SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K
            (Mark One)
                [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                   For the fiscal year ended December 31, 1996
                                       OR
              [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                           Commission File No. 0-22428

                                ZYTEC CORPORATION
             (Exact name of registrant as specified in its charter)


           MINNESOTA                                           41-1465891
(State or other jurisdiction of                             (I.R.S. Employer
incorporation or organization)                             Identification No.)


7575 MARKET PLACE DRIVE, EDEN PRAIRIE, MINNESOTA                          55344
(Address of principal executive offices)                              (Zip Code)


Registrant's telephone number, including area code:  (612) 941-1100


Securities registered pursuant to Section 12(b) of the Act:  NONE
Securities registered pursuant to Section 12(g) of the Act: 
                                                     COMMON STOCK, NO PAR VALUE
                                                           (Title of class)


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

As of February 28, 1997, the aggregate market value of the voting stock held by
nonaffiliates of the registrant, computed by reference to the average of the
high and low prices on such date as reported by the Nasdaq National Market was
$77,918,811.

As of February 28, 1997, there were outstanding 9,264,603 shares of the
registrant's common stock, no par value.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's Annual Report to Shareholders for the year ended
December 31, 1996, are incorporated by reference into Part II and Part IV
hereof.

Portions of the registrant's definitive proxy statement for its 1997 Annual
Meeting of Shareholders, to be filed within 120 days after the end of the fiscal
year covered by this report, are incorporated by reference into Part III hereof.


                                TABLE OF CONTENTS

                                                                          PAGE
                                     PART I
<TABLE>
<CAPTION>
<S>                                                                                  <C>
Item 1.      Business                                                                     3
              Power Conversion:
                Industry and Market                                                     3-6
                Strategy                                                                6-7
                Products and Services                                                   7-8
                Operations                                                              8-9
                Sales, Marketing and Customers                                         9-10
                Backlog                                                                  10
                Competition                                                           10-11
                Research and Development                                                 11
                Intellectual Property Matters                                            11
                Employees                                                                12
              Services and Logistics:
                Industry Overview                                                        12
                Strategy                                                                 12
                Products and Services                                                 12-13
                Employees                                                                13
Item 2.      Properties                                                                  13
Item 3.      Legal Proceedings                                                           13
Item 4.      Submission of Matters to a Vote of Security Holders                         13



                                     PART II

Item 5.      Market for the Company's Common Equity and Related Stockholder Matters      14
Item 6.      Selected Financial Data                                                     14
Item 7.      Management's Discussion and Analysis of Financial Condition and
                Results of Operations                                                    14
Item 8.      Financial Statements and Supplementary Data                                 14
Item 9.      Changes in and Disagreements with Accountants on Accounting and
                Financial Disclosure                                                     14



                                    PART III

Item 10.     Directors and Executive Officers of the Registrant                          15
Item 11.     Executive Compensation                                                      15
Item 12.     Security Ownership of Certain Beneficial Owners and Management              15
Item 13.     Certain Relationships and Related Transactions                              15



                                     PART IV

Item 14.     Exhibits, Financial Statement Schedules and Reports on Form 8-K             16


SIGNATURES                                                                            17-18


INDEX TO EXHIBITS                                                                     19-23

</TABLE>


                                     PART I


ITEM 1.           BUSINESS

      Zytec Corporation ("Zytec" or the "Company") does business in two
segments: Power Conversion which provides power supply design, manufacture and
repair (approximately 90% of the Company's net sales) and Services and Logistics
which provides repair services and logistics for a variety of products primarily
for a significant customer (approximately 10% of net sales).

      In the Power Conversion segment, the Company is a leading designer and
manufacturer of custom electronic power supplies for original equipment
manufacturers ("OEMs") in the communications, networking, computer and other
electronic equipment marketplaces. Recently, the Company has experienced
significant sales growth because it has been the sole-source provider of power
supplies to many of the OEMs that provide hardware for the internet and the data
communications market place. The Company also repairs power supplies and related
products. The Company's power supply components are sold in North America and
Europe, and its products are used worldwide. Zytec's principal OEM customers
include: Digital Equipment, Hewlett-Packard, IBM, Cabletron, Cisco Systems, Sun
Microsystems, Bay Networks, Dell, and Silicon Graphics. In 1996, the Company
manufactured and delivered over 900,000 power supplies representing over 173
different products. The Company's dedication to quality resulted in its winning
the Malcolm Baldrige National Quality Award in 1991.

      The Services and Logistics segment of the business provides repair
services and logistics for a variety of products primarily for Hewlett-Packard.
These products include laser and inkjet printers, facsimile machines, computers,
monitors and other equipment.


POWER CONVERSION

INDUSTRY AND MARKET
      INDUSTRY OVERVIEW
      Power supplies perform many essential functions relating to the supply,
regulation, and distribution of electrical power within electronic equipment.
Electronic systems require a steady supply of electrical power at one or more
voltage levels. Power supplies convert alternating current (AC) from a primary
power source into the direct current (DC) required to power the electronic
system. In addition, power supplies provide different DC voltage levels required
by the different subsystems and components in the system and monitor and
regulate those voltages to protect the product and its components from surges.
Power supplies can also be designed to perform diagnostic functions that prevent
electronic equipment from being damaged by such equipment's own malfunction, as
well as provide power through use of a short-term battery back-up system when
the primary power source fails.

      The dominant technology now used in power supplies is switching
technology. Before the development of switching power supplies, power supply
technology was fairly simple, and power supplies consisted of a transformer and
some related components to rectify and control power surges. As the complexity
of electronic equipment has increased, power supplies and their underlying
technology have become more advanced. Switching power supplies such as those
manufactured by Zytec have hundreds of components, provide advanced diagnostic
and power management functions, can be designed to provide battery back-up
power, and are smaller and more efficient than power supplies using simpler
technology.


                            SWITCHING POWER SUPPLIES

   [GRAPHIC SHOWING FROM AC WALL POWER IN TO AC TO DC POWER SUPPLY TO A DISK
         DRIVE OR MEMORY OR INTEGRATED CIRCUITS OR MOTORS OR MONITORS]

      As a further enhancement of AC/DC power supplies utilizing switching
technology, a newer more flexible technology is emerging which the Company
refers to as "distributed power architecture" (DPA). Most electronic systems
have a number of subsystems, each of which may require a different operating
voltage or level of power. As a result, power supplies often have multiple
outputs that can provide all required system voltage levels. In such power
supplies, power is "distributed" throughout the system so that in addition to
the main AC/DC power supply, DC/DC converters located on or near the subsystem
or component being powered change the voltage of the DC to the specific level of
voltage needed. Distributed power permits greater flexibility to meet the power
supply requirements if components or subsystems are added or upgraded.

                         DISTRIBUTED POWER ARCHITECTURE

                    [GRAPHIC SHOWING FROM INPUT TO AC TO DC
                  FRONT END TO OUTPUT TO VARIOUS SUB SYSTEMS]

      Micro-Tech Consultants forecasts that the US high density DC/DC converter
power supply market will grow from $309 million in 1996 to $500 million in 2000,
representing a projected average annual growth rate of approximately 12.8%.
Micro-Tech Consultants also forecasts that the entire US distributed power
architecture market will grow from $1,402 million in 1996 to $2,256 million in
2000 for an average annual growth rate of 12.6%.

      MARKET OVERVIEW
      Ninety percent of the Company's business is the manufacture of custom
power supplies. According to a market report from Micro-Tech Consultants, the
worldwide market for power supplies was estimated to be over $19.6 billion in
1995. This is forecasted to grow to $32.7 billion in 2000. The overall market
for power supplies can be defined several ways, as follows:

      MERCHANT/CAPTIVE. Merchant power supply manufacturers design and
manufacture power supplies for others. Captive power supply manufacturers design
and manufacture power supplies for use within their own products. According to
Micro-Tech Consultants, the merchant segment of the market accounted for 51% of
the power supply units shipped in the United States in 1995 and is projected to
grow to 60% in the year 2000 as OEMs demand product options and features and
high quality levels that make power supplies increasingly difficult to design
and manufacture in-house.


      POWER RANGE. The market is also segmented by power supply output range, as
follows:

<TABLE>
<CAPTION>
                          Typical               % of                                        Representative
Power Range           Characteristics          Market*         End Users                     Applications
------------------------------------------------------------------------------------------------------------------
<S>               <C>                           <C>     <C>                            <C>
LOW               * Less than 150 Watts         21%     *  PC Companies                * Personal Computers
                  * Lower Technology                    *  Consumer Electronics        * Consumer Electronics
                  * Higher Volume                                                      * Desk Top Printers
                  * Lower Margin

MID               * 150-750 Watts               63%     *  Internetwork Companies      * Routers, Hubs
                  * High Technology                     *  Computer Companies          * Workstations, Fault
                  * Moderate Volume                     *  Medical Companies           * Tolerant Computers
                  * Higher Margin                                                      * Blood Analyzers

HIGH              * More than 750 Watts         16%     *  Computer Companies          * Main-frame Computers
                  * High Technology                     *  Industrial Companies        * Industrial Process Control
                  * Lower Volume                        *  Internetworking Companies   * High-end Routers/Switches
                  * Higher Margin
</TABLE>

---------
    *  Based on a 1996 market report from Micro-Tech Consultants.


      APPLICATION. The United States power supply market also is segmented into
different applications. Set forth below are the principal segments and the
corresponding compound annual revenue growth rate as forecasted by Micro-Tech
Consultants:

                                                                   GROWTH RATE
           APPLICATIONS                                             1995-2000
           ------------                                             ---------
           Computer, Peripherals and Office Equipment*...........    14.0%
           Communications*.......................................    18.3%
           Military/Aerospace....................................    (9.6)%
           Industrial ...........................................     7.6%
---------
* Zytec actively participates in the computers, peripherals, office equipment
and communications market segments.


      CUSTOM/STANDARD. Custom power supplies are designed and packaged to meet
the form, fit, and functional requirements of an OEM's unique and specific
application. They are attractive to OEMs because they present maximum design
flexibility, provide the lowest cost, and allow the use of special features.
Standard, "off-the-shelf" power supplies are not design-specific but also do not
require substantial up-front engineering design costs. Once a product has
reached the stage of development where the OEM is confident that there will be a
market demand for the product, it is typically cost-effective to custom design a
unique power supply to meet that product's specific requirements. The OEM is
then able to utilize a moderately high-volume, customized solution at the lowest
cost per watt of power without paying for unnecessary features or capabilities.
Custom power supplies represented 63.0% of the United States market in 1995,
according to Micro-Tech Consultants.

      Zytec pursues the custom power supply business because it capitalizes on
the Company's strengths in the area of sophisticated design, volume
manufacturing, and customer service. The effect, though, is that competition
among qualified design and manufacturing outsourcing companies providing these
customized solutions is keen. The competition causes downward pressure on gross
margins, which is only partially offset by lower selling and distribution costs.

      Zytec believes a number of important trends affecting its customers will
continue to shape the power supply marketplace. The applications segments which
are growing rapidly, such as workstations and data communications hardware
(e.g., hubs, routers and file servers), need mid-range power. In addition, OEMs
face pressure from end users to improve the price and performance of products,
bring new products to market quickly, provide more product options and features,
reduce product size, and meet increasingly complex safety and regulatory agency
standards. The Company believes that these pressures will support the need for
and encourage a modest migration from captive manufacturers to
merchant-provided, custom-designed power supply manufacturers such as Zytec and
that market dynamics will maintain the vitality of the mid-range segment of the
market.


STRATEGY
      Zytec's objective is to be the supplier of choice to a targeted group of
multinational OEM customers who require sophisticated power supply solutions and
who are likely to have substantial volume requirements. To achieve this
objective, Zytec's strategy is to differentiate itself through advanced
technology and design, shorter product development cycles and superior product
performance, quality, service and value. The Company's primary target market for
the last several years has been OEMs in the communications, networking, computer
and other electronic equipment marketplaces. These OEMs manufacture hubs,
routers, high availability file servers and disk arrays which typically have
complex technical needs, high product reliability standards, short product
development cycles and variable production needs. The Company implements this
strategy by combining the following key elements:

      DELIVER HIGH-QUALITY PRODUCTS AND SERVICES
      Zytec believes that quality and responsiveness to the customer's needs are
of critical importance in its efforts to compete successfully. Zytec's Minnesota
and Austrian operations are certified to ISO 9001, and the Company plans to
qualify each of its locations to applicable IS0 9000 standards as necessary to
meet customer requirements. Zytec actively involves all employees in
implementing techniques to measure, monitor and improve performance and provides
all employees with education and training, including courses in statistical
process control and related techniques. Also, employees participate in Zytec's
planning sessions and monitor adherence to their annual plans on a monthly
basis. Through its commitment to customer service and quality, the Company
believes it is able to provide superior value to its customers.

      PROVIDE LEADING-EDGE ENGINEERING AND TIME TO MARKET
      Zytec's target markets and customers are characterized by high growth
rates and continually evolving technology. As a result, Zytec's customers
typically require leading-edge technology designed in a relatively short period.
Zytec's initiatives to maintain leading-edge technology and reduce time to
market include collaborative research with the Power Electronics Center at
Virginia Polytechnic Institute; a series of in-house technical training
symposia; increased use of standard circuits; sharing of engineering concepts
between Austria and US; and computerized simulation of analog design
characteristics (begun in 1995). These initiatives have contributed to a
reduction of time to market of about 20% per year in 1994, 1995 and 1996. The
design engineering personnel located in Richardson, Texas, who perform system
engineering for Zytec's DPA products, participate in these process improvement
initiatives.

      DEVELOP AND EXPAND COLLABORATIVE RELATIONSHIPS
      Through the development and expansion of collaborative relationships with
its customers, Zytec attempts to satisfy their needs by offering a full range of
value added services, including design expertise, process development and
control, testing, inventory management, and rapid response to volume and design
changes. Some custom-designed projects are priced based on agreed-to gross
margins and allow for a sharing of the costs, risks and rewards of the
manufacturing process with the customer. These relationships also provide the
Company with valuable knowledge regarding the customer's products. The Company
focuses its efforts on customers with which it believes the opportunity exists
to develop long-term business collaborations.

      LEVERAGE ADVANCED MANUFACTURING AND MANAGEMENT TECHNIQUES
      Zytec's strategy focuses on the quality of all elements of the production
process, rather than merely the quality of the end product. To implement this
strategy, Zytec uses sophisticated design and manufacturing techniques (such as
computer integrated design and manufacture, computer aided design, and automated
testing and assembly of printed circuit boards), combined with advanced
management techniques, including just-in-time manufacturing, statistical process
control and total quality commitment. These techniques allow the Company to
decrease production costs by improving the efficiency of production processes.

      EXPAND COMPLEMENTARY BUSINESSES
      The Company believes that providing a wide range of services affords the
Company a competitive advantage, as it further addresses customer needs and
therefore increases the likelihood that the Company will make continuing sales
to its customers. For example, at a customer's request, the Company may build
assemblies by adding cables, harnesses, frames, and other components to its
power supply unit. In addition, Zytec offers power supply repair services for
Zytec-manufactured power supplies as well as power supplies manufactured by
others.


PRODUCTS AND SERVICES
      In 1996, the Company manufactured and delivered over 900,000 power
supplies representing over 173 different products, including 33
customer-designed power supplies and 140 products designed by Zytec. Zytec also
provides related repair and support services to customers.

      POWER SUPPLY PRODUCTS
      A Zytec-designed power supply progresses through a five-phase cycle of
development that may last from 6 to 18 months, depending on the customer's
product introduction schedule and the design complexity. In Phase Zero and Phase
One of development, a team is assembled, the product specifications are refined
with varying degrees of customer involvement, and the product is conceptually
designed. In Phase Two, the detailed design analysis and layouts are completed
and documented, initial prototypes are manufactured and shipped to the customer,
and Zytec begins to track the product's actual cost against targeted cost. In
Phase Three, prototypes are tested extensively by Zytec and the customer, design
corrections are made, design documentation is released, and safety compliance
approvals are obtained. In Phase Four, production plans, processes, and
capabilities are established to support volume production, and customer service
standards are implemented. Phase Five is volume production.

<TABLE>
<CAPTION>
                       THE PRODUCT DEVELOPMENT CYCLE

                         TYPICAL TIME LINE                MAJOR ACTIVITIES

<S>                     <C>                              <C>
         Phase 0         Time of Award                    *  Assign design team
                                                          *  Establish project schedule
                                                          *  Specification review

         Phase 1         Week 1-8,                        *  Design review
                         Depending upon complexity        *  Preliminary electrical and mechanical
                                                             design completed
                                                          *  Cost targets compared to quote

         Phase 2         Month 1-4                        *  Detailed design analysis
                                                          *  CAD layouts
                                                          *  Prototypes manufactured and delivered
                                                          *  Documentation
                                                          *  Costs reviewed

         Phase 3         Month 5-18                       *  Testing and qualification
                                                          *  Design corrective action
                                                          *  Documentation release
                                                          *  Customer design review
                                                          *  Safety compliance approvals obtained
                                                          *  Costs reviewed
                                                          *  Product performance variation measured

         Phase 4         Month 5-18                       *  Pre-production product manufactured and tested
                                                          *  Production process capabilities determined
                                                          *  Initial production started
                                                          *  Design responsibility transferred to
                                                             manufacturing
                                                          *  Customer service standards implemented

         Phase 5         Month 6-18                       *  Volume production
</TABLE>

      As customers demand shorter development times, the risk that all five
phases of development will not be completed successfully on schedule rises.
Early life project profitability may be reduced substantially if the Company has
not completed all phases of development before manufacturing start-up begins.

      Zytec also manufactures power supplies based on designs supplied by the
customer. In customer-designed projects, Zytec manufactures a power supply that
the customer has designed, using suppliers agreed to between the customer and
Zytec.

      In 1995, Zytec introduced and shipped the first substantial quantities of
its DPA converters. This technology, licensed from Digital Equipment Corporation
and subsequently Galaxy Power, Inc., offers higher efficiency in smaller size
than traditional switching power supplies. In early 1996, the Company
established a subsidiary in Dallas, Texas to lead the Company's design and
marketing efforts for this new technology.

      REPAIR OF POWER SUPPLIES
      In 1996, Zytec repaired over 1,100 different power supply models
originally manufactured by over 200 different companies in its Redwood Falls,
Minnesota location. Repair activities are also carried out in Kindberg, Austria.
Many of the Company's power supply customers use Zytec's repair services for
power supplies manufactured by the Company and by others.

OPERATIONS
      QUALITY MANAGEMENT TECHNIQUES
      A key element of Zytec's competitive strategy is delivering high-quality
products and services. Zytec's focus on this strategy led to its receipt of one
of three Malcolm Baldrige National Quality Awards given in 1991. The Company
also won the first Minnesota Quality Award in 1991, and has received over 30
superior service and quality awards from its customers, including IBM, Abbott
Laboratories, Stratus Computers, Tektronix and Sun Microsystems, since 1987.

      Zytec's quality management techniques focus on all elements of the
production process, rather than merely the quality of the end product. To
implement this strategy, Zytec uses sophisticated design and manufacturing
techniques (such as computer integrated design and manufacture, computer aided
design, and automated testing and assembly of printed circuit boards), combined
with advanced management techniques, including just-in-time (JIT) manufacturing,
statistical process control (SPC), and total quality commitment (TQC). These
techniques allow the Company to decrease production costs by improving the
efficiency of production processes.

      *     JIT manufacturing increases efficiencies and shortens the
            manufacturing cycle.

      *     SPC complements the JIT process and is a set of analytical and
            problem solving techniques through which Company personnel can
            continuously evaluate stages of production and administrative
            processes.

      *     TQC is a management approach which involves all employees in
            establishing overall and specific goals, tracking adherence to these
            goals on a monthly, weekly or daily basis, and being responsible and
            accountable for achieving the established objectives.

     MANUFACTURING PROCESS
     A typical power supply consists primarily of one or more printed circuit
boards, electronic components, transformers and other electromagnetic
components, and a sheet metal chassis. The production of the Company's power
supplies entails the assembly of structural hardware combined with sophisticated
automated assembly of circuit boards using automated surface mount and
pin-through-hole interconnection technology. Surface mount technology permits
reduction in board size by eliminating the need for holes in the printed circuit
boards, allowing components to be placed on both sides of a board.
Pin-through-hole assembly involves attaching electrical components to circuit
boards by means of pins or leads that are inserted into pre-drilled holes and
soldered to the electrical circuits on the boards.

     In response to market demands for increased quality and reliability, design
complexity, and sophisticated technology, Zytec has automated many electronic
assembly and testing processes which were traditionally performed manually. In
addition, the demand for shorter manufacturing cycles has also led to increased
use of automated assembly and testing. The Company believes that the power
supply manufacturing industry has remained fragmented partly because it
traditionally has been a labor intensive, low investment industry; thus, it
believes that increased levels of automation will strengthen Zytec's competitive
position.

     Many of the Company's customers 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, Zytec
designs and manufactures power supplies in accordance with the certification
requirements of many international agencies, such as Underwriters Laboratories
Incorporated (UL) in the United States; the Canadian Standards Association (CSA)
in Canada; Technischer Uberwachungs-Verein (TUV) and Verband Deutscher
Electrotechniker (VDE), both in Germany; the British Approval Board for
Telecommunications (BABT) in the United Kingdom; and International
Electrotechnical Committee (IEC), a European standards organization. Both Zytec
Austria and Zytec US (Redwood Falls, Minnesota) are certified to ISO 9001, which
is a European model for quality assurance.

     SUPPLIERS
     Zytec typically uses a primary source of supply for each specific
component, but it has several sources for each kind of component. As with
customers, Zytec stresses early supplier involvement in design, the use of
quality methods such as SPC and TQC, and frequent feedback through monthly
statistical analysis of quality and delivery. Several major suppliers provide
"just in time" shipments of products to Zytec. No supplier provides more than
10% of the dollar value of material used by the Company on a consolidated basis.

     In March 1996, an existing supplier of magnetic components (transformers,
coils and toroids) to Austria was acquired by the Company from the Hungarian
government by privatization. The acquisition gives the Company a source of very
high quality, low-cost custom components. This facility will be operated as a
wholly-owned subsidiary of the Austrian operation. It will provide the majority
of magnetic components used by Zytec Austria and has recently become a supplier
to US operations as well.

SALES, MARKETING AND CUSTOMERS
      Zytec markets its custom products and services through an integrated sales
approach involving direct sales representatives and account managers, along with
active support from design engineering and production personnel. The Company's
products and repair services are sold worldwide through an eleven-member sales
organization. Eight sales personnel are responsible for North American power
supply sales. Two sales representatives are responsible for marketing the
Company's repair business in North America. One sales person, headquartered in
Vienna, Austria, is responsible for European power supply sales.

      Because of the costs inherent in starting new customer relationships, the
Company focuses on retaining existing customers and targets a select few major
and emerging OEM industry leaders with which the opportunity exists to provide
products and services across a number of product families and through successive
product generations. The Company focuses its resources on market segments that
are (a) growing relatively fast and (b) have the potential for profit. Potential
customers are assigned to Company sales representatives who evaluate the
customer against the Company's customer selection criteria. For most end
products of a customer, or versions of such end products, the Company believes
it has established itself as a sole source provider of power supplies for the
product.

      The typical sales process begins with a customer or a potential customer
making a request for quote (RFQ) from a number of power supply manufacturers.
Based on the nature of the RFQ, the Zytec sales representative may work with the
Company's design engineers on early stage design in an effort to determine the
product's likely specifications, cost and price range. Once this process is
completed, Zytec will submit its bid for the project. The requesting OEM will
review the RFQ responses it receives and make a "short list" of two or three
potential suppliers. Further refinements are made during a second round of
bidding, at which point one supplier is selected, usually within 60 days. If
Zytec's bid is selected, a Zytec account manager is assigned to manage order
placement, delivery scheduling and design change implementation for that
customer. On an ongoing basis, Zytec's engineering personnel provide technical
support to customers in the areas of product design changes, field performance
and testing.

      Some customers prefer to use Zytec to produce customer-designed products
as an introduction to the Company and its full service design and manufacturing
capabilities. Zytec's collaborative relationships allow it to gain valuable
knowledge about an existing customer and its processes, which Zytec believes
gives it an advantage in obtaining future business from that customer.
Historically, the Company has had substantial recurring sales from existing
customers.

      The Company's promotional activities include informational mailings to
customers and selected potential customers and the publication in industry
periodicals of articles written by Zytec personnel. In addition, the Company
participates regularly in industry-wide conferences and trade shows and sponsors
customer seminars.

      The following chart profiles the percentage of Zytec's 1996 Power
Conversion revenues and typical customers in major market application segments:

<TABLE>
<CAPTION>
                                             PERCENTAGE OF
PRODUCT OR MARKET SERVED BY CUSTOMERS       POWER CONVERSION   REPRESENTATIVE CUSTOMERS
-------------------------------------           REVENUES       ------------------------
                                                --------
<S>                                                <C>         <C>
POWER SUPPLIES:

     Data communications                           22 %        Cabletron, Bay Networks, Cisco,
                                                               Ericsson

     File servers                                  18          Digital Equipment,
                                                               Hewlett-Packard, Compaq, IBM, Dell

     Computer peripherals                          20          Digital Equipment,
                                                   --          Hewlett-Packard, IBM, 3M

                  Inter/Intranet                   60

     Workstations                                  15          Hewlett-Packard, Silicon Graphics,
                                                               Sun Microsystems
                                            
     Mini/Fault tolerant computers                 11          IBM, Unisys, Stratus
                                            
     Test and measurement                          10          Tektronix, Hewlett-Packard, Abbott
                                                               Laboratories
     Repair, other                                  4
                                                  ---
                                       
                  Total Power Conversion          100 %
                                                  ===
</TABLE>

      Although the Company seeks to diversify both its customer and market
application base, a small number of companies are responsible for a significant
portion of Zytec's net sales. At December 31, 1996, the Company had 22 power
supply product customers worldwide. During 1996, the Company had three power
supply customers with revenue exceeding $20 million, including Digital Equipment
Corporation ($37 million, or 16% of net sales), Cabletron ($25 million, or 11%
of net sales), and IBM ($23 million, or 10% of net sales), and a total of seven
customers with revenues exceeding $5 million. The Company expects to continue to
depend upon a limited number of customers for a substantial portion of its
revenues.

BACKLOG
      Sales are made pursuant to purchase orders rather than long-term
contracts. Backlog consists of purchase orders on hand generally having delivery
dates scheduled within the next three months. Zytec's backlog was $54.2 million
and $52.3 million at December 31, 1996 and December 31, 1995, respectively. Due
to the increasing trend for OEMs to reduce their lead time for purchase orders,
and because customers may cancel or reschedule deliveries, the Company does not
consider backlog to be a reliable indicator of future financial results.

COMPETITION
      The merchant power supply manufacturing industry is highly fragmented and
characterized by intense competition. According to Micro-Tech Consultants, there
were estimated to be about 300 power supply manufacturers in the United States
in 1996. Over 80% of the power supply companies in the world have annual
revenues less than $10 million. According to Micro-Tech Consultants, in 1995
Zytec was the 3rd largest power supply company in the United States and the 9th
largest power supply company in the world.

      Zytec's competition 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 Zytec. Certain of
the Company's competitors have greater resources and geographic presence than
Zytec. Zytec also views as competitive threats the potential that its customers
may decide to produce their own power supplies, and that OEMs with captive
manufacturing capabilities may compete in the merchant market. However, several
large OEMs have divested their captive power supply manufacturing operations,
including NCR, TRW and Digital Equipment Corporation. Management believes that
the principal bases of competition in Zytec's targeted market are manufacturing
technology, cycle time of design and manufacture, technical knowledge, quality,
and the availability of value added services. To remain competitive, Zytec must
compete favorably on the basis of value by providing technologically advanced
manufacturing services, improving quality and reliability levels, offering
flexible delivery schedules, and delivering finished products on a reliable
basis.

RESEARCH AND DEVELOPMENT
      Zytec's research and development activities are principally directed to
the development of new custom power supply products to satisfy specific customer
needs. Additionally, the Company continues to develop its common circuit design
to assist in the development of future products for specific customers. Zytec's
research activities also include internally performed research and an
affiliation with the Virginia Polytechnic Institute Power Electronics Center.
Internal research efforts are focused on improving circuits and packaging in
order to reduce component cost, improve ease of manufacture, and accommodate
product size constraints, as well as analysis techniques, such as computer
simulations intended to reduce design cycle time.

      Customers in the Company's target markets require product designs to be
completed quickly. A major challenge for Zytec is to reduce design time without
reducing quality of the design. In 1996, the Company's average time to design
and introduce a product into production improved by 20%, the same rate of
improvement achieved in 1994 and 1995. Most of the improvement comes from design
standardization and process improvements. In 1995, the Company began a project
to use computer simulation to speed the process of original design. The Company
expects to realize initial results from this project in late 1997.

      Product development is performed by a group of 34 engineers located in
Minnesota, 3 in Texas, and 21 in Austria. The Company's total expenditures for
research and development were $9.5 million, $8.6 million and $8.1 million in
1996, 1995, and 1994, respectively. Of these amounts, 16.7%, 18.2%, and 30.2%,
respectively, were funded by customers in connection with new product designs.
Customer reimbursements of research and development expenditures are reported as
"other revenue" in the Company's financial statements. Other revenue as a
percentage of research and development expenditures is declining, due in part to
higher levels of research (which are not reimbursed by customers) and in part to
the trend toward lower funding per project.

INTELLECTUAL PROPERTY MATTERS
      Zytec signed a licensing agreement in September 1992 with Digital
Equipment Corporation to complete the design and manufacture of a family of
DC/DC converters in the 150 watt to 300 watt range. In addition, Zytec signed a
license agreement with Ericsson Components AB (Ericsson), a multinational
telecommunications firm headquartered in Sweden, for Ericsson's power division
to market Zytec's DC/DC converters in the standard power supply marketplace
worldwide. The licensing agreement with Ericsson will expire December 31, 2002.

      Zytec also signed a licensing agreement, in December 1994, with Galaxy
Power Inc., (Galaxy) Boston, Massachusetts, to develop a "next generation"
family of high density DC/DC converters. This agreement is a non-exclusive,
perpetual license to make, have made, use, market and sell certain high density
DC/DC product lines under Zytec's name and on a private label basis to Ericsson
for an up-front license fee plus engineering fees. Zytec also has a first right
to acquire a license from Galaxy for certain future products developed by
Galaxy. These products were introduced to the market place in 1996.

      Zytec currently holds several patents, trademarks, and a service mark.
These items of intellectual property are not deemed of significant importance to
the Company's business. The Company believes that although the patents and other
proprietary information it holds and may obtain will be of value, they will not
determine the Company's success, which depends principally on its emphasis on
service and value.

EMPLOYEES
      As of February 28, 1997, the Power Conversion segment had 1,482 full-time
employees in the following locations:

             Minnesota       635                Austria       381
             Colorado        187                Hungary       276
             Texas             3

The Company also engaged other personnel on a part-time basis. None of the
Company's United States employees are members of a collective bargaining unit.
The employees of Zytec Austria are members of a national labor union, as are
most employees of Austrian companies. Management believes employee relations are
good.

SERVICES AND LOGISTICS

INDUSTRY OVERVIEW
      OEMs must find ways to repair products which fail in the field. Often, the
process involves the logistics of arranging for return of products and, when
they have been repaired, arranging for delivery of products to their customers.
This function has traditionally been accomplished as part of the OEM's business.
In the 1980s and 1990s, as companies have focused their energies on core
competencies, electronics manufacturers have often outsourced many activities
that they do not consider essential to their business. In the case of Zytec's
Services and Logistics operation, the Company was retained by Hewlett-Packard
("HP") in 1992 to manage inbound logistics and outbound logistics for some of
its computer products and repair certain products. This business has grown
rapidly since 1992 as HP has transferred more products to Zytec. The original
products repaired were older computers, special purpose computers, monitors and
some power units. Since 1992, Zytec has taken over repair of laserjet and
deskjet printers, faxes, scanners and other products. It is this regular
transfer of products from HP to Zytec that has been responsible for the high
growth rates in the business. Through 1996, nearly all of the Services and
Logistics' sales were to HP. In 1997, Zytec plans to expand similar services to
other customers.

STRATEGY
      Zytec's objective is to be a value added supplier to its customers for
repair services and logistics by specializing in process design improvement,
thus allowing the customers to achieve high quality service on products it sells
at a lower cost than the customers could otherwise enjoy. In addition, Zytec's
Services and Logistics operation has taken steps to broaden its business base to
include some aspects of network systems design and installation as well as
service.

      It is Zytec's strategy to expand its Services and Logistics facilities
within the value chain of manufacturer distribution and repair. For this
purpose, Zytec has established a Foreign Trade Zone ("FTZ"), which allows
reduced or delayed customs duties on products returned from foreign locations
for repair or on component parts shipped to the United States and assembled in
the FTZ. The FTZ, together with existing repair processes, allows Zytec to
service both domestic and foreign products and, in combination with its process
design capability, to perform assembly or light manufacturing operations.
Another expansion of the value chain involves network services operations, which
plan to target configuration and installation of hardware, as well as provide
follow-on maintenance.


PRODUCTS AND SERVICES
      INBOUND LOGISTICS
      Zytec receives nearly all of the returned products for the
computer-related divisions of HP. The first step in Zytec's process is to
determine the nature of repair needed and the supplier to perform the repair.
Since HP uses a number of different suppliers for its components, repair of
those components may be accomplished by Zytec (about 48% of products returned)
or by some 277 other suppliers. Zytec's first task is to accomplish the
identification and redirecting of units in an efficient manner.

      PRODUCT REPAIR
      Zytec repairs approximately 3,500 products for HP. Zytec designs processes
for repairing both high volume and low volume products. Repair is accomplished
using parts specified and supplied by HP. Work teams from Zytec analyze and
design the processes for repairing the products.

      OUTBOUND LOGISTICS
      Zytec develops and maintains warehousing space for storage of defective
and repaired products. Some products are repaired and shipped back to the
original customer; some are repaired to equivalent-to-new (ETN) condition and
put in stock, and some products are scrapped for parts value. Ownership of all
products is retained by HP throughout these processes.

      FOREIGN TRADE ZONE
      The Company has recently completed development of a FTZ, which allows
repair and basic manufacture of parts arriving from foreign manufacturers
without immediate payment of duty. The FTZ also gives HP some cost advantages in
forwarding fees.

EMPLOYEES
      As of February 28, 1997, the Company had 544 full-time employees in the
Services and Logistics segment located in Lincoln, California.


ITEM 2.           PROPERTIES

      The following table identifies the Company's facilities. Management
believes that the Company's facilities are adequate for the foreseeable future.

<TABLE>
<CAPTION>
                                                                APPROXIMATE       OWNED VS.
      FACILITY                      PRIMARY ACTIVITY           SQUARE FOOTAGE      LEASED
      --------                      ----------------           --------------      ------
<S>                          <C>                                  <C>             <C>
Power Conversion
----------------
Eden Prairie, MN              Engineering, Administration           28,000         Leased
Redwood Falls, MN             Manufacturing                        101,000         Owned
Redwood Falls, MN             Manufacturing                         99,000         Leased
Broomfield, CO                Manufacturing                         73,000         Leased
Vienna, Austria               Engineering, Administration            9,200         Leased
Kindberg, Austria             Manufacturing                         58,000         Leased
Tatabanya, Hungary            Magnetics Manufacturing               62,000         Owned

Services and Logistics
----------------------
Lincoln, CA                   Repair, Logistics                    210,000         Leased

</TABLE>


ITEM 3.           LEGAL PROCEEDINGS

      The Company and its subsidiaries are involved in various legal proceedings
arising in the normal course of business, none of which is expected to result in
any significant loss to the Company or any of its subsidiaries.



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

      The Company held a Special Meeting of Stockholders on October 9, 1996 to
approve the Zytec Corporation Employee Stock Purchase Plan. The votes of the
stockholders on this proposal were as follows:

              In Favor      Opposed      Abstained     Broker Non-Vote
              --------      -------      ---------     ---------------
              5,071,469      68,581        33,610            -0-


                                     PART II


ITEM 5.           MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER
                  MATTERS

      Information regarding the market for the Company's Common Stock and
related stockholder matters is set forth under "Zytec Common Stock" on page 27
in the Company's Annual Report to Shareholders for the year ended December 31,
1996, and is incorporated herein by reference.


ITEM 6.           SELECTED FINANCIAL DATA

      Selected financial data of the Company is set forth under "Selected
Financial Data" on page 10 in the Company's Annual Report to Shareholders for
the year ended December 31, 1996, and is incorporated herein by reference.


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

      Management's Discussion and Analysis of Financial Condition and Results of
Operations is set forth under "Financial and Operations Review" on pages 11-15
in the Company's Annual Report to Shareholders for the year ended December 31,
1996, and is incorporated herein by reference.


ITEM 8.           FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

      The consolidated financial statements of the Company as of December 31,
1996 and 1995, and for each of the three years in the period ended December 31,
1996, are set forth on pages 16-27 in the Company's Annual Report to
Shareholders for the year ended December 31, 1996, and are incorporated herein
by reference. Quarterly consolidated financial data is set forth under
"Quarterly Financial Information" on page 27 in the Company's Annual Report to
Shareholders for the year ended December 31, 1996, and is incorporated herein by
reference.


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

      Not applicable.


                                    PART III


ITEM 10.          DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

      Information regarding directors and executive officers of the Company is
set forth under "Information Regarding Directors, Nominees and Executive
Officers" on pages 3-9 in the Company's definitive proxy statement for its 1997
Annual Meeting of Shareholders to be held April 28, 1997, and is incorporated
herein by reference.

      Information regarding compliance with Section 16(a) of the Securities
Exchange Act of 1934 is set forth under "Principal Shareholders--Compliance with
Section 16(a)" on page 13 in the Company's definitive proxy statement for its
1997 Annual Meeting of Shareholders to be held April 28, 1997, and is
incorporated herein by reference.


ITEM 11.          EXECUTIVE COMPENSATION

      Information regarding compensation of directors and executive officers of
the Company is set forth under "Information Regarding Directors, Nominees and
Executive Officers" on pages 7-10 in the Company's definitive proxy statement
for its 1997 Annual Meeting of Shareholders to be held April 28, 1997, and is
incorporated herein by reference.


ITEM 12.          SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                  MANAGEMENT

      Information regarding security ownership of certain beneficial owners and
management is set forth under "Principal Shareholders" on pages 12-13 in the
Company's definitive proxy statement for its 1997 Annual Meeting of Shareholders
to be held April 28, 1997, and is incorporated herein by reference.


ITEM 13.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      Information regarding certain relationships and related transactions is
set forth under "Information Regarding Directors, Nominees and Executive
Officers" on pages 3-9 in the Company's definitive proxy statement for its 1997
Annual Meeting of Shareholders to be held April 28, 1997, and is incorporated
herein by reference.


                                     PART IV


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

(a)   FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES AND EXHIBITS

      1.    FINANCIAL STATEMENTS.

                  The following are incorporated herein by reference from pages
                  16-27 of the Company's Annual Report to Shareholders for the
                  year ended December 31, 1996:

                  Consolidated Statements of Operations for the years ended
                        December 31, 1996, 1995, and 1994
                  Consolidated Balance Sheets as of December 31, 1996 and 1995
                  Consolidated Statements of Cash Flows for the years ended
                        December 31, 1996, 1995, and 1994
                  Consolidated Statement of Stockholders' Equity for the years
                        ended December 31, 1996, 1995 and 1994
                  Notes to Consolidated Financial Statements
                  Report of Independent Accountants


      2.    FINANCIAL STATEMENT SCHEDULES.
                  The following are included herein on pages 24-25 and should be
                  read in conjunction with the consolidated financial statements
                  referred to above:

                  Report of Independent Accountants
                  Schedule II -- Valuation and Qualifying Accounts

                  All other schedules are inapplicable to the Registrant, or
                  equivalent information has been included in the consolidated
                  financial statements or the notes thereto, and have therefore
                  been excluded.


      3.    EXHIBITS.
                  See Index to Exhibits on pages 19-23 of this Report.


(b)   REPORTS ON FORMS 8-K

      The Company did not file any reports on Form 8-K during the three months
      ended December 31, 1996.


SIGNATURES

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

Dated:   March 17, 1997                ZYTEC CORPORATION
                                       (Registrant)



                                       By  /s/ John B. Rogers
                                          -------------------------------------
                                          John B. Rogers
                                          Treasurer and Vice President - Finance


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

<TABLE>
<CAPTION>
             SIGNATURE                                TITLE                                DATE
             ---------                                -----                                ----
<S>                                     <C>                                         <C>
/s/ Ronald D. Schmidt                    Chairman of the Board, President,            March 17, 1997
-----------------------------------      and Chief Executive Officer                  ------------------
Ronald D. Schmidt                        (Principal Executive Officer)


/s/ Ervin F. Kamm, Jr.                   President, Zytec Power Conversion and        March 17, 1997
-----------------------------------      Director                                     ------------------
Ervin F. Kamm, Jr.


/s/ John M. Steel                        Vice President, Marketing and Sales          March 13, 1997
-----------------------------------      and Director                                 ------------------
John M. Steel


/s/ Sherman Winthrop                     Secretary and Director                       March 12, 1997
-----------------------------------                                                   ------------------
Sherman Winthrop


/s/ Josef J. Matz                        Managing Director of Zytec GmbH              March 17, 1997
-----------------------------------      and Director                                 ------------------
Josef J. Matz


/s/ John B. Rogers                       Treasurer and Vice President - Finance       March 17, 1997
-----------------------------------      (Principal Financial and Principal           ------------------
John B. Rogers                           Accounting Officer)


/s/ Thomas J. Kent                       Vice President & General Manager,            March 13, 1997
-----------------------------------      Services and Logistics and Director          ------------------
Thomas J. Kent


/s/ Lawrence J. Matthews                 Director                                     March 12, 1997
-----------------------------------                                                   ------------------
Lawrence J. Matthews


/s/ Gary C. Flack                        Director                                     March 12, 1997
-----------------------------------                                                   ------------------
Gary C. Flack


/s/ Dr. Fred C. Lee                      Director                                     March 15, 1997
-----------------------------------                                                   ------------------
Dr. Fred C. Lee


/s/ James S. Womack                      Director                                     March 14, 1997
-----------------------------------                                                   ------------------
James S. Womack

</TABLE>

<TABLE>
<CAPTION>
                                INDEX TO EXHIBITS


EXHIBIT
   NO.                        DESCRIPTION                                      METHOD OF FILING
   ---                        -----------                                      ----------------
<S>         <C>                                                      <C>
     3.1     Articles of Incorporation of the Company, as             Incorporated by reference to Exhibit
             amended.                                                 3.1 to the Company's Registration   
                                                                      Statement on Form S-1 (File No. 33- 
                                                                      68822).                             

     3.2     Bylaws of the Company.                                   Incorporated by reference to Exhibit 
                                                                      3.2 to the Company's Registration    
                                                                      Statement on Form S-1 (File No. 33-  
                                                                      68822).                              

    10.1     Employee Incentive Stock Option Plan                     Incorporated by reference to Exhibit
             ("ISOP") and form of Employee Incentive                  10.3 to the Company's Registration  
             Stock Option Agreement ("ISOP Agreement")                Statement on Form S-1 (File No. 33- 
             adopted by the Company's Board of Directors              68822).                             
             ("Board") and approved by the Company's 
             shareholders on December 16, 1993.     

    10.2     ISOP and form of ISOP Agreement adopted                  Incorporated by reference to Exhibit 
             by the Board and approved by the                         10.4 to the Company's Registration   
             Company's shareholders on September 24,                  Statement on Form S-1 (File No. 33-  
             1984.                                                    68822).                              

    10.3     ISOP and form of ISOP Agreement adopted                  Incorporated by reference to Exhibit
             by the Board and approved by the Company's               10.5 to the Company's Registration  
             shareholders on October 25, 1985.                        Statement on Form S-1 (File No. 33- 
                                                                      68822).                             

    10.4     ISOP and form of ISOP  Agreement adopted                 Incorporated by reference to Exhibit 
             by the Board on February 6, 1987 and                     10.6 to the Company's Registration   
             approved by the Company's shareholders on                Statement on Form S-1 (File No. 33-  
             April 24, 1987.                                          68822).                              

    10.5     ISOP and form of ISOP Agreement adopted                  Incorporated by reference to Exhibit
             by the Board and approved by the                         10.7 to the Company's Registration  
             Company's shareholders on January 29,                    Statement on Form S-1 (File No. 33- 
             1993.                                                    68822).                             

    10.6     ISOP and form of ISOP Agreement adopted                  Incorporated by reference to Exhibit    
             by the Board on February 16, 1996 and                    10.6 to Form 10-K for the year ended    
             approved by the Company's shareholders on                December 31, 1995 (File No. 0-22428).   
             April 29, 1996.  

    10.7     Employment Agreement by and between                      Incorporated by reference to Exhibit 
             Josef J. Matz and Zytec Austria dated                    10.25 to the Company's Registration  
             September 30, 1991 documenting the                       Statement on Form S-1 (File No. 33-  
             appointment of Josef J. Matz as Managing                 68822).                              
             Director of Zytec G.m.b.H. 

    10.08    Loan agreement between City of Redwood                   Incorporated by reference to Exhibit 
             Falls, Minnesota and the Company dated                   99.1 to Form 8-K filed on September  
             September 1, 1994.                                       29, 1994 (File No. 0-22428).         

    10.09    Indenture of Trust between City of Redwood               Incorporated by reference to Exhibit 
             Falls, Minnesota and First Trust National                99.2 to Form 8-K filed on September  
             Association dated September 1, 1994.                     29, 1994 (File No. 0-22428). 

    10.10    Credit Agreement dated as of May 30, 1996,               Incorporated by reference to Exhibit    
             among the Company, the Lenders named                     99.1 of Company Form S-3 (File No.      
             therein, and Harris Trust and Savings Bank,              333-05515) filed and on June 7, 1996
             Individually and as Agent and also the First             for the original Agreement. First      
             Amendment dated July 18, 1996, Second                    and Second Amendments are incorpor-
             Amendment dated August 8, 1996, and Third                ated by reference to Exhibits 10.1      
             Amendment dated December 23, 1996 to said                and 10.2 on Form 10-Q for the           
             Credit Agreement.                                        quarter ended June 30, 1996. Third      
                                                                      Amendment filed herewith.               

    10.11    Note and Warrant Purchase Agreement dated                Filed herewith.
             as of December 23, 1996 between the
             Company and BMO Nesbitt Burns Capital
             (U.S.), Inc.

    10.12    Convertible Subordinated Promissory Note                 Filed herewith.
             between the Company and BMO Nesbitt
             Burns Capital (U.S.), Inc. in the amount of
             $12,000,000 dated December 23, 1996.

    10.13    Stock Purchase Warrant between the Company               Filed herewith.
             and BMO Nesbitt Burns Capital (U.S.), Inc.
             dated December 23, 1996.

    10.14    Registration Agreement between the Company               Filed herewith.
             and BMO Nesbitt Burns Capital (U.S.), Inc.
             dated December 23, 1996.

    10.15    Office/Warehouse Lease by and between Welsh              Incorporated by reference to Exhibit
             Construction Corporation and the Company dated           10.49 to the Company's Registration
             May 31, 1984, as extended September 28, 1989,            Statement on Form S-1 (File No. 33-
             as first amended May 12, 1994 and as second              68822). The first amendment is
             amended October 2, 1995 and as third amended             incorporated by reference to Exhibit
             October 31, 1995, regarding the leasing of               10.1 to Form 10-Q for the quarter ended
             certain property located in Eden Prairie,                July 3, 1994 (File No. 0-22428). The
             Minnesota.                                               second and third amendments are
                                                                      incorporated by reference to Exhibit
                                                                      10.22 on Form 10-K for the year ended
                                                                      December 31, 1995 (File No. 0-22428).

    10.16    Office/Warehouse Lease by and between Welsh              Incorporated by reference to Exhibit
             Construction Corporation and the Company dated           10.50 to the Company's Registration 
             April 4, 1985, as extended September 28, 1989,           Statement on Form S-1 (File No. 33-68822).
             and as amended May 12, 1994 and as second                The first amendment is incorporated by
             amended September 29, 1995, regarding the                reference to Exhibit 10.2 to Form 10-Q for
             leasing of certain property located in Eden              the quarter ended July 3, 1994 (File No.
             Prairie, Minnesota.                                      0-22428). The second amendment is 
                                                                      incorporated by reference to Exhibit 10.23
                                                                      on Form 10-K for the year ended December
                                                                      31, 1995 (File No. 0-22428).

    10.17    Lease by and between CIT Group/Equipment                 Incorporated by reference to Exhibit    
             Financing Inc. and the Company dated April               10.3 to Form 10-Q for the quarter ended 
             20, 1994 regarding the lease of certain                  July 3, 1994 (File No. 0-22428).        
             equipment. 
             
    10.18    Agreement by and between Oates Business                  Incorporated by reference to Exhibit   
             Park and the Company dated May 1, 1995                   10.26 to Form 10-K for the year ended  
             regarding the leasing of certain premises                December 31, 1995. (File No. 0-22428). 
             and real property located in Lincoln, 
             California.
             
    10.19    Agreement and Addendum by and between Buzz               Filed herewith.
             Oates Enterprise and the Company dated 
             September 15, 1995, as amended
             December 8, 1995, and as second amended 
             March 8, 1996, and as third amended 
             May 14, 1996, and as fourth amended 
             November 8, 1996, regarding the leasing of 
             certain premises and real property located in
             Lincoln, California.
             
    10.20    Agreement and Addendum by and between Blue Sky           Filed herewith.
             Venture Partnership and the Company dated 
             June 17, 1996 regarding the leasing of certain 
             premises and real property located in Lincoln,
             California.

    10.21    Agreement by and between Superior Investments I,         Incorporated by reference to Exhibit
             Inc. and the Company dated January 22, 1996              10.27 to Form 10-K for the year ended
             regarding the leasing of certain premises and            December 31, 1995. (File No. 0-22428).
             real property located in Broomfield, Colorado.

    10.22    Lease by and between Banc One Leasing                    Incorporated by reference to Exhibit
             Corporation and the Company dated March 7,               10.28 to Form 10-K for the year ended
             1996 regarding the lease of certain equipment.           December 31, 1995. (File No. 0-22428).
 
    10.23    Form of Employee Disclosure and Assignment               Incorporated by reference to Exhibit 
             Agreement executed by all employees of                   10.51 to the Company's Registration  
             Company regarding the the disclosure and                 Statement on Form S-1 (File No. 33-  
             ownership of certain proprietary information             68822).                              
             of the Company.

    10.24    Employee Disclosure and Assignment Agreemen              Incorporated by reference to Exhibit 
             executed by Ronald D. Schmidt dated April 13,            10.51 to the Company's Registration  
             1984 regarding the disclosure and ownership              Statement on Form S-1 (File No. 33-  
             of certain proprietary information of the                68822).                              
             Company.                                                 

    10.25    Employee Disclosure and Assignment                       Incorporated by reference to Exhibit 
             Agreement executed by John B. Rogers dated               10.53 to the Company's Registration  
             December 23, 1985 regarding the disclosure               Statement on Form S-1 (File No. 33-  
             and ownership of certain proprietary                     68822).                              
             information of the Company.

    10.26    Employee Disclosure and Assignment                       Incorporated by reference to Exhibit 
             Agreement executed by John M. Steel dated                10.54 to the Company's Registration  
             April 13, 1984 regarding the disclosure                  Statement on Form S-1 (File No. 33-  
             and ownership of certain proprietary                     68822).                              
             information of the Company.

    10.27    Employee Disclosure and Assignment                       Incorporated by reference to Exhibit   
             Agreement executed by Max R. Davis dated                 10.33 to Form 10-K for the year ended  
             April 18, 1995 regarding the disclosure                  December 31, 1995. (File No. 0-22428). 
             and ownership of certain proprietary
             information of the Company.

    10.28    Employee Disclosure and Assignment                       Incorporated by reference to Exhibit  
             Agreement executed by N. Charles Wussow                  10.56 to the Company's Registration   
             dated January 27, 1993 regarding the                     Statement on Form S-1 (File No. 33-   
             disclosure and ownership of certain                      68822).                               
             proprietary information of the Company.

    10.29    Employee Disclosure and Assignment                       Filed herewith.
             Agreement executed by Thomas J. Kent
             dated June 21, 1994 regarding the 
             disclosure and ownership of certain
             proprietary information of the Company.

    10.30    Employee Disclosure and Assignment                       Filed herewith.
             Agreement executed by Ervin F. Kamm, Jr.
             dated January 24, 1997 regarding the
             disclosure and ownership of certain   
             proprietary information of the Company.

    10.31    Master Business Agreement Software License               Incorporated by reference to Exhibit 
             and Hardware Purchase Agreement by and                   10.63 to the Company's Registration  
             between Xerox Corporation and the Company                Statement on Form S-1 (File No. 33-  
             dated June 21, 1984 regarding the licensing              68822).                              
             of certain software and purchase of certain
             hardware.

    10.32    Rental Agreement by and between Schrack                  Incorporated by reference to Exhibit 
             Elektronik Aktiengesellschaft and                        10.70 to the Company's Registration  
             IMMORENT-Weiko Grundverwertungsge-                       Statement on Form S-1 (File No. 33-  
             sellschaft m.b.H. dated March 14, 1985                   68822).                              
             (English translation) regarding the
             leasing of certain real property located
             in Kindberg, Austria.
           
    10.33    Real Estate Lease Agreement by and between               Incorporated by reference to Exhibit 
             IMMORENT - Weiko Grundverwertungsge-                     10.71 to the Company's Registration  
             sellschaft m.b.H. and Schrack Elektronik                 Statement on Form S-1 (File No. 33-  
             Aktiengesellschaft dated December 16,                    68822).                              
             1984 (English translation) regarding the
             leasing of certain real property located
             in Kindberg, Austria.
           
    10.34    Lease (Rental) Agreement by and between                  Incorporated by reference to Exhibit 
             Schrack Telecom AG and Schrack Power                     10.72 to the Company's Registration  
             Supply Gesellschaft m.b.H. dated February                Statement on Form S-1 (File No. 33-  
             19, 1991 (English translation) regarding                 68822).                              
             the leasing of certain property located
             in Kindberg, Austria.
           
    10.35    Sublease (Subrental) Agreement by and                    Incorporated by reference to Exhibit 
             between Schrack Power Supply Gesellschaft                10.73 to the Company's Registration  
             m.b.H. and Schrack Power Supply Gesellschaft             Statement on Form S-1 (File No. 33-  
             m.b.H. dated February 14, 1991 (English                  68822).                              
             translation) regarding the leasing of 
             certain property located in Kindberg,
             Austria.
           
    10.36    Sublease (Subrental) Agreement by and                    Incorporated by reference to Exhibit  
             between Schrack Power Supply Gesellschaft                10.74 to the Company's Registration   
             m.b.H. and Schrack Telecom AG dated                      Statement on Form S-1 (File No. 33-   
             February 14, 1991 (English translation)                  68822).
             regarding the leasing of certain property
             located in Kindberg, Austria.
           
    11.1     Computation of net income per share.                     Filed herewith.
           
    13       Annual Report to Shareholders (Only                      Filed herewith.
             those portions expressly incorporated by
             reference herein shall be deemed filed with
             the Commission)
           
    22       Subsidiaries of the Company.                             Filed herewith.

    23.1     Consent of Coopers & Lybrand L.L.P.                      Filed herewith.

    27.1     Financial Data Schedule                                  Filed herewith.

</TABLE>




                        REPORT OF INDEPENDENT ACCOUNTANTS



To the Stockholders and Board of Directors of
Zytec Corporation:



Our report on the consolidated financial statements of Zytec Corporation has
been incorporated by reference in this Form 10-K from page 27 of the 1996 Annual
Report to Shareholders of Zytec Corporation. In connection with our audits of
such financial statements, we have also audited the related financial statement
schedule listed in the index on page 16 of this Form 10-K.

In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.


                                            /s/ Coopers & Lybrand L.L.P.
                                            -----------------------------------
                                            COOPERS & LYBRAND L.L.P.


Minneapolis, Minnesota
February 18, 1997



<TABLE>
<CAPTION>
                               ZYTEC CORPORATION
                SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
              FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
                             (DOLLARS IN THOUSANDS)

COL. A                                COL B.      COL. C       COL. D         COL. E         COL F.
                                                       Additions
                                   BALANCE AT   CHARGED TO    CHARGED TO                  BALANCE AT 
                                    BEGINNING    COST AND        OTHER                        END
DESCRIPTION                         OF PERIOD    EXPENSES      ACCOUNTS      DEDUCTIONS    OF PERIOD
<S>                                     <C>       <C>            <C>            <C>        <C>  
YEAR ENDED DECEMBER 31, 1994:
Inventory reserve                       $458      $991           $ 1(c)         $967(a)      $ 483
Allowance for doubtful accounts            1        18             1(c)                         20

YEAR ENDED DECEMBER 31, 1995:
Inventory reserve                        483       645             2(c)          580(a)        550
Allowance for doubtful accounts           20                                      11(b)          9

YEAR ENDED DECEMBER 31, 1996:
Inventory reserve                        550       452            (6)(c)         482(a)        514
Allowance for doubtful accounts            9        46            (1)(c)          42(b)         12


----------------
</TABLE>

(a)  Obsolete inventory written off.
(b)  Uncollectible accounts written off, net of recovery of accounts previously 
     written off.
(c)  Amounts charged to other accounts includes foreign currency translation
     adjustments.