's financial statements or tax
returns. The effects of income taxes are measured based on enacted tax laws or
rates.

    Under the provisions of the Puerto Rico Industrial Incentives Act of 1987,
the Company has been granted a 90% partial tax exemption from the payment of
Puerto Rico taxes on income derived from marketing the products manufactured by
the Company in Puerto Rico. In addition, the grant also provides for a 90%
exemption on property taxes and a 60% exemption on municipal license taxes. The
Company has received similar tax exemptions in Puerto Rico in connection with
the distribution of its products. All of these exemptions are valid through
2010. Additionally, P-E operates in the Dominican Republic in a tax-free
enterprise zone and, accordingly, pays no income taxes in connection with its
operations in that country. The Company has not provided for the U.S. federal
and state income tax that would be paid on unremitted earnings from P-E and
Melcher of approximately $18,124,000 and $3,064,000, respectively, at
December 31, 1999, as there is no intention to remit the earnings.

    The Company's operations in Mexico are subject to various income and
corporate taxes on earnings generated in Mexico under the MAQUILADORA program.
These taxes have not been material to date.

    EARNINGS PER SHARE--The following is a reconciliation of the earnings per
share data (in thousands, except per share data):

<TABLE>
<CAPTION>
                                           YEAR ENDED                       YEAR ENDED                       YEAR ENDED
                                       DECEMBER 31, 1997                DECEMBER 31, 1998                DECEMBER 31, 1999
                                 ------------------------------   ------------------------------   ------------------------------
                                            AVERAGE      PER                 AVERAGE      PER                 AVERAGE      PER
                                  INCOME     SHARES     SHARE      INCOME     SHARES     SHARE      INCOME     SHARES     SHARE
                                 --------   --------   --------   --------   --------   --------   --------   --------   --------
<S>                              <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>
Income attributable to common
  stockholders.................   $6,720                           $5,730                          $10,047
Basic EPS:
  Shares outstanding...........              11,659                           17,073                           18,387
                                  ------     ------                ------     ------               -------     ------
  Basic EPS....................    6,720     11,659      $.58       5,730     17,073      $.34      10,047     18,387      $.55
                                                         ====                             ====                             ====
Dilutive securities--Stock
  options......................                 275                              252                              626
                                  ------     ------                ------     ------               -------     ------
Diluted EPS....................   $6,720     11,934      $.56      $5,730     17,325      $.33     $10,047     19,013      $.53
                                  ======     ======      ====      ======     ======      ====     =======     ======      ====
</TABLE>

    REVENUE RECOGNITION--Revenue is recognized upon shipment of product. Sales
are recorded net of sales returns and discounts.

    WARRANTY ACCRUAL--The Company provides for estimated warranty costs based on
historical warranty repair experience and current sales volume.

                                      F-11
<PAGE>
                                POWER-ONE, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
    ENGINEERING--Engineering costs include sustaining product engineering,
custom product development and research and development costs which are expensed
in the period incurred. Research and development expenses were $2,193,000,
$2,436,000 and $9,250,000 for the years ended December 31, 1997, 1998 and 1999,
respectively.

    USE OF ESTIMATES IN THE PREPARATION OF THE FINANCIAL STATEMENTS--The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect amounts reported therein. Due to the inherent uncertainty involved in
making estimates, actual results reported in future periods may differ from
those estimates.

    DERIVATIVE INSTRUMENTS--The Company enters into derivative instrument
contracts to manage exposure to fluctuations in interest rates. The interest
rate differential and any gains and losses resulting from interest rate swap or
swaption contracts, all of which are used to hedge underlying debt obligations,
are reflected as an adjustment to interest expense over the life of the
contracts. At December 31, 1998 and 1999, no derivative instruments were held by
the Company.

    In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities," which establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. It requires
that an entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value. In
addition, this statement requires hedge accounting when certain conditions are
met. This statement is effective for all fiscal quarters of fiscal years
beginning after June 15, 2000. The Company is currently evaluating the impact of
SFAS No. 133 on its operations and financial position.

    FAIR VALUE OF FINANCIAL INSTRUMENTS--The recorded values of accounts
receivable, accounts payable and accrued expenses approximate their fair values
based on their short-term nature. The recorded values of notes payable to bank,
long-term debt and other liabilities approximate fair value, as interest is tied
to or approximates market rates.

    CONCENTRATION OF CREDIT RISK--Financial instruments that potentially subject
the Company to concentrations of credit risk consist primarily of cash and cash
equivalents, placed with high credit quality institutions, and trade
receivables. The Company sells products and extends credit to customers,
primarily in the United States and Europe, periodically monitors its exposure to
credit losses, and maintains allowances for anticipated losses.

    CONVERSION OF FOREIGN CURRENCIES--The reporting currency for the
consolidated financial statements of the Company is the U. S. dollar. The assets
and liabilities of companies whose functional currency is other than the U. S.
dollar are included in the consolidation by translating the assets and
liabilities at the exchange rates applicable at the end of the reporting year.
The statements of operations and cash flows of such companies are translated at
the average exchange rates during the applicable period. Translation gains or
losses are accumulated as a separate component of shareholders' equity. The
Company has not tax effected the cumulative translation adjustment as there is
no intention to remit the earnings.

                                      F-12
<PAGE>
                                POWER-ONE, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
    RECLASSIFICATIONS--Certain prior year amounts have been reclassified to
conform to the current year presentation.

3. ACQUISITIONS

    In August 1998, the Company increased its international presence and
portfolio of products by acquiring Melcher for $53 million, including debt
assumed. Total cash consideration paid was $41.8 million plus $1.6 million of
transaction related costs. Located in Uster Switzerland, Melcher primarily
designs and manufactures high-reliability DC/DC and AC/DC power supplies which
it sells to leading OEMs throughout Europe and North America, including
Ericsson, Daimler-Chrysler and Siemens. High-reliability power supplies are
designed for rugged use in heavy-duty equipment in industries such as
transportation and telecommunications. Melcher has manufacturing operations in
three European locations and sales and application engineering offices in six
European countries. By acquiring Melcher, the Company added approximately 750
products to its portfolio and gained better access to the $4 billion European
power supply market. The purchase price was negotiated at arms length with the
sellers, none of whom had any prior relationship with the Company. The source of
funds for the acquisition was a combination of the Company's available cash, as
well as advances totaling $10.0 million under its existing credit facility.

    The acquisition was accounted for using the purchase method of accounting.
The purchase price, including liabilities assumed, was allocated to tangible
assets and intangible assets. The excess of the aggregate purchase price over
the estimated fair market values of the net assets acquired was recognized as
goodwill and other identifiable intangible assets, and is being amortized over
periods ranging from seven to 20 years. The fair market value of Melcher's
assets and liabilities have been included in the Company's balance sheet as of
December 31, 1998. The consolidated statements of operations, comprehensive
income and of cash flow for the year ended December 31, 1998, include four
months of Melcher's operations.

    On January 29, 1999, the Company completed its purchase of IPD for
$31.8 million, including capitalized lease obligations and other indebtedness of
IPD. The total cash consideration paid was $28.3 million plus approximately
$1.2 million of transaction related costs. In addition, the Company plans to pay
$13 million to IPD's former shareholders in the first half of 2000, since IPD
attained certain defined operational performance objections in the 13 month
period ending March 31, 2000.. The purchase price was negotiated at arms length
with IPD, with which the Company had no prior relationship. The source of funds
for the acquisition was a combination of the Company's available cash, as well
as advances totaling approximately $28 million under the Company's existing
credit facility. In a separate transaction, the Company acquired IPD's
manufacturing facility from a separate partnership for its appraised value. The
purchase of the manufacturing facility was completed in the second quarter of
1999 for approximately $4.3 million and was funded by additional borrowings from
credit facilities.

    IPD, a Boston-based company supplies high-density DC/DC power supplies,
which it sells primarily in North America. High density DC/DC power technology
is preferred in applications using high speed / low voltage logic, including the
fast growing voice and data communications industries. IPD sells over 90 models
of high-density DC/DC products to leading OEMs, including Cisco, Nortel and
Newbridge Networks. As part of the acquisition, the Company also acquired IPD's
49% ownership position in Shenzhen SED-IPD International Electronic Device
Co., Ltd., a joint venture based in Shenzhen, China.

                                      F-13
<PAGE>
                                POWER-ONE, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999

3. ACQUISITIONS (CONTINUED)
    The acquisition was accounted for using the purchase method of accounting.
The net purchase price, plus transaction costs, were allocated to tangible
assets and intangible assets. The excess of the aggregate purchase price over
the estimated fair market values of the net assets acquired was recognized as
goodwill and other identifiable intangible assets and is being amortized over
periods ranging from five to 15 years. The fair market value of IPD's assets and
liabilities have been included in the Company's balance sheet as of
December 31, 1999. In connection with the IPD acquisition, the Company recorded
a one time charge of $3.3 million for purchased in-process technology that had
not yet reached technological feasibility. The consolidated statements of
operations, comprehensive income and of cash flows for the year ended
December 31, 1999 included 11 months of IPD's operations.

    In connection with the IPD acquisition, the Company amended its credit
agreement with lenders to waive certain requirements and amend certain
provisions.

    The product lines acquired as a result of the IPD acquisition were
substantially similar to purchased technology related to the Agreement for which
an intangible asset was being amortized over the term of the licensing agreement
(see Note 1). Consequently, the Company recorded a charge of approximately
$1.0 million for the unamortized balance of the intangible asset value related
to the Agreement in 1999.

    The following unaudited pro forma financial information combines the
consolidated results of operations as if the acquisitions of Melcher and IPD had
occurred as of the beginning of the periods presented. Pro forma adjustments
include only the effects of events directly attributable to the transaction that
are expected to have a continuing impact and that are factually supportable. The
pro forma amounts contained in the table below include adjustments for
amortization of intangibles, depreciation expense, assumed interest expense,
assumed decrease in interest earned and related tax effect. The pro forma
amounts exclude non-recurring items totaling $4.4 million in 1999 and
$2.3 million in 1998.

<TABLE>
<CAPTION>
                                                              DECEMBER 31,
                                                         ----------------------
                                                           1998          1999
                                                         --------      --------
                                                         (DOLLARS IN THOUSANDS,
                                                            EXCEPT PER SHARE
                                                                AMOUNTS)
<S>                                                      <C>           <C>
Net sales..............................................  $161,567      $207,631
Net income attributable to common stockholders.........  $  5,797      $ 12,227
Basic earnings per common share........................  $   0.34      $   0.66
Diluted earnings per common share......................  $   0.33      $   0.64
</TABLE>

    The pro forma financial information does not necessarily reflect the
operating results that would have occurred had the acquisition been consummated
as of the above dates, nor is such information indicative of future operating
results. In addition, the pro forma financial results contain estimates since
Melcher did not maintain information on a period comparable with the Company's
fiscal year-end.

                                      F-14
<PAGE>
                                POWER-ONE, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999

4. INVENTORIES

    Inventories consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                               DECEMBER 31,
                                                            -------------------
                                                              1998       1999
                                                            --------   --------
<S>                                                         <C>        <C>
Raw materials.............................................  $16,036    $37,258
Subassemblies-in-process..................................    5,001      6,708
Finished goods............................................   11,359     11,474
                                                            -------    -------
                                                            $32,396    $55,440
                                                            =======    =======
</TABLE>

5. PROPERTY AND EQUIPMENT

    Property and equipment consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                               DECEMBER 31,
                                                            -------------------
                                                              1998       1999
                                                            --------   --------
<S>                                                         <C>        <C>
Land......................................................  $   633    $ 1,629
Buildings (useful lives of 20 years)......................    5,229     13,265
Factory and office equipment (useful lives of 3 to 10
  years)..................................................   24,174     47,793
Vehicles (useful lives of 3 to 4 years)...................      804        741
Leasehold improvements (useful lives of 5 to 10 years)....    2,716      2,721
Construction in progress..................................    9,097      3,155
                                                            -------    -------
                                                             42,653     69,304
Less accumulated depreciation and amortization............    8,045     14,945
                                                            -------    -------
                                                            $34,608    $54,359
                                                            =======    =======
</TABLE>

    Factory and office equipment under capital leases included in property and
equipment consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                              -------------------
                                                                1998       1999
                                                              --------   --------
<S>                                                           <C>        <C>
Cost........................................................    $479      $2,009
Less accumulated depreciation and amortization..............      65         721
                                                                ----      ------
                                                                $414      $1,288
                                                                ====      ======
</TABLE>

6. CREDIT FACILITY

    On August 12, 1999, the Company entered into a Second Amended and Restated
Credit Agreement with Bank of America, N.A. which increased its revolving line
of credit from $50 million to $65 million. The line of credit bears interest on
amounts outstanding payable quarterly based on the Company's leverage ratio and
one of the following rates, as selected by the Company: LIBOR plus 1.25% to
2.50% or the bank's base rate plus 0% to 1.25%. The credit agreement
(a) provides for restrictions on additional

                                      F-15
<PAGE>
                                POWER-ONE, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999

6. CREDIT FACILITY (CONTINUED)
borrowings, dividends, leases and capital expenditures; (b) prohibits the
Company, without prior approval, from paying dividends, liquidating, merging,
consolidating or selling its assets or business; and (c) requires the Company to
maintain a specified net worth, minimum working capital and certain ratios of
current liabilities and total debt to net worth. At December 31, 1998 and 1999
amounts outstanding under this line of credit were $10.0 million and
$2.5 million, respectively (interest rate of 6.63% at December 31, 1998 and
3.69% at December 31, 1999). Borrowings are collateralized by substantially all
of the Company's assets.

    In addition, Melcher has various credit facilities with banks in Switzerland
and Germany ranging from $0.3 million to $4.8 million which can be drawn upon in
the form of term loans. The aggregate credit limit for all credit facilities is
$13.2 million. Melcher's credit facility in Switzerland bears interest on
amounts outstanding payable at various time intervals and market rates based on
Swiss LIBOR plus a margin ranging from 1.25% to 2.00%. Certain of Melcher's
credit agreements require Melcher to maintain certain financial covenants as
well as certain financial reporting obligations to the lenders none of which is
materially restrictive to Melcher. At December 31, 1998, short-term (including
current portion of long-term debt) and long-term amounts outstanding under
Melcher's credit facilities were $7.6 million and $7.7 million, respectively, at
interest rates ranging from 2.9% to 5.5% and 3.2% to 7.0%, respectively. At
December 31, 1999, short-term (including current portion of long-term debt) and
long-term amounts outstanding under Melcher's credit facilities were
$5.5 million and $3.1 million, respectively, at interest rates ranging from 2.9%
to 4.4% and 3.6% to 5.0%, respectively.

    At December 31, 1998 and 1999, short-term (including current portion of long
term debt) amounts outstanding under all credit agreements with banks were
$17.6 million and $8.0 million, respectively. At December 31, 1998 and 1999,
long-term amounts outstanding under all credit agreements with banks were
$7.7 million and $3.1 million, respectively.

    On February 11, 2000, the Company amended its $65 million credit agreement
with the lenders and the administrative lender to waive certain of the
requirements of the credit agreement and amend certain provisions of the credit
agreement in connection with the Company's acquisition of HC Power (See
Note 16)

                                      F-16
<PAGE>
                                POWER-ONE, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999

7. LONG-TERM DEBT

    Long-term debt consists primarily of borrowings in Swiss francs as follows
(in thousands):

<TABLE>
<CAPTION>
                                                                DECEMBER 31,
                                                             -------------------
                                                               1998       1999
                                                             --------   --------
<S>                                                          <C>        <C>
Term loan due February 1, 1999, payable to a bank. Interest
  is payable annually in arrears at a rate of 3.5%. The
  loan was extended on February 1, 1999 to expire on
  February 28, 2000 at an interest rate of 2.9%, payable on
  the due date.............................................  $ 1,092     $   --

Term loans maturing between September 30, 1999 and
  September 30, 2000, payable to a bank. Interest is
  payable half yearly in arrears at rates ranging between
  3.2% and 3.7%. The loans are subject to the restrictive
  covenants described in Note 6............................    1,457        941

Term loan due November 14, 1999, payable to a bank.
  Interest is payable half yearly in arrears at a rate of
  7.0%. The loan is collateralized by real property owned
  by the Company (net book value of $3,937) and is subject
  to the restrictive covenants described in Note 6.........    1,456         --

Term loans maturing between June 30, 2000 and June 2, 2002,
  payable to a bank. Interest is payable quarterly in
  arrears at rates ranging between 4.0% and 5.0%. The loan
  is collateralized by real property owned by the Company
  (net book value of $3,937) and is subject to the
  restrictive covenants described in Note 6................    2,912         --

Term loans maturing between November 24, 2000 and
  October 7, 2002, payable to a bank. Interest is payable
  quarterly in arrears at rates ranging between 3.6% and
  5.0%.....................................................    2,912      2,508

Term loan due February 15, 2000, payable to a bank.
  Interest is payable half yearly in arrears at a rate of
  3.5%.....................................................      728        628

Term loans maturing between March 31, 2000 and June 2,
  2002, payable to a bank. Interest is payable quarterly in
  arrears at rates ranging between 3.4% and 5.0%. The loan
  is collateralized by real property owned by the Company
  (net book value of $3,261) and is subject to the
  restrictive covenants described in Note 6................       --      2,983
                                                             -------     ------

                                                              10,557      7,060

Less current portion.......................................    2,912      3,922
                                                             -------     ------

Long-term debt, less current portion.......................  $ 7,645     $3,138
                                                             =======     ======
</TABLE>

                                      F-17
<PAGE>
                                POWER-ONE, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999

7. LONG-TERM DEBT (CONTINUED)
    The long-term debt matures as follows (in thousands):

<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31,
-------------------------
<S>                                                           <C>
2000........................................................  $3,922
2001........................................................   2,200
2002........................................................     938
                                                              ------
                                                              $7,060
                                                              ======
</TABLE>

8. OTHER ACCRUED EXPENSES

    Other accrued expenses consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                                DECEMBER 31,
                                                             -------------------
                                                               1998       1999
                                                             --------   --------
<S>                                                          <C>        <C>
Accrued warranty...........................................   $1,765    $ 1,750
Accrued bonuses............................................    1,025      4,077
Income taxes payable.......................................      585      3,250
Other accrued expenses.....................................    4,207      6,282
                                                              ------    -------
                                                              $7,582    $15,359
                                                              ======    =======
</TABLE>

9. COMMITMENTS AND CONTINGENCIES

    LEASES--Power-One, Inc. leases its production and office facilities in
Camarillo, California under a lease agreement expiring on September 1, 2004. The
lease provides for increases each five years under a formula based upon changes
in the consumer price index.

    Power-One, Inc. also leases manufacturing facilities in Puerto Rico and the
Dominican Republic. The leases in Puerto Rico and the Dominican Republic expire
at various dates through 2008 and provide for renewal options of ten years in
Puerto Rico and six years in the Dominican Republic.

    Melcher leases office and manufacturing facilities in Switzerland, France,
Italy, Germany, the Netherlands, and Ireland. The leases expire at various dates
through 2005 and provide for renewal options ranging from three months to six
years. In addition, Melcher and IPD lease certain factory and office equipment
under capital lease agreements.

                                      F-18
<PAGE>
                                POWER-ONE, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999

9. COMMITMENTS AND CONTINGENCIES (CONTINUED)
    Future minimum lease payments for operating leases and the present value of
minimum lease payments under capital leases as of December 31, 1999 are as
follows (in thousands):

<TABLE>
<CAPTION>
                                                             CAPITAL    OPERATING
YEARS ENDING DECEMBER 31,                                     LEASES     LEASES
-------------------------                                    --------   ---------
<S>                                                          <C>        <C>
2000.......................................................   $ 977      $1,887
2001.......................................................     583       1,754
2002.......................................................     255       1,663
2003.......................................................      41       1,657
2004.......................................................               1,211
Thereafter.................................................                 722
                                                              -----      ------
Total minimum lease payments...............................   1,856      $8,894
                                                                         ======
Less amount representing interest..........................     162
                                                              -----
Present value of minimum lease payments....................   1,694
Less current obligation under capital leases...............     877
                                                              -----
Obligations under capital leases, excluding current
  installments.............................................   $ 817
                                                              =====
</TABLE>

    Total rent expense was approximately $1,407,000, $1,821,000 and $2,554,000
for the years ended December 31, 1997, 1998 and 1999, respectively.

    LEGAL PROCEEDINGS--The Company is involved in routine litigation arising in
the ordinary course of its business. In the opinion of the Company's management,
none of the pending litigation will have a material adverse effect on the
Company's consolidated financial condition or results of operations.

10. REDEEMABLE PREFERRED STOCK

    Upon conversion from a limited liability company to a C-corporation on
January 29, 1996, the Company issued 10,000,000 shares of Common Stock with a
par value of $0.001 and 15,153,698 shares of Series A redeemable preferred stock
with a stated value of $1.00 in a proportionate exchange for each member's
interest in Power One, LLC, with an aggregate historical value of $14,972,000.
The historical book value of equity has been allocated $100,000 to Common Stock
with the remaining $14,872,000 allocated to preferred stock. The difference
between the stated par value and the assigned historical value of the preferred
stock was being accreted into the preferred stock value over ten years. In 1997,
the remaining unamortized balance was accreted into the preferred stock in
conjunction with the conversion and repayment of the preferred stock on
October 6, 1997 as discussed below. For financial presentation purposes the
accretion has been included with preferred stock dividends in the statement of
operations.

    Preferred stockholders were entitled to 10% cumulative dividends, if
declared. At December 31, 1996, undeclared dividends totaled $1,389,000, which
had been recorded to redeemable preferred stock.

    Preferred shares were redeemable on February 1, 2006, or such earlier date
as determined by the Company's board of directors, with the redemption price
being computed at the original issuance price of $1.00 per share plus any unpaid
dividends, declared or undeclared. On October 6, 1997 in conjunction with

                                      F-19
<PAGE>
                                POWER-ONE, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999

10. REDEEMABLE PREFERRED STOCK (CONTINUED)
the Company's initial public offering, 14,950,848 shares of preferred stock were
converted into 1,254,177 shares of Common Stock at the initial public offering
price of $14 per share.

    The remaining 202,850 shares of preferred stock were repurchased from a
stockholder for a lump sum payment of $242,000. The conversion and repurchase
was based on the liquidation value of the preferred stock on October 6, 1997 of
approximately $17,800,000, which included accrued undeclared dividends of
$2,648,000.

11. COMMON STOCK

    Effective in September 1997, the Company increased its authorized capital
stock to 60,000,000 shares of Common Stock with a par value of $.001, and
30,000,000 shares of Preferred Stock.

    On October 6, 1997, the Company completed its initial public offering of
5,000,000 shares of the Company's Common Stock. In conjunction with the Offering
the Company granted the underwriters an overallotment option to purchase up to
750,000 additional shares of the Common Stock at the public offering price of
$14.00 per share. On October 20, 1997, the underwriters exercised their
overallotment option. All of these shares were newly issued and sold on behalf
of the Company. The gross proceeds of the 5,750,000 shares sold by the Company
were $80,500,000. The Company incurred $6,707,000 in costs in connection with
the offering consisting of underwriter commissions and expenses, printing costs,
legal, accounting and other fees. After offering costs the Company's net
proceeds totaled $73,793,000.

    On September 20, 1999, the Company completed a secondary public stock
offering of 6,500,000 shares of the Company's Common Stock at an offering price
of $25.00. In connection with the offering, the Company granted the underwriters
an overallotment option to purchase up to an additional 975,000 shares of the
Common Stock at the public offering price of $25.00 per share. On October 14,
1999, the underwriters exercised their overallotment option. The Company sold
4,975,000 of these shares. The remaining 2,500,000 shares were sold by certain
stockholders, and the Company did not receive any proceeds from the sale of
these shares. The gross proceeds of the 4,975,000 shares were $124,375,000. The
Company incurred approximately $6,046,000 in costs in connection with the
offering consisting of underwriter commissions and expenses, printing costs,
legal, accounting and other fees. After offering costs, the Company's net
proceeds were $118,329,000.

    STOCK OPTIONS--In February 1996, the Board of Directors approved a stock
option plan for the issuance of 1,000,000 shares of Common Stock. In
January 1999, the Plan was amended to increase the shares issuable under the
plan. The Company can issue either qualified or non-qualified stock options
under the Plan. At December 31, 1999, 4,427,435 shares of Common Stock were
issuable under the Plan. The option price is determined by the Board of
Directors based on the fair market value of the Company's Common Stock on the
date of grant. The options vest over four and seven year terms. Those options
with seven year vesting terms include accelerated vesting provisions that allow
for vesting over five years if certain performance measures are met. There were
no options exercisable as of December 31, 1997. There were 504,350 and 507,383
options exercisable as of December 31, 1998 and December 31, 1999, respectively.
In connection with the issuance of stock options in March and June of 1997, the
Company has computed compensation cost for the difference between the estimated
fair market values and the option exercise prices at the date of grant totaling
approximately $190,000, which is being amortized over the seven year vesting
period of the options. For the years ended December 31, 1998 and 1999, $27,000
in compensation

                                      F-20
<PAGE>
                                POWER-ONE, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999

11. COMMON STOCK (CONTINUED)
expense was recognized each year. Subsequent to 1997, all options have been
granted at the fair market value.

    Stock option activity of the Company is as follows:

<TABLE>
<CAPTION>
                                                                         WEIGHTED
                                          NUMBER     EXERCISE PRICE      AVERAGE
                                        OF OPTIONS     PER OPTION     EXERCISE PRICE
                                        ----------   --------------   --------------
<S>                                     <C>          <C>              <C>
Options outstanding--December 31,
  1996................................    467,500        $1.00            $ 1.00
Options granted.......................    317,150    $1.50 - $19.00       $12.80
Options canceled......................     (7,750)   $1.50 - $14.00       $ 1.98
                                        ---------    --------------       ------
Options outstanding--December 31,
  1997................................    776,900    $1.00 - $19.00       $ 5.81

Options granted.......................  1,190,515    $6.13 - $14.25       $ 8.76
Options exercised.....................    (27,950)       $1.00            $ 1.00
Options canceled......................   (553,850)   $1.00 - $19.00       $11.92
                                        ---------    --------------       ------
Options outstanding--December 31,
  1998................................  1,385,615    $1.00 - $14.00       $ 5.97

Options granted.......................    474,000    $7.00 - $29.81       $13.71
Options exercised.....................    (54,775)   $1.00 - $14.00       $ 6.93
Options cancelled.....................    (45,635)   $6.13 - $10.38       $ 8.97
                                        ---------    --------------       ------
Options outstanding--December 31,
  1999................................  1,759,205    $1.00 - $29.81       $ 7.95
</TABLE>

    The Company accounts for its plans in accordance with Accounting Principles
Board Opinion No. 25. Had compensation cost been determined on the basis of fair
value pursuant to SFAS No. 123, "Accounting for Stock-Based Compensation," net
income and basic and diluted earnings per share would have been as follows:

<TABLE>
<CAPTION>
                                                        YEARS ENDED DECEMBER 31,
                                                     ------------------------------
                                                       1997       1998       1999
                                                     --------   --------   --------
                                                         (IN THOUSANDS, EXCEPT
                                                           PER SHARE AMOUNTS)
<S>                                                  <C>        <C>        <C>
Net income
  As reported......................................   $8,234     $5,730    $10,047
  Pro forma........................................    8,141      5,246      8,981

Basic earnings per share
  As reported......................................   $ 0.58     $ 0.34    $  0.55
  Pro forma........................................   $ 0.57     $ 0.31    $  0.49

Diluted earnings per share
  As reported......................................   $ 0.56     $ 0.33    $  0.53
  Pro forma........................................   $ 0.56     $ 0.30    $  0.47
</TABLE>

    The fair value of each option grant is estimated on the date of grant using
the Black-Scholes model, with the following assumptions used in 1997, 1998 and
1999: risk-free interest rate of 6.90%, 4.18%, and

                                      F-21
<PAGE>
                                POWER-ONE, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999

11. COMMON STOCK (CONTINUED)
5.79%, respectively, expected volatility of 44.6%, 63.8% and 76.9%,
respectively, an expected option life of 8.5, 8.5 and 7.5 years, respectively,
and no expected dividends for each of the three years. The fair value of stock
options granted were $2,599,000, $3,811,000 and $4,977,000 in 1997, 1998 and
1999, respectively.

    The following table summarizes information regarding options outstanding at
December 31, 1999:

<TABLE>
<CAPTION>
                                   OPTIONS OUTSTANDING                   OPTIONS EXERCISABLE
                        ------------------------------------------   ----------------------------
      RANGE OF                         REMAINING       WEIGHTED                       WEIGHTED
      EXERCISE            NUMBER      CONTRACTUAL      AVERAGE         NUMBER         AVERAGE
       PRICES           OUTSTANDING      LIFE       EXERCISE PRICE   EXERCISABLE   EXERCISE PRICE
---------------------   -----------   -----------   --------------   -----------   --------------
<C>                     <C>           <S>           <C>              <C>           <C>
    $1.00 - $2.00          429,575     6.33 yrs         $ 1.04         429,575         $ 1.04
        $6.13              466,830     8.81 yrs         $ 6.13           3,058         $ 6.13
    $6.94 - $9.94          238,000     8.77 yrs         $ 7.21           9,750         $ 7.00
       $10.38              267,000     9.08 yrs         $10.38              --             --
   $13.25 - $15.38         255,300     8.10 yrs         $14.14          65,000         $14.00
   $18.50 - $29.81         102,500     9.71 yrs         $25.20              --             --
                         ---------      --------        ------         -------         ------
$1.00 - $29.81.......    1,759,205    8.19 yrs          $ 7.95         507,383         $ 2.85
                         =========      ========        ======         =======         ======
</TABLE>

    EMPLOYEE STOCK PURCHASE PLAN--The Company has adopted, effective January 1,
1998, an Employee Stock Purchase Plan, under which 3,000,000 shares are reserved
for purchase by employees. Substantially all of the Company's employees may
contribute from two to eight percent of their qualified earnings toward the
purchase of Company Common Stock. The plan provides the participants the
opportunity to purchase shares at 85% of the fair market value on either the
grant date or the closing price at the end of each six month offering period,
which generally runs from January 1 through June 30, whichever is lower. At
December 31, 1998 and December 31, 1999 there were 5,692 and 19,866 shares
issued under this plan.

12. PROFIT SHARING PLAN

    Power-One, Inc. has a 401(k) profit sharing plan covering all employees,
subject to certain participation and vesting requirements. The plan provides
that Power-One, Inc. will partially match employee contributions up to specified
percentages. Total contributions were $79,000, $180,000 and $194,000 for the
years ended December 31, 1997, 1998 and 1999, respectively.

13. BUSINESS GEOGRAPHICAL LOCATIONS

    As required by SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information", the Company has reviewed its business activities and
determined that it does not have more than one operating segment as defined by
this statement. This determination was based on the management approach which
focuses on the way management organizes the Company's business activities for
making operating decisions and assessing performance. The Company primarily
operates in one industry segment which includes the design, development and
manufacture of AC/DC and DC/DC power supplies for the electronics equipment
industry.

    The Company has manufacturing and distribution facilities in the United
States, Puerto Rico, Dominican Republic, Mexico, Switzerland, Slovakia and
Massachusetts. The Company's operations in

                                      F-22
<PAGE>
                                POWER-ONE, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999

13. BUSINESS GEOGRAPHICAL LOCATIONS (CONTINUED)
Puerto Rico are considered part of the United States and are included as North
America. The following table summarizes the Company's revenues and long lived
assets in different geographic locations (in thousands):

<TABLE>
<CAPTION>
                                                    YEAR ENDED DECEMBER 31,
                                                 ------------------------------
                                                   1997       1998       1999
                                                 --------   --------   --------
<S>                                              <C>        <C>        <C>
Revenues:(a)
  North America................................  $91,846    $ 84,475   $152,670
  Europe.......................................    1,033      17,560     44,892
  Other foreign countries......................      189         484      7,840
                                                 -------    --------   --------
    Total......................................  $93,068    $102,519   $205,402
                                                 =======    ========   ========

Long Lived Assets:
  North America................................  $ 6,346    $  8,699   $ 22,930
  Mexico.......................................    3,926       7,974     12,601
  Switzerland..................................               11,752      9,605
  Dominican Republic...........................    3,347       5,245      8,367
  Other foreign countries......................                2,853      3,940
                                                 -------    --------   --------
    Total......................................  $13,619    $ 36,523   $ 57,443
                                                 =======    ========   ========
</TABLE>

------------------------

(a) Revenues are attributable to countries based on location of customer

14. INCOME TAXES

    The components of income tax expense for the years ended December 31, 1997,
1998 and 1999 are as follows (in thousands):

<TABLE>
<CAPTION>
                                                        1997       1998       1999
                                                      --------   --------   --------
<S>                                                   <C>        <C>        <C>
Current:
  Federal...........................................   $  758     $2,810     $3,417
  State.............................................      117        585        929
  Foreign...........................................      378      1,063      3,006
                                                       ------     ------     ------
Total current.......................................    1,253      4,458      7,352
                                                       ------     ------     ------

Deferred:
  Federal...........................................    1,779       (844)      (454)
  State.............................................      510       (202)      (119)
  Foreign...........................................              (1,086)      (325)
                                                       ------     ------     ------
Total deferred......................................    2,289     (2,132)      (898)
                                                       ------     ------     ------
Provision for income taxes..........................   $3,542     $2,326     $6,454
                                                       ======     ======     ======
</TABLE>

                                      F-23
<PAGE>
                                POWER-ONE, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999

14. INCOME TAXES (CONTINUED)
    The components of deferred tax assets (liabilities) at December 31, 1998 and
1999 are as follows (in thousands):

<TABLE>
<CAPTION>
                                                          1998                             1999
                                             ------------------------------   ------------------------------
                                             FEDERAL     STATE     FOREIGN    FEDERAL     STATE     FOREIGN
                                             --------   --------   --------   --------   --------   --------
<S>                                          <C>        <C>        <C>        <C>        <C>        <C>
Current:
  Uniform capitalization...................  $   236     $  61                $   246     $  62
  Sales discount reserve...................      214        56                    253        63
  Bad debt reserve.........................      309        80     $   (50)       480       124     $  (131)
  Inventory reserve........................      477       124        (436)       955       244        (362)
  Warranty reserve.........................                                       335        89
  State Taxes..............................      201                               10        22
  Inventory Overheads......................                           (736)                            (781)
  Litigation reserves......................                           (583)                            (109)
  NOL......................................                            521                              214
  Other....................................       64        23         (25)       154        57         (47)
                                             -------     -----     -------    -------     -----     -------
    Total current..........................    1,501       344      (1,309)     2,433       661      (1,216)

Noncurrent:
  Intangible assets........................   (1,448)     (382)                (1,399)     (364)
  Fixed Assets.............................                         (1,788)       285        71
  Other....................................       46        12         (25)       148        83      (1,581)
                                             -------     -----     -------    -------     -----     -------
    Total noncurrent.......................   (1,402)     (370)     (1,813)      (966)     (210)     (1,581)

Net deferred tax assets (liabilities)......  $    99     $ (26)    $(3,122)   $ 1,467     $ 451     $(2,797)
                                             =======     =====     =======    =======     =====     =======
</TABLE>

    Net deferred tax assets amounting to $1,272,000 were acquired by the Company
through the acquisition of IPD.

    A reconciliation of the Company's provision for income taxes for the years
ended December 31, 1997, December 31, 1998 and 1999 to the U.S. federal
statutory rate is as follows:

<TABLE>
<CAPTION>
                                                             1997                     1998                     1999
                                                      -------------------      -------------------      -------------------
                                                       AMOUNT       %           AMOUNT       %           AMOUNT       %
                                                      --------   --------      --------   --------      --------   --------
<S>                                                   <C>        <C>           <C>        <C>           <C>        <C>
Provision for income taxes at statutory rate........   $4,004       34%         $2,739       34%         $5,610       34%
Foreign income taxed at lower rates.................   (1,137)     (10)           (494)      (6)         (1,438)      (9)
State taxes net of federal benefit..................      414        4             253        3             534        3
IPD Nondeductible goodwill..........................       --       --              --       --             559        3
IPD Nondeductible in process research development...       --       --              --       --           1,122        7
Other...............................................      261        2            (172)      (2)             67        1
                                                       ------      ---          ------       --          ------       --
                                                       $3,542       30%         $2,326       29%         $6,454       39%
                                                       ======      ===          ======       ==          ======       ==
</TABLE>

                                      F-24
<PAGE>
                                POWER-ONE, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999

15. RELATED PARTY TRANSACTIONS

    Stephens Inc, a majority stockholder, provided financial advisory services
of approximately $710,000 relating to the acquisition of IPD. Similar services
were provided in relation to the HC Power acquisition (see Subsequent
Events--Note 16). At December 31, 1999 no amounts were owed to Stephens Inc.

16. SUBSEQUENT EVENTS

    On February 29, 2000, the Company acquired HC Power, Inc. ("HCP") in a
stock-for-stock transaction, whereby the former shareholders of HCP received a
total of 2,121,207 shares of Power-One's common stock for all shares of common
stock of HCP outstanding on the effective date of the merger. Of the total
shares issued, 212,117 shares were placed in an escrow to fund possible
indemnification claims under the merger agreement. The merger is being accounted
for as a pooling of interests.

    HCP is based in Irvine, CA and is a supplier of power systems for
telecommunications and Internet service providers and OEM equipment
manufacturers. HCP's major service providers include Williams Communications,
CEA Telecom, Qwest, and Nextel, and its key OEMs include Motorola and Nortel
Networks.

    In connection with the HC Power acquisition, the Company amended its credit
agreement with lenders to waive certain requirements and amend certain
provisions.

    On March 31, 2000, the Company agreed to acquire Norwegian-based Powec AS
for $78 million. The consideration to be paid consists of approximately
$70 million in cash and 140,340 shares of the Company's common stock.
Additionally, the Company will assume approximately $8 million in debt. Certain
additional payments may be made to Powec shareholders based on the attainment of
defined operational performance through 2001. The acquisition will be accounted
for using the purchase method of accounting.

    Powec is a leading supplier of power systems for major service providers and
equipment manufacturers in the telecommunications industry. Powec's customers
include Nokia, Vodafone, Ericsson, Eircon, Telia, Hong Kong Telecom, Telenor,
Sonora and TeleDanmark.

    The Company has also agreed to acquire a telecommunications product line
from Crane Co. for approximately $14 million in cash. This product line has the
exclusive distribution rights for Powec's products in North, South and Central
America and extensive relationships with telecommunication equipment
manufactures such as Motorola, Ericsson and Nokia US.

                                     ******

                                      F-25
<PAGE>
                                POWER-ONE, INC.

                      QUARTERLY FINANCIAL DATA (UNAUDITED)

                             1998 AND 1999 QUARTERS

                 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                     1998 QUARTERS ENDED
                                                          -----------------------------------------
                                                          MAR. 31    JUNE 30    SEPT. 30   DEC. 31
                                                          --------   --------   --------   --------
<S>                                                       <C>        <C>        <C>        <C>
Net sales...............................................  $26,673    $24,373    $23,101    $28,372

Gross profit............................................   11,103     10,073      8,141      9,756

Income (loss) from operations...........................    4,088      3,929        328       (243)

Net income (loss) attributable to common stockholders...    3,073      3,048        287       (678)

Diluted earnings (loss) per share.......................  $  0.18    $  0.18    $  0.02    $ (0.04)
</TABLE>

<TABLE>
<CAPTION>
                                                                     1999 QUARTERS ENDED
                                                          -----------------------------------------
                                                          MAR. 31    JUNE 30    SEPT. 30   DEC. 31
                                                          --------   --------   --------   --------
<S>                                                       <C>        <C>        <C>        <C>
Net sales...............................................  $34,834    $46,568    $61,241    $62,759

Gross profit............................................   13,181     19,888     24,547     27,590

Income (loss) from operations...........................   (3,364)     4,462      8,365      9,019

Net income (loss) attributable to common stockholders...   (3,517)     1,979      4,522      7,063

Diluted earnings (loss) per share.......................  $ (0.21)   $  0.11    $  0.25    $  0.31
</TABLE>

                                      F-26
<PAGE>
                                POWER-ONE, INC.

                 SCHEDULE II: VALUATION AND QUALIFYING ACCOUNTS

          FOR EACH OF THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999

<TABLE>
<CAPTION>
                                                                                                     CHANGE IN
                                         BALANCE AT   CHARGED TO                                  FOREIGN CURRENCY    BALANCE
                                         BEGINNING     COSTS AND     ACQUIRED                       ON BEGINNING     AT END OF
DESCRIPTION                              OF PERIOD    EXPENSES(1)   BALANCES(2)   DEDUCTIONS(3)       BALANCE          PERIOD
-----------                              ----------   -----------   -----------   -------------   ----------------   ----------
<S>                                      <C>          <C>           <C>           <C>             <C>                <C>
Allowance for doubtful accounts:
  Year Ended December 31, 1997.........  $  638,000    $296,000     $               $(109,000)       $               $  825,000
  Year Ended December 31, 1998.........     825,000     140,000        468,000        (31,000)                        1,402,000
  Year Ended December 31, 1999.........   1,402,000     150,000        501,000       (192,000)         (64,000)       1,797,000

Accrued sales discounts and returns:
  Year Ended December 31, 1997.........     585,000     (50,000)                                                        535,000
  Year Ended December 31, 1998.........     535,000     217,000                                                         752,000
  Year Ended December 31, 1999.........     752,000      (6,000)                                                        746,000

Accrued Warranties:
  Year Ended December 31, 1997.........     400,000     141,000                      (141,000)                          400,000
  Year Ended December 31, 1998.........     400,000     298,000      1,192,000       (125,000)                        1,765,000
  Year Ended December 31, 1999.........   1,765,000     329,000        150,000       (317,000)        (177,000)       1,750,000
</TABLE>

------------------------------

(1) For the allowance for doubtful accounts, represents charges to bad debt
    expense for the year.

   For the accrued sales discounts and returns, represents the provision for
    estimated discounts and returns.

   For the accrued warranties, represents the provision for estimated
    warranties.

(2) Beginning balance upon acquisition of Melcher effective August 31, 1998 and
    of IPD effective January 29, 1999.

(3) For the allowance for doubtful accounts, represents write off of bad debt.

   For the accrued warranties, represents material used to satisfy customer
    warranty repairs.

                                      S-1
<PAGE>
                               INDEX TO EXHIBITS

<TABLE>
<CAPTION>
          DESCRIPTION
          -----------
<S>       <C>
2.1(a)    Stock and Loan Purchase Agreement effective August 31, 1998
            between SBC Equity Partners Ltd., Defi Holding SA,
            Elektrowatt AG, Dr. Hans Grueter, Dr. Martin Schnider,
            Johann Milavec and Power-One, Inc. regarding the sale and
            purchase of shares in and certain convertible loans to
            Melcher Holding AG

2.2(b)    Agreement and Plan of Merger dated as of January 7, 1999, by
            and among Power-One, Inc., Power-One Acquisition
            Corporation, and International Power Devices, Inc.

3.1(c)    Restated Certificate of Incorporation of the Company

3.2(c)    Amended and Restated Bylaws of the Company

4.1(c)    Specimen Common Stock Certificate

10.1(c)   Form of Indemnification Agreement between the Company and
            its directors, executive officers and certain other
            officers

10.2(d)   Amended and Restated 1996 Stock Incentive Plan, dated
            May 4, 1999

10.3(c)   Management Bonus Plan

10.4(c)   P-E Tax Exemption Grant dated January 4, 1995

10.5(e)   Employee Stock Purchase Plan

10.6(f)   Second Amended and Restated Credit Agreement among the
            Company, NationsBank of Texas, N.A. and certain lenders,
            dated August 12, 1999

10.7      First Amendment to Second Amended and Restated Credit
            Agreement

10.8      Letter of Agreement between the Company and the Chief
            Operating Officer of Power-One, Inc.

21        List of Subsidiaries

23        Independent Auditors' Consent

24        Power of Attorney (Contained on Signature Page)

27        Financial Data Schedule
</TABLE>

------------------------

(a) Previously filed as an exhibit to Form 8-K dated August 31, 1998 and filed
    on September 15, 1998 (File No. 0-29454)

(b) Previously filed as an exhibit to Form 8-K dated January 29, 1999 and filed
    on February 9, 1999 (File No. 0-29454)

(c) Previously filed as an exhibit to the Registration Statement on Form S-1 of
    Power-One, Inc. (File No. 333-32889)

(d) Previously filed as an exhibit to the Registration Statement on form S-8 of
    Power-One, Inc. (File No. 333-87879)

(e) Previously filed as an exhibit to the Registration Statement on Form S-8 of
    Power-One, Inc. (File No. 333-42079)

(f) Previously filed as an exhibit to Amendment No. 1 to the Registration
    Statement on Form S-3 of Power-One, Inc. (File No. 333-84285)

                                      S-2