POWER ONE INC, S-1/A, 1997-09-25

POWER ONE INC
S-1/A, 1997-09-25
ELECTRONIC COMPONENTS, NEC

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 25, 1997

REGISTRATION NO. 333-32889
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

AMENDMENT NO. 2
TO
FORM S-1

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------

POWER-ONE, INC.

(Exact name of Registrant as specified in its charter)

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<S> <C> <C>
DELAWARE 3679 77-0420182
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) Number)
</TABLE>

740 CALLE PLANO
CAMARILLO, CALIFORNIA 93012
(805) 987-8741

(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)

STEVEN J. GOLDMAN
POWER-ONE, INC.
740 CALLE PLANO
CAMARILLO, CALIFORNIA 93012
(805) 987-8741

(Name and address, including zip code, and telephone number, including area
code, of agent for service)
--------------------------

COPIES TO:

<TABLE>
<S> <C>
KENDALL R. BISHOP, ESQ. C. DOUGLAS BUFORD, JR., ESQ.
O'MELVENY & MYERS LLP WRIGHT, LINDSEY & JENNINGS
1999 AVENUE OF THE STARS, SUITE 700 200 WEST CAPITOL AVENUE
LOS ANGELES, CALIFORNIA 90067-6035 LITTLE ROCK, ARKANSAS 72201
(310) 553-6700 (501) 212-1239
</TABLE>

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
--------------------------

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), check the following box. / /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY
DETERMINE.

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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>

SUBJECT TO COMPLETION, DATED SEPTEMBER 25, 1997

PROSPECTUS

5,000,000 SHARES

[LOGO]

COMMON STOCK
----------------

All of the shares of Common Stock, par value $0.001 per share (the "Common
Stock"), offered hereby are being sold by Power-One, Inc. (the "Company" or
"Power-One") through the Underwriters named herein (the "Offering").

Prior to the Offering, there has not been a public market for the Common
Stock of the Company. It is currently estimated that the initial public offering
price will be between $11.00 and $13.00. See "Underwriting" for information
relating to the factors considered in determining the initial public offering
price.

The Company has been approved for listing of the Common Stock on the Nasdaq
National Market, subject to notice of issuance, under the symbol "PWER."

SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK
OFFERED HEREBY.

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

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

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<CAPTION>
UNDERWRITING
DISCOUNTS AND PROCEEDS TO
PRICE TO PUBLIC COMMISSIONS(1) COMPANY(2)
<S> <C> <C> <C>
Per Share................................. $ $ $
Total(3).................................. $ $ $
</TABLE>

(1) The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.

(2) Before deducting expenses of the Offering payable by the Company estimated
at $1,000,000.

(3) The Company has granted to the several Underwriters a 30-day option to
purchase up to an additional 750,000 shares of Common Stock solely to cover
over-allotments, if any, on the same terms and conditions as the shares
offered hereby. See "Underwriting." If such option is exercised in full, the
total Price to Public, Underwriting Discounts and Commissions and Proceeds
to Company will be $ , $ and $ , respectively.

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

The shares of Common Stock are being offered by the several Underwriters,
subject to prior sale, when, as and if issued to and accepted by them and
subject to certain conditions. The Underwriters reserve the right to withdraw,
cancel or modify such offer and to reject orders in whole or in part. It is
expected that delivery of the shares of Common Stock will be made on or about
, 1997.

STEPHENS INC. ROBERTSON, STEPHENS & COMPANY MONTGOMERY SECURITIES

The date of this Prospectus is , 1997.
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THE INSIDE FRONT The following titles with the following pictures and captions under
COVER them are on the inside front cover:

TOP MARGIN "POWERING CUSTOMERS' TECHNOLOGIES"

UPPER LEFT COMMUNICATIONS
Two pictures are under this title. The first picture is an isle in
a telecommunications equipment room. In the foreground is a circuit
board extended out from an equipment rack. In the background is a
technician, in a kneeling position, testing another circuit board.
The second picture is of a row of microwave antennas. The caption
is "Powering network and telecommunications systems to transmit
data throughout the world."

MIDDLE LEFT SEMICONDUCTOR TEST EQUIPMENT
The picture under this title is a close-up of a semiconductor
device being handled with tweezers under an inspection lamp. The
caption is "Powering automation equipment that tests semiconductor
circuitry."

BOTTOM LEFT INDUSTRIAL/INSTRUMENTATION
Two pictures are under this title. The first picture is of the
inside of a flight simulator showing a hand on a control stick and
the flight simulator display screens which have three airplanes on
them. The second picture is of a hand pushing a button on a control
panel. The caption is "powering flight simulators."

UPPER RIGHT Power-One logo and name

MIDDLE RIGHT MEDICAL
A picture of a nurse holding a probe on a patient's neck with the
caption "Powering medical diagnostic equipment."

LOWER RIGHT COMPUTERS/PERIPHERALS
A picture of a man working at a computer terminal with a futuristic
car on the computer screen. The caption is "Powering workstations
for graphics manipulation."

THE INSIDE BACK The top of the page has a Power-One logo in the Upper Right corner
COVER and a title stating:

"POWERING TECHNOLOGY ONE TO 4,000 WATTS"

Below the title is a picture with two groups of Power-One products.
The first group of products has the caption "AC/DC, switchers and
linears". The second group of products has the caption "DC/DC, over
80 models."

The bottom of the page has the Power-One logo.
</TABLE>

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING TRANSACTIONS EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."

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PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION, INCLUDING "RISK FACTORS" AND THE FINANCIAL STATEMENTS AND NOTES
THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, ALL
INFORMATION IN THIS PROSPECTUS ASSUMES (I) THE UNDERWRITERS' OVER-ALLOTMENT
OPTION WILL NOT BE EXERCISED (II) THE COMPANY'S RECAPITALIZATION, AS SET FORTH
UNDER "RECAPITALIZATION," HAS BEEN COMPLETED AND (III) THE INITIAL PUBLIC
OFFERING PRICE WILL BE $12.00 PER SHARE OF THE COMMON STOCK OF THE COMPANY, THE
MIDPOINT OF THE OFFERING PRICE RANGE SET FORTH ON THE COVER PAGE OF THIS
PROSPECTUS. 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. INVESTORS SHOULD ALSO
CAREFULLY CONSIDER THE INFORMATION SET FORTH UNDER THE HEADING "RISK FACTORS."

Power-One is a leading designer and manufacturer of power supplies for
electronic equipment manufacturers in the United States. 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 end-users in the communications, automatic test equipment,
medical equipment, industrial and other electronic equipment industries.
Power-One's customers include OEMs 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 Capstone (Arrow), Kent
Electronics and Pioneer Standard Electronics.

Power supplies perform many essential functions relating to the supply,
regulation and distribution of electrical power within electronic equipment.
Virtually every electronic device that plugs into an AC wall socket requires
some type of AC/DC power supply. 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 altered 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.

According to Micro-Tech Consultants, the worldwide market for switching
power supplies in 1995 (the latest year for which information is available) was
estimated to be over $15.0 billion, with the U.S. accounting for approximately
$6.0 billion. The U.S. switching power supply industry grew at a compound annual
rate of 11.6% from 1993 to 1995, and is anticipated to grow at a compound annual
rate of 10.1% from 1995 to 2000. Switching power supplies accounted for
approximately 74% of the Company's 1996 net sales; linear power supplies
accounted for the remainder. 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. Power-One's net sales increased to $74.2 million in 1996
from $47.0 million in 1992. For this same period, income from operations
increased to $8.0 million from $2.0 million.

OEMs increasingly must meet shorter time-to-market demands and greater
performance pressures if they are to compete successfully. In an effort to do
so, OEMs are moving toward flexible, scaleable, low-cost sub-systems and
components that facilitate their goals of rapid and cost-effective product
development and introduction. These increasing performance demands on OEMs
translate into several significant trends in the power supply industry,
including (i) consolidation of supplier base; (ii) shift in customer

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preference from custom to standard and modified standard products; and (iii)
increased outsourcing by captive power supply manufacturers.

Power-One's business strategy is to power its customers' technologies by
offering one of the broadest ranges of standard and modified standard power
supplies available from any manufacturer. Power-One's broad line of standard,
modified standard and unique modular products permit the Company to capitalize
on its customers' desire to reduce their supplier base to include only vendors
that can meet diverse product and service requirements. Moreover, this strategic
approach allows the Company to quickly and reliably meet its customers' power
supply demands in less time, and generally at a lower cost, than manufacturers
who provide custom products. This, in turn, allows the Company's customers to
get their new products to market more rapidly. Key elements of the Company's
strategy are to (i) further expand its standard product line; (ii) target its
primary market of small and medium-volume purchasers; (iii) expand relationships
with key OEMs; (iv) leverage relationships with distributors; and (v) pursue
external growth opportunities.

The Company was incorporated in Delaware in January 1996. The principal
executive offices of the Company are located at 740 Calle Plano, Camarillo,
California 93012, and its telephone number is (805) 987-8741.

THE OFFERING

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<S> <C>
Common Stock offered........................................ 5,000,000 shares

Common Stock to be outstanding after the Offering(1)(2)..... 16,490,653 shares

Use of proceeds............................................. Repay all bank indebtedness,
payment of amounts owed to
certain officers and general
corporate purposes, including
possible acquisitions. See
"Use of Proceeds."

Proposed Nasdaq National Market symbol...................... PWER
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(1) Excludes 499,750 shares of Common Stock subject to outstanding stock options
at a weighted average exercise price of $1.05 per share, 180,000 shares
subject to options to be granted to Non-Employee Directors at the initial
public offering price upon effectiveness of the Company's Registration
Statement (the "Registration Statement") and 320,250 additional shares of
Common Stock reserved for issuance under the Company's 1996 Stock Incentive
Plan. See "Management--Executive Compensation" and "--Stock Option Plan."

(2) Excludes an additional 392 shares per day from June 30, 1997 to the date of
the consummation of the Offering as a result of the accrual of dividends on
the Company's Redeemable Preferred Stock and the accrual of interest on
certain amounts owed to executive officers, all of which will be exchanged
for Common Stock. See "Recapitalization."

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

The following summary financial data are qualified in their entirety by, and
should be read in conjunction with, "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the financial statements, the
notes thereto and other financial and statistical information included elsewhere
in this Prospectus.

PREDECESSOR COMPANY(1)(2) COMPANY(1)
---------------------------------------------- --------------------------------------------------
NINE MONTHS THREE MONTHS SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, ENDED ENDED YEAR ENDED JUNE 30,
------------------------------- SEPTEMBER 30, DECEMBER 31, DECEMBER 31, --------------------
1992 1993 1994 1995 1995 1996 1996 1997
--------- --------- --------- ------------- ------------- ------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales............. $ 46,997 $ 50,846 $ 55,702 $ 52,732 $ 20,670 $ 74,210 $ 40,743 $ 40,173
Gross profit.......... 15,406 16,768 19,951 21,207 6,322 28,905 16,034 15,825
Income from
operations.......... 2,012 2,553 5,159 7,863 903 8,002 4,692 5,395
Pro forma net
income(3)........... 1,345 2,034 3,359 4,635 (38) 2,869 2,048 2,568
--------- --------- --------- ------------- ------------- ------------- --------- ---------
--------- --------- --------- ------------- ------------- ------------- --------- ---------
Pro forma net income
per share(4)........ $ 0.24 $ 0.22
------------- ---------
------------- ---------
Pro forma weighted
average shares
outstanding(4)...... 11,875 11,947

SELECTED OPERATING DATA:
Gross margin.......... 32.8% 33.0% 35.8% 40.2% 30.6% 39.0% 39.4% 39.4%
EBITDA(5)............. $ 2,830 $ 3,368 $ 5,957 $ 8,564 $ 1,718 $ 12,215 $ 6,582 $ 7,455
Cash flows from:
Operating
activities........ 2,755 1,738 4,049 6,420 (2,152) 4,249 1,943 1,682
Investing
activities........ (359) (785) (1,663) (1,945) (49,840) (3,457) (2,080) (940)
Financing
activites......... (1,107) (476) (620) (688) 55,743 (2,859) 106 (374)
</TABLE>

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<CAPTION>
AT JUNE 30, 1997
-------------------------------------------
PRO FORMA AS
ACTUAL PRO FORMA(4) ADJUSTED(4)(6)
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<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital...................................................... $ 11,343 $ 11,343 $ 36,428
Total assets......................................................... 76,939 76,939 87,924
Total debt........................................................... 45,237 44,480 662
Redeemable preferred stock........................................... 17,122 232 --
Total stockholders' equity........................................... 2,852 20,499 75,534
</TABLE>

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(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, 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. For clarity of presentation
throughout this Prospectus, the Company has described year-ends presented as
if the year ended on December 31 and quarter-ends presented as if the
quarters ended on March 31, June 30, September 30 and December 31. As such,
the years ended December 31, 1993 through 1996 represent 52-week years,
while the year ended December 31, 1992 represents a 53-week year.

(2) Effective September 27, 1995, the Company acquired substantially all of the
assets and liabilities of Power-One, Inc., a California corporation, and the
outstanding capital stock of P-E and Poder Uno (collectively, 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.

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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."

(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 $17,131,180, and (ii) $756,648 owed to the executive
officers, all at an assumed public offering price of $12.00 per share, the
midpoint of the offering price range set forth on the cover page of this
Prospectus, into 1,490,653 shares of Common Stock which is intended to occur
upon the closing of the Offering. Pursuant to applicable rules, pro forma
net income per share and weighted average shares outstanding information is
presented only for the most recent fiscal year and interim period. 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) Adjusted to reflect the sale of the 5,000,000 shares of Common Stock offered
hereby at $12.00 per share, the midpoint of the offering price range set
forth on the cover page of this Prospectus, and the application of the
estimated net proceeds therefrom. See "Use of Proceeds."

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RISK FACTORS

PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE SPECIFIC FACTORS SET
FORTH BELOW AS WELL AS THE OTHER INFORMATION INCLUDED ELSEWHERE IN THIS
PROSPECTUS BEFORE DECIDING TO PURCHASE THE SHARES OF COMMON STOCK OFFERED
HEREBY.

DEPENDENCE ON ELECTRONIC EQUIPMENT INDUSTRIES

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. Factors affecting the electronic equipment industries, in
general, or any of the Company's major customers or their products, in
particular, could have a material adverse effect on the Company's financial
statements. See "Business--Customers."

RELIANCE ON MAJOR CUSTOMERS

During 1996 and the first six months of 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
35%, 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. Additionally, another one of the Company's
primary distributors, who accounted for 7.7% of the Company's total sales in
1996, recently announced that it will be merging with another distributor. The
Company cannot yet determine whether the new distributor will carry the
Company's products. If the new distributor decides not to carry the Company's
products and if the relevant end-users of the Company's products do not continue
to order the Company's products, either through a different distributor or
directly from the Company, the merger could result in 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.

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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 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 cancelled,
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."

COMPETITION

The design, manufacture and sale of power supplies is highly competitive.
Power-One's competition includes numerous companies located throughout the
world, some of which have advantages over the Company in terms of labor and
component costs and technology. Certain of the Company's competitors have
substantially greater resources and geographic presence than the Company. There
can be no assurance that the Company will not encounter increased competition
from existing competitors or new market entrants. Power-One also faces
competition from current and prospective customers that may design and
manufacture their own power supplies. There can be no assurance that the Company
will be able to compete favorably on the basis of value by offering superior
customer service and design engineering services, continuously improving quality
and reliability levels, and offering flexible, reliable delivery schedules, and
a competitive price. In times of an economic downturn, or when dealing with
high-volume orders, price becomes an increasingly important competitive factor,
which could cause the Company to reduce price levels on its products and thereby
adversely affect the Company's financial statements. There can be no assurance
that the Company will continue to be able to compete successfully against
current or future competitors in the market. See "Business--Competition."

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

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<PAGE>
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.

IMPACT OF LOSS OF PUERTO RICAN TAX EXEMPTIONS

The Puerto Rican government has granted the Company's wholly owned Puerto
Rican subsidiary, P-E, a 90% partial tax exemption from income and property
taxes, and a 60% exemption on municipal license taxes. These exemptions are
valid through 2010. The Company does not provide for U.S. federal and state
income taxes that would be paid on earnings of its Puerto Rico operation if
remitted to the U.S., as there is no intention to remit these earnings. At June
30, 1997 accumulated unremitted earnings totaled approximately $3.6 million for
the Puerto Rico operation. In the event the Company repatriates any of these
funds into the U.S., the Company may have to pay U.S. federal and state taxes on
such funds at the normal rates. There can be no assurance that the Company will
not bring funds into the U.S. in the future. Should the Company fail to meet any
of the requirements under these tax exemptions (which are not significant and
with which the Company is in compliance) or if these tax exemptions are revoked
or terminated prior to their expiration, the increased income tax expense could
have a material adverse effect upon the Company's financial statements. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

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."

TECHNOLOGICAL CHANGE

The Company's products are subject to technological change as improvements
to power supply designs are continually taking place. 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."

9
<PAGE>
ABILITY TO ATTRACT AND RETAIN KEY PERSONNEL

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 "Management."

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. See
"Business--Business Strategy."

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, if
it constructs a new facility in Mexico as anticipated, 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."

10
<PAGE>
INFORMATION TECHNOLOGY CHANGES AND EXPANSION

The Company has implemented two software systems to manage its operations
and such systems have yet to be totally integrated. The integration of these
systems is expected to be completed by the end of 1999. In the event that the
implementation results in computer software or hardware problems or does not
achieve the anticipated results, orders and customer deliveries could be
adversely affected, which could have a material adverse impact on the Company's
financial statements. See "Business--Management Information Technology."

INTELLECTUAL PROPERTY

The Company currently relies upon a combination of patents, trademarks and
trade secret laws to establish and protect its proprietary rights in its
products. There can be no assurance that the steps taken by the Company in this
regard will be adequate to prevent misappropriation of its technology or that
the Company's competitors will not independently develop technologies that are
substantially equivalent or superior to the Company's technology. In addition,
the laws of some foreign countries do not protect the Company's proprietary
rights to the same extent as do the laws of the U.S. The Company has a number of
patents and may apply for additional patents. There can be no assurance that
patents will be issued from any applications filed by the Company or that, if
patents are issued, the claims will be sufficiently broad to protect the
technology developed by the Company. No assurance can be given that any patents
issued to the Company will not be challenged, invalidated or circumvented or
that the rights granted thereunder will provide competitive advantages. The
Company may have infringement claims asserted against it in the future or may
need to assert an infringement claim against another company. Litigation
relating to such claims could result in substantial time and money expenditures
by the Company that could result in a material adverse effect on the Company's
financial statements.

PRODUCT AND WARRANTY LIABILITY

The Company's sales to certain customers entail the risk of involvement in
product liability actions. Although the Company has product liability insurance
coverage, there can be no assurance that current or future policy limits will be
sufficient to cover all possible liabilities. Further, there can be no assurance
that adequate product liability insurance will continue to be available to the
Company in the future or that it can be maintained at reasonable cost to the
Company. In the event of a successful product liability claim against the
Company, lack or insufficiency of insurance coverage could have an adverse
effect on the Company's financial statements. Additionally, the Company's
standard warranty policy is to replace or repair defective products. Product
warranty claims and costs associated with related recalls, if substantial, could
have a material adverse effect on the Company's financial statements.

CONCENTRATION OF OWNERSHIP

Immediately after consummation of the Offering and the other transactions to
be consummated therewith, Stephens Group, Inc., its employees, affiliates and
other investors introduced to the Company by them (collectively, the "Stephens
Investors") will own approximately 48.6% (46.5% if the Underwriters'
over-allotment option is exercised in full) 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. See
"Principal Stockholders."

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

11
<PAGE>
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.

NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE

There has been no public market for the Common Stock prior to the Offering,
and there can be no assurance that an active trading market will develop or be
sustained after the Offering. The initial public offering price will be
determined through negotiations among the Company and the representatives of the
Underwriters. See "Underwriting" for a discussion of the factors to be
considered in determining the initial public offering price. The negotiated
public offering price may not be indicative of the market price for the Common
Stock following the Offering. In recent years, the stock market in general and
the stock prices of new public companies and many high technology companies in
particular have experienced extreme price fluctuations, sometimes without regard
to the operating performance of particular companies. Factors such as variations
in actual or anticipated quarterly operating results (which the Company has
experienced in past years and recent quarters), changes in or failure to meet
earnings estimates of securities analysts, market conditions in the industry,
regulatory actions and general economic conditions may have a significant effect
on the market price of the Common Stock. Following periods of volatility in the
market price of a corporation's securities, securities class action litigation
has often resulted. There can be no assurance that such litigation will not
occur in the future with respect to the Company. Such litigation could result in
substantial costs and a diversion of management's attention and resources, which
could have a material adverse impact on the Company's financial statements. See
"--Fluctuations in Quarterly Results."

SUBSTANTIAL AND IMMEDIATE DILUTION

The initial public offering price is substantially higher than the tangible
book value per share of the Common Stock. Investors purchasing shares of Common
Stock in the Offering will therefore incur immediate and substantial dilution.
See "Dilution."

EFFECT ON MARKET PRICE OF COMMON STOCK OF SHARES ELIGIBLE FOR FUTURE SALE

Upon consummation of the Offering, the Company will have outstanding
16,490,653 shares of Common Stock. On the date of this Prospectus, only shares
offered hereby will be immediately eligible for sale in the public market.
Subject to volume limitations on sales pursuant to Rule 144 under the Securities
Act, and taking into account the effect of lock-up agreements binding on
substantially all the Company's stockholders, 11,427,599 additional shares of
Common Stock will be eligible for sale beginning 180 days after the date of this
Prospectus, unless earlier released by Robertson, Stephens & Company LLC. Sales
of substantial amounts of such shares in the public market or the prospect of
such sales could adversely affect

12
<PAGE>
the market price of the Common Stock. See "Description of Capital Stock,"
"Shares Eligible for Future Sale" and "Underwriting."

POSSIBLE ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER PROVISIONS

Effective upon the closing of the Offering, the Board of Directors of the
Company will be divided into three classes. Generally, each director (other than
those directors elected to fill vacancies on the Board of Directors) will serve
until the date of the third annual meeting following the annual meeting at which
the director is elected and until his or her successor is elected and qualified.
The Company's Certificate of Incorporation and Bylaws require that stockholders
give advance notice to the Company's Secretary of any nominations of directors
made or other business to be brought by stockholders at any stockholders'
meeting. The Certificate of Incorporation also requires the approval of 75% of
the Company's voting stock to amend certain of its provisions. The Company's
Board of Directors has the authority to issue up to 30 million shares of
Preferred Stock and to determine the price, rights, preferences and privileges
of those shares without any further vote or action by the stockholders. The
rights of the holders of Common Stock will be subject to, and may be adversely
affected by, the rights of the holders of Preferred Stock that may be issued in
the future. The staggered Board provision, the issuance of Preferred Stock and
other charter provisions may discourage certain types of transactions involving
an actual or potential change in control of the Company, including transactions
in which the stockholders might otherwise receive a premium for their shares
over then current market prices, and may limit the ability of the stockholders
to approve transactions that they may deem to be in their best interests. See
"Management--Directors and Executive Officers" and "Description of Capital
Stock--Certain Anti-Takeover Effects."

FORWARD-LOOKING STATEMENTS

This Prospectus contains forward-looking statements 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 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.

13
<PAGE>
COMPANY FORMATION AND ORGANIZATION

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 Prospectus
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. All financial statements contained in
this Prospectus reflect provisions for federal and state income taxes for all
periods as if Power CA had not been treated as an S corporation and Power-One
LLC had not been treated as a limited liability company.

RECAPITALIZATION

The Company has offered each holder of Redeemable Series A Preferred Stock
(a "Holder") the option to exchange all or part of the Holder's Redeemable
Series A Preferred Stock (the "Redeemable Preferred") and the Holder's accrued
dividends on such Redeemable Preferred for shares of Common Stock valued at the
Price to Public set forth on the cover page of this Prospectus. Except for one
Holder who is holding Redeemable Preferred with a liquidation value of
approximately $232,000, all of the Holders have agreed to exchange their
Redeemable Preferred and the dividends accrued thereon, with a liquidation value
of approximately $17.1 million, for shares of Common Stock (the "Exchange"). As
a result, contemporaneous with the consummation of the Offering, 1,427,599
shares will be issued in exchange for the Redeemable Preferred and the dividends
accrued thereon through June 30, 1997 assuming an initial public offering price
of $12.00 per share, the midpoint of the offering price range set forth on the
cover page of this Prospectus. The Redeemable Preferred accrues dividends at a
rate of 10% per annum or an aggregate of $4,506 per day on the Redeemable
Preferred Shares that will be converted into Common Stock; thus, the exact
number of shares to be issued in exchange for the accrued dividends will
continue to increase at the rate of 376 shares of Common Stock per day, until
the consummation of the Offering. The Company's Board of Directors has called
for redemption immediately after consummation of the Offering and the Exchange
of all the Redeemable Preferred that is not exchanged for Common Stock. The
redemption price is equal to the liquidation value of the Redeemable Preferred.

In addition, on August 11, 1997 the Board offered certain officers of the
Company the option to receive shares of Common Stock valued at the Price to
Public set forth on the cover page of this Prospectus in exchange for certain
amounts owed to such officers under their employment and compensation

14
<PAGE>
agreements. The officers in the aggregate have agreed to exchange approximately
$757,000 for Common Stock. Accordingly, the Company will issue, upon
consummation of the Offering, 63,054 shares of Common Stock to such officers,
assuming an initial public offering price of $12.00 per share, the midpoint of
the offering price range set forth on the cover page of this Prospectus.
Additionally, the amount owed to the executive officers accrues interest at a
rate of 10% per annum or an aggregate of $193 per day on the amount owed that
will be converted into Common Stock; thus, the exact number of shares to be
issued to the officers will continue to increase at a rate of 16 shares of
Common Stock per day, until the consummation of the Offering. The Company has
also agreed to pay all amounts owing to the management, approximately $5.5
million, in one lump sum rather than over 20 quarterly periods. The Exchange and
the transactions described in this paragraph are collectively referred to as the
"Recapitalization." See "Certain Transactions--Future Transactions."

USE OF PROCEEDS

The net proceeds to the Company, assuming an initial public offering price
of $12.00 per share, the midpoint of the offering price range set forth on the
cover page of this Prospectus, from the sale of the 5,000,000 shares of Common
Stock offered hereby are estimated to be $54.8 million ($63.2 million if the
Underwriters' over-allotment option is exercised in full) after deducting
underwriting discounts and commissions and estimated offering expenses. The
Company intends to use a portion of the net proceeds from the Offering to repay
all the amounts outstanding (including both short and long term debt) under the
Company's existing bank credit facility (the "Credit Facility"), which amount
was $38.4 million at June 30, 1996. Borrowing under the Credit Facility at June
30, 1997 bore interest at approximately 8% and the Credit Facility matures in
2002. Amounts borrowed under the Credit Facility in the last 12 months have been
used for working capital purposes. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations." Approximately $5.5 million will
be used to pay amounts owed to certain of the Company's officers pursuant to
their employment and compensation agreements which bear interest at 10% per
annum and approximately $232,000 will be used to redeem the Redeemable Preferred
that is not exchanged for Common Stock. See "Recapitalization." The remainder of
the net proceeds of the Offering will be used for general corporate purposes,
including capital expenditures, working capital and possible future
acquisitions. The Company on occasion reviews possible acquisitions and expects
to continue to do so to supplement its internal growth. The Company is not
currently a party to any agreement or understanding with respect to any
acquisition. Pending use of the net proceeds for the above purposes, the Company
intends to invest such funds in short-term and medium-term, interest-bearing,
investment-grade obligations.

DIVIDEND POLICY

Prior to the Acquisition, Power CA elected to be an S corporation under the
Code and, accordingly, made periodic distributions to its stockholders which
distributions represented a substantial portion of Power CA's earnings. After
the Acquisition and prior to the Reorganization, Power-One LLC made one
distribution to its members to enable such members to pay taxes on their portion
of Power-One LLC's net income. Since the Reorganization, the Company has not
declared a dividend. As noted under "Recapitalization," the Company has called
for redemption of all shares of its Redeemable Preferred that are not exchanged
for Common Stock pursuant to the Exchange. The redemption price equals the
liquidation value of the Redeemable Preferred. All holders of Redeemable
Preferred, other than one holder of 202,850 shares, have agreed to exchange
their Redeemable Preferred and accrued dividends thereon for Common Stock. 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, and the Company expects that its new
credit facility (that the Company expects to enter into upon the consummation of
the Offering) will restrict, the Company's ability to pay dividends. See

15
<PAGE>
"Management's Discussion and Analysis of Financial Condition and Results 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."

16
<PAGE>
CAPITALIZATION

The following table sets forth as of June 30, 1997 (i) the actual
capitalization of the Company, (ii) the capitalization of the Company on a pro
forma basis to give effect to the Recapitalization and (iii) the pro forma
capitalization of the Company as adjusted to give effect to the Recapitalization
and the sale by the Company of the shares of Common Stock offered hereby at
$12.00 per share, the midpoint of the offering price range set forth on the
cover page of this Prospectus, and the application of the estimated net proceeds
therefrom.

<TABLE>
<CAPTION>
JUNE 30, 1997
--------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Debt:
Note payable to bank............................ $10,600 $10,600 $
Current portion of long-term debt............... 4,162 4,162 662
Long-term debt, less current portion............ 24,250 24,250
Other liabilities(1)............................ 6,225 5,468
------- --------- -----------
Total debt.................................... 45,237 44,480 662
------- --------- -----------
Preferred Stock, 30,000,000 shares authorized,
30,000,000 shares authorized pro forma and pro
forma as adjusted:
Redeemable Preferred Stock, 15,253,698 shares
authorized, 15,153,698 shares outstanding, no
shares outstanding pro forma and pro forma as
adjusted...................................... 17,122 232
------- ---------
Stockholders' equity:
Common Stock, 20,000,000 shares authorized,
20,000,000 authorized pro forma, 60,000,000
shares authorized pro forma as adjusted;
10,000,000 shares outstanding, 11,490,653
shares outstanding pro forma, 16,490,653
shares outstanding pro forma as adjusted(2)... 10 11 16
Additional capital.............................. 94 17,982 72,777
Notes receivable from stockholders.............. (235) (235)
Retained earnings............................... 2,983 2,741 2,741
------- --------- -----------
Total stockholders' equity.................... 2,852 20,499 75,534
------- --------- -----------
Total capitalization.............................. $65,211 $65,211 $76,196
------- --------- -----------
------- --------- -----------
</TABLE>

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

(1) Represents amounts owed to certain officers under their employment and
compensation agreements.

(2) Excludes 499,750 shares issuable upon the exercise of outstanding stock
options at a weighted average exercise price of $1.05 per share, 180,000
shares subject to options to be granted to Non-Employee Directors at the
initial public offering price upon effectiveness of the Registration
Statement and 320,250 additional shares reserved for issuance under the
Company's 1996 Stock Incentive Plan. See "Management--Executive
Compensation" and "--Stock Option Plan."

17
<PAGE>
DILUTION

The pro forma net tangible book value (total tangible assets less total
liabilities) of the Company at June 30, 1997, after giving effect to the
Recapitalization, was a deficit of approximately $7.7 million, or $0.70 per
share of Common Stock. After giving effect to the sale by the Company of the
5,000,000 shares of Common Stock offered hereby, resulting in estimated net
proceeds of $54,800,000 based upon an assumed initial public offering price of
$12.00 per share, the midpoint of the offering price range set forth on the
cover page of this Prospectus, less the expected offering related expenses and
the repayment of stockholders' notes, the Company's pro forma net tangible book
value at June 30, 1997 would have been $47.3 million, or $2.87 per share. This
represents an immediate increase in pro forma net tangible book value of $3.57
per share to existing stockholders and an immediate dilution in net tangible
book value of $9.13 per share to new investors purchasing shares in the
Offering. The following table illustrates this per share dilution.

<TABLE>
<CAPTION>
<S> <C> <C>
Initial assumed public offering price per share............................ $ 12.00
Pro forma net tangible book value per share before the Offering and after
the Recapitalization................................................... $ (.70)
Increase per share attributable to new investors......................... 3.57
---------
Pro forma net tangible book value per share after the Offering............. 2.87
---------
Dilution per share to new investors........................................ $ 9.13
---------
---------
</TABLE>

The following table summarizes, on a pro forma basis, as of June 30, 1997,
after giving effect to the Recapitalization, the number of shares of Common
Stock purchased from the Company, the total consideration paid and the average
price per share paid by (i) existing stockholders after giving effect to the
Recapitalization and (ii) new investors (before deducting underwriting discounts
and commissions and estimated expenses payable by the Company):

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------------- -------------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------------ ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Existing stockholders............. 11,490,653 69.7% $ 17,993,000 23.1% $ 1.57
New investors..................... 5,000,000 30.3% 60,000,000 76.9% 12.00
------------ ----- ------------- -----
Total........................... 16,490,653 100.0% $ 77,993,000 100.0%
------------ ----- ------------- -----
------------ ----- ------------- -----
</TABLE>

The foregoing computations assume no exercise of outstanding stock options.
There are options outstanding to purchase 499,750 shares of Common Stock at a
weighted average exercise price of $1.05 per share. To the extent these options
are exercised, there will be further dilution to new investors. 180,000 shares
will be subject to options to be granted to Non-Employee Directors at the
initial public offering price upon effectiveness of the Registration Statement
and 320,250 additional shares are reserved for issuance under the Company's 1996
Stock Incentive Plan. See "Management--Executive Compensation" and "--Stock
Option Plan."

18
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

The following table summarizes certain selected financial data, which should
be read in conjunction with the Company's financial statements and notes thereto
included elsewhere herein and with "Management's Discussion and Analysis of
Financial Condition and Results of Operations." The selected financial data as
of December 31, 1995 and 1996, and for each of the periods in the three years
ended December 31, 1996 have been derived from the Company's and the Predecessor
Company's consolidated and combined financial statements which have been audited
by Deloitte & Touche LLP, the Company's independent auditors. Other information
has been derived from other audited financial statements. The selected financial
data as of and for the six months ended June 30, 1996 and 1997 have been derived
from the Company's unaudited financial statements. In the opinion of management,
the unaudited financial statements have been prepared on the same basis as the
audited financial statements and include all adjustments, consisting of normal
recurring adjustments, necessary for a fair presentation of the financial
position and the results of operations as of such dates and for such periods.
The results for the six month period ended June 30, 1997 are not necessarily
indicative of the results to be expected for the entire year or the quarters
following in 1997.
<TABLE>
<CAPTION>
COMPANY(1)
PREDECESSOR COMPANY(1)(2) -----------------------------------------
---------------------------------------------- SIX
MONTHS
YEAR ENDED DECEMBER 31, NINE MONTHS THREE MONTHS ENDED
ENDED ENDED YEAR ENDED JUNE 30,
------------------------------- SEPTEMBER 30, DECEMBER 31, DECEMBER 31, ---------
1992 1993 1994 1995 1995 1996 1996
--------- --------- --------- ------------- --------------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales...................... $ 46,997 $ 50,846 $ 55,702 $ 52,732 $ 20,670 $ 74,210 $ 40,743
Cost of goods sold............. 31,591 34,078 35,751 31,525 14,348 45,305 24,709
--------- --------- --------- ------------- ------- ------------- ---------
Gross profit................... 15,406 16,768 19,951 21,207 6,322 28,905 16,034

Selling, general and
administrative expense....... 10,380 11,560 12,067 10,947 3,883 14,323 7,949
Engineering expense............ 3,014 2,655 2,725 2,397 1,064 3,964 2,441
Amortization of intangibles.... 472 2,003 952
Other expense.................. 613
--------- --------- --------- ------------- ------- ------------- ---------
Income from operations......... 2,012 2,553 5,159 7,863 903 8,002 4,692
Interest expense............... (726) (543) (629) (494) (1,026) (4,222) (1,951)
Other, net..................... 176 233 8 33 (36) 12 (35)
--------- --------- --------- ------------- ------- ------------- ---------
Income (loss) before income
taxes........................ 1,462 2,243 4,538 7,402 (159) 3,792 2,706
Income taxes................... 45 126 75 155 12 396 283
--------- --------- --------- ------------- ------- ------------- ---------
Net income (loss).............. $ 1,417 $ 2,117 $ 4,463 $ 7,247 $ (171) $ 3,396 $ 2,423
--------- --------- --------- ------------- ------- ------------- ---------
--------- --------- --------- ------------- ------- ------------- ---------
Pro forma amounts:(3)(4)
Income (loss) before income
taxes as reported............ $ 1,462 $ 2,243 $ 4,538 $ 7,402 $ (159) $ 3,792 $ 2,706
Pro forma income taxes......... 117 209 1,179 2,767 (121) 923 658
--------- --------- --------- ------------- ------- ------------- ---------
Pro forma net income (loss).... $ 1,345 $ 2,034 $ 3,359 $ 4,635 $ (38) $ 2,869 $ 2,048
--------- --------- --------- ------------- ------- ------------- ---------
--------- --------- --------- ------------- ------- ------------- ---------
Pro forma net income per
share........................ $ 0.24
-------------
-------------
Pro forma weighted average
shares outstanding........... 11,875
-------------
-------------

<CAPTION>
1997
---------
<S> <C>
STATEMENT OF OPERATIONS DATA:
Net sales...................... $ 40,173
Cost of goods sold............. 24,348
---------
Gross profit................... 15,825
Selling, general and
administrative expense....... 7,788
Engineering expense............ 1,628
Amortization of intangibles.... 1,014
Other expense..................
---------
Income from operations......... 5,395
Interest expense............... (2,009)
Other, net..................... 48
---------
Income (loss) before income
taxes........................ 3,434
Income taxes................... 866
---------
Net income (loss).............. $ 2,568
---------
---------
Pro forma amounts:(3)(4)
Income (loss) before income
taxes as reported............ $ 3,434
Pro forma income taxes......... 866
---------
Pro forma net income (loss).... $ 2,568
---------
---------
Pro forma net income per
share........................ $ 0.22
---------
---------
Pro forma weighted average
shares outstanding........... 11,947
---------
---------
</TABLE>

(FOOTNOTES ON FOLLOWING PAGE)

19
<PAGE>

<TABLE>
<CAPTION>
PREDECESSOR COMPANY(1)(2)
------------------------------------------------ COMPANY(1)
--------------------------------------------------
YEAR ENDED DECEMBER 31, NINE MONTHS THREE MONTHS SIX MONTHS
ENDED ENDED YEAR ENDED ENDED JUNE 30,
------------------------------- SEPTEMBER 30, DECEMBER 31, DECEMBER 31, --------------------
1992 1993 1994 1995 1995 1996 1996 1997
--------- --------- --------- --------------- ------------- ------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SELECTED OPERATING DATA:
Gross profit margin....... 32.8% 33.0% 35.8% 40.2% 30.6% 39.0% 39.4% 39.4%
EBITDA(5)................. $ 2,830 $ 3,368 $ 5,957 $ 8,564 $ 1,718 $ 12,215 $6,582 $7,455
Cash flows from:
Operating activities.... 2,755 1,738 4,049 6,420 (2,152 ) 4,249 1,993 1,682
Investing activities.... (359) (785) (1,663) (1,945 ) (49,840 ) (3,457 ) (2,080) (940)
Financing activities.... (1,107) (476) (620) (688 ) 55,743 (2,859 ) 106 (374)
</TABLE>

<TABLE>
<CAPTION>
AT JUNE 30, 1997
-----------------------------------------
PROFORMA AS
ACTUAL PRO FORMA(4) ADJUSTED(4)(6)
--------- ------------- ---------------

<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.......................................................... $ 11,343 $ 11,343 $ 36,428
Total assets............................................................. 76,939 76,939 87,924
Total debt............................................................... 45,237 44,480 662
Redeemable preferred stock............................................... 17,122 232 --
Total stockholders' equity............................................... 2,852 20,499 75,534
</TABLE>

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

(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 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. For clarity of presentation
throughout this Prospectus, the Company has described year-ends presented as
if the year ended on December 31 and quarter-ends presented as if the
quarters ended on March 31, June 30, September 30 and December 31. As such,
the years ended December 31, 1993 through 1996 represent 52-week years,
while the year ended December 31, 1992 represents a 53-week year.

(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."

(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 $17,131,180, and (ii) $756,648 owed to the executive
officers, each at an assumed public offering price of $12.00 per share, the
midpoint of the offering price range set forth on the cover page of this
Prospectus, into 1,490,653 shares of Common Stock which is intended to occur
upon the closing of the Offering. Pursuant to applicable rules, pro forma
net income per share and weighted average shares outstanding information is
presented only for the most recent fiscal year and interim period. See Note
2 of Notes to Consolidated Financial Statements.

20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

THE FOLLOWING SHOULD BE READ IN CONJUNCTION WITH THE COMBINED AND
CONSOLIDATED FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, INCLUDED
ELSEWHERE IN THIS PROSPECTUS.

GENERAL

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.

The Company has recently formed a strategic accounts group which targets
existing and potential customers who are leaders in high-growth industries and
who typically purchase power supplies in large quantities. To the extent that
this group is effective, the Company's gross profit margin may decline since
high volume products typically have a lower gross profit margin than the
Company's other 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 Operation 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.

21
<PAGE>
The following table sets forth, for the periods indicated, certain Combined
and Consolidated Statements of Operations data as a percentage of net sales:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------- --------------------
1994 1995 1996 1996 1997
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net sales..................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold............................ 64.2 62.5 61.0 60.6 60.6
--------- --------- --------- --------- ---------
Gross profit.................................. 35.8 37.5 39.0 39.4 39.4
SG&A expense.................................. 21.7 20.2 19.3 19.6 19.4
Engineering expense........................... 4.9 4.7 5.4 6.0 4.1
Amortization of intangibles................... 0.0 0.6 2.7 2.3 2.5
Other expense................................. 0.0 0.0 0.8 0.0 0.0
--------- --------- --------- --------- ---------
Income from operations........................ 9.2 12.0 10.8 11.5 13.4
Interest expense.............................. (1.1) (2.1) (5.7) (4.8) (4.9)
Other, net.................................... 0.0 0.0 0.0 (0.1) 0.1
--------- --------- --------- --------- ---------
Income before income taxes.................... 8.1 9.9 5.1 6.6 8.6
Pro forma income taxes........................ 2.1 3.6 1.2 1.6 2.2
--------- --------- --------- --------- ---------
Pro forma net income.......................... 6.0% 6.3% 3.9% 5.0% 6.4%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>

SIX MONTHS ENDED JUNE 30, 1997 AND JUNE 30, 1996

NET SALES. Net sales decreased $570,000, or 1.4%, to $40.2 million for the
six months ended June 30, 1997 from $40.7 million for the six months ended June
30, 1996. The decrease resulted primarily from a downturn in certain electronic
market segments that began in 1996 and continued through the first quarter of
1997. In particular, this downturn resulted in lower sales to two of the
Company's largest customers in the first quarter of 1997. However, order rates
accelerated in the first quarter of 1997 and net sales in the second quarter of
1997 were the highest in the Company's history. Net sales for the second quarter
of 1997 grew 28% over the first quarter of 1997.

GROSS PROFIT. Gross profit decreased $209,000, or 1.3%, to $15.8 million
for the six months ended June 30, 1997 from $16.0 million for the six months
ended June 30, 1996. The decrease resulted primarily from lower sales for the
six months ended June 30, 1997 as compared to the six months ended June 30,
1996. Gross profit margin remained constant. Gross profit margin for the six
months ended June 30, 1997 was favorably impacted by 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.
This gross margin improvement was offset by a shift in product mix for the six
months ended June 30, 1997 that included sales of more custom products, which
contribute lower gross margins than the Company's other product lines.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and
administrative ("SG&A") expense decreased $161,000, or 2.0%, to $7.8 million for
the six months ended June 30, 1997 from $7.9 million for the six months ended
June 30, 1996. As a percent of net sales, SG&A expense decreased to 19.4% for
the six months ended June 30, 1997 from 19.6% for the six months ended June 30,
1996. These decreases resulted primarily from reduced expenses associated with
temporary cost cutting measures undertaken in the third quarter of 1996. Most of
the savings occurred from reductions in the administrative area.

ENGINEERING EXPENSE. Engineering expense declined $813,000, or 33.3%, to
$1.6 million for the six months ended June 30, 1997 from $2.4 million for the
six months ended June 30, 1996. As a percent of net sales, engineering expense
decreased to 4.1% for the six months ended June 30, 1997 from 6.0% for the six
months ended June 30, 1996. Certain engineering expenses, which had been
increased in the first half of

22
<PAGE>
1996 based upon anticipated sales increases, were reduced, primarily by the
reduction of personnel, in the last half of 1996 as sales declined. The Company
believes that no strategic business was affected by this reduction. The Company
began to refill many of these positions toward the end of the second quarter.

AMORTIZATION OF INTANGIBLES. The amortization of intangibles, both in
dollar amount and as a percent of net sales, increased in the six months ended
June 30, 1997 as a result of expenses incurred in connection with a license
agreement for DC/DC products, that was entered into in April 1996.

INCOME FROM OPERATIONS. As a result of the above factors, income from
operations increased $703,000, or 15.0%, to $5.4 million for the six months
ended June 30, 1997 from $4.7 million for the six months ended June 30, 1996. As
a percent of sales, income from operations increased to 13.4% for the six months
ended June 30, 1997 from 11.5% for the six months ended June 30, 1996.

INCOME TAXES. Income tax expense increased to $866,000, or 2.2% of net
sales for the six months ended June 30, 1997, from the pro forma tax expense of
$658,000, or 1.6% of net sales for the six months ended June 30, 1996. The
percentage increase primarily reflects an increase in the Company's effective
tax rate from 24.3% in 1996 to 25.2% in 1997 resulting from a higher proportion
of the Company's earnings being generated in the U.S. 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 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, GENERAL AND ADMINISTRATIVE EXPENSE. SG&A expense decreased
$507,000, or 3.4%, to $14.3 million in 1996 from $14.8 million in 1995. As a
percent of net sales, SG&A expense decreased to 19.3% in 1996 from 20.2% in
1995. These decreases resulted primarily from decreases in bonuses of $1.2
million and the elimination of $363,000 in payments to the executive committee
of the Predecessor Company. These savings were offset in part by an increase in
bad debt expense of $335,000 and expenses relating to the expansion of the
Company's operations in the Dominican Republic totalling $767,000.

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.

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.

23
<PAGE>
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.

YEARS ENDED DECEMBER 31, 1995 AND DECEMBER 31, 1994

NET SALES. Net sales increased $17.7 million, or 31.8%, to $73.4 million in
1995 from $55.7 million in 1994. This increase was due largely to an increase of
approximately 61% in sales of the Company's high-range power product line, used
primarily by the semiconductor test equipment industry. Additionally, sales of
the mid-range power product line grew to $6.3 million in 1995 from $673,000 in
1994.

GROSS PROFIT. Gross profit increased $7.6 million, or 38.0%, to $27.5
million in 1995 from $20.0 million in 1994. Gross profit margin increased to
37.5% in 1995 from 35.8% in 1994. The 1996 increase resulted primarily from a
product mix shift to more profitable high-range power products, an increased
utilization of fixed overhead and the devaluation of the Mexican peso. These
increases would have been greater if gross profit margins in 1995 had not been
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
Acquisition. Excluding this one-time increase, gross profit margin would have
been 39.5% for 1995.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. SG&A expense increased $2.8
million, or 22.9%, to $14.8 million in 1995 from $12.1 million in 1994. This
increase resulted primarily from higher variable costs related to increased
bonuses and commissions of $1.5 million as a result of higher sales and
approximately $500,000 in costs associated with the Acquisition. As a percent of
sales, SG&A expense decreased to 20.2% in 1995 from 21.7% in 1994, as fixed SG&A
costs were spread over a larger sales base.

ENGINEERING EXPENSE. Engineering expense increased $736,000, or 27.0%, to
$3.5 million in 1995 from $2.7 million in 1994. This increase was attributable
primarily to increased product development and sustaining engineering expense in
1995. As a percent of sales, engineering expense decreased to 4.7% in 1995 from
4.9% in 1994.

AMORTIZATION OF INTANGIBLES. The amortization of intangibles in 1995
reflects the amortization of intangible assets in the fourth quarter of 1995 as
a result of the Acquisition. Prior to the Acquisition in September 1995 the
Company did not have any intangibles on its balance sheet.

INCOME FROM OPERATIONS. As a result of the above factors, income from
operations increased $3.6 million, or 69.9%, to $8.8 million in 1995 from $5.2
million in 1994. As a percent of sales, income from operations increased to
12.0% in 1995 from 9.2% in 1994.

INTEREST EXPENSE. Interest expense increased $891,000 to $1.5 million in
1995 from $629,000 in 1994. This increase was due to the increased debt incurred
in connection with the Acquisition.

24
<PAGE>
PRO FORMA INCOME TAXES. Pro forma income taxes increased to $2.6 million in
1995 from $1.2 million in 1994. The increase reflects an increase in the
effective tax rate to 36.5% in 1995 from 26.0% in 1994 and the impact of the 63%
increase in income before income taxes. The increase in the effective income tax
rate reflects the disproportionate amount of earnings generated by the Company's
operations in the U.S. over historical pro forma levels.

QUARTERLY RESULTS

The following table presents unaudited quarterly operating results for the
Predecessor Company and the Company. In the opinion of management, this
information has been prepared on the same basis as the audited Combined and
Consolidated Financial Statements included in this Prospectus and includes all
adjustments (consisting of only normal recurring accruals) that management
considers necessary for a fair presentation of the results for such periods.
Such quarterly results are not necessarily indicative of the results of
operations for any future period. The ordering patterns of the Company's
customer base generally have resulted in a decline in sales from the second
quarter to the third quarter. The Company's results of operations have
fluctuated and may continue to fluctuate from period to period, including on a
quarterly basis.
<TABLE>
<CAPTION>
1995 QUARTERS ENDED
------------------------------------------------
PREDECESSOR COMPANY 1996 QUARTERS ENDED
------------------------------------------------
COMPANY
------------------------------------- -----------------------------------------------------------
MAR. 31 JUNE 30 SEPT. 30 DEC. 31 MAR. 31 JUNE 30 SEP. 30 DEC. 31
----------- ----------- ----------- --------- ----------- ----------- ----------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF
OPERATIONS:
Net sales................. $ 14,998 $ 19,594 $ 18,140 $ 20,670 $ 20,129 $ 20,614 $ 17,165 $ 16,302
Gross profit.............. 6,173 7,751 7,283 6,322 7,819 8,215 6,836 6,035
Income from operations.... 2,028 3,194 2,641 903 1,809 2,883 1,271 2,039
Pro forma net income
(loss).................. 1,177 1,898 1,560 (38) 613 1,435 195 626

<CAPTION>
1997 QUARTERS ENDED
------------------------
MAR. 31 JUNE 30
----------- -----------
<S> <C> <C>
CONSOLIDATED STATEMENTS OF
OPERATIONS:
Net sales................. $ 17,617 $ 22,556
Gross profit.............. 7,015 8,810
Income from operations.... 2,295 3,100
Pro forma net income
(loss).................. 997 1,571
</TABLE>

CERTAIN INCOME TAX MATTERS

The Company has operated in Puerto Rico since 1981 under various exemptions
that 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 June
30, 1997, accumulated unremitted earnings totaled approximately $3.6 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

25
<PAGE>
company, taxes for federal and most state income tax purposes on earnings were
paid directly by the owners.

LIQUIDITY AND CAPITAL RESOURCES

During the six months ended June 30, 1997, the Company had cash flow from
operations of $1.7 million compared to cash flow from operations of $1.9 million
in the comparable period in 1996. Cash flow from operations decreased primarily
due to increases in accounts receivable of $3.8 million and increases in
inventories of $800,000 that were partially offset by an increase in accrued
expenses of $1.4 million. The increase in accounts receivable primarily resulted
from a change in billing terms with its distributors which increased days sales
outstanding from its distributors to an average of 45 days from an average of 15
days.

The Company has funded its operations primarily from cash flow provided by
operations and short and long-term borrowings. At the end of 1996, the Company's
balance of cash and cash equivalents was $1.7 million compared to $3.8 million
at the end of 1995, a decrease of $2.1 million. Net cash provided by operating
activities in 1996 was $4.2 million after giving effect to an increase of $1.5
million in accounts receivable and $1.8 million in accounts payable.
Depreciation and amortization was $4.2 million in 1996, compared with $1.5
million in 1995, primarily due to the Acquisition and the corresponding increase
in intangible assets of $30 million. Major cash expenditures in 1996 included
the purchase of $2.9 million of capital equipment and net repayment of $1.6
million of bank borrowings.

The Company currently anticipates that its capital expenditures for 1997
will be approximately $3.4 million, of which approximately $1.5 million
represents investments in surface mount manufacturing equipment. 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.

In September 1995, the Company obtained a term loan of $30 million and a
revolving line of credit of $15 million from a syndicate of banks led by
NationsBank of Texas, N.A. ("NationsBank") primarily to finance the Acquisition
and for working capital and other general corporate purposes. In September 1996,
the commitment on each of these loans was increased by $2.5 million. Both loans
are collateralized by substantially all of the Company's assets. The term loan
is due in full on September 30, 2002, with quarterly principal payments of
$750,000 due in September 1997, $1.0 million due in each of the next four
quarters and increasing thereafter each 12 months to a maximum of $1.75 million
due in the four quarters commencing on December 31, 2001. Interest on amounts
outstanding is payable monthly based on one of the following rates, as selected
by the Company: LIBOR plus 2.0% to 2.5% or the bank's base rate plus 1.0% to
1.5%. The interest rate was 8.03% at June 30, 1997.

The Company's revolving line of credit bears interest on amounts outstanding
payable monthly based on one of the following rates, as selected by the Company:
LIBOR plus 2.0% to 2.5% or the bank's base rate plus 1.0% to 1.5%. The interest
rate was 8.1875% at June 30, 1997. As of June 30, 1997, $6.9 million was
available under the revolving line of credit.

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.

Effective October 30, 1995, the Company entered into an interest swap
agreement with a bank for a notional amount of $20.0 million. Under the
agreement, the Company has agreed to a fixed rate of 6.025% and the bank has
agreed to a floating rate equal to LIBOR. Interest payments are exchanged
quarterly. The Company will cancel this agreement upon repayment of the various
loans with the proceeds of the Offering. The Company does not expect to incur
any substantial costs as a result of such cancellation.

26
<PAGE>
On March 31, 1997, the Company amended the original termination date of its
interest swap from October 30, 2000 to April 30, 1999 and concurrently entered
into a swaption agreement. The Company entered into this amendment because it
believed that interest rates within the applicable period would not change
dramatically and that it could save a substantial amount by reducing the term of
the interest rate swap; however, due to the requirement of its lender that the
Company maintain an adequate interest rate hedge through October 2000, the
Company concurrently entered into the swaption agreement. Under the swaption
agreement, the Company may exercise on April 28, 1999 its option to enter into a
one-year interest swap agreement with a notional amount of $15.0 million. If
exercised, the Company would agree to pay a fixed rate of 10.0% and the bank
would agree to a floating rate equal to LIBOR.

The Company believes its existing working capital and borrowing capacity,
coupled with the funds generated from the Company's operations and the net
proceeds from the Offering, will be sufficient to fund its anticipated working
capital, capital expenditures and debt payment requirements for the foreseeable
future. The Company is currently in negotiations with NationsBank to establish a
$50 million line of credit that will become available simultaneous with the
Offering. This line of credit will be used to finance acquisitions, working
capital, and capital expenditure requirements. There is no assurance that a new
line will be established with NationsBank. Moreover, if the Company makes a
large acquisition, it may be necessary to raise debt or equity in the private or
public securities markets.

27
<PAGE>
BUSINESS

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
end-users 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 Capstone (Arrow), Kent Electronics and Pioneer
Standard Electronics.

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 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. Finished goods from such operations are
shipped to Puerto Rico and distributed from there in order to maintain 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, providing the Company with a line of DC/DC products.

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

28
<PAGE>
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.

According to Micro-Tech Consultants, the worldwide market for switching
power supplies in 1995 (the latest year for which information is available) was
estimated to be over $15.0 billion, with the U.S. accounting for approximately
$6.0 billion. The U.S. switching power supply industry grew at a compound annual
rate of 11.6% from 1993 to 1995, and is anticipated to grow at a compound annual
rate of 10.1% from 1995 to 2000. The power supply industry is highly fragmented,
with more than 300 power supply manufacturers in the U.S. The Company believes
that most of these companies have sales under $10.0 million annually. Power
supplies are configured using two technologies: linear or switching. Linear
power supplies are relatively large and require a switch to accept different
voltages. In contrast, switching power supplies are smaller and use a technology
that eliminates the need for a switch when using different voltages. The market
for power supplies can be further segmented in several different ways, including
by (i) merchant and captive manufacturers, (ii) custom and standard products and
(iii) output wattage.

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. The merchant segment accounted for more than 50% of power
supplies sold in the U.S. in 1995 and is expected to increase to approximately
60% by 2000 as a result of increased outsourcing by captive manufacturers. The
merchant segment in the U.S. is expected to grow at a compound annual rate of
13.7% from 1995 to 2000, compared to 5.7% for the captive segment.

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 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.

OUTPUT WATTAGE. Power supplies can be grouped by output (watt) ranges:
low-range power, mid-range power and high-range power. Low-range power supplies
(under 200 watts) tend to be less technologically complex, manufactured in high
volumes, and used in various lower cost applications, including personal
computers, small networking systems, small industrial instrumentation systems
and a host of other consumer applications. Mid-range power supplies (200 - 500
watts) tend to be more technologically complex, manufactured in moderate to high
volumes, and used in more sophisticated products, including workstations, data
and voice communications systems, and medical and diagnostic equipment.
High-range power supplies (over 500 watts) tend to be technologically complex,
higher priced products, manufactured in low volumes, and used in sophisticated
systems, including mainframe computers, semiconductor test systems,
telecommunications sub-stations, flight simulators and advanced medical imaging
equipment.

INDUSTRY TRENDS

The markets for electronic products are growing as a result of new product
introductions, technological change, demand for a wider variety of electronic
product features and increasingly powerful and less expensive electronic
components. As a result, OEMs are facing greater competition in their own
markets for more complex electronic products and to compete successfully, they
increasingly must meet shorter time-to-market demands and greater performance
pressures. In an effort to do so, OEMs are moving

29
<PAGE>
toward flexible, scaleable, low-cost sub-systems and components that facilitate
their goals of rapid and cost-effective product development and introduction.
These increasing performance demands translate into several significant trends
in the power supply industry, including:

CONSOLIDATION OF SUPPLIER BASE. In order to lower costs and accelerate
delivery schedules, OEMs and electronic distributors are increasingly reducing
their supplier base to include only vendors who can offer a broad range of
quality products and service most of their needs. This one-stop shopping
approach places increased requirements on power supply manufacturers to invest
in full product offerings and sophisticated engineering.

SHIFT IN CUSTOMER PREFERENCE FROM CUSTOM TO STANDARD AND MODIFIED STANDARD
PRODUCTS. Product life cycles within the electronic equipment industry are
decreasing. The reduced time-to-market for new products increases the demand for
standard and modified standard power supplies that can be delivered quickly and
cost-effectively, particularly when small and medium-volume purchases are
involved.

INCREASED OUTSOURCING BY CAPTIVE POWER SUPPLY MANUFACTURERS. Many OEMs have
historically built power supplies for use in their own products. As the level of
complexity and investment in designing and manufacturing power supplies have
increased, these OEMs are increasingly outsourcing their power supply needs in
order to focus on research, development and marketing of their own products.

BUSINESS STRATEGY

Power-One's business strategy is to power its customers' technologies by
offering one of the broadest ranges of standard and modified standard power
supplies available from any manufacturer. Power-One's broad line of standard,
modified standard and unique modular products permit the Company to capitalize
on its customers' desire to reduce their supplier base to include only vendors
which can meet their diverse product and service requirements. Moreover, the
Company utilizes flexible manufacturing which allows it to quickly and reliably
meet its customers' power supply demands in less time, and at a lower initial
cost, than manufacturers who provide custom products. This, in turn, permits the
Company's customers to get their new products to market more rapidly.

The Company believes the Power-One brand name is associated with high
quality, dependability and consistency in the power supply industry. The Company
prides itself on having each product meet all customer specifications and
ensuring that its products can work in multiple product applications. All of the
Company's manufacturing facilities are ISO 9001 or 9002 certified, which are
frameworks for quality assurance. The Company also focuses on offering its
customers superior service and support. In December 1995, Power-One received the
award for "Service Leader for Power Suppliers" from the readers of Electronic
Engineering Product News magazine.

Key elements of Power-One's strategy include:

FURTHER EXPAND STANDARD PRODUCT LINE. The Company plans to continue the
development and expansion of its standard product line to allow it to meet more
of the electronic industry's power supply requirements by offering standard and
modified standard solutions to custom problems. The Company's product marketing
and engineering departments will focus on the future power supply needs of
certain current and potential customers.

TARGET ITS PRIMARY MARKET. Power-One will continue to target customers in
the domestic merchant power supply market that utilize a variety of standard
products, place small to medium-volume annual orders of $500,000 to $3.0 million
and put a premium on quality, reliability and service. The Company intends to
continue to avoid selling to high-volume personal computer and consumer product
manufacturers. The small to medium-volume targeted market has historically been
less price sensitive than higher-volume markets.

30
<PAGE>
EXPAND RELATIONSHIPS WITH KEY OEMS. The Company has recently created its
national Strategic Accounts Program which is focused on selling to its current
and potential OEM customers who are leaders in high-growth industries and who
are expected in the future to order more than $3.0 million of products annually.

LEVERAGE RELATIONSHIPS WITH DISTRIBUTORS. The Company has been one of the
pioneers in selling power supplies through electronic distributors and has one
of the largest networks of industrial electronic distributors in the U.S. The
Company believes its reputation with its distributors gives it ready access to a
broader base of customers than the OEM customers alone. By leveraging its
existing network of distributors and expanding its current array of products,
the Company will continue to provide its power supply products to smaller OEMs
and other end-users in an efficient and cost-effective manner.

PURSUE EXTERNAL GROWTH OPPORTUNITIES. The Company is committed to pursuing
opportunities to grow its business through acquisitions of other power supply
manufacturers, joint ventures or licensing agreements, either in the U.S. or
internationally. In addition, the Company believes that the fragmented nature of
the power supply market, the shrinking of customers' supplier bases and the
relative undercapitalization of many competitors will present opportunities for
further consolidation. However, there can be no assurance that the Company will
consummate any acquisition, joint venture or license agreement.

PRODUCTS

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. In 1996, the Company shipped more than 900,000 power
supply units, with average sales prices ranging from $5 to $2,500.

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

<TABLE>
<CAPTION>
AVERAGE
TYPICAL REPRESENTATIVE SALES
POWER(1) CHARACTERISTICS APPLICATIONS PRICE RANGE
- --------------------- --------------------------- ----------------------------------------------- ------------
<S> <C> <C> <C>
Low-Range

Linear - 5 to 150 watts - Analog to digital converters $20-150
- Low noise - Operational amplifiers
- Excellent voltage - Medical electronics
regulation
- High voltage isolation

Switchers -30 to 200 watts - Printers $15-125
- Higher unit volume - High-speed modems
- Low technology - Electro-mechanical devices
- Point-of-sale terminals
- Low-end networking

Mid-Range - 200 to 500 watts - Networking systems $150-450
- Medium unit volume - Mini-computers
- Moderate technology - Medical diagnostic equipment
</TABLE>

31
<PAGE>
<TABLE>
<CAPTION>
AVERAGE
TYPICAL REPRESENTATIVE SALES
POWER(1) CHARACTERISTICS APPLICATIONS PRICE RANGE
- --------------------- --------------------------- ----------------------------------------------- ------------
<S> <C> <C> <C>
High-Range - 500 to 4,000 watts - Semiconductor test systems $500-2,500
- Lower unit volume - Telecommunications substations
- High technology - Large-scale computers/flight simulators
- Complex medical imaging equipment

DC/DC Converters - 1-30 watts - On-board power conversion $5-90
- More compatible with - Isolation from electronic noise
power supplies - Instrumentation
manufactured by
competitors
- Easily sold through
distributors
</TABLE>

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

(1) With the exception of DC/DC Converters, all products are AC/DC power
supplies.

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 less than 26% of its revenues in 1996,
to decline slightly in the coming years as end-users 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. 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 more compatible

32
<PAGE>
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 is considering 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--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 end-users. The percentages
of products sold by the Company to distributors and OEM customers, respectively,
in 1995, 1996 and the six months ended June 30, 1997, were as follows:

<TABLE>
<CAPTION>
1995 1996 1997 (TO JUNE 30)
----- ----- ---------------------
<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 15 OEM customers include well-recognized names such
as General Electric, Hewlett-Packard, Siemens, Teradyne, Texas Instruments and
Unisys. OEM sales in 1996 and the six months ended June 30, 1997 were to the
following market segments (based on sales to the Company's largest 100 OEM
customers who account for approximately 90% of all OEM sales).

<TABLE>
<CAPTION>
MARKET SEGMENT(1) 1996 1997 (TO JUNE 30)
- ---------------------------------------------------------------- ----- ---------------------------
<S> <C> <C>
Communications.................................................. 26% 32%
Automatic Test Equipment........................................ 21% 27%
Medical Equipment............................................... 22% 16%
Industrial...................................................... 10% 11%
Retail Equipment/Gaming......................................... 11% 6%
Computer and Other.............................................. 10% 8%
</TABLE>

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

(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's sales efforts target end-users who traditionally utilize
standard products and place small to medium-volume orders ranging from $500,000
to $3.0 million per year. The Company believes this market historically has been
less price competitive than higher-volume markets. Most small to medium size
orders for the Company's products are filled from product inventories maintained
by its distributors while orders from the Company's OEM customers are filled
from its work-in-progress or finished goods inventory.

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

33
<PAGE>
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 June 30, 1997 Power-One's sales department consisted of 19 professionals,
including five regional sales managers strategically located across the country,
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's newly formed strategic account sales team of three people generally
focuses on certain high growth OEM customers.

The Company has contractual agreements with 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 end-users will purchase 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 10% of the Company's net sales
in 1995, 1996 and the first six months of 1997, respectively. No other
distributor accounted for more than 10% of the Company's annual net sales during
the last three years or the first six months of 1997. 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 12% in the first six
months of 1997, and Cisco, which accounted for 13% of net sales in the first six
months of 1997, are the only OEM customers to account for more than 10% of the
Company's net sales in any year since 1994 or in the six months ended June 30,
1997. The Company's top 15 OEM customers accounted for approximately 31% of the
Company's total sales in 1996. 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 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
.75% of sales. The Company also advertises through the use of press releases,
direct mail programs and catalogs.

34
<PAGE>
RESEARCH AND DEVELOPMENT; ENGINEERING

The Company's product research and development is performed at its
facilities in Camarillo by an engineering department of 29 professionals. 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 improving electromagnetic components in order to reduce
component costs, improve ease of manufacture, and accommodate product size
constraints. Customers in the Company's target markets require product designs
to be completed quickly. Thus, the Company focuses on reducing design 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. 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. Surface mount technology permits reduction in board size by eliminating
the need for holes in the printed circuit boards, thus allowing components to be
placed on both sides of a board.

Power-One generally uses the low-cost labor force available in the Dominican
Republic and Mexico to manufacture and assemble its products. Substantially all
the Company's products are manufactured and assembled in either the Dominican
Republic or Mexico. 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. Furthermore, the use of manual assembly provides the Company with a high
degree of flexibility and fast production cycle times that are required for a
large variety, medium volume business such as the Company's.

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

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

35
<PAGE>
are certified to ISO 9002. Power-One's teamwork management approach involves
employees in implementing techniques to measure, monitor and improve
performance. Every new production employee in Puerto Rico, the Dominican
Republic and Mexico is provided classroom training. Selected employees
participate in Power-One's annual planning sessions and monitor adherence to
their annual plans on a monthly basis. Power-One combines these and other
advanced management and manufacturing techniques with flexible manufacturing
technology, continuous process improvement and statistical process control.
These techniques allow the Company to decrease production costs by improving the
efficiency of production processes and increasing production yields. 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

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 and are expected to
be fully integrated by the end of 1999. A wide area communications network is
installed in all manufacturing facilities. Manufacturing software is used in
conjunction with MRP II. In the event that future integration and updates to
these systems result in computer software or hardware problems or do 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. See "Risk Factors--Information Technology Changes and Expansion."

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 37.7% to $27.1 million
at June 30, 1997, as compared to $19.7 million at June 30, 1996. Although
customers may cancel or reschedule deliveries without penalty, the Company's
backlog has historically been a reliable 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

36
<PAGE>
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. See "Risk
Factors--Competition."

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. See "Risk
Factors--Intellectual Property."

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 June 30, 1997, the Company had a total of 1,704 full-time employees, of
whom 194 were employed in California, 32 were employed in Puerto Rico, 777 were
employed in Mexico and 701 were employed in the Dominican Republic. The Company
considers its relations with its employees to be good. None of the Company's
employees is represented by a union.

37
<PAGE>
FACILITIES

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

<TABLE>
<CAPTION>
APPROXIMATE EXPIRATION
FACILITY PRIMARY ACTIVITY SQUARE FOOTAGE OF LEASE
- ----------------------------------------- ---------------------------------- --------------- ------------------
<S> <C> <C> <C>

Camarillo, CA Administration, Research and 98,000 August 2004
Development, Manufacturing, Sheet
Metal Fabrication, Central
Storage, Marketing and Sales

Santo Domingo, Dominican Republic Low Power Manufacturing and 65,000 January 2000(1)
Assembly

Isabela, Puerto Rico Assembly and Administration 46,000 March 1998(2)

San Luis, Mexico Manufacturing and Assembly 33,000 Month-to-
month(3)

San Luis, Mexico Manufacturing and Assembly 11,000 May 1999(4)

San Luis, Mexico Manufacturing and Assembly 22,000 May 1999(4)
</TABLE>

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

(1) Subject to the Company's three consecutive two-year renewal options.

(2) Subject to an option for an additional 5 years.

(3) The Company is currently negotiating a new lease arrangement.

(4) Subject to an option for one additional year.

The Company believes that its facilities are sufficient to meet its current
needs; however, as more space is needed, if any lease is terminated, or if the
Company cannot negotiate extensions on any leases on terms satisfactory to the
Company, interruption in the Company's activities could result. See "Risk
Factors--Manufacturing Capacity."

In April 1996, Power-One purchased approximately 404,000 square feet of land
in San Luis, Mexico. The Company expects to commence construction of a new
110,000 square foot manufacturing facility on this land in the middle of 1998,
which would be expected to be completed in 1999. 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.

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.

38
<PAGE>
MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

Set forth below is certain information concerning the directors, executive
officers and certain other key officers of the Company.

<TABLE>
<CAPTION>
NAME AGE 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..................... 50 Executive Vice President

Brad W. Godfrey..................... 38 Vice President--Worldwide Manufacturing

David J. Hage....................... 50 Vice President--Sales and Marketing

Donna M. Koep....................... 37 Vice President--Human Resources

John A. Martins..................... 38 Vice President--Quality Assurance

Jon E.M. Jacoby..................... 59 Director

Douglas H. Martin................... 44 Director

Albert Y.C. Yu...................... 56 Director(1)
</TABLE>

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

(1) Dr. Yu will become a Director shortly after the Company's Registration
Statement is declared effective.

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 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.

39
<PAGE>
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.

JON E.M. JACOBY. Mr. Jacoby became a director of the Company in 1995. Mr.
Jacoby is a director and an Executive Vice President of Stephens Group, Inc. Mr.
Jacoby is a Senior Executive Vice President of Stephens Inc., an affiliate of
Stephens Group, Inc., where he has been employed since 1963. He received his
B.S. degree from the University of Notre Dame and his M.B.A. from Harvard
Business School. He is a director of Delta & Pine Land Company, Medicus Systems,
Inc., and Beverly Enterprises, Inc.

DOUGLAS H. MARTIN. Mr. Martin became a director of the Company in 1995. Mr.
Martin is a Senior Vice President of Stephens Group, Inc. and a Senior Vice
President of Stephens Inc., where he has been employed since 1981. He received
his B.A. degree in physics and economics from Vanderbilt University and his
M.B.A. from the Stanford University Graduate School of Business.

DR. ALBERT Y.C. YU. Dr. Yu, who will become a director shortly after
effectiveness of the Company's Registration Statement, is Senior Vice President
and General Manager of the Microprocessor Products Group of Intel Corporation.
In his twenty-one years with Intel, Dr. Yu has held a number of senior
management positions in manufacturing, technology development, product planning
and general management. Prior to joining Intel, Dr. Yu was Director of Device
Physics at Fairchild Semiconductor. Dr. Yu received his Ph.D. and M.S. from
Stanford University and his B.S. from California Institute of Technology, all in
Electrical Engineering.

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.

The Company intends to appoint one additional independent director to its
Board of Directors within three months of the consummation of the Offering. Upon
consummation of the Offering, the Company does not expect to pay its directors
who are employees of the Company for their services as directors. Directors who
are not employees are paid $5,000 per year, various amounts for attending
meetings, plus stock options. See "Management--Stock Option Plan."

COMMITTEES OF THE BOARD OF DIRECTORS

AUDIT COMMITTEE. Following the Offering, the Board of Directors intends to
establish an audit committee (the "Audit Committee"), to be comprised of Mssrs.
Jacoby and Martin, to make recommendations concerning the engagement of
independent public accountants, review with the independent public accountants
the plans and results of the audit engagement, approve professional services
provided by the

40
<PAGE>
independent public accountants, review independence of the independent public
accountants, consider the range of audit and non-audit fees and review the
adequacy of the Company's internal accounting controls.

COMPENSATION COMMITTEE. Following the Offering, the Board of Directors
intends to establish a compensation committee (the "Compensation Committee"), to
be comprised of Mssrs. Jacoby and Martin, to determine compensation of the
Company's executive officers and to administer the Company's 1996 Stock
Incentive Plan (the "Plan"). The current executive officer salaries were set by
the Board.

EXECUTIVE COMPENSATION

The following table sets forth a summary of annual and long-term
compensation awarded to, earned by, or paid to the Chief Executive Officer of
the Company and each of the four other most highly compensated executive
officers (the "Named Executive Officers") of the Company whose total annual
salary and bonus for the 1996 fiscal year was in excess of $100,000:

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION -------------------
----------------------- OPTIONS TO PURCHASE ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS(1) COMMON STOCK COMPENSATION
- ------------------------------------------------------- ---------- ----------- ------------------- -------------
<S> <C> <C> <C> <C>
Steven J. Goldman...................................... $ 302,526 $ -- 82,000 $ *
President and Chief Executive Officer
Eddie K. Schnopp....................................... 110,084 -- 45,000 11,641(2)
Vice President--Finance and Logistics, Chief
Financial Officer and Secretary
Dennis R. Roark........................................ 141,024 -- 55,000 *
Executive Vice President
David J. Hage.......................................... 125,008 22,500 55,000 *
Vice President--Sales and Marketing
Brad W. Godfrey........................................ 107,660 200 45,000 32,784(3)
Vice President--Worldwide Manufacturing
</TABLE>

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

* Less than $50,000 or 10% of the total salary and bonus for 1996.

(1) In 1996, no bonuses were awarded to Mr. Goldman, Mr. Schnopp or Mr. Roark,
and only a minimal bonus was awarded to Mr. Godfrey. For 1997, each Named
Executive Officer may receive a bonus depending on the financial results of
the Company. See "--Employment Contracts."

(2) Includes a car allowance of $7,800 and 401k contributions of $3,841.

(3) Includes a car allowance of $13,260, living expenses of $18,000 and 401k
contributions of $1,524.

41
<PAGE>
The following table sets forth information for the Named Executive Officers
with respect to grants of options to purchase Common Stock of the Company made
during the year ended December 31, 1996.

OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS(1)

<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS POTENTIAL REALIZABLE VALUE AT
UNDERLYING GRANTED TO ASSUMED ANNUAL RATES OF STOCK PRICE
OPTIONS EMPLOYEES EXERCISE OR APPRECIATION FOR OPTION TERM(2)
GRANTED IN FISCAL BASE PRICE EXPIRATION --------------------------------------
NAME (#)(1) YEAR ($/SH) DATE 0% 5% 10%
- ----------------------- ----------- ------------- ------------- ----------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Steven J. Goldman...... 82,000 17.0% $ 1.00 2/22/06 $ 902,000 $ 1,330,671 $ 2,470,242
Eddie K. Schnopp....... 45,000 9.3 1.00 2/22/06 495,000 730,247 1,355,621
Dennis R. Roark........ 55,000 11.4 1.00 2/22/06 605,000 892,524 1,656,870
David J. Hage.......... 55,000 11.4 1.00 2/22/06 605,000 892,524 1,656,870
Brad W. Godfrey........ 45,000 9.3 1.00 2/22/06 495,000 730,247 1,355,621
</TABLE>

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

(1) The stock options listed above were granted on February 23, 1996 pursuant to
the Company's 1996 Stock Incentive Plan. The options become exercisable
beginning in the third year after the grant, at a rate of 10% in each year
for years three and four, 20% in year five, and 30% in years six and seven
(or at an accelerated rate if certain Company financial goals are met) as
long as the optionee remains an employee of the Company. The maximum term of
each option granted is 10 years from the date of grant. The exercise price
was in excess of the value of the stock on the grant date, as determined in
good faith by the Board of Directors on that date, based upon a review of a
number of factors, including the Company's operating results and financial
condition through the grant date. See "Management--Stock Option Plan."

(2) Potential gains are net of the exercise price but before taxes associated
with the exercise and assume that the options are exercised on the latest
possible date. The 0%, 5% and 10% assumed annual rates of compounded stock
appreciation, based upon an initial public offering price of $12.00 per
share, the midpoint of the offering price range set forth on the cover page
of this Prospectus, are pursuant to the rules of the Securities and Exchange
Commission and do not represent the Company's estimate or projection of the
future Common Stock price. Actual gains, if any, on stock option exercises
are dependent on the future financial performance of the Company, overall
market conditions and the option holders' continued employment through the
vesting period.

EMPLOYMENT CONTRACTS

On September 27, 1995 the Company entered into employment and compensation
agreements with each of the Named Executive Officers. Each agreement, as
amended, terminates on December 31, 1997, subject to the Company's right to
extend each contract for up to three years. The Company is presently in
discussion with the Named Executive Officers regarding the possible amendment
and extension of each of the agreements. Pursuant to the terms of said
agreements, Mr. Goldman, Mr. Schnopp, Mr. Roark, Mr. Hage, and Mr. Godfrey will
each receive (i) a yearly base salary in 1997 of $302,562, $130,104, $146,692,
$132,528, and $114,124, respectively, with such base salary being raised each
year if the Board so desires and (ii) a yearly bonus equal to as much as 62.5%
of their base salary (except for Mr. Hage whose bonus can be up to $100,000 and
Mr. Godfrey whose maximum bonus is 50% of his base salary) if, pursuant to the
terms of the Company's Management Bonus Plan (the "Management Bonus Plan")
certain Company financial goals are met. Further, in the employment and
compensation agreements, the Company agreed, upon certain occurrences, including
an initial public offering of the Company's common stock, to pay each officer
$3,002,428, $377,000, $754,278, $753,479, and $377,000, respectively, plus
interest at a rate of 10% compounded annually from September 27, 1995. Each
agreement may be terminated by death, disability and other similar occurrences,
or by either party for cause (as defined in the respective agreements).

42
<PAGE>
STOCK OPTION PLAN

In February 1996, the Company and its stockholders adopted the Company's
1996 Stock Incentive Plan (the "Plan"). The Plan provides a means to attract,
motivate, retain and reward key employees of the Company and its subsidiaries
and promote the success of the Company. In September 1997 the Plan was amended
to provide that (i) the maximum number of shares of Common Stock that may be
issued pursuant to outstanding grants and awards and are available for future
grants and awards under the Plan shall be equal to 1,000,000 shares plus 10% of
any increase in outstanding shares that occur after August 31, 1997 and (ii)
Non-Employee Directors will receive certain stock options. The maximum number of
shares that may be subject to all awards granted to any individual in any
calendar year is limited to 500,000 shares.

ADMINISTRATION AND ELIGIBILITY. The Plan provides that it will be
administered by the Board of Directors or a committee appointed by the Board of
Directors. The Board of Directors intends to appoint the Company's Compensation
Committee to administer the Plan after the Offering. The Plan empowers the
Compensation Committee, among other things, to interpret the Plan, to make all
determinations deemed necessary or advisable for the administration of the Plan
and to award to officers and other key employees of the Company and its
subsidiaries ("Eligible Employees"), as selected by the Compensation Committee,
options, including incentive stock options ("ISOs") as defined in the Code,
stock appreciation rights ("SARs"), shares of restricted stock, performance
shares and other awards valued by reference to Common Stock, based on the
performance of the participant, the performance of the Company or its Common
Stock and/or such other factors as the Compensation Committee deems appropriate.
To date, only non-qualified stock options have been granted under the Plan.

TRANSFERABILITY. Generally speaking, options under the Plan are not
transferable other than by will or the laws of descent and distribution, are
exercisable only by the participant, and may be paid only to the participant or
the participant's beneficiary or representatives. However, the Compensation
Committee may establish conditions and procedures under which exercise by and
transfers and payments to certain third parties are permitted, to the extent
permitted by law.

PAYMENT. The Plan permits optionees, with certain exceptions, to pay the
exercise price of options in cash, Common Stock (valued at its fair market value
on the date of exercise), a combination thereof or, if an option award so
provides, by delivering irrevocable instructions to a stockbroker to promptly
deliver the exercise price to the Company upon exercise (i.e., a so-called
"cashless exercise"). Cash received by the Company upon exercise will constitute
general funds of the Company and shares of Common Stock received by the Company
upon exercise will return to the status of authorized but unissued shares.

TERM AND EXERCISE PERIOD OF OPTIONS. The Plan provides that options may be
granted for such terms as the Compensation Committee may determine but not
greater than ten years after the date of the Option. The Plan does not impose
any minimum vesting period, post-termination exercise period or pricing
requirement, although in the ordinary course, customary restrictions will likely
be imposed. Options will generally be exercisable during the holder's employment
by the Company or by a related company. Generally speaking, options which have
become exercisable prior to termination of employment will remain exercisable
for ninety days thereafter (180 days in the case of disability or death). Such
periods, however, cannot exceed the expiration dates of the Options. The
Committee has the authority to accelerate the exercisability of Options or
(within the maximum ten-year term) extend the exercisability periods.

NON-EMPLOYEE DIRECTORS. Under the Plan, each director who is not an
employee (a "Non-Employee Director") will be granted stock options to purchase
40,000 shares of Common Stock upon becoming a director at an exercise price
equal to the market price of the Common Stock on that date. Non-Employee
Directors on the date of the Offering will each be granted stock options to
purchase 40,000 shares of Common Stock on the date of the Offering at the public
offering price. Dr. Yu, upon becoming a Director

43
<PAGE>

on the date of the Offering, will also be granted additional stock options to
purchase 60,000 shares of Common Stock at the public offering price. In
addition, at the close of trading on the day of the annual stockholders meeting
in each calendar year beginning in the fourth year following the initial grant,
each Non-Employee Director on such date will be granted stock options to
purchase 10,000 shares of Common Stock at an exercise price equal to the market
price of the Common Stock on that date. All Non-Employee Director options have a
10-year term and will vest in equal annual installments over a four-year period
commencing on the first anniversary of the grant date. If a Non-Employee
Director's services are terminated for any reason other than the director's
death, disability or retirement, any portion of stock options held by such
director that are exercisable will remain exercisable for three months after
such termination of services or until the expiration of the term of such option,
whichever occurs first. If the Non-Employee Director dies, becomes disabled or
retires, stock options held by such director will become exercisable immediately
and remain exercisable for one year after the date of such termination of
services or until the expiration of the term of such option, whichever first
occurs.

TERMINATION, AMENDMENT AND ADJUSTMENT. The Plan may be terminated by the
Compensation Committee or by the Board of Directors at any time. In addition,
the Compensation Committee or the Board may amend the Plan from time to time,
without the authorization or approval of the Company's stockholders, unless that
approval is required by law, agreement or the rules of any exchange upon which
the stock of the Company is listed. No Option may be granted under the Plan
after February 22, 2006, although options previously granted may thereafter be
amended consistent with the terms of the Plan.

Upon the occurrence of a Change in Control Event (as defined in the Plan),
in addition to acceleration of vesting, an appropriate adjustment to the number
and type of shares or other securities or property subject to an option and the
price thereof may be made in order to prevent dilution or enlargement of rights
under options.

Individual awards may be amended by the Compensation Committee in any manner
consistent with the Plan, including amendments that effectively reprice options
without changes to other terms. Amendments that adversely affect the holder of
an option, however, are subject to his or her consent.

The Plan is not exclusive and does not limit the authority of the Board of
Directors or the Compensation Committee to grant other awards, in stock or cash,
or to authorize other compensation, under any other plan or authority.

MANAGEMENT BONUS PLAN

Under the Company's Management Bonus Plan, which covers certain key
employees, the Named Executive Officers can earn bonuses of up to 62.5% of their
salaries, except that Mr. Hage can earn a bonus of up to $100,000 under this
plan and the sales bonus plan described below and Mr. Godfrey's bonus cannot
exceed 50% of his salary. Bonuses are based on actual EBITDA realized by the
Company during any fiscal year as a percentage of planned EBITDA. Mr. Hage, who
is Vice President--Sales and Marketing, also participates in the Company's sales
bonus plan. Bonuses under this plan are based on increases in net sales over the
prior year.

401(k) SAVINGS AND THRIFT PLAN

The Company has a defined contribution 401(k) plan that covers substantially
all full-time Camarillo employees who have been employed during an open
enrollment period. The 401(k) plan allows all employees to defer amounts up to
the statutory limit each year. The Company has a discretionary matching program
under which, in 1996, the Company matched 50% of the first 3% and 25% of the
next 3% of employee contributions.

44
<PAGE>
EMPLOYEE STOCK PURCHASE PLAN

The Company has adopted, effective January 1, 1998, the Employee Stock
Purchase Plan (the "Purchase Plan"), which is designed to furnish eligible
employees of the Company and its subsidiaries an incentive to advance the best
interests of the Company by providing a formal program whereby they may
voluntarily purchase Common Stock of the Company at a favorable price and upon
favorable terms. Generally speaking, all employees who are scheduled to work an
average of at least 20 hours per week are eligible to participate in the
Purchase Plan.

Under the Purchase Plan, employees may designate between two and eight
percent of their base compensation to purchase Common Stock. The exercise price
of the Common Stock is 85% of the fair market value of the Common Stock.
Generally speaking, participants pay for the Common Stock through payroll
deductions. The Purchase Plan will be administered by the Compensation
Committee.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Prior to the Offering, the Company had no compensation committee or other
committee of the Board performing similar functions. Decisions concerning
compensation of executive officers were made by the Company's Board. No officer
or employee of the Company, other than Mr. Goldman, Mr. Schnopp and Ms. Koep,
participated in deliberations concerning such compensation matters.

CERTAIN TRANSACTIONS

NOTES PAYABLE TO THE COMPANY

Ms. Koep and Mr. Martins, each an officer of the Company, executed
promissory notes in favor of the Company on September 27, 1995 in connection
with their purchase of Redeemable Preferred Stock of the Company. Each note has
a face value of $100,000 and obligates the issuer to pay the Company the face
amount of the note plus accrued interest at a rate of 10% per annum on September
27, 2002. Mr. Martins also executed two additional promissory notes in favor of
the Company in 1997 in exchange for $11,000 that Mr. Martins requested for
personal financial matters. These notes have an aggregate face value of $11,000
and each bear interest at a rate of 8.5% per annum. Each of the notes may be
prepaid without penalty, and the Company has been informed that each officer
intends to pay off all such notes at the consummation of the Offering.

FUTURE TRANSACTIONS

The Company has implemented a policy requiring that any material transaction
with an affiliated party is subject to approval by a majority of the directors
not interested in such transaction, who must determine that the terms of any
such transaction are no less favorable to the Company than those that could be
obtained from an unaffiliated third party.

Upon consummation of the Offering, the Recapitalization will occur. See
"Recapitalization" and "Management--Employment Contracts."

45
<PAGE>
PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the Company's outstanding Common Stock by (i) all those known by
the Company to be beneficial owners of more than 5% of the Company's outstanding
Common Stock, (ii) each director of the Company and executive officer of the
Company and (iii) all directors and executive officers of the Company as a
group. The address of each person listed is in care of the Company, 740 Calle
Plano, Camarillo, California 93012, unless otherwise indicated.

<TABLE>
<CAPTION>
SHARES
BENEFICIALLY PERCENTAGE
OWNED(1) ------------------------------
----------- BEFORE AFTER
NAME OF BENEFICIAL OWNER NUMBER OFFERING(1) OFFERING(1)(2)
- ------------------------------------------------------------------------- ----------- ------------- ---------------
<S> <C> <C> <C>
Stephens Group, Inc.(3)(4)............................................... 3,738,866 32.7% 22.7%
Warren A. Stephens(3)(5)................................................. 592,602 5.2 3.6
W. R. Stephens, Jr.(3)(6)................................................ 765,035 6.7 4.6
Elizabeth Stephens Campbell(3)(7)........................................ 675,034 5.9 4.1
Steven J. Goldman........................................................ 1,824,613 15.9 11.1
Eddie K. Schnopp(8)...................................................... 344,139 3.0 2.1
Dennis R. Roark.......................................................... 513,268 4.5 3.1
David J. Hage............................................................ 471,263 4.1 2.9
Brad W. Godfrey.......................................................... 234,680 2.0 1.4
Jon E.M. Jacoby(3)(9).................................................... 1,466,257 12.8 8.9
Douglas H. Martin(3)(10)................................................. 112,165 1.0 0.7
Albert Y.C. Yu(11)....................................................... -- -- --
All executive officers and directors as a group (8 persons).............. 4,966,385 42.7 30.1
</TABLE>

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

(1) Gives effect to the Recapitalization as if such Recapitalization occurred on
June 30, 1997. See "Recapitalization." Percentage ownership is based on
11,490,653 shares of Common Stock outstanding before the Offering and
16,490,653 shares of Common Stock outstanding after the Offering.

(2) Excludes 750,000 shares of Common Stock subject to the Underwriters'
over-allotment option.

(3) Address is c/o Stephens Group, Inc., 111 Center Street, Little Rock,
Arkansas 72201.

(4) The following affiliates of Stephens Group, Inc. own, in the aggregate, an
additional 3,824,306 shares (33.3% of shares outstanding prior to the
Offering(1) and 23.2% of shares outstanding after the Offering(1)(2)):
Grandchild's Trust One UID 12/16/85 (40,058 shares); Grandchild's Trust Two
UID 12/16/85 (40,058 shares); Grandchild's Trust Three UID 12/89 (40,058
shares); Bess C. Stephens Trust UID 1/4/85 (140,817 shares); Warren A.
Stephens Trust UID 9/30/87 (92,550 shares); Stephens Inc. Custodian for
Warren A. Stephens IRA (53,412 shares); Warren & Harriet Stephens Children's
Trust UID 9/30/87 (133,530 shares); Harriet Calhoun Stephens Trust UID
3/22/84 (63,469 shares); Elizabeth Stephens Campbell Revocable Trust UID
8/25/92 (308,163 shares); W.R. Stephens Trust UID 1/4/85 (31,292 shares);
W.R. Stephens Jr. Revocable Trust UID 2/19/93 (368,164 shares); Jon E.M.
Jacoby (96,142 shares); J & J Partners (53,412 shares); Jacoby Enterprises,
Inc. (213,649 shares); Coral Two Corporation (146,884 shares); Delaware
Charter Guarantee & Trust F/B/O Jon E.M. Jacoby Keogh (24,035 shares);
Douglas H. Martin (69,435 shares); Stephens Inc. Custodian for Doug Martin
IRA (42,730 shares); K. Rick Turner (5,340 shares); Stephens Inc. Custodian
for K. Rick Turner IRA (5,340 shares); C. Ray Gash (26,705 shares); Robert
L. Schulte (13,352 shares); Michael B. Johnson (5,340 shares); Curtis F.
Bradbury (106,824 shares); Bradbury Enterprises, Inc. (53,412 shares);
William S. Walker (8,012 shares); Gordon D. and Amanda F. Grender JTWROS
(80,118 shares); Stephens Investment Partners I LLC (160,237 shares); Coral
Partners (96,142 shares); Jackson T. Stephens Trust No. One UID 1/4/88
(135,306 shares); Jackson T. Stephens Grandchildrens Trust AAAA UID 1/26/96
(492,289 shares); Pamela Diane Stephens Trust One UID 4/10/92 (366,871
shares); Warren Miles Amerine Stephens Trust UID 9/10/86 (63,720 shares);
John Calhoun Stephens Trust UID 12/1/87 (63,720 shares); Laura Whitaker
Stephens Trust UID 12/28/90 (63,720 shares); Susan Stephens Campbell 1995
Trust UID 12/4/95 (30,000 shares); Craig D. Campbell, Jr. 1995 Trust UID
12/4/95 (30,000 shares); Elizabeth Chisum Campbell 1995 Trust UID 12/4/95
(30,000 shares); W. R. Stephens, Jr. Children's Trust UID 3/1/95 (30,000
shares). The principal stockholders of Stephens Group, Inc. are the Jackson
T. Stephens Trust No. One UID 1/4/88 and the Bess C. Stephens Trust UID
1/4/85. Stephens Group, Inc. has advised the Company that it does not act as
a group with any of its affiliates. Mr. Jacoby is a director and an officer
of Stephens Group, Inc. and its subsidiary, Stephens Inc. Mr. Martin is an
officer of Stephens Group, Inc. Mr. Stephens is a director and an officer of
Stephens Group, Inc. and Stephens Inc. Mr. Stephens, Jr. is a director and
an officer of Stephens Group, Inc. The mailing address for the Stephens
Group, Inc. and its affiliates listed in this footnote is: c/o Stephens
Group, Inc., 111 Center Street, Little Rock, Arkansas 72201.

46
<PAGE>
(5) Includes: 92,550 shares owned by Warren A. Stephens Trust UID 9/30/87,
53,412 shares owned by Stephens Inc. Custodian for Warren A. Stephens IRA,
63,720 shares owned by Warren Miles Amerine Stephens Trust UID 9/10/86,
63,720 shares owned by John Calhoun Stephens Trust UID 12/1/87 and 63,720
shares owned by Laura Whitaker Stephens Trust UID 12/28/90, as to which Mr.
Stephens, as sole trustee, has sole power to vote and sole power of
disposition; also includes 135,306 shares owned by Jackson T. Stephens Trust
No. One UID 1/4/88, 40,058 shares owned by Grandchild's Trust One UID
12/16/85, 40,058 shares owned by Grandchild's Trust Two UID 12/16/85 and
40,058 shares owned by Grandchild's Trust Three UID 12/89, as to which Mr.
Stephens, as a co-trustee, had shared power to vote and shared power of
disposition. Does not include shares owned by Stephens Group, Inc. or other
of its affiliates, except for the affiliates mentioned in this footnote.

(6) Includes: 368,164 shares owned by W. R. Stephens, Jr. Revocable Trust UID
2/19/93, as to which Mr. Stephens, as sole trustee, has sole power to vote
and sole power of disposition; and includes 366,871 shares owned by Pamela
Diane Stephens Rose Trust One UID 4/10/92 and 30,000 shares owned by W. R.
Stephens, Jr. Children's Trust UID 3/1/95, as to which Mr. Stephens, as a
co-trustee, has shared power to vote and shared power of disposition. Does
not include shares owned by Stephen Group, Inc. or other of its affiliates,
except for affiliates mentioned in this footnote.

(7) Includes: 308,163 shares owned by Elizabeth Ann Stephens Campbell Revocable
Trust UID 8/25/92, as to which Ms. Campbell, as sole trustee, has sole power
to vote and sole power of disposition and includes 366,871 shares owned by
Pamela Diane Stephens Rose Trust One UID 4/10/92, as to which Ms. Campbell,
as a co-trustee, has shared power to vote and shared power of disposition.
Does not include shares owned by Stephens Group, Inc. or other of its
affiliates, except for the affiliates mentioned in this footnote.

(8) Includes 110,202 shares owned by Ms. Koep who is married to Mr. Schnopp. Mr.
Schnopp disclaims beneficial ownership of such shares.

(9) Includes: 53,412 shares owned by J & J Partners as to which Mr. Jacoby has
shared power to vote and shared power of disposition, 213,649 shares owned
by Jacoby Enterprises, Inc., as to which Mr. Jacoby has sole power to vote
and sole power of disposition, 146,884 shares owned by Coral Two Corporation
as to which Mr. Jacoby has sole power to vote and sole power of disposition,
24,035 shares owned by Delaware Charter Guarantee & Trust F/B/O Jon E.M.
Jacoby Keogh as to which Mr. Jacoby has sole power to vote and sole power of
disposition, and 96,142 shares owned by Coral Partners in which Mr. Jacoby
is a general partner, and as to which Mr. Jacoby has shared power to vote
and shared power of disposition; also includes shares held by the following
entities as to which Mr. Jacoby disclaims beneficial ownership: 133,530
shares owned by Warren and Harriet Stephens Children's Trust UID 9/30/87 and
492,289 shares owned by Jackson T. Stephens Grandchildren's Trust AAAA UID
1/26/96 as to which Mr. Jacoby, as sole trustee, has sole power to vote and
sole power of disposition; and includes 40,058 shares owned by Grandchild's
Trust One UID 12/16/85, 40,058 shares owned by Grandchild's Trust Two UID
12/16/85, 40,058 shares owned by Grandchild's Trust Three UID 12/89, 30,000
shares owned by Susan Stephens Campbell 1995 Trust UID 12/4/95, 30,000
shares owned by Craig D. Campbell, Jr. 1995 Trust UID 12/4/95 and 30,000
shares owned by Elizabeth Chisum Campbell 1995 Trust UID 12/4/95, as to
which Mr. Jacoby, as a co-trustee, has shared power to vote and share power
of disposition. Does not include shares owned by Stephens Group, Inc. or
other of its affiliates, except for the affiliates mentioned in this
footnote.

(10) Includes: 42,730 shares owned by Stephens Inc. Custodian for Douglas H.
Martin IRA, as to which Mr. Martin has sole power to vote and sole power of
disposition. Does not include shares owned by Stephens Group, Inc. or other
of its affiliates, except for the affiliates mentioned in this footnote.

(11) Dr. Yu will become a Director shortly after the Registration Statement
becomes effective.

47
<PAGE>
DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company consists of 60 million shares of
Common Stock, par value $0.001 per share, and 30 million shares of Preferred
Stock, that can be issued in one or more series. Immediately following the
completion of the Offering, an aggregate of 16,490,653 shares of Common Stock
will be issued and outstanding (assuming no exercise of the Underwriters'
over-allotment option) and no shares of Preferred Stock will be issued and
outstanding.

The following description of the Company's capital stock is a summary of the
material terms of such stock. It does not purport to be complete and is subject
in all respects to applicable Delaware law and to the provisions of the
Company's Restated Certificate of Incorporation (the "Certificate of
Incorporation") and Amended and Restated Bylaws (the "Bylaws"), copies of which
have been filed as exhibits to the Registration Statement of which this
Prospectus is a part.

COMMON STOCK

The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. Subject to
preferential rights with respect to any outstanding Preferred Stock, holders of
Common Stock are entitled to receive ratably such dividends as may be declared
by the Board of Directors out of funds legally available therefor. See "Dividend
Policy." In the event of liquidation, dissolution or winding up of the Company,
the holders of Common Stock are entitled to share ratably in all assets
remaining after payment of liabilities and satisfaction of preferential rights
of any outstanding Preferred Stock. The Common Stock has no preemptive or
conversion rights or other subscription rights. The outstanding shares of Common
Stock are, and the shares of Common Stock to be issued upon completion of the
Offering will be, fully paid and non-assessable.

PREFERRED STOCK

The Board of Directors is authorized to issue the Preferred Stock in one or
more series and to fix the rights, preferences, privileges and restrictions
thereof, including dividend rights, dividend rates, conversion rights, voting
rights, terms of redemption, redemption prices, liquidation preferences and the
number of shares constituting any series or the designation of such series,
without further vote or action by the stockholders. The issuance of Preferred
Stock may have the effect of delaying, deterring or preventing a change in
control of the Company without further action of the stockholders. The issuance
of Preferred Stock with voting and conversion rights may adversely affect the
voting power of the holders of Common Stock, including the loss of voting
control to others. See "Risk Factors--Possible Anti-Takeover Effect of Certain
Charter Provisions."

POSSIBLE ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER PROVISIONS

The Company's Certificate of Incorporation establishes a classified Board
and requires that any action required or permitted to be taken by stockholders
of the Company must be effected at a duly called annual or special meeting of
stockholders and may not be effected by a consent in writing. In addition, the
Certificate of Incorporation and Bylaws of the Company require that stockholders
give advance notice to the Company's Secretary of any directorship nominations
or other business to be brought by stockholders at any stockholders' meeting.
The Certificate of Incorporation also requires the approval of 75% of the
Company's voting stock to amend certain provisions of the Certificate of
Incorporation. These provisions may have the effect of deterring hostile
takeovers or delaying changes in control or management of the Company. See "Risk
Factors--Possible Anti-Takeover Effect of Certain Charter Provisions."

CERTAIN PROVISIONS OF DELAWARE LAW

The Company is a Delaware corporation and is subject to Section 203 of the
Delaware General Corporations Law (the "DGCL"). In general, Section 203 prevents
an "interested stockholder" (defined

48
<PAGE>
generally as a person owning 15% or more of a corporation's outstanding voting
stock) from engaging in a "business combination" (as defined therein) with a
Delaware corporation for three years following the date such person became an
interested stockholder unless (i) before such person became an interested
stockholder, the board of directors of the corporation approved the transaction
in which the interested stockholder became an interested stockholder or approved
the business combination, (ii) upon consummation of the transaction that
resulted in the interested stockholder becoming an interested stockholder, the
interested stockholder owns at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced (excluding shares owned by
persons who are both officers and directors of the corporation and shares held
by certain employee stock ownership plans) or (iii) following the transaction in
which such person became an interested stockholder, the business combination is
approved by the board of directors of the corporation and authorized at a
meeting of stockholders by the affirmative vote of the holders of at least
two-thirds of the outstanding voting stock of the corporation not owned by the
interested stockholder.

LIMITATION OF LIABILITY AND INDEMNIFICATION AGREEMENTS

The Company's Certificate of Incorporation provides that to the fullest
extent permitted by the DGCL, a director of the Company shall not be liable to
the Company or its stockholders for monetary damages for breach of fiduciary
duty as a director. Under the DGCL, liability of a director may not be limited
(i) for any breach of the director's duty of loyalty to the Company or its
stockholders, (ii) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law, (iii) in respect of
certain unlawful dividend payments or stock redemptions or repurchases and (iv)
for any transaction from which the director derives an improper personal
benefit. The effect of the provisions of the Company's Certificate of
Incorporation is to eliminate the rights of the Company and its stockholders
(through stockholders' derivative suits on behalf of the Company) to recover
monetary damages against a director for breach of the fiduciary duty of care as
a director (including breaches resulting from negligent or grossly negligent
behavior), except in the situations described in clauses (i) through (iv) above.
This provision does not limit or eliminate the rights of the Company or any
stockholder to seek nonmonetary relief such as an injunction or rescission in
the event of a breach of a director's duty of care. In addition, the Company's
Certificate of Incorporation provides that the Company shall indemnify its
directors, officers, employees and agents against losses incurred by any such
person by reason of the fact that such person was acting in such capacity.

The Company has entered into agreements with each of the directors,
executive officers and certain other officers of the Company pursuant to which
the Company has agreed to indemnify such director or officer from claims,
liabilities, damages, expenses, losses, costs, penalties or amounts paid in
settlement incurred by such director or officer in or arising out of his or her
capacity as a director, officer, employee and/or agent of the Company or any
other corporation of which such person is a director or officer at the request
of the Company to the maximum extent provided by applicable law. In addition,
such director or officer is entitled to an advance of expenses to the maximum
extent authorized or permitted by law.

CERTAIN ANTI-TAKEOVER EFFECTS

The provisions of the Certificate of Incorporation and the Bylaws of the
Company summarized above may be deemed to have anti-takeover effects and may
delay, defer or prevent a tender offer or takeover attempt that a stockholder
might consider to be in such stockholder's best interest, including those
attempts that might result in a premium over the market price for the shares
held by stockholders. See "Risk Factors--Possible Anti-Takeover Effect of
Certain Charter Provisions."

TRANSFER AGENT OR REGISTRAR

The Transfer Agent and Registrar for the Common Stock is American Stock
Transfer and Trust.

49
<PAGE>
LISTING

Prior to the Offering, there has not been a public trading market for the
Common Stock. The Company has been approved for listing of the Common Stock on
the NASDAQ National Market upon notice of issuance, under the symbol "PWER."

SHARES ELIGIBLE FOR FUTURE SALE

Upon the consummation of the Offering, the Company will have outstanding
16,490,653 shares of Common Stock (assuming no exercise of the Underwriters'
over-allotment option). All of the shares of Common Stock sold in the Offering
will be freely tradeable under the Securities Act, unless purchased by
"affiliates" of the Company as that term is defined under the Securities Act.
Upon the expiration of lock-up agreements between the Company, substantially all
the stockholders and the Underwriters, which will occur 180 days after the date
of this Prospectus (the "Effective Date"), 11,427,599 shares of Common Stock
owned by these stockholders (the "Restricted Shares") will become eligible for
sale, subject to compliance with Rule 144 of the Securities Act as described
below.

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned Restricted Shares for at
least one year, will be entitled to sell in any three-month period a number of
shares that does not exceed the greater of: (i) 1% of the number of shares of
Common Stock then outstanding (approximately 164,490 shares immediately after
the Offering) or (ii) the average weekly trading volume of the Company's Common
Stock on NASDAQ during the four calendar weeks immediately preceding the date on
which the notice of sale is filed with the Securities and Exchange Commission.
Substantially all of the Restricted Shares have been held for over one year.
Sales pursuant to Rule 144 are subject to certain requirements relating to
manner of sale, notice and availability of current public information about the
Company. A person (or persons whose shares are aggregated) who is not deemed to
have been an affiliate of the Company at any time during the 90 days immediately
preceding the sale and who has beneficially owned Restricted Shares for at least
two years is entitled to sell such shares pursuant to Rule 144(k) without regard
to the limitations and requirements described above.

The Company, and its officers, directors and substantially all its current
stockholders have agreed with the Underwriters that until 180 days after the
Effective Date not to directly or indirectly, offer, sell, contract to sell,
grant any option to purchase or otherwise dispose of any Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock, or
in any manner transfer all or a portion of the economic consequences associated
with the ownership of the Common Stock, or cause a registration statement
covering any shares of Common Stock to be filed, without the prior written
consent of Robertson, Stephens & Company LLC, subject to certain limited
exceptions. The Company has also agreed not to directly or indirectly, offer,
sell, contract to sell, grant any option to purchase or otherwise dispose of any
Common Stock or any securities convertible into or exercisable or exchangeable
for Common Stock or, in any manner, transfer all or a portion of the economic
consequences associated with the ownership of the Common Stock or cause a
registration statement covering any shares of Common Stock to be filed, for a
period of 180 days after the Effective Date, without the prior written consent
of Robertson, Stephens & Company LLC, subject to certain limited exceptions
including grants of options pursuant to, and issuance of shares of Common Stock
upon exercise of options under, the Plan. The lock-up agreements may be released
at any time as to all or any portion of the shares subject to such agreements at
the sole discretion of Robertson, Stephens & Company LLC. See "Risk
Factors--Effect on Market Price of Common Stock of Shares Eligible for Future
Sale."

The Company is unable to estimate the number of shares that may be sold in
the future by the existing stockholders or the effect, if any, that sales of
shares by such stockholders will have on the market price of the Common Stock.
Sales of substantial amounts of Common Stock by such stockholders could
adversely affect the market price of the Company's Common Stock.

50
<PAGE>
UNDERWRITING

Upon the terms and subject to the conditions stated in the Underwriting
Agreement dated the date of this Prospectus, each Underwriter named below has
severally agreed to purchase, and the Company has agreed to sell to such
Underwriter, the number of shares of Common Stock set forth opposite the name of
such Underwriter.

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- --------------------------------------------------------------------------------- ----------
<S> <C>
Stephens Inc.....................................................................
Robertson, Stephens & Company LLC................................................
Montgomery Securities............................................................

----------
Total.......................................................................... 5,000,000
----------
----------
</TABLE>

The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares are subject to
approval of certain legal matters by counsel and to certain other conditions.
The Underwriters are obligated to take and pay for all shares of Common Stock
offered hereby (other than those covered by the over-allotment option described
below) if any such shares are taken.

The Underwriters, for whom Stephens Inc., Robertson, Stephens & Company LLC
and Montgomery Securities are acting as Representatives, propose to offer part
of the shares directly to the public at the public offering price set forth on
the cover page of this Prospectus and part of the shares to certain dealers at a
price that represents a concession not in excess of $ per share under the
public offering price. The Underwriters may allow, and such dealers may reallow,
a concession not in excess of $ per share to certain other dealers. After
the Offering, the public offering price and such concessions may be changed by
the Underwriters. The Representatives of the Underwriters have advised the
Company that the Underwriters do not intend to confirm any Shares to any
accounts over which they exercise discretionary authority.

In connection with the Offering, the Underwriters may purchase and sell the
Common Stock in the open market. These transactions may include over-allotment
and stabilizing transactions and purchases to cover syndicate short positions
created in connection with the Offering. Stabilizing transactions consist of
certain bids or purchases for the purpose of preventing or retarding a decline
in the market price of the shares of Common Stock; syndicate short positions
involve the sale by the Underwriters of a greater number of shares of Common
Stock than they are required to purchase from the Company in the Offering. The
Underwriters may also impose a penalty bid, whereby selling concessions allowed
to syndicate members or other broker-dealers in respect of the shares of Common
Stock sold in the Offering for their account may be reclaimed by the syndicate
if the shares of Common Stock are repurchased by the syndicate in stabilizing or
covering transactions. These activities may stabilize, maintain or otherwise
affect the market price of the shares of Common Stock, which may be higher than
the price that might otherwise prevail in the open market; and these activities,
if commenced, may be discontinued at any time. These transactions may be
effected on the NASDAQ National Market, in the over-the-counter market or
otherwise.

The Company has granted to the Underwriters an option, exercisable for 30
days from the date of this Prospectus, to purchase up to 750,000 additional
shares of Common Stock at the price to the public set forth on the cover page of
this Prospectus minus the underwriting discounts and commissions. The

51
<PAGE>
Underwriters may exercise such option solely for the purpose of covering
over-allotments, if any, in connection with the Offering. To the extent such
option is exercised, each Underwriter will be obligated, subject to certain
conditions, to purchase approximately the same percentage of such additional
shares as the number of shares set forth opposite each Underwriter's name in the
preceding table bears to the total number of shares listed in such table.

The Company, and its officers, directors and substantially all of its
current stockholders have agreed that, for a period of 180 days from the date of
this Prospectus, they will not, without the prior written consent of Robertson,
Stephens & Company LLC, offer, sell, contract to sell or otherwise dispose of
any shares of Common Stock of the Company or any securities convertible into, or
exercisable or exchangeable for, any class of Common Stock of the Company, other
than by the Company pursuant to its existing benefit plans.

Prior to the Offering, there has not been any public market for the Common
Stock of the Company. Consequently, the initial public offering price for the
shares of Common Stock included in the Offering has been determined by
negotiations between the Company and the Underwriters. Among the factors
considered in determining such price were the history of and prospects for the
Company's business and the industry in which it competes, an assessment of the
Company's management and the present state of the Company's development, the
past and present revenues and earnings of the Company, the prospects for growth
of the Company's revenues and earnings, the current state of the economy in the
U.S. and California and the current level of economic activity in the industry
in which the Company competes and in related or comparable industries, and
currently prevailing conditions in the securities markets, including current
market valuations of publicly traded companies which are comparable to the
Company.

The Company, on the one hand, and the Underwriters, on the other hand, have
agreed to indemnify each other against certain liabilities, including
liabilities under the Securities Act.

Under Rule 2720 of the National Association of Securities Dealers, Inc. (the
"NASD"), the Company may be deemed an affiliate of Stephens Inc. The Offering is
being conducted in accordance with Rule 2720, which provides that, among other
things, when a NASD member participates in the underwriting of an affiliates's
equity securities, the initial public offering price can be no higher than that
recommended by a "qualified independent underwriter" meeting certain standards.
In accordance with this requirement, Robertson, Stephens & Company LLC has
served in such role and has recommended a price in compliance with the
requirements of Rule 2720. In connection with the Offering, Robertson, Stephens
& Company LLC, in its role as a qualified independent underwriter has performed
due diligence investigations and reviewed and participated in the preparation of
the Prospectus and the Registration Statement of which this Prospectus forms a
part. In addition, the Underwriters may not confirm sales to any discretionary
account without the prior written approval of the customer.

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon for the
Company by O'Melveny & Myers LLP, Los Angeles, California. Certain legal matters
in connection with the Offering will be passed upon for the Underwriters by
Wright, Lindsey & Jennings, Little Rock, Arkansas.

EXPERTS

The financial statements of the Company as of December 31, 1995 and 1996 and
of the Company and its Predecessor Company for each of the periods in the three
years ended December 31, 1996, included in this Prospectus and the related
financial statement schedule included elsewhere in the Registration Statement
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their reports appearing herein and elsewhere in this Registration Statement and
are included in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.

52
<PAGE>
ADDITIONAL INFORMATION

The Company has filed with Securities and Exchange Commission (the
"Commission"), Washington, D.C. 20549, a Registration Statement on Form S-1
under the Securities Act with respect to the Common Stock offered hereby. This
Prospectus does not contain all of the information set forth in the Registration
Statement and the exhibits thereto. Certain items are omitted in accordance with
the rules and regulations of the Commission. For further information with
respect to the Company and the Common Stock offered hereby, reference is made to
the Registration Statement and the exhibits filed as a part hereof. Statements
contained in this Prospectus as to the contents of any contract or any other
document referred to are not necessarily complete, and, in each instance, if
such contract or document is filed as an exhibit, reference is made to the copy
of such contract or document filed as an exhibit to the Registration Statement,
each such statement being qualified in all respects by such reference to such
exhibit. The Company is currently subject to the informational requirements of
the Securities Exchange Act of 1934, as amended, except the proxy requirements,
and files reports and other information with the Commission. The Registration
Statement, including exhibits thereto, as well as the reports and other
information filed by the Company with the Commission, may be inspected without
charge at the public reference facilities maintained by the Commission in Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's
regional offices located at the Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661 and 7 World Trade Center, 13th Floor, New York, NY
10048, and copies of all or any part thereof may be obtained from such office
after payment of fees prescribed by the Commission. The Commission maintains a
Web site at http://www.sec.gov that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission. In addition, after being approved for listing on NASDAQ,
upon notice of issuance, the Common Stock, reports and other information
concerning the Company may be inspected at the offices of NASDAQ.

The Company will issue to its stockholders annual reports and unaudited
quarterly reports for the first three quarters of each fiscal year. Annual
reports will include audited financial statements and a report of its
independent auditors with respect to the examination of such financial
statements. In addition, the Company will issue such other interim reports as it
deems appropriate.

53
<PAGE>
INDEX TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
---------

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

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

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

Consolidated Statement 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-8

Notes to Consolidated and Combined Financial Statements.................................................... F-10
</TABLE>

F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT

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

We have audited the accompanying consolidated balance sheets of Power-One,
Inc. and its subsidiaries (the "Company") as of December 31, 1995 and 1996 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, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the 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, 1995 and 1996, 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, 1996 in conformity with
generally accepted accounting principles.

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
March 14, 1997

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

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------- JUNE 30,
1995 1996 1997
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS (NOTES 6 AND 7)
CURRENT ASSETS:
Cash...................................................... $ 3,751 $ 1,684 $ 2,052
Accounts receivable:......................................
Trade, less allowance for doubtful accounts: $203--
December 31, 1995; $638--December 31, 1996; $754--
June 30, 1997......................................... 9,024 10,391 14,342
Other................................................... 283 397 210
Inventories (Note 3)...................................... 19,786 18,840 19,617
Refundable income taxes................................... 54 29 29
Deferred tax assets--current (Notes 2 and 14)............. 834 873
Prepaid expenses and other current assets................. 528 380 710
------- ------- -----------
Total current assets.................................. 33,426 32,555 37,833
PROPERTY AND EQUIPMENT, net (Note 4)........................ 8,191 8,884 8,641
INTANGIBLE ASSETS, net (Note 2)............................. 29,817 29,210 28,196
OTHER ASSETS................................................ 1,411 1,574 1,715
DEFERRED TAX ASSETS, noncurrent (Notes 2 and 14)............ 482 554
------- ------- -----------
TOTAL....................................................... $72,845 $72,705 $76,939
------- ------- -----------
------- ------- -----------

LIABILITIES AND STOCKHOLDERS'/MEMBERS' EQUITY PRO FORMA
(NOTE 2)
-----------
(UNAUDITED)
<S> <C> <C> <C> <C>
CURRENT LIABILITIES:
Note payable to bank (Note 6)............................. $11,200 $10,400 $10,600
Current portion of long-term debt (Note 7)................ 2,500 3,929 4,162
Bank overdraft............................................ 1,405 656 1,935
Accounts payable.......................................... 4,663 2,892 3,269
Accrued payroll and related expenses...................... 807 536 827
Other accrued expenses (Note 8)........................... 4,775 4,631 5,697
------- ------- -----------
Total current liabilities............................. 25,350 23,044 26,490
------- ------- -----------
LONG-TERM DEBT, less current portion (Note 7)............... 27,500 26,326 24,250
------- ------- -----------
OTHER LIABILITIES (Note 9).................................. 5,399 5,923 6,225 $ 5,468
------- ------- ----------- -----------
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
$17,364 at June 30, 1997 (Note 11)........................ 16,287 17,122 232
------- -----------
STOCKHOLDERS'/MEMBERS' EQUITY (Notes 11 and 12):
Members' capital (Note 2)................................. 14,972
Common stock, par value $0.001, 20,000,000 shares
authorized; 10,000,000 shares issued and outstanding at
December 31, 1996 and June 30, 1997 (unaudited),
respectively, (unaudited pro forma 11,490,653 shares)... 10 10 11
Additional capital........................................ 90 94 17,982
Notes receivable from stockholders (Note 5)............... (205) (225) (235) (235)
Retained earnings (deficit)............................... (171) 1,250 2,983 2,741
------- ------- ----------- -----------
Total stockholders'/members' equity................... 14,596 1,125 2,852 20,499
------- ------- ----------- -----------
TOTAL....................................................... $72,845 $72,705 $76,939 $76,939
------- ------- ----------- -----------
------- ------- ----------- -----------
</TABLE>

See notes to consolidated financial statements.

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

CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
COMPANY
------------------------------------------------
PREDECESSOR COMPANY PERIOD FROM
------------------------ OCTOBER 1,
YEAR NINE MONTHS 1995
ENDED ENDED (INCEPTION) YEAR ENDED SIX MONTHS ENDED
DECEMBER SEPTEMBER THROUGH DECEMBER JUNE 30,
31, 30, DECEMBER 31, 31, --------------------
1994 1995 1995 1996 1996 1997
----------- ----------- ------------- ----------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
NET SALES....................... $ 55,702 $ 52,732 $ 20,670 $ 74,210 $ 40,743 $ 40,173
COST OF GOODS SOLD (Note 1)..... 35,751 31,525 14,348 45,305 24,709 24,348
----------- ----------- ------------- ----------- --------- ---------
GROSS PROFIT.................... 19,951 21,207 6,322 28,905 16,034 15,825
----------- ----------- ------------- ----------- --------- ---------
EXPENSES:
Selling....................... 6,283 5,680 1,778 6,865 3,852 3,894
General and administrative.... 5,784 5,267 2,105 7,458 4,097 3,894
Engineering................... 2,725 2,397 1,064 3,964 2,441 1,628
Amortization of intangibles... 472 2,003 952 1,014
Other......................... 613
----------- ----------- ------------- ----------- --------- ---------
Total expenses.............. 14,792 13,344 5,419 20,903 11,342 10,430
----------- ----------- ------------- ----------- --------- ---------
INCOME FROM OPERATIONS.......... 5,159 7,863 903 8,002 4,692 5,395
----------- ----------- ------------- ----------- --------- ---------
OTHER INCOME (EXPENSE):
Interest income............... 32 65 24 28 16 11
Interest expense.............. (629) (494) (1,026) (4,222) (1,951) (2,009)
Other income (expense)........ (24) (32) (60) (16) (51) 37
----------- ----------- ------------- ----------- --------- ---------
Total other expense......... (621) (461) (1,062) (4,210) (1,986) (1,961)
----------- ----------- ------------- ----------- --------- ---------
INCOME (LOSS) BEFORE INCOME
TAXES......................... 4,538 7,402 (159) 3,792 2,706 3,434
INCOME TAXES (Notes 2 and 14)... 75 155 12 396 283 866
----------- ----------- ------------- ----------- --------- ---------
NET INCOME (LOSS)............... $ 4,463 $ 7,247 $ (171) $ 3,396 $ 2,423 $ 2,568
----------- ----------- ------------- ----------- --------- ---------
----------- ----------- ------------- ----------- --------- ---------
PRO FORMA INFORMATION (Note 2)
(Unaudited):
Income (loss) before income
taxes as reported........... $ 4,538 $ 7,402 $ (159) $ 3,792 $ 2,706 $ 3,434
Pro forma income tax (benefit)
provision................... 1,179 2,767 (121) 923 658 866
----------- ----------- ------------- ----------- --------- ---------
Pro forma net income (loss)... $ 3,359 $ 4,635 $ (38) $ 2,869 $ 2,048 $ 2,568
----------- ----------- ------------- ----------- --------- ---------
----------- ----------- ------------- ----------- --------- ---------
Pro forma net income per
share....................... $ 0.24 $ 0.22
----------- ---------
----------- ---------
Pro forma weighted average
shares outstanding.......... 11,875 11,947
----------- ---------
----------- ---------
</TABLE>

See notes to consolidated financial statements.

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

CONSOLIDATED STATEMENT OF REDEEMABLE PREFERRED STOCK AND
STOCKHOLDERS'/MEMBERS' EQUITY

PERIOD FROM OCTOBER 1, 1995 (INCEPTION) THROUGH DECEMBER 31, 1995 AND
YEAR ENDED DECEMBER 31, 1996 AND THE SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
STOCKHOLDERS'/MEMBERS' EQUITY
REDEEMABLE PREFERRED -----------------------------------------------------------------
STOCK COMMON STOCK NOTES
--------------------- MEMBERS' ---------------------- ADDITIONAL RECEIVABLE FROM
SHARES AMOUNT CAPITAL SHARES AMOUNT CAPITAL STOCKHOLDERS
---------- --------- ----------- --------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, OCTOBER 1, 1995
(Inception)..................... $ -- $ --
Contribution of members
capital....................... 14,972 (200)
Interest on notes receivable
from stockholders............. (5)
Net loss........................
----------- -----
BALANCE, DECEMBER 31, 1995........ 14,972 (205)
Net distribution to members of
Power-One LLC.................
Effect of conversion from limited
liability company to C
corporation..................... 15,153,698 $ 14,872 (14,972) 10,000,000 $ 10 $ 90
Interest on notes receivable
from stockholders............. (20)
Accretion of preferred stock to
redemption value (Note 11).... 26
Accrual of preferred stock
dividend (Note 11)............ 1,389
Net income......................
---------- --------- ----------- --------- ----- ----------- -----
BALANCE, DECEMBER 31, 1996........ 15,153,698 16,287 -- 10,000,000 10 90 (225)
Interest on notes receivable
from stockholder
(unaudited)................... (10)
Accretion of preferred stock to
redemption value
(Unaudited)................... 14
Accrual of preferred stock
dividend (Unaudited).......... 821
Stock option compensation
expense-net...................
Net income (Unaudited).......... 4
---------- --------- ----------- --------- ----- ----------- -----
BALANCE, JUNE 30, 1997
(Unaudited)..................... 15,153,698 17,122 10,000,000 10 94 (235)
Conversion (on a pro forma
basis) of other liabilities to
common stock (unaudited) (Note
2)............................ 63,054 -- 757
Conversion (on a pro forma
basis) of preferred stock to
common stock (Unaudited) (Note
2)............................ (14,950,848) (16,890) 1,427,599 1 $ 17,131
---------- --------- ----------- --------- ----- ----------- -----
PRO FORMA BALANCE, JUNE 30, 1997
(Note 2) (Unaudited)............ 202,850 $ 232 $ -- 11,490,653 $ 11 $ 17,982 $ (235)
---------- --------- ----------- --------- ----- ----------- -----
---------- --------- ----------- --------- ----- ----------- -----

RETAINED
EARNINGS
(DEFICIT) TOTAL
----------- ---------
<S> <C> <C>
BALANCE, OCTOBER 1, 1995
(Inception)..................... $ -- $ --
Contribution of members
capital....................... 14,772
Interest on notes receivable
from stockholders............. (5)
Net loss........................ (171) (171)
----------- ---------
BALANCE, DECEMBER 31, 1995........ (171) 14,596
Net distribution to members of
Power-One LLC................. (560) (560)
Effect of conversion from limited
liability company to C
corporation..................... (14,872)
Interest on notes receivable
from stockholders............. (20)
Accretion of preferred stock to
redemption value (Note 11).... (26) (26)
Accrual of preferred stock
dividend (Note 11)............ (1,389) (1,389)
Net income...................... 3,396 3,396
----------- ---------
BALANCE, DECEMBER 31, 1996........ 1,250 1,125
Interest on notes receivable
from stockholder
(unaudited)................... (10)
Accretion of preferred stock to
redemption value
(Unaudited)................... (14) (14)
Accrual of preferred stock
dividend (Unaudited).......... (821) (821)
Stock option compensation
expense-net................... 4
Net income (Unaudited).......... 2,568 2,568
----------- ---------
BALANCE, JUNE 30, 1997
(Unaudited)..................... 2,983 2,852
Conversion (on a pro forma
basis) of other liabilities to
common stock (unaudited) (Note
2)............................ 757
Conversion (on a pro forma
basis) of preferred stock to
common stock (Unaudited) (Note
2)............................ (242) 16,890
----------- ---------
PRO FORMA BALANCE, JUNE 30, 1997
(Note 2) (Unaudited)............ $ 2,741 $ 20,499
----------- ---------
----------- ---------
</TABLE>

See notes to consolidated financial statements.

F-5
<PAGE>
POWER-ONE INC.

COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY--PREDECESSOR COMPANY

YEAR ENDED DECEMBER 31, 1994 AND NINE MONTHS ENDED SEPTEMBER 30, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
POWER-ELECTRONICS, INC.
--------------------------------------------------
POWER-ONE, INC. COMMON VOTING NONVOTING COMMON STOCK PODER-UNO
STOCK COMMON STOCK COMMON STOCK
---------------------- ------------------------ ------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- ----------- ----------- ----------- ----------- ----------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1,
1994.................. 721,432 $ 144 72,854 $ 1 -- $ -- 7,117,300 $ 3
Repurchase of common
stock............... (6,389) (1) (607)
Shares issued......... 3,292 14 333 41
Net income............
--
--------- ----- ----------- --- --- ----- ---------
BALANCE, DECEMBER 31,
1994.................. 718,335 157 72,580 42 7,117,300 3
Notes receivable from
stockholders........
Net income............
--
--------- ----- ----------- --- --- ----- ---------
BALANCE, SEPTEMBER 30,
1995.................. 718,335 $ 157 72,580 $ 42 -- $ -- 7,117,300 $ 3
--
--
--------- ----- ----------- --- --- ----- ---------
--------- ----- ----------- --- --- ----- ---------

NOTES
RECEIVABLE FROM RETAINED
STOCKHOLDERS EARNINGS TOTAL
--------------- ----------- ---------
<S> <C> <C> <C>
BALANCE, JANUARY 1,
1994.................. $ -- $ 6,938 $ 7,086
Repurchase of common
stock............... (148) (149)
Shares issued......... 55
Net income............ 4,463 4,463

----- ----------- ---------
BALANCE, DECEMBER 31,
1994.................. 11,253 11,455
Notes receivable from
stockholders........ (789) (789)
Net income............ 7,247 7,247

----- ----------- ---------
BALANCE, SEPTEMBER 30,
1995.................. $ (789) $ 18,500 $ 17,913

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

See notes to consolidated financial statements.

F-6
<PAGE>
(This page has been left blank intentionally.)

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

CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

COMPANY
-----------------------------------------------
PERIOD FROM
PREDECESSOR COMPANY OCTOBER 1,
------------------------ 1995
NINE MONTHS (INCEPTION) SIX MONTHS ENDED
YEAR ENDED ENDED THROUGH YEAR ENDED --------------------
DECEMBER SEPTEMBER DECEMBER 31, DECEMBER JUNE 30, JUNE 30,
31, 1994 30, 1995 1995 31, 1996 1996 1997
----------- ----------- ------------ ----------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss).............. $ 4,463 $ 7,247 $ (171) $ 3,396 $ 2,423 $ 2,568
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities:
Depreciation and
amortization............... 798 701 815 4,213 1,890 2,060
Gain on sale of property and
equipment.................. (42)
Deferred income taxes........ (1,316) (432) (111)
Loss on sale of real
estate..................... 81
Changes in operating assets
and liabilities:
Accounts receivable, net... (362) (2,726) (928) (1,501) (1,261) (3,764)
Inventories................ (582) (5,443) (733) 946 1,620 (777)
Refundable income taxes.... 62 (4) 21 25 25
Prepaid expenses and other
current assets........... (158) (75) (140) 148 (709) (330)
Accounts payable........... (627) 3,937 (499) (1,771) (1,513) 377
Accrued expenses........... 416 2,783 (517) (415) (360) 1,357
Other liabilities.......... 524 260 302
----------- ----------- ------------ ----------- --------- ---------
Net cash provided by
(used in) operating
activities............. 4,049 6,420 (2,152) 4,249 1,943 1,682
----------- ----------- ------------ ----------- --------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Acquisition of property and
equipment.................... (1,978) (1,928) (1,480) (2,903) (2,184) (799)
Proceeds from sale of property
and equipment................ 286
Purchase of Power-One, net of
acquired cash of $4,452...... (42,158)
Proceeds from sale of real
estate....................... 80
Payment to Power-Electronics,
Inc. shareholders............ (5,000)
Payments for purchased
technology................... (391)
Other assets................... (51) (17) (1,202) (163) 104 (141)
----------- ----------- ------------ ----------- --------- ---------
Net cash used in
investing activities... $ (1,663) $ (1,945) $ (49,840) $ (3,457) $ (2,080) $ (940)
----------- ----------- ------------ ----------- --------- ---------
</TABLE>

(Continued)

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

CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS (CONTINUED)

(IN THOUSANDS)

<TABLE>
<CAPTION>
COMPANY
-----------------------------------------------------
PERIOD FROM
PREDECESSOR COMPANY OCTOBER 1,
---------------------------- 1995
NINE MONTHS (INCEPTION) SIX MONTHS ENDED
YEAR ENDED ENDED THROUGH YEAR ENDED ----------------------
DECEMBER 31, SEPTEMBER 30, DECEMBER 31, DECEMBER 31, JUNE 30, JUNE 30,
1994 1995 1995 1996 1996 1997
------------- ------------- -------------- ------------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of capital lease
obligations........................... $ (30) $ (113)
Proceeds from borrowings on notes
payable to bank....................... $ 11,200 $ 2,300 $ 1,500 $ 200
Repayments of note payable to bank...... (736) 1,193 (3,100)
Bank overdraft.......................... 797 385 (229) (749) 1,351 1,279
Proceeds from borrowings on long-term
debt.................................. 307 30,000 3,250
Repayments of long-term debt............ (564) (414) (4,000) (1,250) (1,843)
Dividends paid.......................... (300) (950)
Repurchase of common stock.............. (149)
Proceeds from sale of common stock...... 55
Proceeds from issuance of members
capital............................... 14,772
Net distributions to members of
Power-One LLC......................... (560) (1,495)
Increase in notes receivable from
stockholders.......................... (789) (10)
------ ------ ------- ------ --------- -----------
Net cash (used in) provided by
financing activities................ (620) (688) 55,743 (2,859) 106 (374)
------ ------ ------- ------ --------- -----------
(DECREASE) INCREASE IN CASH............... 1,766 3,787 3,751 (2,067) (31) 368
CASH, BEGINNING OF PERIOD................. 1,999 3,765 3,751 3,751 1,684
------ ------ ------- ------ --------- -----------
CASH, END OF PERIOD....................... $ 3,765 $ 7,552 $ 3,751 $ 1,684 $ 3,720 $ 2,052
------ ------ ------- ------ --------- -----------
------ ------ ------- ------ --------- -----------
NON-CASH INVESTING AND FINANCING
ACTIVITIES:
Subordinated note issued for purchase of
leasehold improvements................ $ 125
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for:..........................
Interest.............................. $ 638 $ 501 $ 929 $ 3,841 $ 1,469 $ 1,150
Income taxes.......................... $ 162 $ 119 $ -- $ 765 $ 485 $ 1,665
</TABLE>

See notes to consolidated financial statements.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED DECEMBER 31, 1994, PERIODS ENDED SEPTEMBER 30, 1995 AND

DECEMBER 31, 1995 AND YEAR ENDED DECEMBER 31, 1996 AND (UNAUDITED)
THE SIX MONTHS ENDED JUNE 30, 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 the Company's products are manufactured and assembled in
the Dominican Republic and Mexico. However, the assets and liabilities of these
foreign operations are not significant in relation to the consolidated financial
statements, and the U.S. dollar is considered to be the functional currency.
Such operations represent captive manufacturing facilities of the Company. 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, 1994, 1995 and 1996 all represent
52-week years. For simplicity of presentation, the Company has described
year-ends presented as of December 31 and the six-month periods ended as June
30.

ORGANIZATION--Effective September 27, 1995, the Company 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 year ended December 31, 1994 and 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 merged 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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEAR ENDED DECEMBER 31, 1994, PERIODS ENDED SEPTEMBER 30, 1995 AND

DECEMBER 31, 1995 AND YEAR ENDED DECEMBER 31, 1996 AND (UNAUDITED)
THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997

1. GENERAL INFORMATION (CONTINUED)
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 largest customers amounted to 12% to a single customer in
1994, 11% each to two customers throughout 1995, 15% to a single customer in
1996 and 13%, 12% and 10% to three customers for the six months ended June 30,
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.

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, 1995 and 1996 and June 30, 1997,
accumulated amortization related to these intangible assets totaled $472,000,
$2,370,000 and $3,315,000, 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 estimated
useful life of the products, ten years, using the straight-line method.
Accumulated amortization was $105,000 and $174,000 at December 31, 1996 and June
30, 1997, respectively.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEAR ENDED DECEMBER 31, 1994, PERIODS ENDED SEPTEMBER 30, 1995 AND

DECEMBER 31, 1995 AND YEAR ENDED DECEMBER 31, 1996 AND (UNAUDITED)
THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.

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

Under the provisions of the Puerto Rico Industrial Incentives Act of 1987,
the Company has been granted a 90% partial tax exemption from the payment of
Puerto Rico taxes on income derived from marketing the products manufactured by
the Company in Puerto Rico. In addition, the grant also provides for a 90%
exemption on property taxes and a 60% exemption on municipal license taxes. The
Company has received similar tax exemptions in Puerto Rico in connection with
the distribution of its products. All of these exemptions are valid through
2010. Additionally, P-E operates in the Dominican Republic in a tax-free
enterprise zone and, accordingly, pays no income taxes in connection with its
operations in that country. The Company has not provided for U.S. federal and
state income tax that would be paid on unremitted earnings of approximately
$2,070,000 and $3,630,000 at December 31, 1996 and June 30, 1997 (unaudited),
respectively, 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.

PRO FORMA NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE--Pro forma net
income per common and common equivalent share for the year ended December 31,
1996 and for the six-month period ended June 30, 1997 have been determined by
dividing pro forma net income by the weighted average common and common
equivalent shares outstanding during the period, computed in accordance with the
treasury stock method. As required by rules promulgated by the Securities and
Exchange Commission, options issued at prices below the offering price in the
twelve months prior to the initial public offering and redeemable preferred
stock and other liabilities owed to certain officers expected to be converted to
common stock have been included in the calculation of weighted average common
and common equivalent

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEAR ENDED DECEMBER 31, 1994, PERIODS ENDED SEPTEMBER 30, 1995 AND

DECEMBER 31, 1995 AND YEAR ENDED DECEMBER 31, 1996 AND (UNAUDITED)
THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
shares as if outstanding for the periods presented using the treasury stock
method. Income per share for all periods prior to the year ended December 31,
1996 have not been presented as such information is not indicative of the
Company as an on-going entity.

UNAUDITED PRO FORMA INFORMATION--Prior to January 29, 1996, net income of
the Company and the 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 the
Predecessor Company were taxable entities for all periods presented. For pro
forma 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.

As of June 30, 1997, the unaudited pro forma consolidated balance sheet and
statement of redeemable preferred stock and stockholders'/members' equity have
been presented assuming the conversion of the Company's Series A redeemable
preferred stock plus accrued dividends and a portion of the other liabilities
plus accrued interest. Upon election of the preferred stockholders and officers
owed amounts under the Other Liabilities and closing of the public offering
contemplated by this Prospectus, it is anticipated that all but 202,850 shares
of the 15,153,698 preferred shares outstanding plus accrued dividends thereon,
as well as $757,000 in other liabilities owed to officers, will convert into
common stock of the Company at $12.00 per share, the midpoint of the offering
price range set forth on the cover page of this Prospectus. Accordingly, pro
forma stockholders' equity reflects the conversion of the preferred stock and
other liabilities into 1,490,653 shares of the Company's common stock.

UNAUDITED FINANCIAL STATEMENTS--In the opinion of management, the unaudited
financial statements have been prepared on the same basis as the audited
financial statements and include all adjustments, consisting of normal recurring
adjustments, necessary for a fair presentation of the financial position and the
results of operations as of such dates and for such periods.

REVENUE RECOGNITION--Revenue is recognized upon shipment of product.

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 swaps 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.

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 interest rate
swap and interest swaption agreements are based on a termination value and
approximated $107,000 and $58,000 in favor of the Company at December 31, 1996
and June 30, 1997, respectively.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEAR ENDED DECEMBER 31, 1994, PERIODS ENDED SEPTEMBER 30, 1995 AND

DECEMBER 31, 1995 AND YEAR ENDED DECEMBER 31, 1996 AND (UNAUDITED)
THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.

NEW ACCOUNTING STANDARD--In February 1997, the Financial Accounting Standard
Board issued Statement No. 128, "Earnings per Share," which is required to be
adopted for periods ending after December 15, 1997 (1998 for the Company). At
that time, the Company will be required to compute earnings per share under the
new standard and the dilutive effect of stock options will be excluded from
basic earnings per share.

3. INVENTORIES

Inventories consist of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- JUNE 30,
1995 1996 1997
--------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Raw materials.............................................. $ 10,799 $ 11,885 $ 12,551
Subassemblies-in-process................................... 5,648 4,257 3,279
Finished goods............................................. 3,339 2,698 3,787
--------- --------- -----------
$ 19,786 $ 18,840 $ 19,617
--------- --------- -----------
--------- --------- -----------
</TABLE>

4. PROPERTY AND EQUIPMENT

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

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- JUNE 30,
1995 1996 1997
--------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Land........................................................ $ 583 $ 583
Factory and office equipment................................ $ 6,440 7,911 8,387
Autos....................................................... 124 508 568
Leasehold improvements...................................... 1,171 1,468 1,600
Construction in progress.................................... 799 920 1,009
--------- --------- -----------
8,534 11,390 12,147
Less accumulated depreciation and amortization.............. 343 2,506 3,506
--------- --------- -----------
$ 8,191 $ 8,884 $ 8,641
--------- --------- -----------
--------- --------- -----------
</TABLE>

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEAR ENDED DECEMBER 31, 1994, PERIODS ENDED SEPTEMBER 30, 1995 AND

DECEMBER 31, 1995 AND YEAR ENDED DECEMBER 31, 1996 AND (UNAUDITED)
THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997

5. NOTES RECEIVABLE FROM STOCKHOLDERS

The Company advanced cash of $200,000 to two of its stockholders in exchange
for notes receivable, which accrue 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, 1995 and
1996 and June 30, 1997.

6. NOTE PAYABLE TO BANK

Power-One has a credit agreement with a bank that provides 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 2.0% to 2.5% or the bank's base rate plus 1.0% to 1.5%.
The interest rate was 7.875% and 8.1875% at December 31, 1996 and June 30, 1997
(unaudited), respectively. The Company's available credit under the revolving
line was $7,100,000 and $6,900,000 at December 31, 1996 and June 30, 1997,
respectively. Borrowings are collateralized by substantially all of the
Company's assets.

Effective October 30, 1995, the Company entered into an interest swap
agreement with a bank for a notional amount of $20,000,000. Under the agreement,
the Company has agreed to a fixed rate of 6.025% and the bank has agreed to a
floating rate equal to LIBOR. Interest payments are exchanged quarterly
beginning January 30, 1996.

On March 31, 1997, the Company amended the original termination date of its
interest swap agreement from October 30, 2000 to April 30, 1999 and concurrently
entered into a swaption agreement. Under the swaption agreement, the Company may
exercise on April 28, 1999 its option to enter into a one-year interest swap
agreement with a notional amount of $15,000,000. If exercised, the Company would
agree to pay a fixed rate of 10% and the bank would agree to a floating rate
equal to LIBOR (see Notes 2 and 7). In conjunction with these transactions the
Company realized a net gain of $145,000 on the transaction, which has been
deferred and is being amortized over the life of the agreements in interest
expense.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEAR ENDED DECEMBER 31, 1994, PERIODS ENDED SEPTEMBER 30, 1995 AND

DECEMBER 31, 1995 AND YEAR ENDED DECEMBER 31, 1996 AND (UNAUDITED)
THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997

7. LONG-TERM DEBT

Long-term debt consists of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- JUNE 30,
1995 1996 1997
--------- --------- -----------
(UNAUDITED)
<S> <C> <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 2.0% to 2.5% or
the bank's base rate plus 1.0% to 1.5%. The interest rate was 7.875% and
8.03% at December 31, 1996 and June 30, 1997, respectively. The loan is
collateralized by substantially all of the Company's assets and is subject to
the restrictive covenants described in Note 6................................ $ 30,000 $ 29,250 $ 27,750
Present value of technology and license agreement obligation at 8.5% (Note
2)........................................................................... 1,005 662
--------- --------- -----------
30,000 30,255 28,412
Less current portion........................................................... 2,500 3,929 4,162
--------- --------- -----------
Long-term debt, less current portion........................................... $ 27,500 $ 26,326 $ 24,250
--------- --------- -----------
--------- --------- -----------
</TABLE>

Scheduled principal repayment requirements for long-term debt are as follows
(in thousands):

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- -----------------------------------------------------------------------------------
<S> <C>
1997............................................................................... $ 3,929
1998............................................................................... 4,451
1999............................................................................... 4,687
2000............................................................................... 5,500
2001............................................................................... 6,438
Thereafter......................................................................... 5,250
---------
$ 30,255
---------
---------
</TABLE>

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEAR ENDED DECEMBER 31, 1994, PERIODS ENDED SEPTEMBER 30, 1995 AND

DECEMBER 31, 1995 AND YEAR ENDED DECEMBER 31, 1996 AND (UNAUDITED)
THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997

8. OTHER ACCRUED EXPENSES

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

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- JUNE 30,
1995 1996 1997
--------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Accrued bonuses.............................................. $ 1,379 $ 317 $ 1,078
Accrued sales commissions.................................... 929 1,132 1,418
Accrued warranty expense..................................... 400 400 400
Income taxes payable......................................... 809 353
Other accrued expenses....................................... 2,067 1,973 2,448
--------- --------- -----------
$ 4,775 $ 4,631 $ 5,697
--------- --------- -----------
--------- --------- -----------
</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 is obligated to pay in aggregate $5,264,000 plus accrued interest on the
balance at 10% per annum. The agreements specify that the Company will 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 continues through December 31, 1997, under certain
provisions as specified in the agreements, payments under similar terms may
begin on September 30, 1998. A lump-sum payment will be paid to each employee in
the event of a greater than 50% change in ownership of the Company.

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 up to five years in Puerto Rico, six years in
the Dominican Republic and one year for certain of its facilities in Mexico.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEAR ENDED DECEMBER 31, 1994, PERIODS ENDED SEPTEMBER 30, 1995 AND

DECEMBER 31, 1995 AND YEAR ENDED DECEMBER 31, 1996 AND (UNAUDITED)
THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997

10. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Future minimum lease payments for operating leases as of December 31, 1996
are as follows (in thousands):

<TABLE>
<CAPTION>
<S> <C>
1997................................................................................. $ 1,109
1998................................................................................. 1,015
1999................................................................................. 1,015
2000................................................................................. 914
2001................................................................................. 828
Thereafter........................................................................... 2,208
---------
$ 7,089
---------
---------
</TABLE>

Total rent expense was $1,054,000, $907,000, $342,000, $984,000, $613,000
and $687,000 for the year ended December 31, 1994, nine-months ended September
30, 1995, the period October 1, 1995 through December 31, 1995, the year ended
December 31, 1996 and the unaudited six-month periods ended June 30, 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 par value of $.001 and 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 is being accreted into the preferred
stock value over ten years.

Preferred shares are 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.

Preferred stockholders are entitled to 10% cumulative dividends, if
declared. At December 31, 1996 and June 30, 1997 (unaudited), undeclared
dividends totaled $1,389,000 and $2,210,000, respectively, which have been
recorded to redeemable preferred stock.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEAR ENDED DECEMBER 31, 1994, PERIODS ENDED SEPTEMBER 30, 1995 AND

DECEMBER 31, 1995 AND YEAR ENDED DECEMBER 31, 1996 AND (UNAUDITED)
THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997

12. COMMON STOCK

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. 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, 1996 or June 30, 1997. In connection with the
issuance of stock options in 1997, the Company has computed compensation cost
for the difference between the estimated fair market values and the option
exercise prices totaling approximately $190,000, which is being amortized over
the seven year vesting period of the options. For the unaudited six months ended
June 30, 1997, $6,000 in compensation expense was recognized.

Stock option activity of the Company is as follows:

<TABLE>
<CAPTION>
EXERCISE WEIGHTED AVERAGE
NUMBER OF PRICE PER EXERCISE PRICE
OPTIONS OPTION PER SHARE
------------- ------------- -----------------
<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......................................... 34,500 $1.50-$2.00 $ 1.70
Options canceled........................................ (2,250) $1.50 $ 1.50
------------- -------------
Options outstanding--June 30, 1997...................... 499,750 $1.00-$2.00 $ 1.05
------------- ------------- -----
------------- ------------- -----
</TABLE>

The Company accounts for its plan in accordance with Accounting Principles
Board Opinion No. 25. Had compensation cost been determined on the basis of fair
value pursuant to Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation," net income would have been $3,380,000
in 1996 and $2,560,000 for the six months ended June 30, 1997. The fair value of
each option grant is estimated on the date of grant using the Black-Scholes
model, with the following assumptions used: risk-free interest rate ranging from
6.5% to 6.9%, estimated expected volatility of 40.8%, an expected option life of
8.5 years, and no expected dividends. The fair value of stock options granted
were $217,000 in 1996 and $202,000 for the six months ended June 30, 1997.

REPURCHASE OF COMMON STOCK--Common stock held by employees and common stock
issuable to employee stock option holders is subject to certain repurchase
provisions contained in either the officers' employment agreement or the stock
option agreement. Under the provisions of these agreements the Company has the
right to call the shares held by an employee within 60 days of their severance
from the Company, at a formula value based on the Company's earnings. In event
the Company does not exercise its call right, the employee has the right to put
the shares to the Company under a different valuation formula. Payments under
these agreements are generally due over 20 equal quarterly installments plus
interest, and are contingent upon the Company remaining in compliance with its
debt agreements and state laws. Under the agreements, these rights cease in the
event of a public offering or a change in control of the Company. Effective
September 1997, the employment agreements were amended and these repurchase
provisions were deleted. Accordingly, no outstanding common stock is subject to
these provisions.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEAR ENDED DECEMBER 31, 1994, PERIODS ENDED SEPTEMBER 30, 1995 AND

DECEMBER 31, 1995 AND YEAR ENDED DECEMBER 31, 1996 AND (UNAUDITED)
THE SIX MONTHS ENDED JUNE 30, 1996 AND 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 $133,000, $110,000, $33,000, $143,000,
$88,000 and $68,000 for the year ended December 31, 1994, the nine-months ended
September 30, 1995, the period October 1, 1995 through December 31, 1995, the
year ended December 31, 1996 and the six-months ended June 30, 1996 and 1997,
respectively.

14. 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 are as follows (in thousands):

<TABLE>
<CAPTION>
<S> <C>
Current:
Federal............................................................................ $ 1,221
State.............................................................................. 334
Puerto Rico and Foreign............................................................ 157
---------
Total current.................................................................... 1,712
---------
Deferred:
Federal............................................................................ (675)
State.............................................................................. (185)
---------
Total deferred................................................................... (860)
---------
Provision for income taxes........................................................... 852
Recordation of deferred income tax benefits upon conversion from limited liability
company to C corporation........................................................... (456)
---------
Income taxes......................................................................... $ 396
---------
---------
</TABLE>

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEAR ENDED DECEMBER 31, 1994, PERIODS ENDED SEPTEMBER 30, 1995 AND

DECEMBER 31, 1995 AND YEAR ENDED DECEMBER 31, 1996 AND (UNAUDITED)
THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997

14. INCOME TAXES (CONTINUED)
The components of deferred tax assets (liabilities) at December 31, 1996 are
as follows (in thousands):

<TABLE>
<CAPTION>
FEDERAL STATE
--------- ---------
<S> <C> <C>
Current:
Uniform capitalization................................................... $ 250 $ 69
Sales discount reserve................................................... 157 43
Allowance for bad debts.................................................. 144 40
Inventories.............................................................. 103 28
Noncurrent:................................................................
Obligations due at acquisition........................................... 1,790 490
Intangible assets........................................................ (1,693) (463)
Accrued interest......................................................... 224 61
Depreciation and amortization............................................ 58 15
--------- ---------
Net deferred tax assets................................................ $ 1,033 $ 283
--------- ---------
--------- ---------
</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) to the U.S. federal statutory rate is as follows:

<TABLE>
<CAPTION>
AMOUNT PERCENTAGE
--------- -------------
<S> <C> <C>
Provision for income taxes at statutory rate............................ $ 1,289 34%
Puerto Rico income taxed at lower rates................................. (521) (14)
State taxes net of federal benefit...................................... 116 3
Tax benefit of limited liability company from January 1 to January 29,
1996.................................................................. (97) (3)
Other................................................................... 65 2
--
---------
852 22
Recordation of net deferred tax assets upon conversion to C
corporation........................................................... (456) (12)
--
---------
$ 396 10%
--
--
---------
---------
</TABLE>

15. SUBSEQUENT EVENTS--UNAUDITED

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive
Income," which will be effective for the Company beginning January 1, 1998. SFAS
No. 130 requires reporting and display of comprehensive income and its
components in a full set of general-purpose financial statements. Comprehensive
income is defined as the change in equity (net assets) of a business enterprise
during a period from transactions and other events and circumstances from
nonowner sources. It includes all changes in equity during a period except those
resulting from investments by owners and distributions to owners.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEAR ENDED DECEMBER 31, 1994, PERIODS ENDED SEPTEMBER 30, 1995 AND

DECEMBER 31, 1995 AND YEAR ENDED DECEMBER 31, 1996 AND (UNAUDITED)
THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997

15. SUBSEQUENT EVENTS--UNAUDITED (CONTINUED)
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information," which
will be effective for the Company beginning January 1, 1998. SFAS No. 131
requires reporting of certain information about operating segments, products and
services, geographic areas in which the Company operates and major customers.
The statement defines an operating segment as a component of an enterprise (i)
that engages in business activities from which it may earn revenues and incur
expenses, (ii) whose operating results are regularly reviewed by the
enterprise's chief operating decision maker to make decisions about resources to
be allocated to the segment to assess its performance, and (iii) for which
discreet financial information is available.

The impact of accounting standards issued and not yet effective on the
Company's financial position and result of operations has not been determined,
as management is in the process of evaluating their impact.

F-22
<PAGE>
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------

NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE HEREBY. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR BY ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY TO ANY PERSON IN ANY
JURISDICTION WHERE SUCH AN OFFER WOULD BE UNLAWFUL. THE DELIVERY OF THIS
PROSPECTUS DOES NOT IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary............................. 3
Risk Factors................................... 7
Company Formation and Organization............. 14
Recapitalization............................... 14
Use of Proceeds................................ 15
Dividend Policy................................ 15
Capitalization................................. 16
Dilution....................................... 17
Selected Financial and Operating Data.......... 18
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 20
Business....................................... 27
Management..................................... 38
Certain Transactions........................... 44
Principal Stockholders......................... 45
Description of Capital Stock................... 47
Shares Eligible for Future Sale................ 49
Underwriting................................... 50
Legal Matters.................................. 51
Experts........................................ 51
Additional Information......................... 52
Index to Consolidated and Combined Financial
Statements................................... F-1
</TABLE>

UNTIL , 1997 (25 DAYS AFTER THE EFFECTIVE DATE OF THIS
PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.

5,000,000 SHARES

[LOGO]

COMMON STOCK

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

PROSPECTUS
-------------

STEPHENS INC.

ROBERTSON, STEPHENS & COMPANY

MONTGOMERY SECURITIES

, 1997

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Company in connection
with the sale of Common Stock being registered. All amounts are estimates except
the SEC registration fee and the NASD fee.

<TABLE>
<CAPTION>
AMOUNT TO BE
PAID
------------
<S> <C>
SEC registration fee............................................................ $ 22,652
NASD fee........................................................................ 7,975
Application fee--National Market System......................................... 50,000
Printing and engraving expenses................................................. 150,000
Legal fees and expenses......................................................... 250,000
Accounting fees and expenses.................................................... 100,000
Blue Sky qualification fees and expenses........................................ 10,000
Transfer Agent and Registrar fees............................................... 10,000
D&O Insurance................................................................... 300,000
Miscellaneous fees and expenses................................................. 99,373
------------
Total......................................................................... $ 1,000,000
------------
------------
</TABLE>

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

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Company has entered into agreements (the "Indemnification Agreements")
with each of the directors and officers of the Company pursuant to which the
Company has agreed to indemnify such director or officer from claims,
liabilities, damages, expenses, losses, costs, penalties or amounts paid in
settlement incurred by such director or officer in or arising out of such
person's capacity as a director, officer, employee and/or agent of the Company
or any other corporation of which such person is a director or officer at the
request of the Company to the maximum extent provided by applicable law. In
addition, such director or officer is entitled to an advance of expenses to the
maximum extent authorized or permitted by law.

II-1
<PAGE>
To the extent that the Board of Directors or the stockholders of the Company
wish to limit or repeal the ability of the Company to provide indemnification as
set forth in the Company's Certificate of Incorporation, such repeal or
limitation may not be effective as to directors and officers who are parties to
the Indemnification Agreements, because their rights to full protection would be
contractually assured by the Indemnification Agreements. It is anticipated that
similar contracts may be entered into, from time to time, with future directors
of the Company.

The Form of Underwriting Agreement filed as Exhibit 1.1 to this Registration
Statement provides for indemnification by the Underwriters of the Company and
its directors and officers for certain liabilities arising under the Securities
Act or otherwise.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

On February 1, 1996, Power-One LLC, a Delaware limited liability company
("Power LLC"), was merged into Power-Merger, Inc., a Delaware corporation
("Power-Merger"), with Power-Merger as the surviving entity (the "Merger").
Immediately after the consummation of the Merger, Power-Merger changed its name
to Power-One, Inc. (the "Company").

As a result of the Merger, the Company issued an aggregate of 10,000,000
shares of Common Stock, par value $.001, and 15,153,698 shares of Series A
Preferred Stock, par value $.001, to the members of Power LLC in exchange for
all of the outstanding membership interests of Power LLC. The Company issued the
shares without complying with the registration and prospectus delivery
requirements of the Securities Act, in reliance upon the exemption provided by
Section 4(2) of the Securities Act.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits

<TABLE>
<CAPTION>
NUMBER 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

5.1* Opinion of O'Melveny & Myers LLP

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

10.8* Credit Agreement among the Company, NationsBank of Texas, N.A., and certain lenders, dated September
27, 1995

10.9* First Amendment to Credit Agreement among the Company, NationsBank of Texas, N.A. and certain lenders,
dated February 1, 1996

10.10* Second Amendment to Credit Agreement among the Company, NationsBank of Texas, N.A. and certain lenders,
dated September 18, 1996
</TABLE>

II-2
<PAGE>

<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ----------- -------------------------------------------------------------------------------------------------------
<S> <C>
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

10.15* Third Amendment to Credit Agreement among the Company, NationsBank of Texas, N.A. and certain lenders,
dated August 18, 1997

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

11* Statement regarding Computation of Pro Forma Per Share Earnings

21* List of Subsidiaries

23.1 Independent Auditors' Consent and Report on Financial Statement Schedule

23.2* Consent of O'Melveny & Myers LLP (included in Exhibit 5.1)

24* Power of Attorney (see page S-1)

27.1* Financial Statements Schedule

99.1 Consent of Director
</TABLE>

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

* Previously filed.

(b) Financial Statement Schedule

Valuation and Qualifying Accounts--Schedule VIII

All other schedules for which provision is made in the applicable accounting
regulations of the Commission are provided in the Notes to the Financial
Statements included elsewhere in this Registration Statement or are not required
under the applicable instructions or are inapplicable and therefore have been
omitted.

ITEM 17. UNDERTAKINGS

(a) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in this Registration Statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.

(b) The undersigned Registrant hereby undertakes to provide to the
Underwriters at the closing specified in the Underwriting Agreement,
certificates in such denominations and registered in such names as required by
the Underwriters to permit prompt delivery to each purchaser.

(c) Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the provisions described in Item 14 or

II-3
<PAGE>
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission, such indemnification is against public policy as
expressed in the Securities Act, and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered hereunder, the Registrant
will, unless in the opinion of its counsel, the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.

(d) The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Act, the
information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or Rule
497(h) under the Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of Prospectus shall be deemed
to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.

II-4
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement on Form S-1 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Los
Angeles, State of California on this 25th day of September, 1997.

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

By: /s/ STEVEN J. GOLDMAN
-----------------------------------------
Steven J. Goldman
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:

SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------

President, Chief Executive
/s/ STEVEN J. GOLDMAN Officer and Chairman
- ------------------------------ (Principal Executive September 25, 1997
Steven J. Goldman Officer)

Vice President, Chief
* Financial Officer and
- ------------------------------ Secretary September 25, 1997
Eddie K. Schnopp (Principal Financial and
Accounting Officer)

*
- ------------------------------ Director September 25, 1997
Jon E.M. Jacoby

*
- ------------------------------ Director September 25, 1997
Douglas H. Martin

*By: /s/ Steven J. Goldman
-------------------------
Steven J. Goldman
ATTORNEY-IN-FACT

S-1
<PAGE>
POWER ONE, INC.

VALUATION AND QUALIFYING ACCOUNTS--SCHEDULE VIII

<TABLE>
<CAPTION>
COLUMN B COLUMN C--ADDITIONS COLUMN E
----------- ------------------------ -----------
BALANCE AT CHARGED TO CHARGED TO COLUMN D BALANCE AT
BEGINNING COSTS AND OTHER ------------- END OF
COLUMN A--DESCRIPTION OF PERIOD EXPENSES(1) ACCOUNTS DEDUCTIONS(2) PERIOD
- --------------------------------------------------- ----------- ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year Ended December 31, 1994(3).................. $ 215,000 $ (7,000) $ 208,000
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

Accrued sales discounts and returns:
Year Ended December 31, 1994(3).................. $ 245,000 $ 120,000 $ 365,000
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

Accrued warranties:
Year Ended December 31, 1994(3).................. $ 250,000 $ 477,000 $ (327,000) $ 400,000
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
</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.

S-2
<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
NUMBER 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

5.1* Opinion of O'Melveny & Myers LLP

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

10.8* Credit Agreement among the Company, NationsBank of Texas, N.A., and certain lenders, dated September
27, 1995

10.9* First Amendment to Credit Agreement among the Company, NationsBank of Texas, N.A. and certain lenders,
dated February 1, 1996

10.10* Second Amendment to Credit Agreement among the Company, NationsBank of Texas, N.A. and certain lenders,
dated September 18, 1996

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

10.15* Third Amendment to Credit Agreement among the Company, NationsBank of Texas, N.A. and certain lenders,
dated August 18, 1997

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

11* Statement regarding Computation of Pro Forma Per Share Earnings

21* List of Subsidiaries

23.1 Independent Auditors' Consent and Report on Financial Statement Schedule

23.2* Consent of O'Melveny & Myers LLP (included in Exhibit 5.1)

24* Power of Attorney (see page S-1)

27.1* Financial Statements Schedule

99.1 Consent of Director
</TABLE>

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

* Previously filed.

<PAGE>
[LOGO]

August
11th
1 9 9 7

To Certain Executive Officers of Power-One, Inc.:

Power-One, Inc. (the "Company") has filed a Registration Statement
on Form S-1 (the "Registration Statement") with the Securities and Exchange
Commission (a copy of which is enclosed). The Registration Statement relates
to the initial public offering (the "Offering") of the Company's common stock
(the "Common Stock"). The Company expects the Offering to be consummated in
early October 1997.

In anticipation of the Offering, the Company's Board of Directors
(the "Board") has determined that it is in the best interests of the Company
and its stockholders to recapitalize the Company.

The recapitalization of the Company, as described on page 14 of the
enclosed Registration Statement, includes an offer by the Board to each of
Mr. Goldman, Mr. Schnopp, Mr. Roark, Mr. Hage, and Mr. Godfrey
(collectively, the "Executive Officers") to exchange certain deferred amounts
of compensation owed to the Executive Officers pursuant to their respective
Employment and Compensation agreements (the "Employment Agreements") for
Common Stock. To that end, the Board is offering each Executive Officer an
opportunity to exchange all or any Deferred Compensation (as defined in the
Employment Agreements) owed to such Executive Officer for Common Stock. The
Common Stock will be valued at the initial price for which the Common Stock
is sold to the public in the Offering (the "IPO Price").

The number of shares of Common Stock to be received by an Executive
Officer in the exchange will be determined as follows: the amount of Deferred
Compensation to be exchanged divided by the IPO Price. The IPO Price is
estimated to be between $11.00 per share and $13.00 per share; however, THE
ACTUAL IPO PRICE WILL NOT BE KNOWN UNTIL JUST PRIOR TO THE OFFERING, AND THE
IPO PRICE MAY BE HIGHER THAN $13.00 PER SHARE OR LOWER THAT $11.00 PER SHARE.
For a description of how the IPO price will be determined please see pages
50-51 of the Registration Statement.

In determining whether you would like to exchange some or all of
your Deferred Compensation for Common Stock, you should note that the board
has decided that, immediately after the Offering, the Company will pay each
Executive Officer all amounts of Deferred Compensation that are not exchanged
for Common Stock. The Common Stock issued pursuant to the aforementioned
exchange, as well as any cash paid for the Deferred Compensation that is

[ADDRESS]

<PAGE>

Page 2 - August 11, 1997

not exchanged for Common Stock, will be distributed immediately after
consummation of the Offering. You should also note that the Common Stock you
receive (if any) in exchange for your Deferred Compensation, like the Common
Stock you currently hold, will (i) not be registered stock and (ii) be subject
to the 180 day lock-up period following the Offering and other applicable
holding requirements of applicable law.

The exchange and the payment of Deferred Compensation are subject to
the consummation of the Offering.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES.
- ----------------------------------------

The receipt of Common Stock for your right to receive Deferred
Compensation pursuant to the exchange will be a taxable transaction for
federal income tax purposes and may also be a taxable transaction under
applicable state, local or foreign tax laws. In general, you will recognize
ordinary income for federal tax purposes equal to the dollar value of
Deferred Compensation whether the Deferred Compensation is paid in cash or
exchanged for Common Stock.

THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR
GENERAL INFORMATION ONLY AND IS BASED UPON PRESENT LAW. YOU ARE URGED TO
CONSULT YOUR TAX ADVISOR WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE
EXCHANGE, INCLUDING THE APPLICATION AND EFFECT OF THE ALTERNATIVE MINIMUM TAX
AND STATE, LOCAL AND FOREIGN TAX LAWS.

ENCLOSED MATERIALS:
- -------------------

The following documents and forms are enclosed for your review and
attention:

1. REGISTRATION STATEMENT
----------------------

This is the document that Company has filed with the SEC. Please
review the Registration Statement carefully as it will provide you
with important information regarding the proposed Offering, the
recapitalization and the Company. HOWEVER, PLEASE BE AWARE THAT
THIS REGISTRATION STATEMENT IS STILL SUBJECT TO COMPLETION AND HAS NOT
BEEN APPROVED BY THE SEC OR ANY STATE SECURITIES COMMISSION NOR HAS
THE ACCURACY OR ADEQUACY OF THIS REGISTRATION STATEMENT BEEN APPROVED
BY ANY REGULATORY ENTITY.

2. SELECTION LETTER
----------------

The Selection Letter allows you to elect to exchange all, some or
none of your Deferred Compensation. PLEASE COMPLETE, SIGN, DATE AND
DELIVER TO O'MELVENY & MYERS LLP, ATTENTION: JOHN SLUSHER (COUNSEL
TO THE COMPANY), IN THE ENCLOSED FEDERAL EXPRESS ENVELOPE, THE
SELECTION LETTER WHICH IS ENCLOSED IN THIS PACKET. Please be sure
to fill in the blanks in the Selection Letter with the percentage
of Deferred Compensation that you wish to exchange and to sign and
date the letter.
<PAGE>

Page 3 - August 11, 1997

YOUR RIGHT TO PARTICIPATE IN THE EXCHANGE DESCRIBED ABOVE AND TO
RECEIVE COMMON STOCK IN EXCHANGE FOR YOUR DEFERRED COMPENSATION DEPENDS UPON
YOUR DELIVERY OF A PROPERLY EXECUTED SELECTION LETTER TO O'MELVENY & MYERS
LLP BY AUGUST 25, 1997.

THIS LETTER AND THE ENCLOSED MATERIALS DO NOT CONSTITUTE AN OFFER
TO SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE, THE COMMON STOCK IN ANY
JURISDICTION, OR FROM ANY PERSON, IF SUCH OFFER OR SOLICITATION OF SUCH
OFFER, IN SUCH JURISDICTION OR TO SUCH PERSON, WOULD BE UNLAWFUL.

NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS LETTER AND THE RELATED
REGISTRATION STATEMENT, In CONNECTION WITH THE OFFER MADE HEREBY AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS SHOULD NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED. THE DELIVERY OF THIS LETTER AND THE ENCLOSED
MATERIALS SHALL NOT, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE INFORMATION CONTAINED IN THE REGISTRATION
STATEMENT OR IN THE AFFAIRS OF THE COMPANY SINCE THE RESPECTIVE DATES OF THIS
LETTER OR THE REGISTRATION STATEMENT.

IN MAKING DECISIONS RELATING TO THE EXCHANGE DISCUSSED IN THIS
LETTER, THE EXECUTIVE OFFICERS OF THE COMPANY MUST RELY ON THEIR OWN
EXAMINATION OF THE COMPANY AND THE OFFER BEING MADE, INCLUDING THE MERITS AND
RISKS INVOLVED. EXECUTIVE OFFICERS OF THE COMPANY ARE URGED TO CONSULT THEIR
LEGAL, TAX AND FINANCIAL ADVISORS WITH RESPECT TO THE SPECIFIC RISKS AND
POTENTIAL CONSEQUENCES OF THE EXCHANGE TO THEM, INCLUDING THE APPLICATION AND
EFFECT OF APPLICABLE STATE AND FEDERAL LAWS.

After reviewing the enclosed materials, please complete and sign
the enclosed Selection Letter and return it to John Slusher in the enclosed
federal express envelope. If you have any questions or concerns relating to
this letter or the enclosed materials, please feel free to call Steve Goldman
or Ed Schnopp, or John Slusher at O'Melveny & Myers LLP (counsel to the
Company) at (310) 246-6701.

IT IS IMPERATIVE THAT THE MATERIALS BE RETURNED AS SOON AS
PRACTICABLE AND NO LATER THAN AUGUST 25, 1997. IF THE SELECTION LETTER IS NOT
RETURNED BY AUGUST 25, 1997, YOU WILL BE DEEMED TO HAVE DECIDED NOT TO
EXCHANGE ANY OF YOUR DEFERRED COMPENSATION, AND YOUR DEFERRED COMPENSATION
WILL BE PAID TO YOU UPON CONSUMMATION OF THE OFFERING ON THE TERMS DISCUSSED
ABOVE.

<PAGE>
Page 4 - August 11, 1997

Thank you in advance for your assistance with this process and your
prompt response will be greatly appreciated.

Very truly yours,

/s/ STEVEN GOLDMAN
-----------------------------
Steven Goldman

Enclosure

cc (w/encls): Jon Jacoby
Doug Martin
Ken Bishop

<PAGE>
EXHIBIT 23.1

INDEPENDENT AUDITORS' CONSENT AND REPORT ON FINANCIAL STATEMENT SCHEDULE

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

We consent to the use in this Registration Statement of Power-One, Inc. on
Form S-1 of our report dated March 14, 1997, appearing in the Prospectus, which
is part of this Registration Statement, and to the references to us under the
headings "Selected Financial and Operating Data" and "Experts" in such
Prospectus.

Our audits of the financial statements referred to in our aforementioned
report also included the financial statement schedule of the Company listed in
Item 16. This financial statement schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated and combined financial statements taken as a
whole, present fairly in all material respects the information set forth
therein.

DELOITTE & TOUCHE LLP

Los Angeles, California
September 25, 1997

<PAGE>
EXHIBIT 99.1

CONSENT OF DIRECTOR

To Power-One, Inc.:

I hereby consent to the use of my name as a director in this Registration
Statement on Form S-1 of Power-One, Inc., registration number 333-32889, as I
have agreed to become a director of Power-One, Inc. effective immediately after
the Registration Statement has been declared effective by the SEC.

September 15, 1997

/s/ ALBERT YU

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

Albert Yu