INTERNATIONAL RECTIFIER CORP /DE/, S-3/A, 2000-03-07

INTERNATIONAL RECTIFIER CORP /DE/
S-3/A, 2000-03-07
SEMICONDUCTORS & RELATED DEVICES

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 7, 2000

REGISTRATION NO. 333-30348
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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

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

<TABLE>
<S> <C>
DELAWARE 95-1528961
(State or other jurisdiction (I.R.S. Employer
of Identification No.)
incorporation or organization)
</TABLE>

233 KANSAS STREET
EL SEGUNDO, CA 90245
(310) 726-8000
(Address, including zip code, and telephone number, including
area code, of Registrant's Principal Executive Offices)

L. MICHAEL RUSSELL, ESQ.
EXECUTIVE VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
INTERNATIONAL RECTIFIER CORPORATION
233 KANSAS STREET
EL SEGUNDO, CA 90245
(310) 726-8000
(Name and address, including zip code, and telephone number,
including area code, of Agent for Service)
--------------------------

COPIES TO:

<TABLE>
<S> <C>
KENDALL R. BISHOP, ESQ. BRYANT B. EDWARDS, ESQ.
O'Melveny & Myers LLP Latham & Watkins
1999 Avenue of the Stars 633 West Fifth Street
Suite 700 Suite 4000
Los Angeles, California 90067 Los Angeles, California 90071
Telephone: (310) 246-6780 Telephone: (213) 485-1234
Facsimile: (310) 246-6779 Facsimile: (213) 891-8763
</TABLE>

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

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE REGISTRATION STATEMENT IS DECLARED EFFECTIVE.
--------------------------

If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), other than securities offered only in
connection with dividend or interest reinvestment plans, check the following
box. / /

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

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

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

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

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>

SUBJECT TO COMPLETION, DATED MARCH 7, 2000

The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
<PAGE>
P_R_O_S_P_E_C_T_U_S
[LOGO]

8,000,000 SHARES

INTERNATIONAL RECTIFIER CORPORATION

COMMON STOCK
$ PER SHARE
---------

We are selling 7,600,000 shares of our common stock, and the selling
stockholder named in this prospectus is selling 400,000 shares. We will not
receive any proceeds from the sale of shares by the selling stockholder. The
underwriters named in this prospectus may purchase up to an additional 1,200,000
shares of common stock from us under certain circumstances.

Our common stock is listed on The New York Stock Exchange and the Pacific
Exchange under the symbol "IRF". The last reported sale price of our common
stock on The New York Stock Exchange on February 17, 2000 was $38 1/16 per
share.

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

INVESTING IN OUR COMMON STOCK INVOLVES CERTAIN RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 8.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

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

<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- --------
<S> <C> <C>
Public Offering Price $ $
Underwriting Discount $ $
Proceeds to International Rectifier Corporation (before
expenses) $ $
Proceeds to the Selling Stockholder (before expenses) $ $
</TABLE>

The underwriters are offering the shares subject to various conditions. The
underwriters expect to deliver the shares to purchasers on or about
, 2000.

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

SALOMON SMITH BARNEY J.P. MORGAN & CO.

BANC OF AMERICA SECURITIES LLC

GRUNTAL & CO., LLC

, 2000
<PAGE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
DIFFERENT INFORMATION. WE ARE NOT MAKING AN OFFER OF THESE SECURITIES IN ANY
STATE WHERE THE OFFER IS NOT PERMITTED. YOU SHOULD NOT ASSUME THAT THE
INFORMATION PROVIDED BY THIS PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN
THE DATE ON THE FRONT OF THIS PROSPECTUS.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Prospectus Summary.......................................... 3

Risk Factors................................................ 8

Special Note Regarding Forward Looking Statements........... 13

Use of Proceeds............................................. 14

Price Range of Common Stock................................. 14

Dividend Policy............................................. 14

Capitalization.............................................. 15

Selected Consolidated Financial Data........................ 16

Management's Discussion and Analysis of Financial Condition
And Results of Operations................................. 18

Business.................................................... 29

Management.................................................. 39

Principal and Selling Stockholders.......................... 41

Description of Capital Stock................................ 42

Underwriting................................................ 44

Certain United States Federal Tax Consequences to Non-U.S.
Holders of Common Stock................................... 45

Legal Matters............................................... 47

Experts..................................................... 48

Where You Can Find Additional Information................... 48

Index to Consolidated Financial Statements.................. F-1
</TABLE>

All trademarks and tradenames appearing in this prospectus are owned by
their respective holders.

2
<PAGE>
PROSPECTUS SUMMARY

YOU SHOULD READ THE FOLLOWING SUMMARY TOGETHER WITH THE MORE DETAILED
INFORMATION REGARDING OUR COMPANY AND THE COMMON STOCK BEING SOLD IN THIS
OFFERING, INCLUDING "RISK FACTORS" AND OUR CONSOLIDATED FINANCIAL STATEMENTS AND
RELATED NOTES, INCLUDED ELSEWHERE IN THIS PROSPECTUS AND INCORPORATED BY
REFERENCE.

INTERNATIONAL RECTIFIER CORPORATION

We are a leading designer, manufacturer and marketer of power semiconductors
and the leading worldwide supplier of a type of power semiconductor called a
MOSFET, a metal oxide semiconductor field effect transistor. Power
semiconductors perform a power management function by converting electricity
into a form more usable by electrical products. The technology advancements of
power semiconductors increase system efficiency, allow more compact end
products, improve features and functionality and extend battery life. Our
products are used in a range of end markets, including communications, consumer
electronics, information technology, automotive, industrial and
government/space.

We use our proprietary technology, comprehensive knowledge of power
management, and low cost manufacturing platforms to offer what we believe is one
of the industry's most advanced and competitive lines of power semiconductors.
Our products are broadly divided among three product categories:

- POWER INTEGRATED CIRCUITS AND ADVANCED CIRCUIT DEVICES. A Power Integrated
Circuit, or Power IC, is a semiconductor that integrates logic and power
management functions on the same chip to optimize system performance.
Advanced Circuit Devices are chipsets, multichip modules and advanced
performance discrete devices that address power management requirements in
more demanding applications. Our Power ICs and Advanced Circuit Devices
allow manufacturers to reduce the size, extend the battery life and
enhance the functionality of electronic devices. These products provide
application specific power management solutions for wireless and wireline
communication devices, Internet infrastructure equipment and appliances,
video game stations, portable electronics, including personal digital
assistants and notebook computers, as well as automotive systems and motor
control devices.

- POWER SYSTEMS. Power Systems combine power semiconductors with other power
management components in modules that improve power efficiency, provide a
cost-effective alternative to custom analog designs and enable customers
to introduce new products more quickly. We are focusing on Power Systems
for automotive electronics, including electric power steering and
integrated starter/alternator motors, as well as motor control
applications, including refrigeration and air conditioning.

- POWER COMPONENTS. Power Components are discrete devices used in general
power management applications. These include power MOSFETs, insulated gate
bipolar transistors, referred to as IGBTs, rectifiers, diodes and
thyristors. Power MOSFETs and IGBTs rapidly and efficiently switch
electricity on and off in order to supply power in a form that can be
formatted to the specific requirements of a circuit. Our power components
are used in virtually all of our end markets.

INDUSTRY OVERVIEW

3
<PAGE>
Within the power semiconductor market, MOSFETs and IGBTs are critical to power
management. Based on statistics published by the Semiconductor Industry
Association, industry-wide revenues from sales of power MOSFETs and IGBTs were
$3.13 billion in calendar 1999.

Demand for power semiconductors is being driven by the following:

- the growth of communications and Internet infrastructure;

- the increase in demand for portable electronics;

- the increasing applications in automotive electronics and motor controls;
and

- the recovery and expansion of Asian Pacific economies.

STRATEGY

We concentrate our resources on opportunities to add value and leverage our
competitive advantages through the following strategic initiatives:

FOCUS ON ADDING VALUE IN HIGH GROWTH MARKETS. We are leveraging our
leadership position in power semiconductors to offer proprietary products that
have higher average selling prices and gross margins in targeted applications.
Unlike most of our competitors, we focus all of our efforts in power
semiconductors. We believe this focus has resulted in our developing the most
advanced products for these markets. For example, our Power ICs are used in
power management for Intel's Pentium-Registered Trademark- III, AMD's
Athlon-Registered Trademark-, Motorola's cellular phones, and next generation
video game stations. In Power Systems, we are working with major automotive
suppliers in designing advanced systems to replace traditional hydraulic and
belt-driven applications with more cost-effective electronic systems that
improve performance and fuel efficiency. We are also targeting a wide range of
applications that have not historically utilized Power Systems, including
refrigerators, washing machines, air conditioners and other appliances.

EXTEND LEADERSHIP IN POWER COMPONENTS. The research firm Dataquest ranks us
as the world's leader in sales of MOSFETs. We pioneered the fundamental
technology that set the industry standard for power MOSFETs and estimate that
approximately 70% of the world's power MOSFETs are produced by us or use our
patented technology. Over the last two years, we have invested aggressively to
advance trench and planar process technologies. These investments have produced
what we believe are the most efficient power MOSFET components in the
marketplace. Our leadership position in Power Components provides us with a
platform for continued expansion in value-added growth markets.

CAPITALIZE ON LEADING CUSTOMER RELATIONSHIPS. As a result of our leadership
and strength in power semiconductors, industry leaders look to us for products
and programs that address their most challenging power management needs. These
relationships put us at the forefront of developing products for new trends in
the marketplace. We offer high quality customer service with comprehensive sales
and engineering support, including Internet service applications, electronic
order entry and just-in-time delivery. Our leading customers include Alcatel,
American Power Conversion, Compaq, Delphi, IBM, Lockheed-Martin, Lucent, Maxtor,
Mitsubishi, Motorola, Nortel Networks, Philips and Sony. In addition, our rate
of design wins has accelerated into the applications of these customers as well
as AMD, Bosch, Cisco Systems, Dell, Intel, Qualcomm and Groupe Schneider.

4
<PAGE>
quarter of fiscal 1998, we opened a new research and development facility that
provides submicron process capability and capacity for rapid development. Our
long-term investment in research and development has resulted in a broad patent
portfolio, consisting of 313 issued patents and 430 patents pending. In fiscal
1999, licenses under our patents generated approximately $26.5 million in
royalties. We believe our technology leadership and product innovation will
continue to be a source of growth in the fastest growing segments of the power
semiconductor industry.

CAPITALIZE ON LOW COST MANUFACTURING. Unlike many of our competitors, we
fabricate most of our chips in facilities designed to address the specific
requirements of power semiconductors. We believe that our wafer fabrication
costs are among the lowest in the industry. We have production facilities in
California, England, Italy, Mexico, Wales, India and China. We also use
third-party foundries and assemblers to supplement our internal manufacturing.

ORGANIZATION

We were founded in 1947 as a California corporation and reincorporated in
Delaware in 1979. Our principal executive offices are located at 233 Kansas
Street, El Segundo, California 90245 and our telephone number is (310)726-8000.

RECENT DEVELOPMENTS

On January 28, 2000, we announced an agreement with Zing
Technologies, Inc., to acquire all the outstanding shares of Zing through a
tender offer and merger for an aggregate net cash purchase price of
approximately $28.5 million. Zing's wholly owned subsidiary and sole operating
business, Omnirel LLC, manufactures and sells high reliability power
semiconductor systems, including multi-chip power semiconductors, integrated
power modules and packaged semiconductor components for the military, and for
industrial and high-end commercial markets. Omnirel's products, customers,
technology and manufacturing capabilities provide a strategic complement to our
own Power Systems business. Net sales for the Omnirel operating unit of Zing for
the fiscal year ended June 30, 1999 were approximately $25 million. The tender
offer for the outstanding shares of Zing expired, as scheduled, on March 6,
2000, with approximately 96% of the outstanding shares of Zing having been
tendered. We intend to complete the acquisition by merger between our
acquisition subsidiary and Zing.

THE OFFERING

The following information assumes that the underwriters do not exercise the
option that we have granted to them to purchase additional shares in the
offering and is based on the shares outstanding as of February 10, 2000. It
excludes, as of February 10, 2000, 6,904,723 shares of common stock subject to
outstanding options with a weighted average exercise price of $15.74 per share
and 4,835,091 shares of common stock available for future grants under our stock
option plans.

<TABLE>
<S> <C>
Common stock offered by us.................................. 7,600,000 shares

Common stock offered by the selling stockholder............. 400,000 shares

Common stock to be outstanding after the offering........... 59,858,667 shares

Use of proceeds............................................. To repay debt and for general
corporate purposes, including
possible acquisitions. See "Use of
Proceeds."

New York Stock Exchange Symbol.............................. IRF
</TABLE>

5
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

The information under "As Adjusted" in the balance sheet data below reflects
the receipt and application of the net proceeds from the sale of 7,600,000
shares of common stock by us in this offering as described under "Use of
Proceeds," at an assumed public offering price of $38 1/16 per share.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEARS ENDED JUNE 30, DECEMBER 31,
-------------------------------------- ------------------------
1997 1998 1999 1998 1999
-------- -------- ---------- ---------- --------
(RESTATED)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Revenues........................................... $486,127 $551,891 $ 545,371 $260,330 $323,337
-------- -------- ---------- -------- --------
Gross profit....................................... 163,060 (1) 176,164 151,992 (2) 72,363 (2) 106,421
Selling and administrative expense................. 105,954 104,661 98,193 48,605 53,740
Research and development expense................... 35,495 39,132 40,512 20,418 21,660
Impairment of assets, restructuring and severance
charges.......................................... 71,000 (1) -- 24,520 (2)(3) 12,000 (2) --
-------- -------- ---------- -------- --------
Operating profit (loss).......................... (49,389) 32,371 (11,233) (8,660) 31,021
Interest expense, net.............................. (4,015) (7,288) (11,120) (5,356) (7,320)
Other income (expense)............................. 714 (494) 53,509 (4) 44,347 (4) 600
Provision (benefit) for income taxes............... (9,484) 8,114 10,780 10,503 6,788
-------- -------- ---------- -------- --------
Income (loss) before cumulative effect of change
in accounting principle........................ $(43,206) $ 16,475 $ 20,376 $ 19,828 $ 17,513
======== ======== ========== ======== ========
Net income (loss)................................ $(43,206) $ 16,475 $ (5,778)(5) $ (6,326)(5) $ 17,513
======== ======== ========== ======== ========
Net income (loss) per common share:
Basic:
Income (loss) before cumulative effect of
change in accounting principle............... $ (0.84) $ 0.32 $ 0.39 $ 0.38 $ 0.34
Net income (loss).............................. (0.84) 0.32 (0.11) (0.12) 0.34
Diluted:
Income (loss) before cumulative effect of
accounting change............................ $ (0.84) $ 0.32 $ 0.39 $ 0.38 $ 0.33
Net income (loss).............................. (0.84) 0.32 (0.11) (0.12) 0.33
Weighted average common shares outstanding:
Basic............................................ 51,307 51,248 51,612 51,523 51,974
Diluted.......................................... 51,307 51,674 51,788 51,605 53,594

SUPPLEMENTAL DATA
Depreciation and amortization...................... $ 37,103 $ 38,937 $ 46,162 $ 23,285 $ 26,316
Capital expenditures............................... $ 99,762 $ 90,280 $ 71,577 $ 38,468 $ 23,290
Total units sold................................... 680,011 941,072 1,210,572 549,103 816,689
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, 1999
-------------------
AS
ACTUAL ADJUSTED
-------- --------
<S> <C> <C>
BALANCE SHEET DATA
Cash and cash equivalents................................... $ 30,028 $152,450
Total assets................................................ 718,889 841,311
Total debt, including current portion....................... 174,060 22,060
Stockholders' equity........................................ 417,686 692,108
</TABLE>

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

(1) In fiscal 1997, we initiated a program to decrease costs through increased
yields, lower material costs and lower assembly and operating expenses. This
resulted in a $75.0 million special charge that included $61.0 million
related to asset write-downs, $10.0 million in severance costs and a
$4.0 million inventory write-down that reduced gross profit.

6
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$14.5 million special charge consisting of $5.9 million in severance costs,
$6.1 million for the write-down of related assets and a $2.5 million
inventory write-down that reduced gross profit.

(3) In addition to the assembly line relocation charge as noted above in (2), we
recorded a charge of $12.5 million in the second half of fiscal 1999
relating to additional severance charges for affected employees in sales,
customer service and administration.

(4) In fiscal 1999, other income (expense) included a $43.5 million pretax
benefit associated with the settlement of patent litigation recorded in the
second quarter of fiscal 1999 and other settlements of patent litigation in
the second half of fiscal 1999.

(5) We elected early adoption of Statement of Position 98-5, "Reporting on the
Costs of Start-Up Activities," which requires the expense of all start-up
and preoperating costs as they are incurred. The cumulative effect of this
change in accounting principle, net of tax benefit of $5.4 million, was
$26.2 million, which was recorded in the first quarter of fiscal 1999.

7
<PAGE>
RISK FACTORS

BEFORE YOU INVEST IN OUR COMMON STOCK, YOU SHOULD CAREFULLY CONSIDER THE
RISKS DESCRIBED BELOW. YOU SHOULD ALSO REFER TO THE OTHER INFORMATION INCLUDED
IN THIS PROSPECTUS AND THE INFORMATION INCORPORATED IN THIS PROSPECTUS BY
REFERENCE, BEFORE YOU DECIDE TO INVEST IN OUR COMMON STOCK.

DOWNTURNS IN THE HIGHLY CYCLICAL SEMICONDUCTOR INDUSTRY OR CHANGES IN END MARKET
DEMAND COULD AFFECT OUR OPERATING RESULTS AND THE VALUE OF OUR BUSINESS.

The semiconductor industry is highly cyclical and the value of our business
may decline during the "down" portion of these cycles. During recent years, we,
as well as many others in our industry, experienced significant declines in the
pricing of our products. The pricing pressure in the semiconductor industry in
recent years was primarily due to the Asian currency crisis, industry-wide
excess manufacturing capacity and weak economic growth outside the United
States. Although markets for semiconductors have improved, we cannot assure you
that they will continue to improve or that our markets will not experience
renewed, possibly more severe and prolonged, downturns in the future. In
addition, we may experience significant changes in our profitability as a result
of variations in sales, changes in product mix, price competition for orders and
the costs associated with the introduction of new products. The markets for our
products depend on continued demand in the communications, consumer electronics,
information technology, automotive, industrial and government/space markets, and
these end markets may experience changes in demand that could adversely affect
our operating results and financial condition.

THE SEMICONDUCTOR BUSINESS IS HIGHLY COMPETITIVE AND INCREASED COMPETITION COULD
REDUCE THE VALUE OF AN INVESTMENT IN OUR COMPANY.

The semiconductor industry, including the segment in which we do business,
is highly competitive. Competition is based on price, product performance,
product availability, quality, reliability and customer service. In addition,
even in strong markets, price pressures may emerge as competitors attempt to
gain a greater market share by lowering prices. We compete in various markets
with companies of various sizes, many of which are larger and have greater
financial and other resources than we have, and thus may be better able to
pursue acquisition candidates and to withstand adverse economic or market
conditions. In addition, companies not currently in direct competition with us
may introduce competing products in the future.

NEW TECHNOLOGIES COULD RESULT IN THE DEVELOPMENT OF NEW PRODUCTS AND A DECREASE
IN DEMAND FOR OUR PRODUCTS, AND WE MAY NOT BE ABLE TO DEVELOP NEW PRODUCTS TO
SATISFY CHANGES IN DEMAND.

Our failure to develop new technologies or react to changes in existing
technologies could materially delay our development of new products, which could
result in decreased revenues and a loss of market share to our competitors.
Rapidly changing technologies and industry standards, along with frequent new
product introductions, characterize the semiconductor industry. Hence, we must
devote significant resources to research and development. Our financial
performance depends on our ability to design, develop, manufacture, assemble,
test, market and support new products and enhancements on a timely and
cost-effective basis. We cannot assure you that we will successfully identify
new product opportunities and develop and bring new products to market in a
timely and cost-effective manner, or that products or technologies developed by
others will not render our products or technologies obsolete or noncompetitive.
A fundamental shift in technologies in our product markets could have a material
adverse effect on our competitive position within the industry. In addition, to
remain competitive, we must continue to reduce die sizes and improve
manufacturing yields. We cannot assure you that we can accomplish these goals.

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<PAGE>
OUR INTERNATIONAL OPERATIONS EXPOSE US TO MATERIAL RISKS.

In the six months ended December 31, 1999, our product sales by region were
36% in North America, 40% in Asia and 24% in Europe. We expect revenues from
foreign markets to continue to represent a significant portion of total
revenues. We maintain or contract with significant operations in the
Philippines, United Kingdom, Italy, Malaysia, China, Mexico, South Korea, India
and Taiwan. Among others, the following risks are inherent in doing business
internationally:

- changes in, or impositions of, legislative or regulatory requirements,
including tax laws in the United States and in the countries in which we
manufacture or sell our products;

- trade restrictions;

- transportation delays;

- work stoppages;

- economic and political instability; and

- foreign currency fluctuations.

In addition, the laws of certain foreign countries may not protect our products
or intellectual property rights to the same extent as do U.S. laws. Therefore,
the risk of piracy of our technology and products may be greater in these
foreign countries. Although we have not experienced any material adverse effect
on our operating results as a result of these and other factors, we cannot
assure you that such factors will not have a material adverse effect on our
financial condition and operating results in the future.

DELAYS IN BEGINNING PRODUCTION AT NEW FACILITIES, IMPLEMENTING NEW PRODUCTION
TECHNIQUES OR IN RESOLVING PROBLEMS ASSOCIATED WITH TECHNICAL EQUIPMENT
MALFUNCTIONS COULD ADVERSELY AFFECT OUR MANUFACTURING EFFICIENCIES.

Our manufacturing efficiency will be an important factor in our future
profitability, and we cannot assure you that we will be able to maintain or
increase our manufacturing efficiency to the same extent as our competitors. Our
manufacturing processes are highly complex, require advanced and costly
equipment and are continuously being modified in an effort to improve yields and
product performance. Impurities, defects or other difficulties in the
manufacturing process can lower yields.

In addition, as is common in the semiconductor industry, we have from time
to time experienced difficulty in beginning production at new facilities or in
effecting transitions to new manufacturing processes. As a consequence, we have
experienced delays in product deliveries and reduced yields. We may experience
manufacturing problems in achieving acceptable yields or experience product
delivery delays in the future as a result of, among other things, capacity
constraints, construction delays, upgrading or expanding existing facilities or
changing our process technologies, any of which could result in a loss of future
revenues. Our operating results could also be adversely affected by the increase
in fixed costs and operating expenses related to increases in production
capacity if revenues do not increase proportionately.

INTERRUPTIONS, DELAYS OR COST INCREASES AFFECTING OUR MATERIALS, PARTS OR
EQUIPMENT MAY IMPAIR OUR COMPETITIVE POSITION.

Our manufacturing operations depend upon obtaining adequate supplies of
materials, parts and equipment, including silicon, mold compounds and
leadframes, on a timely basis from third parties. Our results of operations
could be adversely affected if we were unable to obtain adequate supplies of
materials, parts and equipment in a timely manner or if the costs of materials,
parts or equipment increase significantly. From time to time, suppliers may
extend lead times, limit supplies or increase prices due to capacity constraints
or other factors. Although we generally use materials, parts and equipment
available from multiple suppliers, we have a limited number of suppliers for
some materials,

9
<PAGE>
parts and equipment. While we believe that alternate suppliers for these
materials, parts and equipment are available, an interruption could materially
impair our operations.

Also, some of our products are assembled and tested by third party
subcontractors. We do not have any long-term assembly agreements with these
subcontractors. As a result, we do not have immediate control over our product
delivery schedules or product quality. Due to the amount of time typically
required to qualify assemblers and testers, we could experience delays in the
shipment of our products if we are forced to find alternative third parties to
assemble or test them. Any product delivery delays in the future could have a
material adverse effect on our operating results and financial condition. Our
operations and ability to satisfy customer obligations could be adversely
affected if our relationships with these subcontractors were disrupted or
terminated.

OUR INTELLECTUAL PROPERTY IS ONE OF OUR PRINCIPAL ASSETS. PROTECTING THIS ASSET
MAY BE COSTLY AND UNCERTAIN.

We rely heavily on our patents and proprietary technologies. Patent
litigation settlements and royalty income substantially contribute to our
financial results. Enforcement of our intellectual property rights is costly,
risky and time-consuming. We cannot assure you that we can successfully continue
to protect our intellectual property rights, especially in foreign markets.

Our royalty income is largely dependent on the following factors:

- the remaining terms of our MOSFET patents;

- the defensibility and enforceability of our patents;

- the introduction and acceptance of power MOSFETs and IGBTs that are not
covered by our patents;

- changes in our licensees' unit sales, prices or die sizes; and

- the terms, if any, upon which expiring license agreements are
renegotiated.

Our key MOSFET patents expire between 2000 and 2010, with four such patents
expiring in 2000, although our broadest patents expire in 2007 and 2008. The
U.S. Patent and Trademark Office is currently reexamining two of our broadest
MOSFET patents that expire in 2008. Recently, the U.S. Patent and Trademark
Office issued a decision upholding the patentability of all the claims of one of
those patents and we are awaiting certification from that office. However, we
cannot assure you that the validity of either of the two patents presently
undergoing reexamination, or others that may be subject to future reexamination,
will be upheld by the U.S. Patent and Trademark Office.

We do not believe that the above reexamination or expiration of our MOSFET
patents in 2000 should result in a material decrease in our licensing revenues.
However, any decrease in our royalty income generally could have a material
adverse effect on our operating results and financial condition.

OUR FAILURE TO OBTAIN OR MAINTAIN THE RIGHT TO USE CERTAIN TECHNOLOGIES MAY
NEGATIVELY AFFECT OUR FINANCIAL RESULTS.

Our future success and competitive position may depend in part upon our
ability to obtain or maintain certain proprietary technologies used in our
principal products, which is achieved in part by defending claims by our
competitors of intellectual property infringement. We license certain patents
owned by others. We have also been notified that certain of our products may
infringe the patents of third parties. Although licenses are generally offered
in such situations, we cannot eliminate the risk of litigation alleging patent
infringement. While we are not currently engaged as a defendant in intellectual
property litigation that we believe will have a material adverse effect, we
could become subject to lawsuits in which it is alleged that we have infringed
upon the intellectual property rights of others.

10
<PAGE>
Our involvement in existing and future intellectual property litigation
could result in significant expense to us, adversely affect sales of the
challenged product or technologies and divert the efforts of our technical and
management personnel, whether or not such litigation is resolved in our favor.
If any such infringements exist, arise or are claimed in the future, we may be
exposed to substantial liability for damages and may need to obtain licenses
from the patent owners, discontinue or change our processes or products or
expend significant resources to develop or acquire non-infringing technologies.
We cannot assure you that we would be successful in such efforts or that such
licenses would be available under reasonable terms. Our failure to develop or
acquire non-infringing technologies or to obtain licenses on acceptable terms or
the occurrence of related litigation itself could have a material adverse effect
on our operating results and financial condition.

WE MUST COMMIT RESOURCES TO PRODUCT PRODUCTION PRIOR TO RECEIPT OF PURCHASE
COMMITMENTS AND COULD LOSE SOME OR ALL OF THE ASSOCIATED INVESTMENT.

We sell products primarily pursuant to purchase orders for current delivery,
rather than pursuant to long-term supply contracts. Many of these purchase
orders may be revised or canceled without penalty. As a result, we must commit
resources to the production of products without any advance purchase commitments
from customers. Our inability to sell products after we devote significant
resources to them could have a material adverse effect on our business,
financial condition and results of operations.

WE RECEIVE A SIGNIFICANT PORTION OF OUR REVENUES FROM A SMALL NUMBER OF
CUSTOMERS AND DISTRIBUTORS.

Historically, a significant portion of our revenues has come from a small
number of customers and distributors. For fiscal 1999 and the six months ended
December 31, 1999, our top five customers or distributors accounted for, in the
aggregate, approximately 27% and 27%, respectively, of our total revenues. The
loss or financial failure of any significant customer or distributor, any
reduction in orders by any of our significant customers or distributors, or the
cancellation of a significant order, could materially and adversely affect our
business.

WE MAY FAIL TO ATTRACT OR RETAIN THE QUALIFIED TECHNICAL, SALES, MARKETING AND
MANAGERIAL PERSONNEL REQUIRED TO OPERATE OUR BUSINESS SUCCESSFULLY.

Our future success depends, in part, upon our ability to attract and retain
highly qualified technical, sales, marketing and managerial personnel. Personnel
with the necessary semiconductor expertise are scarce and competition for
personnel with these skills is intense. We cannot assure you that we will be
able to retain existing key technical, sales, marketing and managerial employees
or that we will be successful in attracting, assimilating or retaining other
highly qualified technical, sales, marketing and managerial personnel in the
future. If we are unable to retain existing key employees or are unsuccessful in
attracting new highly qualified employees, our business, financial condition and
results of operations could be materially and adversely affected.

WE ARE ACQUIRING AND MAY CONTINUE TO ACQUIRE OTHER COMPANIES AND MAY BE UNABLE
SUCCESSFULLY TO INTEGRATE SUCH COMPANIES WITH OUR OPERATIONS.

We recently announced our intention to acquire Zing Technologies, Inc. and
we may continue to expand and diversify our operations with additional
acquisitions. If we are unsuccessful in integrating these companies with our
operations, or if integration is more difficult than anticipated, we may
experience disruptions that could have a material adverse effect on our
business, financial condition and results of operations. Some of the risks that
may affect our ability to integrate or realize any anticipated benefits from
companies we acquire include those associated with:

- unexpected losses of key employees or customers of the acquired company;

- conforming the acquired company's standards, processes, procedures and
controls with our operations;

11
<PAGE>
- coordinating our new product and process development;

- hiring additional management and other critical personnel; and

- increasing the scope, geographic diversity and complexity of our
operations.

OUR PRODUCTS MAY BE FOUND TO BE DEFECTIVE, PRODUCT LIABILITY CLAIMS MAY BE
ASSERTED AGAINST US AND WE MAY NOT HAVE SUFFICIENT LIABILITY INSURANCE.

One or more of our products may be found to be defective after we have
already shipped the products in volume, requiring a product replacement or
recall. We may also be subject to product returns that could impose substantial
costs and have a material and adverse effect on our business, financial
condition and results of operations.

Product liability claims may be asserted with respect to our products.
Although we currently have product liability insurance, we cannot assure you
that we have obtained sufficient insurance coverage or that we will have
sufficient resources to satisfy any product liability claims.

AN ADVERSE RULING OR DECISION IN A PENDING TRIAL COULD MATERIALLY IMPAIR OUR
FINANCIAL POSITION.

Our directors and some of our officers are defendants in three lawsuits in
California that allege intentional and negligent misrepresentations and
violations of the federal securities laws in connection with our public offering
of common stock in April 1991 and the redemption in June 1991 of our 9%
convertible subordinated debentures. The suits also allege that our projections
for growth in fiscal 1992 were materially misleading. Although some of the
claims have been dismissed and we believe that the remaining allegations in
these lawsuits are without merit, we cannot presently determine the final
outcome of these lawsuits. A substantial judgment or settlement, if any, could
have a material adverse effect on our operating results and financial condition.
Trial of the remaining claims is scheduled for April 25, 2000.

LARGE POTENTIAL ENVIRONMENTAL LIABILITIES, INCLUDING THOSE RELATING TO A FORMER
OPERATING SUBSIDIARY, MAY ADVERSELY IMPACT OUR FINANCIAL POSITION.

Federal, state and local laws and regulations impose various restrictions
and controls on the discharge of materials, chemicals and gases used in our
semiconductor manufacturing processes. In addition, under some laws and
regulations, we could be held financially responsible for remedial measures if
our properties are contaminated or if we send waste to a landfill or recycling
facility that becomes contaminated, even if we did not cause the contamination.
Also, we may be subject to common law claims if we release substances that
damage or harm third parties. Further, we cannot assure you that changes in
environmental laws or regulations will not require additional investments in
capital equipment or the implementation of additional compliance programs in the
future. Any failure to comply with environmental laws or regulations could
subject us to serious liabilities and could have a material adverse effect on
our operating results and financial condition.

We and Rachelle Laboratories, Inc., a former operating subsidiary that
discontinued operations in 1986, were each named a potentially responsible party
in connection with the investigation by the U.S. Environmental Protection Agency
of the disposal of allegedly hazardous substances at a major superfund site in
Monterey Park, California, known as the OII Site. Although we have settled all
outstanding claims that have arisen out of this site, no claims against Rachelle
have been settled.

We received a letter dated July 25, 1995 from the U.S. Department of
Justice, directed to Rachelle, offering to settle claims against Rachelle
relating to the first elements of clean-up work at the OII Site for $4,953,148.
The offer stated that the settlement would not cover the cost of any additional
remedial actions required to finish the clean-up. This settlement offer expired
by its terms on September 1, 1995. On August 7, 1995, we received a Supplemental
Information Request from the EPA directed to Rachelle, to which counsel for
Rachelle responded with information regarding waste shipped to the site. Counsel
for Rachelle received a letter from the EPA dated September 30, 1997,

12
<PAGE>
requesting that Rachelle participate in the final remedial actions at the site,
and counsel replied on October 21, 1997. We have taken the position that none of
the wastes generated by Rachelle were hazardous. Neither we nor Rachelle have
received any further communications from the EPA in connection with this site.

We cannot presently determine with accuracy the amount of the potential
demand to Rachelle for the cost of the final remedy. Based upon information
received to date, we believe that any demand for the cost of the final remedy,
if made, would not likely be material to our financial condition although it
could affect our results of operations and cash flows. Any demands related to
the cost of the final remedy would be in addition to the amount demanded for
earlier phases of the OII Site clean-up. Our insurer has not yet accepted
liability although it has made payments for defense costs we have incurred in
connection with the lawsuit.

SOME OF OUR FACILITIES ARE LOCATED NEAR MAJOR EARTHQUAKE FAULT LINES.

Our corporate headquarters, our major manufacturing facility, our research
facility and certain other critical business operations are located near major
earthquake fault lines. We could be materially and adversely affected in the
event of a major earthquake. Although we maintain earthquake insurance, we can
give you no assurance that we have obtained or will maintain sufficient
insurance coverage.

DELAWARE LAW AND OUR CHARTER DOCUMENTS CONTAIN PROVISIONS THAT COULD DISCOURAGE
OR PREVENT A POTENTIAL TAKEOVER OF OUR COMPANY THAT MIGHT OTHERWISE RESULT IN
OUR STOCKHOLDERS RECEIVING A PREMIUM OVER THE MARKET PRICE OF THEIR SHARES.

Provisions of Delaware law and our certificate of incorporation and bylaws
could make more difficult the acquisition of our company by means of a tender
offer, a proxy contest, or otherwise, and the removal of incumbent officers and
directors. These provisions include:

- Section 203 of the Delaware General Corporation Law, which prohibits a
merger with a 15%-or-greater stockholder, such as a party that has
completed a successful tender offer, until three years after that party
became a 15%-or-greater stockholder;

- our board of directors is divided into three classes with staggered three
year terms for each class, which could make it more difficult to gain
control of our board of directors;

- the authorization in the certificate of incorporation of undesignated
preferred stock, which could be issued without stockholder approval in a
manner designed to prevent or discourage a takeover; and

- provisions in our bylaws eliminating stockholders' rights to call a
special meeting of stockholders, which could make it more difficult for
stockholders to wage a proxy contest for control of our board or to vote
to repeal any of the anti-takeover provisions contained in our certificate
of incorporation and bylaws.

SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS

Some of the statements in this prospectus or incorporated by reference are
forward-looking, including, without limitation, the statements under the
captions "Prospectus Summary," "Risk Factors," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business." You
can identify these statements by the use of words like "may," "will," "could,"
"should," "project," "believe," "anticipate," "expect," "plan," "estimate,"
"forecast," "potential," "intend," "continue" and variations of these words or
comparable words. Forward-looking statements do not guarantee future performance
and involve risks and uncertainties. Actual results may differ substantially
from the results that the forward-looking statements suggest for various
reasons, including those discussed under "Risk Factors." These forward looking
statements are made only as of the date of this prospectus. We do not undertake
to update or revise the forward looking statements, whether as a result of new
information, future events or otherwise.

13
<PAGE>
USE OF PROCEEDS

We will receive estimated net proceeds of approximately $274 million from
the sale of shares of common stock in this offering, after deducting
underwriting discounts and estimated offering expenses, and assuming a public
offering price of $38 1/16 per share. We expect to use the net proceeds of this
offering to:

- repay all of the indebtedness outstanding under our secured credit
agreement (approximately $152 million); and

- provide funds for general corporate purposes, including capital
expenditures and possible acquisitions.

Indebtedness under our secured credit agreement accrues interest at variable
rates and must be repaid in full in 2004 and 2005. At December 31, 1999, the
weighted average interest rate on secured credit agreement borrowings was 9.5%.
We intend to terminate the secured credit agreement after this offering.

Pending use of the net proceeds as described above, we will invest the net
proceeds in investment grade, marketable securities.

PRICE RANGE OF COMMON STOCK

Our common stock is traded on The New York Stock Exchange and the Pacific
Exchange under the symbol "IRF". The following table sets forth for the quarters
indicated the high and low composite per share closing sales prices as reported
by the exchanges.

<TABLE>
<CAPTION>
HIGH LOW
----------- -----------
<S> <C> <C>
FISCAL YEAR 1998
First Quarter............................................... $ 23 3/4 $ 18
Second Quarter.............................................. 23 3/8 11 9/16
Third Quarter............................................... 14 9/16 10 9/16
Fourth Quarter.............................................. 12 1/2 8 3/16
FISCAL YEAR 1999
First Quarter............................................... 8 9/16 4 1/4
Second Quarter.............................................. 10 13/16 4 1/4
Third Quarter............................................... 11 7/8 6 3/8
Fourth Quarter.............................................. 13 1/2 7 3/16
FISCAL YEAR 2000
First Quarter............................................... 17 7/16 12 1/4
Second Quarter.............................................. 26 15 3/4
Third Quarter (through February 17, 2000)................... 39 7/8 23 3/4
</TABLE>

On February 17, 2000, the last reported sale price of our common stock on
The New York Stock Exchange was $38 1/16 per share. As of December 31, 1999,
there were approximately 1,639 stockholders of record of our common stock.

DIVIDEND POLICY

We have not recently declared or paid any dividends. We do not intend to pay
cash dividends in the foreseeable future as all funds will be used to expand
operations. Furthermore, our current credit agreement prohibits us from paying
any cash dividends.

14
<PAGE>
CAPITALIZATION

The following table sets forth our unaudited actual cash and cash
equivalents and capitalization as of December 31, 1999, and as adjusted to give
effect to our sale and issuance of 7,600,000 shares of common stock in this
offering at an assumed public offering price of $38 1/16 per share and the
application of the associated net proceeds. This table should be read in
conjunction with "Selected Consolidated Financial Data," "Management's
Discussion and Analysis of Financial Condition and Results of Operations," and
our consolidated financial statements and notes appearing elsewhere in this
prospectus or incorporated by reference herein.

<TABLE>
<CAPTION>
DECEMBER 31, 1999(1)
----------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents................................... $ 30,028 $152,450
======== ========

Debt obligations, including current portion................. $174,060 $ 22,060
-------- --------
Stockholders' equity:
Common stock, par value $1.00 per share; authorized
150,000,000; issued and outstanding 52,061,454 actual
and 59,661,454 as adjusted.............................. 52,061 59,661
Preferred stock, par value $1.00 per share; authorized
1,000,000; issued and outstanding none.................. -- --
Capital contributed in excess of par value of shares...... 260,326 527,148
Retained earnings......................................... 110,381 110,381(2)
Accumulated other compensation loss....................... (5,082) (5,082)
-------- --------
Total stockholders' equity.............................. 417,686 692,108
-------- --------
Total capitalization.................................. $591,746 $714,168
======== ========
</TABLE>

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

(1) The actual and as adjusted information set forth in the table excludes
6,510,783 shares of common stock issuable upon exercise of options
outstanding as of December 31, 1999 at a weighted average exercise price of
$14.36 per share, and 5,321,514 shares of common stock available for future
grants under our stock option plans.

(2) We estimate that the termination of the credit agreement will result in an
extraordinary charge of $3.8 million after taxes that will be reflected in
the fiscal quarter in which the debt is repaid.

15
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

The selected consolidated financial data as of June 30, 1998 and 1999 and
for our fiscal years ended June 30, 1997, 1998 and 1999 are derived from our
audited consolidated financial statements and should be read in conjunction with
the audited consolidated financial statements and notes appearing elsewhere in
this prospectus and incorporated by reference herein. The selected consolidated
financial data as of June 30, 1995, 1996 and 1997, and for the fiscal years
ended June 30, 1995 and 1996 are derived from our audited consolidated financial
statements which are not included in this prospectus. Information as of and for
the six-month periods ended December 31, 1998 and 1999 are unaudited but reflect
all material adjustments (consisting of normal recurring adjustments), which in
our opinion are necessary to present the information in accordance with
generally accepted accounting principles. The information for the six months
ended December 31, 1999 is not necessarily predictive of our operating results
for the entire year.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEARS ENDED JUNE 30, DECEMBER 31,
----------------------------------------------------- ------------------------
1995 1996 1997 1998 1999 1998 1999
-------- -------- -------- -------- -------- ---------- --------
(RESTATED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Revenues............................ $429,026 $576,849 $486,127 $551,891 $545,371 $260,330 $323,337
Cost of sales....................... 278,202 351,046 323,067 375,727 393,379 187,967 216,916
-------- -------- -------- -------- -------- -------- --------
Gross profit........................ 150,824 225,803 163,060(1) 176,164 151,992(2) 72,363(2) 106,421
Selling and administrative
expense........................... 82,328 102,129 105,954 104,661 98,193 48,605 53,740
Research and development expense.... 20,108 26,967 35,495 39,132 40,512 20,418 21,660
Impairment of assets, restructuring
and severance charges............. -- -- 71,000(1) -- 24,520(2)(3) 12,000(2) --
-------- -------- -------- -------- -------- -------- --------
Operating profit (loss)........... 48,388 96,707 (49,389) 32,371 (11,233) (8,660) 31,021
Interest expense, net............... (377) (394) (4,015) (7,288) (11,120) (5,356) (7,320)
Other income (expense).............. (544) (383) 714 (494) 53,509(4) 44,347(4) 600
(Provision) benefit for income
taxes............................. (8,069) (29,451) 9,484 (8,114) (10,780) (10,503) (6,788)
-------- -------- -------- -------- -------- -------- --------
Income (loss) before cumulative
effect of accounting change..... 39,398 66,479 (43,206) 16,475 20,376 19,828 17,513
Cumulative effect of change in
accounting principle, net of
income tax benefit of $5,431...... -- -- -- -- (26,154)(5) (26,154)(5) --
-------- -------- -------- -------- -------- -------- --------
Net income (loss)................. $ 39,398 $ 66,479 $(43,206) $ 16,475 $ (5,778) $ (6,326) $ 17,513
======== ======== ======== ======== ======== ======== ========
Net income (loss) per common share:
Basic:
Income (loss) before cumulative
effect of change in accounting
principle..................... $ 0.85 $ 1.31 $ (0.84) $ 0.32 $ 0.39 $ 0.38 $ 0.34
======== ======== ======== ======== ======== ======== ========
Net income (loss)............... $ 0.85 $ 1.31 $ (0.84) $ 0.32 $ (0.11) $ (0.12) $ 0.34
======== ======== ======== ======== ======== ======== ========
Diluted:
Income (loss) before cumulative
effect of accounting change... $ 0.84 $ 1.29 $ (0.84) $ 0.32 $ 0.39 $ 0.38 $ 0.33
======== ======== ======== ======== ======== ======== ========
Net income (loss)............... $ 0.84 $ 1.29 $ (0.84) $ 0.32 $ (0.11) $ (0.12) $ 0.33
======== ======== ======== ======== ======== ======== ========
Average common shares outstanding:
Basic........................... 46,535 50,577 51,307 51,248 51,612 51,523 51,974
Diluted......................... 47,020 51,384 51,307 51,674 51,788 51,605 53,594
</TABLE>

(FOOTNOTES ON FOLLOWING PAGE)

16
<PAGE>

<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEARS ENDED JUNE 30, DECEMBER 31,
-------------------------------------------------------------- ----------------------
1995 1996 1997 1998 1999 1998 1999
---------- ---------- ---------- ---------- ---------- ----------- --------
(RESTATED)
<S> <C> <C> <C> <C> <C> <C> <C>
SUPPLEMENTAL DATA
Depreciation and
amortization................ $ 23,444 $ 30,144 $ 37,103 $ 38,937 $ 46,162 $ 23,285 $ 26,316
Capital expenditures.......... $ 106,902 $ 112,275 $ 99,762 $ 90,280 $ 71,577 $ 38,468 $ 23,290
Total units sold.............. 551,209 728,567 680,011 941,072 1,210,572 548,102 816,689
</TABLE>

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
---------------------------------------------------- ---------------------
1995 1996 1997 1998 1999 1998 1999
-------- -------- -------- -------- -------- ---------- --------
(RESTATED)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA(6)
Cash, cash equivalents and short-term
investments.......................... $ 53,820 $ 53,760 $ 53,414 $ 45,526 $ 40,397 $ 26,858 $ 30,028
Net property, plant and equipment...... 245,218 327,978 333,559 390,892 380,504 377,705 377,920
Total assets........................... 496,184 629,079 679,753 735,827 709,085 747,763 718,889
Total debt............................. 49,116 71,564 174,984 206,907 181,461 195,106 174,060
Stockholders' equity................... 345,181 421,213 381,715 399,650 396,274 422,670 417,686
</TABLE>

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

(1) In fiscal 1997, we initiated a program to decrease costs through increased
yields, lower material costs, and lower assembly and operating expenses.
This resulted in a $75.0 million special charge that included $61.0 million
related to asset write-downs, $10.0 million in severance costs, and a
$4.0 million inventory write-down that reduced gross profit.

(2) In the quarter ended December 31, 1998, we decided to relocate assembly
lines from our facility in England to our facility in Mexico and to
streamline worldwide sales and administration through reductions in
personnel. These plans resulted in a $14.5 million special charge consisting
of $5.9 million in severance costs and $6.1 million for the write-down of
related assets, and a $2.5 million inventory write-down that reduced gross
profit.

(3) In addition to the assembly line relocation as noted above in (2), we
recorded a charge of $12.5 million in the second half of fiscal 1999
relating to additional severance charges for affected employees in sales,
customer service and administration.

(6) Certain reclassifications have been made to previously reported amounts to
conform to current period presentation.

17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

The following table sets forth items included in selected financial data as
a percentage of revenues.

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
FISCAL YEARS ENDED JUNE 30, DECEMBER 31,
------------------------------------ ----------------------
1997 1998 1999 1998 1999
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenues.......................................... 100.0 % 100.0% 100.0 % 100.0 % 100.0%
Cost of sales..................................... 66.5 68.1 72.1 72.2 67.1
----- ----- ----- ----- -----
Gross profit...................................... 33.5(1) 31.9 27.9(2) 27.8(2) 32.9
Selling and administrative expense................ 21.8 19.0 18.0 18.7 16.6
Research and development expense.................. 7.3 7.1 7.4 7.8 6.7
Impairment of assets, restructuring and severance
charges......................................... 14.6(1) -- 4.5(2)(3) 4.6(2) --
----- ----- ----- ----- -----
Operating profit (loss)........................... (10.2)% 5.8% (2.0)% (3.3)% 9.6%
===== ===== ===== ===== =====
</TABLE>

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

(1) In fiscal 1997, we initiated a program to decrease costs through increased
yields, lower material costs and lower assembly and operating expenses. This
resulted in a $75.0 million special charge, which included $61.0 million
related to asset write-downs, $10.0 million in severance costs and a
$4.0 million inventory write-down that reduced gross profit.

(3) In addition to the assembly line relocation as noted above in (2), we
recorded a charge of $12.5 million in fiscal 1999 relating to additional
severance charges for affected employees in sales, customer service and
administration.

QUARTERLY RESULTS OF OPERATIONS

The table below sets forth statement of operations data for each of the
eight consecutive quarters through December 31, 1999. This information has been
derived from our unaudited consolidated financial statements. The unaudited
consolidated financial statements include all material adjustments (consisting
of normal recurring adjustments), which in our opinion are necessary to present
the information in accordance with generally accepted accounting principles.
This information should be read in conjunction with our consolidated financial
statements and notes appearing elsewhere in this prospectus and incorporated by
reference.

18
<PAGE>

<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31,
1998 1998 1998 1998 1999 1999 1999 1999
--------- -------- --------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue....................... $140,376 $133,782 $127,493 $132,837 $137,550 $147,491 $152,239 $171,098
Cost of sales................. 95,862 94,933 91,283 96,684 97,669 107,743 104,020 112,896
-------- -------- -------- -------- -------- -------- -------- --------
Gross profit.................. 44,514 38,849 36,210 36,153 39,881 39,748 48,219 58,202
-------- -------- -------- -------- -------- -------- -------- --------
Gross profit percent.......... 31.7% 29.0% 28.4% 27.2% 29.0% 26.9% 31.6% 34.0%
Selling and administrative
expense..................... 26,774 25,551 24,207 24,398 24,575 25,013 26,656 27,084
Research and development
expense..................... 10,796 10,827 10,021 10,397 10,147 9,947 10,596 11,064
Impairment of assets,
restructuring, and severance
charges..................... 12,000(1) 4,200(2) 8,320(3)
-------- -------- -------- -------- -------- -------- -------- --------
Total operating costs....... 37,570 36,378 34,228 46,795 38,922 43,280 37,252 38,148
-------- -------- -------- -------- -------- -------- -------- --------
Operating profit.............. $ 6,944 $ 2,471 $ 1,982 $(10,642) $ 959 $ (3,532) $ 10,967 $ 20,054
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>

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

(1) In the quarter ended December 31, 1998, we decided to relocate assembly
lines from our facility in England to our facility in Mexico and to
streamline worldwide sales and administration through education in
personnel. These plans resulted in a $14.5 million special charge, which
included a $12.0 million restructuring charge consisting of $5.9 million in
severance costs and $6.1 million for the write-down of related assets, and a
$2.5 million in inventory write-down that reduced gross profit.

(2) We recorded a charge of $4.2 million relating to severance charges for
affected employees in sales, customer service and administration in third
quarter of fiscal 1999.

(3) We recorded an additional charge of $8.3 million relating to severance
charges for affected employees in sales, customer service and administration
in the fourth quarter of fiscal 1999.

SIX MONTHS ENDED DECEMBER 31, 1999 COMPARED WITH THE SIX MONTHS ENDED
DECEMBER 31, 1998

Our revenues for the six-month period ended December 31, 1999 increased
24.2% to $323.3 million from $260.3 million for the six month period ended
December 31, 1998. The revenue increase reflected strong demand in portable and
consumer electronics, computers and servers. Revenues in the six-month period
ended December 31, 1999 included $15.1 million of net patent royalties, versus
$11.1 million in the comparable prior-six-month period, reflecting a number of
new license agreements and market growth.

For the six months ended December 31, 1999, our product sales by region
(based on the location of the customer) were approximately 36% from North
America, 24% from Europe and 40% from Asia, which includes Japan and Asia
Pacific, compared to 41%, 26% and 33%, respectively, for the six months ended
December 31, 1998. Revenue in Asia Pacific grew 54% over the six months ended
December 31, 1998, reflecting the continued move of American and European
manufacturing activities to this region as well as strong demand in all sectors.
The 26% growth of year-to-year revenue from Japan reflects strong demand for
proprietary products and improved market conditions. Europe remains stable with
continuing strength in the automotive and cellular phone industries. North
America sales remained constant, despite the impact of certain customers moving
assembly from the U.S. to Asia. Unit shipments increased 49% period to period.

Gross profit for the six-month period ended December 31, 1999 increased to
$106.4 million (32.9% of revenues) from $72.4 million (27.8% of revenues) for
the six months ended December 31, 1998. The gross margin increase reflected a
higher proportion of revenue from proprietary products, lower manufacturing
costs as a result of continued manufacturing efficiencies and restructuring
efforts, and firm pricing. During December 1998, we charged $2.5 million to the
cost of goods sold due to the write-down of inventory as a result of the planned
relocation of assembly lines from our facility in

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England to our facility in Mexico. Excluding the inventory charge, gross profit
for the six-month period ended December 31, 1998 was 28.8% of revenue. See
"Impairment of Assets, Restructuring and Severance Charges" below.

In the six-month period ended December 31, 1999, selling and administrative
expense was $53.7 million (16.6% of revenues), versus $48.6 million (18.7% of
revenues) in the comparable year-ago period. The reduction in the ratio of
selling and administrative expense to revenues reflects the results of ongoing
initiatives to increase the productivity of selling and administrative
activities and the benefit of restructuring programs. We expect selling and
administrative expense as a percentage of revenues to decrease with rising
sales.

In the six-month period ended December 31, 1999, our research and
development expenditures increased to $21.7 million (6.7% of revenues), compared
to $20.4 million (7.8% of revenues) in the comparable prior-year period. We
anticipate an increased level of research and development expenditures to
accelerate the development of new products.

Other income was $0.6 million in the first half of fiscal 2000 versus other
income of $44.3 million in the comparable prior-year period. During the second
quarter of fiscal 1999, we recorded a $43.5 million pretax benefit related to
the settlement of patent litigation. The income reported from these settlements
was net of advanced and deferred royalty payments, patent defense costs, and the
share of our royalty proceeds payable to Unitrode Corporation.

Net interest expense increased $2.0 million in the six-month period ended
December 31, 1999, compared to the respective prior-year period. This increase
reflects higher interest rates and the terms of the new credit agreement that we
entered into at the end of the fourth quarter of fiscal 1999.

Our net realized and unrealized foreign currency gains and losses were less
than $1.0 million in each six-month period.

In fiscal 1999, we reported a non-cash, after-tax charge of $26.2 million
associated with the early adoption of Statement of Position ("SOP") 98-5, a
mandated change in accounting practices for certain start-up and preoperating
costs. The cumulative effect of this accounting change was recorded
retroactively to the first quarter of fiscal 1999 as a one-time charge. We had
previously deferred and amortized such costs.

FISCAL YEAR 1999 COMPARED WITH FISCAL YEAR 1998

Fiscal 1999 was a 52-week year compared to a 53-week year in fiscal 1998.
Revenues for fiscal 1999 were $545.4 million, slightly lower than fiscal 1998
revenue of $551.9 million. Net patent royalties contributed $26.5 million to
revenue, compared to $17.2 million in the prior period. During fiscal 1999, our
global pricing averaged an 8% decline on a same mix basis in fiscal 1999 versus
1998, compared to a 14% decline in fiscal 1998 versus 1997.

In fiscal 1999, our product sales by region, based on the location of the
customer, were approximately 42% from North America, 24% from Europe and 34%
from Asia, which includes Japan and Asia Pacific, compared to 47%, 26% and 27%,
respectively, in fiscal 1998. Year-to-year revenue in Japan decreased by 9.9%
but increased in Asia Pacific by 35.4%, reflecting a partial economic recovery
and our penetration into new market segments in the Asian market. Europe was
down 10.1% year-to-year, with weakness in most market segments. Revenue in North
America decreased 12.4% year-to-year, reflecting distributors' efforts to reduce
their inventories and the shift of some U.S. based customers' assembly
operations to locations in Asia.

Unit shipments increased 28% year-to-year. The revenue comparison over the
same period reflects price pressure and a shift to smaller, lower-priced
products, particularly in Asian markets.

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Gross profit was $152.0 million (27.9% of revenues) in fiscal 1999, versus
$176.2 million (31.9% of revenues) in fiscal 1998. The year-to-year gross profit
comparison reflected intense industry-wide price declines, unfavorable
fluctuations in product mix, and certain other expenses: a $2.5 million
inventory write-down associated with the transfer of manufacturing lines as part
of a restructuring program, and $2.7 million related to the adoption of
Statement of Position 98-5, "Reporting on the Costs of Start-up Activities".
Total cost of sales reflected the substantial increase in unit shipments to meet
rising demand.

In an effort to offset price pressure, we substantially reduced unit costs
and achieved approximately $53.0 million in manufacturing cost reductions in
fiscal 1999. Cost reduction measures included re-negotiation of prices paid for
materials and subcontract manufacturing services and process changes that
benefited manufacturing yields, as well as increased utilization of our
production capacity.

Selling and administrative expense was $98.2 million (18.0% of revenues) in
fiscal 1999 versus $104.7 million (19.0% of revenues) in fiscal 1998. The
improvement in absolute dollars and as a percent of sales reflects initiatives
to increase the productivity of selling and administrative activities as well as
the benefit of restructuring programs.

In fiscal 1999, research and development expenditures increased
$1.4 million to $40.5 million (7.4% of revenues) from $39.1 million (7.1% of
revenues) in the prior period. Higher research and development expenses for
fiscal 1999 reflect accelerated development of new products, as well as higher
overhead costs associated with a new research and development facility. We
expect this increased development activity to yield significant new products.

Other income was $53.5 million in fiscal 1999, compared to other expense of
$0.5 million in fiscal 1998. Other income primarily consisted of proceeds from
license agreements for prior periods and amounts in settlement of litigation for
past patent infringement (net of legal costs and the share of our royalty
proceeds payable to Unitrode Corporation).

In fiscal 1999, our net interest expense increased $3.8 million from the
prior year. The increase was due to higher interest expense incurred on higher
average debt balances over the prior year, which were partially offset by
increases in interest income on investments.

We reported a non-cash, after-tax charge of $26.2 million associated with
the early adoption of SOP 98-5, an AICPA-mandated change in accounting practices
for certain start-up and preoperating costs. We had previously deferred and
amortized such costs.

Our net realized and unrealized foreign currency gains and losses were less
than $1 million in each year.

FISCAL YEAR 1998 COMPARED WITH FISCAL YEAR 1997

Fiscal 1998 was a 53-week year compared to a 52-week year in fiscal 1997.
Our revenues for fiscal 1998 increased 14% to $551.9 million from
$486.1 million in the prior year. Unit shipments increased 38 percent, but the
revenue increase was partially offset by a $12.3 million unfavorable fluctuation
in currency exchange rates and an approximate average 14% price reduction on our
products on a same mix basis. The price decline reflected the impact of Asian
economic conditions and efforts by customers and distributors to reduce channel
inventories. Net patent royalties contributed $17.2 million to our revenue,
compared to $20.3 million in the prior period. Royalties are based on licensees'
sales of products covered by our patents, which we believe declined as a result
of economic and business conditions, currency exchange rates and fluctuations in
product mix.

Gross profit was $176.2 million (31.9% of revenues) in fiscal 1998 versus
$163.1 million (33.5% of revenues) in fiscal 1997. The gross profit decline
reflects pricing and market conditions described above. During the fourth
quarter of fiscal 1997, we recorded a $75.0 million pre-tax charge related to a

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restructuring program designed to improve its competitive position and
accelerate growth and earnings by streamlining operations and administration.

Selling and administrative expense was $104.7 million (19.0% of revenues) in
fiscal 1998 versus $106.0 million (21.8% of revenues) in fiscal 1997. Reductions
in selling and administrative expenses reflect our continued efforts to control
spending and to administer its activities more efficiently.

In fiscal 1998, our research and development expenditures increased
$3.6 million to $39.1 million (7.1% of revenues) from $35.5 million (7.3% of
revenues) in the prior period. Higher research and development expenses reflect
higher overhead costs associated with a new research and development facility
and our increased development of new products.

In fiscal 1998, our net interest expense increased $3.3 million from the
prior year. The increase was due to higher interest expense incurred on higher
average debt balances over the prior year, which were partially offset by small
increases in interest income on investments and interest capitalized on
construction-in-progress.

Our net realized and unrealized foreign currency gains and losses were less
than $1 million in each year.

SEASONALITY

We have experienced moderate seasonality in our business in recent years. On
average over the past three years, we have reported approximately 48% of annual
revenues in the first half and 52% in the second half of our fiscal year.

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 1999, we maintained cash and cash equivalent balances of
$30.0 million. During the six-month period ended December 31, 1999, operating
activities generated cash flow of $23.3 million.

Net investing activities consumed $16.4 million, primarily due to capital
expenditures of $23.3 million, offset in part by the liquidation of short-term
investments. At December 31, 1999, we had made purchase commitments for capital
expenditures of approximately $18.8 million. Assuming existing market
conditions, we plan fiscal 2000 capital investments of approximately
$75 million, principally for fabrication and assembly capacity to meet market
demand. We intend to fund capital expenditures and working capital requirements
through cash and cash equivalents on hand, anticipated cash flow from
operations, and, as needed, from the proceeds of this offering or credit
facilities that we may establish, from time to time, following this offering.

Cash used in financing activities consumed $8.8 million. In June 1999, we
entered into a syndicated credit agreement with Banque Nationale de Paris. The
credit agreement consists of two term loans totaling $155 million due in 2004
and 2005 and a $70 million revolving line of credit. The proceeds from the term
loans were used to pay down all of our existing long-term unsecured bank loans
and substantially all domestic bank loans. As of December 31, 1999,
$152.1 million was outstanding under these two term loans and no borrowings have
occurred against the $70 million revolving line of credit. The interest rate on
these two term loans is based on 3.0% to 3.5% above the applicable LIBOR rate
and 2.0% to 2.5% above the applicable base rate. The base rate applies to
borrowings which are shorter than 30 days. The loans are collateralized by the
majority of our assets. The credit agreement subjects us to a number of
restrictive covenants, including the following:

- maximum leverage, minimum interest coverage and fixed charge coverage
ratios;

- minimum EBITDA (earnings before interest, taxes, depreciation and
amortization);

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- maximum capital expenditures; and

- a limitation on losses.

The credit agreement also contains restrictions with respect to the payment
of cash dividends, the sale of assets, mergers and acquisitions, additional
financing, and investments. At December 31, 1999, we also had $20.4 million in
foreign revolving lines of credit, against which $13.5 million had been
borrowed. We fully utilized foreign term loan facilities of $3.6 million and
equipment financing facilities of $4.8 million. In total, as of December 31,
1999, we had credit facilities of $250.9 million, against which we had borrowed
$174.1 million.

We intend to pay off and terminate the credit agreement with a portion of
the net proceeds from this offering. We currently estimate that the termination
of the credit agreement will result in an extraordinary charge of $3.8 million
after taxes which will be reflected in the fiscal quarter in which the credit
agreement is terminated.

Based on cash and cash equivalents on hand and our unused credit facilities,
at December 31, 1999, our liquidity was $106.9 million.

We anticipate that our operating cash flow, funds from this offering and
cash and cash equivalents will be sufficient to meet our anticipated future
working capital, capital expenditures and interest service requirements on our
debt obligations. Although we believe that funding will be sufficient, we may
also consider the use of funds from other external sources including, but not
limited to, public or private offerings of debt or equity.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to various risks including changes in interest rates
affecting the repayment of debt and return on investments and foreign currency
rate fluctuations. We do not hold or purchase any foreign currency or interest
rate contracts for trading purposes. Our objective in managing the exposure to
foreign currency changes is to reduce the risk to earnings and cash flow by
entering into forward exchange contracts that are intended to reduce risks
associated with the value of its existing foreign currency assets, liabilities,
firm commitments and anticipated foreign revenues and costs. The gains and
losses on these contracts are intended to offset changes in the related
exposures. We do not hedge our foreign currency exposure in a manner that would
entirely eliminate the effects of changes in foreign exchange rates on our
consolidated net income.

In the normal course of business, we also face risks that are either
nonfinancial or nonquantifiable. Such risks principally include country risk,
credit risk and legal risk and are not discussed or quantified in the following
analyses.

INTEREST RATE RISK

Our financial assets are not subject to significant interest rate risk due
to their short duration. Our financial liabilities that are subject to interest
rate risk are our long-term debt obligations. A 70 basis-point increase in
interest rates (approximately 10% of our weighted average interest rate on debt)
affecting our financial instruments would have an immaterial effect on our
results of operations, financial position or cash flows. Our credit agreement
with Banque Nationale de Paris requires us to hedge the interest rate for at
least half of the $152.1 million in outstanding term loans under the agreement.
We have entered into interest rate swap agreements to hedge 50% of these
outstanding term loans. The purpose of these swaps is to offset with a fixed
interest rate a portion of the risk inherent in this variable rate debt. Under
these agreements, we will pay the counterparties (the parties assuming the
interest rate risk) interest at a weighted average fixed rate of 6.2% and the
counterparties will pay us interest at a variable rate equal to LIBOR. The
weighted average three-month LIBOR rate applicable to these agreements was 6.2%
at December 31, 1999.

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FOREIGN CURRENCY RISK

We conduct business in various parts of the world and in various foreign
currencies. We manage potential foreign currency exposure by entering into
forward foreign exchange contracts or other non-speculative risk management
instruments to hedge foreign currency denominated receivables and payables at
certain of our international subsidiaries. At December 31, 1999, we evaluated
the effect that near-term changes in foreign exchange rates would have had on
the fair value of our combined foreign currency position, related to our
outstanding foreign currency forward exchange contracts. If we assumed an
adverse change of 10% in foreign exchange rates, the potential decrease in our
foreign currency position would have had an immaterial effect on the results of
our operations, financial position and cash flows.

In fiscal 1999, we derived over 58% of our revenues from sales in foreign
markets. In the six months ended December 31, 1999, we derived approximately 59%
of our revenues from sales in foreign markets. The fair market value of our
foreign currency forward contracts was $43.1 million at December 31, 1999. Our
net realized and unrealized foreign currency gains and losses were less than
$1 million for each of the years ended June 30, 1999, 1998 and 1997 and the six
months ended December 31, 1999.

IMPACT OF THE INTRODUCTION OF THE EURO

On January 1, 1999, eleven member states of the European Union established
fixed conversion rates between their existing national currency and a common
currency, the "euro." Until January 1, 2002, either the euro or the
participating country's present currency will be accepted in non-cash
transactions. On January 1, 2002, euro-denominated bills and coins will be
issued and the participating country's present currency will be gradually
withdrawn during a short period of dual circulation of no more than three
months.

We have initiated an internal analysis to determine the effects of the
January 1, 2002 conversion. The current assessment includes the potential impact
of the technical challenges to adapt information technology and other systems to
accommodate euro-denominated transactions, the impact on currency exchange rate
risk and currency exchange costs, and the impact on existing contracts.

Based on currently available information, we do not believe that the euro
conversion will have a material adverse impact on our business or financial
condition. We will continue to evaluate the impact of the euro conversion.

INCOME TAXES

Our effective tax rate for the six months ended December 31, 1999 was
approximately 27.9%, which differs from the U.S. federal statutory tax rate of
35%, due primarily to higher statutory tax rates in certain foreign
jurisdictions, offset by foreign tax credits, research and development credits,
state tax credits, and a decrease in valuation allowances.

Our effective tax rate in fiscal 1999 was approximately 34.6% due primarily
to the increase in valuation allowance, higher statutory tax rates in certain
foreign jurisdictions and foreign jurisdiction losses without foreign tax
benefit, offset by foreign tax credits, research and development credits and
state tax credits. The difference between the U.S. federal statutory tax rate of
35.0% and our effective tax rate (benefit) of approximately 33.0% and (18.0)% in
fiscal 1998 and 1997, respectively, was attributable mainly to foreign
jurisdiction losses offset by foreign tax credits and state tax credits for 1998
and foreign jurisdiction losses without foreign tax benefits and accruals for
additional tax for 1997.

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IMPAIRMENT OF ASSETS, RESTRUCTURING AND SEVERANCE CHARGES

During the fourth quarter of fiscal 1997, due to a decline in selling prices
for our MOSFET and IGBT products, we recorded a $75 million pretax charge
related to a restructuring program designed to improve our cost structure.
Specifically, the restructuring activities included shifting production from
older manufacturing facilities to newer, more efficient facilities, changing
business processes by consolidating order entry, customer support, inventory
management, information systems and finance activities at fewer locations and
accelerating the deployment of our new product development center. The
restructuring activities were expected to reduce the cost of our business
processes and lower product costs and result in increased flow of new products,
which are less price sensitive. The charge was composed of $61 million for the
write-down of assets, $4 million for the write-down of inventory, primarily
wafers, to net realizable value and $10 million for termination benefits to be
paid in connection with the severed employees. The restructuring activities
occurred over an approximate eighteen-month transition period through
December 31, 1998.

We determined the asset write-down of property and equipment of $61 million
by comparing the expected future undiscounted cash flows to the respective asset
carrying value. If an asset was deemed to be impaired, we adjusted the carrying
value to its expected future discounted cash flows. The net book value of the
applicable property and equipment before the $61 million write-down was
$79 million. The write-downs related to the following:

- Wafer fabrication equipment located in El Segundo, California with a
carrying value of $21 million, was adjusted to its fair value of
$2 million. One wafer fabrication line, dedicated primarily to research
and product development, was abandoned and replaced by a new product
development facility in August 1998. The other wafer fabrication line,
which manufactured product using equipment that processed 4-inch wafers,
was abandoned and replaced with a more advanced line located in Italy,
which processes 5-inch wafers, in August 1998. Using 5-inch wafers results
in significant manufacturing savings. The current status of the wafer
fabrication impaired equipment falls into three categories: (1) it was
scrapped as of June 1997, (2) it is idle with no viable plans for usage,
or (3) it is being used on a sporadic basis in research and development.
There is no viable external market for this equipment.

- Assembly equipment in England of $26 million was adjusted to its fair
value of $4 million. Specifically, three product assembly and packaging
lines in England were operating at a gross margin loss. We have continued
to utilize these lines periodically for market development activities, and
these lines remain unprofitable.

- Information systems applications with a carrying value of $32 million were
written down to $12 million as a result of lack of vendor support. Our
software vendor changed business strategies and informed us of its
intention to stop supporting and developing the software technology that
certain of our information systems applications were based upon. In
June 1997, we determined that no viable alternatives could be identified.
Consequently, we ceased development and implementation of certain
forecasting, planning and order management programs and determined the
assets related to these specific activities were impaired (i.e. no future
use and were abandoned). These assets consisted of costs related to
external consulting fees and expenses. The remaining book value relates to
modules that have not been abandoned.

As of June 30, 1999, we had eliminated approximately 242 employees related
to the June 1997 restructuring. The majority of the positions eliminated were
operators and technicians at our North American operations. We also eliminated
production and assembly positions in our manufacturing operations in Italy due
to the outsourcing of certain production and assembly activities. In addition,
we eliminated administrative and sales positions in France, England, Germany,
Japan and North America, related to the regional consolidation of certain
administrative functions.

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As of June 30, 1999, there was no remaining accrued severance liability in
our consolidated balance sheet related to the June 1997 restructuring.

We anticipated this restructuring to result in annual savings of
approximately $20 million, which would be fully achieved on an annual basis
beginning in December 1998. We believe that we have achieved these savings, but
they have been more than offset by continued selling price reductions.

During December 1998, we recorded a $14.5 million restructuring charge
associated with plans to relocate high-volume assembly lines from our facility
in England to our facility in Mexico to take advantage of labor rate savings,
and to centralize more of our European customer service and administrative
activities, resulting in reductions in personnel. We expect to complete this
operational transition over the next six months ending on June 30, 2000. The
charge consisted of $5.9 million for estimated severance costs associated with
the elimination of approximately 350 positions, primarily consisting of
operators and technicians, $6.1 million for the write-off of assets to be
abandoned, and $2.5 million for the write-down of inventory related to specialty
product lines. None of the assets written down, which consist primarily of
building improvements relating to the high-volume assembly production lines, and
production information systems, will remain in use and all of them will be
abandoned after the production lines are relocated. In the third quarter of
fiscal 1999, we recorded a final charge of $4.2 million relating to additional
severance costs, after appropriate notification was given to 43 remaining
affected employees in the sales, customer service and administrative areas. The
severance per person is larger for the March 1999 restructuring versus the
December 1998 restructuring as the 43 positions included in the March 1999
restructuring are primarily highly-paid employees in sales and administrative
management. The 350 positions in the December 1998 restructuring are primarily
operators and technicians who have a much lower salary level. Therefore, we
estimate that, ultimately, charges associated with all of these actions will
total approximately $18.7 million.

We expect the anticipated cost savings from the second and third fiscal 1999
quarter restructuring activities to result in estimated annual savings of
approximately $5 million in fiscal 2000 and $13 million annually thereafter.
These estimated savings consist of lower direct labor costs, lower factory
overhead, including lower depreciation expense, lower materials costs and lower
selling and administrative costs.

As of December 31, 1999, we had eliminated 64 positions, paid $6.0 million
for termination benefits related to this program and recorded the asset
impairment of $8.6 million. The remaining unutilized restructuring accrual of
$4.1 million, which is classified as current, relates to severance payments to
these previously notified employees for positions that are scheduled to be
eliminated during the next six months.

During June 1999, we recorded an $8.3 million charge related to employee
severance associated with the elimination of approximately 39 positions. This
included a reduction in sales and administrative management staff levels and the
resignation of Dr. Derek B. Lidow, who shared the responsibility of Chief
Executive Officer. As of December 31, 1999, we had eliminated 25 positions and
paid $4.9 million for termination benefits. The remaining unutilized severance
accrual of $3.4 million at December 31, 1999, which is classified as current,
relates to severance payments to these previously notified employees for
positions that are scheduled to be eliminated during the next six months.

RECENT ACCOUNTING PRONOUNCEMENTS

Effective the first day of fiscal 2000, we adopted SOP 98-1, "Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use." Issued
by the American Institute of Certified Public Accountants ("AICPA"), SOP 98-1
provides standards on accounting for the costs of computer software developed or
obtained for internal use. The new standards do not significantly differ from
our previous accounting treatment for software developed or obtained for
internal use and did not have a significant impact on the Consolidated Financial
Statements.

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During fiscal 1999, we elected early adoption of Statement of Position 98-5,
"Reporting on the Costs of Start-Up Activities." This new accounting standard,
issued in April 1998 by the American Institute of Certified Public Accountants,
requires most entities to expense all start-up and preoperating costs as they
are incurred. We previously deferred such costs and amortized them over the life
of the related asset following the start-up of each new process. The early
adoption of SOP 98-5 was required to be made retroactive to the beginning of the
first quarter of fiscal 1999. The cumulative effect of this change in accounting
principle, net of income tax benefit of $5.4 million, was $26.2 million or $0.50
per basic and diluted share and was recorded retroactively to the first quarter
of 1999 as a one-time charge. Beginning July 1, 1998, all start-up and
preoperating costs are expensed as incurred.

Effective July 1, 1998, we adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income," and accordingly have
included a separate Statement of Comprehensive Income following our Consolidated
Statement of Income. Comprehensive income generally represents all changes in
stockholders' equity during the period except those resulting from investments
by, or distributions to, stockholders. The balance of accumulated other
comprehensive income consists of accumulated foreign currency translation
adjustments.

On June 30, 1997, the Financial Accounting Standards Board issued SFAS
No. 131 "Disclosures about Segments of an Enterprise and Related Information."
SFAS No. 131 requires publicly-held companies to report financial and
descriptive information about their operating segments in financial statements
issued to stockholders for interim and annual periods. The Statement also
requires additional disclosures with respect to products and services,
geographic areas of operation and major customers. SFAS No. 131 is effective for
fiscal years beginning after December 15, 1997 and requires restatement of
earlier periods presented. We adopted SFAS No. 131 in the fiscal year ended
June 30, 1999. The adoption of SFAS No. 131 did not affect our results of
operations or financial position, but did affect the disclosure of segment
information as presented in Note 5 of the Notes to Consolidated Financial
Statements.

In February 1998, the FASB issued SFAS No. 132 "Employers' Disclosures about
Pensions and Other Postretirement Benefits." SFAS No. 132 supersedes the
disclosure requirements for SFAS No. 87 "Employers' Accounting for Pensions,"
SFAS No. 88 "Employers' Accounting for Settlements and Curtailments of Defined
Benefit Pension Plans," and SFAS No. 106 "Employers' Accounting for
Postretirement Benefits Other than Pensions." This Statement is effective for
fiscal years beginning after December 15, 1997. This Statement revises
employers' disclosures about pension and postretirement benefit plans. We
adopted SFAS No. 132 in the fiscal year ended June 30, 1999. Our pension
obligation is immaterial and, therefore, not disclosed separately.

In June 1998, the FASB issued SFAS No. 133 "Accounting for Derivative
Instruments and Hedging Activities," which was later amended by SFAS No. 137
"Accounting for Derivative Instruments and Hedging Activities--Deferral of the
Effective Date of FASB Statement No. 133." SFAS No. 133 established standards
for the accounting and reporting for derivative instruments, including certain
derivative instruments embedded in other contracts, and hedging activities. This
Statement generally requires recognition of gains and losses on hedging
instruments, based on changes in fair value or the earnings effect of a
forecasted transaction. SFAS No. 133, as amended by SFAS No. 137, is effective
for all fiscal quarters of fiscal years beginning after June 15, 2000. We do not
believe that SFAS No. 133 or SFAS No. 137 will have a material impact on our
consolidated financial statements.

YEAR 2000 READINESS

The Year 2000 issue is the result of many existing computer programs and
embedded microprocessors using only two digits to refer to the year. Beginning
in the year 2000, these systems need to be upgraded or replaced to distinguish
21(st) century dates from 20(th) century dates.

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We have adopted the definition of Year 2000 conformity published by the
British Standards Institute ("BSI") as DISC PD2000-1. Currently, none of our
products contain date processing logic. We, therefore, believe that our products
are Year 2000 compliant pursuant to the BSI DISC PD2000-1 definition.

Our Global Year 2000 Team was formed to manage and coordinate company-wide
Year 2000 initiatives, while local site teams addressed research and remediation
for site-specific equipment, facilities and suppliers. We are estimating
$7.5 million for the cost of investigation and remediation for the period
August 1997 to March 2000. The estimate includes staff salaries and remediation
expenses. Through December 31, 1999, we expensed $6.9 million of this estimate.

We have successfully completed the verification process for all internal
information systems, factory equipment, facilities, suppliers and business
partners. To date, we have not experienced any business interruptions due to any
Year 2000 related cause and have concluded all of our planned investigation and
remediation related to the Year 2000 issue.

Furthermore, we have established programs to ensure that current and future
purchases of equipment and software are Year 2000 compliant pursuant to the BSI
DISC PD2000-1 definition.

Based on currently available information, we do not believe that the Year
2000 matters discussed above will have a material adverse impact on our
financial condition, liquidity, or results of operations. We cannot assure you
that our compliance efforts and contingency plans will adequately address every
issue that may arise in the year 2000. The costs of our Year 2000 remediation
reflect our best estimates, which were based on assumptions of future events,
including the continued availability of certain resources, third-party
compliance and other factors. We cannot assure you that these estimates will be
achieved, and actual results could differ materially from those anticipated.

This disclosure is a Year 2000 statement and constitutes a Year 2000
Readiness Disclosure under Public Law No. 105-271.

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BUSINESS

INDUSTRY OVERVIEW

Power semiconductors provide a source of reliable power for a wide range of
electrical and electronic systems and equipment. The more sophisticated the end
product, the greater its need for specially-formatted, finely-regulated power.
The adoption of power semiconductor technology is rising with the increasing
complexity of electronic products and the rapid proliferation of electronic
features in communications, consumer electronics, information technology,
automotive and industrial products. Within the power semiconductor market,
MOSFETs and IGBTs are critical to power management. Based on statistics
published by the Semiconductor Industry Association, industry-wide revenues from
sales of power MOSFETs and IGBTs were $3.13 billion in calendar 1999.

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Demand for power semiconductors is being driven by the following:

- GROWTH OF COMMUNICATIONS AND INTERNET INFRASTRUCTURE. Rapid growth in
communications, enterprise computing and the Internet is accelerating
demand for advanced power semiconductors. Internet infrastructure
equipment, such as routers, servers, hubs and switches, rely on
advancements in power management efficiency in order to operate at higher
speeds and to process more information with the desired degree of
reliability.

- INCREASE IN DEMAND FOR PORTABLE ELECTRONICS. Worldwide demand for mobility
and convenience is creating significant growth opportunities in portable
electronics that depend on efficient power conversion to extend battery
life and enhance product performance. The latest-generation personal
computers rely on advances in power management technology to operate
efficiently at ever-lower voltages. In addition, high-efficiency power
semiconductors enable makers of new cellular phones and notebook computers
to offer more compact products that have greater operating speed and
performance.

- INCREASING APPLICATIONS IN AUTOMOTIVE ELECTRONICS AND MOTOR CONTROLS. The
proliferation of power features in automobiles and tougher standards for
safety, fuel economy, and emissions are driving the adoption of more
complex power electronics. Electric motors consume approximately half of
the world's electricity. Because of cost and complexity, controls that
permit variable-speed operation have been predominantly used in very
high-end motor applications. Recent advancements in power management make
possible cost-effective, variable-speed motor controls that increase
energy efficiency and improve performance in a wide range of industrial,
commercial, and household applications.

- RECOVERY AND EXPANSION OF ASIA PACIFIC ECONOMIES. The Asia Pacific region
has begun to recover from its recent financial crisis and many Asia
Pacific countries have returned to rapid growth. As disposable income
increases in the region, we expect demand for consumer products, such as
cellular phones, Internet devices, computers, televisions and other
electric appliances, to expand the market for our products.

STRATEGY

We concentrate our resources on opportunities to add value and leverage our
competitive advantages through the following strategic initiatives:

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<PAGE>
Power Components provides us with a platform for continued expansion in
value-added growth markets.

CAPITALIZE ON LEADING CUSTOMER RELATIONSHIPS. As a result of our leadership
and strength in power semiconductors, industry leaders look to us for products
and programs that address their most challenging power management needs. These
relationships put us at the forefront of developing products for new trends in
the marketplace. We offer high quality customer service with comprehensive sales
and engineering support, including Internet service applications, electronic
order entry and just-in-time delivery. Our leading customers include Alcatel,
American Power Conversion, Compaq, Delphi, IBM, Lockheed-Martin, Lucent, Maxtor,
Mitsubishi, Motorola, Nortel Networks, Philips and Sony. In addition, our rate
of design wins has accelerated into the applications of these customers, as well
as AMD, Bosch, Cisco Systems, Dell, Intel, Qualcomm and Groupe Schneider.

LEVERAGE OUR LEADING TECHNOLOGY POSITION. Our leading technology enables us
to set performance and architecture standards for power electronics in targeted
applications. Our research and development program focuses on Power ICs,
Advanced Circuit Devices and Power Systems and the advancement and
diversification of our HEXFET-Registered Trademark- power MOSFET and IGBT
product lines. Over the past three years, we have spent approximately
$115 million on research and development. In the first quarter of fiscal 1998,
we opened a new research and development facility that provides submicron
process capability and capacity for rapid development. Our long-term investment
in research and development has resulted in a broad patent portfolio, consisting
of 313 issued patents and 430 patents pending. In fiscal 1999, licenses under
our patents generated approximately $26.5 million in royalties. We believe our
technology leadership and product innovation will continue to be a source of
growth in the fastest growing segments of the power semiconductor industry.

PRODUCTS AND APPLICATIONS

Our products process electrical power into a form that is usable by electric
products. We believe that our full complement of power management technology
represents a competitive advantage, enabling us to provide customers with
integrated solutions for their power management needs. Our products are broadly
divided among three product categories: Power ICs and Advanced Circuit Devices,
Power Systems and Power Components.

POWER ICS AND ADVANCED CIRCUIT DEVICES

A Power IC is a semiconductor that integrates logic and power management
functions on the same chip. These devices optimize the performance of circuits
that often include power MOSFETs and IGBTs and allow our customers to simplify
circuit design and assembly, improve reliability, and reduce overall system size
and cost. The ability of a Power IC to sense and respond to circuit conditions
makes its performance superior to discrete components. Our Power ICs often use
our proprietary power MOSFET technology. We have obtained extensive patent
protection for our Power ICs and have additional patent applications pending.

Advanced Circuit Devices are chipsets, multichip modules and advanced
performance discrete devices that address power management requirements in more
demanding applications.

Increased complexity in routers, servers and high-end enterprise computers
and other devices require increased levels of power and more effective heat
dissipation, making power management one

31
<PAGE>
of the most critical tasks. Notebook computers and other portable devices are
trending to lower voltages and higher current levels, which require greater
efficiency and more complex power management to meet speed and performance
demands and to extend battery life. Over the last two years, we invested heavily
in key trench and planar process technologies. These investments have resulted
in what we believe are the most efficient power MOSFET devices in the
marketplace. We believe this new generation of power MOSFETS sets a new standard
for price/performance in high-volume consumer electronics applications. We have
achieved multiple design wins for our new trench and planar low voltage products
in Power ICs and Advanced Circuit Devices for latest generation digital cell
phones, high-end portable PCs and other products.

POWER SYSTEMS

Power Systems combine power semiconductors with other power management
components in specialized modules that improve power efficiency and simplify
circuit design. We are currently focusing our Power Systems on automotive
electronics and motor control. Our products provide a cost-effective alternative
to custom analog designs.

The proliferation of power features in automobiles and tougher standards for
safety, fuel economy, and emissions are driving the adoption of more complex
power electronics. An engineering group representing Mercedes-Benz, General
Motors, Ford and MIT has forecasted that the electrical load per vehicle could
triple from 800 to 2,400 watts by the year 2005, significantly reducing fuel
efficiency at a time when regulations require improved gas mileage. Our Power
Systems can help offset this impact by replacing traditional hydraulic and
belt-driven applications with electronic systems. For example, electric power
steering systems can increase fuel efficiency by more than one-and-one-half
miles per gallon. In addition, electrically operated automotive systems improve
reliability and maintenance. Power Systems are also designed into automotive
electronics, including integrated starter/alternator motors, fuel and water
pumps and fan controls.

Motors consume approximately half of the world's electricity. New
variable-speed motors equipped with Power Systems increase energy efficiency and
performance in a wide range of industrial, commercial and household
applications. For example, most refrigerator motors can only run at full speed,
but a variable-speed motor can run at the lowest speed needed to maintain the
required refrigerator temperature. Our Power Systems designed for variable-speed
motors reduce electricity consumption, simplify product design, shorten
time-to-market, improve product performance, and reduce overall costs. We have
recently achieved design wins from leading worldwide manufacturers in high-end
refrigerators, washers and home appliances.

COMPONENTS

SWITCHING PRODUCTS. Power MOSFETs and IGBTs rapidly and efficiently switch
electricity on and off in order to supply power in a form that can be formatted
to the specific requirements of a circuit. Our HEXFET-Registered Trademark-
power MOSFET and IGBT component products comprised approximately two-thirds of
our fiscal 1999 sales.

Through our HEXFET-Registered Trademark- product line, we believe we are the
market leader in power MOSFETs. Our emphasis on quality control and reliability
has helped us maintain market acceptance and brand recognition of our
HEXFET-Registered Trademark- line of products. We pioneered the fundamental
technology that set the industry standard for power MOSFETs.

MOSFETs are critical in a wide variety of electric products. Communications
applications include cellular phones, telephone networks and modems. Computer
and peripheral applications include power supplies, disk drives and printers.
Office equipment applications include copiers and facsimile machines. Consumer
electronics applications include home entertainment, video cameras, household
appliances, and power tools. Automobile applications include anti-lock braking
systems, fuel injection systems,

32
<PAGE>
power accessories and air bags. Industrial applications include automated
production equipment, instrumentation and test equipment. Government/space
applications include communications satellites and command-and-control systems.

IGBTs typically perform the switch function in industrial applications that
require higher current and voltage than power MOSFETs can handle efficiently.
The performance and ruggedness of these devices enable them to replace bipolar
transistors and thyristors in many high-voltage, high-current motor control and
power conditioning applications. Energy-efficient, variable-speed motor controls
are an emerging application, and we believe electric and hybrid vehicles may
require large quantities of IGBTs for each vehicle. Our IGBT technology is
closely related to our power MOSFET technology. We believe that our patents on
fundamental power MOSFET technology also apply to IGBTs.

RECTIFIERS, DIODES AND THYRISTORS. We manufacture a broad line of
rectifiers, diodes and thyristors. These products, which also condition
electrical power to make it more efficient and usable, are used principally in
industrial end products that require power handling capability from one amp to
5,000 amps and from 20 volts to 5,000 volts. Applications include motor and
lighting controls, welding equipment, fork lifts, machine tools, induction
heating, locomotives, motor-driven production lines, smelting equipment and
power supplies.

Our Schottky diodes and fast-recovery diodes serve the output rectification
function of power conversion. A diode is a discrete device that conducts current
in one direction. A Schottky diode is an ultra-fast diode used in
high-frequency, low-voltage circuits. A fast-recovery diode is a diode suited to
applications above 200 volts where high switching speed is desirable. Schottky
diodes are used with power MOSFETs in high-frequency applications such as
computers and peripherals. Our HEXFRED-Registered Trademark- fast-recovery
diodes are used with IGBTs in higher-current, lower-frequency applications such
as motor controls.

MANUFACTURING

Semiconductor manufacturing involves two phases of production: wafer
fabrication and assembly. Wafer fabrication requires a sequence of process steps
that expose silicon wafers to chemicals that change their electrical properties.
The chemicals are applied in patterns that define cells or circuits within
numerous individual devices, termed "die" or "chips", on each wafer. Assembly is
the sequence of production steps that divide the wafer into individual chips and
enclose the chips in structures, termed "packages", that make them usable in a
circuit. Power semiconductors generally use process technology and equipment
already proven in the manufacturing of integrated circuits.

We have production facilities in California, England, Italy, Mexico, Wales,
India and China. In addition, we have equipment at, or manufacturing supply
agreements with, subcontractors located in the Philippines, Japan, Taiwan,
Malaysia, the Czech Republic, Wales and the United States.

We fabricate the majority of our power MOSFET and IGBT wafers at our HEXFET
America facility in Temecula, California. Our most advanced wafer fabrication
facility, located in El Segundo, California, expands our manufacturing
resources, as well as our development capability. A wafer fabrication facility
for high-voltage Power ICs and other Advanced Circuit Devices, as well as
assembly operations for components used in government/space applications, is
located in El Segundo, California. We manufacture substantially all of our
Schottky diodes, high-power rectifiers and thyristors at our Turin, Italy
facility. Plants that assemble power MOSFETs and other products are located
overseas in facilities we own or in subcontracted facilities. We are in the
process of transferring high-volume assembly lines for power MOSFETs, IGBTs and
diodes from our Oxted, England facility into our existing facility in Mexico. We
have installed a production facility in Penllergaer, Wales, to assemble Power
Systems. We also have arrangements with third parties for product assembly in
the Philippines, Malaysia, Taiwan, Japan, the Czech Republic and Mexico. In a
duty-free zone in India, we have an assembly facility for rectifiers and
thyristors.

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<PAGE>
MARKETING, SALES AND DISTRIBUTION

We market our products through sales staff, representatives and
distributors. We believe the depth of our power management product line enhances
our competitive position in the overall power semiconductor market.

In fiscal 1999, our product sales by region, based on the location of the
customer, were approximately 42% from North America, 24% from Europe and 34%
from Asia, which includes Japan and Asia Pacific. In the six months ended
December 31, 1999, our product sales in these regions were 36%, 24% and 40%,
respectively. Our domestic direct sales force is organized into four regional
sales zones. In Europe, our products are sold through our own sales force as
well as through independent sales agents and distributors. Our European sales
and representative offices are in England, Italy, Sweden, France, Germany,
Finland, Denmark, Switzerland, Russia, the Czech Republic and Hungary. In Asia,
we have sales, representative or liaison offices in India, Japan, Singapore,
China, Hong Kong, South Korea, Taiwan, the Philippines, Australia and New
Zealand.

Because many applications require products from several product groups, we
have organized our marketing efforts by application, rather than product type.
These groups focus on several key commercial sectors and on government/space
business. In addition, our staff of application engineers provides customers
with technical advice and support regarding the use of our products.

CUSTOMERS

Our devices are incorporated in subsystems and end-products manufactured by
other companies. Approximately 40% of our revenues comes from sales of our
products to distributors. We have historically found it more difficult to
determine distributor demand than demand from our other customers. Sales to one
customer, Arrow Electronics, accounted for 10.7% of our revenues in fiscal 1999.
The following table lists our major customers by end market for fiscal 1999:

<TABLE>
<CAPTION>
END MARKETS CUSTOMERS
- ----------- ---------
<S> <C>
Communications....................... Alcatel, Motorola, Nortel Networks,
Qualcomm and Samsung
Information Technology............... American Power Conversion, Artesyn,
Compaq, IBM, Lucent and Maxtor
Consumer Electronics................. Fuji, Hitachi, Philips, Siemens and
Sony
Automotive........................... Bosch, BOSE, Delphi, Ford and TRW
Industrial........................... Groupe Schneider, Grundfos, ITW,
Lights of America and Lincoln
Government/Space..................... AlliedSignal, Bosch, Hughes,
Lockheed-Martin and Marconi
</TABLE>

Our major distributors and contract manufacturers, based on revenues for
fiscal 1999 are:

<TABLE>
<S> <C>
Distributors......................... Arrow Electronics, Future Electronics
and Zenitron
Contract Manufacturers............... Celestica, Jabil, Natsteel, SCI and
Solectron
</TABLE>

BACKLOG

As of December 31, 1999, our backlog of orders was $166.6 million compared
to $146.9 million as of June 30, 1999. Backlog is comprised of purchase orders
and customer forecast commitments scheduled to be shipped within the following
twelve months. Increasingly, major customers are operating their businesses with
shorter lead-times and are placing their orders at shorter intervals,

34
<PAGE>
which tends to reduce backlog relative to future revenue. Given adequate notice,
we usually allow customers to cancel purchase orders without penalty. Backlog is
not necessarily indicative of sales for any future period.

RESEARCH AND DEVELOPMENT

We conduct research and development activities to improve the
price/performance ratio of our product offerings across a wide range of end-use
applications. Our research and development program focuses on Power ICs,
Advanced Circuit Devices and Power Systems and the advancement and
diversification of our HEXFET-Registered Trademark- power MOSFET and IGBT
product lines. We also direct our research and development towards reducing the
cost of customers' existing products and products in development. Our program
places increasing emphasis on the development of chipsets and system-level
solutions that improve overall system performance and cost and help customers to
accelerate market introduction of their products.

In the six months ended December 31, 1999, and the fiscal years 1999 and
1998, we spent approximately $21.7 million, $40.5 million and $39.1 million,
respectively, on research and development activities.

Our research and development center in El Segundo provides increased
capacity and submicron capability for development, pilot production and limited
production of advanced power MOSFETs and IGBTs. The 55,000 square foot facility
incorporates a 12,000 square-foot clean-room and is designed to support greater
levels of development activity.

During the first six months of fiscal 2000, our product introductions
accelerated, and we achieved cost reductions and performance enhancements across
the full range of our product line. Our new benchmark products for target
applications introduced in fiscal 1999 and the first six months of fiscal 2000
included:

- Multiple design wins for new trench and planar low-voltage MOSFETs that
increase our penetration in advanced digital cell phones and high-end
portable PCs;

- New high-voltage power MOSFETs that combine process technologies to
achieve benchmark performance in power supplies for servers and routers
needed to carry internet traffic;

- High-performance intelligent power switches, proprietary Power ICs and
proprietary modules that won designs in electric power steering, fan
controls and diesel fuel injection applications;

- Proprietary high-voltage Power ICs and IGBTs that have been designed into
high-end refrigerators and washing machines by major U.S., European and
Asian brand-name OEM's;

- Power ICs for dimmable electronic lighting; and

- A new chipset, built around a unique 1200 Power IC, which adds
functionality and sharply increases our product content in industrial
motor drives.

INTELLECTUAL PROPERTY

We have made significant investments in developing and protecting our
intellectual property. Through successful enforcement of our patents, we have
entered into a number of license agreements, generated royalty income, and
received substantial payments in settlement of litigation. We currently have 155
unexpired U.S. patents and 132 U.S. patents pending. Our power MOSFET patents
expire between 2000 and 2010, with the broadest remaining in effect until 2007
and 2008. In addition, we have 158 issued foreign patents and 298 foreign
patents pending in a number of countries. We are also licensed to use certain
patents owned by others. We have several registered trademarks in the United
States and abroad, including the trademark HEXFET-Registered Trademark-. We
believe that our intellectual property contributes to our competitive advantage.

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<PAGE>
We are committed to enforcing our rights under our patents, including
through litigation, if necessary. In January 1999, we announced agreements that
settled outstanding patent litigation with Samsung Semiconductor, Inc. and
Samsung Electronics Company and with Fuji Electric Company and Collmer
Semiconductor, Inc. In the second half of fiscal 1999, we settled litigation and
disputes with Rohm Co., Ltd. and Shindengen Electric Company, respectively,
which resulted in two additional royalty-bearing license agreements. We
currently have license agreements with most of the major power MOSFET
manufacturers in the United States and abroad. In fiscal 1999, we derived
$26.5 million of net royalty revenues from license agreements and in the six
months ended December 31, 1999, we derived $15.1 million of net royalty revenues
from license agreements. Other income of $53.5 million in fiscal 1999 primarily
consisted of proceeds from license agreements for prior periods and amounts in
settlement of litigation for past patent infringement, net of legal costs and
the share of our royalty proceeds payable to Unitrode Corporation. Under the
terms of an agreement with Unitrode Corporation, we pay Unitrode approximately
12% of our net patent royalty income from our power MOSFET patents. We do not
believe that the expiration of four of our power MOSFET patents in 2000 will
have a material adverse effect on our licensing revenues. Most of our broadest
power MOSFET patents were subject to, and have successfully emerged from,
reexamination by the United States Patent and Trademark Office.

COMPETITION

We encounter differing degrees of competition for our various products,
depending upon the nature of the product and the particular market served.
Generally, the semiconductor industry is highly competitive and subject to rapid
price changes, and many of our competitors are larger companies with greater
financial resources. We believe that we are distinguished from our competitors
by our comprehensive line of power management products and ability to combine
these products into compact, cost-effective packages and system-level solutions.
Our products compete with products manufactured by others on the basis of
breadth of product line, quality, price, reliability, overall performance of the
products, delivery time to the customer, and service (including technical advice
and support). Our major competitors include: Fairchild Semiconductor
Corporation, Infineon Technologies AG (formerly Siemens AG), Intersil
Corporation (formerly part of Harris Corporation), NEC Corporation, On
Semiconductor (formerly a division of Motorola, Inc.), Philips International
B.V., ST Microelectronics (formerly called SGS-Thomson Microelectronics),
Toshiba Corporation, and Vishay-Siliconix Incorporated.

ENVIRONMENTAL MATTERS

Federal, state, and local laws and regulations impose various restrictions
and controls on the storage, use and discharge of certain materials, chemicals,
and gases used in semiconductor manufacturing processes. We do not believe that
compliance with such laws and regulations as now in effect will have a material
adverse effect on our results of operations, financial position or cash flows.

However, under some of these laws and regulations, we could be held
financially responsible for remedial measures if properties are contaminated, or
if waste is sent to a landfill or recycling facility that becomes contaminated.
Also, we may be subject to common law claims if we release substances that
damage or harm third parties. We cannot make assurances that changes in
environmental laws and regulations will not require additional investments in
capital equipment and the implementation of additional compliance programs in
the future which could have a material adverse effect on our results of
operations, financial position or cash flows, as could any failure by us to
comply with environmental laws and regulations.

36
<PAGE>
superfund site in Monterey Park, California, known as the OII Site. Other
potentially responsible parties who settled certain claims with the EPA under
consent decrees filed suit in Federal Court in May 1992 against a number of
other such parties, including us, for cost recovery and contribution under the
provisions of the Comprehensive Environmental Response, Compensation and
Liability Act. We have settled all outstanding claims that have arisen out of
this site. No claims against Rachelle have been settled.

We also received a letter dated July 25, 1995 from the U.S. Department of
Justice, directed to Rachelle, offering to settle claims against Rachelle
relating to the first elements of clean-up work at the site for $4,953,148, but
the final remedy assessment has not yet been made. The offer stated that the
settlement would not cover the cost of any additional remedial actions required
to finish the clean-up. This settlement offer expired by its terms on
September 1, 1995. On August 7, 1995, we received a Supplemental Information
Request from the EPA directed to Rachelle, to which counsel for Rachelle
responded with information regarding waste shipped to the site. Counsel for
Rachelle received a letter from the EPA dated September 30, 1997, requesting
that Rachelle participate in the final remedial actions at the site, and counsel
replied on October 21, 1997. We have taken the position that none of the wastes
generated by Rachelle were hazardous. We have received no further communications
in connection with this site.

We cannot determine with accuracy the amount of the potential demand to
Rachelle for the cost of the final remedy. Based upon information received to
date, we believe that any demand for the cost of the final remedy, if made,
would likely be significant, although it should be substantially below, the
demand amount for earlier phases of the site clean-up. Any demands related to
the cost for the final remedy would be in addition to the amount demanded for
earlier phases of the OII Site clean-up. Our insurer has not accepted liability
although it has made payments for defense costs we have incurred in connection
with the lawsuit.

We also received a letter dated September 9, 1994, from the State of
California Department of Toxic Substances Control stating that we may be a
potentially responsible party for the deposit of hazardous substances at a
facility in Whittier, California. In June 1995, we joined a group of other
potentially responsible parties to remove contamination from the site. The group
currently estimates the total cost of the clean-up to be between $20 million and
$25 million, although the actual cost could be much higher. We estimated that we
sent approximately 0.1% of the waste, by weight, sent by all parties
contributing to the clean-up of the site, and we believe the cost of the
clean-up will be roughly allocated among the parties by the amount of waste
contributed. On July 31, 1999, the group proposed two settlement offers: one for
$34,165 and the second for $68,330. The first settlement offer covers
investigation and remediation of the site itself and a small area extending
beyond the site. The second settlement offer covers this area plus all
additional downgradient contamination. On September 14, 1999, we accepted the
$68,330 settlement offer, which requires EPA acceptance, and made the required
payment on September 28, 1999. There can be no assurance, however, that the EPA
will accept the settlement offers or what the ultimate outcome of this matter
will be. We believe that, whatever the outcome, it will not have a material
adverse effect on our financial condition, results of operations or cash flows.

EMPLOYEES

As of December 31, 1999, we employed approximately 4,556 people, of whom
approximately 3,405 were employed in North America, 1,011 in Western Europe and
140 in Asia. The only collective bargaining agreements to which we are subject
are with respect to our employees in Italy. We have approximately 500 employees
in Italy. We consider our relations with our employees to be good.

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<PAGE>
PROPERTIES

Our operations occupy a total of approximately 1,001,000 square feet, of
which approximately 635,000 square feet are located within the United States. Of
the worldwide total, we lease approximately 257,000 square feet and we own the
balance.

Our major facilities are in the following locations:

<TABLE>
<CAPTION>
TOTAL SQUARE FEET
-------------------
FACILITY OWNED LEASED LEASE EXPIRATION
- -------- -------- -------- ------------------------------------
<S> <C> <C> <C>
Temecula, California................ 331,000 --
El Segundo, California.............. 127,000 177,000 May 31, 2000 to July 31, 2004
Tijuana, Mexico..................... 129,000 --
Oxted, England(1)................... 40,000 32,000 June 30, 2000 to March 27, 2012
Turin, Italy........................ 110,000 --
</TABLE>

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

(1) We intend to sell this facility and move to leased facilities.

The Wales Development Agency agreed to build a 80,000 square foot
manufacturing facility for us. The building is scheduled to be completed in
March 2000. Upon completion, we will purchase the building for approximately
$4 million.

We believe our facilities are adequate for our current and anticipated
near-term operating needs. We estimate that we currently utilize approximately
73% of our worldwide manufacturing capacity.

We have sales or technical support offices located throughout the United
States and in Canada, France, Denmark, Germany, Switzerland, Finland,
Scandinavia, Russia, the Czech Republic, Hungary, Hong Kong, Japan, China,
Korea, Taiwan, the Philippines, Singapore and India, which operate in leased
facilities.

LEGAL PROCEEDINGS

We and some of our directors and officers have been named as defendants in
three class action lawsuits filed in Federal District Court for the Central
District of California in 1991. These suits seek unspecified but substantial
compensatory and punitive damages for alleged intentional and negligent
misrepresentations and violations of the federal securities laws in connection
with the public offering of our common stock completed in April 1991 and the
redemption and conversion in June 1991 of our 9% Convertible Subordinated
Debentures due 2010. They also allege that our projections for growth in fiscal
1992 were materially misleading. Two of these suits also named our underwriters,
Kidder, Peabody & Co. Incorporated and Montgomery Securities, as defendants.

The Court has granted summary judgment in favor of our underwriters and has
dismissed the claims brought under Section 11 and 12(2) of the Securities Act of
1933 and the claims based on common law fraud and negligent misrepresentation in
the prospectuses. Accordingly, the remaining claims are under Section 10(b) of
the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.

The Court decertified the class pursuing common law claims for fraud and
negligent misrepresentation and granted the defendants' motion to narrow the
stockholder class period to June 19, 1991 through October 21, 1991. The trial is
currently scheduled for April 25, 2000.

Although we believe that the remaining claims alleged in the suits are
without merit, we cannot presently determine the ultimate outcome. A substantial
judgment or settlement, if any, could have a material adverse effect on our
results of operations, financial position or cash flows. No provision for any
liability that may result upon adjudication of these matters has been made in
the Consolidated Financial Statements.

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<PAGE>
MANAGEMENT

The following table sets forth the name, age and position of each of our
executive officers and directors as of December 31, 1999. Our executive officers
serve at the discretion of the board of directors. Our directors are divided
into three classes, and the directors in each class serve three-year terms
expiring in successive years.

<TABLE>
<CAPTION>
NAME AGE TITLE
- ---- -------- ------------------------------------------
<S> <C> <C>
Eric Lidow................................ 87 Chairman of the Board
Alexander Lidow, Ph.D..................... 45 Chief Executive Officer
Robert J. Mueller......................... 70 Executive Vice President--External Affairs
and Business Development
Michael P. McGee.......................... 40 Executive Vice President and Chief
Financial Officer
L. Michael Russell........................ 52 Executive Vice President, Secretary and
General Counsel
Nabeel Gareeb............................. 35 Executive Vice President, Components Group
Donald S. Burns........................... 74 Director
George Krsek, Ph.D........................ 79 Director
Derek B. Lidow, Ph.D...................... 46 Director
Minoru Matsuda............................ 62 Director
James D. Plummer, Ph.D.................... 55 Director
Jack O. Vance, Ph.D....................... 75 Director
Rochus E. Vogt, Ph.D...................... 70 Director
</TABLE>

Eric Lidow, one of our founders, has been a director since our inception in
1947 and was Chief Executive Officer until March 6, 1995. Mr. Lidow continues as
Chairman of the Board and also serves as Chairman of our Executive Committee.

Alexander Lidow, Ph.D., has been employed by us since 1977. He served as the
Vice President--Research and Development of our Semiconductor Division beginning
July 1979, was promoted to Semiconductor Division Executive Vice
President--Manufacturing and Technology in March 1985, and became the President
of our Electronic Products Division in July 1989. In February 1992, Dr. Lidow
was elected Executive Vice President of Operations. He was elected a director in
September 1994 and Chief Executive Officer in March 1995. Dr. Lidow serves on
the Board of Overseers of RAND Corporation and on the Board of Trustees of the
California Institute of Technology. Dr. Lidow is a son of Eric Lidow and a
brother of Derek B. Lidow, one of our directors.

Robert J. Mueller has been employed by us since 1961. He served as Vice
President of Marketing for our Semiconductor Division from 1963 until 1967 when
he was promoted to Vice President--Sales. In October 1968, he was promoted to
Corporate Vice President--Foreign Operations. Mr. Mueller became Executive Vice
President--World Marketing and Foreign Operations in April 1977, Corporate
Executive Vice President--External Affairs and Worldwide Sales in July 1989, and
Executive Vice President--External Affairs and Business Development in
July 1993. He was first elected a director in 1990.

Michael P. McGee joined us in July 1990 as Director of Corporate Accounting
and was promoted to Corporate Controller in December 1990. Mr. McGee became Vice
President, Controller and Principal Accounting Officer in 1991, and in 1993,
became Vice President and Chief Financial Officer. In November 1998, Mr. McGee
was elected Executive Vice President. From 1985 to the time he joined us in
1990, Mr. McGee was a senior manager and audit manager at Ernst & Young.

39
<PAGE>
L. Michael Russell joined us in January 1997 as Vice President and General
Counsel and became Secretary in February 1997. In November 1998, he was elected
Executive Vice President. Immediately prior to joining us, Mr. Russell was
General Counsel, Consumer & Industrial Segment, and Chief International Counsel
of Teledyne, Inc., where he was employed in the Corporate Legal Department for
more than five years.

Nabeel Gareeb joined us in August 1992 as Vice President of Manufacturing of
our HEXFET America facility in Temecula, California. Mr. Gareeb became Vice
President--Switch Business and Fab Operations in 1996. In 1998, he became Senior
Vice President--Switch Group and in July 1999, he became Senior Vice
President--Components Group. In November 1999, Mr. Gareeb was elected Executive
Vice President, Components Group.

Donald S. Burns has been Chairman, President, and Chief Executive Officer of
Prestige Holdings, Ltd., an investment advisory firm, since 1978. Mr. Burns was
elected a director in 1993.

George Krsek, Ph.D, was President of Houba, Inc., a pharmaceutical firm,
from 1975 to July 1994 and to December 1997 was Managing Member of Konec L.L.C.,
a management consulting company. In December 1997, Konec L.L.C. reorganized as
Konec, Inc. and Dr. Krsek became President and Chairman of the Board of
Konec, Inc., a management consulting firm. He has been one of our directors
since 1979.

Derek B. Lidow, Ph.D, is the President, Chief Executive Officer and a
Director of iSuppli Inc., an Internet company. He is also Chief Executive
Officer and a director of Lidow Technologies, Inc., a venture capital firm. He
was employed by us from 1977 until June 1999 when he resigned from his position
as one of our two Chief Executive Officers. In addition, Dr. Lidow serves as a
member of the Leadership Council of the School of Engineering of Princeton
University and is a Trustee of the Los Angeles Philharmonic. Dr. Lidow is a son
of Eric Lidow and a brother of Alexander Lidow.

Minoru Matsuda was employed by Hitachi, Ltd. and its American subsidiary,
Hitachi American, Ltd., from 1960 through March 1997. His management positions
included General Manager of operations in Indonesia; Manager of the Planning
Department for International Operations; and Senior Counsel, Intellectual
Property Office. In April 1997, Mr. Matsuda became a Professor at Kanazawa
Institute of Technology, Japan's largest institution of higher education
specializing in engineering and technology. A member of the New York State Bar,
Mr. Matsuda was elected as one of our directors in September 1997.

James D. Plummer, Ph.D., is the Frederick Emmons Terman Professor of
Engineering at Stanford University, Dean of the Stanford School of Engineering
and Director of the Stanford Nanofabrication Laboratory. Dr. Plummer was elected
a director in September 1994.

Jack O. Vance, Ph.D., became the Managing Director of Management Research, a
management consulting firm, in 1990. From 1960 through 1989, he was a director
of McKinsey & Co., Inc., a management consulting firm. During the years 1973
through 1989, he was also the Managing Director of the firm's Los Angeles
office. He has been one of our directors since 1988. He is also a director of
The Olson Company, King's Seafood Company, Semtech Corporation, Mathers
Fund, Inc., First Consulting Group and Hankin & Co.

Rochus E. Vogt, Ph.D., is the R. Stanton Avery Distinguished Service
Professor and a Professor of Physics, California Institute of Technology, and
was Provost from 1983 through 1987. He has been one of our directors since 1984.

40
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS

As of December 31, 1999, there were 52,061,454 shares of our common stock
issued and outstanding. The following table shows, as of December 31, 1999, the
beneficial ownership of our common stock by:

- owners of more than five percent of our common stock;

- each director;

- each executive officer;

- all directors and executive officers as a group; and

- the selling stockholder.

<TABLE>
<CAPTION>
OWNERSHIP PRIOR OWNERSHIP AFTER
TO OFFERING OFFERING
---------------------- SHARES ----------------------
NUMBER OF BEING NUMBER OF
NAME AND ADDRESS SHARES PERCENTAGE OFFERED SHARES PERCENTAGE
- ---------------- --------- ---------- -------- --------- ----------
<S> <C> <C> <C> <C> <C>
State of Wisconsin Investment Board(1).... 3,950,000 7.6% 0 3,950,000 6.6%
P.O. Box 7842, Madison, WI 53707
Eric Lidow(2)(3).......................... 2,512,748 4.8 400,000 2,112,748 3.5
Alexander Lidow(2)(3)..................... 1,585,121 3.0 0 1,585,121 2.6
Derek B. Lidow(2)(3)...................... 1,166,433 2.2 0 1,166,433 1.9
Donald S. Burns(3)(4)..................... 61,100 * 0 61,100 *
Nabeel Gareeb(3).......................... 39,092 * 0 39,092 *
George Krsek(3)........................... 45,500 * 0 45,500 *
Minoru Matsuda(3)......................... 19,000 * 0 19,000 *
Michael P. McGee(3)....................... 135,112 * 0 135,112 *
Robert J. Mueller(3)...................... 129,400 * 0 129,400 *
James D. Plummer(3)....................... 55,000 * 0 55,000 *
L. Michael Russell(3)..................... 38,919 * 0 38,919 *
Jack O. Vance(3).......................... 91,900 * 0 91,900 *
Rochus E. Vogt(3)......................... 83,000 * 0 83,000 *
All Directors and Named Executive Officers
as a Group (13) persons(3).............. 5,962,325 11.1 400,000 5,562,325 9.0
</TABLE>

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

* Less than 1%

(1) Based on Schedule 13G dated January 10, 2000.

(2) Includes 236,745 shares held by members of the Lidow family, other than
Messrs. Eric Lidow, Alexander Lidow and Derek B. Lidow. The Messrs. Lidow
disclaim any beneficial ownership in any such shares. The 5,268,618 shares
beneficially owned by members of the Lidow family constitute 9.9% of our
shares. In addition, the Lidow Foundation, of which the Messrs. Lidow are
directors, owns 87,634 shares and the Messrs. Lidow disclaim any pecuniary
interest in any such shares.

(3) Amounts include, in the aggregate, 1,887,068 options exercisable prior to
March 1, 2000 under our stock option plans by named executive officers and
directors.

(4) A member of the Burns family other than Mr. Burns is the beneficial owner of
1,100 shares. Mr. Burns disclaims any beneficial ownership in any such
shares.

The business address of each director and named executive officer is 233
Kansas Street, El Segundo, California 90245.

41
<PAGE>
DESCRIPTION OF CAPITAL STOCK

The following description summarizes the most important terms of our capital
stock. Because it is only a summary, it does not contain all of the information
that may be important to you. For a complete description, you should refer to
our Restated Certificate of Incorporation, or Certificate of Incorporation, and
Amended and Restated Bylaws, or Bylaws.

Our Certificate of Incorporation authorizes us to issue 150 million shares
of common stock and 1 million shares of preferred stock. No other classes of
capital stock are authorized under our Certificate of Incorporation.

COMMON STOCK

Each share of common stock is entitled to one vote on all matters submitted
to a vote of the stockholders. Holders of common stock may receive dividends
only when our Board of Directors declares them, but our secured credit agreement
prohibits us from paying dividends without obtaining prior approval. In certain
cases, common stockholders may not receive dividends until we have satisfied our
obligations to any preferred stockholders. If we liquidate, dissolve or wind-up
our business, either voluntarily or not, common stockholders will share equally
in the assets remaining after we pay our creditors and any preferred
stockholders. The common stock has no preemptive, conversion or other
subscription rights, and all outstanding shares are fully paid and
non-assessable.

PREFERRED STOCK

Our board of directors may issue shares of preferred stock at any time, in
one or more series, without stockholder approval. The board of directors will
determine the designation, relative rights, preferences and limitations of each
series of preferred stock. If we issue preferred stock, it could delay a change
in control and make it harder to remove our present management. Under certain
circumstances, preferred stock could also adversely affect the voting power of
common stockholders.

RIGHTS AGREEMENT

In August 1996, our board of directors declared a distribution of one right
for each outstanding share of common stock. The distribution was made as of
August 14, 1996, to the stockholders of record on that date. Each right entitles
the registered holder to purchase from us, initially, one one-thousandth of a
share of junior participating preferred stock at a purchase price of $135.00,
subject to adjustment. The description and terms of the rights are set forth in
a rights agreement between Chase Mellon Shareholder Services as rights agent and
us. You should refer to the rights agreement for a more detailed description of
the terms and provisions of the rights. You may obtain a copy of the rights
agreement from us free of charge by contacting our transfer agent. See "Where
You Can Find More Information." Any certificates representing shares of common
stock we issue in this offering will contain a notation incorporating the rights
agreement by reference.

POSSIBLE ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER PROVISIONS

In addition to the authorized preferred stock, other provisions of our
Certificate of Incorporation and Bylaws may make it more difficult for a third
party to acquire, or may discourage a third party from attempting to acquire
control of us.

In accordance with provisions contained in our Certificate of Incorporation
and Bylaws, our board of directors is divided into three classes with staggered
three year terms for each class. The Certificate of Incorporation and Bylaws
provide that the directors have the right to increase (with certain
restrictions) or decrease the number of directors. The Certificate of
Incorporation provides that

42
<PAGE>
vacancies for newly created directorships may be filled by a majority vote of
the remaining directors and removal for cause may only be made by the vote of a
majority of the outstanding shares.

Amendment of any of the foregoing provisions of our Certificate of
Incorporation requires the approval of the holders of at least 66 2/3% of our
stock issued and outstanding having voting power, given at a duly convened
stockholders meeting upon a proposal adopted by our board.

Under our Bylaws, a special meeting of stockholders may be called only by
certain officers or a majority of the board.

CERTAIN PROVISIONS OF DELAWARE LAW

We are a Delaware corporation and are subject to Section 203 of the Delaware
General Corporation Law, or DGCL. In general, Section 203 prevents an
"interested stockholder" (defined generally as a person owning 15% or more of a
corporation's outstanding voting stock) from engaging in a "business
combination" (as defined therein) with a Delaware corporation for three years
following the date of the transaction in which the person became an interested
stockholder, unless

(a) before the date of the proposed action, the board of directors of the
corporation approved either the business combination or the transaction
in which the stockholder became an interested stockholder;

(b) upon consummation of the transaction that resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced (excluding shares owned by persons who are both
officers and directors of the corporation and shares held by certain
employee stock plans); or

(c) on or after the date of the proposed action, the business combination is
approved by the board of directors of the corporation and authorized at a
meeting of stockholders, and not by written consent, by the affirmative
vote of the holders of at least two-thirds of the outstanding voting
stock of the corporation not owned by the interested stockholder.

LIMITATION OF LIABILITY AND INDEMNIFICATION AGREEMENTS

Our Certificate of Incorporation provides that to the fullest extent
permitted by the DGCL, our directors will not be liable to us or our
stockholders for monetary damages for breach of fiduciary duty as a director.
Under the DGCL, liability of a director may not be limited

(a) for any breach of the director's duty of loyalty to us or our
stockholders,

(b) for acts or omissions not in good faith or involving intentional
misconduct or a knowing violation of law,

(d) for any transaction from which the director derives an improper personal
benefit.

The effect of the provisions of our Certificate of Incorporation is to
eliminate our rights and the rights of our stockholders (through stockholders'
derivative suits on our behalf) to recover monetary damages against a director
for breach of the fiduciary duty of care as a director (including breaches
resulting from negligent or grossly negligent behavior), except in the
situations described in clauses (a) through (d) above. This provision does not
limit or eliminate our rights or the rights of any stockholder to seek
nonmonetary relief, such as an injunction or rescission, in the event of a
breach of a director's duty of care. In addition, our Certificate of
Incorporation provides that we will indemnify our directors, officers, employees
and agents against losses incurred by any such person because such person was
acting in such capacity.

43
<PAGE>
UNDERWRITING

Subject to the terms and conditions stated in the underwriting agreement
dated the date hereof, each underwriter named below has severally agreed to
purchase, and International Rectifier and the selling stockholder have agreed to
sell to such underwriter, the number of shares set forth opposite the name of
such underwriter.

<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
- ---- ---------
<S> <C>
Salomon Smith Barney Inc....................................
J.P. Morgan & Co............................................
Banc of America Securities LLC..............................
Gruntal & Co., LLC..........................................
---------
Total..................................................... 8,000,000
=========
</TABLE>

The underwriting agreement provides that the obligations of the several
underwriters to purchase the shares included in this offering are subject to
approval of certain legal matters by counsel and to certain other conditions.
The underwriters are obligated to purchase all the shares (other than those
covered by the over-allotment option described below) if they purchase any of
the shares.

Salomon Smith Barney Inc. is acting as book-running lead manager for this
offering. Salomon Smith Barney Inc. and J.P. Morgan & Co. are acting as
joint-lead managers. The underwriters propose to offer some of the shares
directly to the public at the public offering price set forth on the cover page
of this prospectus and some of the shares to certain dealers at the public
offering price less a concession not in excess of $ per share. The
underwriters may allow, and such dealers may reallow, a concession not in excess
of $ per share on sales to certain other dealers. If all of the shares
are not sold at the offering price, the underwriters may change the public
offering price and the other selling terms.

International Rectifier has granted to the underwriters an option,
exercisable for 30 days from the date of this prospectus, to purchase up to
1,200,000 additional shares of common stock at the public offering price less
the underwriting discount. The underwriters may exercise such option solely for
the purpose of covering over-allotments, if any, in connection with this
offering. To the extent such option is exercised, each underwriter will be
obligated, subject to certain conditions, to purchase a number of additional
shares approximately proportionate to such underwriter's initial purchase
commitment.

International Rectifier and its executive officers and directors have agreed
that, for a period of 90 days from the date of this prospectus, they will not,
without the prior written consent of Salomon Smith Barney Inc., dispose of or
hedge any shares of common stock of International Rectifier or any securities
convertible into or exchangeable for common stock. Salomon Smith Barney Inc. in
its sole discretion may release any of the securities subject to these lock-up
agreements at any time without notice. The common stock is listed on The New
York Stock Exchange and the Pacific Exchange under the symbol "IRF".

The following table shows the underwriting discounts and commissions to be
paid to the underwriters by International Rectifier and the selling stockholder
in connection with this offering.

44
<PAGE>
These amounts are shown assuming both no exercise and full exercise of the
underwriters' option to purchase additional shares of common stock.

<TABLE>
<CAPTION>
PAID BY INTERNATIONAL
RECTIFIER PAID BY SELLING STOCKHOLDER
--------------------------- ----------------------------
NO EXERCISE FULL EXERCISE NO EXERCISE FULL EXERCISE
----------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Per share...................................... $ $ $ $
Total.......................................... $ $ $ $
</TABLE>

In connection with the offering, Salomon Smith Barney Inc., on behalf of the
underwriters, may purchase and sell shares of common stock in the open market.
These transactions may include over-allotment, syndicate covering transactions
and stabilizing transactions. Over-allotment involves syndicate sales of common
stock in excess of the number of shares to be purchased by the underwriters in
the offering, which creates a syndicate short position. Syndicate covering
transactions involve purchases of the common stock in the open market after the
distribution has been completed in order to cover syndicate short positions.
Stabilizing transactions consist of certain bids or purchases of common stock
made for the purpose of preventing or retarding a decline in the market price of
the common stock while the offering is in progress.

The underwriters also may impose a penalty bid. Penalty bids permit the
underwriters to reclaim a selling concession from a syndicate member when
Salomon Smith Barney Inc., in covering syndicate short positions or making
stabilizing purchases, repurchases shares originally sold by that syndicate
member.

Any of these activities may cause the price of the common stock to be higher
than the price that otherwise would exist in the open market in the absence of
such transactions. These transactions may be effected on The New York Stock
Exchange, the Pacific Exchange or in the over-the-counter market, or otherwise
and, if commenced, may be discontinued at any time.

International Rectifier will pay the expense of this offering, estimated to
be $800,000.

International Rectifier and the selling stockholder have agreed to indemnify
the underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, or to contribute to payments the underwriters may be
required to make in respect of any of those liabilities.

CERTAIN UNITED STATES FEDERAL TAX CONSEQUENCES
TO NON-U.S. HOLDERS OF COMMON STOCK

The following is a general discussion of certain United States federal
income and estate tax consequences of the purchase, ownership and disposition of
common stock by a Non-U.S. Holder. When we use the term "Non-U.S. Holder," we
mean any person or entity that is not a United States Holder ("U.S. Holder"). A
U.S. Holder is any beneficial owner of common stock that is:

- a citizen or resident of the United States,

- a corporation or partnership created or organized in or under the laws of
the United States or any political subdivision thereof,

- an estate the income of which is subject to United States federal income
taxation regardless of its source, or

- a trust, (x) that is subject to the supervision of a court within the
United States and the control of one or more United States persons as
described in section 7701(a)(30) of the Internal Revenue Code of 1986, as
amended (the "Code"), or (y) that has a valid election in effect under
applicable United States Treasury regulations to be treated as a United
States person.

45
<PAGE>

This discussion does not address all aspects of United States federal income
and estate taxes and does not deal with foreign, state and local consequences
that may be relevant to such Non-U.S. Holders in light of their personal
circumstances. Furthermore, this discussion is based on provisions of the Code,
existing and proposed regulations promulgated thereunder and administrative and
judicial interpretations thereof, as of the date hereof, all of which are
subject to change. We advise each prospective purchaser of common stock to
consult a tax advisor with respect to current and possible future tax
consequences of acquiring, holding and disposing of common stock as well as any
tax consequences that may arise under the laws of any United States state,
municipality or other taxing jurisdiction.

DIVIDENDS

Dividends paid to a Non-U.S. Holder of common stock generally will be
subject to withholding of United States federal income tax at a 30% rate or such
lower rate as may be specified by an applicable income tax treaty. However,
dividends that are effectively connected with the conduct of a trade or business
by the Non-U.S. Holder within the United States and, where a tax treaty applies,
are attributable to a United States permanent establishment of the Non-U.S.
Holder, are not subject to the withholding tax, but instead are subject to
United States federal income tax on a net income basis at applicable graduated
individual or corporate rates. Certain certification and disclosure requirements
must be complied with in order for effectively connected income to be exempt
from withholding. Any such effectively connected dividends received by a foreign
corporation may be subject to an additional "branch profits tax" at a 30% rate
or such lower rate as may be specified by an applicable income tax treaty.

Through December 31, 2000, dividends paid to an address outside the United
States are presumed to be paid to a resident of that country (unless the payer
has knowledge to the contrary) for purposes of the withholding tax discussed
above and, under the current interpretation of United States Treasury
regulations, for purposes of determining the applicability of a tax treaty rate.
However, United States Treasury regulations (the "Final Regulations") provide
that a Non-U.S. Holder of common stock who wishes to claim the benefit of an
applicable treaty rate (and avoid back-up withholding as discussed below) for
dividends paid after December 31, 2000, will be required to satisfy applicable
certification and other requirements.

A Non-U.S. Holder of common stock eligible for a reduced rate of United
States withholding tax pursuant to an income tax treaty may obtain a refund of
any excess amounts withheld by filing an appropriate claim for refund with the
Internal Revenue Service (the "IRS").

GAIN ON DISPOSITION OF COMMON STOCK

A Non-U.S. Holder generally will not be subject to United States federal
income tax with respect to gain recognized on a sale or other disposition of
common stock unless (1) the gain is effectively connected with a trade or
business of the Non-U.S. Holder in the United States, and, where a tax treaty
applies, is attributable to a United States permanent establishment of the
Non-U.S. Holder, (2) in the case of a Non-U.S. Holder who is an individual and
holds the common stock as a capital asset, such holder is present in the United
States for 183 or more days in the taxable year of the sale or other disposition
and certain other conditions are met, or (3) we are or have been a "United
States real property holding corporation" for United States federal income tax
purposes.

An individual Non-U.S. Holder described in clause (1) above will be subject
to tax on the net gain derived from the sale under regular graduated United
States federal income tax rates. An individual Non-U.S. Holder described in
clause (2) above will be subject to a flat 30% tax on the gain derived from the
sale, which may be offset by United States source capital losses (even though
the individual is not considered a resident of the United States). If a Non-U.S.
Holder that is a foreign corporation falls

46
<PAGE>

under clause (1) above, it will be subject to tax on its gain under regular
graduated United States federal income tax rates and, in addition, may be
subject to a branch profits tax equal to 30% of its effectively connected
earnings and profits (within the meaning of the Code) for the taxable year, as
adjusted for certain items, unless it qualifies for a lower rate or exemption
under an applicable income tax treaty.

We believe we are not and we do not anticipate becoming a "United States
real property holding corporation" for United States federal income tax
purposes.

Special rules may apply to certain Non-U.S. Holders, such as foreign
insurance companies, "controlled foreign corporations," "passive foreign
investment companies," "foreign personal holding companies," and companies that
accumulate earnings for the purpose of avoiding tax, that are subject to special
treatment under the Code. Such entities should consult their own tax advisors to
determine the United States federal, state, local and other tax consequences
that may be relevant to them.

FEDERAL ESTATE TAX

Common stock held by an individual Non-U.S. Holder at the time of death will
be included in such holder's gross estate for United States federal estate tax
purposes, unless an applicable estate tax treaty provides otherwise.

INFORMATION REPORTING AND BACKUP WITHHOLDING

We must report annually to the IRS and to each Non-U.S. Holder the amount of
any dividends paid to such holder and the tax withheld with respect to such
dividends, regardless of whether withholding was required. Copies of the
information returns reporting such dividends and withholding may also be made
available to the tax authorities in the country in which the Non-U.S. Holder
resides under the provisions of an applicable income tax treaty.

Under current law, backup withholding at the rate of 31% (as opposed to the
general withholding tax rate of 30% described above) generally will not apply to
dividends paid to a Non-U.S. Holder at an address outside the United States
(unless the payer has knowledge that the payee is a U.S. person). Under the
Final Regulations, however, a Non-U.S. Holder will be subject to backup
withholding unless applicable certification requirements are met.

Payment of the proceeds of a sale of common stock within the United States
or conducted through certain U.S. related financial intermediaries is subject to
both backup withholding and information reporting unless the beneficial owner
certifies under penalties of perjury that it is a Non-U.S. Holder (and the payer
does not have actual knowledge that the beneficial owner is a United States
person) or the holder otherwise establishes an exemption.

Any amounts withheld under the backup withholding rules may be allowed as a
refund or a credit against such holder's United States federal income tax
liability provided the required information is furnished to the IRS.

LEGAL MATTERS

O'Melveny & Myers LLP, Los Angeles, California, will pass upon the validity
of the shares of common stock we are offering. Latham & Watkins, Los Angeles,
California will pass upon certain legal matters for the underwriters.

47
<PAGE>
EXPERTS

The consolidated financial statements as of June 30, 1999 and 1998 and for
each of the three years in the period ended June 30, 1999 included in this
prospectus have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.

WHERE YOU CAN FIND MORE INFORMATION

We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference room. You may also obtain our SEC filings from the SEC's Website at
"http://www.sec.gov."

The SEC allows us to incorporate by reference the information we file with
them, which means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is considered
to be part of this prospectus. When we file information with the SEC in the
future, that information will automatically update and supersede this
information. We incorporate by reference the documents listed below and any
future filings we will make prior to the termination of the offering to the SEC
under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934:

1. our Annual Report on Form 10-K for the fiscal year ended June 30, 1999;

2. our Quarterly Reports on Form 10-Q for the quarters ended September 30, 1999
and December 31, 1999;

3. our Current Report on Form 8-K, dated July 6, 1999; and

4. the description of our common stock contained in our Registration Statement
on Form 8-A filed with the Commission on June 17, 1985 (which incorporates
by reference the description of our Common Stock contained in our
Registration Statement on Form S-3 filed with the Commission on June 14,
1985) and the description of our share purchase rights contained in our
Registration Statement on Form 8-A filed with the Commission on August 21,
1996, and any amendment or report filed for the purpose of updating such
descriptions.

You may request a copy of these filings, at no cost, by writing or telephoning
us at:

L. Michael Russell, Esq.
Executive Vice President, Secretary
and General Counsel
International Rectifier Corporation
233 Kansas Street
El Segundo, California 90245
Telephone: (310) 726-8268

48
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Report of Independent Accountants........................... F-2
Consolidated Statement of Operations for the fiscal years
ended June 30, 1997, 1998 and 1999 and the six-month
periods ended December 31, 1998 and 1999 (unaudited)...... F-3
Consolidated Statement of Comprehensive Income for the
fiscal years ended June 30, 1997, 1998 and 1999 and the
six-month periods ended December 31, 1998 and 1999
(unaudited)............................................... F-4
Consolidated Balance Sheet as of June 30, 1998 and 1999 and
as of December 31, 1999 (unaudited)....................... F-5
Consolidated Statement of Stockholders' Equity for the
fiscal years ended June 30, 1997, 1998 and 1999 and for
the six-month period ended December 31, 1999
(unaudited)............................................... F-6
Consolidated Statement of Cash Flows for the fiscal years
ended June 30, 1997, 1998 and 1999 and for the six-month
periods ended December 31, 1998 and 1999 (unaudited)...... F-7
Notes to Consolidated Financial Statements.................. F-8
</TABLE>

F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

The Stockholders and Board of Directors

International Rectifier Corporation

In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, comprehensive income, stockholders'
equity, and cash flows present fairly, in all material respects, the financial
position of International Rectifier Corporation and its subsidiaries at
June 30, 1999 and 1998, and the results of their operations and their cash flows
for each of the three years in the period ended June 30, 1999, in conformity
with generally accepted accounting principles. These financial statements are
the responsibility of the Company's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.

As discussed in Note 1 to the consolidated financial statements, in fiscal
1999 the Company changed its method of accounting for the cost of start-up
activities.

PricewaterhouseCoopers LLP

Los Angeles, California
July 27, 1999, except for Note 9, as to which the date is September 14, 1999

F-2
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS

(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEARS ENDED JUNE 30, DECEMBER 31,
------------------------------ ---------------------
1997 1998 1999 1998 1999
-------- -------- -------- ---------- --------
(RESTATED)
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues.................................. $486,127 $551,891 $545,371 $260,330 $323,337
Cost of sales............................. 323,067 375,727 393,379 187,967 216,916
-------- -------- -------- -------- --------
Gross profit............................ 163,060 176,164 151,992 72,363 106,421
Selling and administrative expense........ 105,954 104,661 98,193 48,605 53,740
Research and development expense.......... 35,495 39,132 40,512 20,418 21,660
Impairment of assets, restructuring and
severance charges (Note 4).............. 71,000 -- 24,520 12,000 --
-------- -------- -------- -------- --------
Operating profit (loss)................. (49,389) 32,371 (11,233) (8,660) 31,021
Other income (expense):
Interest, net........................... (4,015) (7,288) (11,120) (5,356) (7,320)
Other, net.............................. 714 (494) 53,509 44,347 600
-------- -------- -------- -------- --------
Income (loss) before income taxes and
cumulative effect of accounting
change.................................. (52,690) 24,589 31,156 30,331 24,301
Provision (benefit) for income taxes (Note
6)...................................... (9,484) 8,114 10,780 10,503 6,788
-------- -------- -------- -------- --------
Income (loss) before cumulative effect of
accounting change....................... (43,206) 16,475 20,376 19,828 17,513
Cumulative effect of change in accounting
principle, net of income tax benefit of
$5,431.................................. -- -- (26,154) (26,154) --
-------- -------- -------- -------- --------
Net income (loss)......................... $(43,206) $ 16,475 $ (5,778) $ (6,326) $ 17,513
======== ======== ======== ======== ========
Net income (loss) per common share:
Basic:
Income (loss) before cumulative effect
of change in accounting principle..... $ (0.84) $ 0.32 $ 0.39 $ 0.38 $ 0.34
Cumulative effect of change in
accounting principle.................. -- -- (0.50) (0.50) --
-------- -------- -------- -------- --------
Net income (loss) per common
share--Basic (Note 7)................. $ (0.84) $ 0.32 $ (0.11) $ (0.12) $ 0.34
======== ======== ======== ======== ========
Diluted:
Income (loss) before cumulative effect
of change in accounting principle..... $ (0.84) $ 0.32 $ 0.39 $ 0.38 $ 0.33
Cumulative effect of change in
accounting principle.................. -- -- (0.50) (0.50) --
-------- -------- -------- -------- --------
Net income (loss) per common share--
Diluted (Note 7)...................... $ (0.84) $ 0.32 $ (0.11) $ (0.12) $ 0.33
======== ======== ======== ======== ========
Average common shares outstanding--Basic
(Note 7)................................ 51,307 51,248 51,612 51,523 51,974
======== ======== ======== ======== ========
Average common shares and potentially
dilutive securities outstanding--Diluted
(Note 7)................................ 51,307 51,674 51,788 51,605 53,594
======== ======== ======== ======== ========
</TABLE>

The accompanying notes are an integral part of this statement.

F-3
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(IN THOUSANDS)

The accompanying notes are an integral part of this statement.

F-4
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(IN THOUSANDS EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
JUNE 30, JUNE 30, DECEMBER 31,
1998 1999 1999
-------- -------- ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 32,294 $ 31,497 $ 30,028
Short-term investments.................................... 13,232 8,900 --
Trade accounts receivable, less allowance for doubtful
accounts ($1,401 at June 30, 1998 and $2,168 at June 30,
1999)................................................... 129,738 121,659 145,804
Inventories............................................... 130,653 108,463 110,239
Deferred income taxes (Note 6)............................ 8,080 16,078 15,069
Prepaid expenses and other receivables.................... 3,253 19,677 15,407
-------- -------- --------
Total current assets.................................... 317,250 306,274 316,547
Property, plant and equipment, at cost, less accumulated
depreciation ($208,879 at June 30, 1998 and $252,707 at
June 30, 1999)............................................ 390,892 380,504 377,920
Other assets................................................ 27,685 22,307 24,422
-------- -------- --------
Total assets............................................ $735,827 $709,085 $718,889
======== ======== ========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank loans (Note 2)....................................... $ 28,153 $ 14,996 $ 13,536
Long-term debt, due within one year (Note 2).............. 37,226 8,047 7,904
Accounts payable.......................................... 46,637 64,809 63,810
Accrued salaries, wages and commissions................... 15,875 19,546 17,444
Other accrued expenses.................................... 26,042 33,234 33,562
-------- -------- --------
Total current liabilities............................... 153,933 140,632 136,256
Long-term debt, less current maturities..................... 141,528 158,418 152,620
Other long-term liabilities................................. 29,352 7,142 6,719
Deferred income taxes (Note 6).............................. 11,364 6,619 5,608
Commitments and contingencies (Notes 9, 10, 11, 13, 14 and
15)
Stockholders' equity (Notes 1 and 3):
Common shares, $1 par value, authorized: 150,000,000;
issued and outstanding: 51,350,923 shares at June 30,
1998 and 51,780,700 shares at June 30, 1999............. 51,351 51,781 52,061
Preferred shares, $1 par value, authorized: 1,000,000;
issued and outstanding: none............................ -- -- --
Capital contributed in excess of par value of shares...... 255,195 257,746 260,326
Retained earnings......................................... 98,646 92,868 110,381
Accumulated other comprehensive loss...................... (5,542) (6,121) (5,082)
-------- -------- --------
Total stockholders' equity.............................. 399,650 396,274 417,686
-------- -------- --------
Total liabilities and stockholders' equity.............. $735,827 $709,085 $718,889
======== ======== ========
</TABLE>

The accompanying notes are an integral part of this statement.

F-5
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

(IN THOUSANDS EXCEPT SHARE QUANTITIES)

<TABLE>
<CAPTION>
CAPITAL
CONTRIBUTED ACCUMULATED
IN EXCESS OF OTHER
COMMON PAR VALUE RETAINED COMPREHENSIVE
SHARES OF SHARES EARNINGS INCOME(LOSS) TOTAL
-------- ------------ -------- ------------- --------
<S> <C> <C> <C> <C> <C>
BALANCE, JUNE 30, 1996...................... $50,821 $249,388 $125,377 $(4,373) $421,213
Issuance of common shares:
48,440--exercise of stock options......... 49 342 -- -- 391
182,190--stock purchase plan.............. 182 2,306 -- -- 2,488
Tax benefits from exercise of stock options --
and stock purchase plan................... 163 -- -- 163
Net loss for the year ended June 30, 1997... -- -- (43,206) -- (43,206)
Foreign currency translation adjustments.... -- -- -- 666 666
------- -------- -------- ------- --------
BALANCE, JUNE 30, 1997...................... 51,052 252,199 82,171 (3,707) 381,715
Issuance of common shares:
82,361--exercise of stock options......... 82 528 -- -- 610
216,655--stock purchase plan.............. 217 2,181 -- -- 2,398
Tax benefits from exercise of stock options --
and stock purchase plan................... 287 -- -- 287
Net income for the year ended June 30, --
1998...................................... -- 16,475 -- 16,475
Foreign currency translation adjustments.... -- -- -- (1,835) (1,835)
------- -------- -------- ------- --------
BALANCE, JUNE 30, 1998...................... 51,351 255,195 98,646 (5,542) 399,650
Issuance of common shares:
85,600--exercise of stock options;........ 86 549 -- -- 635
344,177--stock purchase plan.............. 344 2,040 -- -- 2,384
Adjustment to tax benefits from exercise of --
stock options and stock purchase plan..... (38) -- -- (38)
Net loss for the year ended June 30, 1999... -- -- (5,778) -- (5,778)
Foreign currency translation adjustments.... -- -- -- (579) (579)
------- -------- -------- ------- --------
BALANCE, JUNE 30, 1999...................... 51,781 257,746 92,868 (6,121) 396,274
Issuance of common shares (unaudited):
148,274--exercise of stock options........ 148 1,614 -- -- 1,762
132,480--stock purchase plan.............. 132 966 -- -- 1,098
Net income for the six months ended --
December 31, 1999 (unaudited)............. -- 17,513 -- 17,513
Foreign currency translation adjustments --
(unaudited)............................... -- -- 1,039 1,039
------- -------- -------- ------- --------
BALANCE, DECEMBER 31, 1999 (UNAUDITED)...... $52,061 $260,326 $110,381 $(5,082) $417,686
======= ======== ======== ======= ========
</TABLE>

The accompanying notes are an integral part of this statement.

F-6
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

(IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEARS ENDED JUNE 30, DECEMBER 31,
------------------------------ ---------------------
1997 1998 1999 1998 1999
-------- -------- -------- ---------- --------
(RESTATED)
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flow from operating activities:
Net income (loss)........................ $(43,206) $ 16,475 $ (5,778) $ (6,326) $ 17,513
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization........ 37,103 38,937 46,162 23,285 26,316
Deferred income...................... (718) (600) (600) (300) (300)
Deferred income taxes................ (15,500) 9,452 (7,231) 2,444 (8)
Deferred compensation................ 3,170 (1,892) (6,888) (6,193) (92)
Impairment of assets, restructuring
and severance charges.............. 75,000 -- 27,020 14,500 --
Cumulative effect of change in
accounting principle............... -- -- 26,154 26,154 --
Change in working capital (Note 1)... (34,455) (16,291) 18,373 (13,978) (20,125)
-------- -------- -------- -------- --------
Net cash provided by operating
activities............................... 21,394 46,081 97,212 39,586 23,304
-------- -------- -------- -------- --------
Cash flow from investing activities:
Additions to property, plant and
equipment.............................. (99,762) (90,280) (71,577) (38,468) (23,290)
Purchase of short-term investments....... (67,000) (47,550) (12,900) (4,000) (3,000)
Proceeds from sale of short-term
investments............................ 68,150 51,168 17,232 13,232 11,900
Change in other noncurrent assets........ (9,117) (5,596) 8,862 336 (2,027)
-------- -------- -------- -------- --------
Net cash used in investing activities...... (107,729) (92,258) (58,383) (28,900) (16,417)
-------- -------- -------- -------- --------
Cash flow from financing activities:
Net proceeds from issuance of (repayments
of) short-term bank debt............... 518 16,922 (12,727) (20,475) (1,800)
Proceeds from issuance of long-term
debt................................... 100,187 42,128 192,669 42,443 52
Payments on long-term debt and
obligations under capital leases....... (15,511) (18,650) (217,352) (43,352) (5,900)
Net proceeds from issuance of common
stock.................................. 2,879 3,295 2,981 1,216 2,860
Other.................................... (970) (1,560) (5,647) (694) (3,990)
-------- -------- -------- -------- --------
Net cash provided by (used in) financing
activities............................... 87,103 42,135 (40,076) (20,862) (8,778)
-------- -------- -------- -------- --------
Effect of exchange rate changes on cash and
cash equivalents......................... 36 (228) 450 740 422
-------- -------- -------- -------- --------
Net increase (decrease) in cash and cash
equivalents.............................. 804 (4,270) (797) (9,436) (1,469)
Cash and cash equivalents, beginning of
period................................... 35,760 36,564 32,294 32,294 31,497
-------- -------- -------- -------- --------
Cash and cash equivalents, end of period... $ 36,564 $ 32,294 $ 31,497 $ 22,858 $ 30,028
======== ======== ======== ======== ========
</TABLE>

The accompanying notes are an integral part of this statement.

F-7
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ALL INFORMATION SUBSEQUENT TO JUNE 30, 1999 AND FOR THE

SIX MONTHS ENDED DECEMBER 31, 1998 AND 1999 IS UNAUDITED

1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BUSINESS

International Rectifier Corporation ("Company") is a leading designer,
manufacturer and marketer of power semiconductors and the leading worldwide
supplier of a type of power semiconductor called a MOSFET, a metal oxide
semiconductor field effect transistor. Power semiconductors perform a power
management function by converting electricity into a form more usable by
electrical products. The technology advancements of power semiconductors
increase system efficiency, allow more compact end products, improve features
and functionality and extend battery life. The Company's products are used in a
range of end markets, including communications, consumer electronics,
information technology, automotive, industrial and government/space.

IR was founded as a California corporation in 1947 and reincorporated in
Delaware in 1979.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company
and all of its majority-owned subsidiaries that are located in Europe, Mexico,
Japan and Southeast Asia. All material intercompany transactions have been
eliminated.

UNAUDITED INFORMATION

The consolidated financial statements and related disclosures for the
six-month periods ended December 31, 1998 and 1999 included herein are
unaudited; however, they contain all normal recurring adjustments which, in the
opinion of management, are necessary to present fairly the consolidated
financial position of the Company at December 31, 1999 and the consolidated
results of operations and cash flows for the six-month periods ended
December 31, 1998 and 1999. It should be understood that accounting measurements
at interim dates inherently involve greater reliance on estimates than at
year-end. The results of operations for the six-month period ended December 31,
1999 are not necessarily indicative of the results to be expected for the full
year.

FISCAL PERIODS

The Company operates on a fiscal calendar under which fiscal 1997 consisted
of 52 weeks ending June 29. Fiscal 1998 consisted of 53 weeks ending July 5 and
fiscal 1999 consisted of 52 weeks ending July 4. For convenience, all references
herein to fiscal years are to fiscal years ended June 30. The six months ended
December 31, 1998 and 1999 each consisted of 26 weeks.

REVENUE RECOGNITION

The Company recognizes revenues from product sales to all customers,
including distributors, at the time of shipment.

RESEARCH AND DEVELOPMENT

Research and development costs are expensed as incurred.

F-8
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

ALL INFORMATION SUBSEQUENT TO JUNE 30, 1999 AND FOR THE

SIX MONTHS ENDED DECEMBER 31, 1998 AND 1999 IS UNAUDITED

1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ADVERTISING

The Company expenses all advertising costs in the periods in which those
costs are incurred. The Company shares portions of certain distributors'
advertising expenses through cooperative advertising arrangements. In fiscal
1997, 1998 and 1999, the Company spent approximately $4,078,000, $3,579,000 and
$3,928,000, respectively, on advertising. In the six months ended December 31,
1998 and 1999, the Company spent approximately $1,886,000 and $1,761,000,
respectively, on advertising.

ENVIRONMENTAL COSTS

Costs incurred to investigate and remediate contaminated sites are expensed.

INCOME TAXES

Deferred income taxes are determined based on the difference between the
financial reporting and tax bases of assets and liabilities using enacted rates
in effect during the year in which the differences are expected to reverse.
Valuation allowances are established when necessary to reduce deferred tax
assets to the amount expected to be realized. Income tax expense is the tax
payable for the period and the change during the period in deferred tax assets
and liabilities.

At June 30, 1999, U.S. income taxes have not been provided on approximately
$24,550,000 of undistributed earnings of foreign subsidiaries since management
considers these earnings to be invested indefinitely or substantially offset by
foreign tax credits. It is not practicable to estimate the amount of
unrecognized deferred U.S. taxes on these undistributed earnings.

NET INCOME (LOSS) PER COMMON SHARE

Net income (loss) per common share-Basic is computed by dividing net income
(loss) available to common stockholders (the numerator) by the weighted average
number of common shares outstanding (the denominator) during the period. The
computation of Net income (loss) per common share-Diluted is similar to the
computation of Net income (loss) per common share-Basic except that the
denominator is increased to include the number of additional common shares that
would have been outstanding if the dilutive potential common shares had been
issued.

STATEMENT OF CASH FLOWS

The Company invests excess cash from operations in investment grade money
market instruments. The Company considers all highly liquid debt instruments
with a purchased maturity of three months or less to be cash equivalents.
Components in the change in working capital for the fiscal years ended

F-9
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

ALL INFORMATION SUBSEQUENT TO JUNE 30, 1999 AND FOR THE

SIX MONTHS ENDED DECEMBER 31, 1998 AND 1999 IS UNAUDITED

1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
June 30, 1997, 1998 and 1999 and for the periods ended December 31, 1998 and
1999, were comprised of the following (in thousands):

<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEARS ENDED JUNE 30, DECEMBER 31,
------------------------------ -------------------
1997 1998 1999 1998 1999
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Trade accounts receivable,
net...................... $ (929) $ (8,381) $ (1,107) $ 17,571 $(17,066)
Inventories................ (35,643) (16,104) 15,494 14,864 (1,275)
Prepaid expenses and other
receivables.............. 764 (279) (6,704) (44,694) 1,094
Accounts payable........... (847) 7,106 18,525 (4,090) (925)
Accrued salaries, wages and
commissions.............. 791 1,660 3,893 (2,647) (2,220)
Other accrued expenses..... 1,409 (293) (11,728) 5,018 267
-------- -------- -------- -------- --------
$(34,455) $(16,291) $ 18,373 $(13,978) $(20,125)
======== ======== ======== ======== ========
</TABLE>

Supplemental disclosures of cash flow information (in thousands):

SHORT-TERM INVESTMENTS

The Company's short-term investments consist of investment grade money
market instruments. All of the Company's investments have original maturities of
less than one year. In accordance with the criteria established by Statement of
Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," all investments have been classified
as "available-for-sale." The Company utilizes the specific identification method
for determining the cost of the investments. At June 30, 1998 and 1999, the cost
of the investments approximates the market value.

F-10
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

ALL INFORMATION SUBSEQUENT TO JUNE 30, 1999 AND FOR THE

SIX MONTHS ENDED DECEMBER 31, 1998 AND 1999 IS UNAUDITED

1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVENTORIES

Inventories are stated at the lower of cost (principally first-in,
first-out) or market. Inventories at June 30, 1998 and 1999 and at December 31,
1999 were comprised of the following (in thousands):

<TABLE>
<CAPTION>
JUNE 30, JUNE 30, DECEMBER 31,
1998 1999 1999
-------- -------- ------------
<S> <C> <C> <C>
Raw materials............................... $ 21,101 $ 15,277 $ 15,769
Work-in-process............................. 56,224 52,124 52,908
Finished goods.............................. 53,328 41,062 41,562
-------- -------- --------
$130,653 $108,463 $110,239
======== ======== ========
</TABLE>

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are stated at cost. Upon retirement or other
disposal, the asset cost and related accumulated depreciation are removed from
the accounts and any gain or loss on disposition is included in income.
Depreciation is provided on the straight-line method, based on the estimated
useful lives of the assets, or the units of production method based upon the
estimated output of the equipment. Depreciation expense for the fiscal years
ended June 30, 1997, 1998 and 1999 was $34,916,000, $38,937,000 and $46,162,000,
respectively. Depreciation expense for the six months ended December 31, 1998
and 1999 was $21,882,000 and $26,316,000, respectively. Property, plant and
equipment at June 30, 1998 and 1999 and at December 31, 1999 were comprised of
the following (in thousands):

<TABLE>
<CAPTION>
JUNE 30, JUNE 30, DECEMBER 31,
1998 1999 1999
--------- --------- ------------
<S> <C> <C> <C>
Buildings and improvements................. $ 122,904 $ 120,872 $ 145,273
Equipment.................................. 417,261 425,194 404,130
Construction-in-progress................... 49,382 76,841 80,535
Less accumulated depreciation.............. (208,879) (252,707) (262,336)
--------- --------- ---------
380,668 370,200 367,602
Land....................................... 10,224 10,304 10,318
--------- --------- ---------
$ 390,892 $ 380,504 $ 377,920
========= ========= =========
</TABLE>

Depreciation of improvements to leased premises is provided on the
straight-line method over the shorter of the remaining term of the lease or
estimated useful lives of the improvements. Capital leases

F-11
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

ALL INFORMATION SUBSEQUENT TO JUNE 30, 1999 AND FOR THE

SIX MONTHS ENDED DECEMBER 31, 1998 AND 1999 IS UNAUDITED

1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
included in property, plant and equipment at June 30, 1998 and 1999 and at
December 31, 1999 were as follows (in thousands):

<TABLE>
<CAPTION>
JUNE 30, JUNE 30, DECEMBER 31,
1998 1999 1999
-------- -------- ------------
<S> <C> <C> <C>
Equipment.................................... $14,263 $ 13,607 $ 13,927
Less accumulated depreciation................ (9,105) (10,882) (10,631)
------- -------- --------
$ 5,158 $ 2,725 $ 3,296
======= ======== ========
</TABLE>

Repairs and maintenance costs are charged to expense. In the fiscal years
ended June 30, 1997, 1998 and 1999, repairs and maintenance costs were
$16,016,000, $18,757,000 and $16,686,000, respectively. In the six months ended
December 31, 1998 and 1999, repairs and maintenance costs were $7,708,000 and
$10,480,000, respectively.

Historically, preoperating and start-up costs incurred in connection with
construction of major new production facilities were capitalized until such
facilities became operational. These costs were then amortized over the lives of
such facilities. Effective fiscal 1999, preoperating and start-up costs are
expensed as incurred in accordance with Statement of Position ("SOP") 98-5, as
described more fully below in the Recent Accounting Pronouncements section of
Note 1 to the Consolidated Financial Statements.

LONG-LIVED ASSETS

The Company identifies and records impairment losses on long-lived assets
when events and circumstances indicate that such assets might be impaired. The
Company periodically evaluates the recoverability of its long-lived assets based
on expected undiscounted cash flows and recognizes impairments, if any, based on
expected discounted cash flows.

INTANGIBLE ASSETS

Patent and related costs are amortized using the straight-line method over
the life of the related patent portfolio.

CONCENTRATION OF RISK

The Company places its temporary cash investments with high credit quality
financial institutions. At times, such investments may be in excess of insured
limits.

The Company performs periodic credit evaluations of its customers' financial
condition and generally does not require collateral. Receivables on average are
due in 60 days. Credit losses have consistently been within management's
expectations.

F-12
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

ALL INFORMATION SUBSEQUENT TO JUNE 30, 1999 AND FOR THE

SIX MONTHS ENDED DECEMBER 31, 1998 AND 1999 IS UNAUDITED

1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FINANCIAL CURRENCY TRANSACTIONS

In general, the functional currency of a foreign operation is deemed to be
the local country's currency. Assets and liabilities of operations outside the
United States are translated into U.S. dollars using current exchange rates.
Income and expense are translated at average exchange rates prevailing during
the period. The effects of foreign currency translation adjustments are included
as a component of stockholders' equity. At June 30, 1998 and 1999, accumulated
foreign currency translation losses were $5,542,000 and $6,121,000,
respectively. At December 31, 1999, accumulated foreign currency translation
loss was $5,082,000.

The Company hedges certain portions of its exposure to foreign currency
fluctuations of foreign currency denominated receivables and payables at certain
of its international subsidiaries through forward foreign exchange contracts. At
June 30, 1998 and 1999, the Company had approximately $26,100,000 and
$44,581,000, respectively, of forward foreign exchange contracts outstanding
with fair values of $25,916,000 and $43,922,000, respectively. At December 31,
1999, the Company had approximately $43,566,000 of forward foreign exchange
contracts outstanding, with a fair value of $43,083,000. The fair value of
foreign currency contracts is estimated based on the spot rate of the various
hedged currencies as of the end of the period. Total net realized and unrealized
gains or losses on forward contracts for the years ending June 30, 1998 and 1999
were $89,000 and $287,000, respectively. For the six months ended December 31,
1999, total net realized and unrealized losses on forward contracts were
$568,000. These net realized and unrealized gains or losses were included in
"Other Income (Expense)." The Company does not hold or issue forward contracts
for trading purposes.

At June 30, 1998 and 1999, maturities of the Company's forward foreign
exchange contracts were three months or less in term.

INTEREST RATE SWAPS

Under the Company's new Credit Agreement entered into on June 30, 1999, the
Company is required to hedge the interest rate for at least half of the
$152.1 million in outstanding term loans under the agreement. The Company has
entered into interest rate swap agreements to hedge 50% of these outstanding
term loans. The purpose of these swaps is to offset with a fixed interest rate a
portion of the risk inherent in this variable-rate debt. Under these agreements,
IR will pay the counterparties (the parties assuming the interest rate risk)
interest at a weighted average fixed rate of 6.2% and the counterparties will
pay IR interest at a variable rate equal to LIBOR. The weighted average
three-month LIBOR rate applicable to these agreements was 6.2% at December 31,
1999.

ESTIMATES

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

F-13
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

ALL INFORMATION SUBSEQUENT TO JUNE 30, 1999 AND FOR THE

SIX MONTHS ENDED DECEMBER 31, 1998 AND 1999 IS UNAUDITED

1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
STOCK-BASED COMPENSATION

The Company accounts for its stock-based compensation plans using the
intrinsic value method prescribed in Accounting Principles Board ("APB") Opinion
No. 25, "Accounting for Stock Issued to Employees." SFAS No. 123, "Accounting
for Stock-Based Compensation," encourages, but does not require companies to
record stock-based employee compensation plans at fair value. The Company has
elected to continue accounting for stock-based compensation in accordance with
APB No. 25 and is providing the required disclosures under SFAS No. 123 in the
Notes to the Consolidated Financial Statements.

RECENT ACCOUNTING PRONOUNCEMENTS

Effective the first day of fiscal 2000, the Company adopted SOP 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use." SOP 98-1 provides guidance on accounting for the costs of
computer software developed or obtained for internal use. The new guidance does
not significantly differ from the Company's previous accounting treatment for
software developed or obtained for internal use, and as a result, did not have a
significant impact on the Consolidated Financial Statements.

The Company elected early adoption of SOP 98-5, "Reporting on the Costs of
Start-Up Activities," during fiscal 1999. This new accounting standard, issued
in April 1998 by the American Institute of Certified Public Accountants,
requires most entities to expense all start-up and preoperating costs as they
are incurred. The Company previously deferred such costs and amortized them over
the life of the related asset following the start-up of each new process. The
early adoption of SOP 98-5 was required to be made retroactive to the beginning
of the Company's first quarter of fiscal 1999. The cumulative effect of this
change in accounting principle, net of income tax benefit of $5.4 million, was
$26.2 million, $0.50 per basic and diluted share, and was recorded retroactively
to the first quarter of fiscal 1999 as a one-time charge. Effective July 1,
1998, all start-up and preoperating costs are expensed as incurred.

Effective July 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income," and accordingly has included a separate Consolidated
Statement of Comprehensive Income following the Company's Consolidated Statement
of Income. Comprehensive income generally represents all changes in
stockholders' equity during the period except those resulting from investments
by, or distributions to, stockholders. The balance of accumulated other
comprehensive income consists of accumulated foreign currency translation
adjustments.

On June 30, 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 131 "Disclosures about Segments of an Enterprise and Related
Information". SFAS No. 131 requires publicly-held companies to report financial
and descriptive information about their operating segments in financial
statements issued to stockholders for interim and annual periods. The Statement
also requires additional disclosures with respect to products and services,
geographic areas of operation, and major customers. SFAS No. 131 is effective
for fiscal years beginning after December 15, 1997 and requires restatement of
earlier periods presented. The Company adopted SFAS No. 131 in the fiscal year
ended June 30, 1999. The adoption of SFAS No. 131 did not affect the Company's
results of

F-14
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

ALL INFORMATION SUBSEQUENT TO JUNE 30, 1999 AND FOR THE

SIX MONTHS ENDED DECEMBER 31, 1998 AND 1999 IS UNAUDITED

1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
operations or financial position, but did affect the disclosure of segment
information as presented in Note 5 of the Notes to the Consolidated Financial
Statements.

In February 1998, the FASB issued SFAS No. 132 "Employers' Disclosures about
Pensions and Other Postretirement Benefits." SFAS No. 132 supersedes the
disclosure requirements for SFAS No. 87 "Employers' Accounting for Pensions,"
SFAS No. 88 "Employers' Accounting for Settlements and Curtailments of Defined
Benefit Pension Plans," and SFAS No. 106 "Employers' Accounting for
Postretirement Benefits Other than Pensions." This Statement is effective for
fiscal years beginning after December 15, 1997. This Statement revises
employers' disclosures about pension and postretirement benefit plans. The
Company adopted SFAS No. 132 in the fiscal year ended June 30, 1999. The
Company's pension obligation is immaterial and, therefore, not disclosed
separately.

In June 1998, the FASB issued SFAS No. 133 "Accounting for Derivative
Instruments and Hedging Activities," which was later amended by SFAS No. 137
"Accounting for Derivative Instruments and Hedging Activities--Deferral of the
Effective Date of FASB Statement No. 133." SFAS No. 133 established standards
for the accounting and reporting for derivative instruments, including certain
derivative instruments embedded in other contracts, and hedging activities. This
Statement generally requires recognition of gains and losses on hedging
instruments, based on changes in fair value or the earnings effect of a
forecasted transaction. SFAS No. 133, as amended by SFAS No. 137, is effective
for all fiscal quarters of fiscal years beginning after June 15, 2000.
Management does not believe that SFAS No. 133 or SFAS No. 137 will have a
material impact on the Consolidated Financial Statements.

RECLASSIFICATION

Certain reclassifications have been made to previously reported amounts to
conform to the current-period presentation.

2. BANK LOANS AND LONG-TERM DEBT

At June 30, 1999, the Company entered into a syndicated Credit Agreement
with Banque Nationale de Paris as Sole Arranger, Administrative Agent and
Issuing Agent and Sanwa Bank California as the Syndication Agent. The financing
consisted of two term loans totaling $155 million due in 2004 and 2005 and a
$70 million revolving credit facility. The proceeds from the term loans were
used to pay down all of the Company's existing long-term unsecured bank loans
and substantially all domestic loans. The interest rate on these two term loans
is based on 3.0% and 3.5% above the applicable LIBOR rate and 2.0% to 2.5% above
the applicable base rate. The base rate applies to borrowings which are shorter
than 30 days. The interest rate on the revolving credit facility is based on
either 3.0% above the applicable LIBOR rate or 2.0% above the prime rate as the
Company may elect. At June 30, 1999, outstanding borrowings on the term loans
were $155 million with a weighted average interest rate of 8.79% and the
revolving credit facility had $70 million available for borrowing. At
December 31, 1999, $152.1 million was outstanding against these two term loans,
and no borrowings had occurred against the $70 million revolving line of credit.
The loans are collateralized by the majority of the Company's assets. The Credit
Agreement imposes some restrictions, including the following: (a) maximum
leverage, minimum interest coverage and fixed charge coverage ratios

F-15
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

ALL INFORMATION SUBSEQUENT TO JUNE 30, 1999 AND FOR THE

SIX MONTHS ENDED DECEMBER 31, 1998 AND 1999 IS UNAUDITED

2. BANK LOANS AND LONG-TERM DEBT (CONTINUED)
(b) minimum EBITDA (Earnings Before Interest, Taxes, Depreciation and
Amortization) (c) maximum capital expenditures and (d) a limitation on losses.
The Credit Agreement also restricts the Company with respect to the payment of
cash dividends, the sale of assets, mergers and acquisitions, additional
financing, and investments.

At June 30, 1999, the Company had $5.5 million outstanding in
equipment-collateralized financing facilities and $5.7 million outstanding in
foreign unsecured term loans. The Company had an additional $23.9 million of
unsecured revolving credit facilities from financial institutions at foreign
locations, of which at June 30, 1999, $15.0 million was outstanding.

At December 31, 1999, the Company had $20.4 million in foreign revolving
lines of credit, against which $13.5 million had been borrowed. Foreign term
loan facilities of $3.6 million and equipment financing facilities of
$4.8 million were both fully utilized. As of December 31, 1999, the Company had
$253.8 million under its credit facilities, against which $174.1 million had
been borrowed.

The following is a summary of the Company's long-term debt and other loans
at June 30, 1998 and 1999 and at December 31, 1999 (in thousands):

<TABLE>
<CAPTION>
JUNE 30, JUNE 30, DECEMBER 31,
1998 1999 1999
-------- -------- ------------
<S> <C> <C> <C>
Domestic bank loans collateralized by the majority of the
Company's assets, payable in quarterly installments of
principal and interest at variable rates of 8.6% and
11.0%, due in 2004 and 2005............................... $ -- $155,213 $152,134
Domestic bank loans collateralized by equipment, payable in
varying monthly installments at rates from 6.4% to 8.7%,
due through 2002, paid down in 1999....................... 45,599 -- --
Domestic unsecured bank loans payable in varying monthly
installments.............................................. 107,237 -- --
Capitalized lease obligations payable in varying monthly
installments primarily at rates from 6.3% to 8.2%, due in
2002 through 2004......................................... 885 5,298 4,838
Foreign bank loans collateralized by property and/or
equipment, payable in varying monthly installments at
10.8%, due in 2000........................................ 1,991 216 107
Foreign unsecured bank loans payable in varying monthly
installments at rates from 4.3% to 8.4%, due in 2003
through 2006.............................................. 23,042 5,738 3,445
-------- -------- --------
Debt, including current portion of long-term debt........... 178,754 166,465 160,524
Foreign unsecured revolving bank loans at rates from 1.5% to
8.5%...................................................... 28,153 14,996 13,536
-------- -------- --------
Total Debt.................................................. $206,907 $181,461 $174,060
======== ======== ========
</TABLE>

F-16
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

ALL INFORMATION SUBSEQUENT TO JUNE 30, 1999 AND FOR THE

SIX MONTHS ENDED DECEMBER 31, 1998 AND 1999 IS UNAUDITED

2. BANK LOANS AND LONG-TERM DEBT (CONTINUED)

As of June 30, 1999, scheduled principal payments on long-term debt are as
follows: fiscal 2000: $8,047,000; fiscal 2001: $11,775,000; fiscal 2002:
$9,810,000; fiscal 2003: $14,708,000; fiscal 2004: $16,997,000; and $105,128,000
thereafter.

During fiscal 1997, 1998 and 1999, the Company incurred interest expense,
net of capitalized interest, of $7,357,000, $10,060,000 and $12,703,000,
respectively. During the six months ended December 31, 1998 and 1999, the
Company incurred interest expense, net of capitalized interest, of $7,124,000
and $8,140,000, respectively.

In accordance with SFAS No. 107 "Disclosures About Fair Value of Financial
Instruments," the fair values of the Company's debt have been estimated based on
current rates offered to the Company for debt of the same remaining maturities.
The carrying amounts of the loans to the Company approximate their fair values.

3. CAPITAL STOCK

EMPLOYEE STOCK PURCHASE PLAN

The Company has a compensatory employee stock purchase plan ("ESPP"). Under
this plan employees are allowed to designate between two and ten percent of
their eligible compensation to purchase shares of the Company's common stock at
85 percent of fair market value at a designated date. During fiscal 1997, 1998
and 1999, 182,190, 216,655, and 344,177 shares were purchased at weighted
average per share exercise prices of $13.66, $11.07 and $6.93, respectively.
Shares authorized under this plan that remained unissued were 1,657,541,
1,440,886 and 1,096,709 at June 30, 1997, 1998 and 1999, respectively. The
weighted average per share fair value of ESPP options granted, using the
Black-Scholes method, in 1997, 1998 and 1999 was $5.54, $4.31 and $2.84 per
share, respectively.

STOCK OPTION PLANS

The Company has four stock option plans, the Stock Option Plan of 1984 (as
amended) ("1984 Plan"), the Amended and Restated Stock Incentive Plan of 1992
("1992 Plan"), the 1997 Employee Stock Incentive Plan ("1997 Plan") and the 2000
Stock Incentive Plan ("2000 Plan"). Under the 1984 Plan and the 1992 Plan,
options to purchase shares of the Company's common stock may be granted to the
Company's employees, including executive officers, and to members of the
Company's Board of Directors. Under the 1997 Plan, options to purchase shares of
the Company's common stock may be granted to the Company's employees and
consultants, but not to executive officers of the Company or members of its
Board of Directors. Under the 2000 Plan, options to purchase shares of the
Company's common stock may be granted to the Company's employees, officers,
directors, and consultants and advisors. Options have been issued with an
exercise price at least equal to the fair value of the Company's common stock at
the date of grant ("at market") and become generally exercisable in annual
installments of 20%, beginning on the first anniversary date.

The 1984 Plan terminated in August 1994. As of June 1999, there are no
remaining options outstanding under the 1984 Plan. During fiscal 1997, 1998 and
1999, 2,400, 2,800 and 14,000 shares, respectively, expired under the 1984 Plan.

In November 1996, the stockholders of the Company approved an amendment to
the stock option plan of 1992. The amendment broadened the types of options and
other stock-based awards (e.g.,

F-17
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

ALL INFORMATION SUBSEQUENT TO JUNE 30, 1999 AND FOR THE

SIX MONTHS ENDED DECEMBER 31, 1998 AND 1999 IS UNAUDITED

3. CAPITAL STOCK (CONTINUED)
restricted stock, SARs and performance shares) that may be granted (prior to the
amendment, only non-qualified options could be granted), extended the term of
the 1992 Plan for three years to December 31, 2002, retained the provision for
the annual increase in shares of the Company's common stock available for grant
of 1.5% of outstanding shares, increased the maximum number of shares that may
be granted to non-employee directors from 100,000 to 120,000 (including an
annual grant of 5,000 shares to each such director), reduced the holding period
for full vesting of certain non-employee director options from one year to six
months, and generally provided the committee of the Board of Directors that
administers the 1992 Plan with substantial powers and discretion in respect to
awards. During fiscal 1998 and 1999, only non-qualified options were issued, at
market, under the 1992 Plan. On January 1, 1997, 1998 and 1999, 764,078, 767,928
and 773,019 shares, respectively, were added to the 1992 Plan.

The Board of Directors adopted the 1997 Plan in November 1997. The terms of
the options authorized and granted under the 1997 Plan are substantially similar
to those under the 1992 Plan. As of June 30 and December 31, 1999, there are
824,100 and 63,650 shares, respectively, available for future grants to eligible
employees; no awards may be granted after December 31, 2002. Executive officers
and directors are not eligible for grants under the 1997 Plan. During fiscal
1998 and 1999, only non-qualified options were issued under the 1997 Plan.

In November 1999, the stockholders of the Company approved the 2000 Plan.
The 2000 Plan is effective as of January 1, 2000, and there are 4,500,000 shares
available for future grants to eligible persons. No awards may be granted under
the 2000 Plan after December 31, 2009. As of December 31, 1999, no options have
been issued.

A summary of the status of options under the 1984, 1992 and 1997 Plans is as
follows:

<TABLE>
<CAPTION>
WEIGHTED AVERAGE WEIGHTED AVERAGE
OPTION EXERCISE GRANT DATE FAIR
SHARES PRICE PER SHARE VALUE PER SHARE
--------- ---------------- ----------------
<S> <C> <C> <C>
Outstanding, June 30, 1996.......... 1,839,935 $12.75 --
Options granted................... 1,018,000 17.49 $7.99
Options exercised................. (48,440) 8.08 --
Options expired or canceled....... (11,310) 14.69 --
---------
Outstanding, June 30, 1997.......... 2,798,185 14.55 --
Options granted................... 1,666,960 15.22 7.73
Options exercised................. (82,361) 7.41 --
Options expired or canceled....... (88,002) 15.29 --
---------
Outstanding, June 30, 1998.......... 4,294,782 14.93 --
Options granted................... 1,388,050 9.20 4.20
Options exercised................. (85,600) 7.42 --
Options expired or canceled....... (207,485) 13.69 --
---------
Outstanding, June 30, 1999.......... 5,389,747 13.62 --
=========
</TABLE>

F-18
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

ALL INFORMATION SUBSEQUENT TO JUNE 30, 1999 AND FOR THE

SIX MONTHS ENDED DECEMBER 31, 1998 AND 1999 IS UNAUDITED

3. CAPITAL STOCK (CONTINUED)
During the six months ended December 31, 1999, the Company granted 1,411,100
options, 148,274 options were exercised and 141,790 options expired or were
cancelled.

The following table summarizes significant option groups outstanding at
June 30, 1999 and related weighted average price and life information:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------- -------------------------------
RANGE OF NUMBER WEIGHTED AVERAGE WEIGHTED NUMBER WEIGHTED
EXERCISE PRICE OUTSTANDING AT REMAINING AVERAGE EXERCISABLE AT AVERAGE
PER SHARE JUNE 30, 1999 LIFE (YEARS) EXERCISE PRICE JUNE 30, 1999 EXERCISE PRICE
--------------- -------------- ---------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
$ 5.50 to $6.94 223,200 7.9 $ 6.42 63,200 $ 6.20
7.50 to 10.69 1,663,850 8.1 8.50 625,550 8.24
11.19 to 16.75 1,858,915 7.8 13.33 910,303 12.95
17.44 to 23.81 1,643,782 7.5 20.11 789,728 20.01
--------- ---------
$ 5.50 to
$23.81......... 5,389,747 7.8 $13.62 2,388,781 $13.87
========= =========
</TABLE>

Additional information relating to the 1984, 1992 and 1997 Plans at
June 30, 1997, 1998 and 1999 is as follows:

<TABLE>
<CAPTION>
JUNE 30,
---------------------------------
1997 1998 1999
--------- --------- ---------
<S> <C> <C> <C>
Options exercisable......................... 628,285 1,178,881 2,388,781
Options available for grant................. 710,278 746,448 1,309,902
Total reserved common stock shares for stock
option plans.............................. 3,508,463 5,041,230 6,699,649
</TABLE>

The fair value of options at date of grant was estimated using the
Black-Scholes model with the following weighted average assumptions:

<TABLE>
<CAPTION>
JUNE 30,
------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Expected life (years).................................. 5 5 5
Interest rate.......................................... 6.43% 5.81% 5.40%
Volatility............................................. 49.95% 49.88% 57.03%
Dividend yield......................................... 0% 0% 0%
</TABLE>

The Company applies APB Opinion No. 25 and related interpretations in
accounting for its stock-based compensation programs. Had the Company recorded
compensation expense using the accounting

F-19
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

ALL INFORMATION SUBSEQUENT TO JUNE 30, 1999 AND FOR THE

SIX MONTHS ENDED DECEMBER 31, 1998 AND 1999 IS UNAUDITED

3. CAPITAL STOCK (CONTINUED)
method recommended by SFAS No. 123, net income (loss) and net income (loss) per
common share--Basic and Diluted would approximate the following (in thousands
except per share data):

<TABLE>
<CAPTION>
FISCAL YEAR ENDED JUNE 30,
------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Net income (loss)
As reported................................... $(43,206) $16,475 $(5,778)
Pro forma..................................... (45,273) 12,918 (10,091)
Net income (loss) per common share--Basic
As reported................................... $ (0.84) $ 0.32 $ (0.11)
Pro forma..................................... (0.88) 0.25 (0.20)
Net income (loss) per common share--Diluted
As reported................................... $ (0.84) $ 0.32 $ (0.11)
Pro forma..................................... (0.88) 0.25 (0.20)
</TABLE>

The effects of applying SFAS No. 123 in this pro forma disclosure are not
indicative of future amounts. SFAS No. 123 does not apply to awards prior to
1996. The Company anticipates grants of additional awards in future years.

SHAREHOLDER RIGHTS PLAN

On August 2, 1996, the Company's Board of Directors adopted a Shareholder
Rights Plan (the "Plan") under which preferred stock purchase rights (the
"Rights") have been and will continue to be granted for each outstanding share
of the Company's common stock held at the close of business on August 14, 1996.
The Plan is intended to ensure fair and equitable treatment for all shareholders
in the event of unsolicited attempts to acquire the Company.

The Rights will become exercisable ten days after a person or group (the
"Acquiror") has acquired beneficial ownership of 20% or more of the Company's
common stock other than pursuant to a qualified offer, or announces or commences
a tender offer or exchange offer that could result in the acquisition of
beneficial ownership of 20% or more. Once exercisable, each Right entitles the
holder to purchase one one-thousandth of a share of a new series of preferred
stock at an exercise price of $135, subject to adjustment to prevent dilution.
If the Acquiror acquires 20% or more of the Company's common stock, each Right
(except those held by the Acquiror) entitles the holder to purchase either the
Company's stock or stock in the merged entity at half of market value. The
Rights have no voting power, expire on August 14, 2006, and may be redeemed at a
price of $0.01 per Right up to and including the tenth business day after a
public announcement that 20% or more of the Company's shares have been acquired
by the Acquiror.

The Company amended and restated its Rights Agreement, as of December 15,
1998, to remove the requirement that continuing directors vote in board
approvals of certain corporate transactions.

4. IMPAIRMENT OF ASSETS, RESTRUCTURING AND SEVERANCE CHARGES

Due to a decline in selling prices for its MOSFET and IGBT products, during
the fourth quarter of fiscal 1997, the Company recorded a $75 million pretax
charge related to a restructuring program designed to improve the Company's cost
structure. Specifically, the restructuring activities included

F-20
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

ALL INFORMATION SUBSEQUENT TO JUNE 30, 1999 AND FOR THE

SIX MONTHS ENDED DECEMBER 31, 1998 AND 1999 IS UNAUDITED

4. IMPAIRMENT OF ASSETS, RESTRUCTURING AND SEVERANCE CHARGES (CONTINUED)
shifting production from older manufacturing facilities to newer, more efficient
facilities, changing business processes by consolidating order entry, customer
support, inventory management, information systems and finance activities at
fewer locations and accelerating the deployment of the Company's new product
development center. The restructuring activities were expected to reduce the
cost of the Company's business processes and lower product costs and result in
increased flow of new products, which are less price sensitive. The charge was
composed of $61 million for the write-down of assets, $4 million for the
write-down of inventory, primarily wafers, to net realizable value and
$10 million for termination benefits to be paid in connection with the severed
employees. The restructuring activities occurred over an approximate
eighteen-month transition period through December 31, 1998.

The asset write-down of property and equipment of $61 million was determined
by comparing the expected future undiscounted cash flows to the respective asset
carrying value. If an asset was deemed to be impaired, the carrying value was
adjusted to its expected future discounted cash flows. The net book value of the
applicable property and equipment prior to the $61 million write-down was
$79 million. The write-downs related to the following:

1) Wafer fabrication equipment located in El Segundo, California with a
carrying value of $21 million was adjusted to its fair value of $2 million. One
wafer fabrication line, dedicated primarily to research and product development,
was abandoned and replaced by a new product development facility in
August 1998. The other wafer fabrication line, which manufactured product using
equipment that processed 4-inch wafers, was abandoned and replaced with a more
advanced line located in Italy, which processes 5-inch wafers, in August 1998.
Using 5-inch wafers results in significant manufacturing savings. The current
status of the wafer fabrication impaired equipment falls into three categories:
a) it was scrapped as of June 1997, b) it is idle with no viable plans for
usage, or c) it is being used on a sporadic basis in research and development.
There is no viable external market for this equipment.

2) Assembly equipment in England of $26 million was adjusted to its fair
value of $4 million. Specifically, three product assembly and packaging lines in
England were operating at a gross margin loss. The Company has continued to
utilize these lines periodically for market development activities, and these
lines remain unprofitable.

3) Information systems applications with a carrying value of $32 million
were written down to $12 million as a result of lack of vendor support. The
Company's software vendor changed business strategies and informed the Company
of its intention to stop supporting and developing the software technology that
certain of the Company's information systems applications were based upon. It
was determined in June 1997 that no viable alternatives could be identified. As
a result of this decision, the Company ceased development and implementation of
certain forecasting, planning and order management programs and determined that
the assets related to these specific activities were impaired (i.e. no future
use and were abandoned). These assets consisted of costs related to external
consulting fees and expenses. The remaining book value relates to modules that
have not been abandoned.

As of June 30, 1999, the Company had eliminated approximately 242 employees
related to the June 1997 restructuring. The majority of the positions eliminated
were operators and technicians at the Company's North American operations. The
Company also eliminated production and assembly positions in its manufacturing
operations in Italy due to the outsourcing of certain assembly activities. In
addition, administrative and sales positions in France, England, Germany, Japan
and North America, related to the regional consolidation of certain
administrative functions, were eliminated.

F-21
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

ALL INFORMATION SUBSEQUENT TO JUNE 30, 1999 AND FOR THE

SIX MONTHS ENDED DECEMBER 31, 1998 AND 1999 IS UNAUDITED

4. IMPAIRMENT OF ASSETS, RESTRUCTURING AND SEVERANCE CHARGES (CONTINUED)
As of June 30, 1999, there was no remaining accrued severance liability in
the Company's Consolidated Balance Sheet related to the June 1997 restructuring.

During the second quarter of fiscal 1999, the Company recorded a
$14.5 million restructuring charge associated with plans to relocate high-volume
assembly lines from its facility in England to its facility in Mexico to take
advantage of labor rate savings, to centralize more of its European customer
service and administrative activities, and to reduce personnel. The Company
expects to complete this operational transition over the next six months ending
on June 30, 2000. The charge consisted of $5.9 million for estimated severance
costs associated with the elimination of approximately 350 positions, primarily
consisting of operators and technicians; $6.1 million for the write-off of
assets to be abandoned; and $2.5 million, which was charged to Cost of Sales,
for the write-down of inventory related to specialty product lines. None of the
assets written down (primarily building improvements relating to the high-volume
assembly production lines and production information systems) will remain in
use, and all will be abandoned after the production lines are relocated. In the
third quarter of fiscal 1999, the Company recorded a charge of $4.2 million
relating to additional severance costs, after appropriate notification was given
to 43 remaining affected employees in the sales, customer service and
administrative areas. The severance per person was larger for the third-quarter
fiscal 1999 restructuring versus the second-quarter fiscal 1999 restructuring as
the 43 positions included in the third-quarter fiscal 1999 restructuring were
primarily relatively high-paid employees in sales and administrative management.
The 350 positions in the second-quarter fiscal 1999 restructuring were primarily
operators and technicians who on average have a much lower salary level.
Therefore, the Company estimates that, ultimately, charges associated with all
of these actions will total approximately $18.7 million.

As of June 30, 1999, the Company had eliminated 17 positions, paid
$2.8 million for termination benefits related to this program and recorded the
asset impairment of $8.6 million. The remaining unutilized restructuring accrual
of $7.3 million, which is classified as current, relates to severance payments
to these previously notified employees for positions that are scheduled to be
eliminated during the next twelve months. As of December 31, 1999, the Company
had eliminated an additional 47 positions and paid an additional $3.2 million
for termination benefits, leaving a remaining unutilized restructuring accrual
of $4.1 million, which is classified as current.

During the fourth quarter of fiscal 1999, the Company recorded an
$8.3 million charge related to employee severance associated with the
elimination of approximately 39 positions. This includes a reduction in sales
and administrative management and staff levels and the resignation of Dr. Derek
B. Lidow who shared the responsibility of Chief Executive Officer. As of
June 30, 1999, the Company had eliminated 4 positions and paid $3.5 million in
termination benefits. The remaining unutilized severance accrual of
$4.8 million at June 30, 1999, which is classified as current, relates to
severance payments to these previously notified employees for positions that are
scheduled to be eliminated during the next twelve months. As of December 31,
1999, the Company had eliminated an additional 21 positions and paid an
additional $1.4 million in termination benefits, leaving a remaining unutilized
restructuring accrual of $3.4 million, which is classified as current.

F-22
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

ALL INFORMATION SUBSEQUENT TO JUNE 30, 1999 AND FOR THE

SIX MONTHS ENDED DECEMBER 31, 1998 AND 1999 IS UNAUDITED

5. GEOGRAPHIC SEGMENTS AND FOREIGN OPERATIONS

As described in Note 1, the Company adopted SFAS No. 131 in fiscal 1999. The
Company operates in one operating segment. Revenues from unaffiliated customers
are based on the location in which the sale originated. Geographic information
for the fiscal years ended June 30, 1997, 1998, 1999 and six months ended
December 31, 1998 and 1999 is presented below (in thousands):

<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEAR ENDED JUNE 30, DECEMBER 31,
------------------------------ -------------------
1997 1998 1999 1998 1999
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenues from Unaffiliated Customers
England................................. $ 70,208 $ 85,900 $ 77,457 $ 38,692 $ 37,970
Singapore............................... 57,656 59,840 79,489 36,900 57,368
Other Foreign........................... 118,218 138,635 125,173 58,549 89,376
-------- -------- -------- -------- --------
Subtotal-Foreign...................... 246,082 284,375 282,119 134,141 184,714
United States........................... 219,717 250,283 236,732 115,042 123,511
Unallocated royalties................... 20,328 17,233 26,520 11,147 15,112
-------- -------- -------- -------- --------
Total............................... $486,127 $551,891 $545,371 $260,330 $323,337
======== ======== ======== ======== ========
</TABLE>

<TABLE>
<CAPTION>
JUNE 30,
------------------------------ DECEMBER 31,
1997 1998 1999 1999
-------- -------- -------- ------------
<S> <C> <C> <C> <C>
Identifiable Assets
England......................................... $ 98,275 $107,220 $103,002 $ 83,782
Singapore....................................... 47,993 55,958 62,625 66,457
Other Foreign................................... 41,448 44,619 32,549 60,718
-------- -------- -------- --------
Subtotal-Foreign.............................. 187,716 207,797 198,176 210,957
United States................................... 433,684 464,863 482,636 452,445
Corporate Assets................................ 58,353 63,167 28,273 55,487
-------- -------- -------- --------
Total....................................... $679,753 $735,827 $709,085 $718,889
======== ======== ======== ========
</TABLE>

Corporate assets consist of cash, short-term investments, royalties
receivable, inventory reserves, deferred taxes and certain other assets.

No single customer accounted for more than 10% of the Company's consolidated
net revenues in fiscal 1997 or 1998. One customer accounted for 10.7% of the
Company's consolidated net revenues in fiscal 1999. For the six months ended
December 31, 1999, one customer accounted for 11% of the Company's consolidated
net revenues. No single customer accounted for more than 10% of the Company's
consolidated net revenues in the six months ended December 31, 1998.

F-23
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

ALL INFORMATION SUBSEQUENT TO JUNE 30, 1999 AND FOR THE

SIX MONTHS ENDED DECEMBER 31, 1998 AND 1999 IS UNAUDITED

6. INCOME TAXES

Income (loss) before income taxes and cumulative effect of accounting change
for the fiscal years ended June 30, 1997, 1998 and 1999 and six months ended
December 31, 1998 and 1999 is as follows (in thousands):

The provision (benefit) for income taxes for the fiscal years ended
June 30, 1997, 1998 and 1999, and for the periods ended December 31, 1998 and
1999, consists of (in thousands):

<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEARS ENDED JUNE 30, DECEMBER 31,
------------------------------ -------------------
1997 1998 1999 1998 1999
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Current income taxes:
Domestic...................................... $ (2,666) $(4,940) $ 680 $ 58 $ 318
Foreign....................................... 8,710 3,597 17,413 7,993 6,472
-------- ------- ------- ------- ------
6,044 (1,343) 18,093 8,051 6,790
-------- ------- ------- ------- ------
Deferred income taxes:
Domestic...................................... (16,312) 9,009 (3,515) (1,260) (802)
Foreign....................................... 784 448 (3,798) 3,712 800
-------- ------- ------- ------- ------
(15,528) 9,457 (7,313) 2,452 (2)
-------- ------- ------- ------- ------
Total provision (benefit)....................... $ (9,484) $ 8,114 $10,780 $10,503 $6,788
======== ======= ======= ======= ======
</TABLE>

Deferred taxes result primarily from temporary differences relating to
depreciation, financial statement reserves and state taxes.

F-24
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

ALL INFORMATION SUBSEQUENT TO JUNE 30, 1999 AND FOR THE

SIX MONTHS ENDED DECEMBER 31, 1998 AND 1999 IS UNAUDITED

6. INCOME TAXES (CONTINUED)
The Company's effective tax rate (benefit) on pretax income (loss) differs
from the U.S. Federal Statutory tax rate for the fiscal years ended June 30,
1997, 1998 and 1999 and six months ended December 31, 1998 and 1999 as follows:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEARS ENDED JUNE 30, DECEMBER 31,
------------------------------------ ----------------------
1997 1998 1999 1998 1999
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Statutory tax rate (benefit).................... (35.0)% 35.0% 35.0% 35.0% 35.0%
Change in valuation allowance................... -- 1.5 37.6 11.7 (7.6)
Foreign tax differential........................ 14.4 3.7 51.2 39.4 14.0
Foreign tax credit benefit...................... (1.7) (5.1) (48.4) (41.7) (10.1)
Research tax credit benefit..................... (0.4) (1.0) (42.1) (8.7) (4.8)
State taxes, net of federal tax benefit......... (0.6) (4.8) (7.6) (6.2) 1.2
Accrual without tax effect(1)................... 5.0 -- -- -- --
Deferred compensation........................... -- -- 7.0 5.9 --
Other, net...................................... 0.3 3.7 1.9 (0.8) 0.2
------ ----- ----- ----- -----
(18.0)% 33.0% 34.6% 34.6% 27.9%
====== ===== ===== ===== =====
</TABLE>

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

(1) Accrual without tax effect is the increase in tax liabilities for additional
income tax exposures resulting from worldwide tax audits.

The major components of the net deferred tax asset (liability) are as
follows (in thousands):

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
------------------- --------------
1998 1999 1999
-------- -------- --------------
<S> <C> <C> <C>
Deferred tax liabilities:
Depreciation........................................... $(51,833) $(48,651) $(48,826)
Effect of state taxes.................................. (1,907) (3,185) (2,946)
Other.................................................. (1,805) (1,370) (1,370)
-------- -------- --------
Total deferred tax liabilities......................... (55,545) (53,206) (53,142)
-------- -------- --------
Deferred tax assets:
Financial statement reserves........................... 4,041 5,348 5,334
Credit carryovers...................................... 22,600 67,386 69,282
Impairment of assets, restructuring and severance
charges.............................................. 16,158 17,941 16,141
Inventory adjustment................................... 1,044 571 (626)
Net operating loss carryovers.......................... 12,599 2,582 1,782
Other.................................................. 116 649 651
-------- -------- --------
Total deferred tax assets.............................. 56,558 94,477 92,564
-------- -------- --------
Valuation allowance...................................... (4,297) (31,812) (29,961)
-------- -------- --------
Net deferred tax asset (liability)....................... $ (3,284) $ 9,459 $ 9,461
======== ======== ========
</TABLE>

F-25
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

ALL INFORMATION SUBSEQUENT TO JUNE 30, 1999 AND FOR THE

SIX MONTHS ENDED DECEMBER 31, 1998 AND 1999 IS UNAUDITED

6. INCOME TAXES (CONTINUED)
The Company's federal net operating loss ("NOL") carryforwards of
$26,614,000 from fiscal 1998 will be fully utilized to offset taxable income in
fiscal 1999. In addition, at June 30, 1999, the Company has approximately
$16,188,000, $1,187,000 and $38,238,000, respectively, of foreign tax credits,
investment tax credits, and research and development tax credit carryforwards,
before valuation allowance, available to reduce income taxes otherwise payable,
which expire from 2000 to 2019. In addition, the Company has approximately
$3,497,000 of alternative minimum tax credits, which can be carried over
indefinitely to offset regular tax liablilities to the extent of the alternative
minimum tax, and a $8,276,000 state tax credit, before valuation allowance,
which expires from 2004 to 2007.

The Company's NOL carryforward benefits of $2,582,000 were generated from
the Company's United Kingdom subsidiary. The NOLs can generally be carried
forward indefinitely, with certain limitations.

Realization of deferred tax assets is dependent upon generating sufficient
taxable income. Management believes that there is a risk that certain deferred
tax assets may result in no benefit and, accordingly, has established a
valuation allowance of $31,812,000 against them at June 30, 1999. Although
realization is not assured for the remaining deferred tax assets, management
believes it is more likely than not that they will be realized through future
taxable earnings or alternative tax strategies.

The Internal Revenue Service is currently auditing the Company's income tax
returns for fiscal 1995 through 1997. Management believes that resolution of the
audit will not have a material impact on the Company's consolidated financial
position, results of operations or cash flows.

7. NET INCOME (LOSS) PER COMMON SHARE

The reconciliation of the numerator and denominator of the Net income (loss)
per common share--Basic and Diluted determined in accordance with SFAS No. 128
"Earnings per Share," was as

F-26
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

ALL INFORMATION SUBSEQUENT TO JUNE 30, 1999 AND FOR THE

SIX MONTHS ENDED DECEMBER 31, 1998 AND 1999 IS UNAUDITED

7. NET INCOME (LOSS) PER COMMON SHARE (CONTINUED)
follows for the years ended June 30, 1997, 1998 and 1999 and for the six months
ended December 31, 1998 and 1999 (in thousands except per share amounts):

<TABLE>
<CAPTION>
INCOME SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ---------
<S> <C> <C> <C>
Year ended June 30, 1997
Net loss per common share--Basic.......................... $(43,206) 51,307 $(0.84)
Effect of dilutive securities:
Stock options......................................... -- -- --
-------- ------ ------
Net loss per common share--Diluted........................ $(43,206) 51,307 $(0.84)
======== ====== ======
Year ended June 30, 1998
Net income per common share--Basic........................ $ 16,475 51,248 $ 0.32
Effect of dilutive securities:
Stock options......................................... -- 426 --
-------- ------ ------
Net income per common share--Diluted...................... $ 16,475 51,674 $ 0.32
======== ====== ======
Year ended June 30, 1999
Net loss per common share--Basic.......................... $ (5,778) 51,612 $(0.11)
Effect of dilutive securities:
Stock options......................................... -- 176 --
-------- ------ ------
Net loss per common share--Diluted........................ $ (5,778) 51,788 $(0.11)
======== ====== ======
Six months ended December 31, 1998 (restated):
Net loss per common share--Basic.......................... $ (6,326) 51,523 $(0.12)
Effect of dilutive securities:
Stock options......................................... -- 82 --
-------- ------ ------
Net loss per common share--Diluted........................ $ (6,326) 51,605 $(0.12)
======== ====== ======
Six months ended December 31, 1999:
Net income per common share--Basic........................ $ 17,513 51,974 $ 0.34
Effect of dilutive securities:
Stock options......................................... -- 1,620 (0.01)
-------- ------ ------
Net income per common share--Diluted...................... $ 17,513 53,594 $ 0.33
======== ====== ======
</TABLE>

8. PROFIT SHARING AND RETIREMENT PLANS

The Company previously had a defined contribution plan for all eligible
employees ("The Profit Sharing and Retirement Plan"). This plan provided for
contributions by the Company in such amounts as the Board of Directors
determined annually. Effective November 1, 1996, the Company elected to
terminate its Profit Sharing and Retirement Plan in order to focus on
improvements in its voluntary Retirement Savings Plan (401K). Employees and
former employees not fully vested at the time of the plan termination became
100% vested and were given various distribution options as defined by

F-27
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

ALL INFORMATION SUBSEQUENT TO JUNE 30, 1999 AND FOR THE

SIX MONTHS ENDED DECEMBER 31, 1998 AND 1999 IS UNAUDITED

8. PROFIT SHARING AND RETIREMENT PLANS (CONTINUED)
ERISA. Under the established Retirement Savings Plan (401K), the Company made an
annual contribution for each participating employee of up to $1,200 in fiscal
1997, 1998 and 1999. Combined plan contributions by the Company totaled
$1,365,000, $1,261,000 and $1,174,000 for fiscal 1997, 1998 and 1999,
respectively.

9. ENVIRONMENTAL MATTERS

Federal, state, and local laws and regulations impose various restrictions
and controls on the storage, use and discharge of certain materials, chemicals,
and gases used in semiconductor manufacturing processes. The Company does not
believe that compliance with such laws and regulations as now in effect will
have a material adverse effect on the Company's results of operations, financial
position or cash flows.

However, under some of these laws and regulations, the Company could be held
financially responsible for remedial measures if properties are contaminated, or
if waste is sent to a landfill or recycling facility that becomes contaminated.
Also, the Company may be subject to common law claims if it releases substances
that damage or harm third parties. The Company cannot make assurances that
changes in environmental laws and regulations will not require additional
investments in capital equipment and the implementation of additional compliance
programs in the future which could have a material adverse effect on the
Company's results of operations, financial position or cash flows, as could any
failure by the Company to comply with environmental laws and regulations.

The Company and Rachelle Laboratories, Inc. ("Rachelle"), a former operating
subsidiary of the Company that discontinued operations in 1986, were each named
a potentially responsible party ("PRP") in connection with the investigation by
the United States Environmental Protection Agency ("EPA") of the disposal of
allegedly hazardous substances at a major superfund site in Monterey Park,
California ("OII Site"). Certain PRPs who settled certain claims with the EPA
under consent decrees filed suit in Federal Court in May 1992 against a number
of other PRPs, including the Company, for cost recovery and contribution under
the provisions of the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"). The Company has settled all outstanding claims that
have arisen out of the OII Site. No claims against Rachelle have been settled.

The Company received a letter, directed to Rachelle, dated July 25, 1995,
from the U.S. Department of Justice offering to settle claims against Rachelle
relating to the first elements of clean-up work at the OII Site for $4,953,148
(the final remedy assessment has not yet been made). The offer stated that the
settlement would not cover the cost of any additional remedial actions required
to finish the clean-up. This settlement offer expired by its terms on
September 1, 1995. On August 7, 1995, the Company received a Supplemental
Information Request from the EPA directed to Rachelle, to which counsel for
Rachelle responded with information regarding waste shipped to the OII Site.
Counsel for Rachelle received a letter from the EPA dated September 30, 1997,
requesting that Rachelle participate in the final remedial actions at the site,
and counsel replied on October 21, 1997. The Company has taken the position that
none of the wastes generated by Rachelle were hazardous. Neither the Company nor
Rachelle, nor counsel for either of them, have received any further
communication in connection with Rachelle's involvement with the OII Site.

F-28
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

ALL INFORMATION SUBSEQUENT TO JUNE 30, 1999 AND FOR THE

SIX MONTHS ENDED DECEMBER 31, 1998 AND 1999 IS UNAUDITED

9. ENVIRONMENTAL MATTERS (CONTINUED)
The Company cannot determine with accuracy the amount of the potential
demand to Rachelle for the cost of the final remedy. Based upon information
received to date, the Company believes that any demand for the cost of the final
remedy would, if made, likely be significant, although it should be
substantially below the demand amount for earlier phases of the OII Site
clean-up. Any demands related to the costs for the final remedy would be in
addition to the amount demanded for earlier phases of the OII Site clean-up. The
Company's insurer has not accepted liability although it has made payments for
defense costs for the lawsuit against the Company.

The Company received a letter dated September 9, 1994, from the State of
California Department of Toxic Substances Control stating that it may be a PRP
for the deposit of hazardous substances at a facility in Whittier, California.
In June 1995, the Company joined a group of other PRPs to remove contamination
from the site. The group currently estimates the total cost of the clean-up to
be between $20 million and $25 million, although the actual cost could be much
higher. The Company estimated that it sent approximately 0.1% of the waste, by
weight, sent by all PRPs contributing to the clean-up of the site, and the
Company believes the cost of the clean-up will be roughly allocated among PRPs
by the amount of waste contributed. On July 31, 1999, the group proposed two
settlement offers to the Company: one for $34,165 and the second for $68,330.
The first settlement offer covers investigation and remediation of the site
itself and a small area extending beyond the site. The second settlement offer
covers this area plus all additional downgradient contamination. On
September 14, 1999, the Company accepted the $68,330 settlement offer, which
requires EPA acceptance, and made the required payment on September 28, 1999.
There can be no assurance, however, that the EPA will accept the settlement
offers or what the ultimate outcome of this matter will be. The Company believes
that, whatever the outcome, it will not have a material adverse effect on the
Company's financial condition, results of operations or cash flows.

10. COMMITMENTS

The future minimum lease commitments under non-cancelable capital and
operating leases of equipment and real property at June 30, 1999 are as follows
(in thousands):

<TABLE>
<CAPTION>
CAPITAL OPERATING TOTAL
FISCAL YEARS LEASES LEASES COMMITMENTS
- ------------ -------- --------- -----------
<S> <C> <C> <C>
2000......................................... $ 1,589 $2,554 $ 4,143
2001......................................... 1,488 1,966 3,454
2002......................................... 1,334 1,120 2,454
2003......................................... 1,136 902 2,038
2004......................................... 788 736 1,524
Later years.................................. -- 1,020 1,020
Less imputed interest........................ (1,037) -- (1,037)
------- ------ -------
Total minimum lease payments................. $ 5,298 $8,298 $13,596
======= ====== =======
</TABLE>

Total rental expense on all operating leases charged to income was
$8,552,000, $7,698,000 and $6,710,000 in fiscal 1997, 1998 and 1999,
respectively. For the six months ended December 31, 1998 and 1999, rental
expense on operating leases charged to income was $3,308,000 and $2,709,000,
respectively.

F-29
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

ALL INFORMATION SUBSEQUENT TO JUNE 30, 1999 AND FOR THE

SIX MONTHS ENDED DECEMBER 31, 1998 AND 1999 IS UNAUDITED

10. COMMITMENTS (CONTINUED)
The Company had outstanding purchase commitments for capital expenditures of
approximately $10.1 million at June 30, 1999 and approximately $18.8 million at
December 31, 1999.

11. INTELLECTUAL PROPERTY RIGHTS

Most of the Company's broadest power MOSFET patents were subject to, and
have successfully emerged from, reexamination by the United States Patent and
Trademark Office ("PTO"). The Company's 5,008,725 and 5,130,767 patents are
currently undergoing reexamination in the PTO. Recently, the PTO issued a
decision upholding the patentability of all the claims of the 5,008,725 patent.

12. OTHER INCOME (EXPENSE)

Other income was $53.5 million in fiscal 1999, compared to other expense of
$0.5 million in fiscal 1998 and other income of $0.7 million in fiscal 1997.
Fiscal 1999 other income primarily consisted of proceeds from license agreements
for prior periods and amounts in settlement of litigation for past patent
infringement (net of legal costs and the share of the Company's royalty proceeds
payable to Unitrode Corporation).

In December 1998, the Company entered into licensing agreements with two
competitors, Samsung Semiconductor, Inc. and Samsung Electronics Co., Ltd.,
(together "Samsung") and Fuji Electric Co., Ltd. ("Fuji"), with respect to the
Company's power MOSFET/IGBT patents. The respective agreements provide for
payments of royalties for prior periods. The agreement with Samsung also
provides for a paid-up license that expired in April 1999. The agreement with
Fuji provides for ongoing royalties on worldwide sales covered by the licensed
patents of the Company.

In March 1999, the Company entered into a licensing agreement with
Shindengen Electric Company. The agreement, effective as of January 1, 1999,
provided for payments of royalties for prior periods, as well as ongoing
royalties on worldwide sales covered by the licensed patents of the Company.

In June 1999, the Company entered into a licensing agreement with Rohm
Co., Ltd. The agreement provides for payments of royalties for prior periods, as
well as ongoing royalties on worldwide sales covered by the licensed patents of
the Company.

13. LITIGATION

On December 6, 1999, the Company filed suit in Federal District Court in Los
Angeles, California against Semiconductor Components Industries, LLC, dba ON
Semiconductor, alleging infringement of certain of the Company's U.S. patents.
The suit seeks damages and customary relief in such matters.

The Company, along with 87 other companies, was sued in Phoenix, Arizona
federal court on February 26, 1999, by the Lemelson Foundation for alleged
infringement of various Lemelson "machine-vision" and "auto ID" patents. In
July 1999, the Company entered into an agreement with the Lemelson Foundation
that settled all outstanding claims and grants the Company a license to use the
Lemelson patents asserted against the Company.

F-30
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

ALL INFORMATION SUBSEQUENT TO JUNE 30, 1999 AND FOR THE

SIX MONTHS ENDED DECEMBER 31, 1998 AND 1999 IS UNAUDITED

13. LITIGATION (CONTINUED)
The Company and certain of its directors and officers have been named as
defendants in three class action lawsuits filed in Federal District Court for
the Central District of California in 1991. These suits seek unspecified but
substantial compensatory and punitive damages for alleged intentional and
negligent misrepresentations and violations of the federal securities laws in
connection with the public offering of the Company's common stock completed in
April 1991 and the redemption and conversion in June 1991 of the Company's 9%
Convertible Subordinated Debentures due 2010. They also allege that the
Company's projections for growth in fiscal 1992 were materially misleading. Two
of these suits also named the Company's underwriters, Kidder, Peabody & Co.
Incorporated and Montgomery Securities, as defendants.

On March 31, 1997, the Court, on the Company and the individual defendants'
motion for summary judgment, issued the following orders: (a) the motion for
summary judgment was granted as to claims brought under Sections 11 and 12(2) of
the Securities Act of 1933; (b) the motion was denied as to claims brought under
Section 10(b) of the Securities Exchange Act of 1934 and the Securities and
Exchange Commission Rule 10b-5; and (c) the motion was granted as to the common
law claims for fraud and negligent misrepresentation to the extent said claims
are based on representations contained in the prospectuses and was denied in all
other respects. The Court also granted the summary judgment motion brought by
the underwriters. The plaintiffs' motion for reconsideration or certification of
an interlocutory appeal of these orders was denied.

On January 28, 1998, the Court decertified the class pursuing common law
claims for fraud and negligent misrepresentation and granted the defendants'
motion to narrow the shareholder class period to June 19, 1991 through
October 21, 1991. Plaintiffs' motion for reconsideration or certification of an
interlocutory appeal of these rulings was denied.

On June 14, 1999, the Court approved a notice of the pendency of the class
action and a proof of claim form for dissemination to class members. Such
dissemination took place in June 1999. Trial is scheduled for April 25, 2000.

Although the Company believes that the remaining claims alleged in the suits
are without merit, the ultimate outcome cannot be presently determined. A
substantial judgment or settlement, if any, could have a material adverse effect
on the Company's results of operations, financial position or cash flows. No
provision for any liability that may result upon adjudication of these matters
has been made in the Consolidated Financial Statements.

14. EXECUTIVE AGREEMENT

The Company entered into an executive agreement with Eric Lidow dated
May 15, 1991. The agreement set Mr. Lidow's annual salary at $500,000, granted
the Board discretion to increase his salary and to pay him bonuses, and
established a pension. Mr. Lidow's salary was increased in May 1992 to $550,000,
in August 1994 to $632,500 and in July 1999 to $670,450. Mr. Lidow was not
awarded a bonus in fiscal 1999. The agreement may be terminated by either party
upon 90 days written notice.

F-31
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

ALL INFORMATION SUBSEQUENT TO JUNE 30, 1999 AND FOR THE

SIX MONTHS ENDED DECEMBER 31, 1998 AND 1999 IS UNAUDITED

14. EXECUTIVE AGREEMENT (CONTINUED)

Under the agreement, prior to its amendment described below, Mr. Lidow would
have been entitled to begin receiving the pension payments when his employment
with the Company ceased for any reason (except termination for cause). The
pension would have been payable in annual installments, equal to the sum of 90%
of his then current salary and the average of his prior three years' cash
bonuses, if any. If Mr. Lidow's wife survived him, she would have received, for
the remainder of her life, annual payments in an amount equal to two-thirds of
the amount of the pension payment that would have been payable to Mr. Lidow.
Before the amendments to the agreement described below, if Mr. Lidow had retired
at fiscal 1998 year-end, the pension would have been equal to $821,250 per year
for the remainder of Mr. Lidow's life and $547,500 per year for the remainder of
Mrs. Lidow's life, if she had survived him. The Company had funded a trust to
cover its liability for the pension based on actuarial assumptions established
by PricewaterhouseCoopers LLP. However, the Company's actual liability for the
pension in ensuing years could have been more or less than the funding depending
upon whether actual events mirrored the actuarial assumptions.

In fiscal 1998, the Company's Compensation Committee and Mr. Lidow
renegotiated his executive agreement. The Compensation Committee then
recommended adoption of the renegotiated agreement by the Board, which the Board
approved. In taking these actions, the Compensation Committee and the Board
considered, among other things, their and Mr. Lidow's desire to limit the sale
of his shares of the Company's Common Stock to meet commitments and their
concerns about the uncertainty of the Company's liability for the pension. In
connection with the former consideration, the Company also made certain loans to
Mr. Lidow, which have since been repaid. See Note 15 in the Notes to the
Consolidated Financial Statements. The amendments to Mr. Lidow's agreement
canceled all of the Company's obligations with respect to the pension. As
consideration, the corpus of the trust of $8,096,663 was distributed to
Mr. Lidow in several installments, $1,500,000 and $6,596,663 in fiscal 1998 and
1999, respectively. Based on actuarial analysis, the consideration was less than
the amount needed to purchase the retirement benefit from a third party company.
Mr. Lidow and his wife are not entitled to receive any additional pension
payments under the agreement.

The funding of the pension had been expensed in prior years, and the lump
sum distribution did not trigger any further expense. Because Internal Revenue
Code Section 162(m) imposes certain restrictions on the deductibility of
non-performance based compensation in excess of $1,000,000, the Company was not
able to deduct any compensation in excess of $1,000,000 paid to Mr. Lidow in
fiscal 1998 and 1999.

15. RELATED PARTIES

In June 1998, after discussing with Eric Lidow his desire to limit his sale
of shares of IR Common Stock to meet commitments, the Board approved two
unsecured loans to him aggregating $1,200,000, with interest at the annual rate
of eight and one-half percent (8.5%). The first loan of $600,000 was made in
June 1998 and the second loan, also for $600,000, was made in July 1998. Both
loans were due December 31, 1998. Mr. Lidow repaid them with accrued interest of
$23,497 on September 23, 1998. Contemporaneously with the approval of the loans,
the Company amended his executive agreement. (See Note 14 in the Notes to the
Consolidated Financial Statements).

F-32
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

ALL INFORMATION SUBSEQUENT TO JUNE 30, 1999 AND FOR THE

SIX MONTHS ENDED DECEMBER 31, 1998 AND 1999 IS UNAUDITED

15. RELATED PARTIES (CONTINUED)
In May 1999, after considering the recommendation of the Chairman and Chief
Executive Officers, the Board determined that the Company should implement a
single CEO management structure. To effectuate this management change, the
Company entered into an agreement with Dr. Derek B. Lidow on May 10, 1999
("Agreement"), which provided for Dr. Lidow's resignation as Chief Executive
Officer and as an employee of the Company. Under the terms of the Agreement,
Dr. Lidow received a severance payment of $3,200,000 on June 15, 1999, a bonus
of $100,000 for fiscal 1999 performance on August 13, 1999 and a grant of
200,000 stock options on June 14, 1999, which were fully vested, and which
expire on June 13, 2009. The Agreement also provided for the immediate
acceleration of the vesting of all of Dr. Lidow's outstanding unvested stock
options and extended the period during which the options could be exercised.
Under the Agreement, Dr. Lidow will provide consulting services to the Company
for a period of two years for which he will be compensated $100,000 per quarter
plus associated expenses.

In connection with Dr. Derek B. Lidow's exercise of an option on June 23,
1999 to purchase 64,000 shares of the Common Stock of the Company, the Company
had an outstanding receivable from Dr. Lidow for $597,694 at June 30, 1999,
which was paid off on July 7, 1999.

During fiscal year 1999, the Company paid $310,160 to the Law Offices of
Janet K. Hart for legal and negotiation services rendered to the Company.
Ms. Hart is the wife of Dr. Alexander Lidow.

16. RESTATEMENT

As discussed in Note 1 in the Consolidated Financial Statements, Recent
Accounting Pronouncements section, in fiscal 1999 the Company reported a
non-cash, after-tax charge of $26.2 million associated with the early adoption
of SOP 98-5, a required change in accounting practices for certain start-up and
preoperating costs. Therefore, the six months ended December 31, 1998 have been
restated to reflect the above charge.

17. ACQUISITION

On January 28, 2000, the Company and Zing Technologies, Inc. ("Zing")
announced that the Company agreed to acquire all the outstanding shares of Zing
for a cash purchase price of $15.36 per share. Zing's wholly owned subsidiary
and sole operating business, Omnirel LLC, supplies power semiconductor modules
and components. The net cash purchase price (net of Zing Technologies, Inc.'s
cash) for the transaction is $28.5 million. Net sales for the Omnirel LLC
operating unit of Zing for the fiscal year ended June 30, 1999 were
approximately $25 million. The Company commenced a cash tender offer in February
and expects to complete the transaction in the quarter ended March 31, 2000.

F-33
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

ALL INFORMATION SUBSEQUENT TO JUNE 30, 1999 AND FOR THE

SIX MONTHS ENDED DECEMBER 31, 1998 AND 1999 IS UNAUDITED

18. QUARTERLY FINANCIAL DATA (UNAUDITED)

Summarized quarterly financial data is as follows (in thousands except per
share amounts):

<TABLE>
<CAPTION>
NET
INCOME (LOSS)
NET PER COMMON LOSS PER
INCOME SHARE-BASIC COMMON NET
(LOSS) AND DILUTED SHARE DUE INCOME
BEFORE BEFORE CUMULATIVE TO (LOSS)
CUMULATIVE CUMULATIVE EFFECT OF CUMULATIVE PER
EFFECT OF EFFECT OF ACCOUNTING EFFECT OF COMMON
GROSS ACCOUNTING ACCOUNTING CHANGE, NET ACCOUNTING NET INCOME SHARE-
REVENUES PROFIT CHANGE CHANGE OF TAX CHANGE (LOSS) DILUTED
-------- -------- ---------- ------------- ----------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FISCAL 1998
1st Quarter.......... $133,111 $44,951 $ 6,095 $ 0.12 -- -- $ 6,095 $ 0.12
2nd Quarter.......... 144,622 47,850 6,699 0.13 -- -- 6,699 0.13
3rd Quarter.......... 140,376 44,514 3,284 0.06 -- -- 3,284 0.06
4th Quarter.......... 133,782 38,849 397 0.01 -- -- 397 0.01
FISCAL 1999
1st Quarter.......... $127,493 $36,210 $ 34 $ 0.00 $(26,154) $(0.50) $(26,120) $(0.50)
2nd Quarter.......... 132,837 36,153 19,794 0.38 -- -- 19,794 0.38
3rd Quarter.......... 137,550 39,881 4,004 0.08 -- -- 4,004 0.08
4th Quarter.......... 147,491 39,748 (3,456) (0.07) -- -- (3,456) (0.07)
FISCAL 2000
1st Quarter.......... $152,239 $48,219 $ 5,129 $ 0.10 -- -- $ 5,129 $ 0.10
2nd Quarter.......... 171,098 58,202 12,384 0.23 -- -- 12,384 0.23
</TABLE>

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

The results, as noted above, for the first quarter in fiscal 1999 differ
from those previously reported on Form 10-Q for that quarter, due to the
adoption of SOP 98-5. No changes were made to the remaining fiscal 1999 quarters
due to immateriality.

F-34
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

8,000,000 SHARES

INTERNATIONAL RECTIFIER CORPORATION

COMMON STOCK

[LOGO]

------

P R O S P E C T U S

, 2000

---------

SALOMON SMITH BARNEY
J.P. MORGAN & CO.
BANC OF AMERICA SECURITIES LLC
GRUNTAL & CO., LLC

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The estimated expenses of the Company in connection with the issuance and
distribution of the shares of common stock being registered hereby are as
follows:

<TABLE>
<CAPTION>
AMOUNT
EXPENSES PAID
- -------- --------
<S> <C>
SEC Registration Fee........................................ $ 94,942
NYSE Fee.................................................... 31,000
PSE Fee..................................................... 7,500
Printing Expenses........................................... 150,000
Legal Fees and Expenses..................................... 100,000
Transfer Agent and Registrar Fees........................... 10,000
Accountants' Fees and Expenses.............................. 75,000
Blue Sky Fees and Expenses.................................. 5,000
Miscellaneous fees and expenses............................. 326,558*
--------
TOTAL....................................................... $800,000
--------
</TABLE>

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

* Includes certain expenses of the Selling Stockholder to be paid by the
Company.

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS

As permitted by Section 145 of the General Corporation Law of Delaware, our
bylaws provide for indemnification of our directors, employees and agents
against expenses (including attorneys' fees) and other amounts paid in
settlement actually and reasonably incurred by them in connection with any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the company), in which any such person was or is a party or is
threatened to be made a party. However, indemnification is only permitted if
(a) such person acted in good faith and in a manner such person reasonably
believed to be in or not opposed to our best interest and (b) with respect to
any criminal action or proceeding, if such person had no reasonable cause to
believe his conduct was unlawful. In the case of an action or suit by or in the
right of the company, we may not indemnify such person in respect of any claim,
issue or matter as to which he has been adjudged liable for negligence or
misconduct in the performance of his duty to us, unless and only to the extent
the court in which such action or suit was brought or the Court of Chancery
determines that such person is fairly and reasonably entitled to indemnity for
such expenses as such court may deem proper. In each case, indemnification will
be made only upon specific authorization of a majority of disinterested
directors, by written opinion of independent legal counsel or by the
stockholders, unless the director, officer, employee or agent has been
successful on the merits or otherwise in defense of any action or suit, in which
case he will be indemnified without such authorization. Our bylaws (a) require
us to pay the expenses incurred by a director or officer in defending or
investigating a threatened or pending action, suit or proceeding in advance of
the final disposition of such action, suit or proceeding upon our receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it is ultimately determined that he is not entitled to indemnification and
(b) permit us to advance such expenses to other of our employees and agents upon
such terms and conditions specified by our board of directors. The advancement
of expenses, as well as indemnification, pursuant to our bylaws, is not
exclusive of any other rights which those seeking indemnification or advancement
of expenses from us may have.

II-1
<PAGE>

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS (CONTINUED)

Our certificate of incorporation eliminates personal liability of our
directors to us or our stockholders for monetary damages for breach of fiduciary
duty as director, except for:

(a) any breach of the duty of loyalty to us or our stockholders;

(b) acts or omissions not in good faith or which involve intentional
misconduct or knowing violations of law;

(c) liability under Section 174 of the Delaware General Corporation Law
relating to unlawful dividends and stock repurchases; or

(d) any transaction from which the director derived an improper personal
benefit.

Our bylaws permit us to purchase and maintain insurance on behalf of our
directors, officers, employees or agents against liability asserted against such
person in any such capacity, whether or not we would have the power to indemnify
him or her against such liability under the provisions of our bylaws. However,
we maintain liability insurance providing coverage only with respect to claims
made against officers and directors as to which they are entitled to be
indemnified by us.

We have a policy of directors and officers liability insurance which insures
our directors and officers against the costs of defense, settlement or payment
of a judgment under specified circumstances.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

<TABLE>
<CAPTION>
EXHIBIT
NO. ITEM INCORPORATION BY REFERENCE
- --------------------- ----------------------------------------- -----------------------------------------
<C> <S> <C>
1 Form of Underwriting Agreement.
4 Amended and Restated Rights Agreement Form 10-K for Fiscal Year Ended June 30,
between International Rectifier 1999, Commission File No. 1-7935
Corporation and ChaseMellon Shareholder
Services, LLC, dated as of December 15,
1998
5 Opinion of O'Melveny & Myers LLP
regarding the securities
23(a) Consent of O'Melveny & Myers LLP
(included in their opinion filed as
Exhibit 5)
23(b) Consent of Independent Accountants
(PricewaterhouseCoopers LLP)
*24 Powers of Attorney (included on the
signature pages hereto)
</TABLE>

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

* Previously filed.

ITEM 17. UNDERTAKINGS

(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933 (the "Securities
Act") each filing of the Registrant's annual report pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in this
Registration Statement will be deemed to be a

II-2
<PAGE>
ITEM 17. UNDERTAKINGS (CONTINUED)
new registration statement relating to the securities offered therein, and the
offering of such securities at that time will be deemed to be the initial bona
fide offering thereof.

(h) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

(i) The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of Prospectus filed as part of
this Registration Statement in reliance upon II-2 Rule 430A and
contained in a form of Prospectus filed by the Registrant pursuant to
Rule 424(b)(1) or (4) or Rule 497(h) under the Securities Act shall
be deemed to be part of this Registration Statement as of the time it
was declared effective; and

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

II-3
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Amendment
No. 2 to the Registration Statement on Form S-3 to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of El Segundo, State of
California on the 7th day of March, 2000.

<TABLE>
<S> <C> <C>
INTERNATIONAL RECTIFIER CORPORATION

By: /s/ MICHAEL P. MCGEE
-----------------------------------------
Michael P. McGee
EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
</TABLE>

Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 2 to the Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <C> <S>
/s/ ERIC LIDOW* Chairman of the Board March 7, 2000
------------------------------------
Eric Lidow

/s/ ALEXANDER LIDOW* Director, Chief Executive Officer March 7, 2000
------------------------------------
Alexander Lidow

/s/ ROBERT J. MUELLER* Director, Executive Vice President March 7, 2000
------------------------------------
Robert J. Mueller

/s/ DEREK B. LIDOW* Director March 7, 2000
------------------------------------
Derek B. Lidow

/s/ GEORGE KRSEK* Director March 7, 2000
------------------------------------
George Krsek

/s/ JACK O. VANCE* Director March 7, 2000
------------------------------------
Jack O. Vance
</TABLE>

II-4
<PAGE>

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <C> <S>
/s/ ROCHUS E. VOGT* Director March 7, 2000
------------------------------------
Rochus E. Vogt

/s/ DONALD S. BURNS* Director March 7, 2000
------------------------------------
Donald S. Burns

/s/ JAMES D. PLUMMER* Director March 7, 2000
------------------------------------
James D. Plummer

/s/ MINORU MATSUDA* Director March 7, 2000
------------------------------------
Minoru Matsuda
</TABLE>

<TABLE>
<S> <C> <C> <C>
*By: /s/ MICHAEL P. MCGEE*
-------------------------------
Michael P. McGee
</TABLE>

II-5

<PAGE>

International Rectifier Corporation

8,000,000 Shares a/
Common Stock
($1.00 par value)

Underwriting Agreement

New York, New York
, 2000

Salomon Smith Barney Inc.
J.P. Morgan Securities Inc.
Banc of America Securities LLC
Gruntal & Co., LLC
As Representatives of the several Underwriters,
c/o Salomon Smith Barney Inc.
388 Greenwich Street
New York, New York 10013

Ladies and Gentlemen:

International Rectifier Corporation, a corporation organized under the laws
of Delaware (the "Company"), proposes to sell to the several underwriters named
in Schedule I hereto (the "Underwriters"), for whom you (the "Representatives")
are acting as representatives, 7,600,000 shares of Common Stock, $1.00 par value
("Common Stock") of the Company, and the person named in Schedule II hereto (the
"Selling Stockholder") proposes to sell to the several Underwriters 400,000
shares of Common Stock (said shares to be issued and sold by the Company and
shares to be sold by the Selling Stockholder collectively being hereinafter
called the "Underwritten Securities"). The Company also proposes to grant to the
Underwriters an option to purchase up to 1,200,000 additional shares of Common
Stock to cover over-allotments (the "Option Securities"; the Option Securities,
together with the Underwritten Securities, being hereinafter called the
"Securities"). To the extent there are no additional Underwriters listed on
Schedule I other than you, the term Representatives as used herein shall mean
you, as Underwriters, and the terms Representatives and Underwriters shall mean
either the singular or plural as the context requires. The use of the neuter in
this Agreement shall include the feminine and masculine wherever appropriate.
Any reference herein to the Registration Statement, a Preliminary Prospectus or
the Prospectus shall be deemed to refer to and include the documents
incorporated by reference therein pursuant to Item 12 of Form S-3 which were
filed under the Exchange Act on or before the Effective Date of the Registration
Statement or the issue date of such Preliminary Prospectus or the Prospectus, as
the case may be; and any reference herein to the terms "amend", "amendment" or
"supplement" with respect to the Registration Statement, any Preliminary
Prospectus or the Prospectus shall be deemed to refer to and include the filing
of any document under the Exchange Act after the Effective Date of the

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

a/ Plus an option to purchase from the Company up to 1,200,000 additional
shares of Common Stock to cover over-allotments.

<PAGE>
2

Registration Statement, or the issue date of any Preliminary Prospectus or the
Prospectus, as the case may be, deemed to be incorporated therein by reference.
Certain terms used herein are defined in Section 17 hereof.

1. REPRESENTATIONS AND WARRANTIES.

(i) The Company represents and warrants to, and agrees with, each
Underwriter as set forth below in this Section 1.

(a) The Company meets the requirements for use of Form S-3 under the
Act and has prepared and filed with the Commission a registration statement
(file number 333-30348) on Form S-3, including a related preliminary
prospectus, for registration under the Act of the offering and sale of the
Securities. The Company may have filed one or more amendments thereto,
including a related preliminary prospectus, each of which has previously
been furnished to you. The Company will next file with the Commission one
of the following: either (1) prior to the Effective Date of such
registration statement, a further amendment to such registration statement
(including the form of final prospectus) or (2) after the Effective Date of
such registration statement, a final prospectus in accordance with Rules
430A and 424(b). In the case of clause (2), the Company has included in
such registration statement, as amended at the Effective Date, all
information (other than Rule 430A Information) required by the Act and the
rules thereunder to be included in such registration statement and the
Prospectus. As filed, such amendment and form of final prospectus, or such
final prospectus, shall contain all Rule 430A Information, together with
all other such required information, and, except to the extent the
Representatives shall agree in writing to a modification, shall be in all
substantive respects in the form furnished to you prior to the Execution
Time or, to the extent not completed at the Execution Time, shall contain
only such specific additional information and other changes (beyond that
contained in the latest Preliminary Prospectus) as the Company has advised
you, prior to the Execution Time, will be included or made therein.

(b) On the Effective Date, the Registration Statement did or will,
and when the Prospectus is first filed (if required) in accordance with
Rule 424(b) and on the Closing Date (as defined herein) and on any date on
which Option Securities are purchased, if such date is not the Closing Date
(a "settlement date"), the Prospectus (and any supplements thereto) will,
comply in all material respects with the applicable requirements of the Act
and the Exchange Act and the respective rules thereunder; on the Effective
Date and at the Execution Time, the Registration Statement did not or will
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make
the statements therein not misleading; and, on the Effective Date, the
Prospectus, if not filed pursuant to Rule 424(b), will not, and on the date
of any filing pursuant to Rule 424(b) and on the Closing Date and any
settlement date, the Prospectus (together with any supplement thereto) will
not, include any untrue statement of a material fact or omit to state a
material fact

<PAGE>
3

necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; PROVIDED,
HOWEVER, that the Company makes no representations or warranties as to the
information contained in or omitted from the Registration Statement or the
Prospectus (or any supplement thereto) in reliance upon and in conformity
with information furnished in writing to the Company by or on behalf of any
Underwriter through the Representatives specifically for inclusion in the
Registration Statement or the Prospectus (or any supplement thereto).

(c) Each of the Company and its subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction in which it is chartered or organized
with full corporate power and authority to own or lease, as the case may
be, and to operate its properties and conduct its business as described in
the Prospectus, and is duly qualified to do business as a foreign
corporation and is in good standing under the laws of each jurisdiction
which requires such qualification (except where the failure to be so
qualified and in good standing, considering all such cases in the
aggregate, are not reasonably likely to result in a material adverse effect
on the condition (financial or other), business, prospects, properties,
stockholders' equity or results of operations of the Company and its
subsidiaries taken as a whole (a "Material Adverse Effect")).

(d) All the outstanding shares of capital stock of each subsidiary
have been duly and validly authorized and issued and are fully paid and
nonassessable, and, except as otherwise set forth in the Prospectus, all
outstanding shares of capital stock of the subsidiaries, other than Xi'an
IR-Peri Company, Ltd., International Rectifier - Weiguang Company, Ltd.
and Zing Technology, Inc., are owned or controlled by the Company either
directly or through wholly owned subsidiaries free and clear of any
perfected security interest or any other security interests, claims, liens
or encumbrances, except as provided in the Credit Agreement, dated as of
July 1, 1999, among the Company, the initial lenders named therein, and
Sanwa Bank California and Banque Nationale de Paris and related
transaction documents (the "Credit Agreement").

(e) The Company's authorized equity capitalization is as set forth in
the Prospectus; the capital stock of the Company conforms in all material
respects to the description thereof contained in the Prospectus; the
outstanding shares of Common Stock (including the Securities being sold
hereunder by the Selling Stockholder) have been duly and validly authorized
and issued and are fully paid and nonassessable; the Securities being sold
hereunder by the Company have been duly and validly authorized, and, when
issued and delivered to and paid for by the Underwriters pursuant to this
Agreement, will be fully paid and nonassessable; the certificates for the
Securities are in valid and sufficient form; the holders of outstanding
shares of capital stock of the Company are not entitled to preemptive or
other rights to subscribe for the Securities; and, except as set forth in
the Prospectus, no options, warrants or other rights to purchase,
agreements or other obligations to issue, or rights to convert any
obligations into or exchange any securities for, shares of capital stock of
or ownership interests in the Company are outstanding, as of the dates or
dates noted therein.

<PAGE>
4

(f) There is no franchise, contract or other document of a character
required to be filed as an exhibit to the Registration Statement which is
not filed as required.

(g) This Agreement has been duly authorized, executed and delivered
by the Company.

(h) The Company is not and, after giving effect to the offering and
sale of the Securities and the application of the proceeds thereof as
described in the Prospectus, will not be an "investment company" as defined
in the Investment Company Act of 1940, as amended.

(i) No consent, approval, authorization, filing with or order of any
court or governmental agency or body is required in connection with the
transactions contemplated herein, except such as have been obtained under
the Act and such as may be required under the securities or blue sky laws
of any jurisdiction in connection with the purchase and distribution of the
Securities by the Underwriters in the manner contemplated herein and in the
Prospectus.

(j) Neither the issue and sale of the Securities nor the consummation
of any other of the transactions herein contemplated nor the fulfillment of
the terms hereof will result in a breach or violation or imposition of any
lien, charge or encumbrance upon any property or assets of the Company or
any of its subsidiaries pursuant to, (i) the charter or by-laws of the
Company or any of its subsidiaries, (ii) the terms of any indenture,
contract, lease, mortgage, deed of trust, note agreement, loan agreement or
other agreement, obligation, condition, covenant or instrument to which the
Company or any of its subsidiaries is a party or bound or to which its or
their property is subject, or (iii) any statute, law, rule, regulation,
judgment, order or decree applicable to the Company or any of its
subsidiaries of any court, regulatory body, administrative agency,
governmental body, arbitrator or other authority having jurisdiction over
the Company or any of its subsidiaries or any of its or their properties.

(k) No holders of securities of the Company have rights to the
registration of such securities under the Registration Statement.

(l) The consolidated historical financial statements and schedules of
the Company and its consolidated subsidiaries included in the Prospectus
and the Registration Statement present fairly in all material respects the
financial condition, results of operations and cash flows of the Company as
of the dates and for the periods indicated, comply as to form with the
applicable accounting requirements of the Act and have been prepared in
conformity with generally accepted accounting principles applied on a
consistent basis throughout the periods involved (except as otherwise noted
therein).

(m) No action, suit or proceeding by or before any court or
governmental

<PAGE>
5

agency, authority or body or any arbitrator involving the Company or any of
its subsidiaries or its or their property is pending or, to the best
knowledge of the Company, threatened that (i) could reasonably be expected
to have a Material Adverse Effect on the performance of this Agreement or
the consummation of any of the transactions contemplated hereby or (ii)
could reasonably be expected to have a Material Adverse Effect, whether or
not arising from transactions in the ordinary course of business, except as
set forth in or contemplated in the Prospectus (exclusive of any supplement
thereto).

(n) Each of the Company and each of its subsidiaries owns or leases
all such properties as are necessary to the conduct of its operations as
presently conducted.

(o) Neither the Company nor any subsidiary is in violation or default
of (i) any provision of its charter or bylaws, (ii) the terms of any
indenture, contract, lease, mortgage, deed of trust, note agreement, loan
agreement or other agreement, obligation, condition, covenant or instrument
to which it is a party or bound or to which its property is subject, or
(iii) any statute, law, rule, regulation, judgment, order or decree of any
court, regulatory body, administrative agency, governmental body,
arbitrator or other authority having jurisdiction over the Company or such
subsidiary or any of its properties, as applicable, in each case except
where such violation or breach, individually or in the aggregate, would not
have a Material Adverse Effect.

(p) PricewaterhouseCoopers LLP, who have certified certain financial
statements of the Company and its consolidated subsidiaries and delivered
their report with respect to the audited consolidated financial statements
and schedules included or incorporated by reference in the Prospectus, are
independent public accountants with respect to the Company within the
meaning of the Act and the applicable published rules and regulations
thereunder.

(q) There are no transfer taxes or other similar fees or charges
under Federal law or the laws of California, New York or Delaware, or any
political subdivision thereof, required to be paid in connection with the
execution and delivery of this Agreement or the issuance by the Company or
sale by the Company of the Securities.

(r) The Company has filed all foreign, federal, state and local tax
returns that are required to be filed or has requested extensions thereof
(except in any case in which the failure so to file would not have a
Material Adverse Effect, whether or not arising from transactions in the
ordinary course of business, except as set forth in or contemplated in the
Prospectus (exclusive of any supplement thereto)) and has paid all taxes
required to be paid by it and any other assessment, fine or penalty levied
against it, to the extent that any of the foregoing is due and payable,
except for any such assessment, fine or penalty that is currently being
contested in good faith or as would not have a Material Adverse Effect,
whether

<PAGE>
6

or not arising from transactions in the ordinary course of business, except
as set forth in or contemplated in the Prospectus (exclusive of any
supplement thereto).

(s) No labor problem or dispute with the employees of the Company or
any of its subsidiaries exists or is threatened or imminent, and the
Company is not aware of any existing or imminent labor disturbance by the
employees of any of its or its subsidiaries' principal suppliers,
contractors or customers, in each case that could have a Material Adverse
Effect, whether or not arising from transactions in the ordinary course of
business, except as set forth in or contemplated in the Prospectus
(exclusive of any supplement thereto).

(t) The Company and each of its subsidiaries carry, or are covered
by, insurance in such amounts and covering such risks as is adequate for
the conduct of their respective businesses and the value of their
respective properties and as is customary for companies engaged in similar
businesses in similar industries.

(u) No subsidiary of the Company is currently prohibited, directly or
indirectly, from paying any dividends to the Company, from making any other
distribution on such subsidiary's capital stock, from repaying to the
Company any loans or advances to such subsidiary from the Company or from
transferring any of such subsidiary's property or assets to the Company or
any other subsidiary of the Company, except as described in or contemplated
by the Prospectus, as provided in the Credit Agreement or as limited
by applicable corporate law.

(v) The Company and its subsidiaries possess all licenses,
certificates, permits and other authorizations issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct their
respective businesses, and neither the Company nor any such subsidiary has
received any notice of proceedings relating to the revocation or
modification of any such certificate, authorization or permit which, singly
or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, would have a Material Adverse Effect, whether or not arising from
transactions in the ordinary course of business, except as set forth in or
contemplated in the Prospectus (exclusive of any supplement thereto).

(w) The Company and each of its subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurance
that (i) transactions are executed in accordance with management's general
or specific authorizations; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability; (iii)
access to assets is permitted only in accordance with management's general
or specific authorization; and (iv) the recorded accountability for assets
is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.

(x) The Company has not taken, directly or indirectly, any action
that has

<PAGE>
7

constituted or that was designed to or might reasonably be expected to
cause or result in, under the Exchange Act or otherwise, the stabilization
or manipulation of the price of any security of the Company to facilitate
the sale or resale of the Securities.

(y) The Company and its subsidiaries are (i) in compliance with any
and all applicable foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants
("Environmental Laws"), (ii) have received and are in compliance with all
permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii) have
not received notice of any actual or potential liability for the
investigation or remediation of any disposal or release of hazardous or
toxic substances or wastes, pollutants or contaminants, except where such
non-compliance with Environmental Laws, failure to receive required
permits, licenses or other approvals, or liability would not, individually
or in the aggregate, have a Material Adverse Effect, whether or not arising
from transactions in the ordinary course of business, except as set forth
in or contemplated in the Prospectus (exclusive of any supplement thereto).
Except as set forth in the Prospectus, to the Company's best knowledge,
neither the Company nor any of the subsidiaries is named as a "potentially
responsible party" under the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended.

(z) Each of the Company and its subsidiaries has fulfilled its
obligations, if any, under the minimum funding standards of Section 302 of
the United States Employee Retirement Income Security Act of 1974 ("ERISA")
and the regulations and published interpretations thereunder with respect
to each "plan" (as defined in Section 3(3) of ERISA and such regulations
and published interpretations) in which employees of the Company and its
subsidiaries are eligible to participate and each such plan is in
compliance in all material respects with the presently applicable
provisions of ERISA and such regulations and published interpretations. The
Company and its subsidiaries have not incurred any unpaid liability to the
Pension Benefit Guaranty Corporation (other than for the payment of
premiums in the ordinary course) or to any such plan under Title IV of
ERISA.

(aa) The Company has no subsidiaries that are significant subsidiaries
defined by Rule 1-02 of Regulation S-X, other than International
Rectifier Southeast Asia Plc., Ltd. and International Rectifier Company
(Great Britain ) Ltd.

(bb) The Company and its subsidiaries own, possess, license or have
other rights to use, on reasonable terms, all patents, patent applications,
trade and service marks, trade and service mark registrations, trade names,
copyrights, licenses, inventions, trade secrets, technology, know-how and
other intellectual property (collectively, the "Intellectual Property")
necessary for the conduct of the Company's business as now conducted or as
proposed in the Prospectus to be

<PAGE>
8

conducted. Except as set forth in the Prospectus, to the Company's best
knowledge: there is no pending or threatened action, suit, proceeding or
claim by others challenging the Company's rights in or to any such
Intellectual Property; there is no pending or threatened action, suit,
proceeding or claim by others challenging the validity or scope of any such
Intellectual Property; there is no pending or threatened action, suit,
proceeding or claim by others that the Company infringes or otherwise
violates any patent, trademark, copyright, trade secret or other
proprietary rights of others; there is no U.S. patent or published U.S.
patent application which contains claims that dominate or may dominate any
Intellectual Property described in the Prospectus as being owned by or
licensed to the Company or that interferes with the issued or pending
claims of any such Intellectual Property; and there is no prior art that
may render any U.S. patent held by the Company invalid or any U.S. patent
application held by the Company unpatentable which has not been disclosed
to the U.S. Patent and Trademark Office; in each case that, individually or
in the aggregate, would have a Material Adverse Effect.

(cc) The statements contained in the Prospectus under the captions
"Risk Factors Our intellectual property is one of our principal assets.
Protecting this asset may be costly and uncertain." and "Business -
Intellectual Property," insofar as such statements summarize legal matters,
agreements, documents, or proceedings discussed therein, are accurate and
fair summaries of such legal matters, agreements, documents or proceedings.

Any certificate signed by any officer of the Company and delivered
to the Representatives or counsel for the Underwriters in connection with
the offering of the Securities shall be deemed a representation and
warranty by the Company, as to matters covered thereby, to each
Underwriter.

(ii) the Selling Stockholder represents and warrants to, and agrees
with, each Underwriter that:

(a) The Selling Stockholder is the record and beneficial owner of the
Securities to be sold by it hereunder free and clear of all liens,
encumbrances, equities and claims and has duly endorsed such Securities in
blank, and, assuming that each Underwriter acquires its interest in the
Securities it has purchased from the Selling Stockholder without notice of
any adverse claim (within the meaning of Section 8-105 of the New York
Uniform Commercial Code ("UCC")), each Underwriter that has purchased such
Securities delivered on the Closing Date to The Depository Trust Company or
other securities intermediary by making payment therefor as provided
herein, and that has had such Securities credited to the securities account
or accounts of such Underwriters maintained with The Depository Trust
Company or such other securities intermediary will have acquired such
Securities free and clear of any adverse claim (within the meaning of
Section 8-105 of the UCC).

<PAGE>
9

(b) The Selling Stockholder has not taken, directly or indirectly,
any action designed to or which has constituted or which might reasonably
be expected to cause or result, under the Exchange Act or otherwise, in
stabilization or manipulation of the price of any security of the Company
to facilitate the sale or resale of the Securities.

(c) Certificates in negotiable form for the Selling Stockholder's
Securities have been placed in custody, for delivery pursuant to the terms
of this Agreement, under a Custody Agreement and Power of Attorney duly
executed and delivered by the Selling Stockholder, in the form heretofore
furnished to you (the "Custody Agreement") with the Company, as Custodian
(the "Custodian"); and the Securities represented by the certificates so
held in custody for the Selling Stockholder are subject to the interests
hereunder of the Underwriters.

(d) No consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation by the Selling
Stockholder of the transactions contemplated herein, except such as may
have been obtained under the Act and such as may be required under the
securities or blue sky laws of any jurisdiction in connection with the
purchase and distribution of the Securities by the Underwriters and such
other approvals as have been obtained.

(e) Neither the sale of the Securities being sold by the Selling
Stockholder nor the consummation of any other of the transactions herein
contemplated by the Selling Stockholder or the fulfillment of the terms
hereof by the Selling Stockholder will result in a breach or violation of,
or constitute a default under any law or the terms of any indenture or
other agreement or instrument to which the Selling Stockholder is a party
or bound, or any judgment, order or decree applicable to the Selling
Stockholder of any court, regulatory body, administrative agency,
governmental body or arbitrator having jurisdiction over the Selling
Stockholder.

(f) The Selling Stockholder has no reason to believe that the
representations and warranties of the Company contained in this Section 1
are not true and correct, is familiar with the Registration Statement and
has no knowledge of any material fact, condition or information not
disclosed in the Prospectus or any supplement thereto which has adversely
affected or is reasonably expected to adversely affect the business of the
Company or any of its subsidiaries; and the sale of Securities by the
Selling Stockholder pursuant hereto is not prompted by any information
concerning the Company or any of its subsidiaries which is not set forth in
the Prospectus or any supplement thereto.

Any certificate signed by the Selling Stockholder and delivered to
the Representatives or counsel for the Underwriters in connection with the
offering of the Securities shall be deemed a representation and warranty by
the Selling Stockholder, as to matters covered thereby, to each
Underwriter.

<PAGE>
10

2. PURCHASE AND SALE. (a) Subject to the terms and conditions and in
reliance upon the representations and warranties herein set forth, the
Company and the Selling Stockholder agree, severally and not jointly, to
sell to each Underwriter, and each Underwriter agrees, severally and not
jointly, to purchase from the Company and the Selling Stockholder, at a
purchase price of $ per share, the amount of the Underwritten
Securities set forth opposite such Underwriter's name in Schedule I
hereto.

(b) Subject to the terms and conditions and in reliance upon the
representations and warranties herein set forth, the Company hereby grants
an option to the several Underwriters to purchase, severally and not
jointly, up to 1,200,000 Option Securities at the same purchase price per
share as the Underwriters shall pay for the Underwritten Securities. Said
option may be exercised only to cover over-allotments in the sale of the
Underwritten Securities by the Underwriters. Said option may be exercised
in whole or in part at any time (but not more than once) on or before the
30th day after the date of the Prospectus upon written or telegraphic
notice by the Representatives to the Company setting forth the number of
shares of the Option Securities as to which the several Underwriters are
exercising the option and the settlement date. The number of Option
Securities to be purchased by each Underwriter shall be the same percentage
of the total number of shares of the Option Securities to be purchased by
the several Underwriters as such Underwriter is purchasing of the
Underwritten Securities, subject to such adjustments as you in your
absolute discretion shall make to eliminate any fractional shares.

3. DELIVERY AND PAYMENT. Delivery of and payment for the
Underwritten Securities and the Option Securities (if the option provided
for in Section 2(b) hereof shall have been exercised on or before the
third Business Day prior to the Closing Date) shall be made at 10:00 AM,
New York City time, on , 2000, or at such time on such later
date not more than three Business Days after the foregoing date as the
Representatives shall designate, which date and time may be postponed by
agreement among the Representatives, the Company and the Selling
Stockholder or as provided in Section 9 hereof (such date and time of
delivery and payment for the Securities being herein called the "Closing
Date"). Delivery of the Securities shall be made to the Representatives
for the respective accounts of the several Underwriters against payment
by the several Underwriters through the Representatives of the respective
aggregate purchase prices of the Securities being sold by the Company and
the Selling Stockholder to or upon the order of the Company and the
Selling Stockholder by wire transfer payable in same-day funds to the
accounts specified by the Company and the Selling Stockholder. Delivery
of the Underwritten Securities and the Option Securities shall be made
through the facilities of The Depository Trust Company unless the
Representatives shall otherwise instruct.

The Selling Stockholder will pay all applicable state transfer
taxes, if any, involved in the transfer to the several Underwriters of the
Securities to be purchased by them from the Selling Stockholder and the
respective Underwriters will pay any additional stock transfer taxes
involved in further transfers.

<PAGE>
11

If the option provided for in Section 2(b) hereof is exercised after
the third Business Day prior to the Closing Date, the Company will deliver
the Option Securities (at the expense of the Company) to the
Representatives, through the facilities of The Depositary Trust Company
unless the Representatives shall otherwise instruct, on the date specified
by the Representatives (which shall be on the third Business Day after
exercise of said option) for the respective accounts of the several
Underwriters, against payment by the several Underwriters through the
Representatives of the purchase price thereof to or upon the order of the
Company by wire transfer payable in same-day funds to the accounts
specified by the Company. If settlement for the Option Securities occurs
after the Closing Date, the Company will deliver to the Representatives on
the settlement date for the Option Securities, and the obligation of the
Underwriters to purchase the Option Securities shall be conditioned upon
receipt of, supplemental opinions, certificates and letters confirming as
of such date the opinions, certificates and letters delivered on the
Closing Date pursuant to Section 6 hereof.

4. OFFERING BY UNDERWRITERS. It is understood that the several
Underwriters propose to offer the Securities for sale to the public as set
forth in the Prospectus.

5. AGREEMENTS.

(i) The Company agrees with the several Underwriters that:

(a) The Company will use its reasonable best efforts to cause the
Registration Statement, if not effective at the Execution Time, and any
amendment thereof, to become effective. Prior to the termination of the
offering of the Securities, the Company will not file any amendment of the
Registration Statement or supplement to the Prospectus or any Rule 462(b)
Registration Statement unless the Company has furnished you a copy for your
review prior to filing and will not file any such proposed amendment or
supplement to which you reasonably object. Subject to the foregoing
sentence, if the Registration Statement has become or becomes effective
pursuant to Rule 430A, or filing of the Prospectus is otherwise required
under Rule 424(b), the Company will cause the Prospectus, properly
completed, and any supplement thereto to be filed with the Commission
pursuant to the applicable paragraph of Rule 424(b) within the time period
prescribed and will provide evidence satisfactory to the Representatives of
such timely filing. The Company will promptly advise the Representatives
(1) when the Registration Statement, if not effective at the Execution
Time, shall have become effective, (2) when the Prospectus, and any
supplement thereto, shall have been filed (if required) with the Commission
pursuant to Rule 424(b) or when any Rule 462(b) Registration Statement
shall have been filed with the Commission, (3) when, prior to termination
of the offering of the Securities, any amendment to the Registration
Statement shall have been filed or become effective, (4) of any request by
the Commission or its staff for any amendment of the Registration
Statement, or any Rule 462(b) Registration Statement, or for any supplement
to the Prospectus or for any additional

<PAGE>
12

information, (5) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the
institution or threatening of any proceeding for that purpose and (6) of
the receipt by the Company of any notification with respect to the
suspension of the qualification of the Securities for sale in any
jurisdiction or the institution or threatening of any proceeding for such
purpose. The Company will use its reasonable best efforts to prevent the
issuance of any such stop order or the suspension of any such qualification
and, if issued, to obtain as soon as possible the withdrawal thereof.

(b) If, at any time when a prospectus relating to the Securities is
required to be delivered under the Act, any event occurs as a result of
which the Prospectus as then supplemented would include any untrue
statement of a material fact or omit to state any material fact necessary
to make the statements therein in the light of the circumstances under
which they were made not misleading, or if it shall be necessary to amend
the Registration Statement or supplement the Prospectus to comply with the
Act or the Exchange Act or the respective rules thereunder, the Company
promptly will (1) notify the Representatives of such event, (2) prepare and
file with the Commission, subject to the second sentence of paragraph
(i)(a) of this Section 5, an amendment or supplement which will correct
such statement or omission or effect such compliance and (3) supply any
supplemented Prospectus to you in such quantities as you may reasonably
request.

(c) As soon as practicable, the Company will make generally available
to its security holders and to the Representatives an earnings statement or
statements of the Company and its subsidiaries which will satisfy the
provisions of Section 11(a) of the Act and Rule 158 under the Act.

(d) The Company will furnish to the Representatives and counsel for
the Underwriters, without charge, one signed copy of the Registration
Statement (including exhibits thereto) and to each other Underwriter a copy
of the Registration Statement (without exhibits thereto) and, so long as
delivery of a prospectus by an Underwriter or dealer may be required by the
Act, as many copies of each Preliminary Prospectus and the Prospectus and
any supplement thereto as the Representatives may reasonably request. The
Company will pay the expenses of printing or other production of all
documents relating to the offering.

(e) The Company will arrange, if necessary, for the qualification of
the Securities for sale under the laws of such jurisdictions as the
Representatives may designate, will maintain such qualifications in effect
so long as required for the distribution of the Securities and will pay any
fee of the National Association of Securities Dealers, Inc., in connection
with its review of the offering; provided that in no event shall the
Company be obligated to qualify to do business in any jurisdiction where it
is not now so qualified or to take any action that would subject it to
service of process in suits, other than those arising out of the offering
or sale of the Securities, in any jurisdiction where it is not now so
subject.

<PAGE>
13

(f) The Company will not, without the prior written consent of
Salomon Smith Barney Inc., offer, sell, contract to sell, pledge, or
otherwise dispose of, (or enter into any transaction which is designed to,
or might reasonably be expected to, result in the disposition (whether by
actual disposition or effective economic disposition due to cash settlement
or otherwise) by the Company), directly or indirectly, including the filing
(or participation in the filing) of a registration statement with the
Commission in respect of, or establish or increase a put equivalent
position or liquidate or decrease a call equivalent position within the
meaning of Section 16 of the Exchange Act, any other shares of Common Stock
or any securities convertible into, or exercisable, or exchangeable for,
shares of Common Stock; or publicly announce an intention to effect any
such transaction, for a period of 90 days after the date of the
Underwriting Agreement, provided, however, that the Company may grant
options and issue and sell Common Stock pursuant to any employee stock
option plan, stock ownership plan or dividend reinvestment plan of the
Company in effect at the Execution Time and the Company may issue Common
Stock issuable upon the conversion of securities or the exercise of
warrants outstanding at the Execution Time.

(g) The Company will not take, directly or indirectly, any action
designed to or which has constituted or which might reasonably be expected
to cause or result, under the Exchange Act or otherwise, in stabilization
or manipulation of the price of any security of the Company to facilitate
the sale or resale of the Securities.

(ii) The Selling Stockholder agrees with the several Underwriters
that:

(a) The Selling Stockholder will not, without the prior written
consent of Salomon Smith Barney, offer, sell, contract to sell, pledge or
otherwise dispose of, (or enter into any transaction which is designed to,
or might reasonably be expected to, result in the disposition (whether by
actual disposition or effective economic disposition due to cash settlement
or otherwise)), directly or indirectly, or participate in the filing of a
registration statement with the Commission in respect of, or establish or
increase a put equivalent position or liquidate or decrease a call
equivalent position within the meaning of Section 16 of the Exchange Act
with respect to, any shares of capital stock of the Company or any
securities convertible into or exercisable or exchangeable for such capital
stock, or publicly announce an intention to effect any such transaction,
for a period of 90 days after the date of this Agreement, other than shares
of Common Stock disposed of as bona fide gifts approved by Salomon Smith
Barney Inc..

(b) The Selling Stockholder will not take any action designed to or
which has constituted or which might reasonably be expected to cause or
result, under the Exchange Act or otherwise, in stabilization or
manipulation of the price of any security of the Company to facilitate the
sale or resale of the Securities.

<PAGE>
14

you, will confirm such advice in writing, so long as delivery of a
prospectus relating to the Securities by an underwriter or dealer may be
required under the Act, of any change in information in the Registration
Statement or the Prospectus relating to the Selling Stockholder.

6. CONDITIONS TO THE OBLIGATIONS OF THE UNDERWRITERS. The
obligations of the Underwriters to purchase the Underwritten Securities and the
Option Securities, as the case may be, shall be subject to the accuracy of the
representations and warranties on the part of the Company and the Selling
Stockholder contained herein as of the Execution Time, the Closing Date and any
settlement date pursuant to Section 3 hereof, to the accuracy of the statements
of the Company and the Selling Stockholder made in any certificates pursuant to
the provisions hereof, to the performance by the Company and the Selling
Stockholder of their respective obligations hereunder and to the following
additional conditions:

(a) If the Registration Statement has not become effective prior to
the Execution Time, unless the Representatives agree in writing to a later
time, the Registration Statement will become effective not later than (i)
6:00 PM New York City time on the date of determination of the public
offering price, if such determination occurred at or prior to 3:00 PM New
York City time on such date or (ii) 9:30 AM on the Business Day following
the day on which the public offering price was determined, if such
determination occurred after 3:00 PM New York City time on such date; if
filing of the Prospectus, or any supplement thereto, is required pursuant
to Rule 424(b), the Prospectus, and any such supplement, will be filed in
the manner and within the time period required by Rule 424(b); and no stop
order suspending the effectiveness of the Registration Statement shall have
been issued and no proceedings for that purpose shall have been instituted
or threatened.

(b) The Company shall have requested and O'Melveny & Myers LLP,
counsel for the Company, shall have furnished to the Representatives their
opinion, dated the Closing Date and addressed to the Representatives, to
the effect that:

(i) the authorized capital stock of the Company is as set forth
in the Prospectus; the Securities being sold by the Company have been
duly authorized by all necessary corporate action on the part of the
Company, and upon payment for and delivery of such Securities in
accordance with this Agreement and the book-entry of such Securities
by the transfer agent for the Company's Common Stock in the name of
The Depository Trust Company or its nominee, such Securities will be
validly issued, fully paid and non-assessable; no personal liability
for the debts of the Company will be imposed on any holder of such
Securities under the laws of the State of Delaware or the State of
California solely as a result of the ownership of such Securities; and
the holders of the capital stock of the Company are not entitled to
any preemptive rights to subscribe to any additional shares

<PAGE>
15

of the Company's capital stock under the Company's Certificate of
Incorporation or Bylaws or the corporate law of the State of Delaware;

(ii) except for matters described in the Prospectus, such counsel
has not, since January 1, 1999, given substantive attention on behalf
of the Company or any of its subsidiaries to, or represented the
Company or any of its subsidiaries in connection with, any actions,
suits or proceedings pending or threatened against the Company or any
of its subsidiaries before any court, arbitrator or governmental
agency which seek to affect the enforceability of this Agreement or
seek damages in excess of $50,000;

(iii) such counsel does not know of any contract or other
document of a character required to be filed as an exhibit to the
Registration Statement which is not filed as required;

(iv) the Registration Statement has been declared effective under
the Act and, to such counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement has been issued or
threatened by the Commission, and the Prospectus has been filed
pursuant to Rule 424(b) within the time period required by Rule
424(b);

(v) the Registration Statement, on the date it was filed,
appeared on its face to comply in all material respects with the
requirements as to form for registration statements on Form S-3 under
the Act and the related rules and regulations in effect at the date of
filing, except that such counsel need express no opinion concerning
the financial statements and other financial information contained or
incorporated by reference therein;

(vi) the documents incorporated by reference in the Prospectus,
on the respective dates they were filed, appeared on their face to
comply in all material respects with the requirements as to form for
reports on Form 10-K, Form 10-Q and Form 8-K, as the case may be,
under the Exchange Act and the related rules and regulations in effect
at the respective dates of their filing, except that such counsel need
express no opinion concerning the financial statements and other
financial information contained or incorporated by reference therein;

(vii) this Agreement has been duly authorized by all necessary
corporate action on the part of the Company and has been duly executed
and delivered by the Company;

(viii) the Company is not and, after giving effect to the sale of
the Securities and the application of the net proceeds thereof as
described in the Prospectus, will not be an investment company
required to register under the Investment Company Act of 1940, as
amended;

<PAGE>
16

(ix) no order, consent, permit or approval of any California, New
York or federal governmental authority is required on the part of the
Company for the execution and delivery of this Agreement or for the
issuance and sale of the Securities to be sold by the Company, except
such as have been obtained under the Act and such as may be required
under the securities or blue sky laws of any other jurisdiction;

(x) neither the sale of the Securities being sold by the Company
under this Agreement nor the consummation of the other transactions
herein contemplated by the Company will (i) violate the Company's
Certificate of Incorporation or Bylaws, (ii) violate, breach or result
in a default under any existing obligation of or restriction on the
Company under any indenture or other agreement material to the Company
and identified in an Officer's Certificate, a copy of which shall be
delivered to you, (iii) breach or otherwise violate any existing
obligation of or restriction on the Company under any order, judgment
or decree of any court or governmental authority binding on the
Company and identified in the Officer's Certificate, or (iv) violate
any current California, New York or federal statute, rule or
regulation that such counsel has, in the exercise of customary
professional diligence, recognized as applicable to the Company or to
transactions of the type contemplated by this Agreement, except that
such counsel need express no opinion regarding any federal securities
laws, or securities or blue sky laws of any other jurisdiction, or the
provisions of Section 8 of this Agreement, except as otherwise
expressly stated in such opinion; and

(xi) the statements in the Prospectus under the caption
"Description of Capital Stock," insofar as they summarize provisions
of the Certificate of Incorporation or Bylaws of the Company or the
Securities, fairly present the information required by Form S-3.

Such counsel shall also state that in connection with its
participation in conferences in connection with the preparation of the
Registration Statement and the Prospectus, such counsel has not
independently verified the accuracy, completeness or fairness of the
statements contained or incorporated therein, and the limitations
inherent in the examination made by such counsel and the knowledge
available to such counsel is such that it is unable to assume, and
does not assume, any responsibility for such accuracy, completeness or
fairness (except as otherwise specifically stated in paragraph (xi)
above). However, such counsel shall state that on the basis of such
counsel's review of the Registration Statement, the documents
incorporated therein on the effective date of the Registration
Statement, the Prospectus and the documents incorporated therein on
the date of the Prospectus and such counsel's participation in
conferences in connection with the preparation of the Registration
Statement and the Prospectus, such counsel does not

<PAGE>
17

believe that the Registration Statement and the documents incorporated
therein on the effective date of the Registration Statement considered
as a whole as of the effective date of the Registration Statement,
contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading, and such counsel does not believe
that the Prospectus and the documents incorporated therein on the date
of the Prospectus, considered as a whole on the date of the opinion,
contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
However, such counsel need express no opinion or belief as to any
document filed by the Company under the Exchange Act, whether before
or after the effective date of the Registration Statement, except to
the extent that any such document is an incorporated document read
together with the Registration Statement or the Prospectus and
considered as a whole, nor need such counsel express any opinion or
belief as to the financial statements and other financial information
contained or incorporated by reference in the Registration Statement,
the Prospectus or the incorporated documents.

In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the States
of California or New York or the Delaware General Corporation Law or the
Federal laws of the United States, to the extent they deem proper and
specified in such opinion, upon the opinion of other counsel of good
standing whom they believe to be reliable and who are satisfactory to
counsel for the Underwriters and (B) as to matters of fact, to the extent
they deem proper, on certificates of responsible officers of the Company
and public officials. References to the Prospectus in this paragraph (b)
include any supplements thereto at the Closing Date.

(c) The Company has requested and L. Michael Russell, General Counsel
of the Company, shall have furnished to the Representatives his opinion, as
General Counsel to the Company, dated the Closing Date and addressed to the
Representatives, to the effect that:

(i) the Company and each of its subsidiaries have been duly
incorporated and are validly existing as corporations in good standing
under the laws of their respective jurisdictions of incorporation with
full corporate power and authority to own, lease and operate their
respective properties and to conduct their respective businesses as
described in the Prospectus and are duly qualified to conduct their
respective businesses and are in good standing as a foreign
corporation in each jurisdiction in which the nature of their
respective ownership or operation of properties or the conduct of
their respective businesses requires such registration or
qualification, except where the failure so to qualify or to be in good

<PAGE>
18

standing could not, individually or in the aggregate with all other
such failures, reasonably be expected to have a Material Adverse
Effect;

(ii) all of the issued shares of capital stock of each subsidiary
of the Company have been duly and validly authorized and issued, are
fully paid, non-assessable (except for directors' qualifying shares)
and, based solely on his examination of each such subsidiary's stock
ledger and minute books, all such shares are held of record by the
Company, and are free and clear of all security interests, claims,
liens or encumbrances, except as provided in the Credit
Agreement;

(iii) to such counsel's knowledge, there are no contracts,
agreements or understandings between the Company and any person
granting such person the right to require the Company to include
securities of such person in the Registration Statement;

(iv) to such counsel's knowledge, except as set forth in the
Prospectus and as of the dates specified in the Prospectus, there are
no options, warrants, rights or commitments granted by the Company
with respect to the Company's capital stock and the Company is not
obligated to issue, purchase or redeem any shares of the Company's
capital stock; and

(v) to such counsel's knowledge, there are no legal or
governmental proceedings pending or threatened against the Company or
any of its subsidiaries, or to which the Company or any of its
subsidiaries or any of their respective properties or assets is
subject, which are not disclosed in the Prospectus and which are
reasonably likely, individually or in the aggregate with all other
such proceedings, to have a Material Adverse Effect or have a material
adverse effect upon the consummation of the transactions contemplated
by this Agreement.

In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the State
of California or the Delaware General Corporation Law or the Federal laws
of the United States, to the extent he deems proper and specified in such
opinion, upon the opinion of other counsel of good standing whom he
believes to be reliable and who are satisfactory to the counsel for the
Underwriters and (B) as to matters of fact, to the extent he deems proper,
on certificates of responsible officers of the Company and public
officials. References to the Prospectus in this paragraph (c) include any
supplements thereto at the Closing Date.

(d) The Selling Stockholder shall have requested and O'Melveny &
Myers LLP, counsel for the Selling Stockholder, shall have furnished to the
Representatives their opinion dated the Closing Date and addressed to the
Representatives, to the effect that:

<PAGE>
19

(i) each of this Agreement, the Custody Agreement and the Power
of Attorney has been duly executed and delivered by the Selling
Stockholder;

(ii) the Custody Agreement constitutes the legally valid and
binding obligation of the Selling Stockholder, enforceable against the
Selling Stockholder in accordance with its terms, except as may be
limited by bankruptcy, insolvency, moratorium or similar laws relating
to or affecting creditors' rights generally (including, without
limitation, fraudulent conveyance laws) and by general principles of
equity, including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing and the possible
unavailability of specific performance or injunctive relief,
regardless of whether considered in a proceeding in equity or at law;

(iii) upon payment for and delivery to the Underwriters in New
York of the Securities sold by the Selling Stockholder in accordance
with this Agreement, assuming each of the Underwriters is acquiring
the Securities sold by the Selling Stockholder without notice of any
adverse claim, the Underwriters will acquire the Securities free and
clear of any adverse claim as defined in Article 8 of the Uniform
Commercial Code;

(iv) no order, consent, permit or approval of any California, New
York or federal governmental authority is required on the part of the
Selling Stockholder for the execution and delivery of this Agreement
or the sale of the Securities sold by the Selling Stockholder, except
such as have been obtained under the Act and such as may be required
under the securities or blue sky laws of any other jurisdiction; and

(v) neither the sale of the Securities being sold by the Selling
Stockholder under this Agreement nor the consummation of the other
transactions herein contemplated by the Selling Stockholder will (i)
violate, breach or result in a default under any existing obligation
of or restriction on the Selling Stockholder under any indenture or
other agreement material to the Selling Stockholder and identified in
a Selling Stockholder Certificate, a copy of which shall be delivered
to you, (ii) breach or otherwise violate any existing obligation of or
restriction on the Selling Stockholder under any order, judgment or
decree of any court or governmental authority binding on the Selling
Stockholder and identified in the Selling Stockholder Certificate, or
(iii) violate any current California, New York or federal statute,
rule or regulation that such counsel has, in the exercise of customary
professional diligence, recognized as applicable to the Selling
Stockholder or to transactions of the type contemplated by this
Agreement, except that such counsel need express no opinion regarding
any federal securities laws, or securities or blue sky laws of any
other jurisdiction, or the provisions of Section 8 of

<PAGE>
20

this Agreement, except as otherwise expressly stated in such opinion.

In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the States
of California, New York or the Federal laws of the United States, to the
extent they deem proper and specified in such opinion, upon the opinion of
other counsel of good standing whom they believe to be reliable and who are
satisfactory to counsel for the Underwriters, and (B) as to matters of
fact, to the extent they deem proper, on certificates of the Selling
Stockholder and public officials.

(e) The Representatives shall have received from Latham & Watkins,
counsel for the Underwriters, such opinion or opinions, dated the Closing
Date and addressed to the Representatives, with respect to the issuance and
sale of the Securities, the Registration Statement, the Prospectus
(together with any supplement thereto) and other related matters as the
Representatives may reasonably require, and the Company and the Selling
Stockholder shall have furnished to such counsel such documents as they
request for the purpose of enabling them to pass upon such matters.

(f) The Company shall have furnished to the Representatives a
certificate of the Company, signed by the Chairman of the Board or the
Chief Executive Officer and the principal financial or accounting officer
of the Company, in their capacities as such officers of the Company, dated
the Closing Date, to the effect that the signers of such certificate have
carefully examined the Registration Statement, the Prospectus, any
supplements to the Prospectus and this Agreement and that:

(i) the representations and warranties of the Company in this
Agreement are true and correct in all material respects on and as of
the Closing Date with the same effect as if made on the Closing Date
and the Company has complied in all material respects with all the
agreements and satisfied in all material respects all the conditions
on its part to be performed or satisfied at or prior to the Closing
Date;

(ii) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that
purpose have been instituted or, to the Company's knowledge,
threatened; and

(iii) since the date of the most recent financial statements
included or incorporated by reference in the Prospectus (exclusive of
any supplement thereto), there has been no material adverse effect on
the condition (financial or otherwise), prospects, earnings, business
or properties of the Company and its subsidiaries, taken as a whole,
whether or not arising from transactions in the ordinary course of
business, except as set forth in or contemplated in the Prospectus
(exclusive of any

<PAGE>
21

supplement thereto).

(g) The Selling Stockholder shall have furnished to the
Representatives a certificate, signed by the Selling Stockholder, dated the
Closing Date, to the effect that the Selling Stockholder has carefully
examined the Registration Statement, the Prospectus, any supplement to the
Prospectus and this Agreement and that the representations and warranties
of the Selling Stockholder in this Agreement are true and correct in all
material respects on and as of the Closing Date to the same effect as if
made on the Closing Date.

(h) The Company shall have requested and PricewaterhouseCoopers
L.L.P. shall have furnished to the Representatives, at the Execution Time
and at the Closing Date, comfort letters, dated respectively as of the
Execution Time and as of the Closing Date, in form and substance
satisfactory to the Representatives, with respect to the financial
statements and financial information contained or incorporated by reference
in the Registration Statement. References to the Prospectus in this
paragraph (h) include any supplement thereto at the date of the letter.

(i) Subsequent to the Execution Time or, if earlier, the dates as of
which information is given in the Registration Statement (exclusive of any
amendment thereof) and the Prospectus (exclusive of any supplement
thereto), there shall not have been (i) any change or decrease specified in
the letter or letters referred to in paragraph (h) of this Section 6 or
(ii) any change, or any development involving a prospective change, in or
affecting the condition (financial or otherwise), earnings, business or
properties of the Company and its subsidiaries, taken as a whole, whether
or not arising from transactions in the ordinary course of business, except
as set forth in or contemplated in the Prospectus (exclusive of any
supplement thereto) the effect of which, in any case referred to in clause
(i) or (ii) above, is, in the sole judgment of the Representatives, so
material and adverse as to make it impractical or inadvisable to proceed
with the offering or delivery of the Securities as contemplated by the
Registration Statement (exclusive of any amendment thereof) and the
Prospectus (exclusive of any supplement thereto).

(j) Prior to the Closing Date, the Company and the Selling
Stockholder shall have furnished to the Representatives such further
information, certificates and documents as the Representatives may
reasonably request.

(k) The Securities shall have been listed and admitted and authorized
for trading on the New York Stock Exchange, and satisfactory evidence of
such actions shall have been provided to the Representatives.

<PAGE>
22

(l) At the Execution Time, the Company shall have furnished to the
Representatives a letter substantially in the form of Exhibit A hereto from
each executive officer and director of the Company addressed to the
Representatives.

If any of the conditions specified in this Section 6 shall not have
been fulfilled in all material respects when and as provided in this
Agreement, or if any of the opinions and certificates mentioned above or
elsewhere in this Agreement shall not be in all material respects
reasonably satisfactory in form and substance to the Representatives and
counsel for the Underwriters, this Agreement and all obligations of the
Underwriters hereunder may be canceled at, or at any time prior to, the
Closing Date by the Representatives. Notice of such cancelation shall be
given to the Company and the Selling Stockholder in writing or by telephone
or facsimile confirmed in writing.

The documents required to be delivered by this Section 6 shall be
delivered at the office of Latham & Watkins, counsel for the Underwriters,
at 633 West Fifth Street, Suite 4000, Los Angeles, California 90071 on the
Closing Date.

7. REIMBURSEMENT OF UNDERWRITERS' EXPENSES. If the sale of the
Securities provided for herein is not consummated because any condition to
the obligations of the Underwriters set forth in Section 6 hereof is not
satisfied, because of any termination pursuant to Section 10 hereof or
because of any refusal, inability or failure on the part of the Company or
the Selling Stockholder to perform any agreement herein or comply with any
provision hereof other than by reason of a default by any of the
Underwriters, the Company will reimburse the Underwriters severally through
Salomon Smith Barney on demand for all out-of-pocket expenses (including
reasonable fees and disbursements of counsel) that shall have been incurred
by them in connection with the proposed purchase and sale of the
Securities. If the Company is required to make any payments to the
Underwriters under this Section 7 because of the Selling Stockholder's
refusal, inability or failure to satisfy any condition to the obligations
of the Underwriters set forth in Section 6, the Selling Stockholder PRO
RATA in proportion to the percentage of Securities to be sold by each shall
reimburse the Company on demand for all amounts so paid.

8. INDEMNIFICATION AND CONTRIBUTION. (a) The Company agrees to
indemnify and hold harmless each Underwriter, the directors, officers,
employees and agents of each Underwriter and each person who controls any
Underwriter within the meaning of either the Act or the Exchange Act
against any and all losses, claims, damages or liabilities, joint or
several, to which they or any of them may become subject under the Act, the
Exchange Act or other Federal or state statutory law or regulation, at
common law or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of a material fact
contained in the registration statement for the registration of the
Securities as originally filed or in any amendment thereof, or in any
Preliminary Prospectus or the Prospectus, or in any amendment thereof or
supplement thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and
agrees to reimburse each

<PAGE>
23

such indemnified party, as incurred, for any legal or other expenses
reasonably incurred by them in connection with investigating or defending
any such loss, claim, damage, liability or action; PROVIDED, HOWEVER,
that the Company and the Selling Stockholder will not be liable in any
such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission made therein in reliance
upon and in conformity with written information furnished to the Company
by or on behalf of any Underwriter through the Representatives
specifically for inclusion therein; and FURTHER, PROVIDED, HOWEVER, that
the Company shall not be liable to an Underwriter in respect of any
Preliminary Prospectus, or any amendment or supplement thereto, to the
extent that both (i) all of the untrue statements or alleged untrue
statements or omissions or alleged omissions of a material fact contained
in any Preliminary Prospectus or any amendment or supplement thereto were
fully corrected in the Prospectus or in an amendment or supplement
thereto and (ii) the Prospectus, together with such amendment or
supplement, if any, was provided to such Underwriter by the Company prior
to the time the written confirmation of the sale of Securities to such
person was sent and was not sent or given to the purchaser of the stock
in question by such Underwriter at or prior to the written confirmation
of the sale of Securities to such person. This indemnity agreement will
be in addition to any liability which the Company may otherwise have.

(b) The Selling Stockholder agrees to indemnify and hold harmless
each Underwriter, the directors, officers, employees and agents of each
Underwriter and each person who controls any Underwriter within the meaning
of either the Act or the Exchange Act against any and all losses, claims,
damages or liabilities, joint or several, to which they or any of them may
become subject under the Act, the Exchange Act or other Federal or state
statutory law or regulation, at common law or otherwise, only insofar as
such losses, claims, damages or liabilities (or action in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the registration statement for
the registration of the Securities as originally filed or in any amendment
thereof, or in any Preliminary Prospectus or the Prospectus, or in any
amendment thereof or supplement thereto, or arise out of or are based upon
the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, and only with reference to written information relating to the
Selling Stockholder furnished to the Company specifically for inclusion in
the documents referred to in the foregoing indemnity, and the Selling
Stockholder agrees to reimburse each such indemnified party, as incurred,
for any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, damage, liability or
action; PROVIDED, HOWEVER, that the Selling Stockholder shall not be liable
to an Underwriter in respect of any Preliminary Prospectus, or any
amendment or supplement thereto, to the extent that both (i) all of the
untrue statements or alleged untrue statements or omissions or alleged
omissions of a material fact contained in any Preliminary Prospectus or any
amendment or supplement thereto were fully corrected in the Prospectus or
in an amendment or supplement thereto and (ii) the Prospectus, together
with such amendment or supplement, if any, was provided to such Underwriter
by the Company prior to the time the written confirmation of the sale of
Securities to such person was sent and was not sent or given to the
purchaser of the stock in question by such Underwriter at or prior to the
written confirmation of the sale of Securities to such person. This
indemnity agreement will be in addition to any liability which the Selling
Stockholder may otherwise have.

(c) Each Underwriter severally and not jointly agrees to indemnify
and hold harmless the Company, each of its directors, each of its officers
who signs the Registration Statement, and each person who controls the
Company within the meaning of either the Act or the Exchange Act and the
Selling Stockholder, to the same extent as the foregoing indemnity to each
Underwriter, but only with reference to written information relating to
such Underwriter furnished to the Company by or on behalf of such
Underwriter through the Representatives specifically for inclusion in the
documents referred to in the foregoing indemnity. This indemnity agreement
will be in addition to any liability which any Underwriter may otherwise
have. The Company and the Selling Stockholder acknowledge that the
statements set forth in the last paragraph of the cover page regarding
delivery of the Securities and, under the heading "Underwriting," (i) the
list of Underwriters and their respective participation in the sale of the
Securities, (ii) the paragraph related to concessions and reallowances and
(iii) the paragraphs related to stabilization, syndicate covering
transactions and penalty bids in any Preliminary Prospectus and the
Prospectus constitute the only information furnished in writing by or on
behalf of the several Underwriters for inclusion in any Preliminary
Prospectus or the Prospectus.

(d) Promptly after receipt by an indemnified party under this Section
8 of notice of the commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against the indemnifying party
under this Section 8, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying party
(i) will not relieve it from liability under paragraph (a),

<PAGE>
24

(b) or (c) above unless and to the extent it did not otherwise learn of
such action and such failure results in the forfeiture by the indemnifying
party of substantial rights and defenses and (ii) will not, in any event,
relieve the indemnifying party from any obligations to any indemnified
party other than the indemnification obligation provided in paragraph (a),
(b) or (c) above. The indemnifying party shall be entitled to appoint
counsel of the indemnifying party's choice at the indemnifying party's
expense to represent the indemnified party in any action for which
indemnification is sought (in which case the indemnifying party shall not
thereafter be responsible for the fees and expenses of any separate counsel
retained by the indemnified party or parties except as set forth below);
PROVIDED, HOWEVER, that such counsel shall be satisfactory to the
indemnified party. Notwithstanding the indemnifying party's election to
appoint counsel to represent the indemnified party in an action, the
indemnified party shall have the right to employ separate counsel
(including local counsel), and the indemnifying party shall bear the
reasonable fees, costs and expenses of such separate counsel if (i) the use
of counsel chosen by the indemnifying party to represent the indemnified
party would present such counsel with a conflict of interest, (ii) the
actual or potential defendants in, or targets of, any such action include
both the indemnified party and the indemnifying party and the indemnified
party shall have reasonably concluded that there may be legal defenses
available to it and/or other indemnified parties which are different from
or additional to those available to the indemnifying party, (iii) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable
time after notice of the institution of such action or (iv) the
indemnifying party shall authorize the indemnified party to employ separate
counsel at the expense of the indemnifying party. An indemnifying party
will not, without the prior written consent of the indemnified parties,
settle or compromise or consent to the entry of any judgment with respect
to any pending or threatened claim, action, suit or proceeding in respect
of which indemnification or contribution may be sought hereunder (whether
or not the indemnified parties are actual or potential parties to such
claim or action) unless such settlement, compromise or consent includes an
unconditional release of each indemnified party from all liability arising
out of such claim, action, suit or proceeding.

(e) In the event that the indemnity provided in paragraph (a), (b) or
(c) of this Section 8 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Company, the Selling Stockholder and
the Underwriters severally agree to contribute to the aggregate losses,
claims, damages and liabilities (including legal or other expenses
reasonably incurred in connection with investigating or defending same)
(collectively "Losses") to which the Company, the Selling Stockholder and
one or more of the Underwriters may be subject in such proportion as is
appropriate to reflect the relative benefits received by the Company and
the Selling Stockholder on the one hand and by the Underwriters on the
other from the offering of the Securities; PROVIDED, HOWEVER, that in no
case shall any Underwriter (except as may be provided in any agreement
among underwriters relating to the offering of the Securities) be
responsible for any amount in excess of the underwriting discount or
commission applicable to the Securities purchased by such Underwriter
hereunder. If the

<PAGE>
25

allocation provided by the immediately preceding sentence is unavailable
for any reason, the Company, the Selling Stockholder and the Underwriters
severally shall contribute in such proportion as is appropriate to reflect
not only such relative benefits but also the relative fault of the Company
and the Selling Stockholder on the one hand and of the Underwriters on the
other in connection with the statements or omissions which resulted in such
Losses as well as any other relevant equitable considerations. Benefits
received by the Company and the Selling Stockholder shall be deemed to be
equal to the total net proceeds from the offering (before deducting
expenses) received by it, and benefits received by the Underwriters shall
be deemed to be equal to the total underwriting discounts and commissions,
in each case as set forth on the cover page of the Prospectus. Relative
fault shall be determined by reference to, among other things, whether any
untrue or any alleged untrue statement of a material fact or the omission
or alleged omission to state a material fact relates to information
provided by the Company or the Selling Stockholder on the one hand or the
Underwriters on the other, the intent of the parties and their relative
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission. The Company, the Selling Stockholder and the
Underwriters agree that it would not be just and equitable if contribution
were determined by pro rata allocation or any other method of allocation
which does not take account of the equitable considerations referred to
above. Notwithstanding the provisions of this paragraph (e), no person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this Section
8, each person who controls an Underwriter within the meaning of either the
Act or the Exchange Act and each director, officer, employee and agent of
an Underwriter shall have the same rights to contribution as such
Underwriter, and each person who controls the Company within the meaning of
either the Act or the Exchange Act, each officer of the Company who shall
have signed the Registration Statement and each director of the Company
shall have the same rights to contribution as the Company, subject in each
case to the applicable terms and conditions of this paragraph (e).

(f) The liability of the Selling Stockholder under the Selling
Stockholder's representations and warranties contained in Section 1 hereof
and under the indemnity and contribution agreements contained in this
Section 8 shall be limited to an amount equal to the net proceeds to the
Selling Stockholder of the sale of the Securities sold by the Selling
Stockholder to the Underwriters. The Company and the Selling Stockholder
may agree, as among themselves and without limiting the rights of the
Underwriters under this Agreement, as to the respective amounts of such
liability for which they each shall be responsible.

9. DEFAULT BY AN UNDERWRITER. If any one or more Underwriters shall
fail to purchase and pay for any of the Securities agreed to be purchased
by such Underwriter or Underwriters hereunder and such failure to purchase
shall constitute a default in the performance of its or their obligations
under this Agreement, the remaining Underwriters shall be obligated
severally to take up and pay for (in the respective proportions which

<PAGE>
26

the amount of Securities set forth opposite their names in Schedule I
hereto bears to the aggregate amount of Securities set forth opposite the
names of all the remaining Underwriters) the Securities which the
defaulting Underwriter or Underwriters agreed but failed to purchase;
PROVIDED, HOWEVER, that in the event that the aggregate amount of
Securities which the defaulting Underwriter or Underwriters agreed but
failed to purchase shall exceed 10% of the aggregate amount of Securities
set forth in Schedule I hereto, the remaining Underwriters shall have the
right to purchase all, but shall not be under any obligation to purchase
any, of the Securities, and if such nondefaulting Underwriters do not
purchase all the Securities, this Agreement will terminate without
liability to any nondefaulting Underwriter, the Selling Stockholder or the
Company. In the event of a default by any Underwriter as set forth in this
Section 9, the Closing Date shall be postponed for such period, not
exceeding five Business Days, as the Representatives shall determine in
order that the required changes in the Registration Statement and the
Prospectus or in any other documents or arrangements may be effected.
Nothing contained in this Agreement shall relieve any defaulting
Underwriter of its liability, if any, to the Company, the Selling
Stockholder and any nondefaulting Underwriter for damages occasioned by its
default hereunder.

10. TERMINATION. This Agreement shall be subject to termination in
the absolute discretion of the Representatives, by notice given to the
Company prior to delivery of and payment for the Securities, if at any time
prior to such time (i) trading in the Company's Common Stock shall have
been suspended by the Commission or the New York Stock Exchange or trading
in securities generally on the New York Stock Exchange shall have been
suspended or limited or minimum prices shall have been established on such
Exchange, (ii) a banking moratorium shall have been declared either by
Federal or New York State authorities or (iii) there shall have occurred
any outbreak or escalation of hostilities, declaration by the United States
of a national emergency or war, or other calamity or crisis the effect of
which on financial markets is such as to make it, in the sole judgment of
the Representatives, impractical or inadvisable to proceed with the
offering or delivery of the Securities as contemplated by the Prospectus
(exclusive of any supplement thereto).

11. REPRESENTATIONS AND INDEMNITIES TO SURVIVE. The respective
agreements, representations, warranties, indemnities and other statements
of the Company or its officers, of the Selling Stockholder and of the
Underwriters set forth in or made pursuant to this Agreement will remain in
full force and effect, regardless of any investigation made by or on behalf
of any Underwriter, the Selling Stockholder or the Company or any of the
officers, directors, employees, agents or controlling persons referred to
in Section 8 hereof, and will survive delivery of and payment for the
Securities. The provisions of Sections 7 and 8 hereof shall survive the
termination or cancelation of this Agreement.

12. NOTICES. All communications hereunder will be in writing and
effective only on receipt, and, if sent to the Representatives, will be
mailed, delivered or telefaxed to the Salomon Smith Barney Inc. General
Counsel (fax no.: (212) 816-7912) and confirmed to the General Counsel,
Salomon Smith Barney Inc., at 388 Greenwich

<PAGE>
27

Street, New York, New York, 10013, Attention: General Counsel; or, if sent
to the Company, will be mailed, delivered or telefaxed to (310) 726-8467
and confirmed to it at 233 Kansas Street, El Segundo, California 90245,
attention of the Legal Department; or if sent to the Selling Stockholder,
will be mailed, delivered or telefaxed and confirmed to it at the address
set forth in Schedule II hereto.

13. SUCCESSORS. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the
officers, directors, employees, agents and controlling persons referred to
in Section 8 hereof, and no other person will have any right or obligation
hereunder.

14. APPLICABLE LAW. This Agreement will be governed by and construed
in accordance with the laws of the State of New York applicable to
contracts made and to be performed within the State of New York.

15. COUNTERPARTS. This Agreement may be signed in one or more
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same agreement.

16. HEADINGS. The section headings used herein are for convenience
only and shall not affect the construction hereof.

17. DEFINITIONS. The terms which follow, when used in this Agreement,
shall have the meanings indicated.

"Act" shall mean the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.

"Business Day" shall mean any day other than a Saturday, a Sunday
or a legal holiday or a day on which banking institutions or trust
companies are authorized or obligated by law to close in New York
City.

"Commission" shall mean the Securities and Exchange Commission.

"Effective Date" shall mean each date and time that the
Registration Statement, any post-effective amendment or amendments
thereto and any Rule 462(b) Registration Statement became or become
effective.

"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated
thereunder.

"Execution Time" shall mean the date and time that this Agreement
is executed and delivered by the parties hereto.

"Preliminary Prospectus" shall mean any preliminary prospectus
referred to in paragraph 1(i)(a) above and any preliminary prospectus
included in the

<PAGE>
28

Registration Statement at the Effective Date that omits Rule 430A
Information.

"Prospectus" shall mean the prospectus relating to the Securities
that is first filed pursuant to Rule 424(b) after the Execution Time
or, if no filing pursuant to Rule 424(b) is required, shall mean the
form of final prospectus relating to the Securities included in the
Registration Statement at the Effective Date.

"Registration Statement" shall mean the registration statement
referred to in paragraph 1(i)(a) above, including exhibits and
financial statements, as amended at the Execution Time (or, if not
effective at the Execution Time, in the form in which it shall become
effective) and, in the event any post-effective amendment thereto or
any Rule 462(b) Registration Statement becomes effective prior to the
Closing Date, shall also mean such registration statement as so
amended or such Rule 462(b) Registration Statement, as the case may
be. Such term shall include any Rule 430A Information deemed to be
included therein at the Effective Date as provided by Rule 430A.

"Rule 424", "Rule 430A" and "Rule 462" refer to such rules under
the Act.

"Rule 430A Information" shall mean information with respect to
the Securities and the offering thereof permitted to be omitted from
the Registration Statement when it becomes effective pursuant to Rule
430A.

"Rule 462(b) Registration Statement" shall mean a registration
statement and any amendments thereto filed pursuant to Rule 462(b)
relating to the offering covered by the registration statement
referred to in Section 1(a) hereof.

<PAGE>
29

If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us the enclosed duplicate hereof, whereupon this
letter and your acceptance shall represent a binding agreement among the
Company, the Selling Stockholder and the several Underwriters.

Very truly yours,

International Rectifier Corporation

By:
--------------------------------
Name:
Title:

Eric Lidow

---------------------
Eric Lidow

<PAGE>
30

The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.

Salomon Smith Barney Inc.
J.P. Morgan Securities Inc.
Banc of America Securities LLC
Gruntal & Co., LLC

By: Salomon Smith Barney Inc.

By:
--------------------------
Name:
Title:

For themselves and the other
several Underwriters named in
Schedule I to the foregoing
Agreement.

<PAGE>

SCHEDULE I

NUMBER OF UNDERWRITTEN SECURITIES
UNDERWRITERS TO BE PURCHASED
------------ ---------------------------------
Salomon Smith Barney Inc.

J.P. Morgan Securities Inc.

Banc of America Securities LLC

Gruntal & Co., LLC

-------------
Total ................ 8,000,000

<PAGE>

SCHEDULE II

NUMBER OF UNDERWRITTEN
SELLING STOCKHOLDER: SECURITIES TO BE SOLD
- -------------------- ---------------------
Eric Lidow 400,000 shares
[address, fax no.]...............

Total ................ 400,000 shares

<PAGE>

[LETTERHEAD OF OFFICER, DIRECTOR OR MAJOR STOCKHOLDER OF
CORPORATION]

INTERNATIONAL RECTIFIER CORPORATION
PUBLIC OFFERING OF COMMON STOCK

, 2000

Ladies and Gentlemen:

This letter is being delivered to you in connection with the proposed
Underwriting Agreement (the "Underwriting Agreement"), between International
Rectifier Corporation, a Delaware corporation (the "Company"), and each of you
as representatives of a group of Underwriters named therein, relating to an
underwritten public offering of Common Stock, $1.00 par value (the "Common
Stock"), of the Company.

In order to induce you and the other Underwriters to enter into the
Underwriting Agreement, the undersigned will not, without the prior written
consent of Salomon Smith Barney Inc., offer, sell, contract to sell, pledge or
otherwise dispose of, or enter into any transaction which is designed to, or
might reasonably be expected to, result in the disposition (whether by actual
disposition or effective economic disposition due to cash settlement or
otherwise), directly or indirectly, including the participation in the filing of
a registration statement with the Securities and Exchange Commission in respect
of, or establish or increase a put equivalent position or liquidate or decrease
a call equivalent position within the meaning of Section 16 of the Securities
Exchange Act of 1934, as amended, with respect to, any shares of capital stock
of the Company or any securities convertible into, or exercisable or
exchangeable for such capital stock, or publicly announce an intention to effect
any such transaction, for a period of 90 days after the date of this Agreement,
other than shares of Common Stock disposed of as bona fide gifts

If for any reason the Underwriting Agreement shall be terminated prior to
the Closing Date (as defined in the Underwriting Agreement), the agreement set
forth above shall likewise be terminated.

Yours very truly,
[SIGNATURE OF EXECUTIVE OFFICER OR DIRECTOR]
[NAME AND ADDRESS OF EXECUTIVE OFFICER OR DIRECTOR]

<PAGE>
EXHIBIT 5

[O'MELVENY & MYERS LLP LETTERHEAD]

March 7, 2000 OUR FILE NUMBER
412,260-110

International Rectifier Corporation
233 Kansas Street
El Segundo, California 90245

RE: REGISTRATION OF SHARES OF COMMON STOCK
OF INTERNATIONAL RECTIFIER CORPORATION

Ladies and Gentlemen:

At your request, we have examined Amendment No. 2 to the Registration
Statement on Form S-3, File No. 333-30348 (the "Registration Statement") of
International Rectifier Corporation, a Delaware corporation (the "Company"), in
connection with the registration under the Securities Act of 1933, as amended,
of up to 8,800,000 shares of Common Stock, $1.00 par value, of the Company to be
offered by the Company (the "Company Shares") and 400,000 shares of the Common
Stock, $1.00 par value, of the Company to be offered by a selling stockholder
(the "Selling Stockholder Shares").

In our capacity as your counsel, we have examined originals or copies of
those corporate and other records and documents we considered appropriate.

On the basis of such examination, our reliance upon the assumptions in this
opinion and our consideration of those questions of law we considered relevant,
and subject to the limitations and qualifications in this opinion, we are of the
opinion that, when the Board of Directors of the Company, or a duly constituted
committee thereof, has taken all necessary corporate action to authorize and
approve the issuance of the Company Shares and upon payment for and delivery of
the Company Shares in accordance with the definitive underwriting agreement
approved by the Board of Directors of the Company, the Company Shares will be
validly issued, fully paid and non-assessable. The Selling Stockholder Shares
are validly issued, fully paid and non-assessable.

We hereby consent to the use of this opinion in the Registration Statement
and to the reference to this firm under the heading "Legal Matters" in the
Prospectus constituting part of the Registration Statement.

Respectfully submitted,

O'MELVENY & MYERS LLP

<PAGE>
EXHIBIT 23(b)

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in this Amendment No. 2 to the Registration
Statement on Form S-3 of our report dated July 27, 1999, except for Note 9, as
to which the date is September 14, 1999, relating to the consolidated financial
statements of International Rectifier Corporation, which appears in such
Amendment. We also consent to the incorporation by reference of our report dated
July 27, 1999, except for Note 9, as to which the date is September 14, 1999,
relating to the financial statements and financial statement schedule, which
appears in International Rectifier Corporation's Annual Report on Form 10-K for
the year ended June 30, 1999. We also consent to the reference to us under the
heading "Experts" in such Amendment.

PricewaterhouseCoopers LLP

Los Angeles, California
March 7, 2000