CHEROKEE INTERNATIONAL LLC, 10-K, 2000-03-31

CHEROKEE INTERNATIONAL LLC
10-K, 2000-03-31
ELECTRONIC COMPONENTS, NEC

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(mark one)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 1999

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

For the transition period from ________________ to _______________

CHEROKEE INTERNATIONAL, LLC
(Exact name of registrant as specified in its charter)

CALIFORNIA 33-0696451
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

2841 DOW AVENUE
TUSTIN, CALIFORNIA 92780
(Address of principal executive offices)

(714) 544-6665
(Registrant's telephone number, including area code)

N/A
-----------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)

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

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

The voting membership units of the registrant are not publicly traded.
All of the voting membership units are held by affiliates of the registrant.

The number of membership units outstanding of the registrant's voting
and non-voting membership units was 30,302,000 as of February 29, 2000.

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PART I

ITEM 1. BUSINESS

Cherokee International, LLC is a leading designer and manufacturer of a
broad range of switch mode power supplies for OEMs in the telecommunications,
networking, high-end workstation and other electronic equipment industries.
Power supplies perform many essential functions relating to the supply,
distribution and regulation of electrical power and are used in virtually all
electronic equipment. Basic power supplies convert AC from a utility source
such as a wall outlet, into the DC required for electronic systems.

STRATEGIC ADVANTAGES

We believe that our strategic advantages include the following:

- - TIME TO MARKET: A critical factor in a customer's selection of a power supply
manufacturer is the time to market of the power supply. Time to market is the
time required to design, engineer, manufacture and deliver the product to a
customer. We have established a track record of consistently providing high
quality products with short times to market. We streamline the design and
production processes by employing experienced personnel, providing them with
sophisticated state of the art equipment and tools and encouraging our
engineers to communicate directly with our customers' engineers throughout the
design and manufacturing process. In addition, we are one of the few companies
in the industry with the ability to self certify our products for virtually
all safety agencies. Our unique design and production methodologies and North
American based operations increase production efficiency, enhance our customer
relationships and avoid delays in communication and the exchange of designs
and prototypes that burden many of our overseas competitors.

- - STRONG PARTNERSHIPS WITH BLUE CHIP CUSTOMER BASE: We provide products to
leading OEMs such as IBM, Cisco, Hewlett-Packard, Motorola, Lucent, Alcatel,
Nortel, Silicon Graphics and Honeywell. We have been doing business with many
of our customers for over 10 years. We believe that our customers continue to
seek long-term partnerships with a small number of core suppliers like
Cherokee. Our relationships are strengthened by the fact that we work jointly
with many of our customers in the design and development of new products,
which our customers partially fund. We believe that as a result of these
factors we have been successful in building our share with many of these

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customers over the last several years.

- - RECURRING SALES: Our products are generally used for the entire life cycle of
a customer's end products, providing a base of recurring sales from year to
year. We have 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 a
change often requires time-consuming and costly re-testing and
re-certification by the customer and one or more regulatory agencies. It is
also very difficult for another manufacturer to precisely and economically
replicate a power supply unit which is already incorporated into a product.
The life cycle of our customers' products range from approximately 2 to 10
years.

- - LOW COST STATE OF THE ART OPERATIONS: Our sophisticated engineering
capabilities, in-house production of certain critical components, highly
automated manufacturing processes and state of the art testing equipment
enable us to operate extremely efficiently, thereby enhancing profitability,
flexibility and competitiveness. The following initiatives have lowered our
overall cost of production and enhanced profit margins:

- in-house manufacturing of labor intensive magnetic sub-assemblies at our
facilities in India;

- use of common componentry in our product designs, including in our highly
customized products, thereby reducing development and production costs;

- procurement of raw materials and components directly from manufacturers,
rather than distributors;

- use of continuous flow manufacturing lines and computer controlled surface
mount assembly machines to improve quality and yield rates;

- procurement and maintenance of state of the art equipment resulting in
limited maintenance capital expenditures; and

- refinement of our systems and processes to increase overall operational
efficiency.

- - COMMITMENT TO QUALITY AND SERVICE: We believe that in addition to short lead
times and competitive prices, our commitment to provide consistent, high
quality products and services forms the basis of our strong customer
relationships. We manufacture high quality products using advanced testing
methods to monitor our sophisticated design and manufacturing techniques (such
as Computer Aided Design and Computer Aided Engineering). In addition to
testing performed during the design and manufacturing process, we test 100% of
our finished products using automated equipment and customer-approved tests.

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All of our facilities and manufacturing processes are ISO 9000 certified.

- - EXPERIENCED MANAGEMENT: Mr. Pat Patel, our Chairman and Chief Executive
Officer, founded Cherokee Corporation in 1978, formed Cherokee
International, LLC as a California limited liability company on March 28,
1996, and has over 30 years experience in the industry. Mr. Patel is
supported by a senior management team including Ken King, Bud Patel (no
relationship to Pat Patel), Dennis Pouliot and Howard Ribaudo, who have
combined industry experience of over 100 years.

BUSINESS STRATEGY

Our objective is to be the supplier of choice to a targeted group of
industry leading OEMs who require sophisticated power supply solutions and who
are likely to have substantial volume requirements. To achieve this objective,
our strategy is to continue to differentiate ourselves through advanced design
and engineering, shorter time to market and superior product performance,
quality and service. Our strategy focuses on maximizing profitability and
expanding the business through:

- - FOCUSING ON HIGH GROWTH, HIGH MARGIN, MARKETS: Approximately 92% of our 1999
sales were to the networking, telecommunications and high-end workstations
markets, which are expected to grow primarily due to the tremendous increase
in demand for internet/intranet, wireless and other communications. We achieve
higher margins in these markets due to their highly sophisticated design and
engineering requirements and the high demands for technical expertise required
to serve them. Focusing on these high growth areas also allows us to work with
the most sophisticated customers, which further improves our technological and
knowledge base and enables us to create products that can form the basis for
an expanding and more sophisticated product catalog.

- - LEVERAGING CUSTOMER RELATIONSHIPS: We have strong relationships with industry
leaders in the high growth networking, telecommunications and high-end
workstations. We plan to leverage our in-depth knowledge of our customers and

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their needs and continue to increase our share of our customers' business. We
believe that our long-standing customer relationships, coordinated engineering
services and flexible manufacturing capabilities provide us with a significant
advantage when bidding for new business.

- - EXPANDING PRODUCT OFFERING AND MARKET APPLICATIONS: We plan to continue to
broaden our existing product line to attract new customers and to capture a
larger portion of our existing customers' business. Although we may at any
time decide otherwise, products we presently plan to offer in the future
include a larger catalog of higher margin product offerings for multiple
applications, higher power range products for the increased requirements of
internet/intranet, telecommunications and wireless and other applications and
new DC to DC products to provide more complete power solutions for
communication systems such as telecommunication switches.

- - EXPANDING CUSTOMER BASE: We plan to leverage our reputation and success with
our existing blue chip customer base to attract new customers with
significant growth prospects and high-margin product requirements. We plan to
expand our customer base through increased marketing, heightened use of our
network of independent sales representatives and further development of
collaborative relationships in design and engineering. To help achieve this
expansion, we compensate our independent sales representatives with valuable
incentives to attract new customers and provide them with a significant level
of support.

- - CONTINUALLY REDUCING COSTS THROUGH DISCIPLINED DESIGN AND LOW COST
PROCUREMENT: We seek to remain a low cost provider through continued
disciplined design techniques that incorporate common componentry and
circuitry and through the negotiation of long-term contracts for the
procurement of raw materials and components directly with certain suppliers
rather than purchasing through distributors. In addition, where appropriate we
will continue to invest in new technologies to increase automation and lower
costs.

- - PURSUING SELECTED STRATEGIC ACQUISITIONS: The power supply industry is
highly fragmented according to industry sources. We intend to pursue
strategic add-on acquisitions to add products and capabilities that are
complementary to our existing operations.

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POWER SUPPLY INDUSTRY

OVERVIEW

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

The most prevalent technology now used in power supplies is switch mode
technology. Switch mode power supplies, which comprise our entire product line,
are preferred over linear power supplies, with comparable power outputs, due to
their higher energy efficiency, considerably smaller size and lighter weight.
The market for switch mode power supplies is the fastest growing segment of the
overall external power conversion product market, according to industry sources.

CAPTIVE VERSUS MERCHANT MANUFACTURERS

Captive power supply manufacturers design and manufacture power supplies for
in-house use for their own products. Merchant power supply manufacturers design
and manufacture power supplies for use by third parties. According to industry
sources, the merchant segment of the market is expected to grow faster than the
captive segment as OEMs increasingly focus on core competencies and outsource
power supply products to more efficient suppliers. As a leading merchant
manufacturer, we expect to significantly benefit from this shift.

PRODUCT TYPES--CUSTOM, STANDARD AND MODIFIED STANDARD

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 (1) lead times of 4 to 12 months from initial prototype to full

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production; (2) up-front engineering costs; and (3) relatively high volume
production requirements. They are attractive to OEMs because they provide
maximum design flexibility and allow the use of special features. Standard
"off-the-shelf" power supplies are products designed to appeal to a wide range
of customers for use in a variety of different applications. Standard power
supplies offer benefits to the OEM because 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, as compared with custom
products, are characterized by (1) shorter lead times; (2) lower up-front
engineering costs; and (3) smaller minimum order quantities.

PRODUCT TYPES--POWER RANGES, CHARACTERISTICS AND END USERS

The power supply market can be differentiated by power supply output
range as demonstrated in the table below:

POWER TYPICAL REPRESENTATIVE
RANGE CHARACTERISTICS CUSTOMER TYPES APPLICATIONS
- --------- ---------------------------- ---------------------------- ----------------------------
<S> <C> <C> <C>
Low - Less than 150 Watts - PC Companies - PCs
- Lower Technology - Consumer Electronics - Consumer Electronics
- Higher Volume - Desk Top Printers
- Lower Margin

Mid - 150-750 Watts - Internet Companies - Routers, Hubs
- Higher Technology - Computer Companies - Workstations
- Moderate Volume - Medical Companies - Blood Analyzers
- Higher Margin

High - More than 750 Watts - Computer Companies - Main-frame
- Higher Technology - Industrial Companies Computers and
- Lower Volume - Internet Companies High-end workstations
- Higher Margin - Telecommunications - Industrial Process Control
</TABLE>

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<TABLE>

<C> <C>
Companies - High-end Routers
- Communication
Switches
</TABLE>

PRODUCT LINE

Over our more than 20-year history, we have developed an extensive range
of switch mode power supply products. These products, containing magnetic
assemblies, circuits and components, convert AC power to DC power and
maintain voltage levels within specific limits. Our products cover a broad
range of applications, from 10 to 14,000 watts for AC/DC power supplies, and
from 20 to 1,000 watts for DC/DC converters. Our power supplies are
self-contained units, range in weight from one half of a pound to thirty
pounds and are normally incorporated inside our customers' end products.

We plan to continue to broaden our existing product line to include a larger

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catalog of higher margin product offerings for multiple applications, higher
power range products for the increased requirements of internet/intranet,
wireless and other communications applications and new DC to DC products to
provide more complete power solutions for telecommunication systems.

Most of our power supplies are modified standard, although we produce some
custom and standard products.

CUSTOMERS AND APPLICATIONS

Our base of OEM customers are in diverse markets such as telecommunications,
networking, high-end workstations (excluding PCs), industrial process controls
and other electronic equipment industries. Many of the OEMs are Fortune 500
companies and leaders in their respective industries.

Over the past 3 years, we have actively pursued the telecommunications
power supply market. This market, encompassing switching products, cell
sites, wireless communication towers and other telecommunications-related
equipment, has experienced rapid growth from the increase in wireline and
wireless communications.

During 1999, our top 10 customers accounted for approximately 74% of our
sales. During such period, sales to IBM represented more than 10% of our
sales.

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SALES AND MARKETING

We market our products and services through an integrated sales approach
involving account managers and independent sales representatives with active
support from design, engineering and production personnel. Our in-house account
managers supervise customer relationships and oversee a nation-wide network of
commission-based independent sales representatives whose main purpose is to
source new customers.

We focus our efforts on expanding relationships with existing customers and
aggressively targeting emerging OEM industry leaders with whom the opportunity
exists to provide products and services across a number of product families and
through successive product generations. We focus our resources on markets that
are growing relatively quickly and have the potential for significant profit
margins. Potential customers are assigned to our in-house account managers who
evaluate the customer against our customer selection criteria.

On an ongoing basis, our engineering personnel provide technical support to
customers in the areas of product design changes, field performance and testing.
Our collaborative relationships allow us to gain valuable knowledge about an
existing customer and its processes, which we believe gives us an advantage in
obtaining future business from that customer. Historically, we have had
substantial recurring sales from existing customers.

BACKLOG

Backlog consists of purchase orders on hand generally having delivery
dates scheduled within the next four months. Our backlog was approximately
$35.1 million at December 31, 1999, $42.8 million at December 31, 1998, and
$23.4 million at December 31, 1997. In addition, we are currently working on
numerous customer initiated engineering and design projects, which we expect
will result in increased future revenue.

Although customers are generally able to cancel or reschedule deliveries
without penalty, our backlog has historically been a reliable indicator of our
future revenues.

MANUFACTURING PROCESS AND QUALITY CONTROL

A typical power supply consists primarily of one or more printed circuit
boards, electronic and electromagnetic components and a sheet metal chassis. The
production of our power supplies entails the assembly of structural hardware
combined with a sophisticated assembly of circuit boards encompassing highly
automated SMT.

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In response to market demands for increased quality and reliability,
design complexity, and sophisticated technology, we have automated many
electronic assembly and testing processes which were traditionally performed
manually and we have standardized our manufacturing processes to efficiently
utilize our resources and optimize our capacities. Since the beginning of
1997, we have acquired three SMT lines. SMT permits reduction in board size
by eliminating the need for holes in the printed circuit boards and by
allowing components to be placed on both sides of a board. Each SMT line
places as many as 40,000 parts per hour, with each machine hour equating to
approximately 55 labor hours. The new SMT lines have allowed us to
significantly increase throughput and capacity which together with higher
demand has resulted in increased sales.

In addition to increasing automation of our facilities, we have standardized
our operations to include 19 self-contained continuous flow manufacturing lines,
which incorporate flow solder machines, in-circuit test machines, highly
advanced computer controlled burn-in equipment, automated final test machines,
ongoing reliability test equipment, standardized processes and measurements on
all lines.

Most of our customers require that their power supplies meet or exceed
established international safety and quality standards. In response to this
need, we design and manufacture power supplies in accordance with the
certification requirements of many international agencies, including
Underwriters Laboratories Incorporated (UL) in the United States; the Canadian
Standards Association (CSA) in Canada; Technischer Uberwachungs-Verein (TUV) and
Verband Deutscher Electrotechniker (VDE), both in Germany; the British Approval
Board for Telecommunications (BABT) in the United Kingdom; and International
Electrotechnical Committee (IEC), a European standards organization.

Quality and reliability are emphasized in both the design and manufacture of
our products. In addition to testing throughout the design and manufacturing
process, we test and burn-in 100% of all products using automated equipment and
customer-approved processes. An additional out-of-box test or pre-ship audit is
performed on randomly selected units, which are ready for shipment, further
ensuring manufacturing quality and integrity.

Our five sophisticated manufacturing facilities, including plants in
Tustin, California, Irvine, California, Guadalajara, Mexico and two in
Bombay, India, are ISO 9000 certified. Our facilities in India manufacture
labor-intensive magnetic

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sub-assemblies that are distributed to our other facilities for incorporation
into many of our final products.

SUPPLIERS

Our high quality products and reduced time-to-market are the result of a
well managed supply chain network. We typically design products using common
components thereby increasing our purchasing power and reducing inventory risk.
Most of our raw materials, including electronic and other components, sheet
metal, transistors, mechanical parts and electrical wires, are readily available
from several sources. Although some of our raw materials are sourced from only
one manufacturer, they are generally available in large quantities from a number
of different suppliers.

COMPETITION

The merchant power supply manufacturing industry is highly fragmented and
characterized by intense competition. No single company dominates the overall
power supplies market and our competitors vary depending upon the particular
power conversion product category. Our competition includes companies located
throughout the world, including Delta, Astec, Artesyn and Lucent Technologies.
We also view as competitive threats the potential that our customers may decide
to produce their own power supplies and that OEMs with captive manufacturing
capabilities may compete in the merchant market. However, several large OEMs
have divested their captive power supply manufacturing operations, including
IBM, Nortel, NCR, TRW and Digital Equipment.

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ENGINEERING AND PRODUCT DEVELOPMENT

Our engineering and product development activities are principally
directed to the development of new power supplies to satisfy customer needs.
As part of the collaborative relationships established by us with our key
customers, we work closely with our customers to develop new products.
Product development is performed by a group of 28 engineers located in
Tustin, California and Irvine, California.

Our total expenditures for engineering and product development were $4.1
million, $3.8 million and $4.1 million for the years ended December 31, 1999,
1998, and 1997, respectively.

INTELLECTUAL PROPERTY MATTERS

We do not believe that intellectual property or branding is a significant
competitive factor in the power supply industry. As a result, we do not rely
upon proprietary rights in the conduct of our business.

EMPLOYEES

At December 31, 1999, we employed approximately 980 full-time employees
at our facilities in the following capacities:

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INDIVIDUALS
<TABLE>
<CAPTION>
EMPLOYED

- ------ ------
<S> <C>
Manufacturing.............................................. 836
Engineering................................................ 52
Quality.................................................... 38
Marketing.................................................. 10
General Administrative..................................... 44
---------
Total.................................................. 980
=========
</TABLE>

None of our domestic employees are represented by a labor organization. The
approximately 107 employees who work in our Mexican Facility are represented by
a union as required under Mexican law. We have never experienced a work stoppage
or interruption due to a labor dispute. We believe that our relations with our
employees, including in our Mexican facility, are excellent. Over the last
several years, we have given annual bonuses to all of our employees.

RISK FACTORS

We are subject to the following risks:

OUR SUBSTANTIAL INDEBTEDNESS AND DEBT SERVICE OBLIGATIONS COULD IMPEDE OUR
OPERATIONS AND FLEXIBILITY

We have a large amount of outstanding debt compared to the net book value of
our assets and we have substantial repayment obligations and interest expense.
As of December 31 1999, we had:

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- total consolidated debt of approximately $149.6 million; and

- members' deficit of approximately $107.7 million.

Our level of debt and the limitations imposed on us by our debt agreements
could have other important consequences to us, including the following:

- we have less ability to satisfy our obligations with respect to our
10 1/2% Senior Subordinated Notes due 2009;

- we have to use a substantial portion of our cash flow from operations for
debt service rather than for our operations;

- we may not be able to obtain additional debt financing for future working
capital, capital expenditures or other corporate purposes;

- we could be less able to take advantage of significant business
opportunities, such as acquisition opportunities, and react to changes in
market or industry conditions;

- we are more vulnerable to general adverse economic and industry
conditions; and

- we are disadvantaged compared to competitors with lower levels of
outstanding debt compared to net book value of assets.

OUR BUSINESS OPERATIONS ARE RESTRICTED BY PROVISIONS OF OUR DEBT AGREEMENTS;
FAILURE TO COMPLY COULD RESULT IN ACCELERATION OF INDEBTEDNESS

The indenture governing our 10 1/2% Senior Subordinated Notes due 2009,
the notes, and our credit agreement contain a number of covenants that
significantly restrict our ability to dispose of assets, incur additional
indebtedness, incur guarantee obligations, repay other indebtedness or amend
other debt instruments, pay dividends, create liens on assets, enter into
capital leases, make investments, loans or advances, make acquisitions,
engage in mergers or consolidations, make capital expenditures, engage in
certain transactions with subsidiaries and affiliates and otherwise restrict
business operations. In addition, under the credit agreement, we are required
to meet a number of financial ratios and tests.

Our ability to comply with these agreements may be affected by events beyond
our control, including prevailing economic, financial and industry conditions.
The breach of any of these covenants or restrictions could result in an event of
default under our credit agreement or the indenture. In either case, certain
lenders could declare all amounts borrowed under those agreements to be
immediately due and payable, together with accrued and unpaid interest.
Additionally, the senior lenders could terminate their commitments to make

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further extensions of credit under our credit agreement. If we are unable to
repay indebtedness to our senior lenders, they can proceed against the
collateral securing indebtedness under our credit agreement.

THE LOSS OF ONE OR MORE MAJOR CUSTOMERS COULD MATERIALLY AND ADVERSELY AFFECT
OUR RESULTS OF OPERATIONS

During 1999, our top ten customers accounted for approximately 74% of our
sales, including IBM which accounted for more than 10% of our sales. The loss
of any of our major customers could have a material adverse effect on our
financial condition or results of operations. We do not have long-term
contracts with our customers. As a result, we cannot assure that a customer
will not transfer, reduce the volume of, or cancel a purchase order, each of
which could adversely affect our financial condition or results of
operations. In addition, as a provider of power supplies to OEMs, our sales
are dependent upon the success of the underlying products of which our power
supplies are a component.

WE COULD LOSE BUSINESS IF WE FAIL TO KEEP UP WITH RAPID TECHNOLOGICAL CHANGE IN
THE ELECTRONIC EQUIPMENT INDUSTRY

Many of our existing customers are in the electronic equipment industry,
especially telecommunications and networking, and produce products that are
subject to rapid technological change, obsolescence and large fluctuations in
world-wide product demand. These industries are characterized by intense
competition and end-user demand for increased product performance at lower
prices. Our customers make similar demands on us. We cannot assure that we 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 our
major customers or their products, in particular, could have a material adverse
effect on our financial condition or results of operations.

The markets for our products are characterized by:

- rapidly changing technologies;

- increasing customer demands;

- evolving industry standards;

- frequent new product introductions; and

- in some cases, shortening product life cycles.

Generally, our customers purchase power supplies from us for the life cycle of a

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product. The development of new, technologically advanced products is a complex
and uncertain process requiring high levels of innovation and cost, as well as
the accurate anticipation of technological and market trends. As the life cycle
of our customers' products shorten, we will be required to bid on contracts for
replacement or next generation products to replace revenues generated from
discontinued products more frequently. We cannot assure that we will
successfully develop, introduce or manage the transition of new products. The
failure of or the delay in anticipating technological advances or developing and
marketing product enhancements or new products that respond to any significant
technological change or change in customer demand could have a material adverse
effect on our financial condition or results of operations.

WE FACE SIGNIFICANT COMPETITION; OUR FAILURE TO EFFECTIVELY COMPETE COULD
MATERIALLY AND ADVERSELY AFFECT RESULTS OF OPERATIONS AND MARKET SHARE

The design, manufacture and sale of power supplies is highly competitive.
Our competition includes numerous companies located throughout the world, some
of which have advantages over us in terms of labor and component costs and
technology. Many of our competitors have substantially greater resources and
geographic presence than we do. We cannot assure that competition from existing
competitors or new market entrants will not increase. We also face competition
from current and prospective customers that may design and manufacture their own
power supplies. In times of an economic downturn, or when dealing with
high-volume orders, price may become an increasingly important competitive
factor, which could cause us to reduce prices and thereby adversely affect our
results of operations. Some of our major competitors have also been engaged in
merger and acquisition transactions. Such consolidations by competitors are
likely to create entities with increased market share, customer bases,
technology and marketing expertise, and/or sales force size. These developments
may adversely affect our ability to compete. We cannot assure that we will
continue to be able to compete successfully against current or future
competitors in the market.

OUR DEPENDENCE ON INTERNATIONAL OPERATIONS SUBJECTS US TO VARIOUS RISKS
ASSOCIATED WITH, AMONG OTHER THINGS, FOREIGN LAWS, POLICIES, ECONOMIES AND
EXCHANGE RATE FLUCTUATIONS

We have manufacturing operations located in Mexico and India. These
operations are subject to inherent risks, including variations in tariffs,
quotas, taxes and other market barriers, political and economic instability,
work stoppages or strikes, unexpected changes in regulatory requirements,

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restrictions on the export or import of technology, and difficulties in staffing
and managing international operations, which could have a material adverse
effect on our financial condition or results of operations. In addition, while
we transact business predominantly in United States dollars and most of our
revenues are generated in the United States and collected in United States
dollars, a portion of our labor costs are denominated in the Mexican peso and
the Indian rupee. Fluctuations in the value of the U.S. dollar relative to these
foreign currencies, or increased import duties, the imposition of tariffs or
import quotas or interruptions in transportation, will affect our costs of goods
sold and operating margins and could result in exchange losses or delays in
shipments. Historically, we have not actively engaged in substantial exchange
rate hedging activities and do not intend to do so in the future.

AN INTERRUPTION IN DELIVERY OF COMPONENT SUPPLIES COULD LEAD TO SUPPLY SHORTAGES
OR A SIGNIFICANT INCREASE IN PRICES OF COMPONENT SUPPLIES, WHICH COULD
MATERIALLY AND ADVERSELY AFFECT OUR BUSINESS

We are dependent on our suppliers for timely shipments of components. We
typically use a primary source of supply for each component used in our
products. Establishing alternate primary sources of supply, if needed, could
take a significant period of time which could result in supply shortages and
could result in increased prices. In some cases components are sourced from only
one manufacturer and an interruption in supply could materially adversely affect
our operations. Any shortages of particular components, including components
manufactured in our India Facilities, could increase product delivery times
and/or costs associated with manufacturing, reducing gross margins. For more
details, see the heading "Our Dependence on International Operations Subjects us
to Various Risks Associated With, Among Other Things, Foreign Laws, Policies,
Economies and Exchange Rate Fluctuations" above. Additionally, such shortages
could cause a substantial loss of business due to shipment delays. Any
significant shortages or price increases of components could have a material
adverse effect on our financial condition or results of operations.

OUR QUARTERLY SALES MAY FLUCTUATE WHILE OUR EXPENDITURES REMAIN RELATIVELY
FIXED, POTENTIALLY RESULTING IN LOWER GROSS MARGINS

Our 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 us have significantly affected sales and gross
profit. Sales generally may also be affected by other factors. These factors
include:

- the receipt and shipment of large orders;

- raw material availability and pricing;

17
<PAGE>

- product and price competition; and

- the length of sales cycles and economic conditions in the electronics
industry.

Many of these factors are outside our control.

We do not obtain long term purchase orders or commitments from our
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. We rely on our estimates of anticipated future volumes when making
commitments regarding the level of business that we will seek and accept, the
mix of products that we intend 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 our backlog may be subject to cancellation or
postponement without penalty. We cannot assure that we will be able to timely
replace cancelled, 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 our financial condition or
results of operations.

Our expense levels are relatively fixed and are based, in part, on
expectations of future revenues. Consequently, if revenue levels are below
expectations, our financial condition or results of operations could be
materially adversely affected. Due to all of the preceding factors, in some
future quarter or quarters our financial condition or results of operations may
be below our expectations and our gross margins may decrease. For details
concerning our financial condition, see Item 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

OUR ABILITY TO MAINTAIN AND ENHANCE PRODUCT AND MANUFACTURING TECHNOLOGIES AND
TO SUCCESSFULLY OPERATE OUR BUSINESS IS DEPENDENT UPON OUR CONTINUED ABILITY
TO ATTRACT AND RETAIN KEY PERSONNEL

Our success depends to a significant degree on the efforts of Mr. Pat Patel,
our Chief Executive Officer, and the other members of our senior management
team. We have no employment agreements with our key management executives and do
not maintain key person life insurance for any of our officers or Management
Committee members other than Mr. Patel. We believe that the loss of service of

18
<PAGE>

any of these executives could have a material adverse effect on our business.

Our ability to maintain and enhance product and manufacturing technologies
and to manage any future growth will also depend on our success in attracting
and retaining personnel with highly technical skills. The competition for these
qualified technical personnel may be intense if the relatively limited number of
qualified and available power engineers continues. We cannot assure that we will
be able to attract and retain qualified management or other highly technical
personnel.

IF WE ARE UNABLE TO SUSTAIN OUR RAPID GROWTH OR EFFECTIVELY INTEGRATE ACQUIRED
BUSINESSES OUR LONG TERM COMPETITIVE POSITION MAY SUFFER

We believe that our long-term competitive position depends in part on our
ability to continue to increase manufacturing capacity, and we cannot assure
that we will be able to acquire or build sufficient capacity or successfully
integrate and manage such expanded facilities. The failure to obtain sufficient
capacity or to successfully integrate and manage additional or expanded
manufacturing facilities could adversely impact our relationships with customers
and suppliers and materially adversely affect our financial condition or results
of operations.

The growth of our business, through acquisition or otherwise, requires
substantial additional capital, and we cannot assure that such capital will be
available on acceptable terms, or at all. In addition, such growth is expected
to place significant demands on our financial and management resources,
including:

- diversion of management's attention from day to day operations;

- requiring us to develop further the management skills of our managers and
supervisors; and

- requiring additional personnel at all levels, including highly technical
personnel and management.

Moreover, our ability to make successful acquisitions depends on numerous
other factors, including our ability to identify acceptable acquisition
opportunities and consummate acquisition transactions. We cannot assure that we
will be successful in making future acquisitions or, once one or more
acquisitions have been completed, that we will be able to effectively manage
expansion of our operations and attract and retain necessary personnel. Failure

19
<PAGE>

to effectively integrate acquired businesses could adversely affect our
financial condition or results of operations.

THE FAILURE OF OUR COMPUTER SYSTEMS OR THOSE OF OUR CUSTOMERS OR SUPPLIERS TO
RECOGNIZE THE YEAR 2000 COULD ADVERSELY AFFECT OUR OPERATIONS

The Year 2000 issue refers to the potential problems arising from computer
programs written to store and identify years in only two digits instead of four.
As a result, any of our computerized equipment or that of our customers or our
suppliers which is date sensitive may be unable to distinguish between the year
1900 and 2000. This may potentially result in system failures or errors that may
produce disruptions in our normal business operations and those of our suppliers
and customers. As of the date of filing of this Annual Report on Form 10-K,
we have not experienced any material Year 2000 issues. We cannot assume,
however, that we will not have any Year 2000 problems in the future.

CHANGES IN GOVERNMENT REGULATIONS OR PRODUCT CERTIFICATION COULD RESULT IN
DELAYS IN SHIPMENT OR IN LOST SALES, THEREBY MATERIALLY AND ADVERSELY
AFFECTING OUR RESULTS OF OPERATIONS

Our operations are subject to general laws, regulations and government
policies in the United States and abroad relating to items such as minimum wage,
employee safety and other health and welfare regulations. Additionally, our
product standards are certified by agencies in various countries including the
United States, Canada, Germany and the United Kingdom among others. As many
customers will not order uncertified products, changes in such certification
standards could negatively affect the demand for our products, result in the
need to modify our 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 our financial condition or results of operations.

ENVIRONMENTAL COMPLIANCE COULD REQUIRE SIGNIFICANT EXPENDITURES, THEREBY
MATERIALLY AND ADVERSELY AFFECTING OUR RESULTS OF OPERATIONS

We are subject to federal, state and local environmental laws and
regulations (in both the United States 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 violation. Should there be an environmental occurrence, incident

20
<PAGE>

or violation, our financial condition or results of operations may be adversely
affected. We could be held liable for significant damages for violation of
environmental laws and could also be subject to a revocation of licenses or
permits, thereby materially and adversely affecting our financial condition or
results of operations.

ITEM 2. PROPERTIES

The following table identifies our facilities.

APPROX. OWNED
PRIMARY SQUARE VS. LEASE
FACILITIES ACTIVITY FOOTAGE LEASED EXPIRATION DATE
- ------------------------- ------------------------- ----------- ----------- -------------------------
<S> <C> <C> <C> <C>
Tustin, CA Administrative, 86,000 Leased April 30, 2009
Manufacturing,
Engineering

Tustin, CA Storage 14,000 Leased November 30, 2001

Irvine, CA Manufacturing, 31,000 Leased December 31, 2000
Engineering

Guadalajara, Mexico Manufacturing 35,000 Owned --

Bombay, India Manufacturing 14,000 Leased March 31, 2003

Bombay, India Manufacturing 17,000 Leased April 15, 2004

</TABLE>

<PAGE>

ITEM 3. LEGAL PROCEEDINGS

We are subject to disputes and potential claims by third parties
that are incidental to the conduct of our business. We do not believe that
the outcome of any such matters, pending at December 31, 1999, will have a
material adverse effect on our financial condition or results of operations.

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

None.

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED UNITHOLDER
MATTERS

There is no established public trading market for our membership units.

As of March 15, 2000, there were 16 holders of record of our
membership units.

Pursuant to our Second Amended and Restated Operating Agreement, as
amended, subject to certain qualifications, we may make distributions of cash on
our membership units at times, and in amounts, determined by our Management
Committee. Subject to compliance with our contractual obligations, however, we
must make quarterly tax distributions on our membership units to enable our
members to pay taxes on our income. For the fiscal years ended December 31, 1998
and 1999, we made the following distributions:

FISCAL 1999
-------------

Distribution
Date paid per unit
----------- ---------------
<S> <C>
January 14, 1999 $ 0.07
March 12, 1999 $ 0.01
April 14, 1999 $ 0.13
April 30, 1999 (1) $ 5.00
June 10, 1999 $ 0.03
September 15, 1999 $ 0.06
February 1, 2000 (2) $ 0.06
</TABLE>

FISCAL 1998
-------------

Distribution
Date paid per unit
----------- --------------
<S> <C>
January 14, 1998 $ 0.03
April 14, 1998 $ 0.20
April 15, 1998 $ 0.01
June 11, 1998 $ 0.08
September 14, 1998 $ 0.08
December 29, 1998 $ 0.03
</TABLE>

(1) Distribution made as part of the Transactions
(2) Accrued as of December 31, 1999

<PAGE>

On April 30, 1999, we consummated an offering of $100 million aggregate
principal amount of notes, pursuant to exemptions from, or transactions not
subject to, the registration requirements of the Securities Act of 1933, as
amended, and applicable state securities laws. The net proceeds of the offering
were approximately $96.4 million. The offering was effected pursuant to
Section 4(2) of the Securities Act and Rule 144A promulgated thereunder, and the
initial purchaser was Credit Suisse First Boston Corporation. Following the
offering, we effected an exchange offer, registered under the Securities Act,
pursuant to which the 10 1/2% Series A Senior Subordinated Notes due 2009 were
exchanged for 10 1/2% Series B Senior Subordinated Notes due 2009 with
substantially the same terms and conditions as the 10 1/2% Series A Senior
Subordinated Notes due 2009.

We used the net proceeds together with borrowings under our current
credit facility to fund a $150 million cash distribution to our members made
in connection with the acquisition by Cherokee Investor Partners, LLC of 60%
of our then outstanding membership units. Collectively, we refer to the
issuance of the notes, the entrance into our current credit facility, the
acquisition by Cherokee Investors of 60% of our then outstanding membership
units and the $150 million cash distribution as the "Transactions."

ITEM 6. SELECTED FINANCIAL DATA

You should read the following selected historical consolidated financial
information in conjunction with our audited consolidated financial statements
beginning on page F-1 of this Annual Report on Form 10-K. We derived our
selected historical consolidated financial information as of December 31,
1996, 1997, 1998 and 1999 and for the nine months ended December 31, 1996,
and the years ended December 31, 1997, 1998 and 1999 from our audited
consolidated financial statements. Effective March 29, 1996 we entered into
an asset purchase agreement with Cherokee International, Inc. a wholly-owned
subsidiary of Core Industries and an asset transfer agreement with Bikor
Corporation whereby we purchased assets and assumed liabilities for a total
purchase price of $26,536,888. The acquisition was accounted for under the
purchase method of accounting with the total purchase price allocated to net
tangible assets. No goodwill was recorded as the fair market value of assets
acquired and liabilities assumed approximated historical cost. We continued
the businesses of Cherokee International, Inc. and Bikor Corporation
subsequent to the acquisitions and incurred a significant increase in
interest in 1996 and 1997 due to additional borrowings incurred as a result
of the acquisitions. We derived our selected historical consolidated
financial information as of December 31, 1995 and March 31, 1996, and for the
year ended December 31, 1995, and for the three months ended March 31, 1996
from our unaudited consolidated financial statements which have been prepared
by us on a basis consistent with our audited financial statements and, in our
opinion, include all adjustments (consisting of only normal recurring

<PAGE>

adjustments) necessary for a fair presentation of our results of operations
for such periods and financial condition as of the dates presented.

PREDECESSOR CHEROKEE INTERNATIONAL, LLC
------------------------ ------------------------------------------------
3 MONTHS 9 MONTHS YEAR ENDED
YEAR ENDED ENDED ENDED -----------------------------------
DEC. 31 MAR. 31 DEC. 31 DEC. 31 DEC. 31 DEC. 31
1995 1996 1996(a) 1997(a) 1998(a) 1999(a)
----------- ----------- ----------- ----------- ----------- ---------
(IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C> <C>

STATEMENT OF INCOME DATA

Net sales.................................. $ 38,074 $ 12,175 $ 50,197 $ 77,022 $ 87,553 $ 121,458
Cost of sales.............................. 30,552 9,587 33,901 48,990 54,824 77,593
--------- --------- --------- --------- --------- ---------
Gross profit............................... 7,522 2,588 16,296 28,032 32,729 43,865
Operating expenses......................... 6,680 1,927 7,085 9,520 8,794 10,599
Special bonus distribution................. -- -- -- -- -- 5,330
--------- --------- --------- --------- --------- ---------
Operating income........................... 842 661 9,211 18,512 23,935 27,936
Interest expense........................... (509) (152) (1,638) (1,065) (373) (10,675)
Other income (expense)..................... 195 135 41 377 338 (709)
--------- --------- --------- --------- --------- ---------
Income before extraordinary item........... 528 644 7,614 17,824 23,900 16,552
Extraordinary gain on early extinguishment
of debt.................................. -- -- -- 714 -- --
--------- --------- --------- --------- --------- ---------
Pretax income(b)........................... $ 528 $ 644 $ 7,614 $ 18,538 $ 23,900 $ 16,552
========= ========= ========= ========= ========= =========
Basic and diluted income per unit:
Income before extraordinary item........... -- -- $ .25 $ .59 $ .80 $ .55
Net income................................. -- -- $ .25 $ .62 $ .80 $ .55
========= ========= ========= =========
Weighted Average Units Outstanding:
Basic...................................... -- -- 30,000 30,000 30,000 30,124
========= ========= ========= =========
Diluted.................................... -- -- 30,000 30,000 30,000 30,211
========= ========= ========= =========

BALANCE SHEET DATA (AT PERIOD END):
Working capital............................ $ 10,202 $ 5,671 $ 16,445 $ 14,398 $ 23,698 $ 22,757
Total assets............................... 26,065 27,611 28,756 30,654 40,846 54,876
Total debt................................. 6,307 6,784 15,520 4,463 2,042 149,651
Shareholder's equity/members' equity
(deficit)(c)............................. 15,874 16,287 8,654 19,118 30,029 (107,676)

OTHER FINANCIAL DATA:
EBITDA(d).................................. $ 1,890 $ 1,086 $ 10,575 $ 20,015 $ 25,606 $ 35,656
EBITDA margin(e)........................... 5.0% 8.9% 21.1% 26.0% 29.2% 29.4%
Cash flow provided by (used in) operating
activities............................... $ (119) $ (1,675) $ 9,839 $ 20,078 $ 20,066 $ 19,152
Cash flow used in investing activities..... (718) (78) (17,199) (1,355) (1,898) (532)
Cash flow provided by (used in) financing
activities............................... 719 246 6,927 (18,416) (16,256) (13,436)
</TABLE>

<PAGE>

<TABLE>

<S> <C> <C> <C> <C> <C> <C>
Depreciation and amortization.............. $ 1,048 $ 425 $ 1,364 $ 1,503 $ 1,671 $ 2,390
Capital expenditures....................... 718 78 1,935 1,355 1,898 532
</TABLE>

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

(a) Includes financial statements of Bikor Corporation, the assets of which
we acquired on March 29, 1996. The financial statements of Bikor
Corporation are not included for periods prior to such acquisition.

(b) For the year ended December 31, 1995 and the period ended March 31, 1996,
the income of our predecessor was subject to tax on a consolidated basis
with its parent which amounted to $248,000 and $232,000, respectively.
For subsequent periods, pretax income represents net income for a limited
liability company that is not subject to income tax.

(c) For the year ended December 31, 1995, and for the three months ended
March 31, 1996, the term "Shareholders' Equity" applies. For the nine
months ended December 31, 1996, and the years ended December 31, 1997,
1998 and 1999 the term "Members' Equity (Deficit)" applies.

(d) EBITDA represents operating income plus depreciation and amortization
and, for the year ended December 31, 1999, plus a special bonus of
$5,330,000 made by Cherokee in connection with the Transactions. We
consider EBITDA to be a widely accepted financial indicator of a company's
ability to service debt, fund capital expenditures and expand its business;
however, EBITDA is not calculated in the same way by all companies and is
neither a measurement required, nor represents cash flow from operations as
defined, by generally accepted accounting principles. You should not
consider EBITDA to be an alternative to net income, an indicator of
operating performance or an alternative to cash flow as a measure of
liquidity.

(e) EBITDA Margin represents EBITDA as a percentage of net sales.

<PAGE>

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

GENERAL

You should read the following discussion and analysis of our results of
operations, financial condition and liquidity in conjunction with the audited
consolidated financial statements beginning on page F-1 of this Annual Report
on Form 10-K.

OVERVIEW

We are a leading designer and manufacturer of a broad range of switch
mode power supplies for OEMs primarily in the high growth telecommunications,
networking and high-end workstation industries. We produce our products and
related components in five sophisticated manufacturing facilities including
plants located in Tustin, California, Irvine, California, Guadalajara, Mexico
and two in Bombay, India.

Our net sales are principally driven by growth in our customers' industries.
The telecommunications, networking and high-end workstation markets are
benefitting from the proliferation of internet/intranet, wireless and other
communications.

The principal elements comprising cost of sales are raw materials, labor
and manufacturing overhead. Raw materials account for a large majority of
cost of sales. Raw materials include magnetic subassemblies, sheet metal,
electronic and other components, mechanical parts and electrical wires. Labor
costs include employee costs of salaried and hourly employees. Manufacturing
overhead includes lease costs, depreciation on property, plant and equipment,
utilities, property taxes and repairs and maintenance.

Operating expenses include engineering costs, selling and marketing costs
and administrative expenses. Engineering costs primarily include salaries and
benefits of engineering personnel, safety approval and quality certification
fees, depreciation on equipment and subcontract costs for third party
contracting services. Selling and marketing expenses primarily include salaries
and benefits to account managers and commissions to independent sales
representatives. Administrative expenses primarily include salaries and benefits
for certain management and administrative personnel, professional fees and
information system costs.

<PAGE>

Cherokee is organized as a California limited liability company and treated
as a partnership for United States federal income tax purposes. Under this
treatment, Cherokee is not itself subject to United States federal income
taxation. Each member of Cherokee, however, is subject to tax on its allocable
share of Cherokee's income. In general, Cherokee makes distributions to its
members in an amount sufficient to pay their United States federal and state
income taxes resulting from their allocable share of Cherokee's income.

<PAGE>

RESULTS OF OPERATIONS

FISCAL 1999 COMPARED TO FISCAL 1998

NET SALES

Net sales increased by approximately 38.7% or $33.9 million to $121.5
million for the year ended December 31, 1999 from $87.6 million for the year
ended December 31, 1998.

This increase in net sales was primarily attributable to growth in
business with existing customers, along with a broadening of our customer
base resulting in additional sales from projects with new customers.

GROSS PROFIT

Gross Profit increased by approximately 34.0% or $11.1 million to $43.9
million for the year ended December 31, 1999 from $32.7 million for the year
ended December 31, 1998. Gross margin for 1999 decreased to 36.1% from 37.4%
in the prior year.

The increase in gross profit was primarily due to the increase in sales.
The decrease in gross margin compared to the prior year was primarily due to
increased pricing pressure from certain key existing customers and a change in
product mix. This decrease was partially offset by improved operating
leverage due to higher sales volume and improved operating efficiencies due
to increased automation.

<PAGE>

OPERATING EXPENSES

Operating expenses for the year ended December 31, 1999 of $15.9 million
included a $5.3 million special bonus distribution. This bonus payment was in
addition to our discretionary annual management bonus plan and was funded by
capital contributions made by our then existing members. No such special
bonus distribution was made in the prior year.

Operating expenses, excluding the special bonus distribution, increased
by approximately 20.5% or $1.8 million to $10.6 million for the year ended
December 31, 1999 from $8.8 million for the year ended December 31, 1998. As
a percentage of sales, operating expenses, before the special bonus
distribution, declined to 8.7% from 10.0% in the prior year.

The increase in operating expenses was primarily due to the increased costs
to support the higher sales volume. The decline in operating expenses as a
percentage of net sales was primarily attributable to increased operating
leverage as a result of the higher sales volume.

OPERATING INCOME

Operating income for the year ended December 31, 1999 of $27.9 million
includes the $5.3 million special bonus distribution. Excluding the effect of
the special bonus distribution, operating income increased by approximately
39.0% or $9.3 million to $33.3 million for the year ended December 31, 1999
from $23.9 million for the year ended December 31, 1998. Operating margin for
the year ended December 31, 1999, before the special bonus distribution,
improved slightly to 27.4% from 27.3% in the prior year.

The increase in operating income was primarily due to the same factors
contributing to our increase in gross profit as discussed above and improved
operating leverage due to increased sales volume.

INTEREST EXPENSE

Interest expense for the year ended December 31, 1999 was $10.7 million
compared to $0.4 million for the year ended December 31, 1998. This
substantial increase was primarily due to the issuance of $100 million of 10
1/2% senior subordinated notes and a new $50 million term loan, all of which
occurred in April 1999 in connection with the Transactions.

NET INCOME

Net income for the year ended December 31, 1999 was $16.6 million,
which includes the effect of the $5.3 million special bonus distribution.
Excluding the effect of the special bonus distribution, net income
decreased

<PAGE>

by approximately 8.4% or $2.0 million to $21.9 million for the year ended
December 31, 1999 from $23.9 million for the year ended December 31, 1998.
Net income margin for 1999, before the special bonus distribution, was
18.0% compared to 27.3% for 1998.

The decrease in net income and net income margin was primarily due
to the substantially higher interest expense discussed above, partially
offset by the increased operating income discussed above.

FISCAL 1998 COMPARED TO FISCAL 1997

NET SALES

Net sales increased approximately 13.7% or $10.5 million to $87.6 million in
fiscal 1998 from $77.0 million in fiscal 1997.

This increase in net sales was primarily attributable to growth in
business with existing customers, along with new projects with certain new
customers.

GROSS PROFIT

Gross profit increased by approximately 16.8% or $4.7 million to $32.7
million for fiscal 1998 from $28.0 million in fiscal 1997. Gross margin

<PAGE>

for this period increased to 37.4% from 36.4%.

The increase in gross profit and gross margin was primarily attributable to:

- increased sales volume;

- decrease in material costs due to increased purchasing power and better
negotiation of volume discounts;

- continued automation contributing to a reduction in labor costs; and

- lower manufacturing overhead due to increased operating leverage.

OPERATING EXPENSES

Operating expenses decreased by approximately 7.6% or $0.7 million to $8.8
million in fiscal 1998 from $9.5 million in fiscal 1997. Operating expenses as a
percentage of net sales declined to 10.0% in fiscal 1998 from 12.4% in fiscal
1997.

The decrease in operating expenses was primarily attributable to lower
commission expense due to (a) a change in the commission structure in 1998 to a
flat commission from a sliding scale in 1997 and (b) increased sales to certain
existing customers. Also, our improved operating leverage due to higher sales
volume contributed to the decline in operating expenses as a percentage of
sales.

OPERATING INCOME

Operating income increased by approximately 29.3% or $5.4 million to $23.9
million in fiscal 1998 from $18.5 million in fiscal 1997. Operating margin
improved to 27.3% in 1998 from 24.0% in 1997.

The increases in operating income and operating margin were attributable to
the same factors contributing to the increase in gross profit and the reduction
in operating expenses as discussed above.

INTEREST EXPENSE

Interest expense decreased by approximately 65.0% or $0.7 million to $0.4
million in fiscal 1998 from $1.1 million in fiscal 1997 as we continued to repay
our outstanding indebtedness during 1998.

OTHER INCOME

Other income decreased by $0.1 million to $0.3 million in fiscal 1998
from $0.4 million in fiscal 1997. Other income in

<PAGE>

1997 included $0.4 million relating to a contract cancellation fee received
from a customer.

EXTRAORDINARY GAIN

The extraordinary gain in 1997 included $0.7 million relating to a gain from
early repayment of a subordinated note due to Core Industries.

NET INCOME

Net income increased by approximately 28.9% or $5.4 million to $23.9
million in fiscal 1998 from $18.5 million in fiscal 1997. Net income margin
improved to 27.3% from 24.1%.

The increases in net income and net income margin were primarily due
to the same factors that contributed to the improvement in operating income and
operating margin and the decline in interest expense, partially offset by the
decrease in other income in 1998, all as discussed above.

LIQUIDITY AND CAPITAL RESOURCES

CASH FLOWS

FISCAL 1999 COMPARED TO FISCAL 1998

Net cash provided by operating activities was $19.2 million for the year
ended December 31, 1999 compared to $20.1 million for the year ended December
31, 1998. The amount for 1999 includes the negative cash flow effect of a
$5.3 million special bonus distribution which was funded by a capital
contribution made by the existing members. Excluding the effect of the
special bonus distribution, cash provided by operating activities was $24.5
million for fiscal 1999, which increased 21.9% or $4.4 million from fiscal
1998. Cash provided by operating activities for 1999 reflects increased
depreciation and amortization, including amortization of deferred financing
costs, and increased, accrued interest payable of $2.4 million partially
offset by increased inventories of $3.4 million. Cash provided by operating
activities for 1998 reflects a $2.5 million increase in accounts payable,
offset by increases of $5.2 million in accounts receivable and $2.1 million
in inventories.

<PAGE>

Net cash used in financing activities was $13.4 million for the year
ended December 31, 1999 compared to $16.3 million for the year ended December
31, 1998. The amount for 1999 includes the favorable cash flow effect of a
$5.3 million capital contribution made by the existing members to fund the
special bonus distribution discussed above. This was partially offset by
payment in 1999 of $5.4 million of deferred financing costs.

FISCAL 1998 COMPARED TO FISCAL 1997

Net cash provided by operating activities was $20.1 million for fiscal
1998 and 1997. Cash earnings from operations (net income plus depreciation
and amortization) in 1998 were $25.6 million compared to $20.0 million in
1997. Net cash used in working capital increased in 1998 by $5.5 million
primarily attributable to an increase in accounts receivable and inventories
by $5.4 million due to 43.0% higher sales in the fourth quarter of 1998
compared to 1997.

Net cash used in investing activities was $1.9 million for fiscal 1998
compared to $1.4 million for fiscal 1997. This increase of $1.3 million was
primarily attributable to additional purchases of equipment.

Net cash used in financing activities was $16.3 million for fiscal 1998
compared to $18.4 million for fiscal 1997. This decrease of $2.1 million was
attributable to a net decrease on long term debt, term loans and revolving
credit facility by $7.1 million and by an increase of $4.9 million in equity
distributions to members for the purpose of paying income taxes on earnings.

<PAGE>

LIQUIDITY

Historically, we have financed our operations with cash from operations
supplemented by borrowings from our credit facilities. As a result of the
Transactions, our liquidity needs primarily arise from debt service on our
indebtedness, working capital requirements, capital expenditures and
distributions to our members so that they may satisfy their obligations to
pay taxes on our income. As of December 31, 1999, our borrowings consisted of
$100 million of senior subordinated notes and $46 million of borrowings under
our current credit facilities, including $45.4 million under the term loan
facility and $0.6 million drawn under the $25 million revolving credit
facility. Interest expense will have a greater proportionate impact on net
income in subsequent periods in comparison with the periods before these
transactions. We are not subject to any amortization requirements under the
notes prior to maturity but we are required to make scheduled repayments
under the term loan facility.

We believe that cash flow from operations and available borrowing capacity
will be adequate to meet our anticipated cash requirements, including operating
requirements, planned capital expenditures, debt service and distributions to
pay taxes, for the next twelve months.

Our historical capital expenditures have substantially resulted from
investments in equipment to increase our manufacturing capacity and improve
manufacturing efficiencies. Our cash capital expenditures were $0.5 million,
$1.9 million and $1.4 million for fiscal 1999, 1998 and 1997, respectively.
Capital expenditures under capital leases were $3.2 million in 1999 and $0.8
million in 1998. For fiscal 2000, we expect capital expenditures to be
approximately $3-4 million. We expect capital expenditures for fiscal 2000 to
relate principally to continuing investments in equipment to expand
manufacturing capacity as well as automation and test equipment to lower
production costs.

<PAGE>

We are organized as a California limited liability company and treated as
a partnership for United States federal income tax purposes. Under this
treatment, we are not subject to United States federal income taxation. Each
of our members, however, is subject to tax on its allocable share of our
income. In general, we make distributions to our members in an amount
sufficient to pay their United States federal and state income taxes
resulting from their allocable share of our income. During 1999, 1998 and
1997, we made distributions to our members of approximately $160.8 million,
$13.0 million and $8.1 million, respectively. The 1999 distribution included
the $150 million distribution made in connection with the Transactions.

YEAR 2000 COMPLIANCE

The "Year 2000" issue is the result of computer programs using two digits
rather than four to define the applicable year. Because of this programming
convention, software or hardware may recognize a date using "00" as the year
1900 rather than the year 2000. Use of non-Year 2000 compliant programs could
result in system failures, miscalculations or errors causing disruptions of
operations or other business problems, including, among others, a temporary
inability to process transactions and invoices or an inability to engage in
similar normal business activities. As of the date of filing of this Annual
Report on Form 10-K, we have not experienced any material Year 2000 issues.
We cannot assure, however, that we will not have any Year 2000 problems in
the future.

COSTS RELATED TO THE YEAR 2000 ISSUE. Through December 31, 1999, we have
incurred approximately $200,000 in costs related to the implementation of an
ERP system.

<PAGE>

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risks relating to our operations result primarily from
changes in short-term interest rates. We do not have significant foreign
exchange or other market risk. We did not have any derivative financial
instruments at December 31, 1999.

Our exposure to market risk for changes in interest rates relates
primarily to our current credit facility. In accordance with the credit
facility, we enter into variable rate debt obligations to support general
corporate purposes, including capital expenditures and working capital needs. We
continuously evaluate our level of variable rate debt with respect to total debt
and other factors, including assessment of the current and future economic
environment.

We had approximately $46 million in variable rate debt outstanding at
December 31, 1999. Based upon this year-end variable rate debt level, a
hypothetical 10% adverse change in interest rates would increase interest
expense by approximately $0.4 million on an annual basis, and likewise
decrease our earnings and cash flows. We cannot predict market fluctuations
in interest rates and their impact on our variable rate debt, nor can there
be any assurance that fixed rate long-term debt will be available to us at
favorable rates, if at all. Consequently, future results may differ
materially from the estimated adverse changes discussed above.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATE

See the Index to Financial Statements on page F-1.

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

NONE.

36
<PAGE>

ITEM 10. MANAGEMENT

EXECUTIVE OFFICERS AND MANAGEMENT COMMITTEE MEMBERS

Pursuant to our second amended and restated operating agreement, we are
managed by an eight-member Management Committee.

Set forth below is certain information concerning our executive officers and
members of our Management Committee.

NAME AGE POSITION(S) WITH CHEROKEE
- --------------------------------------------- --------- --------------------------------------------------
<S> <C> <C>
Pat Patel.................................... 55 Chairman, Chief Executive Officer and member of
Management Committee

Ken King..................................... 71 Executive Vice President and member of Management
Committee

Bud Patel.................................... 64 Executive Vice President and member of Management
Committee

Dennis Pouliot............................... 52 Vice President of Marketing

Howard Ribaudo............................... 41 Vice President of Sales

Van Holland.................................. 46 Chief Financial Officer

Ian Schapiro................................. 42 Vice President and member of Management Committee

Stephen Kaplan............................... 41 Member of Management Committee

Tony Bloom................................... 61 Member of Management Committee

Raymond Meyer................................ 59 Member of Management Committee

Chris Brothers............................... 34 Member of Management Committee

</TABLE>

PAT PATEL founded Cherokee Corporation in 1978, and served as President
of Cherokee and its successor since its inception. In April 1999, he became
Chairman of the Management Committee and Chief Executive Officer and resigned
as President. Prior to founding Cherokee Corporation, Mr. Patel served as a
Senior Project Engineer at Burroughs Corp. (now Unisys) for four years. Mr.
Patel also serves as President and Chief Executive Officer of, and is a
director of, Cherokee Finance.

KEN KING has served as Executive Vice President of Cherokee and its
predecessor since September 1982. Mr. King joined us after serving as the
President of Delphi Communications Corp. from September 1972 until
September 1982.

37
<PAGE>

BUD PATEL has served as our Executive Vice President since April 1996 and
was a Vice President of Engineering of Cherokee Corporation from 1987 to 1993.
Mr. Patel served as President of Bikor from June 1993 through March 1996 when we
acquired substantially all of the assets of Bikor. Prior to joining the Company
in 1987, Mr. Patel was a Director of Engineering at Leland Electro Systems for
over 25 years. Mr. Patel also serves as a director of Cherokee Finance. Bud
Patel is not related to Pat Patel.

DENNIS POULIOT has served as Vice President of Marketing of Cherokee and its
predecessor since March 1991. Prior to joining us, Mr. Pouliot was a sales
manager at Lambda Qualidyne from June 1989 to March 1991 and a Director of
International Sales and Marketing from September 1978 through June 1989.

HOWARD RIBAUDO has served as our Vice President of Sales since March 1996
and served us in various other marketing capacities for Cherokee Corporation
from 1988 through September 1993. Mr. Ribaudo served as Vice President of Sales
and Marketing for Bikor from September 1993 through March 1996.

VAN HOLLAND became our Chief Financial Officer in August 1999. Prior to
joining Cherokee, Mr. Holland served as Executive Vice President and Chief
Financial Officer of Wyle Electronics, a $1.5 billion electronics distributor.
From 1979 to May 1999, Mr. Holland served in various senior financial management
positions at Wyle. Prior to that, Mr. Holland was an auditor with Arthur
Andersen & Co.

IAN SCHAPIRO became our Vice President and a member of our Management
Committee in April 1999. Mr. Schapiro became a founding principal of GFI
in June 1995. From November 1985 to June 1995 he was a partner of Venture
Associates and of Arthur Andersen & Co. following that firm's acquisition of
Venture Associates. From 1984 to 1985, Mr. Schapiro was Chief Financial
Officer of a technology company, and before that, a commercial banker with
The Bank of California whose portfolio was concentrated in the energy sector.
Mr. Schapiro is a widely quoted author of numerous articles regarding the
financial management of energy utilities. He is a member of the board of
directors of Trace Holdings, LLC. Mr. Schapiro also serves as Vice President
and Secretary of, and is a director of, Cherokee Finance.

STEPHEN KAPLAN became a member of our Management Committee in April
1999. Mr. Kaplan is a principal of Oaktree. Prior to joining Oaktree in June
1995, Mr. Kaplan was a Managing Director of Trust Company of the

38
<PAGE>

West, or TCW. Prior to joining TCW in 1993, Mr. Kaplan was a partner in the
law firm of Gibson, Dunn & Crutcher. Mr. Kaplan serves on the boards of
directors of Acorn Products, Inc., Geologistics Corporation, KinderCare
Learning Centers, Inc., Roller Bearing Holding Company, Inc. and various
other private companies.

TONY BLOOM became a member of our Management Committee in April 1999.
Mr. Bloom is an international investor now based in London. Prior to his
relocation to London in July 1988, he lived in South Africa where he was the
Chairman and Chief Executive of The Premier Group (a multi-billion dollar
conglomerate involved in agribusiness, retail, and consumer products), and a
member of the boards of directors of Barclays Bank, Liberty Life Assurance,
and South African Breweries. Since moving to the United Kingdom, he has been
a member of the board of directors of Rothschild, Deputy Chairman of
Sketchley plc and is currently Chairman of Cine-UK Ltd. Mr. Bloom's
association with GFI goes back to its inception in 1995.

RAYMOND MEYER became a member of our Management Committee in April
1999. Mr. Meyer has served as a Group Executive of GFI since August 1998,
providing experienced advice to select GFI portfolio companies which are
active in the power supply, back-up power, and power measurement fields. From
1984 through 1997, Mr. Meyer was President of Deltec Corporation, a leading
supplier of power systems primarily to the computer industry. Before joining
Deltec, Mr. Meyer held executive management positions in the ACDC Division of
Emerson Electric (OEM power supplies) and Intech/FMI (data acquisition
products).

CHRIS BROTHERS, CPA CFA, became a member of our Management Committee in
April 1999. Mr. Brothers is a Senior Vice President of Oaktree. Prior to
joining Oaktree in 1996, Mr. Brothers worked at the New York headquarters of
Salomon Brothers Inc., where he served as a Vice President in the Mergers and
Acquisitions group. Prior to 1992, Mr. Brothers was a Manager in the
Valuation Services group of Price Waterhouse. Mr. Brothers serves on the
boards of directors of National Mobile Television, Inc., Caminus LLC, Power
Measurement, Ltd. and Trace Holdings, LLC.

Our second amended and restated operating agreement provides that Cherokee
Investors has the right to designate five members of our Management Committee
and our other members as of April 30, 1999, have the right to designate three
members of our Management Committee.

The individuals serving as members of our Management Committee serve
indefinite terms, and may be removed only by the members that appointed that
individual to the Management Committee.

39
<PAGE>

NON-COMPETITION AGREEMENTS

In connection with the Acquisition, each of Messrs. Pat Patel, Bud Patel,
Amrit Patel and Mukesh Patel entered into Non-Competition and Confidentiality
Agreements. The Non-Competition Agreements are effective for the longer of five
years or the period during which the executive directly or indirectly holds any
equity interest in Cherokee.

Each Non-Competition Agreement prohibits the applicable executive from
directly or indirectly taking any action or encouraging others to take any
action, which advances or is intended to advance the interest of any existing or
potential competitor of ours or that would otherwise affect the Company's
relationship with any existing or potential customer in a manner that is not in
our interest. Each Non-Competition Agreement also contains confidentiality and
non-solicitation provisions.

ITEM 11. COMPENSATION OF NAMED EXECUTIVE OFFICERS

The summary compensation table below sets forth information concerning
compensation paid in the fiscal year ended December 31, 1998 and 1999 to our
Chief Executive Officer and our four other most highly compensated executive
officers, referred to in this prospectus as our named executive officers.

SUMMARY COMPENSATION TABLE

ANNUAL COMPENSATION
---------------------------------------
OTHER ANNUAL SECURITIES ALL OTHER
SALARY BONUS(1) COMPENSATION(2) UNDERLYING COMPENSATION(3)
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) OPTIONS (#) ($)
- --------------------------------- ---- ---------- --------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Pat Patel ....................... 1999 319,732 175,000 -- 150,000 5,000
Chairman and President 1998 276,216 281,000 -- -- 5,000

Bud Patel ....................... 1999 202,384 110,000 -- 75,000 5,000
Executive Vice President 1998 186,829 165,803 -- -- 5,000

Dennis Pouliot .................. 1999 150,020 50,000 -- 75,000 1,004,500(4)
Vice President of Marketing 1998 150,020 110,000 -- -- 4,500

Ken King ........................ 1999 71,731 0 -- 37,500 1,002,152(4)
Executive Vice President 1998 116,328 90,626 -- -- 3,490

Howard Ribaudo .................. 1999 124,770 30,000 -- 37,500 3,552
Vice President of Sales 1998 109,999 66,000 -- -- 3,300

</TABLE>

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

(1) Bonus payments reported for 1998 include payments made in early 1998
relating to bonuses earned in 1997 of $125,000 for Pat Patel, $72,376 for Bud
Patel, $50,000 for Dennis Pouliot, $40,626 for Ken King and $30,000 for Howard
Ribaudo.

(2) For each named executive officer, the aggregate dollar amount of other

40
<PAGE>

annual compensation received during fiscal 1999 not properly categorized as
salary or bonus did not exceed the lesser of (1) $50,000 and (2) 10% of the
total salary and bonus reported by such named executive officer for such
fiscal year.

(3) Represents matching contributions made by us on behalf of the named
executive officers under our 401(k) plan.

(4) $1,000,000 represents a special bonus paid by the Company's members.

UNIT OPTION PLAN

1999 UNIT OPTION PLAN. The Management Committee adopted the 1999 Unit Option
Plan (the "Plan") on June 28, 1999, which has been approved by a majority of our
members holding Class A Units, for the benefit of our officers, Board members,
employees, advisors and consultants. The Plan covers an aggregate of 2,970,000
non-voting Class B Units and provides for the issuance of unit options.

The Plan may be administered by the Management Committee or a committee
designated by the Management Committee (either such committee sometimes referred
to as the "plan administrator"). The plan administrator may interpret the Plan
and, subject to its provisions, may prescribe, amend and rescind rules and make
all other determinations necessary or desirable for the administration of the
Plan. The Plan permits the plan administrator to select the officers, Management
Committee representatives, employees, advisors and consultants of the Company
(including Management Committee representatives who are also employees) who will
receive unit options and generally to determine the terms and conditions of such
unit options.

The unit price of each unit option granted under the Plan may generally not
be less than 85% of the fair market value of a Class B Unit on the date a unit
option is granted. Unit options generally vest at the rate of 25% per year over
four years.

In the event that we (i) become incorporated (or merged into a
corporation or transfer all or substantially all of our assets to a
corporation) or (ii) become a publicly traded corporation (each, a
"Conversion Transaction"), the plan administrator will, prior to such
Conversion

41
<PAGE>

Transaction, take such action as it shall determine to be appropriate with
respect to the Plan and the outstanding unit options granted, so as to equitably
treat such options and the participants and to enable them to retain the
benefits of the unit options following such Conversion Transaction. Such actions
may, but need not, include adopting a new plan and converting the unit options
into comparable awards under that plan.

In connection with any proposed (i) liquidation or dissolution of us, (ii) a
sale of all or substantially all of our assets other than in the ordinary course
of our business or (iii) a merger or consolidation involving us in which we are
not the surviving entity or we become a subsidiary of another corporation,
excluding, however, any Conversion Transaction, the plan administrator shall
determine the appropriate treatment, if any, of outstanding unit options and may
make such amendments to the Plan as are necessary to reflect such determination.

Except as otherwise provided, in the event of any merger, reorganization,
consolidation or other change in corporate structure affecting the Class B
Units, an equitable substitution or proportionate adjustment, if any, as
determined by the plan administrator, may be made in (i) the aggregate number of
Class B Units reserved for issuance under the Plan, and (ii) the kind, number
and exercise price of Class B Units subject to outstanding unit options granted
under the Plan.

Except as otherwise provided, in the event of any unit split, reverse unit
split, distribution of units, recapitalization, combination or reclassification
of units, an equitable substitution or proportionate adjustment, as determined
by the plan administrator, shall be made in (i) the aggregate number of Class B
Units reserved for issuance under the Plan, and (ii) the kind, number and
exercise price of Class B Units subject to outstanding unit options granted
under the Plan.

In connection with any such event, the plan administrator may provide for
the cancellation of any outstanding unit options that are vested but
unexercised, or any portion thereof. In connection with any such cancellation,
we will make a payment to the participant in cash or other property equal to the
difference between the aggregate fair market value of the Class B Units subject
to the cancelled unit options, or portion thereof, and the aggregate exercise
price of the cancelled unit options, or portion thereof.

The terms of the Plan provide that the plan administrator may amend, suspend

42
<PAGE>

or terminate the Plan at any time, provided, however, that certain amendments
require approval of a majority of the members holding Class A Units. Further, no
such action may be taken which adversely affects any rights under outstanding
unit options without the holder's consent.

OPTION/SAR GRANTS IN LAST FISCAL YEAR

The following table sets forth summary information regarding the option
grants made to our chief executive officer and each of our four other most
highly paid executive officers during 1999. Options granted to purchase our
Class B units under our 1999 Unit Option Plan generally vest over four equal
annual installments. The exercise price per unit for each option granted is
no less than the per unit fair market value of our Class B Units on the date
of grant as determined by our Management Committee.

The percentage of total options was calculated based on options to
purchase an aggregate of 1,055,000 of our Class B Units granted under our
1999 Unit Option Plan in 1999. The potential realizable value was compounded
annually from the date the options were granted to their expiration date
based on the fair market value of the Class B Units on the date of grant.
These assumed rates of appreciation comply with the rules of the Securities
Exchange Commission and do not represent our estimate of future unit prices.
Actual gains, if any, on unit option exercises will be dependent on the
future performance of our units.

POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
RATES OF UNIT PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM
-----------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS GRANTED
UNDERLYING TO EMPLOYEES IN EXERCISE EXPIRATION
NAME YEAR OPTIONS GRANTED (#) FISCAL YEAR (%) PRICE ($/SH) DATE 5% ($) 10%($)
- ---- ---- ------------------- --------------- ------------ ---- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Pat Patel............... 1999 150,000 14.22 4.00 June 30, 2009 129,304 278,460
Chairman and President
Bud Patel............... 1999 75,000 7.11 4.00 June 30, 2009 64,652 139,230
Executive Vice President
Dennis Pouliot.......... 1999 75,000 7.11 4.00 June 30, 2009 64,652 139,230
Vice President of Marketing
Ken King................ 1999 37,500 3.55 4.00 June 30, 2009 32,326 69,615
Executive Vice President
Howard Ribaudo.......... 1999 37,500 3.55 4.00 June 30, 2009 32,326 69,615
Vice President of Sales

There were no option exercises in the last fiscal year
</TABLE>

AGGREGATED OPTION EXERCISES AND FISCAL YEAR END
OPTION VALUES AT DECEMBER 31, 1999

NUMBER OF SECURITIES
NUMBER OF UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED ON VALUE DECEMBER 31, 1999 DECEMBER 31, 1999
NAME EXERCISE REALIZED (EXERCISABLE/UNEXERCISABLE) (EXERCISABLE/UNEXERCISABLE) (a)
<S> <C> <C> <C> <C>
Pat Patel - - - / 150,000 $ - / 112,500
Bud Patel - - - / 75,000 - / 56,250
Dennis Pouliot - - - / 75,000 - / 56,250
Ken King - - - / 37,500 - / 28,125
Howard Ribaudo - - - / 37,500 - / 28,125
</TABLE>

(a) The units are not publicly traded and the value of the options
represents management's best judgment of value at December 31, 1999.

COMPENSATION OF DIRECTORS

The individuals serving on the Management Committee will receive no
compensation so long as they are affiliated with, or have a financial interest
in, Cherokee. All of our Management Committee members currently do have these
affiliations. The Management Committee has sole discretion to determine to what
extent, if any, to compensate any individuals serving on the Management
Committee.

No director of Cherokee Finance receives any compensation with respect to
his or her position as a director.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

After we completed the Transactions, our Management Committee formed a
compensation committee comprised of Pat Patel, Ken King, Ian Schapiro and
Chris Brothers. No member of the compensation committee will participate in
the determination of his or her own compensation.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth the beneficial ownership of our outstanding
membership units as of March 15, 2000 by:

- each person who is known by us to own beneficially more than 5% of our
outstanding Class A Units;

- each of our Management Committee members and named executive officers; and

- all of our Management Committee members and named executive officers as a
group.

43
<PAGE>

MEMBERSHIP UNITS BENEFICIALLY OWNED(1)
-------------------------------------------------
CLASS A CLASS B
(VOTING) (NON-VOTING)
---------------------- -------------------------
NAME NUMBER PERCENT NUMBER PERCENT
- ---------------------------------------------------------------------- --------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Cherokee Investor Partners, LLC(2)(3)................................. 180,000 60.0% 17,820,000 59.4%
Bikor Corporation(4).................................................. 30,000 10.0% 2,970,000 9.9%
Manju Patel(4)(5)..................................................... 90,000 30.0% 2,160,000 7.2%
Pat Patel(4)(6)....................................................... 90,000 30.0% 2,160,000 7.2%
Ken King(4)........................................................... -- -- 12,500 *
Bud Patel(4)(7)....................................................... 30,000 10.0% 2,970,000 9.9%
Dennis Pouliot(4)..................................................... -- -- 50,000 *
Howard Ribaudo(4)..................................................... -- -- 75,000 *
Ian Schapiro(3)(8).................................................... 180,000 60.0% 17,820,000 59.4%
Stephen Kaplan(9)(10)................................................. 180,000 60.0% 17,820,000 59.4%
Tony Bloom(3)(11)..................................................... 180,000 60.0% 17,820,000 59.4%
Raymond Meyer(3)...................................................... -- -- -- --
Chris Brothers(9)..................................................... -- -- -- --
All Management Committee members and named executive officers as a
group (10 persons).................................................. 300,000 100.0% 23,087,500 77.0%

</TABLE>

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

* Less than 1.0%

(1) The Class A Units and Class B Units are identical except that Class A Units
have voting rights and Class B Units have no voting rights.

(2) The owners of Cherokee Investors include an affiliate of GFI, an affiliate
of Oaktree, Rothschild and an affiliate of the initial purchaser of the
outstanding notes. By virtue of their ownership of equity of Cherokee
Investors, these entities may be deemed to share beneficial ownership of the
membership units owned by Cherokee Investors. GFI, Oaktree, Rothschild and
the initial purchaser, and their affiliates, if appropriate, expressly
disclaim beneficial ownership of such units.

(3) c/o GFI Energy Ventures LLC, 11611 San Vicente Boulevard, Suite 710, Los
Angeles, CA 90049.

(4) c/o Cherokee International, LLC, 2841 Dow Avenue, Tustin, California 92780.

(5) Consists entirely of membership units that Manju Patel holds jointly with
her husband, Pat Patel, as trustees of the Patel Family Trust (see note 6).
Manju Patel expressly disclaims beneficial ownership of any units
beneficially owned by her as trustee of that trust.

(6) Consists entirely of membership units that Mr. Patel holds jointly with his
wife, Manju Patel, as trustees of the Patel Family Trust (see note 5). Mr.
Patel expressly disclaims beneficial ownership of any units beneficially

44
<PAGE>

owned by him as trustee of that trust.

(7) Bud Patel may be deemed to share beneficial ownership of the 30,000 Class A
Units and 2,970,000 Class B Units owned by Bikor, by virtue of his ownership
of Bikor's common stock. Bud Patel expressly disclaims beneficial ownership
of any units beneficially owned by him by virtue of his ownership of Bikor's
common stock.

(8) Ian Schapiro may be deemed to share beneficial ownership of the 180,000
Class A Units and 17,820,000 Class B Units owned by Cherokee Investors by
virtue of his status as a principal of GFI, which, through an affiliate
holds an equity interest in Cherokee Investors. Mr. Schapiro expressly
disclaims beneficial ownership of any units beneficially owned by him by
virtue of his status as a principal of GFI.

(9) c/o Oaktree Capital Management, LLC, 333 South Grand Avenue, Los Angeles,
California 90071.

(10)Stephen Kaplan may be deemed to share beneficial ownership of the 180,000
Class A Units and 17,820,000 Class B Units owned by Cherokee Investors by
virtue of his status as a principal of Oaktree, which, through an affiliate
holds an equity interest in Cherokee Investors. Mr. Kaplan expressly
disclaims beneficial ownership of any units beneficially owned by him by
virtue of his status as a principal of Oaktree.

(11)Tony Bloom may be deemed to share beneficial ownership of the 180,000 Class
A Units and 17,820,000 Class B Units owned by Cherokee Investors by virtue
of his status as a principal of Rothschild, which holds an equity interest
in Cherokee Investors. Mr. Bloom expressly disclaims beneficial ownership of
any units beneficially owned by him by virtue of his status as a principal
of Rothschild.

Our current credit facility is secured by a non-recourse pledge of 100%
of our outstanding membership units (other than those issued to certain of
our employees upon exercise of options or other rights to purchase in the
aggregate up to ten percent (10%) of our outstanding membership units).

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

We lease our facility located at 2841 Dow Avenue in Tustin, California
from Patel/King Investment, or PKI. The Principals of PKI are Pat Patel and
Ken King, our Chairman and CEO and our Executive Vice President,
respectively. Pursuant to the lease, we paid PKI $783,740 in 1997, $862,280
in 1998 and $927,378 in 1999.

Our lease with PKI will run through April 30,2009, with an
extension for an additional 60 months at our option. Pursuant to the lease,
we will pay rent of approximately $79,840 per month to PKI, subject to
certain periodic adjustments.

<PAGE>

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

(a) Documents filed as part of this report:

(1) and (2) Financial Statements and Financial Statement Schedules - The
consolidated financial statements and consolidiated financial statement
schedules of Cherokee International, LLC and subsidiaries as of
December 31, 1999 and 1998 and for each of the three years in the period
ended December 31, 1999 are included in Part II, Item 8.

(3) Exhibits:

*3.1 Second Amended and Restated Operating Agreement of Cherokee
International,LLC, dated as of April 30, 1999.

*3.2 Amendment No. 1 to the Second Amended and Restated
Operating Agreement of Cherokee International, LLC, dated
as of June 28, 1999.

*3.3 Amendment No. 2 to the Second Amended Restated Operating
Agreement of Cherokee International, LLC, dated as of June
28, 1999.

*3.4 Certificate of Incorporation of Cherokee International,
Finance, Inc.

*3.5 Bylaws of Cherokee International Finance, Inc.

*4.1 Indenture, dated as of April 30,1999, among the Issuers and
Firstar Bank of Minnesota, N.A., as trustee, relating to
the notes.

*4.2 Form of 10 1/2% Series A Senior Subordinated Notes due 2009
(included in Exhibit 4.1).

*4.3 Form of 10 1/2% Series B Senior Subordinated Notes due 2009
(included in Exhibit 4.1).

*4.4 Registration Rights Agreement, dated as of April 30, 1999,
among the Issuers and Credit Suisse First Boston
Corporation.

*10.1 Credit Agreement, dated as of April 30, 1999, among
Cherokee International, LLC, as borrower, Heller Financial,
Inc., as agent and lender, and Bank Austria Creditanstalt
Corporate Finance, Inc., Fleet Capital Corporation, Finova
Capital Corporation, Key Corporate Capital Inc. and U.S.
Bank, as lenders.

*10.2 Security Agreement, dated as of April 30, 1999, between
Cherokee International, LLC and Heller Financial, Inc., as
agent.

*10.3 Security Agreement, dated as of April 30, 1999, between
Cherokee International Finance, Inc. and Heller Financial,
Inc., as agent.

*10.4 Cherokee International, LLC 1999 Unit Option Plan.

*10.5 Form of Unit Option Agreement.

*10.6 Cherokee International, LLC 1999 Unit Purchase Plan.

*10.7 Noncompetition and Confidentiality Agreement, dated as of
April 30, 1999, between Cherokee International, LLC and
Mukesh Patel.

*10.8 Noncompetition and Confidentiality Agreement, dated as of
April 30, 1999, between Cherokee International, LLC and Bud
Patel.

*10.9 Noncompetition and Confidentiality Agreement, dated as of
April 30, 1999, between Cherokee International, LLC and Pat
Patel.

*10.10 Noncompetition and Confidentiality Agreement, dated as of
April 30, 1999, between Cherokee International, LLC and
Amrit Patel.

<PAGE>

12.1 Statement regarding the computation of ratio of earnings
to fixed charges for the Company.

24.1 Powers of Attorney for each registrant. (Included in
Signature Page)

27.1 Financial Data Schedule for fiscal year ended
December 31, 1999.

- ---------------------------
* Incorporated by reference to designated exhibit to our Registration
Statement on Form S-4, filed with the Securities and Exchange Commission
on July 13, 1999 (File No. 333-82713).

FORWARD-LOOKING STATEMENTS

Statements in this report containing the words "believes,"
"anticipates," "expects," and words of similar meaning, and any other
statements which may be construed as a prediction of future performance or
events, constitute "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties, and other factors
that may cause the actual results, performance, or achievements of the
Company, or industry results, to be materially different from any future
results, performance, or achievements expressed or implied by such
forward-looking statements. Such factors include, among others, (1)
restrictions imposed by the Company's substantial leverage and restrictive
convenants in its debt agreements, (2) reductions in sales to any of the
Company's significant customers or in customer capacity generally, (3)
changes in the Company's sales mix to lower margin products, (4) increased
competition, (5) disruptions of the Company's established supply channels,
(6) the Company's ability to accurately estimate the cost of succesful
systems preparation and implementation for Year 2000 compliance and (7) the
additional risk factors identified under the heading "Risk Factors" in the
Section "Business", and those described from time to time in the Company's
other filings with the SEC, press releases and other communications. The
Company disclaims any obligations to update any such factors or to announce
publicly the result of any revision to any of the forward-looking statements
contained or incorporated by reference herein to reflect future events or
developments.

<PAGE>

SIGNATURES

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

CHEROKEE INTERNATIONAL, LLC

March 28, 2000 By: /s/ Ganpat I. Patel
-----------------------------------
Ganpat I. Patel
Chairman and Chief Executive Officer

We, the undersigned officers and Management Committee Members of
Cherokee International, LLC, hereby severally constitute Rita Patel and R.
Van Ness Holland, Jr. and each of them singly, our true and lawful attorneys
with full power to them, and each of them singly, to sign for us and in our
names in the capacities indicated below, any and all amendments to this
Annual Report on Form 10-K, and generally do all such things in our name and
behalf in such capacities to enable Cherokee International, LLC to comply
with the applicable provisions of the Securities Exchange Act of 1934, and
all requirements of the Securities and Exchange Commission, and we hereby
ratify and confirm our signatures as they may be signed by our said
attorneys, or either of them, to any and all such amendments.

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

<TABLE>
<CAPTION>
Name Title Date
------ ------- ------
<S> <C> <C>
/s/ Ganpat I. Patel
------------------------------- Chairman, Chief Executive Officer and March 28, 2000
Ganpat I. Patel member of Management Committee
(Principal Executive Officer)
/s/ R. Van Ness Holland, Jr.
------------------------------- Chief Financial Officer (Principal March 28, 2000
R. Van Ness Holland, Jr. Financial and Accounting Officer)

/s/ Kenneth King
------------------------------- Executive Vice President and member March 28, 2000
Kenneth King of Management Committee

/s/ Bahechar S. Patel
------------------------------- Executive Vice President and member March 28, 2000
Bahechar S. Patel of Management Committee

/s/ Ian A. Schapiro
------------------------------- Member of Management Committee March 28, 2000
Ian A. Schapiro

/s/ Stephen Kaplan
------------------------------- Member of Management Committee March 28, 2000
Stephen Kaplan

/s/ Tony Bloom
------------------------------- Member of Management Committee March 28, 2000
Tony Bloom

------------------------------- Member of Management Committee
Raymond Meyer

/s/ Christopher Brothers
------------------------------- Member of Management Committee March 28, 2000
Christopher Brothers
</TABLE>

<PAGE>

INDEX TO FINANCIAL STATEMENTS

Independent Auditors' Report.............................................................................................. F-2
Consolidated Balance Sheets as of December 31, 1999 and 1998.............................................................. F-3
Consolidated Statements of Income for each of the three years in the period ended December 31, 1999....................... F-4
Consolidated Statements of Members' Equity (Deficit) for each of the three years in the period ended December 31, 1999.... F-5
Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 1999................... F-6
Notes to Consolidated Financial Statements................................................................................ F-7
Independent Auditors' Report.............................................................................................. F-15
Schedule of valuation and qualifying accounts for each of the three years in the period ended December 31, 1999........... F-16

</TABLE>

F-1
<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Members of
Cherokee International, LLC

We have audited the accompanying consolidated balance sheets of
Cherokee International, LLC and subsidiaries (the Company) as of December 31,
1999 and 1998 and the related consolidated statements of income, members'
equity (deficit) and cash flows for each of the three years in the period
ended December 31, 1999. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards
generally accepted in the United States of America. Those standards require
that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of Cherokee
International, LLC and subsidiaries as of December 31, 1999 and 1998 and the
results of their operations and their cash flows for each of the three years
in the period ended December 31, 1999 in conformity with accounting
principles generally accepted in the United States of America.

DELOITTE & TOUCHE LLP

Costa Mesa, California
February 16, 2000

F-2
<PAGE>

CHEROKEE INTERNATIONAL, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

DECEMBER 31,
1999 1998
---- ----
<S> <C> <C>
ASSETS (NOTE 4)
CURRENT ASSETS:
Cash and cash equivalents................................................ $ 7,968,576 $2,784,828
Accounts receivable, net of allowance for doubtful accounts of $175,000
in 1999 and 1998....................................................... 14,108,596 14,861,816
Inventories, net ........................................................ 18,911,652 15,467,183
Prepaid expenses and other current assets................................ 50,475 67,576
----------- -----------
Total current assets................................................... 41,039,299 33,181,403
PROPERTY AND EQUIPMENT, net (Notes 3 and 4).............................. 8,761,516 7,457,096
DEPOSITS................................................................. 274,697 207,526
DEFERRED FINANCING COSTS, net of accumulated amortization of $555,919
in 1999 ............................................................... 4,800,504 --
----------- -----------
$54,876,016 $40,846,025
=========== ===========

LIABILITIES AND MEMBERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable......................................................... $5,468,043 $5,896,016
Accrued liabilities...................................................... 1,085,686 825,113
Accrued compensation and benefits (Note 7)............................... 2,211,193 2,054,736
Accrued interest payable................................................. 2,406,054 --
Accrued distribution payable............................................. 1,730,000 --
Current portion of long-term debt (Note 4)............................... 4,545,004 240,000
Current portion of capital lease obligations (Notes 3 and 5)............. 835,947 467,694
----------- -----------
Total current liabilities.............................................. 18,281,927 9,483,559
LONG-TERM DEBT, net of current portion (Note 4).......................... 141,458,228 540,000
CAPITAL LEASE OBLIGATIONS, net of current portion (Notes 3 and 5)........ 2,811,367 793,937
COMMITMENTS (Note 5)
MEMBERS' EQUITY (DEFICIT)(Note 6):
Class A units; 300,000 units issued and
outstanding in 1999 and 1998........................................... 14,000 14,000
Class B units; 30,002,000 units issued and
outstanding in 1999 and 29,700,000 in 1998............................. 2,594,000 1,386,000
Paid-in capital.......................................................... 5,330,000 ---
Retained earnings (deficit).............................................. (115,613,506) 28,628,529
------------- -----------
Total members' equity (deficit)........................................ (107,675,506) 30,028,529
------------- -----------
$ 54,876,016 $40,846,025
============= ===========

</TABLE>

See notes to consolidated financial statements.

F-3
<PAGE>

CHEROKEE INTERNATIONAL, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

YEARS ENDED DECEMBER 31,
1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
NET SALES (Note 8)................................ $ 121,457,537 $ 87,553,056 $ 77,022,168
COST OF SALES..................................... 77,592,619 54,824,150 48,990,442
------------- ------------- -------------
GROSS PROFIT...................................... 43,864,918 32,728,906 28,031,726
OPERATING EXPENSES:
Engineering and development....................... 4,118,124 3,798,767 4,057,255
Selling and marketing ............................ 2,609,261 1,916,442 2,194,493
General and administrative (Notes 5 and 7) 3,871,526 3,079,007 3,267,937
Special bonus distribution (Note 9)............... 5,330,000 -- --
------------- ------------- -------------
Total operating expenses........................ 15,928,911 8,794,216 9,519,685
------------- ------------- -------------
OPERATING INCOME.................................. 27,936,007 23,934,690 18,512,041
OTHER INCOME (EXPENSE):
Interest expense.................................. (10,675,340) (372,870) (1,064,914)
Other income (expense)............................ (708,702) 338,433 376,581
------------- ------------- -------------
Total other income (expense).................... (11,384,042) (34,437) (688,333)
------------- ------------- -------------

INCOME BEFORE EXTRAORDINARY ITEM.................. 16,551,965 23,900,253 17,823,708
EXTRAORDINARY GAIN ON EARLY EXTINGUISHMENT
OF DEBT (Note 4).................................. -- -- 714,436
------------- ------------- -------------

NET INCOME........................................ $ 16,551,965 $ 23,900,253 $ 18,538,144
============= ============= =============

BASIC AND DILUTED INCOME PER UNIT:
Income before extraordinary item ................. $ .55 $ .80 $ .59
============= ============= =============
Net income........................................ $ .55 $ .80 $ .62
============= ============= =============
WEIGHTED AVERAGE UNITS OUTSTANDING:
BASIC.......................................... 30,124,286 30,000,000 30,000,000
============= ============= =============
DILUTED........................................ 30,210,779 30,000,000 30,000,000
============= ============= =============

</TABLE>

See notes to consolidated financial statements.

F-4
<PAGE>

CHEROKEE INTERNATIONAL, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF MEMBERS' EQUITY (DEFICIT)

CLASS A CLASS B
--------- --------- RETAINED
----- ------ ----- ------ PAID-IN EARNINGS
UNITS AMOUNT UNITS AMOUNT CAPITAL (DEFICIT) TOTAL
----- ------ ----- ------ ------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, January 1, 1997 300,000 $1,400,000 $-------- $ ---------- $7,254,132 8,654,132
Unit issuance (Note 6) (1,386,000) 29,700,000 1,386,000
Equity distribution (8,074,000) (8,074,000)
Net income 18,538,144 18,538,144
_______ __________ _________ _________ _______ ___________ ___________
BALANCE, December 31,
1997 300,000 14,000 29,700,000 1,386,000 17,718,276 19,118,276
Equity distribution (12,990,000) (12,990,000)
Net income 23,900,253 23,900,253
_______ ______ _________ _________ _______ ___________ ___________
BALANCE, December 31,
1998 300,000 14,000 29,700,000 1,386,000 28,628,529 30,028,529
Units issued under Unit
Purchase Plan 302,000 1,208,000 1,208,000
Equity distributions (160,794,000) (160,794,000)
Capital contribution to fund
special bonus distribution
(Note 9) 5,330,000 5,330,000
Net income 16,551,965 16,551,965
_______ ______ _________ _________ _______ ___________ ___________
BALANCE, December 31,
1999 300,000 $14,000 30,002,000 $2,594,000 $5,330,000 $(115,613,506) $(107,675,506)
======= ======= ========== ========== ========== ============== ==============

</TABLE>

See notes to consolidated financial statements.

F-5
<PAGE>

CHEROKEE INTERNATIONAL, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .................................................................. $ 16,551,965 $ 23,900,253 $ 18,538,144
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ............................................. 2,389,877 1,670,586 1,503,315
Amortization of deferred financing costs .................................. 555,919
Extraordinary gain on early extinguishment of debt......................... (714,436)
Net change in operating assets and liabilities:
Accounts receivable, net .................................................. 753,220 (5,195,309) (136,167)
Inventories, net .......................................................... (3,444,469) (2,095,821) (1,789,652)
Prepaid expenses and other current assets ................................. 17,101 132,457 (58,055)
Deposits .................................................................. (67,171) (49,600) 244,183
Accounts payable .......................................................... (427,973) 2,467,426 1,794,719
Accrued liabilities ....................................................... 260,573 (399,632) (3,495)
Accrued compensation and benefits ......................................... 156,457 (364,518) 699,122
Accrued interest payable .................................................. 2,406,054
------------- ------------- -------------
Net cash provided by operating activities ................................. 19,151,553 20,065,842 20,077,678
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment ......................................... (532,095) (1,898,202) (1,354,914)

CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on revolving line of credit ...................................... 5,770,937 10,655,388
Payments on revolving line of credit ........................................ (5,185,427) (2,739,773) (8,835,354)
Payments on obligations under capital leases ................................ (776,519) (306,449) (263,203)
Payments on long-term debt .................................................. (5,362,278) (220,000) (12,892,138)
Borrowings on long-term debt ................................................ 150,000,000 993,250
Deferred financing cost ..................................................... (5,356,423)
Proceeds from sale of shares ................................................ 1,208,000
Equity distribution ......................................................... (159,064,000) (12,990,000) (8,074,000)
Capital contribution to fund special bonus
distribution .............................................................. 5,330,000
------------- ------------- ---------------
Net cash used in financing
activities ................................................................ (13,435,710) (16,256,222) (18,416,057)

NET INCREASE IN CASH AND CASH EQUIVALENTS ................................... 5,183,748 1,911,418 306,707
CASH, AND CASH EQUIVALENTS, beginning of
period .................................................................... $ 2,784,828 873,410 566,703
------------- ------------- -------------
CASH, AND CASH EQUIVALENTS, end of
period .................................................................... $ 7,968,576 $ 2,784,828 $ 873,410
============= ============= =============
SUPPLEMENTAL INFORMATION
Cash paid during the year for interest..................................... $ 7,628,151 $ 372,870 $ 1,064,914
============= ============= =============

SUPPLEMENTAL DISCLOSURE OF NONCASH
TRANSACTIONS
Assets acquired under capital lease
obligations................................................................ $ 3,161,202 $ 844,790 $ --
============= ============= =============
</TABLE>

See notes to consolidated financial statements.

F-6
<PAGE>

CHEROKEE INTERNATIONAL, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

1. GENERAL

INCORPORATION Cherokee International, LLC (the Company) was
incorporated on February 21, 1996, under the California Beverly-Killea
Limited Liability Company Act. After the acquisition described below,
principal operations commenced on March 30, 1996.

ACQUISITIONS On March 29, 1996, the Company and Cherokee
International, Inc., a California corporation, entered into an asset purchase
agreement whereby the Company purchased certain assets and assumed certain
liabilities of Cherokee International, Inc. for a total cash payment of
$15,264,383 and issuance of a subordinated note payable of $5,885,218. The
acquisition was funded with cash borrowed from an asset-based lender and
subordinated note payable to the previous owner (Note 4). The acquisition was
accounted for under the purchase method of accounting, with the total purchase
price allocated to net tangible assets.

On March 29, 1996, the Company and Bikor Corporation, a California
corporation, entered into an asset transfer agreement and operations transfer
agreement whereby Bikor Corporation transferred all operations and assets and
certain liabilities to the Company in exchange for 75,000 Class A units of the
Company with a fair market value of $400,000 and a subordinated note payable
of $476,166. The acquisition was accounted for under the purchase method of
accounting, with the total purchase price allocated to net tangible assets.

LINE OF BUSINESS The Company designs, develops, assembles and sells
switch mode power supplies for original equipment manufacturers (OEMs) in the
telecommunications, data networking and high-end workstation markets.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION The consolidated financial statements
include the financial statements of the Company and its wholly-owned
subsidiaries Cherokee Electronica, S.A. DE C.V., (Electronica), Cherokee India
Pvt. Ltd. (India), Powertel India Pvt. Ltd. (Powertel) and Cherokee
International Finance, Inc. (Finance). Finance was formed in April 1999 as a
wholly-owned finance subsidiary to act as a co-obligor of the 10 1/2% Senior
Subordinated Notes (see Note 4) and has no independent assets or operations.
All material intercompany accounts and transactions have been eliminated.

FISCAL YEAR The Company's fiscal years 1999, 1998 and 1997 ended on
January 2, 2000, January 3, 1999 and January 4, 1998, respectively. For
convenience, the accompanying consolidated financial statements have been
shown as ending on the last day of the calendar month.

TRANSLATION OF FOREIGN CURRENCIES: Foreign subsidiary assets and
liabilities denominated in foreign currencies are translated at the exchange
rate on the balance sheet date, or, for long-lived assets at the historical
exchange rate. Revenues, costs and expenses are translated at the average
exchange rate during the year. The functional currency of Electronica,
Powertel and India is the U.S. dollar as the majority of transactions are
denominated in U.S. dollars; therefore, translation gains and losses are
included in results of operations. Transaction and translation gains and
losses were not significant for the periods presented.

CASH AND CASH EQUIVALENTS For presentation purposes in the
consolidated financial statements, all highly liquid debt instruments
purchased with an original maturity date of three months or less are
considered to be cash equivalents.

F-7
<PAGE>

INVENTORIES Inventories are valued at the lower of cost (first-in,
first-out) or market. Inventory costs include the cost of material, labor, and
manufacturing overhead and consist of the following at December 31:

1999 1998
---- ----
<S> <C> <C>
Raw material.......................................... $16,630,304 $13,223,720
Work-in-process....................................... 2,699,689 2,369,463
Finished goods........................................ 577,969 452,310
----------- -----------
19,907,962 16,045,493
Reserve for obsolescence.............................. (996,310) (578,310)
----------- -----------
$18,911,652 $15,467,183
=========== ===========

</TABLE>

PROPERTY AND EQUIPMENT Depreciation and amortization of property and
equipment are provided using the straight-line method over the following
estimated useful lives:

<TABLE>

<S> <C>
Buildings and improvements......................................... 5 years
Machinery and equipment............................................ 5 years
Dies, jigs and fixtures............................................ 3 years
Office equipment and furniture..................................... 3&5 years
Automobiles and trucks............................................. 5 years
Leasehold improvements............................................. 5 years

</TABLE>

DEFERRED FINANCING COSTS During the year ended December 31, 1999,
the Company incurred approximately $6.2 million of costs related to the
issuance of senior subordinated notes and the execution of a new term loan
and credit facility. Approximately $5.4 million of such costs were
capitalized as deferred financing costs and approximately $.8 million of such
costs, were directly expensed and included in other income (expense) in the
accompanying consolidated statements of income. Deferred financing costs are
being amortized over 6 years.

LONG-LIVED ASSETS The Company accounts for the impairment and
disposition of long-lived assets in accordance with SFAS No. 121, ACCOUNTING
FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED
OF. In accordance with SFAS No. 121, long-lived assets to be held are reviewed
for events or changes in circumstances which indicate that their carrying
value may not be recoverable. There was no impairment of the value of such
assets for the years ended December 31, 1999 and 1998.

INCOME TAXES The Company is taxed as a limited liability company
under the provisions of the federal and state tax codes. Under federal laws,
taxes based on income of a limited liability company are payable by the
Company's individual members. Accordingly, no provision for federal income
taxes has been provided in the accompanying financial statements. Provisions
for California franchise tax and fees are not significant for any period
presented.

REVENUE RECOGNITION Revenues from product sales are recognized upon
shipment of the products to customers.

CREDIT RISK The Company performs ongoing credit evaluations of its
customers and generally does not require collateral. The Company maintains
reserves for potential credit losses.

STOCK-BASED COMPENSATION The Company accounts for unit-based awards
to employees using the intrinsic value method in accordance with Accounting
Principles Board (APB) Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO
EMPLOYEES.

F-8
<PAGE>

INCOME PER UNIT In accordance with SFAS No. 128, EARNINGS PER SHARE,
basic income per unit calculations are determined by dividing net income by
the weighted average Class A and B units outstanding. Diluted income per
unit reflects the potential dilutive effect, determined by the treasury stock
method, of additional Class B units that are issuable upon exercise of
outstanding unit options:

Years ended December 31
--------------------------------------
1999 1998 1997
------------ --------- --------
<S> <C> <C> <C>
Options 1,055,000 -- --
============ ========= ========
</TABLE>

SEGMENT INFORMATION The Company has adopted SFAS No. 131, DISCLOSURES
ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION. SFAS No. 131
established standards for reporting information about operating segments in
financial reports issued to stockholders. It also established standards for
related disclosures about products and services, geographic areas and major
customers. The Company currently operates in a single business segment as a
leading designer and manufacturer of a broad range of power supplies for
original equipment manufacturers in the telecommunications, data networking,
high-end workstations and other electronic industries.

COMPREHENSIVE INCOME Comprehensive income is defined as all changes
in a company's net assets except changes resulting from transactions with
shareholders. It differs from net income in that certain items currently
recorded through equity are included in comprehensive income. The Company's
net income was the same as comprehensive income for all periods presented.

NEW ACCOUNTING PRONOUNCEMENT In June 1998, the Financial Accounting
Standards Board issued SFAS No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND
HEDGING ACTIVITIES, which the Company is required to adopt effective in its
fiscal year 2001. SFAS No. 133 will require the Company to record all
derivatives on the balance sheet at fair value. The Company has not completed
its evaluation of the effect of adopting SFAS No. 133.

USE OF ESTIMATES The preparation of financial statements in
accordance with accounting principles generally accepted in the United States
of America requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
liabilities at the date of the financial statements and the amounts of
revenues and expenses during the reporting period. Actual results could differ
from such estimates.

RECLASSIFICATIONS Certain items in the prior period consolidated
financial statements have been reclassified to conform to the current period
presentation.

3. PROPERTY AND EQUIPMENT

Property and equipment consist of the following at December 31:

1999 1998
---- ----
<S> <C> <C>
Land................................................. $398,919 $398,919
Building and improvements............................ 793,752 793,752
Machinery and equipment.............................. 10,382,393 6,706,506
Dies, jigs and fixtures.............................. 356,692 293,568
Office equipment and furniture....................... 1,030,196 852,830
Automobiles and trucks............................... 138,625 138,625
Leasehold improvements............................... 1,513,963 1,261,888
Construction in progress............................. 521,098 995,253
------- -------
15,135,638 11,441,341
Less accumulated depreciation and amortization....... (6,374,122) (3,984,245)
----------- -----------
$8,761,516 $7,457,096
=========== ==========

</TABLE>

Included in property and equipment are assets under capital leases of
$5,155,278 and $3,030,908 as of December 31, 1999 and 1998, respectively.
Accumulated amortization of assets under capital leases was $1,592,023 and
$1,279,264 as of December 31, 1999 and 1998, respectively.

F-9
<PAGE>

4. LONG-TERM DEBT
Long-term debt consists of the following at December 31:

1999 1998
---- ----
<S> <C> <C>
10.5% senior subordinated notes, interest due semi-annually beginning on
November 1, 1999, redeemable at the Company's option beginning May 2004 at a
rate of 105.25% of the original principal amount decreasing to 100% of the
original principal amount at May 2007 and thereafter, the Company may also
redeem up to 35% of the original principal amount prior to May 2002 at 110.5%
of the original principal amount, matures in May 2009.......................... $100,000,000 $ --
Term loan, bearing interest at either LIBOR plus 2.50% or prime plus 1.50%
(9.0% to 10.0% as of December 31, 1999). Interest rates subject to change
based on the Company's leverage ratio as defined, quarterly principal amounts
due beginning September 30, 1999 at amounts ranging from $582,000 to
$3,237,000, remaining unpaid principal and interest due April 30, 2005......... 45,417,722
Five-year credit facility, bearing interest at 8.13%, payable in monthly principal
installments of $20,000 beginning April 1, 1997, paid in full during May 1999... 0 780,000
Revolving lines of credit........................................................ 585,510 --
------------ --------
146,003,232 780,000
Less current portion............................................................. (4,545,004) (240,000)
------------ --------
Total long-term debt............................................................. $141,458,228 $540,000
============ ========

</TABLE>

As of December 31, 1999, maturities of long-term debt are as follows:

<TABLE>

<S> <C>
Year ending December 31:
2000.................................................. $4,545,004
2001.................................................. 6,521,519
2002.................................................. 7,872,405
2003.................................................. 9,269,873
2004.................................................. 11,412,658
Thereafter............................................ 106,381,773
------------
$146,003,232
============
</TABLE>

The term loan is collateralized by substantially all of the
Company's assets and contains certain financial covenants including capital
expenditures limitations, minimum fixed charge coverage and interest coverage
ratios, minimum debt to equity ratio requirements and restrictions on
dividends. The Company was in compliance with these financial covenants as of
December 31, 1999.

During April 1999, the Company entered into a revolving line of
credit agreement, which provides for borrowings, based on a percentage of
certain receivables and inventory, not to exceed $25,000,000. Borrowings bear
interest at LIBOR plus 2.50% or prime plus 1.50% (9.0% to 10.0% as of
December 31, 1999). Interest rates are subject to change over time based on
the Company's leverage ratio as defined. This revolving line of credit is
collateralized by substantially all of the Company's assets and is subject to
the same financial covenants as the term loan discussed above. This revolving
line of credit required payment of commitment fees and expires in 2005.
Outstanding borrowings under this line of credit were $585,510 at December
31, 1999.

The Company restructured its credit facility in March 1997, which
resulted in the payment in full of a subordinated note to the previous owner
of the Company. Payment of the subordinated note resulted in a gain of
approximately $714,000 or $0.03 per unit. This gain on early extinguishment
of debt has been included as an extraordinary item in the accompanying
consolidated statements of income.

F-10
<PAGE>

5. COMMITMENTS

The Company leases certain of its manufacturing facilities under
non-cancelable operating leases for an aggregate monthly rental of approximately
$119,424. These leases expire at various dates through 2009. One of the
manufacturing facilities is leased from an entity controlled by an officer and a
principal member of the Company. Rental expense for the years ended December 31,
1999, 1998 and 1997 totaled approximately $1,375,845, $1,072,700 and $982,700
($927,378, $862,280 and $783,740 to a related entity), respectively.

The Company has two capital lease contracts, bearing interest ranging
from 6.41% to 9.75%. The total monthly principal and interest payments related
to these capital leases are approximately $108,326. The leases expire between
March 2000 and December 2004.

A summary of lease commitments as of December 31, 1999 is as follows:

CAPITAL OPERATING
LEASES LEASES
------------ -------------
<S> <C> <C>
Year ending December 31:
2000 ......................................... $ 1,068,032 $ 1,433,091
2001 ......................................... 952,089 1,200,540
2002 ......................................... 952,089 1,012,790
2003 ......................................... 1,021,116 990,580
2004 ......................................... 344,373 965,572
Thereafter ................................... -- 4,231,766
------------ -----------

Total minimum lease payments ................. 4,337,699 $ 9,834,339
===========
Less amount representing interest ............ (690,385)
------------
Present value of future minimum lease payments 3,647,314
Less current portion ......................... (835,947)
------------
$ 2,811,367
============

</TABLE>

Of the $9,834,339 total minimum payments for operating leases, $9,022,446 is
payable to a related entity.

F-11
<PAGE>

6. MEMBERS' EQUITY (DEFICIT)

CAPITALIZATION The Company's members' equity consists of Class A and
Class B units. Class A units are entitled to one vote per unit and Class B
units are not entitled to vote.

On November 3, 1997, the members and managers authorized a dividend
distribution of Class B units in the ratio of 99 Class B units for every
Class A unit issued and outstanding to members as of November 3, 1997. All
Unit A and Unit B stated values have been restated to reflect this
transaction.

UNIT SPLIT Effective June 28, 1999, the Company's management committee
approved a 75-for-1 split of the outstanding Class A units and Class B units
from 4,000 to 300,000 and from 396,000 to 29,700,000, respectively. Accordingly,
all unit and per unit figures included in the accompanying consolidated
financial statements and footnotes have been restated to reflect this unit split
for all periods presented.

UNIT OPTION PLAN In June 1999, the Company adopted the 1999 Unit
Option Plan (the Plan) which provides for the issuance to officers and key
employees of up to 2,970,000 options to purchase Class B units at an exercise
price per unit of not less than 85% of fair market value at the date of grant.
At December 31, 1999, 1,915,000 options were available for grant. Options
expire no later than ten years from the date of grant and generally become
exercisable over a four-year period.

As permitted by SFAS No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION,
the Company accounts for its employee unit-based compensation plan using the
intrinsic value method under APB Opinion No. 25 and provides the expanded
disclosures specified in SFAS No. 123. On June 28, 1999, the Company granted
1,055,000 unit options at an exercise price of $4.00, which represented the
fair value of the Company's Class B units as determined by the Company's
Management Committee utilizing the arms-length equity transaction which
occurred on April 30, 1999, whereby a new member acquired a 60% majority equity
interest from the then existing members. Accordingly, no compensation expense
was recorded for these unit option grants pursuant to APB Opinion No. 25.

Had compensation cost been determined using the provisions of SFAS
No. 123, the difference between net income and income per unit as reported
and pro forma net income and income per unit would have been as follow:

1999
--------------------------
As Reported Pro Forma
- -------------------------------------------------------------------
<S> <C> <C>
Net income 16,651,965 16,416,974
Net earnings per UNIT:
Basic $ .55 $ .54
============= =============
Diluted $ .55 $ .54
============= =============

</TABLE>

For purposes of estimating the compensation cost of the Company's
option grants in accordance with SFAS No. 123, the fair value of each option
grant is estimated on the date of grant using the Black-Scholes option-pricing
model, with the following weighted average assumptions used for grants during
the year ended December 31, 1999: expected volatility of zero; risk-free
interest rate of 6%; no dividends; and expected lives of four years.

A summary of activity for the 1999 Unit Option Plan is presented below:

WEIGHTED AVERAGE
UNITS EXERCISE PRICE
--------- ----------------
<S> <C> <C>
Outstanding, January 1, 1999............................................................... $
Granted (weighted average fair value of $1.77)............................................. 1,055,000 4.00
Exercised..................................................................................
Canceled...................................................................................
-----------
Balance, December 31, 1999................................................................. 1,055,000 $4.00
===========

</TABLE>

F-12
<PAGE>

The following table summarizes information about options as of December
31, 1999:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
------------------- OPTIONS EXERCISABLE
WEIGHTED AVERAGE -------------------
NUMBER REMAINING CONTRACTUAL WEIGHTED AVERAGE NUMBER WEIGHTED AVERAGE
EXERCISE PRICE OUTSTANDING LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
-------------- ----------- --------------------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
$4.00 1,055,000 9.5 $4.00 $4.00

</TABLE>

UNIT PURCHASE PLAN In June 1999, the Company adopted the 1999 Unit
Purchase Plan covering an aggregate of 1,500,000 shares of Class B units. The
purpose of the 1999 Unit Purchase Plan is to enable selected officers,
management committee members, employees, consultants and advisors of the
Company to purchase Class B units. The price of the Class B units under the
plan shall not be less than 85% of the fair market value of the Class B units
at the date of grant. During 1999, the Company had granted 302,000 Class B
units at $4.00 per unit, representing fair value consistent with the unit
option grants described above, and had 1,198,000 units available to grant as
of December 31, 1999.

7. RETIREMENT PLANS

In March 1996, the managers and members of the Company approved the
adoption of a supplemental retirement plan (the 401(k) Plan) in which
substantially all employees are eligible to participate after completing six
months of employment. The 401(k) Plan allows participating employees to
contribute up to 15% of the employee's pretax compensation, with the Company
making discretionary matching contributions. Company contributions fully vest
and are non-forfeitable after the participant has completed five years of
service. For the years ended December 31, 1999, 1998 and 1997 the Company
elected to contribute approximately $237,764, $201,700 and $184,100
respectively, to the 401(k) Plan, of which approximately $237,764, $194,800 and
$173,100 respectively, is included in accrued compensation and benefits within
the accompanying consolidated balance sheets. Administrative costs associated
with the 401(k) Plan are paid by participants.

8. CONCENTRATION OF NET SALES

For the years ended December 31, 1999, 1998 and 1997 approximately
53%, 59%, and 53%, respectively, of the Company's net sales were derived from
four, six and five customers, respectively, of which one, two and two
customers, respectively, individually exceeded 10%. Although not anticipated,
a decision by a major customer to decrease the amount purchased from the
Company or to cease purchasing the Company's products would have a material
adverse effect on the Company's financial position and results of operations.

The Company sells its power supply products to OEMs in the
telecommunications, networking, high-end workstations and other electronic
industries. The Company uses information based on customers and geographic
location; however, the business activities are managed as a single segment. For
the years ended December 31, 1999, 1998 and 1997 , net sales by region were as
follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
United States........................ $ 99,882,529 $75,583,826 $72,717,181
Europe............................... 18,882,707 10,832,647 3,732,732
Other................................ 2,692,301 1,136,583 572,255
------------ ----------- -----------
$121,457,537 $87,553,056 $77,022,168
============ =========== ===========

</TABLE>

F-13
<PAGE>

The Company's long-lived assets located outside of the United States
were $1,844,457 and $1,896,971 as of December 31, 1999 and 1998, respectively.

9. SPECIAL BONUS DISTRIBUTION

During 1999, the Company's management committee authorized
approximately $5,330,000 of special bonus payments to certain key employees for
their role in the Company's growth and success over the previous years. These
bonus payments were entirely funded by capital contributions made by the
Company's then existing members.

F-14
<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Members of
Cherokee International, LLC:

We have audited the consolidated financial statements of Cherokee
International, LLC and subsidiaries (the Company) for the years ended
December 31, 1999 and 1998 and for each of the three years in the period
ended December 31, 1999, and have issued our report thereon dated February
16, 2000; such report is included elsewhere in this Form 10-K. Our audits also
included the consolidated financial schedules of the Company listed in Item
14a. These consolidated financial statement schedules are the responsibility
of the Company's management. Our responsibility is to express an opinion
based on our audits. In our opinion, such consolidated financial statement
schedules, when considered in relation to the basic consolidated financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.

DELOITTE & TOUCHE LLP

Costa Mesa, California
February 16, 2000

F-15

<PAGE>

CHEROKEE INTERNATIONAL, LLC
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS

CHARGED
BALANCE AT (CREDITED) TO
BEGINNING OF COST AND BALANCE AT END
PERIOD EXPENSES DEDUCTIONS OF PERIOD
<S> <C> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
Year ended December 31, 1997............................... $563,710 ($98,710) ($65,000) $400,000
Year ended December 31, 1998............................... 400,000 (150,771) (74,229) 175,000
Year ended December 31, 1999............................... 175,000 175,000

RESERVE FOR INVENTORY OBSOLESCENCE:
Year ended December 31, 1997............................... $185,370 $ -- $ -- $185,370
Year ended December 31, 1998............................... 185,370 392,940 -- 578,310
Year ended December 31, 1999............................... 578,310 418,000 -- 996,310

</TABLE>

F-16

<PAGE>

EXHIBIT 12.1

Cherokee International, LLC
Calculation of Ratio of Earnings to Fixed Charges
(In thousands, except ratios)

<TABLE>
<CAPTION>
Nine Months Three Months
Ended Ended Year Ended
Year Ended December 31 December 31, March 31, December 31,
-------------------------------- --------------- -------------- --------------
1999 1998 1997 1996 1996 1995
<S> <C> <C> <C> <C> <C> <C>
Earnings

Income before income taxes $16,552 $23,900 $18,538 $7,614 $644 $528
Fixed charges 11,294 860 1,504 1,953 211 745
--------- --------- --------- --------- ------ -------
Total Earnings $27,846 $24,760 $20,042 $9,567 $855 $1,273
=====================================================================================

Fixed Charges

Interest $10,675 $373 $1,065 $1,638 $152 $509
Implicit rental interest expense 619 487 439 315 59 236
--------- -------- --------- -------- ------ ----
Total Fixed Charges $11,294 $860 $1,504 $1,953 $211 $745
====================================================================================

Ratio of Earnings to Fixed Charges 2.5x 28.8x 13.3x 4.9x 4.1x 1.7x

</TABLE>

<PAGE>
<ARTICLE> 5

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-02-2000
<PERIOD-START> JAN-03-1999
<PERIOD-END> DEC-31-1999
<CASH> 7,968,576
<SECURITIES> 0
<RECEIVABLES> 14,283,596
<ALLOWANCES> 175,000
<INVENTORY> 18,911,652
<CURRENT-ASSETS> 41,039,299
<PP&E> 15,135,638
<DEPRECIATION> 6,374,122
<TOTAL-ASSETS> 54,876,016
<CURRENT-LIABILITIES> 18,281,927
<BONDS> 144,269,595
0
0
<COMMON> 2,608,000
<OTHER-SE> (110,283,506)
<TOTAL-LIABILITY-AND-EQUITY> 54,876,016
<SALES> 121,457,537
<TOTAL-REVENUES> 121,457,537
<CGS> 77,592,619
<TOTAL-COSTS> 93,521,530
<OTHER-EXPENSES> 708,702
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,675,340
<INCOME-PRETAX> 16,551,965
<INCOME-TAX> 0
<INCOME-CONTINUING> 16,551,965
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,551,965
<EPS-BASIC> 0.55
<EPS-DILUTED> 0.55

</TABLE>