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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K
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(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended DECEMBER 31, 2001
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-18277

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

DELAWARE 04-2742817
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(State or other jurisdiction of (IRS employer identification no.)
incorporation or organization)


25 FRONTAGE ROAD, ANDOVER, MASSACHUSETTS 01810
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(Address of principal executive offices) (Zip code)

Registrant's telephone number, including area code: (978) 470-2900
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Securities registered pursuant to Section 12(b) of the Act: NONE
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Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $.01 par value
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(Title of Class)

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

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

The aggregate market value of the voting stock held by non-affiliates of the
registrant was approximately $247,020,785 as of February 28, 2002.

On February 28, 2002, there were 30,474,528 shares of Common Stock outstanding
and 11,930,848 shares of Class B Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Company's definitive proxy statement (the "Definitive Proxy
Statement") to be filed with the Securities and Exchange Commission pursuant to
Regulation 14A and relating to the Company's 2002 annual meeting of stockholders
are incorporated by reference into Part III.




PART I

This Annual Report on Form 10-K contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. The words
"believes," "expects," "anticipates," "intends," "estimate," "plan," "assumes"
and other similar expressions identify forward-looking statements. Actual
results could differ materially from those projected in the forward-looking
statements as a result of the risk factors set forth in this report. Reference
is made in particular to the discussions set forth under Part I, Item 1 -
"Business - Second-Generation Automated Manufacturing Line," "- Competition," "-
Patents," "- Licensing," and "- Risk Factors," under Part I, Item 3 - "Legal
Proceedings," and under Part II, Item 7 - "Management's Discussion and Analysis
of Financial Condition and Results of Operations." The risk factors contained in
this report may not be exhaustive. Therefore, the information contained in this
report should be read together with other reports and documents that the Company
files with the Securities and Exchange Commission from time to time, including
Forms 10-Q and 8-K, which may supplement, modify, supersede or update those risk
factors.

ITEM 1 - BUSINESS

THE COMPANY

Vicor Corporation was incorporated in Delaware in 1981. Unless the context
indicates otherwise, the term "Company" means Vicor Corporation and its
consolidated subsidiaries. The Company designs, develops, manufactures and
markets modular power components and complete power systems using an innovative,
patented, high frequency electronic power conversion technology called "zero
current switching." Power systems, a central element in any electronic system,
convert power from a primary power source (e.g., a wall outlet) into the stable
DC voltages that are required by most contemporary electronic circuits.

In 1987, the Company formed VLT Corporation as its licensing subsidiary.
During 2000, the Company reincorporated VLT Corporation in California by merging
it with and into VLT, Inc., a wholly owned subsidiary of the Company. In 1990,
the Company established a Technical Support Center in Germany and a foreign
sales corporation (FSC). In 1995, the Company established Technical Support
Centers in France, Italy, Hong Kong, and England. Also in 1995, the Company
established Vicor Integration Architects ("VIAs"), most of which are majority
owned subsidiaries. VIAs provide customers with local design and manufacturing
services for turnkey custom power solutions. At December 31, 2001 there were six
(6) VIAs operating in the United States. In 1996, the Company established Vicor
B.V., a Netherlands company, which serves as a European Distribution Center. In
1998, the Company acquired the principal assets of the switching power supply
businesses owned by the Japan Tobacco, Inc. group and established a direct
presence in Japan through a new subsidiary called Vicor Japan Company, Ltd.
("VJCL"). VJCL markets and sells the Company's products and provides customer
support in Japan. In 2001, the Company established a new subsidiary, Picor
Corporation, which will design, develop and market Power Management Integrated
Circuits and related products for use in a variety of power system applications.
The Company's Common Stock became publicly traded on the NASDAQ National Market
System in April 1990. All of the above named entities are consolidated in the
Company's financial statements.

PRODUCTS

Power systems are incorporated into virtually all electronic products, such
as computers and telecommunications equipment, to convert electric power from a
primary source, for example a wall outlet, into the stable DC voltages required
by electronic circuits. Because power systems are configured in a myriad of
application-specific configurations, the Company's basic strategy is to exploit
the density and performance advantages of its technology by offering
comprehensive families of economical, component-level building blocks which can
be applied by users to easily configure a power system specific to their needs.
In addition to component-level power converters, which serve as modular power
system building blocks, the Company also manufactures and sells complete
configurable power systems, accessory products, and custom power solutions. The
Company's principal product lines include:

Modular Power Converters

The Company currently offers four first-generation families of
component-level DC-DC power converters: the VI-200, VI-J00, MI-200, and MI-J00
families. Designed to be mounted directly on a printed circuit board

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assembly and soldered in place using contemporary manufacturing processes, each
family comprises a comprehensive set of products which are offered in a wide
range of input voltage, output voltage and power ratings. This allows end users
to select products appropriate to their individual applications.

The product families differ in maximum power ratings, performance
characteristics, package size and, in the case of the "MI" families, in target
market. The MI families are designed specifically to meet many of the
performance and environmental requirements of the military/defense markets.

In 1998, the Company introduced the first complete family of its
second-generation of high power density, component-level DC-DC converters. This
family operates from 48 Volts input and is designed for the telecommunications
market as well as distributed power systems. It consists of 26 modules with the
most popular output voltages in all three of the Company's second-generation
standard packages: the full size (Maxi), the half size (Mini) and the quarter
size (Micro). Output power levels from 50 to 500 Watts are covered by this
second-generation product offering. In 1999, this was followed by two additional
families: a 300 Volt input for off-line (rectified 115 or 230 Volt ac) and
distributed power applications, and a 375 Volt input specifically designed for
use in power factor corrected systems. This latter family increased the power
available to 600 Watts.

The Vicor Design Assistance Computer ("VDAC") is a proprietary system which
enables Vicor's customers to specify on-line, and verify in real time, the
performance and attributes of second-generation DC-DC converters. Using patented
technology, VDAC enables the design of second-generation DC-DC converters with
any output voltage between 2 and 48 Volts and with any input voltage from 18 to
425 Volts, with an input voltage range of up to 2.1:1. All of the Vicor
established brick standards, full-, half- and quarter-size, are available.
Output power is selectable over a continuous range of 20 to 500 Watts per module
and modules can be configured in fault-tolerant arrays capable of delivering
several kilowatts.

In November 2000, the Company introduced a new power conversion
architecture, called PowerStick, which is specifically designed to address the
market for low profile, high density, board mounted DC-DC converters. PowerStick
converters will be able to deliver up to 75 Watts per module and up to 900 Watts
in fault tolerant arrays.

Configurable Products

Utilizing its standard converters as core elements, the Company has
developed several product families which provide complete power solutions
configured to a customer's specific needs. These products exploit the benefits
of the component-level approach to offer higher performance, higher power
densities, lower costs, greater flexibility and faster delivery than traditional
competitive offerings.

Most electronic and data processing ("EDP") and industrial electronic
products operate directly off of AC lines. "Off-line" power systems require
"front end" circuitry to convert AC line voltage into DC voltage for the core
converters. The Company's off-line AC-DC products incorporate a set of modular
front end subassemblies to offer a complete power solution from AC line input to
highly regulated DC output. The product selection includes a low-profile modular
design in various sizes and power levels, and a choice of alternatives to
conventional "box switchers," high power, off-line bulk supplies in
industry-standard packages. Voltage and power levels are either factory or field
configurable.

Many telecommunications, defense and industrial electronic products are
powered from central DC sources (battery plants or generators). The Company's
DC-DC power system choices include a low-profile modular design similar to the
corresponding AC-DC system and a rugged, compact assembly for chassis-mounted,
bulk power applications.

In February 2001, the Company introduced the VIPAC family of power systems,
a new class of user defined, modular power solutions. VIPAC is a new type of
integrated power system leveraging the latest advances in second-generation
DC-DC converter technology and modular front ends. VIPAC combines application
specific processing units, a choice of chassis styles and, in AC input versions,
remotely hold-up capacitors to provide fast, flexible and highly reliable power
solutions for a wide range of demanding applications.


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Accessory Power System Components

Accessory power system components, used with the Company's component-level
power converters, integrate other important functions of the power system,
facilitating the design of complete power systems by interconnecting several
modules. In general, accessory products are used to condition the inputs and
outputs of the Company's modular power components.

VI-HAMs (Harmonic Attenuator Modules) are universal-AC-input,
power-factor-correcting front ends for use with compatible power converters.
VI-AIMs (AC Input Modules) provide input filtering, transient protection and
rectification of the AC line. VI-IAMs (Input Attenuator Modules) provide the DC
input filtering and transient protection required in industrial and
telecommunications markets. VI-RAMs (Ripple Attenuator Modules) condition
converter module outputs for extremely low noise systems. In 1998, the Company
doubled the power capability of its component-level AC front end, the VI-ARM (AC
Rectifier Module). This new front end product is packaged in the same "Micro"
package and includes a microcontroller that tracks the AC line to ensure correct
operation for domestic or international line voltages. In addition, two
accessory products for the 48 Volt input second-generation family were
introduced in 1999: the FiltMod for input filtering and the IAM48 for transient
and spike protection.

Customer Specific Products

Since its inception, the Company has accepted a certain amount of "custom"
power supply business. In most cases, the customer was unable to obtain a
conventional solution which could achieve the desired level of performance in
the available space. By utilizing its component-level power products as core
elements in developing most of these products, the Company was able to meet the
customer's needs with a reliable, high power density, total solution. However,
in keeping with the Company's strategy of focusing on sales of standard families
of component-level power building blocks, custom product sales have not been
directly pursued. The Company has traditionally pursued these custom
opportunities through Value-Added-Resellers ("VARs") and a network of VIAs (see
"The Company," above in Item 1 - "Business"). Most of the VIAs are majority
owned by the Company, while VARs are independent businesses. Both VIAs and VARs
are distributed geographically and are in close proximity to many of their
customers.

SALES AND MARKETING

The Company sells its products through a network of 34 independent sales
representative organizations in North and South America; internationally, 48
independent distributors are utilized. Sales activities are managed by a staff
of Regional and Strategic Sales Managers and sales personnel based at the
Company's world headquarters in Andover, Massachusetts, its Westcor division in
Sunnyvale, California, a Technical Support Center in Lombard, Illinois, in VIA
locations in Oceanside, California and Austin, Texas, and in its Technical
Support Center subsidiaries in Munich, Germany; Camberley Surrey, England;
Milan, Italy; Paris, France; Hong Kong and Tokyo, Japan.

Export sales, as a percentage of total net revenues, were approximately
36%, 32% and 30%, in 2001, 2000 and 1999, respectively.

Because of the technical nature of the Company's product lines, the Company
engages a staff of Field Applications Engineers to support the Company's sales
activities. Field Applications Engineers provide direct technical sales support
worldwide to review new applications and technical matters with existing and
potential customers. There are Field Application Engineers assigned to all
Company locations and are supported by product specialists (Product Line
Engineers) located in Andover. The Company generally warrants its standard
products for a period of two years.

The Company also sells directly to customers through Vicor Express, an
in-house distribution group. Through advertising and periodic mailing of its
catalogs, Vicor Express generally offers customers rapid delivery on small
quantities of many standard products. The Company, through Vicor B.V., has
expanded its Vicor Express operation to include locations in Germany, France,
Italy and England.


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CUSTOMERS AND APPLICATIONS

The Company's customer base is comprised of large Original Equipment
Manufacturers (OEMs) and smaller, lower volume users which are broadly
distributed across several major market areas. Some examples of the diverse
applications of the Company's products are:


TELECOMMUNICATIONS: EDP:
Central Office Systems RAID Systems
Fiber Optic Systems Parallel Processors
Cellular Telecommunications Data Storage Systems
Microwave Communications Campus Network Servers
ATM Switches Enterprise Servers
Paging Equipment File Servers
Broadcast Equipment Optical Switches
Remote Telemetry Equipment
Cable Head End Equipment
Power Amplifiers

MEASUREMENT AND CONTROL: MILITARY:
Process Control Equipment Secure Communications Equipment
Medical Equipment Digital Displays
Seismic Equipment Aircraft/Weapons Test Equipment
Test Equipment Ruggedized Computers
Transportation Systems Electronic Warfare Equipment
Agricultural Equipment Reconnaissance/Targeting Systems
Material Handling Equipment Radar-Jamming Systems
Marine Products Missle Defense Systems

For the years ended December 31, 2001, 2000 and 1999, no single customer
accounted for more than 10% of net revenues.

BACKLOG

As of December 31, 2001, the Company had a backlog of approximately $34.5
million compared to $70.3 million at December 31, 2000. Backlog is comprised of
orders for products, which have a scheduled shipment date within the next 12
months. The Company believes that a substantial portion of sales in each quarter
is, and will continue to be, derived from orders booked in the same quarter.

RESEARCH AND DEVELOPMENT

As a basic element of its long-term strategy, the Company is committed to
the continued advancement of power conversion technology and power component
product development. The Company's research and development efforts are focused
in three areas: continued enhancement of the Company's patented technology;
expansion of the Company's families of component level DC-DC converter products;
and continued development of configurable products based upon market
opportunities. The Company invested approximately $20.2 million, $20.6 million
and $19.9 million, in research and development in 2001, 2000 and 1999,
respectively. Investment in research and development represented 10.3%, 8.0% and
10.5%, of net revenues in 2001, 2000 and 1999. The Company plans to continue to
invest a significant percentage of revenues into research and development.

MANUFACTURING

The Company's principal manufacturing processes consist of assembly of
electronic components onto printed circuit boards, automatic testing of
components, wave, reflow and infrared soldering of assembled components,
encapsulation of converter subassemblies, final "burn-in" of certain products
and product test using automatic test equipment.


4


The Company continues to pursue its strategy to minimize manual assembly
processes, reduce manufacturing costs, increase product quality and reliability
and ensure its ability to rapidly and effectively expand capacity. The strategy
is based upon the phased acquisition and/or fabrication, qualification and
integration of automated manufacturing equipment. The Company plans to make
continuing investments in manufacturing equipment, particularly for the
Company's second-generation products and FastTrack platform, in order to expand
capacity (see "- Second-Generation Automated Manufacturing Line," below).

Components used in the Company's products are purchased from a variety of
vendors. Most of the components are available from multiple sources. In
instances of single source items, the Company maintains levels of inventories it
considers to be appropriate. Incoming components, assemblies and other parts are
subjected to several levels of inspection procedures.

Compliance by the Company with applicable environmental laws has not had a
material effect on the financial condition or operations of the Company


SECOND-GENERATION AUTOMATED MANUFACTURING LINE

Revenues of second-generation products increased by 47% in 2001 over 2000.
Both first and second-generation products are sold to similar customers. While
unit production in 2001 increased by 26% compared to 2000, the Company
experienced a reduction in demand for second-generation products in the third
and fourth quarters of 2001. Gross margins on second-generation products
continue to be significantly lower than those of first-generation products. The
Company took steps in 2001 to increase the capacity of second-generation
manufacturing, which included adding equipment and re-deploying personnel and
equipment from first-generation production lines. The Company is also in the
process of completing an upgrade to second-generation products, internally
designated as FastTrack, which the Company anticipates will also help to
increase production capacity and reduce costs. Approximately $6.4 million of
equipment was placed into service related to the FastTrack program in 2001, with
an additional $2.7 million in construction-in-progress at the end of the year.
It will take several quarters before these steps will be fully implemented and
their effects realized. Gross margins during 2002 will continue to be negatively
impacted unless and until the Company is able to attain higher production
volumes, higher yield levels and component cost reductions with respect to
second-generation products. There can be no assurance that such volumes, yields
or cost reductions can be attained.

COMPETITION

Many power supply manufacturers target markets similar to those of the
Company. Representative examples of these manufacturers are: Lambda Electronics,
a subsidiary of Invensys, plc; the former Power Systems business unit of Lucent
Technologies, now a subsidiary of Tyco International, Ltd.; Artesyn
Technologies; Astec America, a subsidiary of Emerson Electronic Company;
Power-One, Inc.; and C&D Technologies, Inc., Power Electronics Division.
Although certain of the Company's competitors have significantly greater
financial and marketing resources and longer operating histories than the
Company, the Company believes that it has a strong competitive position,
particularly with customers who need small, high density power system solutions
requiring a variety of input-output configurations.

PATENTS

The Company believes that its patents afford significant advantages by
erecting fundamental and multilayered barriers to competitive encroachment upon
key features and performance benefits of its principal product families. The
Company's patents cover the fundamental conversion topologies used to achieve
the performance attributes of its converter product lines; converter array
architectures which are the basis of the products' "parallelability"; product
packaging design; product construction; high frequency magnetic structures; and
automated equipment and methods for circuit and product assembly.

On February 16, 1999, the United States Patent and Trademark Office issued
U.S. patent RE36,098 (the "Reissue Patent") as a reissue of U.S. Patent
4,441,146 (the "Reset Patent"). The Reissue Patent includes original claims 1
through 5 of the Reset Patent plus 38 additional new claims. The claims in the
Reissue Patent


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cover non-coincident active clamp technology in a broadly defined class of
single-ended forward converters and enable design of power converters which are
smaller and more energy efficient than conventional power supplies. The claims
cover, but are not limited to, so-called "zero-voltage switching" technology.
The Company believes that its rights under the Reset Patent and the Reissue
Patent have been and are being infringed. The Company believes in vigorously
protecting its rights under its patents (see "Item 3 - Legal Proceedings"
below).

The Company has been issued 75 patents in the United States (which expire
between 2002 and 2020), 25 in Europe (which expire between 2002 and 2015 ), and
23 in Japan (which expire between 2002 and 2016). The Company also has a number
of patent applications pending in the United States, Europe and the Far East.
Although the Company believes that patents are an effective way of protecting
its technology, there can be no assurances that the Company's patents will prove
to be enforceable (see, e.g., Item 3 - "Legal Proceedings" below). While some of
the Company's patents are deemed materially important to the Company's
operations, the Company believes that no one patent is essential to the success
of the Company.

LICENSING

In addition to generating revenue, licensing is an element of the Company's
strategy for building worldwide product and technology acceptance and market
share. In granting licenses, the Company retains the right to use its patented
technologies, and manufacture and sell its products, in all licensed geographic
areas and fields of use. Licenses are granted and administered through the
Company's wholly owned subsidiary, VLT, Inc., which owns the Company's patents.
Revenues from licensing arrangements have not exceeded 10% of the Company's
consolidated revenues in any of the last three fiscal years.

On March 28, 2001, the Company announced that its wholly-owned subsidiary,
Vicor Hong Kong Ltd. ("VHK"), entered into cooperative agreements with Nagano
Japan Radio Company, Ltd. ("NJRC") under which NJRC received a non-exclusive
license to manufacture high-density power converter modules using Vicor
second-generation power conversion technology (the "licensed converters"). NJRC
will manufacture the licensed converters in its facilities in the Far East.
Under the agreements, VHK and NJRC will market, use and sell the licensed
converters in a variety of product formats throughout the world. VHK has
exclusive worldwide rights to sell and distribute the licensed converters as
stand-alone products. NJRC is licensed to design and manufacture custom power
solutions which incorporate the licensed converters and to sell those custom
power supplies everywhere in the world, with the exception of North America and
Europe. As part of the cooperation, VHK will have exclusive rights to sell
custom power supplies for NJRC in North America and Europe (the "Western
Products"). NJRC is licensed to manufacture and use licensed converters in the
Western Products. NJRC will design the Western Products, manufacture them in its
plants in the Far East and ship them to customers in North America and Europe.

EMPLOYEES

As of December 31, 2001, the Company employed approximately 1,600 full time
and 50 part time people. The Company believes that its continued success
depends, in part, on its ability to attract and retain qualified personnel.
Although there is strong demand for qualified technical personnel, the Company
has not to date experienced difficulty in attracting and retaining sufficient
engineering and technical personnel to meet its needs (See "- Risk Factors -
Dependence on Key Personnel," below).

None of the Company's employees are subject to a collective bargaining
agreement.

RISK FACTORS

This Annual Report on Form 10-K contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Actual results
could differ materially from those projected in the forward-looking statements
as a result of, among other factors, the risk factors set forth below.


6


NEED FOR TECHNOLOGICAL DEVELOPMENTS

The power supply industry and the industries in which many of our customers
operate are characterized by intense competition, rapid technological change,
product obsolescence and price erosion for mature products, each of which could
have an adverse effect on the Company's results of operations. The failure of
the Company to continue to develop and commercialize leading-edge technologies
and products that are cost effective and maintain high standards of quality
could have a material adverse affect on the Company's competitive position and
results of operations.

DEPENDENCE ON CUSTOMERS' BUSINESS PROSPECTS

The Company manufactures modular power components and power systems that
are incorporated into its customers' electronic products. The Company's growth
is therefore dependent on the continued growth in the sales of its customers'
products as well as the development by its customers of new products. The
failure of the Company to anticipate changes in our customers' businesses and
their changing product needs could negatively impact our financial position.

NEED TO PROVIDE ADDITIONAL MANUFACTURING CAPACITY

In order to meet anticipated future growth, the Company will need to
continue to increase manufacturing capacity through the installation of
additional equipment and additional automated manufacturing lines. The Company
has been working to increase the capacity for second-generation products through
the acquisition of new equipment and the re-deployment of equipment from
first-generation production. This will continue to increase fixed costs and
could have a negative impact on the Company's gross margins and profitability.
In addition, the process of installing equipment and new lines, as well as
hiring and training new personnel, could cause disruptions in production or
delays in the shipping of products. If revenue levels do not increase enough to
offset the increased fixed costs, the Company's future operating results could
be adversely affected. In addition, asset values could be impaired if the
additional capacity is underutilized for an extended period of time.

DEPENDENCE ON THIRD PARTY SUPPLIERS AND SUBCONTRACTORS

The Company depends on third party suppliers and subcontractors to provide
components and assemblies used in our products. If suppliers or subcontractors
cannot provide their products or services on time or to our specifications, the
Company may not be able to meet the demand for its products or it may negatively
affect delivery times. In addition, the Company cannot directly control the
quality of the products and services provided by third parties. In order to
grow, the Company may need to find new or change existing suppliers and
subcontractors. This could cause disruptions in production, delays in the
shipping of product or increases in prices paid to third-parties.

FOREIGN SALES AND DISTRIBUTION

International sales have been and are expected to be a significant
component of total sales. Dependence on foreign third parties for sales and
distribution is subject to special concerns, such as foreign economic and
political instability, foreign currency controls and market fluctuations, trade
barriers and tariffs, foreign regulations and exchange rates. Sudden or
unexpected changes in the foregoing could have a material adverse effect on the
Company's results of operations.

DEPENDENCE ON KEY PERSONNEL

The Company's success depends on our ability to retain the services of our
executive officers. The loss of one or more members of senior management could
adversely affect the Company's business and financial results. In particular,
the Company is dependent on the services of Dr. Patrizio Vinciarelli, its
founder, Chairman, President and Chief Executive Officer. The loss of the
services of Dr. Vinciarelli could have a material adverse effect on the
Company's development of new products and on its results of operations. In
addition, the Company depends on highly skilled engineers and other personnel
with technical skills that are in high demand and are difficult to replace. The
Company's continued operations and growth depends on its ability to attract and
retain highly qualified employees in a very competitive employment market.


7


PATENTS AND PROPRIETARY RIGHTS

The Company operates in an industry in which the ability to compete depends
on the development or acquisition of proprietary technologies which must be
protected to preserve the exclusive use of such technologies. The Company
devotes substantial resources to establish and protect our patents and
proprietary rights, and relies on patent and intellectual property law to
protect such rights. Such protection, though, may not prevent competitors from
independently developing products similar or superior to the Company's products.
The Company may be unable to protect or enforce current patents, may rely on
unpatented technology that competitors could restrict or may be unable to
acquire patents in the future, and this may have a material adverse affect on
the Company's competitive position. In addition, the intellectual property laws
of foreign countries may not protect the Company's rights to the same extent as
those of the United States. The Company has been and may need to continue to
defend or challenge patents. The Company may incur significant costs in and
devote significant resources to these efforts which, if unsuccessful, may have a
material adverse effect on its results of operations.

GENERAL ECONOMIC CONDITIONS

The Company is exposed to general economic conditions which could have a
material adverse impact on its business, operating results and financial
condition. As a result of the recent general economic slowdown, the Company's
net revenues declined significantly in 2001 as compared to 2000. In response to
the decline in revenues and demand, which resulted in excess production
capacity, the Company initiated a cost reduction plan in the fourth quarter of
2001 to mitigate the negative effect of these trends (see Part II, Item 7 -
"Cost Reduction Plan"). There can be no assurance that this plan will be
successful.

ITEM 2 - PROPERTIES

The Company's corporate headquarters building, which the Company owns and
which is located in Andover, Massachusetts, provides approximately 90,000 square
feet of office space for its sales, marketing, engineering and administration
personnel.

The Company also owns a building of approximately 230,000 square feet in
Andover, Massachusetts, which houses all Massachusetts manufacturing activities.

The Company's Westcor division owns and occupies a building of
approximately 31,000 square feet in Sunnyvale, California.

ITEM 3 - LEGAL PROCEEDINGS

As previously disclosed in the Company's Forms 10-Q for the fiscal quarters
ended March 31, June 30 and September 30, 2001, in June 1998 the Company and VLT
Corporation (which has since merged with and into VLT, Inc., a wholly-owned
subsidiary of the Company) filed a lawsuit in the United States District Court
of Massachusetts alleging that Unitrode Corporation ("Unitrode") has infringed
and is infringing U.S. Reissue Patent No. 36,098 (the "Reset Patent") entitled
"Optimal Resetting of the Transformer's Core in Single Ended Forward
Converters." The Reset Patent is a reissue of U.S. Patent No. 4,441,146, which
was issued on April 3, 1984. On January 24, 2001, the Court issued a summary
judgment decision in which the Court concluded that the Reset Patent is not
anticipated by certain prior art. The Court further concluded that the Reset
Patent is not invalid for failure to disclose the best mode of practicing the
invention, nor is it invalid for indefiniteness. The Court also concluded that
certain single-ended forward converters, built by Unitrode and four of its
customers using certain Unitrode integrated circuits ("chips"), had infringed
the Reset Patent. The Court declined to rule on certain other matters relating
to the Reset Patent, and those matters were made the subject of a jury trial,
which concluded on May 25, 2001 with the jury rendering a verdict in which it
upheld the validity of the Reset Patent. The jury also found that Unitrode had
not induced the four customers to infringe the Reset Patent. On September 4,
2001, Unitrode filed a notice of appeal in the US Court of Appeals for the
Federal Circuit seeking to overturn the May 25, 2001 jury verdict of patent
validity. Vicor opposed Unitrode's appeal and filed a cross-appeal seeking to
overturn the May 25, 2001 jury verdict of non-inducement. On October 23, 2001
the Company announced that it had entered into a settlement with Unitrode, under
which the parties agreed to withdraw their respective appeals and dismiss their
respective claims. The Company has retained its right to recover damages
directly from infringers using Unitrode chips.


8


Vicor and VLT, Inc. ("VLT") are pursuing infringement claims directly
against Artesyn Technologies, Lambda Electronics, Lucent Technologies and
Power-One in the United States District Court in Boston, Massachusetts. The
lawsuit against Lucent was filed in May 2000 and the lawsuits against the other
defendants were filed in February and March 2001. On April 6, 2001, Vicor and
VLT moved to add Tyco Electronics Power Systems, Inc. as a defendant in the
Lucent proceeding. Tyco Electronics Power Systems, Inc. is the entity which now
operates the former power component business of Lucent. Vicor and VLT are
seeking monetary damages in these suits. On June 29, 2001, Vicor filed a motion
with the Court seeking an attachment of certain of Lucent's property in
Massachusetts. On January 17, 2002, the Court issued an order granting Vicor an
attachment of certain of Lucent's property in an amount of $20 million, unless
Lucent posts a bond for this amount. In granting its order, the Court found that
(1) Vicor had a reasonable likelihood of succeeding in its claim of patent
infringement against Lucent and (2) that $20 million represented a conservative
estimate of actual damages that Vicor is likely to prove at trial. There can be
no assurance that Vicor will ultimately prevail in this litigation or, if it
prevails, as to the amount of damages that would be awarded.

On October 2, 2001, the Company announced that it and VLT had entered into
a license agreement with Magnetek, Inc. ("Magnetek") under which Magnetek
acquired worldwide, non-exclusive rights to use power conversion technology
covered by the Reset Patent. The Company agreed to dismiss its patent
infringement claims against Magnetek on the same date. On July 23, 2001, the
Company announced that it and VLT had entered into a license agreement with
Siemens Corporation ("Siemens") under which Siemens acquired worldwide,
non-exclusive rights to use power conversion technology covered by the Reset
Patent. The Company agreed to dismiss its patent infringement claims against
Siemens on the same date.

The Company is in the process of enforcing its rights against other third
parties that it believes are infringing the Company's intellectual property.

The Company is involved in certain litigation incidental to the conduct of
its business. While the outcome of lawsuits against the Company cannot be
predicted with certainty, management does not expect any current litigation to
have a material adverse impact on the Company.

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

None.













9


PART II

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

The Common Stock of the Company is listed on the National Market System of
the National Association of Securities Dealers Automated Quotation ("NASDAQ")
System and is traded in the over-the-counter market under the NASDAQ symbol
"VICR." The Class B Common Stock of the Company is not traded on any market and
is subject to restrictions on transfer under the Company's Restated Certificate
of Incorporation, as amended. The following table sets forth the quarterly high
and low sales prices for the Common Stock as reported by NASDAQ for the periods
indicated:

2000 HIGH LOW
- ---- ---- ---
First Quarter 45.75 17.50
Second Quarter 36.50 17.50
Third Quarter 56.63 32.25
Fourth Quarter 54.75 25.88


2001
First Quarter 39.94 17.63
Second Quarter 26.09 15.65
Third Quarter 22.85 13.59
Fourth Quarter 17.53 12.16

As of February 28, 2002, there were approximately 369 holders of record of
the Company's Common Stock and approximately 24 holders of record of the
Company's Class B Common Stock. These numbers do not reflect persons or entities
that hold their stock in nominee or "street name" through various brokerage
firms.

DIVIDEND POLICY

The Company has not paid cash dividends on its common equity and it is the
Company's present intention to retain earnings to finance the expansion of the
Company's business.




10



ITEM 6 - SELECTED FINANCIAL DATA

The following selected consolidated financial data with respect to the
Company's statements of operations for the years ended December 31, 2001, 2000
and 1999 and with respect to the Company's balance sheets as of December 31,
2001 and 2000 are derived from the Company's consolidated financial statements,
which appear elsewhere in this report and which have been audited by Ernst &
Young LLP, independent auditors. The following selected consolidated financial
data with respect to the Company's statements of income for the years ended
December 31, 1998 and 1997 and with respect to the Company's balance sheets as
of December 31, 1999, 1998 and 1997 are derived from the Company's audited
consolidated financial statements, which are not included herein. The data
should be read in conjunction with the consolidated financial statements,
related notes and other financial information included herein.




Year Ended December 31
----------------------
(in thousands except per share data)

Income Statement Data 2001 2000 1999 1998 1997
- --------------------- ---- ---- ---- ---- ----


Net revenues $195,910 $257,583 $189,887 $164,634 $162,243
Income (loss) from operations (5,017) 46,010 24,427 18,365 35,950
Net income (loss) (559) 33,920 19,088 15,835 26,217
Net income (loss) per share-diluted (.01) .78 .45 .37 .60
Weighted average shares-diluted 42,342 43,265 42,412 42,785 43,344



At December 31
--------------
(in thousands)

Balance Sheet Data 2001 2000 1999 1998 1997
- ------------------ ---- ---- ---- ---- ----


Working capital $153,159 $146,478 $123,017 $84,594 $128,267
Total assets 289,622 294,113 268,905 249,551 228,843
Total liabilities 24,785 31,192 24,372 40,292 20,419
Stockholders' equity 264,837 262,921 244,533 209,259 208,424



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

The following table sets forth certain items of selected consolidated
financial information as a percentage of net revenues for the periods indicated.
This table and the subsequent discussion should be read in conjunction with the
selected financial data and the Consolidated Financial Statements of the Company
contained elsewhere in this report.




Year Ended December 31
----------------------

2001 2000 1999
---- ---- ----


Net revenues 100.0% 100.0% 100.0%
Gross margin 29.9% 42.6% 42.8%
Selling, general and administrative expenses 22.1% 16.8% 19.4%
Research and development expenses 10.3% 8.0% 10.5%
Income (loss) before income taxes (0.5%) 19.3% 14.7%




11



CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Management's Discussion and Analysis of Financial Condition and Results of
Operations discusses the Company's consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires management
to make estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities. On an ongoing basis, management evaluates its estimates and
judgements, including those related to revenue recognition, allowance for
doubtful accounts, inventories, investments, intangible assets, income taxes,
impairment of long-lived assets, and contingencies and litigation. Management
bases its estimates and judgements on historical experience and on various other
factors that are believed to be reasonable under the circumstances, the results
of which form the basis for making judgements about the carrying value of assets
and liabilities that are not readily apparent from other sources. Actual results
may differ from these estimates under different assumptions or conditions.
Management believes the following accounting policies involve its more
significant judgements and estimates used in the preparation of its consolidated
financial statements. Vicor maintains allowances for doubtful accounts for
estimated losses resulting from the inability of its customers to make required
payments. If the financial condition of the Company's customers were to
deteriorate, resulting in an impairment of their ability to make payments,
additional allowances may be required. The Company adjusts its inventory for
estimated obsolescence or unmarketable inventory based upon assumptions about
future demand and market conditions. If actual future demand or market
conditions are less favorable than those projected by management, additional
inventory write-downs may be required. Management evaluates the recoverability
of the Company's identifiable intangible assets, goodwill and other long-lived
assets in accordance with Statement of Financial Accounting Standards No. 121
(FAS 121), which generally requires that the recoverability of these assets be
assessed when events or circumstances indicate a potential impairment. The
Company is required to adopt two new accounting standards in 2002, FAS 142 and
FAS 144, that provide new guidance regarding potential impairment for goodwill
and long-lived assets, respectively (see Note 1 to the financial statements).
These impairment assessments could result in additional impairment charges to
reduce the carrying value of these assets in the future.

YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000:

Net revenues for fiscal 2001 were $195,910,000, a decrease of $61,673,000
(23.9%) as compared to $257,583,000, for fiscal 2000. The decline in revenues
resulted primarily from a net decrease in unit shipments of standard and custom
products of approximately $54,724,000 and a decrease in license revenue of
approximately $6,949,000. The Company experienced a reduction in demand for its
first-generation products in the fourth quarter of 2000 which continued
throughout 2001. While overall revenues of second-generation products increased
47% in 2001 over 2000, the Company experienced a reduction in demand for
second-generation products in the second half of 2001. While the Company has
experienced an increase in orders in the beginning of 2002, they are still
significantly less than that of 2000 and the first half of 2001. There can be no
assurance that these increases will continue. Both first and second-generation
products are sold to similar customers. The decrease in license revenue was
primarily due to the recognition of the final amounts under the license
agreement with Reltec Corporation during the first quarter of 2001.

Gross margin decreased $51,263,000 (46.7%) from $109,752,000 to
$58,489,000, and decreased as a percentage of net revenues from 42.6% to 29.9%.
The primary component of the decrease in gross margin dollars and gross margin
percentage was the decrease in net revenues. Other factors impacting the gross
margin percentage were an increase in provisions for inventory reserves of
approximately $1,700,000 in 2001 for potential excess materials, an increase in
depreciation on the second-generation automated production line, including
equipment for FastTrack, of approximately $911,000 in 2001 and changes in the
revenue mix. The primary changes in the revenue mix affecting gross margin
percentage were the decrease in license revenue and a higher proportion of
second-generation products shipped in 2001 as compared to 2000, which are at
significantly lower gross margins than those of first-generation products. The
Company continues to refine the designs, processes, equipment and parts
associated with second-generation products. Until the Company achieves higher
production volumes, higher yield levels and attains component cost reductions on
second-generation products, gross margins will continue to be adversely
affected.


12


Selling, general, and administrative expenses were $43,312,000 for the
year, an increase of $133,000 (0.3%) over fiscal 2000. As a percentage of net
revenues, selling, general and administrative expenses increased from 16.8% to
22.1%. The principal components of the $133,000 increase were $1,887,000
(102.0%) of increased legal expense and $1,151,000 (8.0%) of increased
compensation expense. These were offset by a $1,741,000 (25.8%) decrease in
sales commission costs, $665,000 (85.6%) in decreased payroll tax expense
associated with the exercise of stock options and $496,000 (14.1%) in decreased
advertising costs. The increase in legal expense in 2001 was in connection with
activity related to the Company's patent infringement actions (see Part I, Item
3 - "Legal Proceedings").

Research and development expenses decreased $369,000 (1.8%) to $20,194,000,
but increased as a percentage of net revenues to 10.3% from 8.0%. The principal
component of the $369,000 decrease was $947,000 (81.4%) of decreased research
and development expense associated with the operations of Vicor Japan Company,
Ltd. ("VJCL") due to a realignment of their activities to applications
engineering beginning in the second quarter of 2001, which is included in
selling, general and administrative expenses. This was offset by $245,000
(20.8%) of increased research and development costs associated with the
operations of the Vicor Integrated Architects ("VIAs"), $169,000 (19.2%) of
increased facilities costs and $113,000 (34.4%) of increased personnel related
expenses, principally for employment recruiting, advertising and relocation
expenses. The Company has a long-term commitment to reinvesting its profits in
new product design and development in order to maintain and improve its
competitive position.

Other income (expense), net increased $336,000 (8.9%) to $4,122,000. Other
income (expense), net is primarily comprised of interest income derived from
invested cash and cash equivalents and short-term investments, as well as a note
receivable associated with the Company's real estate transaction, as described
in Note 5 to the financial statements. Other income (expense), net increased
primarily due to a gain on the sale of an investment of $1,452,000 in the fourth
quarter of 2001. In exchange, the Company received shares of Scipher plc, a U.K.
company which is publicly traded on the London Stock Exchange. As a result, the
carrying value of this investment will be subject to fluctuations in Scipher's
share price, which is reported in a separate component of stockholders' equity,
and to fluctuations in foreign currency, which is reported in the statement of
operations. Any declines judged to be other than temporary and any realized
gains (losses) will be reported in other income (expense), net (see Note 6 to
the financial statements). This increase was offset by a decrease in interest
income due to a decrease in average interest rates.

Loss before income taxes was $895,000, a decrease of $50,691,000 (101.8%)
compared to 2000.

The benefit for income taxes totaled $336,000 in 2001, while the provision
for income taxes totaled $15,876,000 in 2000. The Company's overall tax rate was
(37.5%) and 31.9% for 2001 and 2000, respectively.

The Company reported a net loss in 2001 of $559,000, as compared with net
income in 2000 of $33,920,000. Diluted loss per share was $(.01) in 2001 and
diluted income per share was $.78 in 2000.

YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999:

Net revenues for fiscal 2000 were $257,583,000, an increase of $67,696,000
(35.7%) as compared to $189,887,000, for fiscal 1999. The growth in revenues
resulted primarily from a net increase in unit shipments of standard and custom
products of approximately $73,403,000, which was offset by a decrease in license
revenue of approximately $5,707,000. The decrease in license revenue was
primarily due to non-recurring payments from licensees for past use of Vicor's
intellectual property in 1999. Although net revenues increased substantially in
fiscal 2000, the Company experienced a reduction in demand for its
first-generation products in the fourth quarter of 2000 which has continued in
early 2001. Shipments of second-generation products approximately doubled in
2000 versus 1999 and have continued to increase in early 2001. Both first and
second-generation products are sold to similar customers.

Gross margin increased $28,568,000 (35.2%) from $81,184,000 to
$109,752,000, and decreased as a percentage of net revenues from 42.8% to 42.6%.
The primary component of the increase in gross margin dollars was an increase in
net revenues. The primary components of the decrease in gross margin percentage
were an increase in depreciation on the second-generation automated production
line of approximately $1,300,000 in 2000 and changes in the revenue mix. These
items were offset by the increase in net revenues.


13


Selling, general, and administrative expenses were $43,179,000 for the
year, an increase of $6,348,000 (17.2%) over fiscal 1999. As a percentage of net
revenues, selling, general and administrative expenses decreased from 19.4% to
16.8%. The principal components of the $6,348,000 increase were $2,037,000
(43.2%) of increased sales commissions costs, $1,802,000 (14.3%) of increased
compensation expense, $1,161,000 (45.4%) of increased marketing program costs
and $756,000 (69.1%) of increased legal fees. The increase in marketing program
costs were due to an increase in space advertising and direct mail to support
new product introductions and increased international marketing expense.

Research and development expenses increased $637,000 (3.2%) to $20,563,000,
and decreased as a percentage of net revenues to 8.0% from 10.5%. The principal
components of the $637,000 increase were $1,314,000 (12.8%) of increased
compensation expense, $249,000 (26.8%) of increased research and development
costs associated with the operations of the VIAs and $198,000 (102.6%) of
increased temporary labor and personnel expenses. The principle component
offsetting the above increase was $1,286,000 (35.3%) of decreased project
material costs.

Other income increased $347,000 (10.1%) to $3,786,000. Other income is
primarily comprised of interest income derived from invested cash and cash
equivalents and short-term investments, as well as a note receivable associated
with the Company's real estate transaction, as described in Note 5 to the
financial statements. Other income increased primarily due to an increase in
interest income due to an increase in cash and cash equivalents balances and
short-term investments and an increase in average interest rates, partially
offset by write-downs of $513,000 for certain equipment no longer in use.

Income before income taxes was $49,796,000, an increase of $21,930,000
(78.7%) compared to 1999. As a percentage of net revenues, income before income
taxes increased from 14.7% in 1999 to 19.3% in 2000.

The provision for income taxes totaled $15,876,000 in 2000 compared to
$8,778,000 in 1999. The Company's overall tax rate was 31.9% and 31.5% for 2000
and 1999, respectively. The increase in the effective tax rate was due to the
reduced impact of tax credits in 2000 on a higher level of income before income
taxes.

Net income in 2000 increased by $14,832,000 to $33,920,000. Diluted
earnings per share were $.78 in 2000 compared to $.45 in 1999.

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 2001, the Company had $57,481,000 in cash and cash
equivalents. Working capital increased $6,681,000 during the year ended December
31, 2001. This increase was due primarily to a decrease in current liabilities
of $7,865,000, offset by a net decrease in current assets of $1,184,000. The
decrease in current assets was due to a decrease in accounts receivable and
inventories of $28,619,000 and a decrease in cash and cash equivalents of
$5,435,000, offset by an increase in short-term investments of $23,208,000 and
an increase in a note receivable of $7,500,000 which was reclassified to current
as it is due in May 2002.

Cash used in investing activities during fiscal 2001 was $46,238,000, an
increase of $23,885,000 (106.9%) compared to fiscal 2000. This increase was
primarily due to an increase in purchases of short-term investments of
$13,464,000 and an increase in net additions to property and equipment of
$5,603,000. Cash provided by financing activities was $1,377,000 in 2001
compared to cash used in financing activities of $22,529,000 in 2000, a net
change of $23,906,000. This change is primarily attributed to a net decrease in
the acquisition cost of treasury stock of $32,851,000 in 2001, and a decrease in
the net proceeds from the issuance of Common Stock upon the exercise of stock
options of $8,945,000.

The Company's primary liquidity needs are for making continuing investments
in manufacturing equipment, much of which is built internally, particularly for
the Company's second-generation products. The internal construction of
manufacturing machinery, in order to provide for additional manufacturing
capacity, is a practice which the Company expects to continue over the next
several years. While manufacturing capacity for second-generation products
increased during 2001, the Company continues to take steps to increase the
capacity of second-generation manufacturing, which includes adding equipment and
re-deploying equipment from first-generation production. In February 2001,
management approved approximately $16 million in new capital expenditures to
execute this plan. Through December 31, 2001, the Company has spent
approximately $9.1

14


million under this plan and anticipates additional spending of approximately $3
million in 2002, which should complete this spending plan.

In February 2000, the Board of Directors of the Company authorized the
repurchase of up to $30,000,000 of the Company's Common Stock (the "February
2000 Plan"). The February 2000 Plan authorizes the Company to make such
repurchases from time to time in the open market or through privately negotiated
transactions. The timing of this program and the amount of the stock that may be
repurchased is at the discretion of management based on its view of economic and
financial market conditions. In 2001, the Company spent $138,000 for the
repurchase of shares of its Common Stock under the February 2000 Plan,
completing this repurchase plan.

In November 2000, the Board of Directors of the Company authorized the
repurchase of up to an additional $30,000,000 of the Company's Common Stock,
under terms similar to those of the February 2000 Plan (the "November 2000
Plan"). There were no repurchases under the November 2000 Plan during 2001.

The Company believes that cash generated from operations and its cash and
cash equivalents will be sufficient to fund planned operations and capital
equipment purchases for the foreseeable future. At December 31, 2001, the
Company had approximately $1,275,000 of capital expenditure commitments,
principally for manufacturing equipment.

The Company does not consider the impact of inflation and changing prices
on its business activities or fluctuations in the exchange rates for foreign
currency transactions to have been material during the last three fiscal years.

COST REDUCTION PLAN

In October 2001, the Company announced a cost reduction plan which included
the following temporary steps: (1) a reduced work schedule for hourly employees,
(2) mandatory use of accrued personal time by salaried employees and (3) a 10%
pay reduction for the Company's officers. This plan has continued into the first
quarter of 2002, and may continue thereafter.

ITEM 7(a) QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISK

The Company is exposed to a variety of market risks, including changes in
interest rates affecting the return on its cash and cash equivalents and
short-term investments, changes in the equity price of the Company's investment
in Scipher plc, a U.K. company whose stock is traded on the London Stock
Exchange, and fluctuations in foreign currency exchange rates.

As the Company's cash and cash equivalents consist principally of money
market securities, which are short-term in nature, the Company's exposure to
market risk on interest rate fluctuations for these investments is not
significant. The Company's short-term investments consist mainly of corporate
and government debt securities, a major portion of which have maturities of less
than one year. These debt securities are all highly rated investments, in which
a significant portion have interest rates reset at auction at regular intervals.
As a result, the Company believes there is minimal market risk to these
investments. The equity price risk for the Company's investment in a U.K.
company may be material as the market price of the stock has experienced
significant fluctuations over the past several months (see Note 6 to the
financial statements). The Company's exposure to market risk for fluctuations in
foreign currency exchange rates relates primarily to the operations of VJCL. The
Company believes that this market risk is currently not material due to the
relatively small size of VJCL's operations.



15




ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX

FINANCIAL STATEMENTS

Report of Independent Auditors

Consolidated Balance Sheets at December 31, 2001 and 2000

Consolidated Statements of Operations For the Years Ended December 31, 2001,
2000 and 1999

Consolidated Statements of Cash Flows For the Years Ended December 31, 2001,
2000 and 1999

Consolidated Statements of Stockholders' Equity For the Years Ended December 31,
2001, 2000 and 1999

Notes to the Consolidated Financial Statements

SCHEDULE (Refer to Item 14)








16




REPORT OF INDEPENDENT AUDITORS


Board of Directors and Stockholders
VICOR CORPORATION

We have audited the accompanying consolidated balance sheets of Vicor
Corporation as of December 31, 2001 and 2000, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
three years in the period ended December 31, 2001. Our audits also included the
financial statement schedule listed in the Index at Item 14(a). These financial
statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Vicor Corporation at December 31, 2001 and 2000, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended December 31, 2001, in conformity with accounting principles generally
accepted in the United States. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.

As discussed in Note 1 to the financial statements, in 2001 the Company
changed its method of accounting for derivatives in accordance with Statement of
Financial Accounting Standards No. 133.




/s/Ernst & Young LLP

Boston, Massachusetts
January 25, 2002,
except for the third paragraph
of Note 6, as to which the date
is February 28, 2002



17


VICOR CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31, 2001 and 2000





2001 2000
---- ----
(in thousands, except share data)
ASSETS

Current assets:
Cash and cash equivalents $ 57,481 $ 62,916
Short-term investments 28,808 5,600
Accounts receivable, less allowance of $1,460 in 2001 and 23,224 48,094
$1,196 in 2000
Note receivable 7,500 -
Inventories, net 40,748 44,497
Deferred tax assets 8,850 6,516
Other current assets 1,889 2,061
-------- --------
Total current assets 168,500 169,684

Property, plant and equipment, net 110,846 107,807
Notes receivable from related parties 2,167 1,566
Other note receivable - 7,500
Other assets 8,109 7,556
-------- --------
$289,622 $294,113
======== ========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable $3,087 $9,515
Accrued compensation and benefits 3,492 4,372
Accrued expenses 4,321 5,064
Income taxes payable 3,624 4,255
Deferred revenue 817 -
-------- --------
Total current liabilities 15,341 23,206

Deferred income taxes 9,444 7,986
Commitments and contingencies - -

Stockholders' equity:
Preferred Stock, $.01 par value, 1,000,000 shares authorized;
360,001 issued and none outstanding in 2001 and 2000 - -
Class B Common Stock: 10 votes per share, $.01 par value,
14,000,000 shares authorized, 11,930,848, issued and outstanding
(11,993,348 in 2000) 119 120
Common Stock: 1 vote per share, $.01 par value, 62,000,000 shares
authorized, 36,784,556 shares issued and 30,458,758 outstanding
(36,550,504 issued and 30,235,806 outstanding in 2000) 369 367
Additional paid-in capital 145,359 142,573
Retained earnings 219,340 219,899
Accumulated other comprehensive income 40 214
Treasury stock at cost: 6,325,798 shares (6,314,698 shares in 2000) (100,390) (100,252)
-------- --------
Total stockholders' equity 264,837 262,921
-------- --------
$289,622 $294,113
======== ========

See accompanying notes



18





VICOR CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended December 31, 2001, 2000 and 1999


2001 2000 1999
---- ---- ----
(in thousands, except per share amounts)


Net revenues $195,910 $257,583 $189,887

Costs and expenses:
Cost of revenue 137,421 147,831 108,703
Selling, general and administrative 43,312 43,179 36,831
Research and development 20,194 20,563 19,926
-------- -------- --------
200,927 211,573 165,460
-------- -------- --------

Income (loss) from operations (5,017) 46,010 24,427

Other income (expense), net 4,122 3,786 3,439
-------- -------- --------

Income (loss) before income taxes (895) 49,796 27,866

Provision (benefit) for income taxes (336) 15,876 8,778
-------- -------- --------

Net income (loss) ($ 559) $ 33,920 $ 19,088
======== ======== ========

Net income (loss) per common share:
Basic ($ .01) $ .80 $ .46
======== ======== ========

Diluted ($ .01) $ .78 $ .45
======== ======== ========

Shares used to compute net income (loss) per share:
Basic 42,342 42,276 41,568
======== ======== ========

Diluted 42,342 43,265 42,412
======== ======== ========









See accompanying notes



19



VICOR CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 2001, 2000 and 1999




2001 2000 1999
---- ---- ----
(in thousands)

Operating activities:
Net income (loss) $ (559) $ 33,920 $ 19,088
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 19,984 18,326 15,782
Gain on sale of investment (1,452) - -
Loss on disposal of equipment 360 625 110
Deferred income taxes (902) 764 890
Tax benefit relating to stock option plans 1,272 7,672 6,148
Change in current assets and liabilities, net 20,464 (22,430) (25,745)
-------- -------- --------

Net cash provided by operating activities 39,167 38,877 16,273

Investing activities:
Additions to property, plant and equipment (22,386) (16,783) (14,827)
Purchase of short-term investments (23,064) (9,600) -
Sales and maturities of short-term investments - 4,000 -
Proceeds from sale of equipment 10 34 17
Decrease (increase) in other assets (197) 364 (1,276)
Decrease (increase) in notes receivable (601) (368) 393
-------- -------- --------

Net cash used in investing activities (46,238) (22,353) (15,693)

Financing activities:
Proceeds from exercise of stock options 1,515 10,460 18,062
Acquisitions of treasury stock (138) (32,989) (8,564)
-------- -------- --------

Net cash provided by (used in)
financing activities 1,377 (22,529) 9,498

Effect of foreign exchange rates on cash 259 (188) 134
-------- -------- --------

Net increase (decrease) in cash and cash equivalents (5,435) (6,193) 10,212

Cash and cash equivalents at beginning of year 62,916 69,109 58,897
-------- -------- --------
Cash and cash equivalents at end of year $ 57,481 $ 62,916 $ 69,109
======== ======== ========




Continued on following page


20



VICOR CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
Years ended December 31, 2001, 2000 and 1999




2001 2000 1999
---- ---- ----
(in thousands)

Change in current assets and liabilities:
Accounts receivable $ 24,609 $ (15,927) $ (3,950)
Inventories 3,508 (11,426) (3,595)
Other current assets 128 3 (374)
Accounts payable and other accrued items (7,971) 1,208 (13,225)
Income taxes payable (627) 3,712 (4,601)
Deferred revenue 817 - -
-------- ---------- ----------
$ 20,464 $ (22,430) $ (25,745)
======== ========== ==========
Supplemental disclosures:
Cash paid during the year for income taxes,
net of refunds ($ 937) $ 3,935 $ 5,777

















See accompanying notes

21





VICOR CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended December 31, 2001, 2000 and 1999

(in thousands)




ACCUMULATED
CLASS B ADDITIONAL OTHER TOTAL
COMMON COMMON PAID-IN RETAINED COMPREHENSIVE TREASURY STOCKHOLDERS'
STOCK STOCK CAPITAL EARNINGS INCOME STOCK EQUITY
------ ------- --------- ---------- -------- --------- ----------


Balance at December 31, 1998 $121 $342 $100,255 $166,891 $349 $(58,699) $209,259

Sales of Common Stock 14 18,048 18,062
Conversion of Class B Common
Stock to Common Stock -
Income tax benefit from
transactions involving stock options 6,148 6,148
Purchase of treasury stock (8,564) (8,564)

Net income for 1999 19,088 19,088
Currency translation adjustments 540 540
Comprehensive income 19,628
---- ---- -------- -------- ---- ---------- --------
Balance at December 31, 1999 121 356 124,451 185,979 889 (67,263) 244,533

Sales of Common Stock 10 10,450 10,460
Conversion of Class B Common
Stock to Common Stock (1) 1 -
Income tax benefit from
transactions involving stock options 7,672 7,672
Purchase of treasury stock (32,989) (32,989)

Net income for 2000 33,920 33,920
Currency translation adjustments (675) (675)
Comprehensive income 33,245
---- ---- -------- -------- ---- ---------- --------
Balance at December 31, 2000 120 367 142,573 219,899 214 (100,252) 262,921

Sales of Common Stock 1 1,514 1,515
Conversion of Class B Common
Stock to Common Stock (1) 1 -
Income tax benefit from
transactions involving stock options 1,272 1,272
Purchase of treasury stock (138) (138)

Net loss for 2001 (559) (559)
Unrealized gain on investments 55 55
Currency translation adjustments (229) (229)
Comprehensive loss (733)
---- ---- -------- -------- ---- ---------- --------
Balance at December 31, 2001 $119 $369 $145,359 $219,340 $ 40 $(100,390) $264,837
==== ==== ======== ======== ==== ========== ========



See accompanying notes

22



VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS
Vicor Corporation (the "Company") designs, develops, manufactures and
markets modular power converters, power system components, and power systems
using a patented, high frequency power conversion technology designated "zero
current switching." The Company also licenses certain rights to its technology
in return for ongoing royalties. The principal markets for the power converters
and systems are large Original Equipment Manufacturers and smaller, lower volume
users which are broadly distributed across several major market areas.

PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All intercompany transactions and balances have been
eliminated upon consolidation.

REVENUE RECOGNITION
Product revenue is recognized in the period when persuasive evidence of an
arrangement with a customer exists, the products are shipped and title has
transferred to the customer, the price is fixed and determinable, and collection
is considered probable. License fees are recognized ratably over the period of
exclusivity or as additional royalty payments would have been required, if
greater, or over the period in which the Company provides services. The Company
recognizes revenue on such arrangements only when the contract is signed, the
license term has begun, all obligations have been delivered to the customer, and
collection is probable.

FOREIGN CURRENCY TRANSLATION
The financial statements of Vicor Japan Company, Ltd. ("VJCL"), for which
the functional currency is the Japanese yen, have been translated into U.S.
dollars in accordance with FASB Statement No. 52, "Foreign Currency
Translation." All balance sheet accounts have been translated using the exchange
rate in effect at the balance sheet date. Income statement amounts have been
translated at the average exchange rates in effect during the year. The gains
and losses resulting from the changes in exchange rates from year to year have
been reported in other comprehensive income. Foreign currency transaction
losses, included in other income (expense), net, were approximately $232,000,
$75,000 and $282,000 in 2001, 2000 and 1999, respectively.

CASH AND CASH EQUIVALENTS
Cash and cash equivalents include funds held in checking and money market
accounts with banks, certificates of deposit and debt securities with maturities
of less than three months when purchased and money market securities. Cash and
cash equivalents are valued at cost which approximates market value. The
Company's money market securities, which are classified as cash equivalents on
the balance sheet, are purchased and redeemed at par. The estimated fair value
is equal to the cost of the securities and due to the nature of the securities
there are no unrealized gains or losses at the balance sheet dates. As of
December 31, 2001, the Company has approximately $47 million of
available-for-sale securities included in cash and cash equivalents ($52 million
as of December 31, 2000).

SHORT-TERM INVESTMENTS
The Company's short-term investments are classified as available for sale
securities and are recorded at fair value, with the unrealized gains and losses,
net of tax, reported in a separate component of stockholders' equity. The
amortized cost of debt securities is adjusted for amortization of premiums and
accretion of discounts to maturity. Such amortization, along with interest and
realized gains and losses, are included in other income (expense), net. The
Company considers these investments, which represent funds for current
operations, to be an integral part of its cash management activities. The
Company has no trading securities or held-to-maturity securities.

INVENTORIES
Inventories are valued at the lower of cost (determined using the first-in,
first-out method) or market. The Company provides reserves for inventories
estimated to be excess, obsolete or unmarketable. The Company's estimation
process for such reserves is based upon its known backlog, projected future
demand and expected

23


VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

market conditions. As sales for the Company's products decline, such as occurred
during 2001, the Company's estimation process will cause larger inventory
reserves to be recorded, resulting in larger charges to cost of sales. This
occurred during 2001.

CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash and cash equivalents,
short-term investments and trade accounts receivable. The Company maintains cash
and cash equivalents and certain other financial instruments with various high
credit, quality financial institutions. Concentrations of credit risk with
respect to trade accounts receivable are limited due to the large number of
entities comprising the Company's customer base. Credit losses have consistently
been within management's expectations and have not been material.

INTANGIBLE ASSETS
Intangible assets, which are included in the other assets in the
accompanying balance sheets, consist primarily of values assigned to patents and
to the excess of cost over the assigned value of net assets acquired. Intangible
assets are amortized using the straight-line method over periods ranging from
five to fifteen years. Amortization expense was approximately $1,007,000,
$1,057,000 and $929,000 in 2001, 2000 and 1999, respectively. Accumulated
amortization was $2,749,000 at December 31, 2001 and $2,585,000 at December 31,
2000.

Long-lived assets, such as these intangible assets, are included in
impairment evaluations when events or circumstances exist that indicate the
carrying amount of those assets may not be recoverable. If the impairment
evaluation indicates the affected asset is not recoverable, the asset's carrying
value would be reduced to fair value. No event has occurred that would suggest
any impariment in the value of long-lived assets recorded in the accompanying
consolidated financial statements.

ADVERTISING EXPENSE
The cost of advertising is expensed as incurred. The Company incurred
$3,010,000, $3,506,000, and $2,189,000 in advertising costs during 2001, 2000
and 1999, respectively.

NET INCOME (LOSS) PER COMMON SHARE
Basic and diluted income (loss) per share are calculated in accordance with
FASB Statement No. 128, "Earnings per Share."

USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

COMPREHENSIVE INCOME
The Company reports comprehensive income in accordance with FASB Statement
No. 130, "Reporting Comprehensive Income." Statement No. 130 requires the
foreign currency translation adjustments related to VJCL and unrealized gains
(losses) on short-term investments to be included in other comprehensive income.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 133 (FAS 133), "Accounting for
Derivative Instruments and Hedging Activities," which required adoption in
periods beginning after June 15, 1999. FAS 133 was subsequently amended by FAS
137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of
the Effective Date of FASB Statement No. 133," which made FAS 133 effective for
fiscal years beginning after June 15, 2000. Accordingly, the Company adopted FAS
133 in the first quarter of 2001. The adoption of FAS 133 did not have a
significant impact on the Company's financial position or the results of
operations.

24


VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

In July 2001, the FASB issued Statement of Financial Accounting Standards
No. 141, (FAS 141), "Business Combinations" and No. 142, (FAS 142) "Goodwill and
Other Intangible Assets." FAS 141 eliminated the pooling-of-interests method of
accounting for business combinations, except for qualifying business
combinations, and further clarifies the criteria to recognize intangible assets
separately from goodwill. Under FAS 142, goodwill and indefinite lived
intangible assets will no longer be amortized but will be tested for impairment
at least annually at the reporting unit level. The Company is required to adopt
FAS 141 and 142 in the first quarter of 2002, and is currently in the process of
evaluating the impact FAS 142 will have on its financial position and results of
operations. FAS 142 will result in the elimination of goodwill amortization in
fiscal 2002.

In June 2001, the FASB issued Statement of Financial Accounting Standards
No. 143 (FAS 143), "Accounting for Asset Retirement Obligations," which
addresses financial accounting and reporting for obligations associated with the
retirement of tangible long-lived assets and the associated asset retirement
costs. It also applies to legal obligations associated with the retirement of
long-lived assets that result from the acquisition, contstruction, development
and/or the normal operation of a long-lived asset, except for certain
obligations of lessees. The Company is required to adopt FAS 143 in the first
quarter of 2003 and does not expect the Statement will have a material effect on
the financial position or results of operations.

In October 2001, the FASB issued Statement of Financial Accounting
Standards No. 144, (FAS 144), "Accounting for the Impairment or Disposal of
Long-Lived Assets." FAS 144 supercedes FAS 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" and provides a
single accounting model for long-lived assets to be disposed of. The Company is
required to adopt FAS 144 in the first quarter of 2002, and does not expect the
adoption to have any significant impact on its consolidated financial
statements.


2. SHORT-TERM INVESTMENTS

The following is a summary of available-for-sale securities (in thousands):



Gross Gross Estimated
Unrealized Unrealized Fair
Cost Gains Losses Value
---- ------ ------ -----
DECEMBER 31, 2001

U. S. corporate securities $18,137 $147 $ - $18,284
Obligations of states and political
subdivisions 9,094 10 (13) 9,091
Other debt securities 1,433 - - 1,433
------- ---- ------- -------
$28,664 $157 $( 13) $28,808
======= ==== ======= =======

DECEMBER 31, 2000
U. S. corporate securities $ 5,600 $ - $ - $ 5,600
======= ==== ======= =======



25


VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. SHORT-TERM INVESTMENTS (CONTINUED)

The amortized cost and estimated fair value of debt securities at December
31, 2001, by contractual maturities, are shown below (in thousands):

Estimated
Cost Fair Value
---- ----------
Due in one year or less $17,791 $17,794
Due after one year through two years 5,573 5,589
Due after two years 5,300 5,425
------- -------
$28,664 $28,808
======= =======

3. INVENTORIES

Inventories were as follows (in thousands):




December 31
2001 2000
---- ----


Raw materials $31,979 $31,341
Work-in-process 3,758 6,513
Finished goods 5,011 6,643
------- -------
$40,748 $44,497
======= =======


4. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are stated at cost and are depreciated and
amortized over a period of 3 to 31.5 years generally under the straight-line
method for financial reporting purposes and accelerated methods for income tax
purposes. Property, plant and equipment were as follows (in thousands):




December 31
2001 2000
---- ----


Land $2,089 $2,089
Buildings and improvements 36,203 36,203
Machinery and equipment 157,962 136,258
Furniture and fixtures 5,222 5,061
Leasehold improvements 3,664 3,126
Construction-in-progress 8,091 8,847
-------- -------
213,231 191,584
Less accumulated depreciation and amortization 102,385 83,777
-------- --------
$110,846 $107,807
======== ========


During 2001, the Company had write-downs of approximately $360,000
($513,000 in 2000) for certain equipment no longer in use, which was included in
other income (expense), net in the accompanying consolidated statements of
operations.

At December 31, 2001, the Company had approximately $1,275,000 of capital
expenditure commitments.

26


VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5. NOTES RECEIVABLE

In May 1997, the Company received a promissory note in the amount of
$7,500,000 from an unrelated third party in exchange for $5,000,000 in cash plus
the termination of an existing note in the amount of $2,500,000. The note bears
interest at 9% and is due in May 2002. The note is secured by a mortgage on
certain real estate and by the assignment of certain leases and other contracts.

The Company's President has borrowed funds from the Company pursuant to a
series of unsecured term notes. The notes have terms of eight years and are due
at various dates through December 2009. The notes bear interest at the higher of
the Company's prime borrowing rate less 1%, or the applicable federal rate under
the Internal Revenue Code of 1986, as amended. As of December 31, 2001, the
notes and interest receivable balance was approximately $2,132,000 ($1,600,000
as of December 31, 2000) and the applicable interest rate at December 31, 2001
was 3.75% (8.50% at December 31, 2000).

6. INVESTMENT

In December 2001, the Company sold shares in a privately held company which
it had accounted for on the cost method, receiving 1,117,465 shares of Scipher
plc, a U.K. company. The sale resulted in a realized gain of $1,452,000. In the
third quarter of 2001, the Company had recognized a decline judged to be other
than temporary on the cost method investment of approximately $600,000.

At December 31, 2001, the investment is valued at $2,400,000, and is
included in other assets in the accompanying balance sheet. The investment is
carried at fair value, which is based on market quotes. Adjustments to the fair
value of the investment due to fluctuations in the share price are reported in a
separate component of stockholders' equity, while adjustments due to
fluctuations in foreign currency are reported in other income (expense), net.
Any declines judged to be other than temporary and any realized gains (losses)
from the sale of the investment will be reported in other income (expense), net.

At February 28, 2002, the fair value of the investment was approximately
$1,544,000, which represents an unrealized loss of approximately $908,000
($536,000 net of income taxes).

7. STOCKHOLDERS' EQUITY

In February 2000, the Board of Directors of the Company authorized the
repurchase of up to $30,000,000 of the Company's Common Stock (the "February
2000 Plan"). The plan authorizes the Company to make such repurchases from time
to time in the open market or through privately negotiated transactions. The
timing of this program and the amount of the stock that may be repurchased is at
the discretion of management based on its view of economic and financial market
conditions. In 2001, the Company spent $138,000 in the repurchase of its Common
Stock under the February 2000 Plan, completing this repurchase plan.

In November 2000, the Board of Directors of the Company authorized the
repurchase of up to an additional $30,000,000 of the Company's Common Stock,
under terms similar to those of the February 2000 Plan (the "November 2000
Plan"). There were no repurchases under the November 2000 Plan during 2001.

Common Stock

Each share of Common Stock entitles the holder thereof to one vote on all
matters submitted to the stockholders. Each share of Class B Common Stock
entitles the holder thereof to ten votes on all such matters.

Shares of Class B Common Stock are not transferable by a stockholder except
to or among such stockholder's spouse, certain of such stockholder's relatives,
and certain other defined transferees. Class B Common Stock is not listed or
traded on any exchange or in any market. Class B Common Stock is convertible at
the option of the holder thereof at any time and without cost to the stockholder
into shares of Common Stock on a one-for-one basis.

27


VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7. STOCKHOLDERS' EQUITY (CONTINUED)

During 2001, a total of 171,552 shares of Common Stock were issued upon the
exercise of stock options, and 62,500 shares of Class B Common Stock were
converted into 62,500 shares of Common Stock.


8. INCOME (LOSS) PER SHARE

The following table sets forth the computation of basic and diluted income
(loss) per share (in thousands, except per share amounts):




2001 2000 1999
---- ---- ----

Numerator:
Net income (loss) $ (559) $ 33,920 $ 19,088
======= ======== ========

Denominator:
Denominator for basic income (loss) per share - weighted average shares
42,342 42,276 41,568

Effect of dilutive securities:
Employee stock options - 989 844
------ ------ ------

Denominator for diluted income per share -
adjusted weighted -average shares and assumed conversions 42,342 43,265 42,412
====== ====== ======

Basic income (loss) per share $ (.01) $ .80 $ .46
======= ====== ======

Diluted income (loss) per share $ (.01) $ .78 $ .45
======= ====== ======


Options to purchase shares of Common Stock in 2001 were not included in the
calculation of net loss per share as the effect would have been antidilutive.
Options to purchase 15,730 shares of Common Stock were outstanding during 2000
(none in 1999) but were not included in the computation of diluted income per
share because the options' exercise prices were greater than the average market
price of the Common Stock and, therefore, the effect would have been
antidilutive.

9. EMPLOYEE BENEFIT PLANS

Stock Options

The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25) and related
Interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided for under FASB
Statement No. 123, "Accounting for Stock-Based Compensation," requires use of
option valuation models that were not developed for use in valuing employee
stock options. Under APB 25, because the exercise price of the Company's
employee stock options equals the market price of the underlying stock on the
date of grant, no compensation expense is recognized.


28


VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

9. EMPLOYEE BENEFIT PLANS (CONTINUED)

Under the Company's 2000 Stock Option and Incentive Plan (the "2000 Plan"),
the Board of Directors or the Compensation Committee may grant certain stock
incentive awards based on the Company's Common Stock, including stock options,
stock appreciation rights, restricted stock, performance shares, unrestricted
stock, deferred stock and dividend equivalent rights. Awards may be granted to
employees and other key persons, including non-employee directors. Discretionary
awards of stock options to non-employee directors shall be in lieu of any
automatic grant of stock options under the Company's 1993 Stock Option Plan (the
"1993 Plan") and the Company's 1998 Stock Option and Incentive Plan (the "1998
Plan"). Incentive stock options may be granted to employees at a price at least
equal to the fair market value per share of the Common Stock on the date of
grant, and non-qualified options may be granted to non-employee directors at a
price at least equal to 85% of the fair market value of the Common Stock on the
date of grant. A total of 2,000,000 shares of Common Stock have been reserved
for issuance under the 2000 Plan. The period of time during which an option may
be exercised and the vesting periods will be determined by the Compensation
Committee. The term of each option may not exceed ten years from the date of
grant.

Under the 1998 Plan, the Board of Directors or the Compensation Committee
may grant certain stock incentive awards based on the Company's Common Stock,
including stock options, stock appreciation rights, restricted stock,
performance shares, unrestricted stock, deferred stock and dividend equivalent
rights. Awards may be granted to employees and other key persons, including
non-employee directors. Incentive stock options may be granted to employees at a
price at least equal to the fair market value per share of the Common Stock on
the date of grant, and non-qualified options may be granted to non-employee
directors at a price at least equal to 85% of the fair market value of the
Common Stock on the date of grant. A total of 2,000,000 shares of Common Stock
were reserved for issuance under the 1998 Plan. The period of time during which
an option may be exercised and the vesting periods will be determined by the
Compensation Committee. The term of each option may not exceed ten years from
the date of grant.

Under the 1993 Plan, the Board of Directors or the Compensation Committee
may grant stock options to employees and non-employee directors to purchase
shares of Common Stock at a price at least equal to the fair market value per
share of the outstanding Common Stock at the time the option is granted. Both
incentive stock options intended to qualify under Section 422 of the Internal
Revenue Code and non-qualified stock options have been authorized to be granted.
Incentive stock options may be granted to employees, including employees who are
directors of the Company, and non-qualified options may be granted to
non-employee directors. A total of 4,000,000 shares of Common Stock were
reserved for issuance under the 1993 Plan. Stock options are typically granted
with vesting periods and become exercisable over various periods of time,
ranging from six months to five years from the date of grant, and expire over
various periods of time, ranging from one to ten years from the date of grant.

Under the Company's 1984 Stock Option Plan, as amended (the "1984 Plan"),
the Board of Directors or the Compensation Committee granted stock options to
employees to purchase shares of Common Stock at a price at least equal to the
fair market value per share of the outstanding Common Stock at the time the
option was granted. Stock options under the 1984 Plan were typically granted
with vesting periods and became exercisable over various periods of time,
ranging from six months to five years from the date of grant, and expire over
various periods of time, ranging from one to thirteen years from the date of
grant. In connection with the adoption and approval of the 1993 Plan, the Board
of Directors terminated the granting of options under the 1984 Plan.


29


VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


9. EMPLOYEE BENEFIT PLANS (CONTINUED)

Activity as to stock options is as follows:




2001 2000 1999
---- ---- ----


Outstanding at beginning of year 2,931,206 2,774,879 2,624,657
Granted 1,266,655 1,293,937 1,865,943
Forfeited and expired (251,389) (258,388) (376,874)
Exercised (171,552) (879,222) (1,338,847)
--------- --------- -----------

Outstanding at end of year 3,774,920 2,931,206 2,774,879
========= ========= =========

Exercisable at end of year 1,551,560 917,019 1,204,361
========= ======= =========

Weighted - average exercise price:
Outstanding at beginning of year $21.53 $14.00 $15.30
Granted $19.81 $30.95 $12.40
Forfeited and expired $23.94 $20.60 $16.95
Exercised $9.00 $11.90 $13.49
Outstanding at end of year $21.37 $21.53 $14.00
Exercisable at end of year $20.92 $14.64 $11.53

Weighted - average fair value of options granted during the year $9.91 $14.23 $4.97
Price range per share of outstanding options $ 1.83-54.50 $ 1.25-54.50 $1.00-31.56
============ ============ ===========
Price range per share of options granted $12.46-35.75 $17.94-54.50 $9.13-31.56
============ ============ ===========
Price range per share of options exercised $ 1.25-31.13 $ 1.00-31.13 $1.84-31.13
============ ============ ===========

Available for grant at end of year 920,516 1,935,782 976,639
============ ============ ===========


The weighted - average contractual life for options outstanding as of December
31, 2001 is 5.36 years.








30


VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


9. EMPLOYEE BENEFIT PLANS (CONTINUED)

The following table summarizes information about stock options outstanding as of
December 31, 2001:




Range of Exercise Prices
------------------------

$1.83-$13.63 $13.88-$19.56 $19.75-$35.75 $39.41-$54.50
------------ ------------- ------------- -------------

OPTIONS OUTSTANDING:
Number Outstanding 1,371,704 746,022 1,115,391 541,803
Weighted-Average Remaining Contractual Life 5.74 6.06 5.03 4.14
Weighted-Average Exercise Price $11.91 $16.98 $25.84 $42.16

OPTIONS EXERCISABLE:
Number Exercisable 477,242 341,873 532,454 199,991
Weighted-Average Exercise Price $10.10 $16.68 $25.41 $42.06


Pro forma information regarding net income (loss) and net income (loss) per
share is required by FAS 123, which also requires that the information be
determined as if the Company had accounted for its employee stock options
granted subsequent to December 31, 1994 under the fair value method described in
that Statement. The fair value for these options was estimated at the date of
grant using a Black-Scholes option pricing model with the following
weighted-average assumptions for 2001, 2000 and 1999, respectively: risk-free
interest rates of 4.4%, 6.1% and 5.4%; dividend yields of zero; volatility
factor of the expected market price of the Company's common stock of .66, .59
and .55; and a weighted-average expected life of the option of 4.5, 4.4 and 3.3
years.

The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair values of its employee stock options.







31


VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

9. EMPLOYEE BENEFIT PLANS (CONTINUED)


For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information follows (in thousands except for earnings per share
information):




2001 2000 1999
---- ---- ----


Pro forma net income (loss) $(8,070) $28,133 $15,811

Pro forma net income (loss) per share:
Basic $(.19) $.67 $.38
Diluted $(.19) $.66 $.38


The effects on 2001, 2000 and 1999 pro forma net income (loss) and net
income (loss) per share of expensing the fair value of stock options issued are
not necessarily representative of the effects on reporting the pro forma results
of operations for future years as the periods presented include only seven, six
and five years, respectively, of option grants under the Company's plans.

401(k) Plan

The Company sponsors a savings plan available to all domestic employees,
which qualifies under Section 401(k) of the Internal Revenue Code. Employees may
contribute to the plan from 1% to 20% of their pre-tax salary subject to
statutory limitations. Beginning October 1, 2000, the Company began to match
employee contributions to the plan at a rate of 50% up to the first 3% of an
employee's contribution. The Company's matching contributions currently vest at
a rate of 20% per year based upon years of service. The Company's contribution
to the plan was approximately $662,000 in 2001 and $176,000 in 2000.

Stock Bonus Plan

Under the Company's 1985 Stock Bonus Plan, as amended, shares of Common
Stock may be awarded to employees from time to time as determined by the Board
of Directors. At December 31, 2001, 109,964 shares were available for further
award. All shares awarded to employees under this plan have vested. No further
awards are contemplated under this plan at the present time.









32


VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

10. INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets are as follows (in thousands):




December 31
2001 2000
---- ----
Deferred tax assets:

Inventory reserves $ 3,554 $ 2,199
Investment tax credit carry forward 1,907 1,442
Research and development tax credit carry forward 1,407 850
Vacation 751 986
Bad debt 601 493
Other 630 546
------- -------
Total deferred tax assets (current) 8,850 6,516
Deferred tax liabilities:
Depreciation (8,201) (6,637)
Patent amortization (1,346) (1,349)
Other 103 -
------- -------
Total deferred tax liabilities (noncurrent) (9,444) (7,986)
------- -------
Net deferred tax assets (liabilities) $ (594) $(1,470)
======= ========


For financial reporting purposes, income (loss) before income taxes
includes the following components (in thousands):




2001 2000 1999
---- ---- ----


Domestic $(100) $48,708 $26,820
Foreign (795) 1,088 1,046
------ ------- -------
$(895) $49,796 $27,866
====== ======= =======


Significant components of the provision (benefit) for income taxes are as
follows (in thousands):




2001 2000 1999
---- ---- ----

Current:
Federal $ 638 $13,266 $6,665
Foreign - 425 408
State (72) 1,421 815
------ ------- ------
566 15,112 7,888
Deferred:
Federal (902) 764 890
------ ------- ------
$(336) $15,876 $8,778
====== ======= ======




33


VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

10. INCOME TAXES (CONTINUED)

The reconciliation of the federal statutory rate to the effective income
tax rate is as follows:




2001 2000 1999
---- ---- ----


Statutory federal tax rate (35.0%) 35.0% 35.0%
State income taxes, net of federal income tax benefit (5.2) 1.9 1.9
Meals and entertainment expense 14.1 0.2 0.4
Foreign Sales Corporation benefit (9.8) (0.5) (0.6)
Tax Credits - (3.5) (3.6)
Other (1.6) (1.2) (1.6)
------- ----- -----
(37.5)% 31.9% 31.5%
======= ===== =====


The research and development tax credit carry forwards expire beginning in
2015. The investment tax credit carryforwards expire beginning in 2003.


11. COMMITMENTS AND CONTINGENCIES

The Company leases certain of its office, warehousing and manufacturing
space, as well as certain equipment. The future minimum rental commitments under
noncancelable operating leases with remaining terms in excess of one year are as
follows (in thousands):

YEAR
2002 $1,161
2003 1,059
2004 797
2005 390
2006 202
Thereafter 121

Rent expense was approximately $1,065,000, $1,028,000 and $1,146,000 in
2001, 2000 and 1999, respectively. The Company also pays executory costs such as
taxes, maintenance and insurance.

The Company has a contract with a third-party to supply nitrogen for its
manufacturing and research and development activities. Under the contract, the
Company is obligated to pay a minimum of $258,000 annually, subject to
semi-annual price adjustments, through 2015.

The Company is involved in certain litigation incidental to the conduct of
its business. While the outcome of lawsuits against the Company cannot be
predicted with certainty, management does not expect any current litigation to
have a material adverse effect on the Company.

12. SEGMENT INFORMATION

The Company operates in one industry segment: the development, manufacture
and sale of power conversion components and systems. During 2001, 2000 and 1999,
no customer accounted for more than 10% of net revenues. Export sales, as a
percentage of total revenue, were approximately 36%, 32% and 30% in 2001, 2000
and 1999, respectively. Export sales and receipts are recorded and received in
U.S. dollars. Foreign exchange fluctuations have not been material to the
Company's operating results during the last three years.

34


VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

13. LICENSE AGREEMENT AND LITIGATION SETTLEMENT

On February 1, 1999, the Company and Reltec Corporation ("Reltec") entered
into a license agreement under which Reltec acquired a non-exclusive, worldwide
license to use Vicor's patented "reset" technology. Concurrently, the Company
and Reltec agreed to settle all pending litigation and disputes relating to
Reltec's past use of certain Vicor intellectual property. In consideration for
the license and the separate settlement of the litigation, Reltec made a
one-time payment of $22.5 million into an escrow fund. Vicor was obligated to
make know-how and technical support available to Reltec under the license and
received and recognized income from the escrow fund through the first quarter of
2001.

14. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The following table sets forth certain unaudited quarterly financial data
(in thousands, except per share amounts):




FIRST SECOND THIRD FOURTH TOTAL
----- ------ ----- ------ -----


2001: Net revenues $55,019 $50,260 $51,599 $39,032 $195,910
Gross profit 17,815 14,215 15,985 10,474 58,489
Net income (loss) 2,079 (953) 122 (1,807) (559)
Net income (loss) per
share:
Basic .05 (.02) .00 (.04) (.01)
Diluted .05 (.02) .00 (.04) (.01)


FIRST SECOND THIRD FOURTH TOTAL
----- ------ ----- ------ -----

2000: Net revenues $57,786 $62,778 $67,851 $69,168 $257,583
Gross profit 24,767 27,156 30,030 27,799 109,752
Net income 7,116 8,215 10,039 8,550 33,920
Net income per share:
Basic .17 .19 .24 .20 .80
Diluted .16 .19 .23 .20 .78


The Company recorded a gain on the sale of an investment of $1,452,000 in
the fourth quarter of 2001. In exchange, the Company received shares in Scipher
plc, a U.K. company which is publicly traded on the London Stock Exchange (see
Note 6).









35


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

None.

PART III

ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Incorporated by reference from the Company's Definitive Proxy Statement for
its 2002 annual meeting of stockholders.

ITEM 11 - EXECUTIVE COMPENSATION

Incorporated by reference from the Company's Definitive Proxy Statement for
its 2002 annual meeting of stockholders.

ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Incorporated by reference from the Company's Definitive Proxy Statement for
its 2002 annual meeting of stockholders.

ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Incorporated by reference from the Company's Definitive Proxy Statement for
its 2002 annual meeting of stockholders.

PART IV

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

(A) (1) FINANCIAL STATEMENTS

See index in Item 8

(A) (2) SCHEDULES

Schedule II Valuation and Qualifying Accounts

All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not required
under the related instructions or are inapplicable, and therefore have been
omitted.

(A) (3) EXHIBITS

Exhibits Description of Document
3.1 o Restated Certificate of Incorporation, dated February 28, 1990 (1)
3.2 o Certificate of Ownership and Merger Merging Westcor Corporation, a
Delaware Corporation, into Vicor
Corporation, a Delaware Corporation, dated December 3, 1990 (1)
3.3 o Certificate of Amendment of Restated Certificate of Incorporation,
dated May 10, 1991 (1)
3.4 o Certificate of Amendment of Restated Certificate of Incorporation,
dated June 23, 1992 (1)
3.5 o Bylaws, as amended (1)
4.1 o Specimen Common Stock Certificate (2)
10.1 o 1984 Stock Option Plan of the Company, as amended (2)
10.2 o 1993 Stock Option Plan (3)
10.3 o $7,500,000 Promissory Note to Vicor Corporation from Andover Park
Realty Trust dated May 29, 1997 (4)
10.4 o Loan Agreement between Vicor Corporation and Andover Park Realty
Trust dated May 29, 1997 (4)
10.5 o Mortgage and Security Agreement to Vicor Corporation from Andover
Park Realty Trust dated May 29, 1997 (4)

36


ITEM 14 - FINANCIAL STATEMENTS, SCHEDULES, EXHIBITS, AND REPORTS ON FORM 8-K
(continued)

10.6 o 1998 Stock Option and Incentive Plan (5)
10.7 o 2000 Stock Option and Incentive Plan (6)
21.1 o Subsidiaries of the Company (7)
23.1 o Consent of Independent Auditors(7)


(1) Filed as an exhibit to the Company's Annual Report on Form 10-K
filed on March 29, 2001 and incorporated herein by reference.
(2) Filed as an exhibit to the Company's Registration Statement on
Form 10, as amended, under the Securities Exchange Act of 1934
(File No. 0-18277), and incorporated herein by reference.
(3) Filed as an exhibit to the Company's Registration Statement on Form
S-8, as amended, under the Securities Act of 1933 (No. 33-65154),
and incorporated herein by reference.
(4) Filed as an exhibit to the Company's Form 10-Q dated June 30, 1997
and incorporated herein by reference. (5) Filed as an exhibit to the
Company's Registration Statement on Form S-8, as amended, under the
Securities Act of 1933 (No. 333-61177), and incorporated herein by
reference.
(6) Filed as an exhibit to the Company's Registration Statement on Form
S-8, as amended, under the Securities Act of 1933 (No. 333-44790),
and incorporated herein by reference.
(7) Filed herewith.

(B) REPORTS ON FORM 8-K

None















37


VICOR CORPORATION
SCHEDULE II
Valuation and Qualifying Accounts
Years ended December 31, 2001, 2000 and 1999




(Credit)
Balance at Charge Other
Beginning of to Costs and Charges Balance at
Period Expenses Deductions (1) End of Period
------------- -------------- ---------------- ---------------

2001
ALLOWANCE FOR DOUBTFUL ACCOUNTS $1,196,000 $544,000 ($280,000) $1,460,000

2000
Allowance for doubtful accounts $853,000 $348,000 ($5,000) $1,196,000

1999
Allowance for doubtful accounts $955,000 $28,000 ($130,000) $853,000

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

(1) Reflects uncollectible accounts written off, net of recoveries.













38


SIGNATURES

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


Dated: March 14, 2002 Vicor Corporation

By: /s/ Mark A. Glazer
-------------------------------------------
Mark A. Glazer
Chief Financial Officer

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





SIGNATURE TITLE DATE

/s/ Patrizio Vinciarelli
- --------------------------------------
Patrizio Vinciarelli President, Chief Executive Officer and March 14, 2002
Chairman of the Board (Principal
Executive Officer)



/s/ Mark A. Glazer
- --------------------------------------
Mark A. Glazer Chief Financial Officer (Principal March 14, 2002
Financial Officer)



/s/ Estia J. Eichten
- --------------------------------------
Estia J. Eichten Director March 14, 2002



/s/ David T. Riddiford
- --------------------------------------
David T. Riddiford Director March 14, 2002



/s/ Jay M. Prager
- --------------------------------------
Jay M. Prager Director March 14, 2002



/s/ Barry Kelleher
- --------------------------------------
Barry Kelleher Director March 14, 2002



/s/ M. Michael Ansour
- --------------------------------------
M. Michael Ansour Director March 14, 2002



/s/ Samuel Anderson
- --------------------------------------
Samuel Anderson Director March 14, 2002



39


Exhibit 21.1

SUBSIDIARIES OF THE COMPANY





Name State or Jurisdiction of Incorporation
---- --------------------------------------
Picor Corporation Delaware, USA
VLT, Inc. California, USA
Vicor GmbH Germany
Vicor International Inc. U.S. Virgin Islands
VICR Securities Corporation Massachusetts, USA
Vicor France SARL France
Vicor Italy SRL Italy
Vicor Hong Kong Ltd. Hong Kong
Vicor U.K. Ltd. United Kingdom
Vicor B.V. Netherlands
Vicor Japan Company Ltd. Japan
Vicor Development Corporation Delaware, USA
Aegis Power Systems, Inc. Delaware, USA
Mission Power Systems, Inc. Delaware, USA
Northwest Power Integration, Inc. Delaware, USA
Converpower Corporation Delaware, USA
Freedom Power Systems, Inc. Delaware, USA


















40