<TABLE>

Selected Consolidated Financial Data
<CAPTION>
                                                                                           Year ended March 31,

(In thousands, except per share data)                                     1997       1996       1995       1994       1993
                                                                          ----       ----       ----       ----       ---- 
<S>                                                                    <C>         <C>        <C>        <C>         <C>     
STATEMENT OF OPERATIONS DATA
Revenues:
        Product sales                                                  $ 86,665    $ 68,014   $ 58,668   $ 33,175    $ 20,961
        Non-recurring engineering revenues                                1,587       4,099      3,810      4,684       3,497
                                                                       --------    --------   --------   --------    --------
                                                                         88,252      72,113     62,478     37,859      24,458
                                                                       --------    --------   --------   --------    --------
Costs and expenses:
        Cost of product sales                                            65,322      45,355     39,068     22,154      14,796
        Research and development                                         17,230      14,548     11,374     10,058       3,461
        Selling, general and administrative                               9,299       7,450      6,784      5,529       3,939
                                                                       --------    --------   --------   --------    --------
                                                                         91,851      67,353     57,226     37,741      22,196
                                                                       --------    --------   --------   --------    --------
        Operating income (loss)                                          (3,599)      4,760      5,252        118       2,262
Interest income (expense), net                                             (392)        889        391       (667)       (235)
                                                                       --------    --------   --------   --------    --------
        Income (loss) from continuing operations before income taxes     (3,991)      5,649      5,643       (549)      2,027
Income tax expense                                                         --           169        170       --          --
                                                                       --------    --------   --------   --------    --------
        Income (loss) from continuing operations                         (3,991)      5,480      5,473       (549)      2,027
Discontinued operation:
        Income (loss) from discontinued military operation                 --          --         --         --          (767)
        Provision for operating losses during phase-out period             --          --         --         --        (1,144)
                                                                       --------    --------   --------   --------    --------
                Net income (loss)                                      $ (3,991)   $  5,480   $  5,473    $  (549)   $    116
                                                                       ========    ========   ========    =======    ========
Net income (loss) per share:
        Income (loss) from continuing operations                       $  (0.49)   $   0.67   $   0.74    $ (0.41)   $   0.42
                                                                       ========    ========   ========    =======    ========
        Shares used in computing per share amounts                        8,152       8,193      7,435      1,325       4,849



BALANCE SHEET DATA
Working capital                                                          24,062      12,710     28,317      7,859       3,355
Total assets                                                             66,633      55,922     45,070     20,965      17,115
Debt and capital lease obligations, net of current portion                7,057        --         --        3,634       1,961
Total shareholders equity                                                42,466      44,838     37,056      9,765       5,953
</TABLE>

     Certain  statements in the following  section  Management's  Discussion and
Analysis of Financial  Condition and Results of Operations  are forward  looking
statements.  These  forward-looking  statements include, but are not limited to,
the statements in the fourth paragraph of Overview  concerning the volatility of
revenues and the expectation of declining  average sales prices,  the statements
in the last paragraph of Overview, the statements in the analysis of Years Ended
March 31, 1997 and 1996 under Revenues  regarding  future NRE revenues and under
Cost of Product Sales regarding anticipated product introductions,  related cost
improvements and trends offsetting such cost improvements,  the statement in the
second paragraph of Liquidity and Capital  Resources  concerning  renewal of the
revolving  line of  credit  and  the  statements  in the  last  paragraph  under
Liquidity and Capital Resources  regarding the anticipated  spending for capital
additions  in  fiscal  1998  and  the  sufficiency  of the  Company's  available
resources  to meet working  capital and capital  expenditure  requirements.  The
forward-looking  statements  contained herein are based on current  expectations
and entail  various risks and  uncertainties  that could cause actual results to
differ materially from those expressed in such forward-looking  statements. Such
risks and  uncertainties  are  included  in the  discussion  under  Management's
Discussion    and   Analysis   of   Financial    Condition    and   Results   of
Operations--Overview.


                    SPECTRIAN CORPORATION AND SUBSIDIARIES 14
<PAGE>

Management's Discussion and Analysis of
           Financial Condition and Results of Operations


Overview

     Spectrian  designs,  manufactures  and markets highly linear single carrier
and  multicarrier  power  amplifiers to wireless  communications  infrastructure
equipment  manufacturers  that  support a broad  range of  worldwide  analog and
digital  transmission  standards,  including AMPS,  TDMA,  CDMA,  TACS, and GSM.
Spectrian  pursues a  strategy  of  vertical  integration  of its  manufacturing
process and expends  significant  resources for research and  development in all
aspects of the design of power amplification products.

     The Company  generates  the majority of its product  sales revenue from the
sale of its power amplifiers. A minor amount of product sales revenue is derived
from  amplifier  repair and  service.  The Company also  receives  non-recurring
engineering  (NRE)  revenues,  which  represent  funding from the  Company's OEM
customers for specific development projects.

     Over  the  last  several  years,  the  Company's  revenues  have  increased
significantly,  primarily as a result of increasing sales to a limited number of
wireless   infrastructure  original  equipment   manufacturers.   The  Company's
principal   customers  in  fiscal  1997,   Northern  Telecom  and  Nortel  Matra
Communications,  in which Northern Telecom has an equity  investment,  accounted
for 63% and 12% of revenues,  respectively.  In fiscal  1996,  sales to Northern
Telecom  and Nortel  Matra  Communications  represented  58% and 17% of revenues
respectively, and in fiscal 1995, these same two customers accounted for 53% and
13% of revenues, respectively. If the Company were to lose a major OEM customer,
in  particular  Northern  Telecom,  or if orders by a major OEM customer were to
otherwise decrease,  the Company's business,  financial condition and results of
operations would be materially adversely affected.

     As a result of the Company's limited customer base, the Company's  revenues
have been and will continue to be volatile. Softness in portions of the wireless
markets in late 1995 and early 1996, driven partly by delays in the build-out of
PCS  infrastructure,  caused  significant  fluctuations in the Company's product
sales  during that period of time.  In fiscal 1997 the Company  made  strides to
broaden its customer  base and product  portfolio by entering the Korean  market
for PCS CDMA amplifiers,  supporting the new US PCS system rollouts,  continuing
to support the conversion  from analog to digital systems and by rolling out its
second generation  multicarrier product.  However, should there be future delays
in the roll-out of PCS and other wireless  systems the Company could  experience
materially  adverse  effects on quarterly and annual  revenues.  The Company has
also experienced, and expects to continue to experience, declining average sales
prices for its power amplifiers.

     The Company's cost of product sales consists primarily of raw materials, RF
transistor  fabrication costs,  amplifier assembly and test costs,  overhead and
warranty  cost.  It does not  include  costs  incurred  in  connection  with NRE
revenues.  Despite its focus on designing  products for  manufacturability,  the
Company has experienced high material and manufacturing costs,  including scrap,
material  obsolescence,  labor  inefficiencies  and an  inability  to  recognize
economies of scale, due in part to rapid increases in production  volume and the
introduction of multiple new products into  manufacturing.  The Company has also
experienced intermittent supply shortages of the semiconductor parts produced by
the Company among other material  shortages.  The Company's  high  manufacturing
costs have historically had a material adverse effect on gross margins. Although
the  Company  has  initiated   corrective   actions,   any  failure  to  achieve
manufacturing  cost reductions,  or any interruption in the supply of materials,
could  have a  material  adverse  effect on the  Company's  business,  financial
condition and results of operations.

     The  Company's  results  of  operations  have in the past,  and will in the
future,  vary  significantly  due to a number of factors,  including the timing,
cancellation or rescheduling of customer orders and shipments;  the availability
of semiconductor RF transistors and other materials; variations in manufacturing
costs and  efficiencies;  the availability for sale of new products;  changes in
the mix of products having  differing gross margins;  changes in average selling
prices;  competitive  factors;  and  variations in product  development or other
operating expenses.  The results of operations for any period are not indicative
of results for any subsequent period.

Results of Operations

     The  following  table  sets  forth,  for  the  periods  indicated,  certain
statement of operations  data of the Company  expressed as a percentage of total
revenues and the gross margin on product sales.

                                                   Year ended March 31,  
                                                 
                                                  1997    1996    1995
                                                  ----    ----    ----
Revenues:                                        
     Product sales                                 98%      94%     94%
     Nonrecurring engineering revenues              2        6       6
                                                  ----    ----    ----
                                                  100      100     100
                                                  ----    ----    ----
Costs and expenses:                              
     Cost of product sales                         74       63      63
     Research and development                      19       20      18
     Selling, general and administrative           11       10      11
                                                  104       93      92
                                                  ----    ----    ----
        Operating income (loss)                    (4)       7       8
Interest income (expense), net                     (1)       1       1
                                                  ----    ----    ----
        Income (loss) from operations            
          before income taxes                      (5)       8       9
                                                  ====    ====    ====
Gross margin on product sales                    24.6%    33.3%   33.4%
                                                 

                    SPECTRIAN CORPORATION AND SUBSIDIARIES 15
<PAGE>                                     

Years Ended March 31, 1997 and 1996

     Revenues.  The  Company's  revenues  increased by 22% from $72.1 million in
fiscal 1996 to $88.3  million in fiscal 1997.  The increase was due primarily to
increasing volume in sales of PCS products, reflecting the build-out of the U.S.
PCS  network  infrastructure,  and  continued  strong GSM product  sales.  These
revenue increases were partially offset by a 61% decrease in NRE revenues,  from
$4.1  million in fiscal 1996 to $1.6  million in fiscal  1997,  due to continued
reductions in the number of customer-funded  research and development  projects.
The  Company  expects  NRE  revenue to further  decline in future  years in both
absolute dollars and as a percentage of revenue.

     Cost of Product Sales. The Company's cost of product sales increased by 44%
to $65.3 million in fiscal 1997 from $45.4 million in fiscal 1996.  Gross margin
on product  sales in fiscal 1997  declined  to 24.6% from 33.3% in fiscal  1996.
During   fiscal  1997  the  Company   introduced   fourteen  new  products  into
manufacturing  to meet customer and market demands.  The need to produce many of
these products in high volumes during their  manufacturing  infancy  resulted in
much higher costs for the related  material,  labor and overhead.  The heavy new
product  volume had a  detrimental  effect on the  Company's  fiscal  1997 gross
margins and  profitability.  The  Company  anticipates  a similar  number of new
products will be introduced in fiscal 1998 but will be developed  primarily from
existing  product  platforms  thereby  producing  some  economies  of scale  and
reducing the inefficiencies  associated with steep learning curves. Trends which
may offset some of these anticipated cost improvements are the increasingly more
complex  amplifier  product  performance  expectations  from the marketplace and
customer pressures to reduce pricing as shipment volumes grow.

     Research and  Development.  The Company's  research and  development  (R&D)
expenses  increased  18% to $17.2  million in fiscal 1997 from $14.5  million in
fiscal 1996. As a percentage of revenues,  R&D expenses  declined  slightly from
20% in fiscal 1996 to 19% in fiscal 1997. The increase in R&D expenses primarily
reflected  nine months of  development  expenses for the Company's  4-inch wafer
fabrication  facility as compared to only three months in fiscal 1996 as well as
increased R&D hiring and the associated recruiting and salary costs.

     Selling,  General and  Administrative.  The Company's selling,  general and
administrative  expenses (SG&A)  increased by 25% to $9.3 million in fiscal 1997
from $7.5 million in fiscal  1996.  SG&A  expenses as a  percentage  of revenues
increased  slightly from 10% in fiscal 1996 to 11% in fiscal 1997.  The increase
in SG&A  expenses  from  fiscal  1996  to 1997  was  primarily  attributable  to
increases in sales and  marketing  headcount,  the related  salaries and expense
benefits  as well as  outside  commissions  expenses  required  to  support  the
Company's expanding customer base and product portfolio.

     Interest Income  (Expense),  net. Net interest  expense for fiscal 1997 was
$392,000, compared to net interest income of $889,000 in fiscal 1996. The change
between fiscal 1997 and fiscal 1996 primarily reflects decreased interest income
as a result of lower  average  cash  balances  in fiscal  1997 and the  interest
expense  incurred as a result of the Company  utilizing  various debt  financing
instruments during fiscal 1997.

     Income  Taxes.  The Company did not record a provision  for income taxes in
fiscal 1997 because of net losses incurred.  An income tax provision of $169,000
was  recorded  in  fiscal  1996,  an  effective  tax rate of 3% after use of net
operating  loss  carryforwards.  As of March 31,  1997,  the  Company  had a net
operating loss  carryforward of approximately $29 million for federal income tax
purposes  and $9 million  for  California  income tax  purposes.  The  Company's
ability to use its net operating loss  carryforwards  against taxable income may
be subject to  restrictions  and  limitations  under Section 382 of the Internal
Revenue Code of 1986,  as amended,  in the event of a change in ownership of the
Company.

Years Ended March 31, 1996 and 1995

     Revenues.  The Company's  revenues increased 15% to $72.1 million in fiscal
1996  from  $62.5  million  in  fiscal  1995.   The  increase  was   principally
attributable to increases in sales of existing cellular  amplifier  products and
increases in sales of new amplifier products for the PCS market.

     Cost of Product Sales. The Company's cost of product sales increased 16% to
$45.4 million in fiscal 1996 from $39.1 million in fiscal 1995.  Gross margin on
product  sales in fiscal  1996 and 1995 was 33.3% and 33.4%,  respectively.  The
very slight  decline in fiscal 1996 gross margin was  attributable  primarily to
lower average selling prices and manufacturing inefficiencies, largely offset by
lower cost of material.

     Research and Development. The Company's R&D expenses increased 28% to $14.5
million in fiscal 1996 from $11.4  million in fiscal  1995.  The increase in R&D
expenses resulted primarily from increased headcount and the associated salaries
expense,  cost of materials for prototypes and other  expenses  associated  with
increasingly complex  semiconductor and amplifier  development  activities.  R&D
expenses as a  percentage  of  revenues,  increased to 20% of revenues in fiscal
1996 from 18% in fiscal  1995,  reflecting  the  Company's  decision to grow R&D
funding at a faster rate than the current growth rate in revenues.

     Selling, General and Administrative.  The Company's SG&A expenses increased
10% to $7.5  million  in fiscal  1996 from $6.8  million  in fiscal  1995.  This
increase in SG&A expenses was pri-

                    SPECTRIAN CORPORATION AND SUBSIDIARIES 16

<PAGE>

marily  attributable  to  increases  in headcount  and  associated  salaries and
administrative  expenses  as  a  result  of  overall  growth  in  the  Company's
operations.

     Interest Income, net. The Company earned net interest income of $889,000 in
fiscal 1996 as compared to net interest  income of $391,000 in fiscal 1995.  The
change between fiscal 1995 and fiscal 1996 reflected the interest  income earned
for a full  year  period  on the  proceeds  from the  Company's  initial  public
offering.

     Income Taxes. The Company recorded a provision for income taxes of $169,000
in fiscal 1996 as compared to $170,000 in fiscal 1995, both at an effective rate
of 3% after use of net operating loss carryforwards.

Liquidity and Capital Resources

     The Company has historically financed its growth through its initial public
offering  of Common  Stock in August 1994 and  through  private  sales of equity
securities,  capital equipment leases,  bank lines of credit and cash flows from
operations.  Cash used by operations in fiscal 1997 was $8.1 million as compared
to cash  provided by  operations of $9.6 million and $7.0 million in fiscal 1996
and  1995  respectively.  The  cash  used  by  operations  in  fiscal  1997  was
principally for purchasing  inventory to support increased  production ramps for
increasing  product  shipment  volumes.  In addition,  cash from  operations was
impacted by the Company's net loss in fiscal 1997 and higher  receivables levels
as a result of  higher  shipment  volumes,  offset  in large  part by  increased
depreciation expense,  higher accounts payable driven by higher inventory levels
and higher accrued  liabilities for warranty and employee benefits among others.
The increase in cash provided by operations in fiscal 1996 primarily  related to
the  increased  depreciation  included  in  expenses,  improved  collections  of
accounts  receivable and  management of accounts  payable,  partially  offset by
increased inventory.

     As of March 31,  1997,  the Company had  working  capital of $24.1  million
including $6.2 million in cash and cash  equivalents.  In addition,  the Company
has a  revolving  line of  credit of $6.0  million  with a bank  secured  by the
majority of the Company's  assets which expires in July 1997, and a $4.0 million
term loan with the same bank to be secured by a portion of the Company's capital
equipment  assets  as the loan is drawn  down.  Under  the  terms of the  master
agreement  governing both these credit  instruments,  the Company is required to
maintain certain minimum working  capital,  net worth,  profitability  and other
specific  financial  ratios. As of March 31, 1997, the Company was in compliance
with these financial covenants.  The Company expects to renew the revolving line
of credit in July 1997. There were no borrowings outstanding against these lines
of credit as of March 31, 1997.

     In January  1997,  the  Company  borrowed  $6.0  million  under a term loan
secured by certain of the Company's capital  equipment.  The loan, which expires
in January 2002,  requires the payment of monthly principal plus interest and is
subject  to  certain  minimum  net  worth  and other  specific  financial  ratio
covenants.  The Company was in compliance  with these  covenants as of March 31,
1997.  In March 1997,  the Company also secured a $3.2 million real estate loan,
which expires in April 2007, for the purchase of a light industrial building for
its future facilities expansion.

     Additions to property and equipment were $16.3  million,  $28.2 million and
$5.8  million in fiscal 1997,  1996 and 1995,  respectively.  Capital  additions
during fiscal 1997 included manufacturing test equipment required to support new
product ramps and increase  factory  capacity,  equipment  purchased for the new
4-inch  wafer  fabrication  facility,  R&D test  equipment  to  support  various
development  projects  and the  acquisition  of a 39,000  square  foot  building
located between the Company's two existing leased  facilities in Sunnyvale,  CA.
In November  1996, the Company  completed a sale of its principal  facilities in
Sunnyvale,   California   including  its  4-inch  wafer  fabrication   facility,
originally  purchased  during  fiscal 1996.  The  proceeds  from the sale of the
facilities were $16.3 million, net of fees, commissions and closing costs.

     The Company anticipates  spending  approximately $16 million in fiscal 1998
for capital additions primarily to support manufacturing  capacity requirements,
development  projects and facilities  expansion.  Based on the Company's current
working  capital  position,  the cash flows the Company expects to generate from
fiscal 1998  operations and the available line of credit the Company  expects to
renew, the Company believes that sufficient  resources will be available to meet
the  Company's  cash  requirements  for at least the next  twelve  months.  Cash
requirements  for periods  beyond the next twelve months depend on the Company's
profitability,  timing  and  level  of  capital  expenditures,  working  capital
requirements and the Company's rate of growth.

                    SPECTRIAN CORPORATION AND SUBSIDIARIES 17

<PAGE>

Consolidated Balance Sheets
                                                            Year Ended March 31,

(In thousands)                                                1997       1996
                                                           ---------------------

ASSETS
Current assets:
        Cash and cash equivalents                          $  6,240    $  1,163
        Short-term investments                                 --         3,002
        Accounts receivable, less
                allowance for doubtful accounts
                of $365 and $339, respectively               15,825      11,980
        Inventories                                          17,301       7,229
        Prepaid expenses and other current assets             1,806         420
                                                           --------    --------
                        Total current assets                 41,172      23,794
Property and equipment, net                                  25,461      32,128
                                                           --------    --------
                                                           $ 66,633    $ 55,922
                                                           ========    ========


LIABILITIES AND SHAREHOLDERS EQUITY
Current liabilities:
        Accounts payable                                   $  8,101    $  6,964
        Accrued liabilities                                   7,421       4,120
        Current portion of debt obligations                   1,588        --
                                                           --------    --------
                        Total current liabilities            17,110      11,084
Debt obligations, net of current portion                      7,057        --
                                                           --------    --------
                        Total liabilities                    24,167      11,084
                                                           --------    --------
Shareholders equity:
        Common stock, no par value; 20,000,000
                shares authorized; 8,265,230 and
                8,014,525 shares issued and
                outstanding, respectively                    53,395      51,956
        Deferred compensation expense                          --          (182)
        Unrealized gains on investments                        --             2
        Accumulated deficit                                 (10,929)     (6,938)
                                                           --------    --------
                        Total shareholders equity            42,466      44,838
                                                           --------    --------
                                                           $ 66,633    $ 55,922
                                                           ========    ========

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                    SPECTRIAN CORPORATION AND SUBSIDIARIES 18
<PAGE>

Consolidated Statements of Operations

                                                      Year Ended March 31,

(In thousands, except per share data)               1997     1996      1995
                                                 ----------------------------
Revenues:
        Product sales                            $ 86,665  $ 68,014  $ 58,668
        Nonrecurring engineering revenues           1,587     4,099     3,810
                                                 --------  --------  --------
                                                   88,252    72,113    62,478
                                                 --------  --------  --------
Costs and expenses:
        Cost of product sales                      65,322    45,355    39,068
        Research and development                   17,230    14,548    11,374
        Selling, general and administrative         9,299     7,450     6,784
                                                 --------  --------  --------
                                                   91,851    67,353    57,226
                                                 --------  --------  --------
                Operating income (loss)            (3,599)    4,760     5,252
Interest income (expense), net                       (392)      889       391
                                                 --------  --------  --------
                Interest (loss) before
                 income taxes                      (3,991)    5,649     5,643
Income tax expense                                   --         169       170
                                                 --------  --------  --------
                Net income (loss)                $ (3,991) $  5,480  $  5,473
                                                 ========  ========  ========
Net income (loss) per share                      $  (0.49) $   0.67  $   0.74
                                                 ========  ========  ========
Shares used in computing per share amounts          8,152     8,193     7,435

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 

                    SPECTRIAN CORPORATION AND SUBSIDIARIES 19

<PAGE>
<TABLE>

Consolidated  Statements of Cash Flows
<CAPTION>

                                                                                   Year Ended March 31, 
(In thousands)                                                                  1997        1996       1995 
                                                                             --------------------------------
<S>                                                                          <C>          <C>        <C>     
Cash flows from operating activities:
        Net income (loss)                                                    $ (3,991)    $ 5,480    $  5,473
        Adjustments to reconcile net income (loss) to net
          cash provided by operating activities:
              Depreciation and amortization                                     6,574       4,793       2,789
              Stock option compensation                                           182         (49)        200
              Tax benefit associated with stock options                          --           138          60
              Changes in operating assets and liabilities:
                 Accounts receivable                                           (3,845)     (1,360)     (2,033)
                 Inventories                                                  (10,072)     (2,444)     (1,239)
                 Prepaid expenses and other assets                             (1,386)        (26)       (227)
                 Accounts payable                                               1,137       2,897         966
                 Accrued liabilities                                            3,301         173       1,011
                                                                             --------    --------    --------
                    Net cash provided by (used for)
                           operating activities                                (8,100)      9,602       7,000
                                                                             --------    --------    --------
Cash flows from investing activities:
        Purchase of short-term investments                                       --       (16,123)    (12,107)
        Proceeds from sale of short-term investments                             3000      25,230        --
        Proceeds from sale of property                                         16,414        --          --
        Purchase of property and equipment                                    (16,321)    (28,182)     (5,800)
                                                                             --------    --------    --------
                     Net cash provided by (used for)
                           investing activities                                 3,093     (19,075)    (17,907)
Cash flows from financing activities:
        Proceeds from sale and leaseback financing                               --          --           584
        Proceeds from real estate loan                                          2,917        --          --
        Proceeds from debt and equipment financing                             18,000        --          --
        Repayments of debt and capital lease obligations                      (12,272)       --        (5,935)
        Proceeds from initial public offering                                    --          --        21,066
        Proceeds from sales of common stock, net                                1,439       2,216         487
                                                                             --------    --------    --------
                Net cash provided by financing activities                      10,084       2,216      16,202
                                                                             --------    --------    --------
                Net increase (decrease) in cash and cash equivalents            5,077      (7,257)      5,295
                Cash and cash equivalents, beginning of year                    1,163       8,420       3,125
                                                                             --------    --------    --------
                Cash and cash equivalents, end of year                       $  6,240    $  1,163    $  8,420
                                                                             ========    ========    ========
Supplemental disclosures of cash flow information:
        Cash paid during the year for interest                               $    660    $     31    $    291
                                                                             ========    ========    ========
        Noncash investing and financing activities:
                Conversion of preferred stock into common stock              $   --      $   --      $ 27,166
                                                                             ========    ========    ========
                Capital equipment acquired under capital lease obligations   $   --      $   --      $    188
                                                                             ========    ========    ========
                Deferred stock option compensation                           $   --      $   (425)   $    308
                                                                             ========    ========    ========
<FN>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</FN>
</TABLE>
                    SPECTRIAN CORPORATION AND SUBSIDIARIES 20


<PAGE>
<TABLE>

Consolidated Statements of Shareholders Equity
<CAPTION>
                                                                                              Deferred   
                                           Preferred stock              Common Stock        Compensation 
                                        Shares         Amount       Shares       Amount        Expense   
                                      -------------------------------------------------------------------
(In thousands)

<S>                                   <C>          <C>            <C>          <C>           <C>         
Balances as of March 31, 1994         4,155,912    $   27,166       817,173    $      940    $     (450) 
Exercise of stock options                  --            --         273,247           121          --    
Employee stock purchase plan               --            --          34,469           366          --    
Repurchase of common stock                 --            --              (1)         --            --    
initial public offering, net of
        $2,372 expenses                    --            --       1,875,000        21,066          --    
Conversion of preferred stock
        into common stock            (4,155,912)      (27,166)    4,155,912        27,166          --    
Deferred stock option compensation         --            --            --             308          (308) 
Stock option compensation                  --            --            --            --             200  
Tax benefit associated
        with stock options                 --            --            --              60          --    
Unrealized gains on investments            --            --            --            --            --    
Net income                                 --            --            --            --            --    
                                     ----------       -------     ---------        ------    ----------  

Balances as of March 31, 1995              --            --       7,155,800        50,027          (558) 
Exercise of stock options                  --            --         761,778         1,161          --    
Employee stock purchase plan               --            --          96,947         1,055          --    
Deferred stock option compensation         --            --            --            (425)          425  
Stock option compensation                  --            --            --            --             (49) 
Tax benefit associated
        with stock options                 --            --            --             138          --    
Unrealized losses on investments           --            --            --            --            --    
Net income                                 --            --            --            --            --    
                                     ----------    ----------     ---------    ----------    ----------  

Balances as of March 31, 1996              --            --       8,014,525        51,956          (182) 
Exercise of stock options                  --            --         114,671           276          --    
Employee stock purchase plan               --            --         136,034         1,163          --    
Stock option compensation                  --            --            --            --             182  
Unrealized losses on investments           --            --            --            --            --    
Net loss                                   --            --            --            --            --    
                                     ----------    ----------     ---------    ----------    ----------  

Balances as of March 31, 1997              --      $     --       8,265,230    $   53,395    $     --    
                                     ==========       =======     =========    ==========    ==========  
</TABLE>






                                    Unrealized                    Total
                                  Gains (Losses) Accumulated   Shareholders
                                  on Investments   Deficit        Equity
                                  -----------------------------------------
(In thousands)

Balances as of March 31, 1994            --      $  (17,891)   $    9,765
Exercise of stock options                --            --             121
Employee stock purchase plan             --            --             366
Repurchase of common stock               --            --
initial public offering, net of
        $2,372 expenses                  --            --          21,066
Conversion of preferred stock
        into common stock                --            --            --
Deferred stock option compensation       --            --            --
Stock option compensation                --            --             200
Tax benefit associated
        with stock options               --            --              60
Unrealized gains on investments    $        5          --               5
Net income                               --           5,473         5,473
                                   ---------     ---------     -----------   

Balances as of March 31, 1995               5       (12,418)       37,056
Exercise of stock options                --            --           1,161
Employee stock purchase plan             --            --           1,055
Deferred stock option compensation       --            --            --
Stock option compensation                --            --             (49)
Tax benefit associated
        with stock options               --            --             138
Unrealized losses on investments           (3)         --              (3)
Net income                               --           5,480         5,480
                                   ---------     -----------   -----------   

Balances as of March 31, 1996               2        (6,938)       44,838
Exercise of stock options                --            --             276
Employee stock purchase plan             --            --           1,163
Stock option compensation                --            --             182
Unrealized losses on investments         --              (2)           (2)
Net loss                                 --          (3,991)       (3,991)
                                   ---------     -----------   -----------   

Balances as of March 31, 1997      $     --      $  (10,929)   $   42,466
                                   =========     ==========    ===========  

                                   
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.



                    SPECTRIAN CORPORATION AND SUBSIDIARIES 21


<PAGE>

1.      Summary of Significant Accounting
        Policies

Principles of Consolidation

     The accompanying  consolidated financial statements include the accounts of
the Company, its wholly owned subsidiary,  American Microwave Technology,  Inc.,
and a  limited  liability  company,  Gibraltar  Court  Associates,  of which the
Company  is  a  majority  owner.  All  significant   intercompany  accounts  and
transactions have been eliminated in consolidation.

Revenue Recognition

     The Company recognizes product sales upon shipment and concurrently accrues
for expected warranty expenses.  Repair and service revenues are recognized when
the service is performed.

     Non-recurring   engineering   (NRE)  revenues  relate  to  customer  funded
development  projects and are deferred and recognized upon completion of project
milestones.  The  Company is under no  obligation  to repay  funds once  related
milestones are achieved.  Costs associated with such NRE revenue of $ 2,142,000,
$4,472,000  and  $5,835,000  for the years ended March 31, 1997,  1996 and 1995,
respectively,   are  included  in  research  and  development   expense  in  the
accompanying consolidated financial statements.

Concentration of Credit Risk and Fair Value of Financial Instruments

     The Company performs ongoing credit evaluations of its customers  financial
condition and generally does not require collateral on accounts receivable. When
required,  the Company  maintains  allowances  for credit losses and such losses
have been within  Management's  expectations.  

     The recorded amounts of financial instruments approximate their fair market
values.

Cash Equivalents and Short-Term Investments

     The Company  considers all liquid  investments with an original maturity of
three months or less to be cash  equivalents.  The cash  equivalents  consist of
repurchase  agreements  and money  market  accounts  as of March 31,  1997.  

     The Company  has  classified  its  investments  in certain  debt and equity
securities as "available-for-sale",  and records such investments at fair market
value,  with  unrealized  gains and losses  reported as a separate  component of
shareholder's  equity.  Interest income is recorded using an effective  interest
rate, with the associated  premium or discount  amortized to interest income. At
March  31,  1997  and  1996,  the  fair  value  of  the  Company's   investments
approximated cost.

Inventories

     Inventories are stated at the lower of first-in, first-out cost or market.

Property and Equipment

     Property and equipment are stated at cost.  Depreciation  and  amortization
are computed using the  straight-line  method over the estimated useful lives of
the respective  assets,  generally  three to five years.  Assets  recorded under
capital leases and leasehold improvements are amortized on a straight-line basis
over the  shorter  of the  lease  terms  or the  estimated  useful  lives of the
respective assets.

Income Taxes

     Income  taxes are  accounted  for under  the  asset and  liability  method.
Deferred  tax  assets  and   liabilities  are  recognized  for  the  future  tax
consequences   attributable  to  differences  between  the  financial  statement
carrying  amounts of existing assets and  liabilities  and their  respective tax
bases and operating loss and tax credit  carryforwards.  Deferred tax assets and
liabilities  are measured  using enacted tax rates  expected to apply to taxable
income in the years in which  those  temporary  differences  are  expected to be
recovered  or settled.  The effect on deferred tax assets and  liabilities  of a
change in tax rates is  recognized  in income in the period  that  includes  the
enactment date. A valuation  allowance is recorded  against  deferred tax assets
where their realization is subject to uncertainty.

Per Share Computations

     Net income  (loss) per share has been computed  using the weighted  average
number of outstanding  shares of Common Stock and common  equivalent shares from
stock options  outstanding (when dilutive using the treasury stock method).  The
modified  treasury  stock  method was used when shares  obtainable  from options
exceeded 20% of the aggregate of Common and Preferred  Stock  outstanding at the
end of the period.  Pursuant to certain Securities and Exchange Commission Staff
Accounting Bulletins,  Common and Preferred Stock issued for consideration below
the initial  public  offering  (IPO) price of $12.50 per share and stock options
granted  with  exercise  prices  below the  $12.50  per share  price  during the
12-month  period  preceding the date of the initial  filing of the  registration
statement in connection with the IPO, even when antidilutive, have been included
in the calculation of common equivalent shares,  using the treasury stock method
and the $12.50 per share  price,  as if they were  outstanding  for all  pre-IPO
periods presented.

     The Financial  Accounting  Standards  Board  recently  issued  Statement of
Financial  Accounting  Standards (SFAS) No. 128, Earnings Per Share. SFAS No.128
requires  presentation of basic earnings per share (EPS) and, for companies with
complex capital structures, diluted EPS. SFAS

                    SPECTRIAN CORPORATION AND SUBSIDIARIES 22


<PAGE>

Notes to Consolidated Financial Statements (continued)

No. 128 is effective for annual and interim  periods  ending after  December 31,
1997.  The Company  expects that basic EPS will be higher than primary  earnings
per share as presented in the accompanying consolidated financial statements and
that diluted EPS will not differ materially from primary earnings per share.

Use of Estimates in the Preparation of Financial Statements

     The  preparation  of financial  statements  in  conformity  with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that affect the reported amounts of assets,  liabilities,  revenues
and expenses during the reporting  period.  The most significant of these relate
to allowances for inventory  obsolescence,  allowances for doubtful accounts and
the warranty accrual. Actual results could differ from those estimates.

Accounting for Stock-Based Compensation

     The Company  accounts for its stock option plans using the intrinsic  value
method set forth in Accounting Principles Board (APB) Opinion No. 25, Accounting
for Stock issued to Employees,  and related  interpretations.  On April 1, 1996,
the Company adopted SFAS No. 123, Accounting for Stock-Based  Compensation,  and
has provided the pro forma disclosure provisions of SFAS No. 123.

Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of

     The Company  adopted the  provisions  of SFAS No. 121,  Accounting  for the
Impairment of Long-Lived  Assets and for Long-Lived Assets to be Disposed of, on
April 1, 1996.  This  statement  requires  that  long-lived  assets and  certain
identifiable  intangibles be reviewed for impairment  whenever events or changes
in  circumstances  indicate  that the  carrying  amount  of an asset  may not be
recoverable.  Adoption of this  statement did not have a material  impact on the
Company's financial position, results of operations or liquidity.


2.      Investments

        Available-for-sale securities consisted of the following (in thousands):

                                                                March 31,
                                                          1997             1996
                                                         -----------------------
U.S. government securities                               $ --             $3,002
Repurchase agreements                                     4,830              893
Corporate debt securities                                   128               38
                                                         -----------------------
                                                         $4,958           $3,933
                                                         =======================

     As of March 31, 1997 and 1996 the estimated  fair value of each  investment
approximated  the  amortized  cost and,  therefore,  there  were no  significant
unrealized gains or losses.  At March 31, 1997 and 1996 all securities held were
due in less than one year and were classified as follows (in thousands):

                                                                March 31,
                                                          1997             1996
                                                         -----------------------
Cash equivalents                                         $4,958           $  931
Short-term investments                                     --              3,002
                                                         -----------------------
                                                         $4,958           $3,933
                                                         =======================


3.      Balance Sheet Components

        Balance sheet components are as follows (in thousands):

                                                                March 31,
                                                            1997          1996
                                                         -----------------------
Inventories:
        Raw materials                                     $ 9,315       $ 1,512
        Work in progress                                    6,699         4,842
        Finished goods                                      1,287           875
                                                         -----------------------
                                                          $17,301       $ 7,229
                                                         =======================
Property and equipment:
        Machinery and equipment $                          37,181       $26,053
        Land, building and improvements                     2,822        15,682
        Furniture and fixtures                              1,376         1,342
        Leasehold improvements                                867           927
                                                         -----------------------
                                                           42,246        44,004
        Less accumulated depreciation
                and amortization                           16,785        11,876
                                                         -----------------------
                                                          $25,461       $32,128
                                                         =======================
Accrued liabilities:
        Employee compensation and benefits                $ 3,772       $ 2,673
        Warranty                                            1,940           699
        Other                                               1,709           748
                                                         -----------------------
                                                          $ 7,421       $ 4,120
                                                         =======================


4.      Debt and Lease Commitments

Lines of Credit

     The  Company  maintains a revolving  line of credit  under a master  credit
agreement with a bank. The master credit agreement  contains  certain  financial
covenants  and  certain  restrictions  on  other  indebtedness  and  payment  of
dividends.  The line of credit,  secured by a majority of the Company's  assets,
expires on July 31, 1997,  bears  interest at the banks prime rate, and provides
for  borrowings and letters of credit  aggregating  up to $6,000,000  based on a
specified percentage of eligible accounts receivable.  As of March 31, 1997, the
Company was

                    SPECTRIAN CORPORATION AND SUBSIDIARIES 23
<PAGE>

in compliance  with its financial  covenants and had $6,000,000  available under
this line of credit with no  borrowings  outstanding.  The Company  also entered
into a $4,000,000  term loan agreement with the same bank in February 1997 which
provides  for  advances of funds  secured by capital  equipment  purchases  with
interest  payments equal to the banks prime rate plus 0.75% until November 1997.
This term loan is  subject  to the same  financial  covenants  as the  Company's
revolving  line of credit.  The Company has until  October 31, 1997 to draw down
some  portion  or all of the loan  amount,  and will be  required  to make equal
monthly payments for thirty-six  months  commencing  November 1997 plus interest
equal to the banks prime rate plus 0.75%.  As of March 31, 1997,  $4,000,000 was
available under this equipment term loan and no borrowings were outstanding.

Equipment and Real Estate Loans

     In January 1997, the Company borrowed $6,000,000 secured by certain capital
equipment.  Under the terms of the agreement,  the Company is required to make a
series of uneven monthly  principal  payments  through January 2002 ranging from
$42,000 to $136,000,  plus  interest at a rate equal to the  Treasury  Rate plus
2.75%,  and  must  maintain   certain  minimum  working   capital,   net  worth,
profitability, and other specific ratios for which the Company was in compliance
as of March 31, 1997.

     In March 1997,  through means of a limited  liability  company in which the
Company is a majority owner, the Company purchased a 39,000 square foot building
and  secured a real estate  loan with an  institutional  lender in the amount of
$3,200,000 of which  $2,917,000  was received by the Company in fiscal 1997. The
loan has an initial maturity date of April 2002 with an option to be extended to
April 2007.  The Company  makes  monthly  payments of principal  and interest in
equal  amounts  which are  amortized  over two  hundred  forty  months  with the
remaining  principal  balance due on the maturity  date.  The interest rate is a
variable interest rate set at the LIBOR rate plus 3.25%. 

     During  fiscal  1997,  the Company  borrowed  $12,000,000  through  various
equipment term loan  arrangements  and repaid the outstanding  balances prior to
fiscal year end.

     Future  minimum debt  principal  payments under these loans as of March 31,
1997  aggregated  $8,645,000  including  $1,588,000,   $1,598,000,   $1,062,000,
$813,000,  and $1,396,000 for the fiscal years 1998,  1999, 2000, 2001 and 2002,
respectively, and $2,188,000, thereafter.

Lease Commitments

     During fiscal 1997, the Company sold its principal  facilities in Sunnyvale
for  $16,414,000,  and  leased the  facilities  back under a lease that has been
classified  as an operating  lease.  The lease  expires in November 2011 and the
quarterly  rent payments are subject to Consumer  Price Index  adjustments  on a
tri-annual basis beginning in November 1999.

     The  Company   leases  these   facilities  and  certain   equipment   under
noncancelable  operating  leases.  Future  minimum  lease  payments  under these
noncancelable  operating  leases as of March  31,  1997  aggregated  $26,790,000
including $2,015,000,  $1,977,000, $1,977,000, $1,977,000 and $1,971,000 for the
fiscal years 1998,  1999,  2000, 2001 and 2002,  respectively  and  $16,872,000,
thereafter.  Rent expense was approximately $819,000,  $778,000 and $802,000 for
the years ended March 31, 1997, 1996 and 1995, respectively.


5.      Shareholders Equity

Authorized Shares

     All  outstanding  shares of Preferred  Stock  automatically  converted into
shares of Common Stock on a one-for-one  basis upon  completion of the Company's
initial  public  offering in August 1994.  At that time,  the Board of Directors
authorized  5,000,000 shares of Preferred Stock and 20,000,000  shares of Common
Stock.

Stock Option Plans

     The Company has adopted  stock option  plans,  (the  "Plans"),  pursuant to
which the  Company's  Board of  Directors  may grant  stock  options to selected
employees, directors, officers and consultants of the Company. Stock options are
generally  granted with an exercise  price equal to the fair market value of the
Company's stock at the date of grant.  The options  generally have 10-year terms
and vest 25%  after one year from the  grant  date  with the  remaining  options
vesting pro rata over the following 36 months.

     Under the 1992 Stock Plan, certain options were granted at prices that were
below fair market  value and,  accordingly,  the  Company  had accrued  deferred
compensation  of $182,000 as of March 31,  1996,  which was fully  amortized  to
expense as of March 1997.  A total of 286,449  shares of Common  Stock have been
reserved for issuance under the 1992 Stock Plan as of March 31, 1997.

     During the year ended  March 31,  1997,  under the  Director  Option  Plan,
10,000 shares were granted,  none were issued, and no remaining shares of Common
Stock were reserved for issuance as of March 31, 1997.

     Outside of the 1992  Stock  Plan and the 1994  Director  Option  Plan,  two
officers  and one  employee  of the  Company  were  granted a combined  total of
390,000  options  during fiscal 1997, at exercise  prices  ranging from $9.50 to
$14.50,  which are subject to the same vesting schedule as that of the Company's
1992 Stock Plan.

                    SPECTRIAN CORPORATION AND SUBSIDIARIES 24

<PAGE>

Notes to Consolidated Financial Statements (continued)

        The per  share  weighted  average  fair  market  value of stock  options
granted during fiscal 1997 and fiscal 1996 were $9.41 and $17.69,  respectively,
on the date of grant  using  the  Black-Scholes  Option-Pricing  Model  with the
following  assumptions  for  both  fiscal  1997 and  fiscal  1996:  stock  price
volatility of 80%, no expected dividends,  an average risk-free interest rate of
6% and an average expected option term of 4.3 years.

        The following table summarizes option activity under the Plans:
                                                                      Weighted 
                                           Available                  Average  
                                             for        Options       Exercise 
                                            Grant     Outstanding      Price 
                                          -------------------------------------
Outstanding as of March 31, 1994          1,629,974     1,532,596    $    0.60
        Granted                            (419,811)      419,811        15.48
        Exercised                              --        (272,900)        0.54
        Canceled                             53,565       (53,565)        4.05
                                          -------------------------------------
Outstanding as of March 31, 1995          1,263,728     1,625,942         4.34
        Granted                            (444,743)      444,743        23.98
        Exercised                              --        (761,791)        1.52
        Canceled                            372,306      (372,306)        4.13
                                          -------------------------------------
Outstanding as of March 31, 1996          1,191,291       936,588        16.03
        Granted at fair market value     (1,760,346)    1,760,346        14.98
        Granted in excess of
           fair market value               (250,000)      250,000        14.50
        Exercised                              --        (114,671)        2.50
        Canceled                          1,105,510    (1,105,510)       19.83
                                          -------------------------------------
Outstanding as of March 31, 1997            286,455     1,726,753    $   13.20

     The following table summarizes  information about stock options outstanding
at March 31, 1997:

                               Weighted
                               Average    Weighted               Weighted
                   Number     Remaining    Average    Number     Average
Range of         Outstanding Contractual  Exercise Exercisable   Exercise
Exercise Prices   Options       Life        Price     Price       Price
---------------------------------------------------------------------------
$ 0.20-9.50       490,348       8.8        $  7.75   107,987     $  2.65
 10.00-13.75      107,833       9.8          13.48     4,333       10.00
       14.50      964,042       8.6          14.50    34,219       14.50
 16.25-38.50      164,530       8.6          21.66    62,786       21.06

$ 0.20-38.50    1,726,753       8.7        $ 13.20   209,325     $ 10.26

Employee Stock Purchase Plan

     In May 1994,  the  Board of  Directors  approved  the 1994  Employee  Stock
Purchase Plan (the "Purchase Plan") which permits eligible employees to purchase
the Company's  Common Stock  through  payroll  deductions.  The Purchase Plan is
implemented by consecutive  and  overlapping  24-month  offering  periods,  each
divided into four 6-month purchase periods.  The purchase price of the shares is
85% of the lower of the fair market value of the Common  Stock at the  beginning
of the offering period or the end of each purchase period.  The Company reserved
a total of 275,000 shares of common stock for issuance under this plan, of which
7,550 shares of Common Stock were still  available  for issuance as of March 31,
1997.  During the year ended March 31, 1997,  there were 136,034 shares acquired
under the Purchase Plan at per share prices ranging from $6.59 to $12.11.

     Under SFAS No. 123,  proforma  compensation cost is calculated for the fair
market value of the employees'  purchase rights.  The per share weighted average
fair market  value of those  purchase  rights  granted in fiscal 1997 and fiscal
1996, respectively,  was $5.14 and $6.54, using the Black-Scholes Option-Pricing
Model with the following assumptions:  for fiscal 1997, a stock price volatility
of 80%, no expected  dividends,  risk free  interest  rate of 6% and an expected
term of 0.9 years; for fiscal 1996, a stock price volatility of 80%, no expected
dividends, a risk free interest rate of 6% and an expected term of 0.8 years.

Pro Forma Fair Value Information

     The Company  applies APB  Opinion No. 25 in  accounting  for its Plans and,
accordingly,  compensation  cost has been recognized for its stock options using
the  intrinsic  value  method  in the  financial  statements.  Had  the  Company
determined  compensation  cost based on the fair value at the grant date for its
stock  options  under SFAS No. 123, the  Company's  net income (loss) would have
been reduced to the pro forma amounts indicated below:

                                                 1997            1996
                                             ------------    ----------
Net income (loss)            As reported     $(3,991,000)    $5,480,000
                             Pro forma       $(8,018,000)    $2,339,000

Earnings (loss) per share    As reported         $ (0.49)       $  0.67
                             Pro forma           $ (0.98)       $  0.29

     Pro forma net income  (loss)  reflects  only the options  granted in fiscal
1997 and 1996. Therefore,  the full impact of calculating  compensation cost for
stock  options  under SFAS No. 123 is not  reflected in the pro forma net income
(loss) amounts  presented above because  compensation cost is reflected over the
options vesting period of four years and  compensation  cost for options granted
prior to April 1, 1995 is not considered.

                    SPECTRIAN CORPORATION AND SUBSIDIARIES 25

<PAGE>

6.      Income Taxes

     Income  tax  expense  for the years  ended  March 31,  1997,  1996 and 1995
differs from the amount  computed by applying the federal income tax rate of 34%
to  pretax  income  (loss)  from  operations  as a result of the  following  (in
thousands):

                                                     Year ended March 31,
                                                   1997       1996        1995
                                                 -------------------------------

"Expected" income tax expense (benefit)          $(1,357)   $ 1,921     $ 1,918
Utilization of net operating loss
        carryforwards                               --       (1,921)     (1,918)
Unutilized net operating losses                    1,337
Alternative minimum tax                             --          169         170
Other                                                 20       --          --
                                                 -------------------------------
Income tax expense                               $  --      $   169     $   170
                                                 ===============================

     The Company is entitled to a deduction  for federal and state tax  purposes
with respect to employees' early  disposition of stock acquired through employee
stock options.  The net reduction in taxes  otherwise  payable arising from that
deduction has been credited to Common Stock.

     The tax  effects of  temporary  differences  that give rise to  significant
portions of the  deferred tax assets and  liabilities  are  presented  below (in
thousands):

                                                                 March 31,
                                                             1997       1996
                                                         -----------------------
Deferred tax assets:
        Various accruals and reserves                       2,921       1,887
        Deferred research and development expenses             66
        Net operating loss carryforwards                   10,266       9,067
        Credit carryforwards                                4,721       3,359
                                                         -----------------------
                Total gross deferred tax assets            17,908      14,379
                Less valuation allowance                  (17,313)    (13,011)
                                                         -----------------------
                Net deferred tax assets                  $    595    $  1,368
                                                         =======================
Deferred tax liabilities:
        Property and equipment depreciation differences  $   (595)   $ (1,368)
                Total gross deferred liabilities             (595)     (1,368)
                                                         -----------------------
                Net deferred tax assets                  $   --      $   --
                                                         =======================

     As of March 31, 1997, the Company has a net operating loss  carryforward of
$29 million for federal income tax purposes and $9 million for California income
tax purposes.  The Company has research credit  carryforwards  of  approximately
$1.6 million and $1.5 million for federal and  California  income tax  purposes,
respectively.  If not  utilized,  these  carryforwards  will  expire in  various
amounts from 1999 through 2012.  The Company also has an  investment  tax credit
carryforward of  approximately  $1.6 million for California  income tax purposes
which,  if not  utilized,  will  expire in 2004  through  2005.  Included in the
deferred  tax assets is  approximately  $8.9  million of assets  relating to the
stock option compensation, which will be credited to equity when realized.


7.      Major Customers

        The following  table  summarizes the annual  percentage  contribution to
revenues by customers when sales to such customers exceeded 10% of such revenues
in fiscal  1997,  1996 and 1995,  and the amounts due from these  customers as a
percentage of total accounts receivable as of March 31, 1997 and 1996, follows:

                        Revenues        Percentage of Total Accounts
                  Year ended March 31,   Receivable as of March 31,
                  1997    1996    1995       1997         1996
                  --------------------------------------------------
Customer A         63%     58%     53%        51%          69%
Customer B         12%     17%     13%        27%          10%

        Customers A and B are major  companies  in the  wireless  infrastructure
equipment industry. Company A has an equity investment in Company B.

Export sales as a percentage of revenues were as follows:

                  Year ended March 31, 
                  1997    1996    1995
                  --------------------
Canada             57%     51%     55%
Europe             13      20      15
Other               3       1       1
                  --------------------
Total exports      73%     72%     71%
                  ====================
              
8.      Subsequent Event

     In April  1997,  the Company  sold its  wholly-owned  subsidiary,  American
Microwave  Technology  (AMT) to the  management  group and  employees of AMT for
approximately $4.0 million, realizing a net gain of approximately $500,000 after
disposition of AMT's assets.  The Company  decided to divest AMT, which designs,
develops and manufactures  radio frequency power amplifier  systems for selected
wireless,  scientific and application  specific markets,  after concluding AMT's
market focus had become less synergistic  with the Company's core business.  For
fiscal years 1997, 1996 and 1995, AMT reported  revenues of approximately  $6.0,
$7.5 and $7.5 million respectively, and pretax income (loss) of $(0.8), $0.3 and
$0.3 million, respectively.

                    SPECTRIAN CORPORATION AND SUBSIDIARIES 26

<PAGE>

Report of KPMG Peat Marwick LLP,
        Independent Auditors

The Board of Directors and Shareholders of Spectrian Corporation:

     We have audited the accompanying  consolidated  balance sheets of Spectrian
Corporation  and  subsidiaries  as of March 31,  1997 and 1996,  and the related
consolidated  statements of operations,  shareholders' equity and cash flows for
each  of the  years  in the  three-year  period  ended  March  31,  1997.  These
consolidated  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial  statements based on our audits.

     We conducted  our audits in accordance  with  generally  accepted  auditing
standards.  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 financial  position of Spectrian
Corporation  and  subsidiaries as of March 31, 1997 and 1996, and the results of
their  operations  and their cash flows for each of the years in the  three-year
period ended March 31, 1997, in conformity  with generally  accepted  accounting
principles.


/s/ KPMG Peat Marwick LLP
-------------------------



San Jose, California
April 11, 1997

                    SPECTRIAN CORPORATION AND SUBSIDIARIES 27

<PAGE>
<TABLE>

Selected Unaudited Quarterly Financial Data
<CAPTION>

                                                    Year Ended March 31, 1997                     Year Ended March 31, 1996

(In thousands, except per share data)       FIRST      SECOND      THIRD      FOURTH     FIRST       SECOND      THIRD       FOURTH
                                           QUARTER     QUARTER     QUARTER    QUARTER    QUARTER     QUARTER     QUARTER     QUARTER
                                          --------    --------    --------    -------   --------    --------    --------    -------

STATEMENT OF OPERATIONS DATA
Revenues:
<S>                                       <C>         <C>         <C>         <C>       <C>         <C>         <C>         <C>    
  Product sales                           $  9,560    $ 22,005    $ 23,839    $31,261   $ 20,262    $ 19,490    $ 11,644    $16,618
  Nonrecurring engineering revenues            363         267         646        311        199       1,461         628      1,811
                                          --------    --------    --------    -------   --------    --------    --------    -------
                                             9,923      22,272      24,485     31,572     20,461      20,951      12,272     18,429
                                          --------    --------    --------    -------   --------    --------    --------    -------
Costs and expenses:
  Cost of product sales                      8,491      16,639      17,211     22,981     13,010      12,682       8,203     11,460
  Research and development                   4,293       3,770       4,773      4,394      3,295       3,737       3,611      3,905
  Selling, general and administrative        2,379       1,948       2,293      2,679      2,058       2,094       1,460      1,838
                                          --------    --------    --------    -------   --------    --------    --------    -------
                                            15,163      22,357      24,277     30,054     18,363      18,513      13,274     17,203
                                          --------    --------    --------    -------   --------    --------    --------    -------
    Operating income (loss)                 (5,240)        (85)        208      1,518      2,098       2,438      (1,002)     1,226
Interest income (expense), net                 (74)       (251)        (70)         3        367         229         201         92
                                          --------    --------    --------    -------   --------    --------    --------    -------
    Income (loss) from operations
      before income taxes                   (5,314)       (336)        138      1,521      2,465       2,667        (801)     1,318
Income taxes                                  --          --          --         --         (201)       (214)         65        181
                                          --------    --------    --------    -------   --------    --------    --------    -------
Net income (loss)                         $ (5,314)   $   (336)   $    138    $ 1,521   $  2,264    $  2,453    $   (736)   $ 1,499
                                          --------    --------    --------    -------   --------    --------    --------    -------
Net income (loss) per share               $  (0.66)   $  (0.04)   $   0.02    $  0.18   $   0.27    $   0.29    $  (0.09)   $  0.18
                                          --------    --------    --------    -------   --------    --------    --------    -------
Shares used in computing
  per share amounts                          8,039       8,147       8,295      8,422      8,276       8,393       7,771      8,332

                                                                           AS A PERCENTAGE OF REVENUES
Revenues:
  Product sales                                 96%         99%         97%        99%        99%         93%         95%        90%
  Nonrecurring engineering revenues              4           1           3          1          1           7           5         10
                                          --------    --------    --------    -------   --------    --------    --------    -------
                                               100         100         100        100        100         100         100        100
Costs and expenses:
  Cost of product sales                         86          75          70         73         64          60          67         62
  Research and development                      43          17          19         14         16          18          29         21
  Selling, general and administrative           24           9           9          8         10          10          12         10
                                          --------    --------    --------    -------   --------    --------    --------    -------
                                               153         100          99         95         90          88         108         93
                                          --------    --------    --------    -------   --------    --------    --------    -------
    Operating income (loss)                    (53)         (0)          1          5         10          12          (8)         7
Interest income (expense), net                  (1)         (1)          0          0          2           1           1          0
                                          --------    --------    --------    -------   --------    --------    --------    -------
    Income (loss) from operations
      before income taxes                      (54%)        (2%)         1%         5%        12%         13%         (7%)        7%
                                          --------    --------    --------    -------   --------    --------    --------    -------
Gross margin on product sales                   11%         24%         28%        26%        36%         35%         30%        31%

</TABLE>

<TABLE>
<CAPTION>

                                                   Year Ended March 31, 1995

                                        FIRST       SECOND       THIRD      FOURTH
                                       QUARTER      QUARTER     QUARTER     QUARTER
                                       --------    --------    --------    --------

STATEMENT OF OPERATIONS DATA
Revenues:
<S>                                    <C>         <C>         <C>         <C>     
  Product sales                        $ 13,867    $ 14,104    $ 13,757    $ 16,940
  Nonrecurring engineering revenues         841       1,202       1,252         515
                                       --------    --------    --------    --------
                                         14,708      15,306      15,009      17,455
                                       --------    --------    --------    --------
Costs and expenses:                       9,330       9,417       9,251      11,070
  Cost of product sales                   2,636       3,067       2,859       2,812
  Research and development                1,586       1,507       1,716       1,975
                                       --------    --------    --------    --------
  Selling, general and administrative    13,552      13,991      13,826      15,857
                                       --------    --------    --------    --------
                                          1,156       1,315       1,183       1,598
    Operating income (loss)                (142)          5         242         286
                                       --------    --------    --------    --------
Interest income (expense), net
    Income (loss) from operations
      before income taxes                 1,014       1,320       1,425       1,884
Income taxes                                (30)        (40)        (43)        (57)
                                       --------    --------    --------    --------
Net income (loss)                      $    984    $  1,280    $  1,382    $  1,827
                                       --------    --------    --------    --------
Net income (loss) per share            $   0.17    $   0.17    $   0.17    $   0.22
                                       --------    --------    --------    --------
Shares used in computing
  per share amounts                       5,903       7,454       8,162       8,220

                                                 AS A PERCENTAGE OF REVENUES
Revenues:
  Product sales                              94%         92%         92%         97%
  Nonrecurring engineering revenues           6           8           8           3
                                       --------    --------    --------    --------
                                            100         100         100         100
Costs and expenses:
  Cost of product sales                      63          61          62          64
  Research and development                   18          20          19          16
  Selling, general and administrative        11          10          11          11
                                       --------    --------    --------    --------
                                             92          91          92          91
                                       --------    --------    --------    --------
    Operating income (loss)                   8           9           8           9
Interest income (expense), net               (1)          0           1           2
                                       --------    --------    --------    --------
    Income (loss) from operations
      before income taxes                     7%          9%          9%         11%
                                       --------    --------    --------    --------
Gross margin on product sales                33%         33%         33%         35%

</TABLE>

                    SPECTRIAN CORPORATION AND SUBSIDIARIES 28