<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549
                                          
                                  ___________
                                          
                                   FORM 10-K
     
    [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
        EXCHANGE ACT OF 1934

                 For the fiscal year ended December 28, 1997
     
                                       OR

    [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
        EXCHANGE ACT OF 1934

                 For the transition period from        to        
                             ___________________

                         Commission File No. 0-29454

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

                  DELAWARE                                77-040182
       (State or other jurisdiction of                (I.R.S. Employer
        incorporation or organization)               Identification No.)

               740 CALLE PLANO                              93012
  (Address of principal executive offices)               (Zip code)

       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.  [ ]

The aggregate market value of the voting stock held by non-affiliates of the 
Registrant as of March 16, 1998 was approximately $90 million.

As of March 16, 1998, 17,059,585 shares of the Registrant's $0.001 par value 
common stock were outstanding.

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                                       1

                               TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                            PAGE
PART I                                                                      ----
<S>       <C>                                                               <C>
Item  1.  Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  2
Item  2.  Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Item  3.  Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . 13
Item  4.  Submission of Matters to a Vote of Security Holder . . . . . . . . 13

PART II

Item  5.  Market for Registrant's Common Equity
          and Related Stockholder Matters. . . . . . . . . . . . . . . . . . 14
Item  6.  Selected Financial Data. . . . . . . . . . . . . . . . . . . . . . 15
Item  7.  Management's Discussion and Analysis of Financial Condition
          and Results of Operation . . . . . . . . . . . . . . . . . . . . . 19
Item  8.  Financial Statements and Supplementary Data  . . . . . . . . . . . 24
Item  9.  Changes in and Disagreements with Accountants on Accounting
          and Financial Disclosures  . . . . . . . . . . . . . . . . . . . . 24

PART III

Item 10.  Directors and Executive Officers of the Registrant . . . . . . . . 24
Item 11.  Executive Compensation . . . . . . . . . . . . . . . . . . . . . . 25
Item 12.  Security Ownership of Certain Beneficial Owners and Management . . 25
Item 13.  Certain Relationships and Related Transactions . . . . . . . . . . 25

PART IV

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K. . 25

Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Index to Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . F-1
Financial Statement Schedule . . . . . . . . . . . . . . . . . . . . . . . . S-1
Index to Exhibits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-2
</TABLE>
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                                       2

UNLESS THE CONTEXT INDICATES OTHERWISE, ALL REFERENCES HEREIN TO THE COMPANY OR
POWER-ONE REFER COLLECTIVELY TO POWER-ONE, INC., ITS WHOLLY-OWNED SUBSIDIARIES
POWER-ELECTRONICS, INC. ("P-E") AND PODER UNO DE MEXICO, S.A. DE C.V. ("PODER
UNO"), AND THE COMPANY'S PREDECESSORS.

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. THE COMPANY CAUTIONS 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 the Company's definitive proxy statement (the "Definitive Proxy
Statement") to be filed with the Securities and Exchange Commission pursuant to
Regulation 14A and relating to the Company's 1998 annual meeting of stockholders
are incorporated by reference into Part III.

PART I

ITEM 1 - BUSINESS

THE COMPANY

     Power-One is a leading designer and manufacturer of power supplies for
electronic equipment manufacturers in the U.S. The Company manufactures a broad
line of more than 700 high-quality brand name products that it sells to both
distributors and OEMs who place a premium on quality, reliability and service.
The Company's products are sold to an installed base of more than 10,000
customers in the communications, automatic test equipment, medical equipment,
industrial and other electronic equipment industries. Power-One's customers
include OEM's which are industry leaders such as Cisco Systems, General
Electric, Hewlett-Packard, Siemens, Teradyne and Texas Instruments. The Company
is also a leading provider of power supplies to electronic distribution
customers in the U.S., including Arrow/Pemco, Future Electronics, Kent
Electronics, Pioneer Standard Electronics and Sterling/Marshall Electronics.

INDUSTRY AND MARKET OVERVIEW

     Power supplies perform many essential functions relating to the supply,
regulation and distribution of electrical power within electronic equipment.
Electronic systems require a precise and constant supply of electrical power at
one or more voltage levels. Traditional power supplies, known as AC/DC, convert
alternating current ("AC") from a primary power source, such as a utility
company, into a precisely controlled direct current ("DC"). Virtually every
electronic device that plugs into an AC wall socket requires some type of AC/DC
power supply. DC/DC converters modify one DC voltage level to other DC levels to
meet the needs of various electronic subsystems and components. Power supplies
are also used to regulate and monitor voltages to protect the electronic
components from surges or drops in voltage, to perform functions that prevent
electronic equipment from being damaged by its own malfunction, or to provide
back-up power in the event that a primary power source fails.

 MERCHANT AND CAPTIVE MANUFACTURERS.  Merchant manufacturers like the Company
design and manufacture power supplies for use by others. Captive manufacturers
are OEMs that design and manufacture power supplies in-house for use within
their own products.

 CUSTOM AND STANDARD PRODUCTS.  Custom power supplies are designed for a
specific customer to meet the exact form, fit and function for a specific
application. Custom products are characterized by (i) long lead times of 4 to 12
months from initial prototype to full production; (ii) significant up-front
engineering costs; and (iii) relatively high volume

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                                       3

production requirements. Standard power supplies are products designed to 
appeal to a wide range of customers and applications. Standard power supplies 
offer benefits to the OEM in that there are no up-front engineering charges 
or minimum order quantities and the product is readily available, which 
allows the OEM to reduce its time-to-market for new products. In addition, 
standard products have lower risks associated with technology, production 
ramps, and customer product qualification. Modified standard power supplies 
are standard products that have been altered in a way that does not change 
the basic product architecture. Modified standard products are characterized 
by (i) short lead times; (ii) low up-front engineering costs; and (iii) small 
minimum order quantities.

PRODUCTS

     The Company's power supplies encompass both standard and modified standard
products, as well as a unique modular high-power product line. Standard power
supplies are not typically industry-wide standards; rather, they are power
supplies that a company manufactures as its standard catalog products that can
be used for many different applications. 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. Modified standard products are the Company's standard
products that have been slightly modified to meet a customer's needs.
Power-One's unique modular designs have allowed it to create more than 1,400
configurations of high-power supplies with custom-like features that meet its
customers' diverse requirements. In contrast to custom products, Power-One's
standard and modular designs reduce time-to-market and minimize costs for new
product introductions. The Company is benefiting from the proliferation of
electronic products and services, from the increasing demand for electronic
equipment and from the shorter product life cycles brought about by today's
changing technology. 

     The Company has developed its extensive catalog of power supply products
over the past 20 years. The Company produces over 700 standard and modified
standard power supplies and converters, as well as unique modular power supplies
that the Company has sold in over 1,400 configurations. All of these products
are sold under the Power-One brand name. These products cover a broad range of
applications, from 1 to 30 watts for DC/DC converters and from 5 to 4,000 watts
for AC/DC power supplies.

     The Company's products are divided into the following main categories: 

 LINEAR.  Power-One is an industry leader in standard linear AC/DC products and
has manufactured linear products since the Company's founding in 1973. Linear
products offer low noise and excellent voltage regulation specifications,
characteristics required for specialized applications such as analog to digital
converters and operational amplifiers used in the instrumentation industry.
Certain applications that require low noise, such as high precision medical
equipment, will continue to use linear products. The Company, however, expects
the linear business, which accounted for approximately 23% of its revenues in
1997, to decline slightly in the coming years as customers redesign their
products to use switching power supplies.

 LOW-RANGE POWER SWITCHERS.  The Company developed a line of low-range power
switchers as a complement to its linear power supply products in the early 1980s
when switching technology first became stable and cost-effective. A second
generation of low-range power products was developed by Power-One in 1989. These
switchers use enhanced, smaller components and a higher quality regulation
circuitry which allows the product to work in a broad range of applications
similar to those of the mature low-range power switchers described above. These
products use a universal input voltage circuit which automatically determines if
the AC line is 110 or 220 volts, allowing the products to be used worldwide
without modification. Power-One has recently introduced a third generation of
low-range power switchers which are targeted at the higher volume customers and
the communications markets. This new series provides Power Factor Correction,
which will be required to meet European standards in the coming years and which
allows more power to be taken from a standard AC wall outlet. 

 MID-RANGE POWER SWITCHERS.  Power-One's mid-range power switchers were
introduced in 1993.

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                                       4

These modular products are configured at the Company's factories into a broad 
array of voltage and current combinations, making them ideal for those 
customers requiring quick turnaround without incurring charges for custom 
development. In September 1994, the Company began shipping a new line of 
dedicated, non-modular products to provide its customers with additional 
low-cost alternatives within the mid-range power area. The Company expanded 
the mid-range power line's features and options in 1995 to include Power 
Factor Correction. 

 HIGH-RANGE POWER SWITCHERS.  The Company's high-range power switchers were
introduced in 1987. This line was one of the industry's first modular products
within the high-power range. The Company has been able to meet almost all of its
customers' high-power requirements with its modular high-range power line. In
1997, the Company expanded the upper-end of its high-power range from 2,500
watts to 4,000 watts. 

 DC/DC CONVERTERS.  The Company manufactures over 80 different types of DC/DC
converters that range in power from 1-30 watts. Unlike AC/DC products, DC/DC
converters are typically compatible with power supplies manufactured by others
and can often replace competitors' DC/DC products. DC/DC converters of more than
30 watts typically involve high density packaging techniques. The Company has
begun expanding its DC/DC line beyond 30 watts, although it has not had any
prior experience with high density packaging. There can be no assurance that
this line, if implemented, will be successful or that the Company will be able
to produce high density packaged products. See "Risk Factors-Dependence on
Electronic Equipment Industries; Technological Change." 

 CUSTOM PRODUCTS.  Power-One designs and manufactures custom products for select
OEM customers to meet unique requirements in size, wattage or configuration. The
volume of a custom product run must be sufficiently large to offset the tooling
and design charges incurred in association with the customization. While
Power-One's emphasis has been on standard products, the Company believes its
large technology base of standard products and standard circuit designs can be
used as "platforms" to allow the Company to quickly and effectively address the
needs of the "custom" market.

CUSTOMERS

     The Company sells its power supplies to OEMs and distributors and,
indirectly through its distributors, to over 10,000 customers. The percentages
of products sold by the Company to distributors and OEM customers, respectively,
in 1995, 1996 and 1997, were as follows: 

<TABLE>
<CAPTION>
                                          1995        1996      1997
                                          ----        ----      ----
     <S>                                   <C>         <C>       <C>
     Distributors                          48%         51%       43%
     OEM Customers                         52%         49%       57%
</TABLE>


     Power-One's base of OEM customers are in diverse market segments such as 
communications, automatic test equipment, medical equipment, and industrial. 
Many of the OEMs are Fortune 500 companies and leaders in their respective 
industries. Power-One's top 25 OEM customers include well-recognized names 
such as Cisco Systems, General Electric, Hewlett-Packard, Siemens, Teradyne 
and Texas Instruments. OEM sales in 1996 and 1997 were to the following 
market segments:

<TABLE>
<CAPTION>

        MARKET SEGMENT (1)                               1996      1997
        ------------------                               ----      ----
        <S>                                               <C>       <C>
        Communications                                    26%       30%
        Automatic Test Equipment/Semiconductor Equip      21%       32%
        Medical Equipment                                 22%       12%
        Industrial                                        10%        9%
        Retail Equipment/Gaming                           11%        6%
        Computer and Other                                10%       11%
</TABLE>

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                                       5

(1)  The Company does not track the percentage of sales to each market
     segment by its distributors. The Company believes, however, that the
     highest percentage of such sales are to the industrial segment.

     The Company has found that OEMs generally prefer not to change suppliers
once a power supply has been designed into a product, due to the fact that such
change often requires time-consuming and costly re-testing and re-certification
by one or more regulatory agencies. It is also very difficult for another
manufacturer to precisely replicate a power supply unit which is already
incorporated into a product. Thus, once the Company has supplied an end-user
with a quality product, the Company is usually able to retain the customer for
the duration of the life-cycle of that customer's particular product.

     SALES AND MARKETING

     At December 31, 1997, Power-One's sales department consisted of 22
professionals, including five regional sales managers strategically located
across the country, three strategic account managers, three product line
managers and a comprehensive technical support and service staff. This group
sells Power-One's products to distributors and OEMs.

     The Company has contractual agreements with approximately 20 manufacturers'
representatives, who collectively have more than 200 salespeople in more than 40
offices throughout the U.S. These manufacturers' representatives, who are
indirectly managed by Power-One's regional managers, are the Company's primary
sales interface to OEMs. While the Company's manufacturers' representatives
handle a variety of products, none of them represent a competing power supply
manufacturer. 

 SMALL ACCOUNT SALES BY INDUSTRIAL DISTRIBUTORS.  The Company estimates that
more than 10,000 customers purchased Power-One products through industrial
electronic distributors in 1997. Most of these customers are small electronics
companies who purchase their power supplies from industrial distributors, either
directly or through catalogs. Most small customers prefer to purchase all of
their electronic components, including power supplies, from distributors with
whom they have an established business relationship and terms of credit. 

     Power-One believes it has one of the largest domestic electronic
distribution networks in the power supply industry. The Company has contractual
agreements with over 30 distribution companies who have locations in more than
160 cities worldwide. Twenty-two of the distribution companies are located in
the U.S. and, collectively, have branches in every major city in the U.S. and
Canada. Many of these distributors have been selling Power-One's products for
over 10 years. Power-One believes that its distribution network is enhanced by
customer loyalty to the Power-One brand and the Company's wide range of
standardized products. Sales to the Company's largest distributor, Pioneer
Standard Electronics, accounted for 11%, 15% and 12% of the Company's net sales
in 1995, 1996 and 1997, respectively. No other distributor accounted for more
than 10% of the Company's annual net sales during the last three years. The
Pioneer relationship has been in existence for more than ten years. See "Risk
Factors-Reliance on Major Customers."

 OEM AND STRATEGIC ACCOUNT SALES.  The Company does not rely on any one customer
or industry for the majority of its sales. Teradyne, which accounted for 11% of
the Company's net sales in 1995, 8% in 1996 and 15% in 1997, and Cisco, which
accounted for 11% of net sales in 1997, are the only OEM customers to account
for more than 10% of the Company's net sales in any year since 1994. The
Company's top 25 OEM customers accounted for approximately 48% of the Company's
total sales in 1997. The percentage of the Company's OEM business is expected to
rise in the future, as more emphasis is placed on strategic accounts. In 1997,
the Company formed a strategic accounts program that specifically targets
existing and potential customers who are leaders in high-growth industries and
who have the potential of ordering over $3 million of power supplies annually.
See "Risk

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                                       6

Factors-Reliance on Major Customers."

 ADVERTISING.  Power-One's advertising and promotional programs have helped the
Company achieve what it believes is one of the most recognized brand names in
the power supply industry. The Company regularly advertises in a variety of
industry journals to generate customer awareness and to reinforce the Power One
brand. Advertising and promotion expenses have historically been approximately
0.75% of sales. The Company also advertises through the use of press releases,
direct mail programs and catalogs. The Company maintains an Internet web site at
"www.power-one.com" which was upgraded during 1997. The web site now features
"PROBE," an interactive search engine that helps customers select the right
power supply depending on their application needs. The web site also features a
technical reference section, regulatory agency specifications, application notes
and a corporate overview section which further amplifies the Company's
capabilities.

RESEARCH AND DEVELOPMENT; ENGINEERING

     The Company's product research and development is directed from its 
facilities in Camarillo, which is anchored by an engineering department 
staffed by 55 full-time employees that also coordinate research and 
development efforts at the Company's subsidiaries Poder-Uno and P-E which 
have an engineering staff of 38 and 15, respectively. The Company's research 
and development activities are principally directed to the development of new 
standard power supply products to satisfy general customer needs and to 
"sustaining engineering" used to support existing products and customers. 
Within its target markets, the Company strives to expand the number of 
products using its power supplies by approaching current and potential 
customers and discussing their future product directions and requirements. A 
portion of the engineering activities are involved with creating custom 
products, with the related expense of such work being partially reimbursed by 
the customer through non-recurring engineering charges. Power-One's research 
activities also focus on improved power conversion efficiency, product and 
component cost reductions, improved ease of manufacturing, and reduction of 
product size. Customers in the Company's target markets require product 
designs to be completed quickly. Thus, the Company focuses on reducing design 
cycle time without reducing the quality of the design.

MANUFACTURING

     A typical power supply consists primarily of a printed circuit board,
electronic components, transformers and other electromagnetic components, and a
sheet metal chassis. The production of the Company's power supplies entails the
assembly of circuit boards using pin-through-hole and automated surface mount
interconnection technology.

     Power-One generally uses the low-cost labor force available in the
Dominican Republic and Mexico to manufacture and assemble its products. The
Company typically manufactures and assembles most of its low-range power
products in the Dominican Republic; the majority of the remaining products are
manufactured in Mexico. Some of the Company's high-power products are assembled
in Camarillo. The Company also performs some light manufacturing in Puerto Rico,
a facility that is primarily used as a distribution center. After the Company
manufactures products in the Dominican Republic, it transports the finished
products to its Puerto Rico facility. The products are then shipped to either
the Company's California headquarters or directly to customers. The Company
believes that its workers produce high-quality power supplies in an efficient,
high-yield and cost-effective manner.

     Many of the Company's 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, Power-One designs and manufactures power supplies in accordance with
the certification requirements of many international agencies, such as
Underwriters Laboratories Incorporated (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 MANAGEMENT

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                                       7

     Quality products and responsiveness to the customer's needs are of critical
importance in Power-One's efforts to compete successfully. The Company strives
for continuous improvements in its processes, products, and services. The
Company's Camarillo facility is certified to ISO 9001, and its foreign locations
are certified to ISO 9002. Through its commitment to customer service and
quality, the Company believes it is able to provide superior value to its
customers.

SUPPLIERS

     Power-One typically designs products using components readily available
from several sources and attempts to avoid components that are only attainable
through one source. Although some components are sourced from only one
manufacturer, raw materials are generally available in large quantities from a
number of different suppliers. The Company has a number of volume purchase
agreements ("VPAs") with selected suppliers of key items such as wire, fuses,
resistors, connectors, capacitors, sheet metal and semiconductors. The use of
VPAs, typically 12 to 18 months in duration, are designed to provide Power-One
constant availability of required supplies, thereby reducing inventory expense
and producing substantial cost savings from volume discounts. The Company has
never had a significant supply shortage that has materially adversely affected
the Company. There can be no assurance, however, that such a supply shortage
will not occur in the future, particularly as the expanding electronics industry
increases demand for supplies. See "Risk Factors-Supplier Dependence." 

MANAGEMENT INFORMATION TECHNOLOGY; YEAR 2000 CONVERSION

     Management information systems include various databases to measure and
improve delivery, process yields, quality and reliability, designs and
performance. The Mexico and Camarillo facilities are fully integrated, while the
Caribbean and Camarillo operations are partially integrated. A wide area
communications network is installed in all manufacturing facilities.
Manufacturing software is used in conjunction with MRP II. 

     The Company is currently in the process of planning to replace its 
Enterprise Resource Planning ("ERP") system with a fully integrated Year 2000 
certified system to be in place by the end of 1999. The key objectives of the 
new IT systems software are to further improve the Company's IT 
infrastructure by providing to management the tools available in a new 
generation of systems software to facilitate rapid information retrieval, to 
allow for flexibility in modifications related to business growth, to 
facilitate business systems integration of acquired companies, to provide a 
clear audit trail detailing the source of information, and to be fully Year 
2000 compliant and certified. This ERP system conversion project will require 
significant planning and implementation resources on a company-wide basis and 
will compete for management's time accordingly.

     Although the Company believes that it is taking appropriate measures
against disruption of its systems related to the Year 2000 issue, there can be
no assurance that the Company will identify all of the problems in advance or be
able to successfully correct all of the problems that are identified. There can
also be no assurance that the Company's suppliers and customers, or the
distributors and manufacturers' representatives with which it does business,
will not be adversely affected by the Year 2000 issue. 

     In the event that the Company's new ERP system does not achieve anticipated
results, orders and customer deliveries could be adversely affected, which could
have a material adverse impact on the Company's financial statements. Similarly,
to the extent that the Company's suppliers, distributors and manufacturers'
representatives do not correct their computer systems, the Company's results
could be adversely affected.

BACKLOG

     Sales are made 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. Power-One's backlog increased 86.1% to $32.2 million
at December 31, 1997, as compared to $17.3 million at December 31, 1996.
Although customers may cancel or reschedule deliveries without penalty, the
Company's backlog has historically been a reliable

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                                       8

indicator of future financial results. The Company does not expect backlog to 
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 sales 
increase. See "Risk Factors-Fluctuations in Quarterly Results." 

COMPETITION

     The Company believes that there are more than 300 merchant power supply
manufacturers in the U.S. with Power-One being one of the 15 largest.
Power-One's competition in the highly fragmented and intensely competitive power
supply market includes companies located throughout the world, some of which
have advantages over the Company in terms of labor and component costs, and
which may offer products comparable in quality to those of the Company. Certain
of the Company's competitors have greater resources and geographic presence than
the Company. Management believes that the principal bases of competition in
Power-One's targeted market are breadth of product line, quality, reliability,
technical knowledge, flexibility, readily available products and, to a lesser
degree, price. However, in times of an economic downturn, or when dealing with
high-volume orders, the Company believes price becomes an increasingly important
competitive factor. Additionally, captive power supply manufacturers are
expected to provide minimal amounts of competition to the Company since most
OEMs focus on their core businesses; however, there can be no assurance that
OEMs will not present greater competition to the Company in the future. 

INTELLECTUAL PROPERTY MATTERS

     Certain equipment, processes, information and knowledge developed by
Power-One and used in the design and manufacture of its products are regarded as
proprietary by the Company. The Company relies on a combination of trade secret
and other intellectual property laws, confidentiality agreements executed by
most of its Camarillo employees, and other measures to protect its proprietary
rights. Power-One currently holds three patents in the U.S. and one related
patent registered in Europe, Japan, Taiwan, and Mexico relating to proprietary
technology used in its products, as well as four trademarks. The remaining terms
for these trademarks vary from one to six years and, subject to use, the Company
expects to renew each mark for another 10 to 20 years. The Company's U.S.
patents expire in 2006, 2007 and 2008, its patent for Europe, Japan and Mexico
expires in 2008 and its patent for Taiwan expires in 2005. Patents and other
proprietary information are of value to the Company, but they are not key
factors in determining the Company's overall success, which depends principally
on its emphasis on quality, reliability, service and value.

     The Company's DC/DC converters are manufactured under a license from Calex
which was entered into in 1996. Under the license agreement Power-One, subject
to certain exceptions and Calex' right to manufacture its own products, received
the exclusive right through 2001, which extends to 2006 if the Company is not in
default, and a non-exclusive right after 2001, to manufacture all Calex standard
DC/DC products of less than 60 watts as well as all new standard DC/DC products
of less than 60 watts that may be developed prior to the end of 2001 by Calex.
The Company pays a fixed royalty for the first three years of the license and
has no payment obligations thereafter. Calex also has obtained the right to
purchase materials from the Company's suppliers and pays the Company a royalty
on such purchases. 

EMPLOYEES

     At December 31, 1997, the Company had a total of 2,335 full-time employees,
of whom 210 were employed in California, 29 were employed in Puerto Rico, 1,038
were employed in Mexico and 1,058 were employed in the Dominican Republic. 

     The Company believes that its continued success depends, in part, on its
ability to attract and retain qualified personnel. The Company considers its
relations with its employees to be good. None of the Company's employees is
represented by a union.

RISK FACTORS

DEPENDENCE ON ELECTRONIC EQUIPMENT INDUSTRIES; TECHNOLOGICAL CHANGE

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                                       9

     Many of Power-One's existing customers are in the electronic equipment
industries and produce products that are subject to rapid technological change,
obsolescence and large fluctuations in product demand. These industries are
characterized by intense competition and end-user demand for increased product
performance at lower prices. Power-One's customers make similar demands on their
suppliers, including the Company. There can be no assurance that the Company
will properly assess developments in the electronic equipment industries and
identify product groups and customers with the potential for continued and
future growth.

     If the Company does not adequately anticipate significant technological
advances or develop and market product enhancements or new products that respond
to any significant technological change in a timely manner, the Company's
financial statements could be materially adversely affected. There can be no
assurance that the Company's research and development efforts will result in
commercially successful new technology and products in the future. In addition,
as the technical complexity of new products increases, it may become
increasingly difficult to introduce new products quickly and according to
schedule, and there can be no assurance that any such new products will be
accepted by the Company's customers. See "Business-Customers." 

RELIANCE ON MAJOR CUSTOMERS

     During 1996 and 1997, the Company's top three customers for each period,
consisting of two distributors and one OEM in 1996 and one distributor and two
OEMs in 1997, accounted for approximately 30% and 39%, respectively, of the
Company's net sales. The loss of any of the Company's major customers could have
a material adverse effect on the Company's financial statements. The Company's
customers are not contractually obligated to utilize the Company's products or
services. There can be no assurance that a customer will not transfer, reduce
the volume of, or cancel a power supply order, each of which could adversely
affect the Company's financial statements. In addition, there is a risk that a
distributor could cease distributing the Company's products, either because it
no longer desires to distribute the Company's products or because the
distributor merges with another company that distributes competing products. In
the summer of 1997, one of the Company's primary distributors, who accounted for
5.6% of the Company's total sales in 1996, merged with another distributor. As a
result, the distributor no longer carries the Company's products. While the
Company believes, based on its discussions with various distributors and other
customers, that most of the major end-users who previously purchased the
Company's products from this distributor will continue to purchase such products
through other distributors or directly from the Company, there is no assurance
that such a termination in the future will not cause a loss of sales which could
have a material adverse effect on the Company's financial statements. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business-Sales and Marketing." 

FLUCTUATIONS IN QUARTERLY RESULTS

     The Company's quarterly results of operations have fluctuated in the past
and may continue to fluctuate in the future. Variations in volume production
orders and in the mix of products sold by the Company have significantly
affected net sales and gross profit. Operating results generally may also be
affected by other factors, including the receipt and shipment of large orders,
plant utilization, product mix, manufacturing process yields, the timing of
expenditures in anticipation of future sales, raw material availability and
pricing, product and price competition, the length of sales cycles and economic
conditions in the electronics industry. Many of these factors are outside the
control of the Company. 

     The Company does not obtain long term purchase orders or commitments from
its customers, and a substantial portion of sales in a given quarter may depend
on obtaining orders for products to be manufactured and shipped in the same
quarter in which those orders are received. Sales for future quarters may be
difficult to predict. The Company relies on its estimates of anticipated future
volumes when making commitments regarding the level of business that it will
seek and accept, the mix of products that it intends to manufacture, the timing
of production schedules and the levels and utilization of

<PAGE>
                                       10

personnel, inventory and other resources. A variety of conditions, both 
specific to the individual customer and generally affecting the customer's 
industry, may cause customers to cancel, reduce or delay orders that were 
previously made or anticipated. At any time, a significant portion of the 
Company's backlog may be subject to cancellation or postponement without 
penalty. The Company cannot ensure the timely replacement of canceled, 
delayed or reduced orders. Significant or numerous cancellations, as well as 
reductions or delays in orders by a customer or group of customers, could 
materially adversely affect the Company's financial statements. The Company's 
expense levels are relatively fixed and are based, in part, on expectations 
of future revenues. Consequently, if revenue levels are below expectations, 
the Company's financial statements could be materially adversely affected. 
Additionally, if the Company increases its percentage of high-volume 
business, the Company's gross margin will decrease since high-volume power 
supply sales typically have a lower gross margin than small to medium-volume 
sales. High-volume orders, especially custom orders, if canceled, may 
substantially increase the risk of inventory obsolescence, write-offs due to 
excess manufacturing capacity and collection problems. Due to all of the 
foregoing factors, in some future quarter or quarters the Company's operating 
results may be below the expectations of securities analysts and investors 
and the Company's gross margins may decrease. In such event, the price of the 
Company's Common Stock could likely be materially adversely affected. See 
"Management's Discussion and Analysis of Financial Condition and Results of 
Operations." 

DEPENDENCE ON INTERNATIONAL OPERATIONS

     The Company has substantially all its manufacturing operations outside of
the U.S. and such operations are subject to certain inherent risks, including
tariffs, quotas, taxes and other market barriers, political and economic
instability including work stoppages or strikes, restrictions on the export or
import of technology, potentially limited intellectual property protection,
difficulties in staffing and managing international operations and potentially
adverse tax consequences. There can be no assurance that any of these factors
will not have a material adverse effect on the Company's financial condition or
results of operations. In addition, while the Company transacts business
predominantly in U.S. dollars and most of its revenues are collected in U.S.
dollars, a substantial portion of the Company's labor costs are denominated in
other currencies such as the Mexican peso and the Dominican Republic peso and a
portion of the Company's material costs are denominated in Asian and European
currencies. Fluctuations in the value of the U.S. dollar relative to foreign
currencies will affect the Company's cost of goods sold and operating margins
and could result in exchange losses. The impact of future exchange rate
fluctuations on the Company's financial statements cannot be accurately
predicted. Historically, the Company has not actively engaged in substantial
exchange rate hedging activities. 

SUPPLIER DEPENDENCE

     The Company is dependent on its suppliers for timely shipments of
components and typically uses a primary source of supply for each component used
in its products. Establishing alternate sources of supply, if needed, could take
a significant period of time which might result in supply shortages for the
Company. In some cases components are sourced from only one manufacturer and an
interruption in supply could materially adversely affect the Company. Any
shortages of particular components may adversely affect the Company's business
by increasing product delivery times, increasing costs associated with
manufacturing, and reducing gross margins. Additionally, such shortages could
cause a substantial loss of business due to shipment delays. Any significant
shortages or price increases of such components could have a material adverse
effect on the Company's financial statements. The electronic equipment industry
is currently, and for the past few years has been, experiencing significant
growth. If this industry continues to grow, it is foreseeable that a shortage of
components and a resulting increase in the price of the components may occur
which could have a material adverse effect on the Company's financial
statements. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business-Suppliers." 

ABILITY TO ATTRACT AND RETAIN KEY PERSONNEL

<PAGE>
                                       11

     The success of the Company depends to a significant degree on the efforts
of the Company's senior management, especially its Chief Executive Officer,
Chief Financial Officer and other executive officers. The Company's operations
may be adversely affected if one or more members of senior management cease to
be active in the Company. The Company's ability to maintain and enhance product
and manufacturing technologies and to manage any future growth will also depend
on its success in attracting and retaining personnel with highly technical
skills, and the competition for such qualified technical personnel is intense
due to the relatively limited number of power supply engineers worldwide. There
can be no assurance that the Company will be able to attract and retain
qualified management or other highly technical personnel. See
"Business-Employees." 

RISKS RELATING TO GROWTH

     The Company's growth, through acquisition or otherwise, may require
additional personnel at all levels of the Company, including highly technical
personnel and management, and there can be no assurance that the Company will be
able to attract and retain such individuals. Moreover, the Company's ability to
make successful acquisitions is dependent on numerous factors including the
Company's ability to identify acceptable acquisition opportunities, obtain
adequate financing on terms acceptable to the Company, consummate acquisitions
and successfully integrate new businesses into the Company. The Company may
incur additional indebtedness in connection with a future business acquisition,
and the incurrence of substantial amounts of debt in connection with such
acquisitions could increase the risk of the Company's operations. If the
Company's cash flow and existing working capital are not sufficient to fund its
general working capital requirements or to service its indebtedness, the Company
would have to raise additional funds through the sale of its equity securities,
the refinancing of all or part of its indebtedness or the sale of assets or
subsidiaries. There can be no assurance that any of these alternatives to raise
additional funds would be available in amounts sufficient for the Company to
meet its obligations. The Company has not completed any acquisitions, and there
can be no assurance that the Company will be successful in making future
acquisitions. Failure to effectively integrate acquired businesses into the
Company could adversely affect the Company's financial statements.

MANUFACTURING CAPACITY

     The Company believes its long-term competitive position depends in part on
its ability to increase manufacturing capacity and there can be no assurance
that the Company will be able to acquire sufficient capacity or successfully
integrate and manage such additional facilities. The Company is currently
utilizing approximately 85% of its manufacturing capacity and expects that, when
construction of the new facility in Mexico is completed in 1998, its present
operations would utilize approximately 65% of its manufacturing capacity.
Increasing manufacturing capacity may require substantial additional capital,
and there can be no assurance that such capital will be available. In addition,
the Company's expansion of its manufacturing capacity has increased and may
continue to increase its fixed costs, and the future profitability and gross
margins of the Company will partially depend on its ability to utilize its
manufacturing capacity in an effective manner. The failure to obtain sufficient
capacity or to successfully integrate and manage additional manufacturing
facilities could adversely impact the Company's relationships with its customers
and suppliers and materially adversely affect the Company's financial
statements. The Company has large manufacturing facilities in various locations,
and a natural disaster in any such area that results in an interruption of
manufacturing could have a material adverse effect on the Company's financial
statements. Additionally, if the Company is unable to successfully renew any of
its leases, it could be forced to relocate; any delay in relocating may result
in an interruption of manufacturing which could have a material adverse effect
on the Company's financial statements. See "Business-Manufacturing" and
"Facilities." 

CONCENTRATION OF OWNERSHIP

     The Stephens Group, Inc. and its affiliates (collectively, the 
"Stephens Investors"), according to information obtained by the Company 
including filings made by the Stephens Investors as of March 15,

<PAGE>
                                       12

1998, own approximately 45.0% of the Company's outstanding Common Stock. 
Accordingly, the Stephens Investors may effectively elect the entire Board of 
Directors of the Company (the "Board" or the "Board of Directors"), approve 
any action requiring stockholder approval (except as otherwise provided by 
law) and otherwise control its management, operations and affairs.

RISKS RELATED TO GOVERNMENT REGULATIONS AND PRODUCT CERTIFICATION

     The Company's operations, like most businesses, are subject to general
laws, regulations and government policies in the U.S. and abroad relating to
areas such as minimum wage, employee safety and other health and welfare
regulations. Additionally, the Company's product standards are certified by
agencies in various countries including the U.S., Canada, Germany, and the
United Kingdom. As many customers will not order uncertified products, changes
in such certification standards could negatively affect the demand for the
Company's products, result in the need to modify its existing products or affect
the development of new products, each of which may involve substantial costs or
delays in sales and could have a material adverse effect on the Company's
financial statements. 

ENVIRONMENTAL RISKS

     Power-One is subject to federal, state and local environmental laws and
regulations (in both the U.S. and abroad) that govern the handling,
transportation and discharge of materials into the environment, including into
the air, water and soil. Environmental laws could become more stringent over
time, imposing greater compliance costs and increasing risks and penalties
associated with violations. Should there be an environmental occurrence,
incident or violation, the Company's financial results may be adversely
affected. The Company could be held liable for significant damages for violation
of environmental laws and could also be subject to a revocation of certain
licenses or permits, thereby materially adversely affecting the Company's
financial statements. 

ITEM 2 - PROPERTIES

     The Company's facilities, all of which are leased by the Company, are
summarized as follows: 

<TABLE>
<CAPTION>
        FACILITY                    PRIMARY ACTIVITY         APPROXIMATE         EXPIRATION
        --------                    ----------------        SQUARE FOOTAGE        OF LEASE
                                                            --------------     -------------
<S>                             <C>                            <C>             <C>
Camarillo, CA                   Administration, Research        98,000          August 2004
                                and Development,
                                Manufacturing, Sheet
                                Metal Fabrication,
                                Central Storage,
                                Marketing and Sales
Santo Domingo, Dominican        Low Power Manufacturing         65,000         January 2000(1)
  Republic                      and Assembly
Isabela, Puerto Rico            Assembly and                    46,000           March 1998(2)
                                Administration
San Luis, Mexico                Manufacturing and               33,000            July 1999(3)
                                Assembly
San Luis, Mexico                Manufacturing and               11,000             May 1999(4)
                                Assembly
San Luis, Mexico                Manufacturing and               22,000             May 1999(4)
                                Assembly
</TABLE>

(1)  Subject to the Company's three consecutive two-year renewal options.
(2)  Subject to an option for an additional 5 years which, it is anticipated,
     will be exercised.
(3)  Subject to the Company's three consecutive one-year renewal options.
(4)  Subject to an option for one additional year.

     In April 1996, Power-One purchased approximately 404,000 square feet of
land in San Luis, Mexico. The Company commenced construction of a new 110,000
square foot manufacturing facility on this land in early 1998, with an expected
completion before the end of 1998.

<PAGE>
                                       13

Upon completion, the current leased facilities in San Luis would be phased 
out. As with any construction project, this new facility will involve many 
risks and uncertainties, including, but not limited to, material and labor 
shortages, work stoppages, legal challenges, design changes and weather. 
Further, engineering, environmental or geological problems and governmental 
regulations and approvals could give rise to delays or cost overruns.

ITEM 3 - LEGAL PROCEEDINGS

     The Company is involved in routine litigation arising in the ordinary
course of its business. While the outcome of lawsuits against the company cannot
be predicted with certainty, 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. 

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

     None.

EXECUTIVE OFFICERS

     Set forth below is certain information concerning the executive officers of
the Company. 

<TABLE>
<CAPTION>
           NAME        AGE (1)                  POSITION
           ----        ------                   --------
    <S>                 <C>      <C>
    Steven J. Goldman     40     President, Chief Executive Officer and 
                                    Chairman of the Board
    Eddie K. Schnopp      39     Vice President-Finance and Logistics, Chief
                                 Financial Officer and Secretary
    Dennis R. Roark       51     Executive Vice President
    Brad W. Godfrey       38     Vice President-Worldwide Manufacturing
    David J. Hage         51     Vice President-Sales and Marketing
    Donna M. Koep         37     Vice President-Human Resources
    John A. Martins       38     Vice President-Quality Assurance
</TABLE>
___________

(1)  As of March 31, 1998.


 STEVEN J. GOLDMAN.  Mr. Goldman became the President and Chief Executive
Officer of the Company in 1990 and was named Chairman of the Board in February
1997. Mr. Goldman, who joined the Company in 1982, held several positions in the
Company from 1982 through 1988, including Vice President of Engineering. From
1988 to 1990, Mr. Goldman was a Senior Vice President and the Chief Financial
Officer of the Company. 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. 

 EDDIE K. SCHNOPP.  Mr. Schnopp was appointed Vice President of Finance and
Logistics of the Company in 1993 and Secretary and Chief Financial Officer of
the Company in 1995. Mr. Schnopp joined Power-One as a member of its Finance
department in 1981 and became its Controller in 1990. He received his B.S.
degree in Accounting from California State University Northridge and is
currently pursuing his M.B.A. degree. Mr. Schnopp is married to Ms. Koep. 

 DENNIS R. ROARK.  Mr. Roark was appointed Executive Vice President of the
Company in 1990. Mr. Roark joined Power-One in 1988 and held the positions of
Director of Research & Development and Vice President of Engineering from 1988
to 1993. Prior to joining Power-One, 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

<PAGE>
                                       14

Polytechnic University-Pomona. 

 BRAD W. GODFREY.  Mr. Godfrey was appointed Vice President of Worldwide
Manufacturing for Power-One in 1993. He joined PE in 1988 as Plant Manager and
held that position until being appointed President of PE in 1990, a position he
held until he became a Vice President of the Company in 1993. Prior to joining
Power-One, Mr. Godfrey was the owner of Reflections Manufacturing, a furniture
and glass manufacturing company in Canada. 

 DAVID J. HAGE.  Mr. Hage was appointed Vice President of Sales and Marketing
when he joined the Company in 1993. Prior to joining Power-One, Mr. Hage was the
Executive Vice President of Power Convertibles Corporation, a subsidiary of
Burr/Brown, Inc. His previous experience includes Marketing Manager of
International Electric Utility and Field Systems Support Manager at Honeywell,
and Director of Marketing Systems and Director of Marketing Planning at
SGS-Thomson Semiconductors. Mr. Hage received his B.S. degree in Electrical
Engineering from Northern Arizona University and his M.B.A. degree from Arizona
State University. 

 DONNA M. KOEP.  Ms. Koep was appointed Vice President of Human Resources for
the Company in 1995. She joined Power-One as a member of the Human Resource
staff in 1978 and has worked in various positions of increasing responsibility
within the Company. From 1986 to 1995 Ms. Koep served as the Company's Director
of Human Resources. Ms. Koep is married to Mr. Schnopp. 

 JOHN A. MARTINS.  Mr. Martins joined the Company in 1992 as the Director of
Quality Assurance and was appointed Vice-President of Quality Assurance in 1995.
Prior to joining the Company, Mr. Martins held the position of Director of
Quality Assurance for Deltec and PowerMate. He received his B.S. degree in
Industrial Engineering from New Jersey Institute of Technology and is certified
as an ISO-9000 Assessor. 

     The officers of the Company serve at the discretion of the Board. Each
director of the Company serves until such director's successor is elected and
qualified or until the director's death, retirement, resignation or removal. 

PART II

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

     The Common Stock of the Company 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 the Company's shares first became publicly traded. Prior to
October 1, 1997, there was no established public trading market for the
Company's Common Stock.

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

The number of holders of record of the Company's Common Stock as of March 15,
1998, was 135.

DIVIDEND POLICY

     The Company anticipates that all future earnings will be retained to
finance the continuing development of its business and does 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, the
general financial condition of the Company and general business conditions. In
addition, the Company's credit facility restricts the Company's ability to pay
dividends. See "Management's Discussion and Analysis of Financial Condition and
Results

<PAGE>
                                       15

of Operations-Liquidity and Capital Resources." 

     The Company's subsidiary, P-E, does not currently intend to declare any
dividends. If P-E does declare and pay a dividend to the Company, the Company
may be forced to pay taxes at the statutory rates on such amount. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations-Certain Income Tax Matters." 

ITEM 6 - SELECTED FINANCIAL DATA

GENERAL

     Prior to September 27, 1995, Power-One, Inc., a California corporation
("Power CA"), Power-Electronics, Inc., a Puerto Rico corporation ("P-E"), and
Poder Uno de Mexico, S.A. de C.V., a Mexican corporation ("Poder Uno"), 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. The financial statements contained in this Annual
Report for periods prior to October 1, 1995 reflect the combined results and
financial condition of Power CA, P-E and Poder Uno (collectively referred to for
the period prior to September 30, 1995 as the "Predecessor Company"). 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
Investors and the Company's previous owners (collectively, the "Acquisition").
The Stephens Investors acquired approximately 65% of the membership interests of
Power-One LLC, with the remainder being acquired by the Company's senior
management. The aggregate amount of consideration paid by the Stephens Investors
and by the Company's senior management was approximately $15 million as well as
the deferral of approximately $5.3 million that was owed to the Company's senior
management. After the total consideration was determined, the Company's senior
management participated on the same pricing as the Stephens Investors. As of
February 1, 1996, Power-One LLC was reorganized (the "Reorganization") 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. Power-One was incorporated in Delaware in
January 1996, and Power CA was incorporated in California in 1973.

     Power CA had elected to be taxed as an S corporation under the Internal
Revenue Code of 1986, as amended (the "Code"). No federal income tax liability
was incurred by either Power CA (when it was an S corporation) or Power-One LLC,
and the stockholders and members of those entities were directly subject to
federal income taxes on their respective interests in the entities' taxable
income. Power-One is a C corporation and following the Reorganization has paid
federal and state taxes on its income.

<PAGE>
                                       16

                      SELECTED FINANCIAL AND OPERATING DATA
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                       PREDECESSOR   COMPANY(1)(2)                                 COMPANY(1)
                                      --------------------------------------------------------------------------------------
                                        YEAR ENDED    YEAR ENDED    NINE MONTHS    THREE MONTHS    YEAR ENDED    YEAR ENDED
                                       DECEMBER 31,  DECEMBER 31,      ENDED           ENDED      DECEMBER 31,  DECEMBER 31,
                                           1993          1994      SEPTEMBER 30,   DECEMBER 31,       1996          1997
                                           ----          ----          1995             1995          ----          ----
                                                                       ----             ----
<S>                                     <C>            <C>            <C>            <C>            <C>            <C>
 STATEMENT OF OPERATIONS DATA:
     Net sales                            $50,846        $55,702        $52,732        $20,670        $74,210        $91,583
     Cost of goods sold                    34,078         35,751         31,525         14,348         45,305         55,481
                                         --------       --------       --------       --------       --------       --------
     Gross profit                          16,768         19,951         21,207          6,322         28,905         36,102
     Selling expense                        6,366          6,283          5,680          1,778          6,865          7,023
     General and administrative expense     4,222          4,626          4,348          1,760          5,873          6,778
     Engineering expense                    2,655          2,725          2,397          1,064          3,964          3,754
     Quality Assurance expense                972          1,053            919            345          1,585          1,901
     Amortization of intangibles                                                           472          2,003          2,029
     Other expense                                                                                        613
                                         --------       --------       --------       --------       --------       --------
     Total expense                         14,215         14,792         13,344          5,419         20,903         21,485
     Income from operations                 2,553          5,159          7,863            903          8,002         14,617
     Interest expense                        (543)          (629)          (494)        (1,026)        (4,222)        (3,181)
     Other, net                               233              8             33            (36)            12            340
                                         --------       --------       --------       --------       --------       --------
     Income (loss) before income taxes      2,243          4,538          7,402           (159)         3,792         11,776
     Income taxes (3)                         126             75            155             12            396          3,542
                                         --------       --------       --------       --------       --------       --------
     Net income (loss)                     $2,117         $4,463         $7,247          $(171)        $3,396         $8,234
                                         --------       --------       --------       --------       --------       --------
                                         --------       --------       --------
     Less: Preferred stock accretion
       and dividends                                                                         0         $1,415         $1,514
                                                                                      --------       --------       --------
     Net income (loss) attributable to
       common stockholders                                                               $(171)        $1,981         $6,720
                                                                                      --------       --------       --------
                                                                                      --------       --------       --------
     Basic earnings (loss) per
       common share(6)                                                                  $(0.02)         $0.20          $0.58
                                                                                      --------       --------       --------
                                                                                      --------       --------       --------
     Diluted earnings (loss) per
       common share(6)                                                                  $(0.02)         $0.20          $0.56
                                                                                      --------       --------       --------
                                                                                      --------       --------       --------
   Pro forma amounts:(3)(4)
     Income (loss) before income taxes
       as reported                         $2,243         $4,538         $7,402          $(159)        $3,792        $11,776
     Pro forma income tax (benefit)
       provision                              209          1,179          2,767           (121)           923          3,542
                                         --------       --------       --------       --------       --------       --------
     Pro forma net income (loss)           $2,034         $3,359         $4,635           $(38)        $2,869         $8,234
                                         --------       --------       --------       --------       --------       --------
                                         --------       --------       --------       --------       --------       --------

<PAGE>
                                       17


     Pro forma earnings per share data:(6)
     Basic earnings per share                                                                                          $0.65
                                                                                                                    --------
     Diluted earnings per share                                                                                        $0.64
                                                                                                                    --------
                                                                                                                    --------
</TABLE>


<TABLE>
<CAPTION>
                                       PREDECESSOR   COMPANY(1)(2)                                 COMPANY(1)
                                      ------------   -------------                                 ----------
                                        YEAR ENDED    YEAR ENDED    NINE MONTHS    THREE MONTHS    YEAR ENDED    YEAR ENDED
                                       DECEMBER 31,  DECEMBER 31,      ENDED           ENDED      DECEMBER 31,  DECEMBER 31,
                                           1993          1994      SEPTEMBER 30,   DECEMBER 31,       1996          1997
                                           ----          ----          1995             1995          ----          ----
                                                                       ----             ----
<S>                                     <C>            <C>            <C>            <C>            <C>            <C>
 SELECTED OPERATING DATA:
     Gross profit margin                    33.0%          35.8%          40.2%          30.6%          39.0%          39.4%
     EBITDA(5)                             $3,368         $5,957         $8,564         $1,718        $12,215        $18,833
     Cash flows from (used in):
     Operating activities                   1,738          4,049          6,420         (2,152)         4,249          8,481
     Investing activities                    (785)        (1,663)        (1,945)       (49,840)        (3,457)        (5,332)
     Financing activities                    (476)          (620)          (688)        55,743         (2,859)        27,185
</TABLE>
<TABLE>
<CAPTION>

                                                              AT DECEMBER 31,              AT DECEMBER 31,
                                                              ---------------              ---------------
                                                                         1996                         1997
                                                                         ----                         ----
 <S>                                                          <C>                         <C>
 BALANCE SHEET DATA:
     Working capital                                                   $9,511                      $61,363
     Total assets                                                      72,705                      112,637
     Total debt                                                        46,578                          326
     Redeemable preferred stock                                        16,287                            0
     Total stockholders' equity                                         1,125                      100,214
</TABLE>


                                                   (FOOTNOTES ON FOLLOWING PAGE)

<PAGE>

                                       18
___________

(1)  The Company's and the Predecessor Company's fiscal year is the 52- or
     53-week period ending on the Sunday nearest to December 31. For clarity of
     presentation the Company has described year-ends presented as if the year
     ended on December 31. As such, the years ended December 31, 1993 through
     1997 represent 52-week years.

(2)  Effective September 27, 1995, the Company 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 the Company's fourth quarter. See Note 1
     of Notes to Consolidated Financial Statements. 

(3)  Pro forma information reflects the provision for U.S. federal and state
     income taxes as if the Company and the Predecessor Company had been subject
     to federal and state income taxation as a C corporation, prior to
     January 29, 1996, the date the Company converted from a limited liability
     company to a C corporation. Prior to January 29, 1996, net income of the
     Company and the Predecessor Company flowed through to their
     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 15 of Notes to Consolidated Financial
     Statements.

(4)  Gives effect to the exchange of (i) 14,950,848 shares of the Redeemable
     Preferred Stock of the Company and accrued dividends thereon with a
     liquidation value of $17,558,000, and (ii) $776,000 owed to the executive
     officers, each at $14 per share, the initial public offering price of the
     Company's stock, into 1,309,585 shares of Common Stock at the closing of
     the Offering. Pursuant to applicable rules, pro forma earnings per share
     information is presented only for the most recent fiscal year. See Note 2
     of Notes to Consolidated Financial Statements.

(5)  EBITDA, which the Company calculates as income from operations before 
     depreciation, amortization and compensation charges for stock option 
     plans, is a supplemental financial measurement used by the Company in 
     the evaluation of its business and by many analysts in the Company's 
     industry. However, EBITDA should only be read in conjunction with all of 
     the Company's financial data summarized above and its 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 the Company's operating performance or to cash flows from 
     operating activities (as determined in accordance with generally 
     accepted accounting principles) as a measure of liquidity. 

(6)  See Note 2 of Notes to Consolidated Financial Statements, "Earnings Per
     Share".

<PAGE>
                                       19

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

     THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE
CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES AS WELL AS THE SECTION UNDER
THE HEADING "RISK FACTORS." 

GENERAL

     Power-One is a leading designer and manufacturer of power supplies for
electronic equipment manufacturers in the U.S. The Company manufactures a broad
line of more than 700 high-quality brand name products that it sells to both
distributors and OEMs who place a premium on quality, reliability and service.
The Company's products are sold to an installed base of more than 10,000
customers in the communications, automatic test equipment, medical equipment,
industrial and other electronic equipment industries.

     The Company is a successor to Power CA, which was incorporated in 1973 as a
manufacturer of AC/DC power supplies. The Predecessor Company operated solely
from its Southern California facility until 1981, at which time it commenced
additional operations in Isabela, Puerto Rico. In 1988, the Predecessor Company
commenced operations in San Luis, Mexico. These foreign facilities were
established to take advantage of certain labor, manufacturing and, in Puerto
Rico, tax efficiencies. From 1994 to 1996, substantially all Puerto Rican
manufacturing operations were moved to Santo Domingo, Dominican Republic to
capitalize on certain labor benefits, while maintaining the tax benefits
associated with its Puerto Rican subsidiary. In September 1995, the Stephens
Investors and management of the Company purchased the Predecessor Company from
its previous owners and implemented a more aggressive growth strategy for the
Company. In April 1996, the Company further broadened its product offering
through the licensing of certain technology and associated rights from Calex
Manufacturing Company ("Calex"), providing the Company with a line of DC/DC
products. 

RESULTS OF OPERATIONS

     There are two statements of operations for the 1995 fiscal year. The 
first statement of operations presents combined information for the 
Predecessor Company during the nine months ended September 30, 1995, while 
the second presents consolidated information for the Company for the three 
months ended December 31, 1995. For ease of reference, information in this 
Management's Discussion and Analysis of Financial Condition and Results of 
Operations for the 1995 fiscal year is presented based upon the sum of 
various amounts set forth in the two income statements. The numbers are not 
reflective of the results that would have occurred if the Acquisition had 
occurred as of January 1, 1995.

     The following table sets forth, for the periods indicated, certain Combined
and Consolidated Statements of Operations data as a percentage of net sales: 

<PAGE>
                                       20

<TABLE>
<CAPTION>
                                             1995          1996        1997
                                             ----          ----        ----
     <S>                                    <C>           <C>         <C>
     Net sales                              100.0%        100.0%      100.0%
     Cost of goods sold                       62.5          61.0        60.6
                                            ------        ------      ------
     Gross profit                             37.5          39.0        39.4
     Selling expense                          10.2           9.3         7.6
     General and administrative                8.3           7.9         7.4
     Engineering expense                       4.7           5.4         4.1
     Quality assurance expense                 1.7           2.1         2.1
     Amortization of intangibles               0.6           2.7         2.2
     Other expense                             0.0           0.8         0.0
                                            ------        ------      ------
     Income from operations                   12.0          10.8        16.0
     Interest expense                         (2.1)         (5.7)       (3.5)
     Other, net                                0.0           0.0         0.4
                                            ------        ------      ------
     Income before income taxes                9.9           5.1        12.9
     Income taxes                              3.6 (1)       1.2 (1)     3.9
                                            ------        ------      ------
     Net income                               6.3% (1)      3.9% (1)    9.0%
                                            ------        ------      ------
                                            ------        ------      ------
</TABLE>
(1)  Pro forma for 1995 and 1996.

YEARS ENDED DECEMBER 31, 1997 AND DECEMBER 31, 1996.

 NET SALES.  Net sales increased $17.4 million, or 23.4%, to $91.6 million for
the year ended December 31, 1997 from $74.2 million for the year ended December
31, 1996. The increase in revenue resulted primarily from strong growth in unit
shipments of standard, modified standard and custom power supplies in both
low-range and high-range power configurations during the third and fourth
quarter of 1997. Price changes in 1997 were not a significant contributor to
overall sales growth. Mirroring the sales increase, Power-One's backlog grew to
$32.2 million at December 31, 1997, compared to $17.3 million at December 31,
1996.

     Power conversion product sales increased over 1996 as the result of the
Company's wide range of product offerings, continued growth in existing OEM
customer accounts and distributors, as well as an increased focus by the
Company's strategic national accounts team on key OEM customers. 

 GROSS PROFIT.  Gross profit increased $7.2 million, or 24.9%, to $36.1 million
for the year ended December 31, 1997 from $28.9 million for the year ended
December 31, 1996, primarily as a result of higher sales. For the year ended
December 31, 1997, gross profit margin as a percent of sales increased slightly
to 39.4%, up from 39.0% for the prior year ended December 31, 1996. The
improvement in gross profit margin was primarily due to lower costs of
production following the transfer of manufacturing from the Company's Puerto
Rico facility to its Dominican Republic facility, which was completed towards
the end of 1996.

 SELLING EXPENSE.  Selling expense increased $158,000, or 2.3%, to $7.0 million
for the year ended December 31, 1997 from $6.9 million for the year ended
December 31, 1996. The increase of $158,000 is primarily due to higher payroll
costs related to an increase in bonuses to the company's sales force of
$465,000, reclassification of certain distribution expense from manufacturing to
selling expense related to the Company's operations in the Dominican Republic
totaling $340,000 and other operating costs aggregating $497,000. These
increases were partially offset by a $639,000 reduction in commissions paid to
manufacturers' representatives as a result of the Company's renegotiating these
commission agreements and an increase in reimbursements from customers for
product repairs of $505,000. As a percent of net sales, selling expense
decreased to 7.6% for the year ended December 31, 1997 from 9.3% for the year
ended December 31, 1996, which is primarily attributable to higher sales volume.

 GENERAL AND ADMINISTRATIVE EXPENSE.  General and administrative expense
increased $905,000, or 15.4%, to $6.8 million for the year ended December 31,
1997 from $5.9 million for the year ended December 31, 1996. As a percent of net
sales, general and administrative expense decreased to 7.4% in 1997 from 7.9% in
1996. The increase of $905,000 is primarily

<PAGE>
                                       21

due to an $861,000 increase in employee performance bonuses as well as growth 
in staffing levels of administrative personnel.

 ENGINEERING EXPENSE.  Engineering expense declined $210,000, or 5.3%, to
$3.8 million for the year ended December 31, 1997 from $4.0 million for the year
ended December 31, 1996. As a percent of net sales, engineering expense
decreased to 4.1% for the year ended December 31, 1997 from 5.4% for the year
ended December 31, 1996. Certain engineering expenses, which had been increased
in the first half of 1996 based upon anticipated sales increases, were reduced,
primarily by the reduction of administrative personnel as well as a reduction in
the use of consultants, in the last half of 1996 as sales declined. The Company
believes that no strategic business was affected by this reduction. The Company
refilled many of these positions by the end of the third quarter of 1997, and
management expects its investment in engineering to increase in 1998.

 QUALITY ASSURANCE EXPENSE.  Quality assurance expense increased $316,000, or
19.9%, to $1.9 million for the year ended December 31, 1997 from $1.6 million
for the year ended December 31, 1996. As a percent of net sales, quality
assurance expense was 2.1% for both 1997 and 1996. The increase of $316,000 is
primarily due to higher payroll costs related to growth in staffing levels to
support the increase in quality activities generated by the increase in sales
volume and due to lower reimbursements from customers for safety agency fees.

 INCOME FROM OPERATIONS.  As a result of the above factors, income from
operations increased $6.6 million, or 82.7%, to $14.6 million for the year ended
December 31, 1997 from $8.0 million for the year ended December 31, 1996. As a
percent of sales, income from operations increased to 16.0% for the year ended
December 31, 1997 from 10.8% for the year ended December 31, 1996.

 INTEREST EXPENSE.  Interest expense decreased $1.0 million, or 24.7%, to
$3.2 million for the year ended December 31, 1997 from $4.2 million for the year
ended December 31, 1996.  This decrease was the result of lower bank borrowings
and the repayment of all amounts outstanding under the Company's existing bank
credit facility with the net proceeds from the Company's initial public offering
("IPO") in the fourth quarter.

 OTHER INCOME.  Other income increased $328,000, to $340,000 for the year ended
December 31, 1997, from $12,000 for the year ended December 31, 1996, and is due
to interest income generated from investment of a portion of the proceeds from
the initial public offering in short-term, interest bearing instruments.

 INCOME TAXES.  The provision for income taxes increased $2.6 million, to $3.5
million for the year ended December 31, 1997, from the pro forma tax expense of
$923,000 for the year ended December 31, 1996. Income taxes as a percent of net
sales increased to 3.9% in 1997 from a pro forma 1.2% in 1996. The percentage
increase primarily reflects an increase in the Company's effective tax rate from
24.3% in 1996 to 30.1% in 1997 resulting from a higher proportion of the
Company's earnings being generated in the U.S. rather than in Puerto Rico.

YEARS ENDED DECEMBER 31, 1996 AND DECEMBER 31, 1995

 NET SALES.  Net sales increased $808,000, or 1.1%, to $74.2 million in 1996
from $73.4 million in 1995. The Company believes that revenues did not grow at
historical rates because of the downturn in certain electronic equipment
markets, especially in the semiconductor industry, in the second half of 1996.
As a result, certain OEM customers reduced their purchasing levels from the
Company. Additionally, electronics distributors began experiencing lower sales
and higher inventory levels, and orders from the Company were significantly
reduced in the fourth quarter of 1996.

 GROSS PROFIT.  Gross profit increased $1.4 million, or 5.0%, to $28.9 million
in 1996 from $27.5 million in 1995. Gross profit margins increased to 39.0% in
1996 from 37.5% in 1995. Gross profit margins in 1995 were adversely affected by
approximately two percentage points as a result of the sale of certain inventory
in the fourth quarter of 1995, the carrying value of which had been increased by
approximately $1.5 million as a result of the

<PAGE>
                                       22

Acquisition. After normalizing the gross margins for this increase, gross 
profit margins decreased 0.5% in 1996. This 0.5% decrease resulted primarily 
from a different product mix.

 SELLING EXPENSE.  Selling expense decreased $593,000, or 8.0%, to $6.9 million
in 1996 from $7.5 million in 1995. As a percent of net sales, selling expense
decreased to 9.3% in 1996 from 10.2% in 1995. These decreases resulted primarily
from decreases in bonuses of $220,000, a decrease in freight expense of $215,000
and an increase in reimbursements from customers for product repairs of
$197,000. These savings were offset in part by an increase in general office
expenses aggregating $39,000.

 GENERAL AND ADMINISTRATIVE EXPENSE.  General and administrative expense
decreased $235,000, or 3.8%, to $5.9 million in 1996 from $6.1 million in 1995.
As a percent of net sales, general and administrative expense decreased to 7.9%
in 1996 from 8.3% in 1995. These decreases resulted primarily from a decrease in
bonuses of $1.0 million and the elimination of $363,000 in payments to the
executive committee of the Predecessor Company which were partially offset by an
increase in bad debt expense of $335,000, higher expenses relating to the
expansion of the Company's operations in the Dominican Republic totaling
$767,000 and general costs aggregating $26,000.

 ENGINEERING EXPENSE.  Engineering expense increased $503,000, or 14.5%, to
$4.0 million in 1996 from $3.5 million in 1995. As a percent of net sales,
engineering expense increased to 5.4% in 1996 from 4.7 % in 1995. These
increases were primarily the result of the increase in certain engineering
expenses in the first half of 1996 based upon anticipated sales increases,
offset in part by reductions in these expenses as sales declined in the last
half of the year.

 QUALITY ASSURANCE EXPENSE.  Quality assurance expense increased $321,000, or
25.4%, to $1.6 million in 1996 from $1.3 million in 1995. As a percent of net
sales, quality assurance expense increased to 2.1% in 1996 from 1.7% in 1995.
These increases are primarily due to a reclassification of quality assurance
expense from manufacturing costs to quality assurance expense related to the
Company's operations in the Dominican Republic.

 AMORTIZATION OF INTANGIBLES.  The amortization of intangibles, as a percent of
net sales, increased to 2.7% in 1996 from 0.6% in 1995. The $2.0 million in 1996
reflects a full year of amortization of intangible assets incurred in connection
with the Acquisition and a partial year's amortization of the license for DC/DC
power supplies entered into in April 1996. The $472,000 in 1995 reflects the
amortization for the fourth quarter of 1995 of intangible assets incurred in
connection with the Acquisition.

 OTHER EXPENSE.  Other expense was $613,000, or 0.8% of net sales in 1996. This
expense reflects costs incurred in connection with the transfer of production
from Puerto Rico to the Dominican Republic.

 INCOME FROM OPERATIONS.  As a result of the above factors, income from
operations decreased $764,000, or 8.7%, to $8.0 million in 1996 from
$8.8 million in 1995. As a percent of net sales, income from operations 
decreased to 10.8% in 1996 from 12.0% in 1995.

 INTEREST EXPENSE.  Net interest expense increased $2.7 million, to $4.2 million
in 1996 from $1.5 million in 1995. This increase relates primarily to the full
year effect in 1996 versus a partial year effect in 1995, of the debt incurred
in connection with the Acquisition in September 1995.

 PRO FORMA INCOME TAXES.  The pro forma income tax rate decreased in 1996 to
24.3% from 36.5% in 1995. The 1995 effective tax rate was higher than historical
pro forma levels because of lower earnings in Puerto Rico as a result of certain
duplicative expenses incurred while production was transferred to the Dominican
Republic, causing a disproportionate share of the Company's profits to be
generated and taxed in the U.S.

CERTAIN INCOME TAX MATTERS

     The Company has operated in Puerto Rico since 1981 under various exemptions
that

<PAGE>
                                       23

provide for lower taxes on profits attributable to Puerto Rico. These
exemptions most recently have been granted pursuant to the Puerto Rico
Industrial Incentives Act of 1987. Under the provisions of the most recent
exemption, which was granted in 1994 when the Company's manufacturing activities
in Puerto Rico were moved to the Dominican Republic, the Company has been
granted a 90% partial tax exemption from property or income taxes on income
derived from distributing products from Puerto Rico and a 60% exemption on
municipal license taxes. This exemption is valid through 2010. Additionally, P-E
has operations 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 does not provide for U.S. federal and state income tax that
would be paid on earnings of its Puerto Rico operation if such earnings were
remitted to the U.S., as there is no intention to remit these earnings. At
December 31, 1997, accumulated unremitted earnings totaled approximately
$6.3 million for the Puerto Rico operation. In the event that the Company does
remit earnings to the U.S., it may be required to pay taxes at the normal U.S.
rate. The Company's operations in Mexico are subject to various income and
corporate taxes on earnings generated in Mexico. These taxes have not been
material to date. 

     The Predecessor Company operated as a Subchapter S corporation for tax
reporting purposes until the Acquisition on September 27, 1995. At such time,
the Company was organized as a limited liability company. Effective January 29,
1996, the Company converted from a limited liability company to a C corporation,
which is subject to both U.S. federal and state income taxes. During the periods
in which the Predecessor Company operated as an S corporation and the Company
operated as a limited liability company, taxes for federal and most state income
tax purposes on earnings were paid directly by the owners.

LIQUIDITY AND CAPITAL RESOURCES

     At December 31, 1997, the Company's cash position had increased to $32.0
million from $1.7 million at December 31, 1996. The increase in cash of $30.3
million was attributable to the Company's initial public offering of 5,750,000
shares of Common Stock on September 30, 1997. The net proceeds of the offering
to the Company, after deducting related expenses, were $73.8 million. The
Company used $36.7 million of the net proceeds from the IPO to repay all
outstanding bank borrowings under the Company's then existing bank credit
facility. An additional $5.6 million of the net proceeds were used to pay
amounts owed to certain of the Company's officers pursuant to their employment
and compensation agreements and another $242,000 was used to redeem the
Redeemable Preferred that was not exchanged for Common Stock. The remainder of
the net proceeds of the IPO will be used for general corporate purposes,
including capital expenditures, working capital and possible future
acquisitions. Pending use of the net proceeds for the above purposes, the
Company has invested such funds in short-term and medium-term, interest-bearing
investment-grade obligations.

     During the year ended December 31, 1997, the Company had cash flow from
operations of $8.5 million compared to cash flow from operations of $4.2 million
in the comparable period in 1996. Cash flow from operations increased primarily
due to higher net income and a $1.6 million increase in accounts payable and
accrued expenses that were partially offset by increases in accounts receivable
of $2.8 million and increases in inventories of $3.5 million. Accounts payable
and accrued expenses increased as a function of higher sales. The increase in
accounts receivable primarily resulted from a change in billing terms with the
Company's distributors which increased days sales outstanding from its
distributors to an average of 45 days from an average of 15 days, as well as
higher sales. The growth in inventories is directly related to sales growth with
inventory turnover remaining stable.

     The Company historically has funded its operations primarily from cash flow
provided by operations and short and long-term borrowings. Major cash
expenditures in 1997 included the purchase of $5.2 million of capital equipment.
Additionally, in 1997 the Company repaid $36.7 million of bank borrowings and
$5.6 million in amounts owed to certain officers of the Company in conjunction
with the Company's IPO.

     The Company currently anticipates that its capital expenditures for 1998
will be approximately $8.9 million, of which approximately $4.5 million
represents the cost of the new manufacturing facility in Mexico, $0.9 million
represents investments in surface mount

<PAGE>
                                       24

manufacturing equipment and the balance represents investments in property, 
plant and equipment in line with the continued upgrading of the Company's 
manufacturing facilities. The amount of these anticipated capital 
expenditures will frequently change based on future changes in business plans 
and condition of the Company and changes in economic conditions.

     On December 10, 1997, the Company amended its credit agreement with a
syndicate of banks led by NationsBank of Texas, N.A, which previously provided
the Company with a revolving line of credit and a term loan aggregating
approximately $47.0 million in available credit into a revolving line of credit
of up to $50.0 million. The amended credit agreement has a maturity date of
December 10, 2002, and will be used to finance acquisitions, working capital,
and capital expenditure requirements.

     The Company's revolving 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 1.0% to 2.25%, or the
bank's base rate plus 0% to 1.25%. As of December 31, 1997, no amounts were
outstanding under the credit agreement. Borrowings are collateralized by
substantially all of the Company's assets.

     The credit agreement (i) provides for restrictions on additional
borrowings, dividends, leases and capital expenditures; (ii) prohibits the
Company, without prior approval, from paying dividends, liquidating, merging,
consolidating or selling its assets or business; and (iii) 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, 1997, the
Company was in compliance with all debt covenants.

     In connection with the credit agreement the Company entered into an
interest rate swap and swaption agreement. These agreements were terminated
concurrently with the repayment of the outstanding borrowings under the credit
facilities at a nominal value to the Company.

     The Company believes its existing working capital and borrowing capacity,
coupled with the funds generated from the Company's operations, the net proceeds
remaining from the IPO and the $50.0 million credit line with NationsBank will
be sufficient to fund its anticipated working capital, capital expenditures and
debt payment requirements for the foreseeable future. However, if the Company
makes a large acquisition, it may be necessary to raise debt or equity in the
private or public securities markets.

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 the Company's 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 28, 
1997, (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
"16(a) Beneficial Ownership Reporting" contained in the Company's Proxy
Statement and is incorporated herein by reference.

<PAGE>
                                       25

ITEM 11 - EXECUTIVE COMPENSATION

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

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 the
Company's 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 the Company's 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-1
 Consolidated Balance Sheets                                               F-2
 Consolidated and Combined Statements of Operations                        F-3
 Consolidated Statements of Redeemable Preferred Stock and 
   Stockholders'/Members' Equity                                           F-5
 Combined Statement of Stockholders' Equity--Predecessor Company           F-6
 Consolidated and Combined Statements of Cash Flows                        F-7
 Notes to Consolidated Financial Statements                                F-9
</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

     During the three months ended December 31, 1997, the registrant did not
file any reports on Form 8-K.

(c) EXHIBITS

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

<TABLE>
<CAPTION>
          DESCRIPTION
          -----------
<S>       <C>
  1.1*    Form of Underwriting Agreement
  3.1*    Form of Restated Certificate of Incorporation of the Company
  3.2*    Form of Amended and Restated Bylaws of the Company
  4.1*    Specimen of Common Stock Certificate
 10.1*    Form of Indemnification Agreement between the Company and its
          directors, executive officers and certain other officers
 10.2*    Form of Employment and Compensation Agreements between the Company and
          Mr. Goldman, Mr. Schnopp, Mr. Roark, Mr. Hage, and Mr. Godfrey
 10.3*    Form of Amendment to Employment and Compensation Agreements
</TABLE>
<PAGE>
                                       26

<TABLE>
<S>       <C>
 10.5*    1996 Stock Incentive Plan
 10.6*    Amended and Restated 1996 Stock Incentive Plan
 10.7*    Form of Management Bonus Plan
 10.11*   Security Agreement between the Company and NationsBank of Texas, N.A.,
          dated February 1, 1996
 10.12*   Form of Pledge Agreement
 10.13*   Product and Component Agreement, including the related License
          Agreement, between the Company and Calex Manufacturing Company dated
          April 2, 1996
 10.14*   P-E Tax Exemption Grant dated January 4, 1995
 10.16*   Form of Employee Stock Purchase Plan
 10.17*   Form of Selection Letter between Company and each executive officer
 10.18*   Amendment to Employment and Compensation Agreement dated September 11,
          1997
 10.19*   Letter Explaining Selection Letter between Company and each executive
          officer
 10.20    Amended and Restated Credit Agreement among the Company, NationsBank of
          Texas, N.A. and certain lenders, dated December 10, 1997
 21*      List of Subsidiaries
 23       Independent Auditors' Consent
 24       Power of Attorney (contained on Signature Page)
 27.1     Financial Data Schedule
 27.2     Financial Data Schedule
 27.3     Financial Data Schedule
</TABLE>
___________
 *  Previously filed as an exhibit to the Registration Statement on Form S-1
    of Power-One, Inc. (File No. 333-32889).

<PAGE>
                                       27

                                   SIGNATURES

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


                                               POWER-ONE, INC.

Date:  March 27, 1998                  By:          /s/  Steven J. Goldman
                                                       Steven J. Goldman
                                                  Chairman of the Board, Chief
                                                Executive Officer and President


     Pursuant to the requirements of the Securities Act of 1934, this annual
report has been signed below by the following persons on behalf of the
registrant and in the capacities 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
     ---------                          -----                         ----
<S>                          <C>                                  <C>
                             Chairman of the Board, Chief
/s/ Steven J. Goldman        Executive Officer and President      March 27, 1998
 (Steven J. Goldman)         (Principal Executive Officer)
 

                             Vice President, Finance and
/s/ Eddie K. Schnopp         Logistics, Chief Financial Officer   March 27, 1998
 (Eddie K. Schnopp)          and Secretary (Principal Financial 
                             and Accounting Officer)

/s/ Jon E. M. Jacoby         Director                             March 27, 1998
 (Jon E. M. Jacoby)

/s/ Douglas H. Martin        Director                             March 27, 1998
 (Douglas H. Martin)

/s/ Dr. Albert Y. C. Yu      Director                             March 27, 1998
 (Dr. Albert Y. C. Yu)
</TABLE>

<PAGE>
                                       F-1

INDEX TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                     POWER-ONE, INC.                                      PAGE
                     ---------------                                      ----
 <S>                                                                       <C>
 Independent Auditors' Report                                              F-1
 Consolidated Balance Sheets                                               F-2
 Consolidated and Combined Statements of Operations                        F-3
 Consolidated Statements of Redeemable Preferred Stock and 
   Stockholders'/Members' Equity                                           F-5
 Combined Statement of Stockholders' Equity--Predecessor Company           F-6
 Consolidated and Combined Statements of Cash Flows                        F-7
 Notes to Consolidated Financial Statements                                F-9
</TABLE>

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, 1996 and 1997 and the
related consolidated and combined statements of operations, redeemable preferred
stock and stockholders'/members' equity, and of cash flows of the Company and
its Predecessor Company for each of the periods in the three years ended
December 31, 1997.  Our audit also includes the 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 based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards.  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, 1996 and 1997, and the consolidated and combined results of the
Company's and its Predecessor Company's operations and cash flows for each of
the periods in the three years ended December 31, 1997 in conformity with
generally accepted accounting principles.  Also, in our opinion, such financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.

As described in Note 1 to the financial statements, on September 27, 1995, the
net assets of the Predecessor Company were acquired by the Company.  The
acquisition has been accounted for by the purchase method of accounting, and
accordingly, the acquisition price has been allocated to the assets acquired and
liabilities assumed based on the estimated fair values on the date of
acquisition.  As such, the amounts reported for the Company are not comparable
to the amounts shown for the Predecessor Company in prior periods.


Deloitte & Touche LLP

Los Angeles, California 
February 23, 1998

<PAGE>
                                       F-2

POWER-ONE, INC.

CONSOLIDATED BALANCE SHEETS (Dollars in Thousands)
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                         DECEMBER 31,
                                                                   -----------------------
ASSETS (Notes 6 and 7)                                                 1996         1997
<S>                                                                <C>         <C>
CURRENT ASSETS:
  Cash and cash equivalents                                        $  1,684    $  32,018  
  Accounts receivable:
    Trade, less allowance for doubtful 
      accounts: $638 - 1996; $825 - 1997                             10,391       13,268  
    Other                                                               397          328  
  Inventories (Note 3)                                               18,840       22,369  
  Refundable income taxes                                                29        2,411  
  Deferred tax assets - current (Notes 2 and 15)                        834          976  
  Prepaid expenses and other current assets                             380          467  
                                                                   --------    ---------
          Total current assets                                       32,555       71,837  

PROPERTY AND EQUIPMENT, Net (Note 4)                                  8,884       11,898  

INTANGIBLE ASSETS, Net (Note 2)                                      29,210       27,181  

OTHER ASSETS                                                          1,574        1,721  

DEFERRED TAX ASSETS, Noncurrent (Notes 2 and 15)                        482
                                                                   --------    ---------
TOTAL                                                              $ 72,705    $ 112,637  
                                                                   --------    ---------
                                                                   --------    ---------
LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Note payable to bank (Note 6)                                   $  10,400    $
  Current portion of long-term debt (Note 7)                          3,929          326  
  Bank overdraft                                                        656
  Accounts payable                                                    2,892        4,465  
  Accrued payroll and related expenses                                  536          652  
  Other accrued expenses (Note 8)                                     4,631        5,031  
                                                                   --------    ---------
          Total current liabilities                                  23,044       10,474  
                                                                   --------    ---------

LONG-TERM DEBT, Less current portion (Note 7)                        26,326
                                                                   --------

DEFERRED TAX LIABILITY, Noncurrent (Notes 2 and 15)                                1,949  
                                                                   --------    ---------
OTHER LIABILITIES (Note 9)                                            5,923
                                                                   --------
COMMITMENTS AND CONTINGENCIES (Notes 10 and 13)

REDEEMABLE PREFERRED STOCK, Stated value $1.00; aggregate
  liquidation value of $16,543 at December 31, 1996 and $0
  at December 31, 1997 (Note 11)                                     16,287
                                                                   --------
STOCKHOLDERS' EQUITY (Notes 11 and 12):
  Common stock, par value $0.001, 60,000,000 shares authorized;
    10,000,000 shares issued and outstanding at December 31, 1996 and
    17,059,585 issued and outstanding at December 31, 1997,
         respectively                                                    10           17
  Additional paid-in capital                                             90       92,227
  Notes receivable from stockholders (Note 5)                          (225)
  Retained earnings                                                   1,250        7,970
                                                                   --------    ---------

          Total stockholders' equity                                  1,125      100,214
                                                                   --------    ---------
TOTAL                                                             $  72,705    $ 112,637
                                                                   --------    ---------
                                                                   --------    ---------
</TABLE>
See notes to consolidated financial statements.
<PAGE>
                                       F-3

POWER-ONE, INC.

CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS (Dollars in Thousands)
-------------------------------------------------------------------------

<TABLE>
<CAPTION>

                                  PREDECESSOR
                                    COMPANY                     COMPANY
                                                 -----------------------------------------
                                                  PERIOD FROM
                                      NINE       OCTOBER 1, 1995
                                     MONTHS       (INCEPTION)           YEAR ENDED
                                      ENDED         THROUGH             DECEMBER 31,  
                                   SEPTEMBER 30,  DECEMBER 31,    ------------------------
                                      1995           1995            1996          1997
<S>                                 <C>            <C>            <C>          <C>
NET SALES (Note 14)                 $  52,732      $  20,670      $  74,210    $  91,583

COST OF GOODS SOLD (Note 1)            31,525         14,348         45,305       55,481
                                     --------        --------      --------     --------
GROSS PROFIT                           21,207          6,322         28,905       36,102
                                     --------        --------      --------     --------
EXPENSES:                              
  Selling                               5,680          1,778          6,865        7,023
  General and administrative            3,985          1,760          5,873        6,778
  Engineering                           2,397          1,064          3,964        3,754
  Quality assurance                     1,282            345          1,585        1,901
  Amortization of intangible assets                      472          2,003        2,029
  Other                                                                 613
                                     --------        --------      --------     --------
          Total expenses               13,344          5,419         20,903       21,485
                                     --------        --------      --------     --------
INCOME FROM OPERATIONS                  7,863            903          8,002       14,617
                                     --------        --------      --------     --------
OTHER INCOME (EXPENSE):                      
  Interest income                          65             24             28          358
  Interest expense (Notes 6 and 7)       (494)        (1,026)        (4,222)      (3,181)
  Other income (expense)                  (32)           (60)           (16)         (18)
                                     --------        --------      --------     --------
          Total other expense            (461)        (1,062)        (4,210)      (2,841)
                                     --------        --------      --------     --------
INCOME (LOSS) BEFORE INCOME TAXES       7,402           (159)         3,792       11,776

INCOME TAXES (Notes 2 and 15)             155             12            396        3,542
                                     --------        --------      --------     --------
NET INCOME (LOSS)                    $  7,247           (171)         3,396        8,234
                                     --------
                                     --------
PREFERRED STOCK ACCRETION 
  AND DIVIDENDS (Note 11)                                  -          1,415        1,514
                                                     --------      --------     --------
NET INCOME (LOSS) ATTRIBUTABLE 
  TO COMMON STOCKHOLDERS                             $  (171)      $  1,981     $  6,720
                                                     --------      --------     --------
                                                     --------      --------     --------
BASIC EARNINGS (LOSS) PER COMMON 
  SHARE                                              $ (0.02)      $   0.20     $   0.58
                                                     --------      --------     --------
                                                     --------      --------     --------
DILUTED EARNINGS (LOSS) PER 
  COMMON SHARE                                       $ (0.02)      $   0.20     $   0.56
                                                     --------      --------     --------
                                                     --------      --------     --------
</TABLE>
See notes to consolidated financial statements.
                                                                    (Continued)

<PAGE>
                                       F-4

POWER-ONE, INC.

CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS (Dollars in Thousands)
------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                  PREDECESSOR
                                                    COMPANY                     COMPANY
                                                                 -----------------------------------------
                                                                  PERIOD FROM
                                                      NINE       OCTOBER 1, 1995
                                                     MONTHS       (INCEPTION)           YEAR ENDED
                                                      ENDED         THROUGH             DECEMBER 31,  
                                                   SEPTEMBER 30,  DECEMBER 31,    ------------------------
                                                      1995           1995            1996          1997
<S>                                                 <C>            <C>            <C>          <C>
PRO FORMA INFORMATION (Note 2):              
  Income (loss) before income tax as reported       $  7,402        $  (159)      $  3,792    $  11,776  

  Pro forma income tax (benefit) provision 
    (Unaudited)                                        2,767           (121)           923        3,542  
                                                    --------        --------      --------     --------
  Pro forma net income (loss) (Unaudited)           $  4,635         $  (38)      $  2,869     $  8,234  
                                                    --------        --------      --------     --------
                                                    --------        --------      --------     --------
PRO FORMA EARNINGS PER SHARE DATA 
  (Note 2):
  Basic earnings per share                                                                      $  0.65  
                                                                                                -------
                                                                                                -------
  Diluted earnings per share                                                                    $  0.64  
                                                                                                -------
                                                                                                -------
</TABLE>
See notes to consolidated financial statements.
                                                                   (Concluded)
<PAGE>
                                       F-5

POWER-ONE, INC.

CONSOLIDATED STATEMENTS OF REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS'/MEMBERS'
EQUITY
PERIOD FROM OCTOBER 1, 1995 (INCEPTION) THROUGH DECEMBER 31, 1995,
YEAR ENDED DECEMBER 31, 1996 AND DECEMBER 31, 1997 (Notes 9 and 11) (Dollars in
thousands)

<TABLE>
<CAPTION>
                                                                              STOCKHOLDERS'/MEMBERS' EQUITY
                                                          -----------------------------------------------------------------------
                                          REDEEMABLE                                                    NOTES
                                       PREFERRED STOCK                   COMMON STOCK     ADDITIONAL  RECEIVABLE   RETAINED
                                   ---------------------  MEMBERS'   --------------------  PAID-IN       FROM      EARNINGS
                                     SHARES     AMOUNT    CAPITAL     SHARES      AMOUNT   CAPITAL   STOCKHOLDERS  (DEFICIT) TOTAL
<S>                                 <C>        <C>       <C>         <C>          <C>     <C>         <C>         <C>       <C>
BALANCE, OCTOBER 1, 1995 (Inception)                     $   -                                          $   -      $  -     $  -  
  Contribution of members capital                          14,972                                         (200)              14,772
                                                                                                                           
  Interest on notes receivable from                                                                                        
    stockholders                                                                                            (5)                  (5)
                                                                                                                           
  Net loss                                                                                                          (171)      (171)
                                                         --------                                       ------     ------   -------
BALANCE, DECEMBER 31, 1995                                 14,972                                         (205)     (171)    14,596
  Net distribution to members of                                                                                           
    Power-One LLC                                                                                                   (560)      (560)
  Effect of conversion from                                                                                                
    limited liability                                                                                                      
    company to C corporation       15,153,698  $ 14,872   (14,972)  10,000,000     $ 10     $ 90                            (14,872)
  Interest on notes receivable                                                                                             
    from stockholders                                                                                      (20)                 (20)
                                                                                                                           
  Accretion of preferred stock to                                                                                          
    redemption value                                 26                                                              (26)       (26)
  Accrual of preferred stock                                                                                               
    dividend                                      1,389                                                           (1,389)    (1,389)
  Net income                                                                                                       3,396      3,396
                                   ----------  --------  ---------  ----------    -----   ------        -------    ------   -------
                                                                                                                           
BALANCE, DECEMBER 31, 1996         15,153,698    16,287      -      10,000,000       10       90          (225)    1,250      1,125
  Interest on notes receivable                                                                                             
    from stockholders                                                                                      (15)                 (15)
                                                                                                                           
  Accrual of preferred stock                                                                                               
    dividend                                      1,258                                                           (1,258)    (1,258)
                                                                                                                           
  Accretion of preferred stock to                                                                                          
    redemption  value                               256                                                             (256)      (256)
                                                                                                                           
  Stock option compensation expense                                                           16                                 16
                                                                                                                           
  Conversion of other liabilities to                                                                                       
    common stock                                                        55,408               776                                776
                                                                                                                           
  Conversion of preferred stock to                                                                                         
    common stock                  (14,950,848)  (17,559)             1,254,177        1   17,558                             17,559
                                                                                                                           
  Repurchase of preferred stock      (202,850)    (242)                                                                    

  Payment on notes receivable
    from stockholders                                                                                      240                  240
                                                                                                                           
  Stock issuance to public                                           5,750,000        6   80,494                             80,500
                                                                                                                           
  Stock issuance costs                                                                    (6,707)                            (6,707)

  Net income                                                                                                        8,234     8,234
                                   ----------  --------  ---------  ----------    -----  -------        -------    ------  --------
BALANCE, DECEMBER 31, 1997               -     $   -     $   -      17,059,585    $  17  $92,227        $  -      $ 7,970  $100,214
                                   ----------  --------  ---------  ----------    -----  -------        -------    ------  --------
                                   ----------  --------  ---------  ----------    -----  -------        -------    ------  --------
</TABLE>
See notes to consolidated financial statements.

<PAGE>
                                       F-6

POWER-ONE INC.

COMBINED STATEMENT OF STOCKHOLDERS' EQUITY - PREDECESSOR COMPANY
NINE MONTHS ENDED SEPTEMBER 30, 1995 (Dollars in Thousands)
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                  POWER-ELECTRONICS, INC.
                                            -----------------------------------
                           POWER-ONE, INC.      VOTING           NONVOTING         PODER-UNO          NOTES
                            COMMON STOCK     COMMON STOCK       COMMON STOCK      COMMON STOCK      RECEIVABLE
                           ---------------  ---------------  ------------------  -----------------     FROM        RETAINED
                           SHARES   AMOUNT  SHARES   AMOUNT   SHARES    AMOUNT   SHARES     AMOUNT  STOCKHOLDERS   EARNINGS   TOTAL
<S>                        <C>      <C>      <C>      <C>      <C>      <C>      <C>        <C>     <C>            <C>      <C>
BALANCE, 
  DECEMBER 31, 1994       718,335   $  157   72,580    $  42                     7,117,300  $  3                   $11,253  $11,455

  Notes receivable 
    from stockholders                                                                                  $  (789)                (789)

  Net income                                                                                                         7,247    7,247
                          -------   ------   ------    -----   ------   ------   ---------  -------    --------    -------  -------
BALANCE, 
  SEPTEMBER 30, 1995      718,335   $  157   72,580    $  42      -     $  -     7,117,300  $  3       $  (789)    $18,500  $17,913
                          -------   ------   ------    -----   ------   ------   ---------  -------    --------    -------  -------
                          -------   ------   ------    -----   ------   ------   ---------  -------    --------    -------  -------
</TABLE>
See notes to consolidated financial statements.
<PAGE>
                                       F-7

POWER-ONE, INC.

CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS (Dollars in Thousands)
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                  PREDECESSOR 
                                                    COMPANY                     COMPANY
                                                                 ----------------------------------------
                                                                   PERIOD FROM
                                                      NINE       OCTOBER 1, 1995
                                                     MONTHS        (INCEPTION)         YEAR ENDED
                                                     ENDED           THROUGH           DECEMBER 31,
                                                  SEPTEMBER 30,    DECEMBER 31,   -----------------------
                                                      1995             1995          1996         1997
<S>                                                 <C>             <C>           <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss)                                 $  7,247        $  (171)      $  3,396     $  8,234  
  Adjustments to reconcile net income (loss) to 
    net cash used in operating activities:
    Depreciation and amortization                        701            815          4,213        4,216  
    Deferred income taxes                                                           (1,316)       2,289  
    Changes in operating assets and liabilities:            
      Accounts receivable, net                        (2,726)          (928)        (1,501)      (2,808) 
      Inventories                                     (5,443)          (733)           946       (3,529) 
      Refundable income taxes                             (4)            21             25       (2,382) 
      Prepaid expenses and other current assets          (75)          (140)           148          (87) 
      Accounts payable                                 3,937           (499)        (1,771)       1,573  
      Accrued expenses                                 2,783           (517)          (415)         516  
      Other liabilities                                                                524          459  
                                                    --------        -------       --------     --------
          Net cash provided by (used in) 
            operating activities                       6,420         (2,152)         4,249        8,481  
                                                    --------        -------       --------     --------
CASH FLOWS FROM INVESTING ACTIVITIES:                       
  Acquisition of property and equipment               (1,928)        (1,480)        (2,903)      (5,185) 
  Purchase of Power-One, net of acquired cash 
    of $4,452                                                       (42,158)              

  Payment to Power-Electronics, Inc. shareholders                    (5,000)              
  Payments for purchased technology                                                   (391)          
  Other assets                                           (17)        (1,202)          (163)        (147) 
                                                    --------        -------       --------     --------
          Net cash used in investing activities       (1,945)       (49,840)        (3,457)      (5,332) 
                                                    --------        -------       --------     --------
</TABLE>
See notes to consolidated financial statements.             
                                                                    (Continued)
<PAGE>

                                       F-8

POWER-ONE, INC.

CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS (Dollars in Thousands)
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                  PREDECESSOR 
                                                    COMPANY                     COMPANY
                                                                 ----------------------------------------
                                                                   PERIOD FROM
                                                      NINE       OCTOBER 1, 1995
                                                     MONTHS        (INCEPTION)         YEAR ENDED
                                                     ENDED           THROUGH           DECEMBER 31,
                                                  SEPTEMBER 30,    DECEMBER 31,   -----------------------
                                                      1995             1995          1996         1997
<S>                                                 <C>             <C>           <C>          <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
  Repayments of capital lease obligations           $   (113) 
  Proceeds from borrowings on notes payable 
    to bank                                                        $ 11,200       $  2,300  
  Repayments of note payable to bank                   1,193                        (3,100)   $ (10,400) 
  Bank overdraft                                         385           (229)          (749)        (656) 
  Proceeds from borrowings on long-term debt                         30,000          3,250               
  Repayments of long-term debt                          (414)                       (4,000)     (29,929)
  Dividends paid                                        (950)
  Proceeds from issuance of members capital                          14,772               
  Net distributions to members of Power-One LLC                                       (560) 
  Increase in notes receivable from 
    shareholders                                        (789) 
  Proceeds from sale of common stock - net                                                       73,793  
  Proceeds from notes receivable from
    stockholders                                                                                    225  
  Repurchase of preferred stock                                                                    (242) 
  Payment of other liabilities                                                                   (5,606) 
                                                    --------       --------       --------    ---------
       Net cash (used in) provided by 
         financing activities                           (688)        55,743         (2,859)      27,185  
                                                    --------       --------       --------    ---------
(DECREASE) INCREASE IN CASH AND CASH 
  EQUIVALENTS                                          3,787          3,751         (2,067)      30,334  
                                                     
CASH AND CASH EQUIVALENTS, 
  BEGINNING OF PERIOD                                  3,765                         3,751        1,684  
                                                    --------       --------       --------    ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD            $  7,552       $  3,751       $  1,684    $  32,018  
                                                    --------       --------       --------    ---------
                                                    --------       --------       --------    ---------
SUPPLEMENTAL CASH FLOW INFORMATION -                                       
  Cash paid for:                                                      
    Interest                                        $    501       $    929       $  3,841    $   3,181  
    Income taxes                                    $    119       $   -          $    765    $   4,340  

SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES:

  On October 6, 1997, the Company exchanged 14,950,848 shares of redeemable preferred stock plus accrued 
    dividends to 1,254,177 shares of common stock at the initial public offering price of $14 per share, a
    value of $17,559,000.

  On October 6, 1997, the Company issued 55,408 shares of common stock to extinguish $776,000 in other 
    liabilities.
</TABLE>

See notes to consolidated financial statements.
                                                                  (Concluded)
<PAGE>

                                       F-9

POWER-ONE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PERIODS ENDED SEPTEMBER 30, 1995 AND DECEMBER 31, 1995, 
YEARS ENDED DECEMBER 31, 1996 AND 1997
------------------------------------------------------------------------------

1.   GENERAL INFORMATION

     The accompanying financial statements of Power-One, Inc. (the "Company") 
     reflect the consolidated results of its operations since its inception 
     on October 1, 1995 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, and Poder Uno de Mexico, 
     S.A. de C.V. ("Poder Uno"), a company located in Mexico under the 
     MAQUILADORA program.

     Substantially all of the Company's products are manufactured in the 
     Dominican Republic and Mexico.  These foreign operations represent 
     captive manufacturing facilities of the Company and for reporting 
     purposes the U.S. dollar is considered to be the functional currency.  
     The Company's reporting period coincides with the 52- to 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, 1995, 
     1996 and 1997 all represent 52-week years. For simplicity of 
     presentation, the Company has described year-ends presented as of 
     December 31.
     
     ORGANIZATION - Effective September 27, 1995, the Company and its 
     management acquired substantially all of the assets and liabilities of 
     Power-One, Inc. and the outstanding capital stock of P-E and Poder Uno 
     (collectively the "Predecessor Company").  For financial reporting 
     purposes, the agreement has been treated as if it was effective on 
     October 2, 1995, the beginning of the Company's fourth quarter.  
     Transactions associated with the Company's operations during the period 
     from September 28 through October 1, 1995 are insignificant when 
     considered in relation to the consolidated financial statements taken as 
     a whole and have been included in the Predecessor Company financial 
     statements.  The accompanying financial statements reflect the combined 
     results of operations of the Predecessor Company for the nine-month 
     period ended September 30, 1995.
     
     The acquisition price included approximately $46,610,000 in cash and 
     $8,100,000 in distributions from P-E.  The acquisition has been 
     accounted for by the purchase method of accounting, and accordingly, the 
     acquisition price has been allocated to the assets acquired and 
     liabilities assumed based on the estimated fair values on the date of 
     acquisition.  The excess purchase price over the fair value of the net 
     assets acquired of $30,289,000 was allocated to intangible assets (see 
     Note 2).  Consequently, the amounts reported in the accompanying 
     financial statements for the Company are not comparable to the amounts 
     shown for the Predecessor Company in the prior periods.
     
     Included in cost of goods sold for the period ended December 31, 1995 is 
     $1,525,000, which primarily represents the difference between the fair 
     value of inventory acquired and the recorded carrying value of the 
     inventory at the acquisition date.
     
     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 11).
     
     OPERATIONS - The Company operates primarily in one industry segment 
     which includes the design, development and manufacture of open frame 
     D.C. power supplies for the commercial electronics industry.  The 
     Company sells its products and grants credit to customers in this 
     industry, primarily in the United States.  Sales to the Company's 
<PAGE>
                                      F-10

     largest customers amounted to 11% each to two customers throughout 1995, 
     15% to a single customer in 1996 and 15%, 12% and 11% each to three 
     customers in 1997.
     
2.   SIGNIFICANT ACCOUNTING POLICIES
     
     PRINCIPLES OF CONSOLIDATION - The accompanying financial statements 
     include the consolidated accounts of the Company and its wholly owned 
     subsidiaries and the combined operations of the Predecessor Company.  
     The majority of P-E's and all of Poder Uno's sales are to Power-One, 
     Inc.  All intercompany accounts and transactions have been eliminated in 
     the accompanying financial statements.
     
     CASH AND CASH EQUIVALENTS - Cash and cash equivalents include time 
     deposits and commercial paper with an original maturity of three months 
     or less.
     
     INVENTORIES - Inventories are stated at the lower of cost (first-in, 
     first-out method) or market.
     
     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 ten 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.
     
     ENGINEERING - Engineering costs include sustaining product engineering, 
     custom product development and research and development costs which are 
     expensed in the period incurred.
     
     INTANGIBLE ASSETS - Intangible assets includes cost in excess of net 
     assets acquired in connection with the acquisition of the Company (see 
     Note 1) 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 5 to 25 years, using the straight-line 
     method.  At December 31, 1996 and 1997, accumulated amortization related 
     to these intangible assets totaled $2,370,000 and $4,259,000, 
     respectively.
     
     Intangible assets include purchased technology related to a technology 
     and license agreement (the "Agreement") with a company entered into on 
     April 2, 1996.  The Agreement calls 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 is being amortized over the term of the licensing agreement, ten 
     years, using the straight-line method. Accumulated amortization was 
     $105,000 and $244,000 at December 31, 1996 and 1997, respectively.
     
     The Company periodically reviews the carrying value of intangible 
     assets, and if future cash flows are believed insufficient to recover 
     the remaining carrying value of an intangible asset, the carrying value 
     is written down in the period the impairment is identified to its future 
     recoverable value.
     
     MEMBERS' CAPITAL - At December 31, 1995, no class of stock had been 
     issued, and members' capital was composed of percentage ownership 
     interests as agreed upon at the time of the Company's formation (see 
     Note 1).

     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.  Additionally, the Predecessor Company had elected 
     to be taxed as an S corporation, for which the taxable income of the 
     entity was allocated to the stockholders and reflected on their 
     respective tax returns.
     
     Upon conversion to a C corporation on January 29, 1996, the Company 
     recorded a net deferred tax asset of $456,000, computed based on the 
     difference between the book and tax bases of its assets and liabilities 
     as of that date.
<PAGE>
                                      F-11

     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 thorugh 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 of 
     approximately $6,310,000 at December 31, 1997 from P-E, 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 - As required by Statement of Financial Accounting 
     Standards ("SFAS") No. 128 "Earnings Per Share" the Company adopted the 
     new standard effective in its fourth quarter of 1997, early adoption of 
     this standard was not permitted.  Additionally, effective in February 
     1998 the Securities and Exchange Commission issued Staff Accounting 
     Bulletin 98 which revised previously promulgated regulations regarding 
     presentation of earnings per share data.  As a result, the Company's 
     previous method of reporting pro forma earnings per share data is no 
     longer applicable and all prior periods have been restated to conform 
     with the new guidelines.
<PAGE>
                                      F-12

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

<TABLE>
<CAPTION>
                                  December 31, 1995               December 31, 1996                 December 31, 1997
                                -------------------               -------------------                -----------------
                                            Average     Per                   Average      Per                 Average        Per
                                (Loss)      Shares     Share       Income      Shares     Share      Income     Shares       Share
                                ------      ------    ------       -------    -------     ------     -------   -------       ------
<S>                            <C>          <C>       <C>          <C>        <C>         <C>        <C>        <C>          <C>
Income attributable to
  common stockholders          $  (171)                            $ 1,981                          $ 6,720  

Basic EPS:
  Shares outstanding 
    beginning of period                     10,000                             10,000                           10,000  
  Shares issuances                                                                                               1,659  
                                ------      ------                 -------                           ------     ------ 

  Basic EPS                       (171)     10,000    $ (.02)        1,981     10,000     $  .20      6,720     11,659       $  .58
                                                      ------                              ------                             ------
                                                      ------                              ------                             ------
Dilutive securities -
  Stock options                                                                   153                              275  
                                ------      ------                 -------     ------                ------     ------

Diluted EPS                     $ (171)     10,000    $ (.02)      $ 1,981     10,153     $  .20      6,720     11,934       $  .56
                                ------      ------    ------       -------     ------     ------                             ------
                                ------      ------    ------       -------     ------     ------                             ------

Pro Forma -
  Assumed conversion:                              
    Preferred stock                                                                                   1,494        968  
    Obligation to officers                                                                               30         43  
                                                                                                     ------     ------
                                                                                               
Pro forma diluted EPS                                                                                 8,244     12,945       $  .64
                                                                                                                             ------
                                                                                                                             ------
Dilutive securities -
  Stock options                                                                                                   (275) 
                                                                                                     ------     ------
                                                                                               
  Pro forma basic EPS                                                                               $ 8,244     12,670       $  .65
                                                                                                     ------     ------       ------
                                                                                                     ------     ------       ------
</TABLE>

     For earnings per share presentation purposes Power One, Inc.'s 
     reorganization from a limited liability company, with no outstanding 
     stock, into a C corporation effective January 29, 1996 has been adjusted 
     retroactively and, accordingly, is reflected as if the common stock was 
     outstanding from the acquisition date, October 1, 1995.  Earnings per 
     share for periods prior to October 1, 1995 have not been presented as 
     such periods relate to a predecessor entity and is not indicative of the 
     Company as an on-going entity.
     
     Pro forma earnings per share have been determined based on assuming the 
     redeemable preferred stock and other liabilities owed to certain 
     officers was converted into common stock as of the beginning of the 
     period.  Accordingly, the applicable portions of the accrued preferred 
     stock dividends and net interest costs have been added back to income 
     attributable to common stockholders in the computation.

     UNAUDITED PRO FORMA INFORMATION - Prior to January 29, 1996, net income 
     of the Company and Predecessor Company flowed through to their 
     stockholders/members.  Consequently, income taxes were the 
     responsibility of the stockholders/members.  The unaudited pro forma 
     income tax provisions included in the statements of operations are 
     determined as if the Company and Predecessor Company were taxable 
     entities for all periods presented.  For pro forma presentation purposes 
     federal income taxes have not been provided on earnings of P-E as there 
     is no intention to remit these earnings.
     
     REVENUE RECOGNITION - Revenue is recognized upon shipment of product.
<PAGE>
                                      F-13

     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 instruments 
     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 swaps.  At December 31, 1997, no derivative instruments were 
     held by the Company.
     
     FAIR VALUE OF FINANCIAL INSTRUMENTS - The recorded values of accounts 
     receivable, accounts payable and accrued expenses approximate their fair 
     value 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.  The fair 
     value of the Company's previous interest rate swap and interest swaption 
     agreements were based on a termination value and approximated $107,000 
     in favor of the Company at December 31, 1996.
     
     CONCENTRATION OF CREDIT RISK - Financial instruments that potentially 
     subject the Company to concentrations of credit risk consist primarily 
     of cash, placed with high credit quality institutions, and trade 
     receivables.  The Company sells products and extends credit to 
     customers, primarily in the United States, periodically monitors its 
     exposure to credit losses, and maintains allowances for anticipated 
     losses.
     
3.   INVENTORIES

     Inventories consist of the following (in thousands):

<TABLE>
<CAPTION>
                                        December 31, 
                                --------------------------
                                    1996            1997
      <S>                       <C>             <C>
      Raw materials             $  11,885       $  11,809 
      Subassemblies-in-process      4,257           3,343 
      Finished goods                2,698           7,217 
                                ---------       ---------
                                $  18,840       $  22,369 
                                ---------       ---------
                                ---------       ---------
</TABLE>
<PAGE>
                                      F-14

4.   PROPERTY AND EQUIPMENT

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

<TABLE>
<CAPTION>
                                                    DECEMBER 31,
                                            --------------------------
                                              1996              1997
<S>                                         <C>              <C>
Land                                        $   583          $   583  
Factory and office equipment                  7,911           12,336  
Autos                                           508              631  
Leasehold improvements                        1,468            1,857  
Construction in progress                        920            1,111  
                                            -------          -------
                                             11,390           16,518  
Less accumulated depreciation
  and amortization                            2,506            4,620  
                                            -------          -------
                                            $ 8,884          $11,898  
                                            -------          -------
                                            -------          -------
</TABLE>

5.   NOTES RECEIVABLE FROM STOCKHOLDERS

     The Company advanced cash of $200,000 to two of its stockholders in 
     exchange for notes receivable, which accrued interest at 10% per annum 
     with all principal and interest due on September 27, 2005.  The notes 
     and related accrued interest are shown as a reduction of stockholders' 
     equity as of December 31, 1996.  The notes and related accrued interest 
     were paid on October 6, 1997.

6.  NOTE PAYABLE TO BANK

     At December 31, 1996, Power-One had a credit agreement with a bank that 
     provided the Company with a revolving line of credit of up to 
     $17,500,000 with interest on amounts outstanding payable monthly based 
     on one of the following rates, as selected by the Company: LIBOR plus 
     2.00% or the bank's base rate plus 1.00%.  The interest rate was 7.875% 
     at December 31, 1996. Borrowings were collateralized by substantially 
     all of the Company's assets.
     
     On December 10, 1997, the Company amended its credit agreement with the 
     bank which previously provided the Company with a revolving line of 
     credit and a term loan aggregating approximately $47,000,000 in 
     available credit into a revolving line of credit of up to $50,000,000 
     with interest on amounts outstanding payable quarterly based on one of 
     the following rates, as selected by the Company:  LIBOR plus 1.00% to 
     2.25% or the bank's base rate plus 0% to 1.25%.  At December 31, 1997, 
     no amounts were outstanding under the credit agreement.  Borrowings are 
     collateralized by substantially all of the Company's assets.
     
     The amended credit agreement (a) provides for restrictions on additional 
     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, 1997 the Company was in compliance with all debt 
     covenants.

     In connection with the credit agreement the Company entered into an
     interest rate swap and swaption agreement.  These agreements were
     terminated concurrently with the repayment of the outstanding borrowings
     under the credit facilities at a nominal value to the Company.
     
7.  LONG-TERM DEBT

     Long-term debt consists of the following (in thousands):
<PAGE>
                                      F-15

<TABLE>
<CAPTION>
                                                                                     DECEMBER 31,
                                                                               ----------------------
                                                                                  1996         1997
<S>                                                                             <C>          <C>
Term loan due September 30, 2002, payable to a bank requiring
  quarterly principal payments starting at $625,000 on January 1,
  1996, increasing to $1,750,000.  Interest on amounts outstanding
  is payable monthly based on one of the following rates as selected
  by the Company, LIBOR plus 2.50% or the bank's base rate plus
  1.50%.  The interest rate was 7.875% at December 31, 1996.  The
  loan is collateralized by substantially all of the Company's assets
  and is subject to the restrictive covenants described in Note 6.
  The term loan was repaid on October 6, 1997                                   $29,250  
                      
Present value of technology and license agreement obligation at 8.5%  
  (Note 2)                                                                        1,005      $  326
                                                                                -------      ------
                                                                                 30,255         326
Less current portion                                                              3,929         326
                                                                                -------      ------
Long-term debt, less current portion                                            $26,326      $    -
                                                                                -------      ------
                                                                                -------      ------

</TABLE>

     Principal repayment requirements for long-term debt at December 31, 1997 
     are all due in 1998.

8.   OTHER ACCRUED EXPENSES

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

<TABLE>
<CAPTION>
                                                   DECEMBER 31,
                                            -------------------------
                                              1996             1997
<S>                                         <C>              <C>
Accrued bonuses                             $   317          $ 1,463  
Accrued sales commissions                     1,307            1,100  
Accrued sales discounts                         585              535  
Income taxes payable                            809                -  
Other accrued expenses                        1,613            1,933  
                                            -------          -------
                                            $ 4,631          $ 5,031  
                                            -------          -------
                                            -------          -------
</TABLE>

9.   OTHER LIABILITIES

     Under the terms of employment and compensation agreements with key 
     members of management entered into at the time of the Company's 
     acquisition in 1995, the Company was obligated to pay in aggregate 
     $5,264,000 plus accrued interest at 10% per annum on the balance.  The 
     agreements specified that the Company would pay the balance due in 20 
     quarterly installments beginning on the first of the month following (i) 
     retirement or termination (other than by voluntary action or discharge 
     for cause during a specified period) or, in the event of death, to the 
     designated beneficiary; or (ii) upon completion of an initial public 
     offering.  In addition, if employment continued through December 31, 
     1997, under certain provisions as specified in the agreements, payments 
     under similar terms may have begun on September 30, 1998.  A lump-sum 
     payment would be paid to each employee in the event of a greater than 
     50% change in ownership of the Company.  In connection with the 
     Company's completion of its initial public offering on October 6, 1997, 
     the total obligation of $6,382,360 was settled with a lump sum cash 
     payment of $5,606,648 and the issuance of 55,408 shares of common stock 
     valued at the initial public offering price of $14 per share.

<PAGE>
                                      F-16

10.  COMMITMENTS AND CONTINGENCIES

     OPERATING LEASES - Power-One, Inc. leases its production and office 
     facilities 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.
     
     The Company also leases manufacturing facilities in Puerto Rico, the 
     Dominican Republic and Mexico.  The leases expire at various dates 
     through 2001 and provide for renewal options of five years in Puerto 
     Rico, six years in the Dominican Republic and one year for certain of 
     its facilities in Mexico.
     
     Future minimum lease payments for operating leases as of December 31, 
     1997 are as follows (in thousands):
<TABLE>
                   <S>                           <C>
                   1998                          $  1,485  
                   1999                             1,281  
                   2000                               924  
                   2001                               828  
                   2002                               803  
                   Thereafter                       1,338  
                                                 --------
                                                 $  6,659  
                                                 --------
                                                 --------
</TABLE>
     Total rent expense was $907,000, $342,000, $1,352,000 and $1,407,000 for 
     the nine-months ended September 30, 1995, the period October 1, 1995 
     through December 31, 1995, the years ended December 31, 1996 and 1997, 
     respectively.
     
     PURCHASE AND SALES COMMITMENT - On April 2, 1996, the Company entered 
     into an agreement to purchase and sell certain products from and to a 
     company for a period extending for ten years.  The value of these 
     commitments is based on approved transactions according to the terms of 
     the agreements at prices based on existing company pricing policies on 
     the date of the related purchase or sale.
     
     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.
     
11.  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 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.  
<PAGE>
                                      F-17

     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.
     
12.  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.
     
     The Company used the net proceeds from the offering to repay bank 
     borrowings totaling $36,600,000 and approximately $5,600,000 in 
     obligations owed to certain executive officers.  The remaining net 
     proceeds of approximately $31,600,000 has been added to the Company's 
     working capital.
     
     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 September 1997, the Plan was amended to increase the shares issuable 
     under the plan from 1,000,000 shares to 1,000,000 shares plus 10% of any 
     increase in outstanding shares that occur after August 31, 1997 and 
     provided that Non-Employee Directors are eligible for certain stock 
     options.  The Company can issue either qualified or non-qualified stock 
     options under the Plan.  At December 31, 1997, 1,705,958 shares of 
     common stock are issuable under the Plan.  The option price is 
     determined by the Board of Directors based on the estimated fair market 
     value of the Company's common stock on the date of grant.  The options 
     vest over seven years and include accelerated vesting provisions that 
     allow for vesting over five years if certain performance measures are 
     met.  No options were exercisable as of December 31, 1997.  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 year ended 
     December 31, 1997, $16,000 in compensation expense was recognized.

     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 granted - February, 1996            483,000              $1.00              $ 1.00
Options canceled                            (15,500)             $1.00              $ 1.00
                                            -------
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  
                                            -------          --------------         ------
                                            -------          --------------         ------
</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-
<PAGE>
                                      F-18

     Based Compensation," net income would have been $3,380,000 in 1996 and 
     $8,141,000 in 1997.  The change in net income would not have an effect 
     on earnings per share in 1996, but would reduce basic earnings per share 
     to $0.57 in 1997, a reduction of $0.01.  For 1997, the change in net 
     income would not have an effect on diluted earnings per share.  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 1996 and 
     1997: risk-free interest rate range of 5.84% to 6.9%, expected 
     volatility of 40.8% and 44.6%, an expected option life ranging from 7 to 
     8.5 years, and no expected dividends.  The fair value of stock options 
     granted were $217,000 in 1996 and $2,599,000 in 1997.

     The following table summarizes information regarding options outstanding
     at December 31, 1997:

<TABLE>
<CAPTION>
    RANGE OF                          OUTSTANDING AT            REMAINING       WEIGHTED
    EXERCISES                          DECEMBER 31,            CONTRACTUAL      AVERAGE
     PRICES                                1997                   LIFE       EXERCISE PRICE
<S>                                    <C>                     <C>           <C>
  $1.00 - $2.00                          494,750                8.32 yrs        $  1.05  
     $14.00                              270,150                9.75 yrs          14.00  
 $17.50 - $19.00                          12,000                9.90 yrs          17.63  
                                         -------                --------        -------
  $1.00 - $19.00                         776,900                8.84 yrs        $  5.81  
                                         -------                --------        -------
                                         -------                --------        -------
</TABLE>

     There are no options which are exercisable as of December 31, 1997.
     
     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.  No shares have been 
     issued under this plan at December 31, 1997.

13. 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 
     $110,000, $33,000, $143,000 and $79,000 for the nine-months ended 
     September 30, 1995, the period October 1, 1995 through December 31, 
     1995, the years ended December 31, 1996 and 1997, respectively.
     
14. BUSINESS GEOGRAPHICAL LOCATIONS

     The Company has manufacturing and distribution facilities in the United 
     States, Puerto Rico, Dominican Republic, and Mexico.  The Company's 
     operations in Puerto Rico are considered part of the United States and 
     are included as North America.  The following table summarizes the 
     Company's operations in different geographic locations (in thousands):
<PAGE>
                                     F-19
<TABLE>
<CAPTION>
                                          PREDECESSOR
                                            COMPANY
                                          NINE MONTHS        OCTOBER 2,          YEAR ENDED
                                             ENDED          1995 THROUGH         DECEMBER 31,
                                          SEPTEMBER 30,     DECEMBER 31,   -----------------------
                                             1995              1995           1996         1997
<S>                                       <C>                <C>            <C>          <C>
North America:
  Sales to unaffiliated customers         $  52,732          $  20,670      $  74,210    $  91,553  
  Intercompany sales and transfers           28,392             10,756         42,748       56,814  
                                          ---------          ---------      ---------    ---------

                                             81,124             31,426        116,958      148,367  
                                          ---------          ---------      ---------    ---------

Mexico and Dominican Republic:
  Sales to unaffiliated customers                                                               30  
  Intercompany sales and transfers            6,639              3,254         19,865       26,155  
                                          ---------          ---------      ---------    ---------

                                              6,639              3,254         19,865       26,185  
                                          ---------          ---------      ---------    ---------

Total sales and transfers                    87,763             34,680        136,823      174,552  

Eliminations                                (35,031)           (14,010)       (62,613)     (82,969) 
                                          ---------          ---------      ---------    ---------

Net sales                                 $  52,732          $  20,670      $  74,210    $  91,583  
                                          ---------          ---------      ---------    ---------
                                          ---------          ---------      ---------    ---------

North American operating income           $   7,770          $   1,874      $   9,857    $  18,917  
Mexico and Dominican Republic 
  operating income                              908                 97          4,583        1,926  
Eliminations                                   (815)            (1,068)        (6,438)      (6,226) 
                                          ---------          ---------      ---------    ---------

Operating income                          $   7,863          $     903      $   8,002    $  14,617  
                                          ---------          ---------      ---------    ---------
                                          ---------          ---------      ---------    ---------
North American identified assets                                            $  62,310    $  95,129

Mexico and Dominican Republic 
  identified assets                                                            10,395       17,508
                                                                            ---------    ---------

Total assets                                                                $  72,705    $ 112,637
                                                                            ---------    ---------
                                                                            ---------    ---------
</TABLE>

     Intercompany transfers between geographic locations are accounted for at 
     cost.  Intercompany sales between geographic locations are accounted for 
     at prices which, in general, provide a profit after coverage of all 
     manufacturing costs.  Operating income is total sales less operating 
     expenses.
     
     The identifiable assets by geographic location are those assets used in 
     the Company's operations in each area.
     
15.  INCOME TAXES
     
     The components of income tax expense for the period from January 29, 
     1996, the date on which the Company converted to a tax paying entity 
     (see Notes 1 and 2), to December 31, 1996 and for the year ended 
     December 31, 1997 are as follows (in thousands):
<PAGE>
                                      F-20
<TABLE>
<CAPTION>
                                             1996                   1997
<S>                                        <C>                    <C>
Current:
  Federal                                  $  1,221               $   758  
  State                                         334                   117  
  Foreign                                       157                   378  
                                           --------               -------

Total current                                 1,712                 1,253  
                                           --------               -------

Deferred:                                          
  Federal                                      (675)                1,779  
  State                                        (185)                  510  
                                           --------               -------

Total deferred                                 (860)                2,289  
                                           --------               -------

Provision for income taxes                      852                 3,542  
Recordation of deferred income tax benefits
  upon conversion from limited liability
  company to C corporation                     (456)                       
                                           --------               -------

Income taxes                               $    396               $ 3,542  
                                           --------               -------
                                           --------               -------
</TABLE>
<PAGE>
                                      F-21

     The components of deferred tax assets (liabilities) at December 31, 1996 
     and 1997 are as follows (in thousands):

<TABLE>
<CAPTION>
                                                      1996                         1997
                                           -------------------------      ----------------------
                                             FEDERAL         STATE        FEDERAL         STATE
<S>                                        <C>              <C>           <C>            <C>
Current:
  Uniform capitalization                   $    250         $   69        $    61        $   16  
  Sales discount reserve                        157             43            140            36  
  Bad debt reserve                              144             40            208            54  
  Inventory reserve                             103             28            206            54  
  Other                                                                       171            30  
Noncurrent:                                        
  Deferred compensation                       1,790            490               
  Intangible assets                          (1,693)          (463)        (1,609)         (418) 
  Accrued interest                              224             61               
  Other                                          58             15             78               
                                           --------         ------        -------        ------

Net deferred tax assets (liabilities)      $  1,033         $  283        $  (745)       $ (228) 
                                           --------         ------        -------        ------
                                           --------         ------        -------        ------
</TABLE>

     A reconciliation of the Company's provision for income taxes for the 
     year ended December 31, 1996 (the initial year the Company became a tax 
     paying entity) and December 31, 1997 to the U.S. federal statutory rate 
     is as follows:

<TABLE>
<CAPTION>
                                                          1996                             1997
                                                --------------------------    ---------------------------
                                                 AMOUNT       PERCENTAGE        AMOUNT       PERCENTAGE
<S>                                             <C>           <C>             <C>            <C>
Provision for income taxes at statutory rate    $ 1,289            34 %       $  4,004        $  34 %
Foreign income taxed at lower rates                (521)          (14)          (1,137)         (10) 
State taxes net of federal benefit                  116             3              414            4  
Tax benefit of limited liability company from      
  January 1 to January 29, 1996                     (97)           (3)              
Other                                                65             2               261           2  
                                                --------         ------        --------        ------

                                                    852            22             3,542          30  
Recordation of net deferred tax assets upon        
  conversion to C corporation                      (456)          (12)              
                                                --------         ------        --------        ------

                                                $   396            10 %        $  3,542          30 %
                                                --------         ------        --------        ------
                                                --------         ------        --------        ------
</TABLE>

                                    ******
<PAGE>
                                      S-1


                                Power-One, Inc.
              Schedule II:  Valuation and Qualifying Accounts
  For Each of the Periods in the Years Ended December 31, 1995, 1996 and 1997

<TABLE>
<CAPTION>
                                                    Balance at     Charged to     Charged to                      Balance
                                                    beginning      Costs and        Other                        at End of
Description                                         of Period      Expenses (1)    Accounts    Deductions (2)     Period
<S>                                                 <C>            <C>             <C>         <C>                <C>
Allowance for doubtful accounts:
Nine Months Ended September 30, 1995 (3)              208,000       100,000                                        308,000 
Three Months Ended December 31, 1995                  308,000                                    (105,000)         203,000 
Year Ended December 31, 1996                          203,000       435,000                                        638,000 
Year Ended December 31, 1997                          638,000       296,000                      (109,000)         825,000 
                                                                                                               
Accrued sales discounts and returns:                                                                           
Nine Months Ended September 30, 1995 (3)              365,000                                                      365,000 
Three Months Ended December 31, 1995                  365,000        73,000                                        438,000 
Year Ended December 31, 1996                          438,000       147,000                                        585,000 
Year Ended December 31, 1997                          585,000                                     (50,000)         535,000 
                                                                                                               
Accrued Warranties:                                                                                            
Nine Months Ended September 30, 1995 (3)              400,000       239,000                      (239,000)         400,000 
Three Months Ended December 31, 1995                  400,000        98,000                       (98,000)         400,000 
Year Ended December 31, 1996                          400,000       300,000                      (300,000)         400,000 
Year Ended December 31, 1997                          400,000       141,000                      (141,000)         400,000 
</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.

(2)  For the allowance for doubtful accounts, represents bad debt charge offs.

(3)  Data of the Predecessor Company.

<PAGE>
                                      S-2

INDEX TO EXHIBITS

<TABLE>
<CAPTION>

           DESCRIPTION
           -----------
   <S>     <C>
     1.1*  Form of Underwriting Agreement
     3.1*  Form of Restated Certificate of Incorporation of the Company
     3.2*  Form of Amended and Restated Bylaws of the Company
     4.1*  Specimen of Common Stock Certificate
    10.1*  Form of Indemnification Agreement between the Company and its
           directors, executive officers and certain other officers
    10.2*  Form of Employment and Compensation Agreements between the Company
           and Mr. Goldman, Mr. Schnopp, Mr. Roark, Mr. Hage,
           and Mr. Godfrey
    10.3*  Form of Amendment to Employment and Compensation Agreements
    10.5*  1996 Stock Incentive Plan
    10.6*  Amended and Restated 1996 Stock Incentive Plan
    10.7*  Form of Management Bonus Plan
    10.11* Security Agreement between the Company and NationsBank of Texas,
           N.A., dated February 1, 1996
    10.12* Form of Pledge Agreement
    10.13* Product and Component Agreement, including the related License
           Agreement, between the Company and Calex Manufacturing
           Company
           dated April 2, 1996
    10.14* P-E Tax Exemption Grant dated January 4, 1995
    10.16* Form of Employee Stock Purchase Plan
    10.17* Form of Selection Letter between Company and each executive officer
    10.18* Amendment to Employment and Compensation Agreement dated September
           11, 1997
    10.19* Letter Explaining Selection Letter between Company and each executive
           officer
    10.20  Amended and Restated Credit Agreement among the Company, NationsBank
           of Texas, N.A. and certain lenders, dated December
           10, 1997
    21*    List of Subsidiaries
    23     Independent Auditors' Consent
    24     Power of Attorney (contained on Signature Page)
    27.1   Financial Data Schedule
    27.2   Financial Data Schedule
    27.3   Financial Data Schedule
</TABLE>
___________
  *  Previously filed as an exhibit to the Registration Statement on Form S-1 of
Power-One, Inc. (File No. 333-32889).