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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-K

(Mark One)

     x    Annual   Report  Pursuant  to Section  13 or  15(d) of the  Securities
    ---   Exchange Act of 1934 for the Fiscal Year Ended October 3, 1999.

                                       OR

          Transition  Report  Pursuant to  Section 13 or 15(d) of the Securities
    ---   Exchange  Act of 1934 for the Transition Period from _____ to ______ .

                        Commission File Number 000-26690
________________________________________________________________________________

                           ELANTEC SEMICONDUCTOR, INC.
             (Exact name of registrant as specified in its charter)

            Delaware                                             77-0408929
(State or other jurisdiction of                               (I.R.S. Employer
 incorporation or organization)                              Identification No.)

              675 Trade Zone Boulevard, Milpitas, California 95035
             (Address of principal executive offices)    (zip code)

       Registrant's telephone number, including area code: (408) 945-1323

________________________________________________________________________________

           Securities registered pursuant to Section 12(b) of the Act:

           None                                        None
   (Title of each class)             (Name of each exchange on which registered)

           Securities registered pursuant to Section 12(g) of the Act:
                     Common Stock, par value $0.01 per share
                         Preferred Stock Purchase Rights

                                (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 filer 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 ]

Aggregate  market  value  of the  voting  stock  held by  non-affiliates  of the
registrant, based upon the closing sale price of the common stock on October 29,
1999 as reported on the Nasdaq National Market:  $201,194,902.  This calculation
does not  include a  determination  that  persons are  affiliates  for any other
purpose.

Number of shares outstanding of the registrant's  common stock as of October 29,
1999: 9,412,627

                                  _____________

                       Documents Incorporated By Reference

Items 10, 11, 12 and 13 of Part III  incorporate  information  by  reference  to
portions of the  registrant's  definitive  proxy  statement  to be  delivered to
stockholders  in connection  with the annual meeting of  stockholders to be held
January 14, 2000.

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<PAGE>
<TABLE>
                                           ELANTEC SEMICONDUCTOR, INC.
                                                    FORM 10-K

                                  For the Fiscal Year Ended September 30, 1999.
                                                Table of Contents
<CAPTION>
                                                     PART I

                                                                                                            Page
                                                                                                            ----
<S>           <C>                                                                                            <C>
Item 1.       Business...........................................................................              3

Item 2.       Properties.........................................................................             14

Item 3.       Legal Proceedings..................................................................             14

Item 4.       Submission of Matters to a Vote of Security Holders................................             14

                                                     PART II

Item 5.       Market for Registrant's Common Equity and Related Stockholder Matters..............             15

Item 6.       Selected Financial Data............................................................             16

Item 7.       Management's Discussion and Analysis of Financial Condition and Results

              of Operations......................................................................             17

Item 7A.      Quantitative and Qualitative Disclosures about Market Risk.........................             23

Item 8.       Financial Statements and Supplementary Data........................................             25

Item 9.       Changes in and Disagreements with Accountants on Accounting and Financial

              Disclosure.........................................................................             26

                                                    PART III

Item 10.      Directors and Executive Officers of the Registrant.................................             27

Item 11.      Executive Compensation.............................................................             27

Item 12.      Security Ownership of Certain Beneficial Owners and Management.....................             27

Item 13.      Certain Relationships and Related Transactions.....................................             27

                                                     PART IV

Item 14.      Exhibits, Financial Statement Schedules and Reports on Form 8-K....................             28

Signatures    ...................................................................................             52

</TABLE>

                                                       2

<PAGE>

                                     PART I

The following  discussion contains forward looking statements that involve risks
and  uncertainties.  The Company's  actual results could differ  materially from
those discussed here. Factors that could cause or contribute to such differences
include,  but are not  limited  to,  those  discussed  in the  section  entitled
"Business" and in the section entitled "Management's  Discussion and Analysis of
Financial Condition and Results of Operations".


ITEM 1:  BUSINESS

Elantec Semiconductor,  Inc. ("Elantec" or the "Company") designs,  manufactures
and markets high performance analog integrated circuits primarily for the video,
optical storage,  integrated  DC:DC, and xDSL markets.  The Company targets high
growth  commercial  markets in which advances in digital  technology are driving
increasing  demand for high  speed,  high  precision  and low power  consumption
analog circuits. Electronic system manufacturers in these markets typically have
requirements for analog circuits with particular  precision,  linearity,  speed,
power  and  signal  amplification  capabilities.  The  Company  addresses  these
requirements  with standard  products that serve several markets and application
specific  standard  products   ("ASSPs")   designed  for  specific  markets  and
applications. By offering both standard products and ASSPs, the Company seeks to
broaden its customer base with standard  products and to expand product sales to
new and existing customers with ASSPs that meet their specific requirements. The
Company offers approximately 150 products, such as amplifiers,  drivers, faders,
transceivers and multiplexers, most of which are available in multiple packaging
configurations.  The Company  fabricates its products at the Company's  internal
manufacturing  facility  in  Milpitas,  California  as well as third party wafer
foundries.

Industry Overview

Analog circuits operate over a wide range of voltages,  which limits the minimum
dimensions  that  can be used in the  device  structures  of  analog  integrated
circuits.  Thus, the  development of successful  analog  integrated  circuits is
generally more dependent on innovative design within  technological  constraints
rather than on achieving  small  feature  sizes and high  densities.  Typically,
designers of analog circuits must take into account  complex  interrelationships
between the manufacturing  process,  the physical layout of the circuit elements
and the  packaging of the end  product,  all of which can  significantly  affect
performance.  Moreover, the high performance characteristics required by new and
emerging applications for analog circuits involve increasingly advanced designs,
which will in turn require  more skilled  analog  designers,  innovative  design
strategies and rigorous design methodologies. The number of design engineers who
have the training,  creativity and experience to design complex analog  circuits
is very  limited,  and the  available  computer-aided  design  ("CAD") tools for
analog circuit design typically require substantial customization by the user in
order to provide adequate utility for complex analog circuit design.

In  order  to  meet  the  needs  of  electronic  systems  manufacturers,  analog
integrated  circuit  companies  offer  a wide  range  of both  high  performance
standard  products and market  specific  ASSPs.  Standard  products can serve as
basic  building  blocks to assist  system  designers in bringing new products to
market rapidly. ASSPs enhance performance and combine functions to reduce system
size and cost as end-user  needs become  better  defined and system unit volumes
increase.  The  critical  point of  competition  for analog  integrated  circuit
companies is at the "design-in" stage when the system designer evaluates various
alternative components for implementing the system architecture.  Companies that
offer  families of analog  standard  products and ASSPs that perform a number of
the functions required by the systems design will typically have an advantage at
the design-in  stage because  systems  designers often prefer to


                                       3

<PAGE>

choose  products  from the same vendor once the vendor has been  qualified  as a
producer of reliable products.

The Company  believes that the pervasive use of digital  integrated  circuits in
electronic  systems  and the rapid  advances in digital  technology  are driving
increasing demand for high performance analog products.

Product Markets and Applications

Elantec targets four high growth  commercial  markets where it believes there is
an increasing demand for analog solutions:  video,  optical storage,  integrated
DC:DC,  and xDSL. In each of its target markets,  the Company offers a family of
standard  products and ASSPs that are designed to be used as building  blocks by
addressing a number of common  component  requirements,  thereby  providing more
effective  solutions for  electronic  systems  designers.  Most of the Company's
standard  products are used in more than one of these markets,  while in general
each ASSP is used in only one specific market.

The following table sets forth examples of typical applications of the Company's
products  in each of the  four  target  commercial  markets  and  representative
applications:

    ------------------------------- ----------------------------------------
                Market                       Typical Applications

    ------------------------------- ----------------------------------------
    Video                           Overhead Displays
                                    Set Top Converters
                                    Special Effects Generators
                                    Switchers/Routers
                                    Video Cameras
                                    Video Distribution Networks
                                    Video Signal Processing
                                    Workstations
    ------------------------------- ----------------------------------------
    Optical Storage                 CD Rewritable Drives
                                    DVD Rewritable Drives
                                    DVD Read-Only Drives
                                    Camcorders
                                    Video Digital Recorders
    ------------------------------- ----------------------------------------
    Integrated DC:DC                DSP based Portable Devices
                                    Video Boards
                                    Networking Boards
                                    Internet Appliances
                                    Portable Instruments
                                    Test Equipment
    ------------------------------- ----------------------------------------
    xDSL                            ADSL Transceivers
                                    HDSL Transceivers

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

Primary Markets

Video.   Video  images  are  increasingly  being  incorporated  into  electronic
applications  such as  multimedia  computing and  communications.  This trend is
creating  increasing  demand  for high speed  amplifiers  and  specialty  analog
circuits for the processing and display of video signals. The Company focuses on
several segments of the video market,  including displays (CRT and flat panels),
set top  converters,  special  effects  generators,  studio  equipment and video
distribution networks.


                                       4

<PAGE>

Optical Storage. Optical storage, in the form of CD-ROM, has grown significantly
in recent years as the media of choice for software  and music.  More  recently,
optical  recordable  devices  such as  CD-R,  CD-R/W,  and DVD  Rewritables  are
increasingly  being  adopted  in  the  marketplace.  The  Company  is  currently
providing  products  that control the laser diode driver for optical disk drives
and products for CD read/write and DVD read/write applications.

Integrated  DC:DC.  The  proliferation  of high density,  small geometry digital
integrated circuits drive the increasing demands for DC:DC converters.  Discrete
components  such as PWM,  rectifiers,  and FET are used to build DC:DC converter
solutions.  For  portable  devices,  as the form factor  gets  smaller and space
becomes a premium,  the demands for single chip,  integrated  converter solution
should increase.  The Company's  strategy is to provide highly  integrated DC:DC
converters  in a single chip  implementation  that is on cost parity to multiple
chip  implementation.  The Company targets its integrated DC:DC products for DSP
powered portable devices, Personal Digital Assistants,  portable instrumentation
and other devices.

xDSL.  The  convergence  of  communications   and  computers  has  also  created
opportunities  for high  performance  analog circuits.  For example,  electronic
communications  through  telephone lines  increasingly  include both digital and
analog  information such as audio, video and data and require digital and analog
circuits to transmit  and process  them.  In this market,  the Company  supplies
transceivers and high speed amplifiers for Asymmetrical  Digital Subscriber Line
("ADSL") and High Bit Rate  Digital  Subscriber  Line  ("HDSL")  techniques  for
increasing the rate at which data is transmitted over twisted-pair wires such as
conventional  telephone  lines.  This is important  for emerging  communications
applications related to Internet access.

Other Markets

In addition to its  primary  markets,  the  Company  historically  has  provided
products to  electronic  systems  manufacturers  in the military and  automotive
markets.

Military.  The  Company  has  historically  offered  products  for a variety  of
military  applications.  On July 1,  1997 the  Company  announced  that it would
discontinue its military hybrid products. This product line accounted for 10.0%,
8.4% and 7.9% of product revenues in 1999, 1998 and 1997,  respectively.  Orders
for these  discontinued  products were accepted  through the middle of 1998 with
last  shipments  from the factory  ending in the fourth  quarter of fiscal 1999.
There will be no more  shipments of military  hybrid  products  starting  fiscal
2000.  However,  the Company does not expect the  discontinuance of this product
line to have a material impact on the Company's future results from operations.

Automotive.  In February 1993, the Company  entered into an exclusive  agreement
with Aisin Seiki Co., Ltd.  ("Aisin"),  a  manufacturer  of automotive  parts in
Japan  and a member of the  Toyota  group of  companies.  Under the terms of the
agreement,  Elantec licensed to Aisin certain  proprietary Elantec technology to
design and manufacture analog integrated  circuits for the automotive market. In
return,  the Company received  technology license fees and royalty payments upon
the sale of products  derived  therefrom.  The agreement  terminated in February
1998 and provided for payments to Elantec  totaling $7.0 million.  Payments were
received  ratably  during fiscal  1993-1998  and as of September  30, 1998,  all
revenues under the agreement had been received.  The Company did not receive any
payments in fiscal 1999. The Company did not renew the license  agreement and no
manufacturing relationship with Aisin currently exists.


                                       5

<PAGE>

Products

The Company offers  approximately 150 high performance analog products,  most of
which are available in multiple packaging configurations.

Standard  Products.  Amplifiers  and  buffers  are used to amplify or  reproduce
analog electrical signals (either voltage or current) without  distortion.  High
power amplifiers  provide a large  electrical  output current or voltage and are
particularly useful in video transmission and communications applications.  High
speed amplifiers and buffers are designed specifically to process high frequency
signals such as video information without  distortion.  Comparators are circuits
that  accurately  measure  an  electrical  signal  level  in  comparison  with a
predetermined  value and indicate the result.  Mosfet  drivers are circuits that
control  the  switching  functions  of mosfet  (metal-oxide-semiconductor  field
effect transistor) power transistors used in power control applications.

Application Specific Standard Products.  For the video market the Company offers
a variety  of ASSPs  that can be used as  standard  building  blocks to  provide
solutions to the video system  designer for many common video  circuit  designs.
Sync  separators are timing  circuits that control the position and stability of
the video image on a video display.  D.C.  restoration  circuits  restore to the
correct  voltage  level a video signal that has been  amplified and processed in
order to ensure accurate transfer of video information. Video multiplexers allow
multiple  video inputs to be connected to a single output in a selected  manner.
Faders combine  separate signals in different ratios for special effects such as
the fading of one video  image into  another.  For the optical  storage  market,
laser  diode  drivers  control  the  performance  of the laser diode used in the
read/write mode in optical storage pick-up heads. The Company's Integrated DC:DC
converter  circuits  convert  supply  voltages  from 5 volts to a lower  voltage
required by modern  microprocessors  and digital signal processors (DSP). In the
xDSL  market,  transceivers  are used to transmit  and receive high speed analog
signals  containing  encoded  digital  information  over twisted pair  telephone
lines.

Sales and Distribution

The Company sells its products both directly to customers,  with the  assistance
of  independent  sales  representatives,   and  indirectly  through  independent
distributors.  The Company's  direct sales force  consists of sales managers and
field application  engineers who support customers,  sales  representatives  and
distributors  in each  major  geographic  market.  The  sales  staff  and  field
application  engineers  are  located  at  the  Company's  Milpitas,   California
headquarters  and in field  offices  in  Massachusetts,  New  Hampshire,  United
Kingdom and Japan.

In North  America,  the Company  sells its  products  through  approximately  21
independent sales  representative  organizations having a total of approximately
55 offices and four distributors  having a total of approximately 104 locations.
These  distributors  are  entitled to price  rebates on unsold  inventory if the
Company lowers the prices of its products.  In addition, on a semi-annual basis,
these  distributors  are permitted to return for credit against  purchases of an
equivalent  dollar value of products up to 5% of their total  product  purchases
during the most recent six-month period.

In fiscal 1999, 1998 and 1997, sales to Insight  Electronics,  Inc.  represented
approximately 10%, 11% and 12% of the Company's net revenues,  respectively. See
Note 1 of Notes to Consolidated Financial Statements.


                                       6

<PAGE>

Outside  North  America,  the Company  sells its  products  through a network of
international  distributors.  Such international sales represented approximately
57%, 53% and 54% of the Company's net product revenues, excluding Aisin contract
revenues, in fiscal 1999, 1998, and 1997, respectively.

Sales to Microtek  International,  Inc. in Japan represented  approximately 30%,
23% and 14% of net product revenues in fiscal 1999, 1998 and 1997, respectively.
See Note 1 of Notes to Consolidated Financial Statements.

In connection with its international sales, the Company is subject to the normal
risks of conducting  business  internationally.  These risks include  unexpected
changes in  regulatory  requirements,  changes  in  legislation  or  regulations
relating to the import or export of  semiconductor  products,  delays  resulting
from difficulty in obtaining  export licenses for certain  technology,  tariffs,
quotas and other barriers and restrictions,  and the burdens of complying with a
variety of foreign  laws.  The Company is also  subject to general  geopolitical
risks, such as political and economic  instability and changes in diplomatic and
trade relationships,  in connection with its international  operations.  Because
certain  sales of the  Company's  products  are  denominated  in  United  States
dollars,  fluctuations  in the value of the dollar could  increase the prices in
local  currencies  of the  Company's  products  in foreign  markets and make the
Company's products relatively more expensive than competitors' products that are
denominated  in  local  currencies.   The  Company   denominates  certain  sales
transactions   in  Japanese   Yen.  The  Company  has   established   a  foreign
currency-hedging program, utilizing foreign currency forward exchange contracts,
or forward contracts of various duration to hedge trade receivables  denominated
in Japanese Yen. Under this program,  gains and losses on the forward  contracts
mitigate the risk of material foreign currency  transaction gains and losses and
offset increases or decreases in the Company's foreign currency receivables. The
Company  does not use  forward  contracts  for  trading  purposes.  The  Company
believes that the use of foreign currency  financial  instruments  should reduce
the  risks  that  arise  from  conducting  business  in  international  markets.
Additionally,  currency exchange  fluctuations could reduce the cost of products
from the  Company's  foreign  competitors  and also reduce the amount of revenue
from sales of the Companies products denominated in foreign currencies.

A substantial portion of the Company's revenues are realized through independent
distributors and independent sales representatives that are not under the direct
control of the Company.  These independent sales  organizations  generally carry
the  product  lines of a number of  companies,  are not  subject to any  minimum
purchase  requirements and can discontinue selling the Company's products at any
time.  Accordingly,  the Company must compete for the focus and sales efforts of
its  distributors  and  independent  sales  representatives.  In  addition,  the
Company's  distributors  are permitted to return to the Company a portion of the
products purchased by them, and the Company's business and results of operations
could be  materially  adversely  affected  if the amount of returns  exceeds the
Company's  reserves.  There can be no assurance that the Company will be able to
retain the loyalty and attention of its  distributors and  representatives.  The
loss of one or more of the Company's  distributors or representatives could have
a material adverse effect on the Company's business and results of operations.

Design Methodology and Process Technology

Design  Methodology.  The  Company's  designers  apply a rigorous,  standardized
design  methodology  intended to accelerate the development and  introduction of
new  products,  maintain  consistent  quality and promote  the  development  and
sharing of design expertise among the engineering  staff. Each designer utilizes
a common set of customized CAD tools on a network of computer  workstations  and
applies  standardized  design rules in order to facilitate  the  integration  of
different designs or design elements.  The Company promotes design integrity and
sharing of expertise by requiring  each designer to subject  designs to a series
of peer reviews and simulation  and  verification  tests at different  stages of
design


                                       7

<PAGE>

development.  The Company has developed  proprietary  computer models of circuit
elements  to assist in the  modeling,  simulation,  layout and  verification  of
circuit designs.

The Company's  approach to new product  development is driven by specific market
requirements in addition to advances in technology and design  methodology.  The
Company  has  adopted a  systematic  approach  of using  its  field  application
engineers and strategic marketing personnel to identify market opportunities for
new high performance  products,  contacting other customers to determine whether
there is an opportunity  to develop  products that will be applicable to a broad
range of customers  in the  Company's  target  markets and  consulting  with the
Company's  circuit  designers  and  marketing  personnel to define ASSPs for the
target markets.

Process  Technology.  The  Company  uses  a  variety  of  semiconductor  process
technologies  for its products in order to meet the particular  requirements  of
different customers and applications. The Company's process technologies include
dielectric  isolation and junction  isolation  complementary  bipolar,  junction
isolation bipolar, and CMOS technologies.

Complementary  Bipolar  Technology.   The  Company  uses  complementary  bipolar
technologies  primarily for high speed applications such as video amplifiers and
video  ASSPs.  Complementary  bipolar  technology  uses two  different  types of
transistors  (referred  to as "pnp" and  "npn") to  process  high  speed  analog
signals efficiently in either positive or negative polarity, which substantially
simplifies  the design  process by allowing  symmetrical  design  architectures,
permits  improved  speed and requires less power.  For high speed,  high voltage
applications,   Elantec  uses   dielectric   isolation   complementary   bipolar
technology.  For low voltage, high speed applications such as certain amplifiers
and video  ASSPs,  the Company uses  junction  isolation  complementary  bipolar
technologies provided by an outside foundry.

Dielectric  Isolation  Technology.   Dielectric  isolation  is  a  manufacturing
technique  that uses  insulating  oxide to isolate  transistors  from each other
electrically.  This  technique  has the inherent  advantages  of low  electrical
capacitance,  which allows high speed signal processing and minimizes cross-talk
or unwanted interference from other signals, and higher voltage operation, which
is useful for instrumentation and many other analog applications.

Complementary  Metal-Oxide-Semiconductor  Technology.  Since  1992,  Elantec has
pursued a strategy to provide a wider range of products  using CMOS  technology.
CMOS technology enables the design of circuits with lower power consumption than
bipolar circuits, but with relatively lower speed, and is well suited for analog
switching and mixed signal  applications.  The Company uses several  third-party
foundries to supply wafers for its CMOS products.

The markets for the Company's products are characterized by rapid  technological
change and frequent new product  introductions.  There can be no assurance  that
the  Company's  analog  products  or the  process  technologies  utilized by the
Company will not become obsolete.  In addition,  as digital integrated  circuits
have become faster and their processing capacity has expanded,  digital circuits
have increasingly been used to perform functions in electronic systems that were
previously  performed with analog  technologies.  There can be no assurance that
further advances in digital processing power will not eventually supplant analog
technologies  in those new  applications,  which  could have a material  adverse
effect on the Company's business and results of operations.

Manufacturing

The  Company  manufactures  semiconductor  wafers for its  dielectric  isolation
complementary  bipolar  products in its own facility to optimize the performance
of these  products  and  maintain a high degree of


                                       8

<PAGE>

manufacturing  control.  The  Company's  manufacturing  facilities  in Milpitas,
California  include a four-inch  wafer  fabrication  facility and a 7,840 square
foot clean room. The Company  broadens its  manufacturing  capabilities by using
third-party  foundries to produce  junction  isolation  bipolar  wafers and CMOS
wafers.  The use of  third-party  foundries  enables the Company to focus on its
design  strengths  and  minimize  fixed  costs and  capital  expenditures  while
providing access to diverse manufacturing  technologies without bearing the full
risk of obsolescence.

Sales of dieletric isolation products represented approximately 35%, 47% and 67%
of  the  Company's  net  product   revenues  in  fiscal  1999,   1998  and  1997
respectively.  The process for manufacturing  dielectrically isolated integrated
circuits  is  more  complex  than  processes  for  junction   isolation  bipolar
manufacturing,  and the number of foundries  that have the capability to produce
dielectrically   isolated   semiconductor   wafers  is  limited.  The  Company's
dielectric  isolation  foundry  that  fabricates  certain  steps of the  process
discontinued  supplying  this  technology in the fourth fiscal  quarter of 1998.
Currently,  the Company internally processes all dielectric isolated wafer steps
except one  out-sourced  step.  The  Company's  results of  operations  would be
materially  adversely affected if the supply of this out-sourced process step is
interrupted.

The Company utilizes  various  external  foundries for the production of bipolar
and CMOS wafers. Sales of these products collectively represented  approximately
55%, 44% and 23% of the Company's net product  revenues in fiscal 1999, 1998 and
1997,   respectively.   The  Company   believes  that  it  has  good   long-term
relationships  with its foundries.  However,  any  interruption in the supply of
wafers  from  the  Company's  foundries  would  have a  negative  impact  on the
Company's  business and results of operations until an alternate source could be
established.  Although the Company  believes that it could  develop  alternative
sources of supply,  there can be no assurance  that the Company could do so in a
timely manner to prevent such a material adverse impact.

The Company's  commercial  products are assembled by a variety of subcontractors
in Asia. These  subcontractors  may be subject to adverse political and economic
conditions,  capacity,  yield and quality problems or have difficulty  obtaining
critical  raw  materials,  which could  result in  disruptions  in the supply of
assembled products. Any delay or disruption in the supply of assembled products,
whether by reason of manufacturing  or assembly delays or other problems,  might
result in the loss of  customers,  limitations  or  reductions  in the Company's
revenue or other material adverse effects on the Company's  business and results
of operations.

The Company tests each integrated circuit or "die" on the wafers produced by the
Company and its foundries for compliance with performance  specifications before
assembly. Following assembly, the packaged units are returned to the Company for
final testing and  inspection  prior to shipment to customers.  The Company then
performs  extensive  testing  on all  circuits  using  advanced  automated  test
equipment to ensure that the circuits satisfy specified performance levels.

Environmental Laws

The  Company is subject to a variety of  federal,  state and local  governmental
regulations  related  to the use,  storage,  discharge  and  disposal  of toxic,
volatile or otherwise  hazardous  chemicals used in its  manufacturing  process.
Although  the  Company  believes  that  its  activities   conform  to  presently
applicable  environmental  regulations,  the failure to comply  with  present or
future  regulations  could  result  in  fines  being  imposed  on  the  Company,
suspension of production or a cessation of operations. There can be no assurance
that regulatory  changes or changes in regulatory  interpretation or enforcement
will not render compliance more difficult and costly. Any failure of the Company
to control  the use of, or


                                       9

<PAGE>

adequately restrict the discharge of, hazardous substances,  or otherwise comply
with  environmental   regulations,   could  subject  it  to  significant  future
liabilities.

Research and Development

The  Company's  ability  to  compete  depends,   in  part,  upon  its  continued
introduction of technologically innovative products on a timely basis. Elantec's
product  development  strategy  emphasizes a broad line of products to address a
diversity of customer  applications.  The  Company's  research  and  development
efforts are directed  primarily at designing  and  introducing  new products and
technologies  and, to a lesser  extent,  developing  new  testing and  packaging
techniques.  The Company continually upgrades its internal technology while also
working  with  foundries  to develop new  technologies  for new  generations  of
products.  In  addition,  the  Company  continually  refines  its  manufacturing
practices and technology to improve the yields of its products.

The Company has assembled a team of highly skilled analog design  engineers.  As
performance demands have increased the complexity of analog circuits, the design
and  development  process  has  become a  multi-disciplinary  effort,  requiring
expertise  ranging from  detailed  knowledge  of device  physics to expertise in
device  placement  and  packaging  to  avoid  unwanted   cross-talk  and  signal
interference.  The Company supports its key designers with an  infrastructure of
process  engineers,  product  engineers and test  engineers who perform  various
support  functions  and allow the designers to focus on the core elements of the
design.

As part of its future  bipolar  product  development  strategy,  the  Company is
developing a silicon on insulator (SOI) technology called bonded wafers.  Bonded
wafer technology uses two flat oxidized silicon wafers that are thermally bonded
to one another, after which one wafer is precisely ground and polished to form a
thin silicon layer supported by the insulating  oxide and the remaining  silicon
wafer. This thin silicon layer is suitable for making individual elements of the
semiconductor  circuits  that  are  electrically  isolated  from  each  other by
insulating  oxide  to  provide  performance  characteristics  superior  to those
achievable  with other  technologies  such as dielectric  isolation and junction
isolation. The Company believes that, if successful, the bonded wafer technology
could provide technologically advanced products at a lower cost than the current
dielectric isolation complementary bipolar technology.  However, there can be no
assurance  that  the   development  of  the  bonded  wafer   technology  can  be
successfully accomplished in a timely manner or that it will provide the desired
improvements  over the Company's  current  technology.  In addition,  the bonded
wafer  technology  being  developed  by  the  Company  could  be  supplanted  by
alternative new technologies  and, the bonded wafer  technology,  if successful,
may not be successfully  transferred to an external foundry.  Significant delays
or  cancellation  of the  development  of the  bonded  wafer  technology  and/or
manufacturing  problems  associated  with  transferring  the  Company's  current
product line to this technology could materially  adversely affect the Company's
business and results of operations.

In fiscal 1999, 1998 and 1997, the Company spent $7.8 million,  $7.2 million and
$6.2 million,  respectively,  on research and  development.  The Company expects
that it will  continue to spend  substantial  funds on research and  development
activities.

Patents and Licenses

The Company  seeks to protect its  proprietary  technology  through  patents and
trade secret protection.  Currently,  the Company holds 40 United States patents
and five foreign  patents,  expiring on various dates between the years 2005 and
2017 and has  additional  pending  United States patent  applications,  although
there can be no assurance that any patents will result from these  applications.
While the Company


                                       10

<PAGE>

intends to continue to seek patent  coverage for its products and  manufacturing
technology where appropriate, the Company believes that its success depends more
heavily on the  technical  expertise and  innovative  abilities of its personnel
than on its patent  position.  Accordingly,  the  Company  also  relies on trade
secrets and confidential  technological know-how in the conduct of its business.
There can be no assurance that the Company's  patents or applicable trade secret
laws  provide  adequate   protection  for  the  Company's   technology   against
competitors who may develop or patent similar technology or reverse engineer the
Company's  products.  In addition,  the laws of certain territories in which the
Company's  products are or may be  developed,  manufactured  or sold,  including
Asia,  Europe and Latin  America,  may not protect the  Company's  products  and
intellectual  property  rights  to the same  extent  as the  laws of the  United
States.

The  semiconductor  industry is characterized by frequent  litigation  regarding
patent and other  intellectual  property rights.  There can be no assurance that
third  parties  will not assert  claims  against  the  Company  with  respect to
existing  or future  products or  technologies.  In the event of  litigation  to
determine the validity of any third-party  claims,  such litigation,  whether or
not determined in favor of the Company,  could result in significant  expense to
the Company and divert the efforts of the  Company's  technical  and  management
personnel  from  productive  tasks.  In the event of an  adverse  ruling in such
litigation,  the Company  might be required  to  discontinue  the use of certain
processes,  cease the manufacture,  use and sale of infringing products,  expend
significant resources to develop non-infringing technology or obtain licenses to
the  infringing  technology.  There can be no assurance  that  licenses  will be
available with reasonable  commercial terms, or at all, with respect to disputed
third-party  technology.  In the event of a successful claim against the Company
and the  Company's  failure to develop or license a substitute  technology  at a
reasonable  cost,  the  Company's  business and results of  operations  would be
materially and adversely affected.

Competition

The  semiconductor  industry is intensely  competitive and is  characterized  by
rapid  technological  change,  product  obsolescence  and price  erosion in many
markets. The analog integrated circuit segment of the semiconductor  industry is
also intensely  competitive,  and many major  semiconductor  companies presently
compete or could compete in some segment of the Company's market.  Most of these
competitors have  substantially  greater  financial,  technical,  manufacturing,
marketing,  distribution  and other  resources  and broader  product  lines than
Elantec. The Company also competes indirectly with the in-house design staffs of
certain  of  its  customers,   which  often  provide  alternative  solutions  to
individual   analog  systems   requirements.   The  Company's   current  primary
competitors are Analog  Devices,  Inc.,  Linear  Technology  Corporation,  Maxim
Integrated Products,  Inc., Toshiba and National Semiconductor  Corporation.  As
the Company expands its product line, it expects that  competition will increase
with these and other domestic and foreign companies.  Although foreign companies
have not  traditionally  focused on the high  performance  analog  market,  many
foreign companies,  particularly certain Asian companies, have the financial and
other resources to participate  successfully in these markets,  and there can be
no assurance that they will not become formidable competitors in the future.

The  Company  believes  that its  ability to compete  successfully  depends on a
number of factors,  including  the breadth of its product  line,  the ability to
develop and introduce new products rapidly, product innovation,  product quality
and reliability,  product  performance,  price,  technical  service and support,
adequacy of  manufacturing,  the ability to introduce new process  technologies,
capacity  and  sources of raw  materials,  efficiency  of  production,  delivery
capabilities and protection of the Company's  products by intellectual  property
laws.  The Company  believes  that  product  innovation,  quality,  reliability,
performance  and the ability to  introduce  products  and  process  technologies
rapidly are more important  competitive factors than price in its target markets
because the Company  competes  primarily at the stage


                                       11

<PAGE>

when system  manufacturers  design analog  products into their  systems.  At the
design-in stage,  there is less price  competition,  particularly where there is
only one source of an application  specific product.  The Company believes that,
by virtue of its analog expertise and rigorous design  methodology,  it competes
favorably  in the  areas  of rapid  product  introduction,  product  innovation,
quality,  reliability  and  performance,  but  it may  be at a  disadvantage  in
comparison to larger companies with broader product lines, greater technical and
financial resources and greater service and support  capabilities.  There can be
no  assurance  that the  Company  will be able to  compete  successfully  in the
future.

Employees

At September  30,  1999,  the Company had 175 full time  employees.  The Company
believes that its future success will depend, in part, on its ability to attract
and retain qualified technical and manufacturing personnel. This is particularly
important in the areas of product design and development,  where competition for
skilled personnel,  particularly those with analog experience,  is intense. None
of the Company's employees is subject to a collective bargaining agreement,  and
the Company has never experienced a work stoppage. The Company believes that its
relations with its employees are good.

In November 1998,  David O'Brien,  the Company's  President and Chief  Executive
Officer resigned from the Company.  On April 1, 1999, James V. Diller,  Director
and Chairman of the Board, assumed the position of Chairman, President and Chief
Executive Officer, a position he previously held on an interim basis.

Executive Officers and Directors of the Company

The executive officers and directors of the Company are as follows:

Name                       Age   Positions
----                       ---   ---------
James V. Diller (1)         64   President, Chief Executive Officer and Chairman
                                 of the Board

Ephraim  Kwok               45   Vice President of  Finance & Administration and
                                 Chief Financial Officer

Richard E. Corbin           64   Vice President of Technology

Ralph S. Granchelli, Jr.    44   Vice President of Marketing

Chuck K. Chan (1,2)         49   Director

Alan V. King (1,2)          64   Director

Umesh Padval                42   Director

----------------
(1)  Member of the Audit Committee.
(2)  Member of the Compensation Committee.

Mr. Diller has been the Company's  President and Chief  Executive  Officer since
April 1999 and prior to this  served as interim  President  and Chief  Executive
Officer since  November  1998. In addition,  Mr. Diller has been Chairman of the
Board since 1997 and was  previously a Director of the Company  since 1986.  Mr.
Diller was a Founder of PMC-Sierra, Inc. a communications semiconductor company,
was its President and Chief Executive Officer from 1983 to 1997 and is currently
its Chairman of the Board.  Mr.  Diller holds a B.S.  degree in physics from the
University of Rhode Island.


                                       12

<PAGE>

Ephraim Kwok has served as Vice President of Finance & Administration  and Chief
Financial  Officer since January 1998. From June 1996 through December 1997, Mr.
Kwok served as Vice President of Finance &  Administration  and Chief  Financial
Officer of Ascent Logic Corporation.  From September 1989 through June 1996, Mr.
Kwok  served as Chief  Operating  Officer  and Chief  Financial  Officer of KMOS
Semiconductor.  Mr. Kwok holds a B.S.  degree from the University of California,
Davis and a M.B.A. degree from the University of California, Berkeley.

Richard E. Corbin has served as Vice President of Technology since June 1997 and
previously served as Vice President of Bipolar Design Engineering from September
1992 to May 1997.  From October 1987 to August 1992,  he served as the Company's
Vice  President of  Operations.  From 1981 to 1987,  Mr.  Corbin was employed at
Precision Monolithics, in a variety of management positions,  including Director
of CMOS Operations and Vice President of New Product  Development.  From 1976 to
1980,  Mr. Corbin held various  positions at Fairchild  Semiconductor  including
Division  Operations  Manager  of  CMOS.  Mr.  Corbin  holds  a B.S.  degree  in
mathematics and physics from Arizona State University.

Ralph S.  Granchelli,  Jr.  has  served as Vice  President  of  Marketing  since
September 1994 and previously served as Vice President of Marketing and Sales of
the Company  from  November  1990 to August  1994.  From 1985 to October 1990 he
served  as the  Company's  Vice  President  of  Sales.  From  1983 to 1985,  Mr.
Granchelli  was  National  Sales  Manager of  Teledyne  Semiconductor,  Inc.,  a
division of Teledyne  Industries,  Inc.  Previously,  Mr. Granchelli held senior
sales positions with Micro Power Systems, Inc., an analog semiconductor company,
and the Advanced Analog Division of Intech, Inc., an analog hybrid semiconductor
company,  and an  engineering  position  at  Teledyne  Philbrick,  a division of
Teledyne  Industries,  Inc. Mr.  Granchelli  holds an A.S. degree in Electronics
Engineering  from Wentworth  Institute of Technology and attended the University
of  Massachusetts,  Amherst  from  1976 to  1979,  where he  studied  electrical
engineering and marketing.

Dr. Chan has been a Director of the Company  since  January 1992 and also served
as a  Director  from  1983 to  1984.  Dr.  Chan  has been a  Partner  in  Alpine
Technology  Ventures,  a venture  capital  firm,  since  December 1994 and was a
Partner in Associated  Venture  Investors,  a venture  capital firm from 1982 to
1996.  In addition,  Dr. Chan serves on the Board of a number of privately  held
companies.  Dr.  Chan holds B.S.,  M.S.  and Ph.D.  degrees in physics  from the
Massachusetts   Institute  of  Technology  and  a  M.B.A.  degree  from  Harvard
University.

Mr. King has been a Director of the Company since  December  1997.  Mr. King has
been Chairman of the Board and Chief Executive Officer of Volterra Semiconductor
Corporation, a start-up company developing power management integrated circuits,
since  September  1996.  Mr. King was President and Chief  Executive  Officer of
Silicon Systems,  Inc., a semiconductor company, from September 1991 to November
1994 and was President  and Chief  Executive  Officer of Precision  Monolithics,
Inc., a semiconductor  company,  from September 1987 to September 1991, and from
September 1986 to September 1987 he was its Executive Vice  President.  Mr. King
holds a B.S. degree in ceramic engineering from the University of Washington.

Mr. Padval was appointed a Director of the Company in November  1999. Mr. Padval
has been the  President of C-Cube  Microsystem's  Semiconductor  Division  since
October 1998,  managing all aspects of C-Cube's  semiconductor  business,  which
focuses  on  providing  digital  video  solutions  into the  communications  and
consumer  markets.  Mr. Padval joined C-Cube  Microsystems from VLSI Technology,
Inc.,  where he was Senior Vice  President  and  General  Manager of the Digital
Entertainment  Division from May 1997 to October 1998.  Prior to this role,  Mr.
Padval served in several Business Unit Management,  Sales and Marketing roles at
VLSI  Technology,  Inc from September  1987.  Mr. Padval holds a B.S.  degree in
engineering  from the  Indian  Institute  of  Mumbai,  India;  a M.S.  degree in


                                       13

<PAGE>

engineering from Pennsylvania State University; and a M.S. degree in engineering
from Stanford University.

Each director  holds office until the next annual  meeting of  stockholders  and
until  his  successor  has been  elected  and  qualified  or until  his  earlier
resignation  or removal.  Each officer was chosen by the Board of Directors  and
serves  at the  pleasure  of the  Board of  Directors  until  his  successor  is
appointed or until his earlier resignation or removal.


ITEM 2:  PROPERTIES

The  Company  leases  approximately  39,000  square  feet of  space  located  in
Milpitas, California for its manufacturing and engineering functions pursuant to
a lease that expires on June 30, 2005. In addition, the Company has a seven year
lease  expiring on October 1, 2003 for a total of  approximately  24,000  square
feet of space  located  adjacent  to the  Milpitas  manufacturing  facility  for
administrative  functions.  The Company also leases  approximately  1,331 square
feet of space for its sales office in Boston,  Massachusetts,  approximately 300
square feet for its sales office in Nashua, New Hampshire,  approximately  1,112
square feet for its sales  office in  Wokingham,  England,  approximately  1,457
square feet for its technical center in Yokohama, Japan, and approximately 4,137
square feet of warehouse  space in Milpitas,  California.  The Company  believes
that its current  facilities are adequate to meet its current  requirements  for
the near term. See Notes to Consolidated Financial Statements.


ITEM 3:  LEGAL PROCEEDINGS

The Company is a party to a number of legal proceedings  arising in the ordinary
course of its business.  These actions include employee-related issues. While it
is not feasible to predict or determine the outcome of these maters, the Company
believes  that the ultimate  resolution of these claims will not have a material
adverse effect on its financial position or results of operations.


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

No matters were submitted to a vote of security holders during the quarter ended
September 30, 1999.


                                       14

<PAGE>

                                     PART II

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

Price Range Of Common Stock

Elantec's  Common Stock has been traded on the Nasdaq  National Market under the
Nasdaq symbol "ELNT" since the Company's  initial public offering on October 11,
1995. As of September 30, 1999,  there were  approximately  189  stockholders of
record,  and the  Company  believes  there  are in  excess  of 3,400  beneficial
stockholders  of its  Common  Stock.  The high and low  closing  sale  prices of
Elantec's Common Stock on the Nasdaq National market for each fiscal quarter for
Elantec's last two fiscal years were as follows:


                      Common Stock Prices
--------------------------------------------------------------------------------
                                                       HIGH           LOW
                                                  ------------------------------
Quarter ended September 30, 1999                   $    21.250     $   12.750
Quarter ended June 30, 1999                        $    13.563          6.375
Quarter ended March 31, 1999                       $     6.875          3.625
Quarter ended December 31, 1998                    $     4.750          2.313


Quarter ended September 30, 1998                   $     5.750     $    3.000
Quarter ended June 30, 1998                             10.750          5.000
Quarter ended March 31, 1998                             9.750          5.375
Quarter ended December 31, 1997                          7.875          5.250



Dividend Policy

The  Company  has never paid cash or declared  dividends  on its stock.  Elantec
anticipates  that it will  continue to retain its earnings to finance the growth
of its business.


                                       15

<PAGE>

ITEM 6: SELECTED FINANCIAL DATA

<TABLE>
The following selected consolidated  financial data is qualified by reference to
and should be read in conjunction with the consolidated financial statements and
related notes thereto and the section  captioned  "Management's  Discussion  and
Analysis of Financial  Condition and Results of Operations"  and other financial
information included elsewhere in this Annual Report on Form 10-K.

<CAPTION>
                                                                                 September 30 (1)
                                                            1999          1998          1997          1996          1995
                                                        --------------------------------------------------------------------
                                                                       (in thousands, except per share data)
<S>                                                          <C>         <C>          <C>            <C>         <C>
Consolidated Statement of Operations Data:
     Net revenues                                            $50,662     $46,210      $35,388        $6,806      $26,884
     Gross profit                                             23,869      21,379       15,277         8,798       13,928
     Income (loss) from operations                            (6,769)      4,261          177         4,300        2,887
     Income (loss) before taxes                               (6,641)      4,522          647         4,761        2,951
     Net income (loss) (2)                                   $(3,875)    $ 7,205      $   566        $4,389      $ 2,713
     Earnings (loss) per basic share (3)                     $ (0.42)    $  0.79      $  0.06        $ 0.52      $  1.46
     Earnings (loss) per diluted share (3)                   $ (0.42)    $  0.75      $  0.06        $ 0.47      $  0.34
     Number of shares used in computing:
           Basic per share amounts (3)                         9,256       9,135        8,881         8,505        1,858
           Diluted per share amounts (3)                       9,256       9,636        9,323         9,332        7,874


                                                            1999          1998          1997          1996          1995
                                                        --------------------------------------------------------------------
                                                                                   (in thousands)

Consolidated Balance Sheet Data:
     Working capital                                         $21,528     $16,786      $18,287       $17,638       $6,854
     Total assets                                             43,871      47,544       37,091        35,246       20,910
     Long-term obligations                                     4,585       4,354        3,336         1,566        1,313
     Total stockholders' equity                               29,526      32,277       24,803        24,074       11,142

<FN>
-------------------------
(1)    The Company's  fiscal periods end on the Sunday closest to the end of the
       calendar period.  For ease of  presentation,  each fiscal period has been
       shown as ending on September 30.

(2)    In the first quarter of fiscal 1999, the Company recorded unusual pre-tax
       charges of $13.0 million  resulting  from the Company's  conclusion  that
       projected  production  volume and  related  cash flow from the  Company's
       internal fabrication facility were not sufficient to recover its carrying
       value. (See Note 11 of Notes to Consolidated Financial Statements.)

       During the  fourth  fiscal  quarter of 1998,  the  Company  reversed  its
       valuation  allowance for certain  deferred tax assets in accordance  with
       Statement of Financial  Accounting  Standards 109, "Accounting for Income
       Taxes."  This  resulted  in an income  tax  benefit  for  fiscal  1998 of
       $3,930,000 or $0.32 per diluted share.

(3)    See  Note  1  of  Notes  to  Consolidated  Financial  Statements  for  an
       explanation  of the  determination  of  the  number  of  shares  used  in
       computing earnings (loss) per share.
</FN>
</TABLE>


                                       16

<PAGE>


ITEM 7: MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATION

The following discussion contains forward-looking  statements that involve risks
and  uncertainties.  The Company's  actual results could differ  materially from
those discussed here. Factors that could cause or contribute to such differences
include,  but are not limited to, those discussed in this section, as well as in
the section entitled "Business".

Results of Operations

The  following  table sets  forth,  as a  percentage  of net  revenues,  certain
consolidated statement of operations data for the periods indicated.

                                                         1999     1998     1997
                                                        ------------------------
Net revenues                                            100.0%   100.0%   100.0%
Gross profit                                             47.1     46.3     43.2
Operating expenses:
     Research and development                            15.4     15.6     17.6
     Marketing, sales, general and administrative        21.4     21.4     25.1
     Unusual charges                                     23.7       -        -
Income (loss) from operations                           (13.4)     9.2      0.5
Income (loss) before income taxes                       (13.1)     9.8      1.8
Net income (loss)                                        (7.6)    15.6      1.6

Net Revenues. Net revenues were $50.7 million in fiscal 1999, an increase of 10%
over net revenues of $46.2 million in fiscal 1998.  The increase in net revenues
was due to an increase in unit  shipments,  while the average  selling price for
the Company's products remained relatively constant during the year. The Company
continues to experience  strong  revenue growth in the optical  storage  market,
which represented 26% of net revenues,  up from approximately 8% of net revenues
in fiscal 1998.

International  revenues represented 57% of net revenues, up slightly from 53% of
net revenues in fiscal 1998. Revenues from Japan and other Pacific Rim countries
increased  24% over fiscal 1998 as a result of  improvement  in the economic and
financial situation in the region.

In fiscal 1999,  domestic revenues remained flat in absolute dollars compared to
1998, but as a percentage of revenues  decreased to 43% of net revenues compared
to 47% of net revenues in fiscal 1998.

Net  revenues  were $46.2  million in fiscal  1998,  an increase of 31% over net
revenues of $35.4  million in fiscal 1997.  The increase in net revenues was due
to an  increase  in unit  shipments,  while the  average  selling  price for the
Company's products remained relatively constant during the year. Geographically,
the Company  experienced  broad  revenue  growth  with U.S.  revenues up 38% and
international revenues up 25% over fiscal 1997.

International  revenues in fiscal 1998  represented  53% of net  revenues,  down
slightly from 56% of net revenues in fiscal 1997.  Revenues from Japan and other
Pacific Rim  countries  increased  25% over fiscal 1997 despite the economic and
financial difficulties experienced by Japan and other countries in the region.

In July 1997, the Company  announced that it would  discontinue its military and
commercial hybrid product. This product line accounted for 10%, 8.4% and 7.9% of
product revenues in fiscal 1999, 1998


                                       17

<PAGE>

and 1997,  respectively.  Orders for these  discontinued  products were accepted
through the middle of 1998 and last  shipments to customers were made during the
fourth  quarter of fiscal  1999.  There will be no more  shipments  of  military
hybrid  products   starting  fiscal  2000.  The  Company  does  not  expect  the
discontinuance  of this product line to have a material  impact on the Company's
fiscal 2000 results from operations.

Gross Margin.  Gross margin was $23.9 million or 47.1% of net revenues in fiscal
1999. The increase in gross margin as a percentage of net revenues,  as compared
to 46.3% in fiscal 1998, was due primarily to the absorption of fixed costs over
a  larger  revenue  base  and  improved  manufacturing  yields  and  pricing  at
third-party foundries.  This was partially offset by higher unfavorable overhead
variances  relating to internal  production and increased  provisions for excess
and obsolete  inventory of  approximately  $1.0 million in the first  quarter of
fiscal 1999 as product mix shifted towards products  manufactured by third party
foundries.  During the first quarter of fiscal 1999,  the Company  implemented a
plan to restructure its  manufacturing  operations in response to a shift in the
mix of products fabricated internally compared to products fabricated by outside
foundries.  During  several  quarters  preceding the  restructuring,  production
volume and revenue from products  fabricated by outside  foundries had generally
increased,  while the volume and revenue  from  internally  fabricated  products
generally  declined.  As a result,  the Company was in a position of significant
over-capacity  in  its  internal   fabrication  facility  located  in  Milpitas,
California.

In response the Company decided to move gradually toward a primarily  outsourced
model  through a period  of  several  years.  The  Company  further  decided  to
discontinue  development of future dielectric process technology in favor of the
more state of the art silicon-on-insulator  technology,  where volume production
is expected to be  outsourced.  As a result of that  decision,  it was concluded
that certain  quantities  of  dielectric  inventory in excess of known  customer
demand  might  become  obsolete.  Of the $1.0  million  write-down  in the first
quarter of fiscal 1999,  approximately  $0.8 million  related to work in process
and  approximately  $0.2  million  related to  finished  goods.  The  dielectric
inventory  value at December 31, 1998 prior to the write-down  consisted of $3.2
million in work in process  and $0.6  million in finished  goods.  The amount of
this inventory on the balance sheet, after the write-down, at September 30, 1999
was $1.2 million in work in process and $0.5 million in finished goods.

Management  expects  improved  overall margins due to changing  product mix, new
product  introductions,  better pricing from  subcontractors  and utilization of
manufacturing  capacity  as the  Company  adjusts  production  to meet  changing
product demands.  However,  while the Company is working on programs to continue
to  improve  manufacturing  efficiencies,  there  can be no  assurance  that the
Company  will  not  encounter   difficulties   due  to  delays  with  technology
introduction,  changes in product mix, unfavorable manufacturing yields or other
manufacturing difficulties in the future. Gross margin may continue to fluctuate
from quarter to quarter.

Gross  margin was $21.4  million or 46.3% of net  revenues in fiscal  1998.  The
increase in gross  margin as a percentage  of revenues,  as compared to 43.2% in
fiscal 1997,  was due  primarily to the  absorption of fixed costs over a larger
revenue  base and  improved  manufacturing  yields and  pricing  at  third-party
foundries.  This was partially offset by higher  unfavorable  overhead variances
relating  to  internal  production  as  product  mix  shifted  towards  products
manufactured by third party foundries during the second half of fiscal 1998, and
increased  provisions for excess and obsolete  inventory.  Write-downs of excess
and obsolete inventory were $1.5 million higher in fiscal 1998 over fiscal 1997.

Research and Development Expenses.  Research and development (R&D) expenses were
$7.8  million,  $7.2 million and $6.2  million in fiscal 1999,  1998 and 1997 or
15.4%,  15.6% and  17.6% of net  revenues,  respectively.  The  increase  in R&D
expenses in fiscal 1999 as compared to 1998 was due  primarily to an increase in
staffing  and  related   compensation  of  $0.3  million,   particularly  design
engineering  personnel,


                                       18

<PAGE>

and higher spending of $0.3 million on new product designs.  The increase in R&D
expenses  in  fiscal  1998 over 1997 was also due to an  increase  in  staffing,
particularly  design  engineering  personnel  and higher  spending  for test and
prototype materials.

Marketing, Sales, General and Administrative Expenses. Marketing, sales, general
and  administrative  (SG&A)  expenses were $10.8 million,  $9.9 million and $8.9
million or 21.4%, 21.4% and 25.1% of net revenues in fiscal 1999, 1998 and 1997,
respectively.  The  increase  in SG&A  expenses in fiscal 1999 over 1998 was due
primarily  to an increase in staffing and related  payroll and benefit  costs of
$0.5 million and higher outside services costs of $0.4 million.  As a percentage
of net sales,  SG&A remained flat in fiscal 1999 as such costs  increased at the
same rate as net revenue growth. The increase in SG&A expenses in fiscal 1998 as
compared to 1997 was also due  primarily  to an increase in staffing and related
payroll and benefit costs, increased legal expenses and higher consulting costs.

Unusual Charges.  As discussed in gross margin section above, the Company in the
first quarter of fiscal 1999 implemented a plan to restructure its manufacturing
operations in response to a shift in the mix of products  fabricated  internally
compared to products fabricated by outside foundries.

The Company's  restructuring  activities  consisted primarily of a write down of
certain equipment, a write-down of inventory,  severance costs, and a write-down
of  previously  capitalized  patent costs (see Note 11 of Notes to  Consolidated
Financial Statements). These actions resulted in pretax charges of $12.0 million
to  operating  expenses  and $1.0  million to cost of goods sold.  Approximately
$12.7  million was utilized in fiscal 1999.  Approximately  $0.3 million will be
utilized in fiscal 2000.

Interest and Other  Income.  Interest and other  income was $0.5  million,  $0.7
million and $0.8 million in 1999, 1998 and 1997,  respectively.  Interest income
for 1999 decreased from 1998 due to lower rate of return on cash equivalents and
short-term  investments.  The decrease from fiscal 1997 to 1998 was due to lower
cash  equivalents  and  short-term  investments  resulting  primarily  from cash
disbursed and lease payments made in conjunction with the Company's  fabrication
facility expansion.

Provision/Benefit  for Taxes on Income.  The 1999  provision for taxes on income
reflects  the benefit  from the unusual  charges  recorded by the Company in the
first  quarter of fiscal 1999. In addition,  the Company  reversed the remaining
valuation  allowance of $500,000 due to the conclusion  that  realization of the
remaining deferred tax assets subject to the valuation  allowance is more likely
than not (see Note 7 of Notes to Consolidated Financial Statements).

Results for the fourth fiscal quarter of 1998 included a $3.1 million  favorable
tax adjustment  resulting primarily from the reversal of the Company's valuation
allowance for certain deferred tax assets at September 30, 1998.

Factors Affecting Future Operating Results

Except for historical  information  contained  herein,  the matters set forth in
this Annual  Report on Form 10-K,  including  the  statements  in the  following
paragraphs,  are forward-looking  statements that are dependent on certain risks
and uncertainties including such factors as, among others, delays in new product
and process technology announcements and product introductions by the Company or
its competitors,  competitive  pricing pressures,  fluctuations in manufacturing
yields,  changes in the mix or markets in which products are sold,  availability
and costs of raw materials,  reliance on subcontractors,  the cyclical nature of
the semiconductor industry,  industry-wide wafer processing capacity,  political
and economic  conditions in various  geographic areas, and costs associated with
other events,  such as  under-


                                       19

<PAGE>

utilization or expansion of production capacity, intellectual property disputes,
litigation, or environmental regulation and other factors described below.

The Company  continued to show steady  revenue  growth in fiscal 1999.  However,
over 75% of the Company's revenue in fiscal 1999 were derived from the video and
optical storage  markets.  This is a market that is highly dependent on consumer
spending.  As a result,  any significant  downturn in the economic climate could
lead to a slowdown of orders from the Company's  customers.  Also, a significant
portion of the revenue  generated  from the video and optical  storage market is
driven by design wins with application  specific  standard  products  ("ASSPs").
Should the Company's ASSP's get designed out by some of the Company's customers,
the Company's operating results could be adversely affected.

The  Company  sells its  products to  distributors  and  manufacturers  in Asian
countries that are currently  recovering  from an economic  recession.  Sales to
this region  represented  45% of the  Company's  net  revenues  in fiscal  1999.
Additionally,  30% of 1999 net revenues were to Microtek International,  Inc. in
Japan (See Note 1 of Notes to Consolidated  Financial  Statements).  The Company
experienced  a slight  increase in revenues from these  countries  during fiscal
1999. However, should the region not be able to sustain this recovery, there can
be no assurance that the Company's  results of operations  will not be adversely
impacted in the future.

The Company utilizes  various external  foundries for the production of CMOS and
bipolar  wafers  as  well as  certain  process  steps  in the  manufacturing  of
dielectric isolation wafers. The number of foundries that have the capability to
process dielectrically isolated semiconductor wafers is limited. The Company has
developed internal capability for a number of these dielectric isolation process
steps and has secured an alternate  vendor for one key process step. The Company
was informed that the current  dielectric  isolation  foundry would  discontinue
supplying  this  technology  in the fourth fiscal  quarter of 1998.  The Company
converted  production  of  most  process  steps  and  secured  a  vendor  for an
additional   key  process  step  during  the  fiscal  fourth  quarter  of  1998.
Manufacturing  problems  encountered  with the new  supplier may have a material
adverse effect on the Company's business and results of operations.

The   semiconductor   industry  is  extremely  capital   intensive.   To  remain
competitive,   the  Company  may  have  to   continue   investing   in  advanced
manufacturing  equipment  and  process  technologies.  The  Company  anticipates
significant  continuing capital expenditures during the following several years.
There can be no assurance  that the Company will not be required to seek debt or
equity  financing to satisfy its cash and capital  needs or that such  financing
will be available on terms  satisfactory  to the Company.  If such  financing is
required and if such financing were not available on terms  satisfactory  to the
Company, its operations would be materially adversely affected.

New products and process technology require significant research and development
expenditures.  However,  there can be no assurance that the Company will be able
to develop and introduce new products in a timely manner, that new products will
gain market  acceptance  or that new process  technologies  can be  successfully
implemented.  If the  Company  is unable to  develop  new  products  in a timely
manner,  and to sell them at gross margins  comparable to the Company's  current
products, the future results of operations could be adversely impacted.

Part of the Company's future bipolar product  development  strategy includes the
development of silicon-on-insulator ("SOI") technology called bonded wafers. The
Company  currently  believes  that, if successful,  the bonded wafer  technology
could provide technologically advanced products at a lower cost than the current
dielectric isolation complementary bipolar technology.  However, there can be no
assurance that SOI wafer technology can be successfully  implemented in a timely
manner or that it will  provide  the  desired  improvements  over the  Company's
current technology. Significant delays or


                                       20

<PAGE>

cancellation  of the  development  of the bonded wafer  technology  could have a
material adverse affect on the Company's business and results of operations.  In
addition,  delays or cancellation  of the  development of this technology  could
adversely  affect the Company's new product  development  program.  From time to
time,  the  Company has  experienced  production  difficulties  that have caused
delivery delays and quality problems. There can be no assurance that the Company
will not experience  manufacturing  problems and product  delivery delays in the
future as a result of, among other things,  changes to its process technologies,
ramping  production  and  equipment  failures.  The  Company  depends on outside
foundries for majority of its revenue. Any product delivery delays,  quality and
manufacturing problems from these foundries could adversely affect the Company's
operating results.

The semiconductor  industry is characterized by vigorous  protection and pursuit
of intellectual  property rights or positions which have resulted in significant
and often protracted and expensive litigation. In recent years, there has been a
growing   trend  of  companies  to  resort  to   litigation   to  protect  their
semiconductor  technology from unauthorized use by others.  The Company believes
its products do not infringe upon any valid  patents.  However,  there can be no
assurance that the Company's  position in these matters will prevail.  There can
be  no  assurance  that  additional  future  claims  alleging   infringement  of
intellectual  property  rights will not be asserted  against  the  Company.  The
intellectual property claims that have been made, or may be asserted against the
Company in the future,  could  require that the Company  discontinue  the use of
certain processes or cease the manufacture, use and sale of infringing products.
Additionally,  the Company may incur significant litigation costs and damages to
develop  noninfringing  technology.  There can be no assurance  that the Company
would  be able to  obtain  such  licenses  on  acceptable  terms  or to  develop
noninfringing technology without a material adverse effect on the Company.

The  Company is subject to a variety of  federal,  state and local  governmental
regulations  related  to the use,  storage,  discharge  and  disposal  of toxic,
volatile or otherwise  hazardous  chemicals used in its  manufacturing  process.
Although  the  Company  believes  that  its  activities   conform  to  presently
applicable  environmental  regulations,  the failure to comply  with  present or
future  regulations  could  result  in  fines  being  imposed  on  the  Company,
suspension of production or a cessation of operations. There can be no assurance
that regulatory  changes or changes in regulatory  interpretation or enforcement
will not render compliance more difficult and costly. Any failure of the Company
to control  the use of, or  adequately  restrict  the  discharge  of,  hazardous
substances, or otherwise comply with environmental regulations, could subject it
to significant future liabilities.

The Company's Common Stock has experienced substantial price volatility and such
volatility   may   occur  in  the   future,   particularly   as  a   result   of
quarter-to-quarter  variations in the actual or anticipated financial results of
the  Company,  the  companies  in the  semiconductor  industry or in the markets
served by the  Company,  or  announcements  by the  Company  or its  competitors
regarding  new  product  introductions.   In  addition,  the  stock  market  has
experienced  extreme price and volume fluctuations that have affected the market
price of many  technology  companies'  stock in  particular.  These  factors may
adversely affect the price of the Common Stock.

Past  performance  of  the  Company  may  not  be a  good  indicator  of  future
performance  due  to  factors  affecting  the  Company,  its  competitors,   the
semiconductor  industry and the overall economy.  The semiconductor  industry is
characterized by rapid technological  change,  price erosion,  cyclical markets,
periodic oversupply,  occasional shortages of materials,  capacity  constraints,
variation in manufacturing efficiencies and significant expenditures for capital
equipment and product development.  Furthermore,  new product  introductions and
patent  protection  of existing  products are critical  factors for future sales
growth and sustained profitability.


                                       21

<PAGE>

Year 2000 Readiness

The Company utilizes numerous  software programs  throughout its operations that
include dates and make  date-sensitive  calculations  based on two-digit  fields
that are assumed to begin with the year 1900. Software programs written based on
this assumption are vulnerable,  as the year 2000 approaches, to miscalculations
and  other  operational   errors  that  may  be  significant  to  their  overall
effectiveness.  In addition,  the Company  relies upon products and  information
from critical  suppliers,  large  customers and other  outside  parties,  in the
normal course of business,  whose software programs are also subject to the same
problem. Should miscalculations or other operational errors occur as a result of
the year 2000  issue,  the  Company or the  parties  on which it depends  may be
unable  to  produce  reliable  information  or  process  routine   transactions.
Furthermore,  in the worse case,  the Company or the parties on which it depends
may,  for an  extended  period of time,  be  incapable  of  conducting  critical
business  activities,  which include but are not limited to,  manufacturing  and
shipping products, invoicing customers and paying vendors.

The Company  initiated a year 2000  remediation  plan during fiscal 1997 to make
the Company's  primary and ancillary  information  systems year 2000  compliant.
This  plan  included  the  implementation  of  year  2000  compliant   financial
application and manufacturing-execution software. The new financial applications
software and upgraded  manufacturing-execution  software have been  implemented.
Based on current  information,  the Company believes that its internal  computer
systems are year 2000 compliant and that the risk of major disruption from these
systems due to year 2000 issues is minimal.

The Company's  current revenue is generated from products that will not generate
any product warranty or product defect liability issues related to the year 2000
compliance.  However, the Company could be negatively affected to the extent its
major suppliers, vendors and customers have not successfully addressed year 2000
issues.  Based on the response  that the Company  received  from a survey of the
major parties,  with which the Company conducts  business,  the Company believes
that the exposure to year 2000 issues is minimal.

The cost of  implementing  such a plan is being funded by income from operations
and  capital  leases  has not been and is not  expected  to be  material  to the
Company's  operating  results.  The cost to address  and  remedy  the  Company's
remaining  year 2000 issues is estimated to be $0.1 million in fiscal 2000.  The
cost of the year 2000  project  (and the date on which the  Company  believes it
will  complete  the year  2000  modification)  are  based on  management's  best
estimates,  which were derived utilizing numerous  assumptions of future events,
including the continued  availability  of certain  resources and other  factors.
However,  there can be no guarantee  that these  estimates  will be achieved and
actual results could differ materially from those anticipated.

Liquidity and Capital Resources

The Company's  primary sources of liquidity are cash and short-term  investments
of $18.7 million at September 30, 1999. Additionally, at September 30, 1999, the
Company had a revolving credit line of $5.0 million, all of which was unused and
available.  The line of credit expires June 30, 2000. The line bears interest at
the bank's prime rate (8.25% at October 3, 1999). Borrowings under this line are
secured by a first  priority  security  interest in virtually  all the Company's
assets  except for  certain  capital  assets  previously  acquired  under  lease
agreements.  The agreement contains certain covenants that include a restriction
on the  declaration  and payment of cash dividends and  restrictions on business
mergers,  acquisitions and  investments.  The Company was in compliance with all
covenants at September 30, 1999.

Cash and  equivalents  at September  30, 1999  increased  by $11.6  million from
September 30, 1998.  Net cash provided by  operations  was $12.9 million  during
fiscal  1999.  Investing  activities  used  $0.8  million


                                       22

<PAGE>

primarily  due to the  acquisition  of $3.2 million in property,  equipment  and
other assets (net of proceeds from  disposition of property and equipment) which
was  partially  offset by net sales of short-term  investments  of $2.4 million.
Financing  activities used $0.4 million primarily for payments on long-term debt
of $0.1 million and payments on capital lease  financing of $1.4 million,  which
was partially offset by proceeds from exercise of employee stock options of $1.2
million.

Cash and equivalents at September 30, 1998 decreased by $4.0 million or 41% from
September  30, 1997.  Net cash provided by  operations  was $4.7 million  during
fiscal  1998.  Investing  activities  used  $7.4  million  primarily  due to the
acquisition  of $9.8 million in property  and  equipment  (net of proceeds  from
disposition  of property and equipment and capital  lease  financing)  which was
partially  offset  by net  sales  of  short-term  investments  of $2.4  million.
Financing  activities used $1.3 million primarily for payments on long-term debt
of $0.7 million and payments on capital  lease  financing of $0.9 million  which
was partially offset by proceeds from exercise of employee stock options of $0.3
million.

The Company  believes that its existing cash and cash  equivalents,  its current
line of credit  and cash from  operations  will be  sufficient  to  support  its
operating  and  capital  needs for at least the next  twelve  months.  Any major
change in the  nature of the  Company's  business,  such as the  acquisition  of
products, the design of products not currently under development or the need for
significant unplanned capital  expenditures,  could change the Company's capital
requirements.  To the extent the Company requires  additional cash, there can be
no  assurance  that the Company  will be able to obtain such  financing on terms
favorable to the Company, or at all.


ITEM 7A:   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

Except for the historical information contained herein, the following discussion
contains  forward-looking  statements that involve risks and uncertainties.  The
Company's  actual results could differ  materially  from those  discussed  here.
Factors that could cause or contribute to such differences  include, but are not
limited to, those discussed in this section,  as well as in the section entitled
"Factors  Affecting  Future  Results".  The  Company is  exposed to market  risk
related to changes in interest rates and foreign  currency  exchange rates.  The
Company does not use derivative financial instruments for speculative or trading
purposes.

Interest  Rate  Sensitivity.  The  Company  maintains  a  short-term  investment
portfolio  consisting  mainly of income  securities with an average  maturity of
less than one year. These available-for-sale  securities are subject to interest
rate risk and will fall in value if market  interest rates  increase.  If market
interest  rates were to increase  immediately  and  uniformly by 10 percent from
levels at September 30, 1999, the fair value of the  approximately  $1.2 million
portfolio would decline by an immaterial  amount.  The Company presently intends
to hold its fixed income  investments until maturity,  and therefore the Company
would not expect its  operating  results  or cash  flows to be  affected  to any
significant  degree  by the  effect  of a sudden  short-term  change  in  market
interest rates on its securities portfolio.

At September 30, 1999, the Company had approximately $4.3 million of outstanding
obligations under capital lease  arrangements.  As the lease payments associated
with these  arrangements do not have variable  interest rates, an increase of 10
percent in  short-term  interest  rates would not have a material  impact on the
Company's net income or cash flows. The Company does not hedge any interest rate
exposures.

Since the Company does not have any  significant  exposure to changing  interest
rates because of the low levels of marketable  securities  with  maturities more
than 90 days,  the  Company  did not  undertake  any  specific  actions to cover
exposure  to interest  rate risk and the Company is not a party to any  interest
rate


                                       23

<PAGE>

risk  management  transactions.  The  Company  did  not  purchase  or  hold  any
derivative financial instruments for trading purposes.

Foreign  Currency  Exchange  Risk.  The Yen is the  functional  currency  of the
Company's  subsidiary  in  Japan  and  the  Company  denominates  certain  sales
transactions   in  Japanese   Yen.  The  Company  has   established   a  foreign
currency-hedging program, utilizing foreign currency forward exchange contracts,
or forward contracts of various duration to hedge trade receivables  denominated
in Japanese Yen. Under this program,  gains and losses on the forward  contracts
mitigate the risk of material foreign currency  transaction gains and losses and
offset increases or decreases in the Company's foreign currency receivables. The
Company  does not use  forward  contracts  for  trading  purposes.  The  Company
believes that the use of foreign currency  financial  instruments  should reduce
the risks that arise from conducting business in international markets.

The Company does not currently enter into foreign exchange forward  contracts to
hedge  balance  sheet  exposures  of its  subsidiary  in Japan and  intercompany
balances  against  future  movements in foreign  exchange  rates.  However,  the
Company does  maintain  cash balances  denominated  in Yen. If foreign  exchange
rates were to weaken  against the U.S.  dollar  immediately  and uniformly by 10
percent from the exchange  rate at September  30, 1999,  the fair value of these
foreign currency amounts would decline by an immaterial amount.

At the end of each fiscal month, all foreign currency assets and liabilities are
revalued using the month end spot rate and the realized and unrealized gains and
losses are recorded  and included in net income as a component of other  income,
net.


                                       24

<PAGE>


ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

1.      INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

        The following Financial Statements are filed as part of this Report.

                                                                        Page No.
                                                                        --------
        Report of Deloitte & Touche LLP, Independent Auditors............  30

        Report of Ernst & Young LLP, Independent Auditors................  31

        Consolidated Balance Sheets as of September 30, 1999 and 1998....  32

        Consolidated Statements of Operations for each of the three
        fiscal years in the period ended September 30, 1999..............  33

        Consolidated Statements of Stockholders' Equity and comprehensive
        income (loss) for each of the three fiscal years in the period
        ended September 30, 1999.........................................  34

        Consolidated Statements of Cash Flows for each of the three fiscal

        years in the period ended September 30, 1999.....................  35

        Notes to Consolidated Financial Statements.......................  36


2.      INDEX TO SUPPLEMENTAL FINANCIAL INFORMATION

        Unaudited Interim Financial Information..........................  50


3.      INDEX TO FINANCIAL STATEMENT SCHEDULE

        The   following    financial   statement   schedule   of   Elantec
        Semiconductor,  Inc. for the years ended  September 30, 1999, 1998
        and 1997 is filed as part of this  report  and  should  be read in
        conjunction with the Consolidated  Financial Statements of Elantec
        Semiconductor, Inc.

        Schedule II - Valuation and Qualifying Accounts for each of the
        three fiscal years in the period ended September 30, 1999........  51

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

        Schedules  other than that listed  above have been  omitted  since
        they are either not required,  not applicable,  or the information
        is otherwise included.


                                 25

<PAGE>


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

On May 29, 1998, the Board of Directors of the Company approved the dismissal of
the Company's independent accountants, Ernst & Young LLP, and the appointment of
Deloitte & Touche LLP ("Deloitte & Touche") beginning with the fiscal year ended
1998.  The report of Ernst & Young LLP for the fiscal year ended 1997  contained
no adverse opinion, disclaimer of opinion or qualification or modification as to
uncertainty,  audit scope or accounting principles.  During the fiscal year 1997
and the interim period from October 1, 1997 through May 29, 1998,  there were no
disagreements  between  the  Company  and  Ernst & Young  LLP on any  accounting
principles or practices,  financial  statement  disclosure or auditing  scope or
procedure, which, if not resolved to the satisfaction of Ernst & Young LLP would
have caused it to make  reference to the subject matter of the  disagreement  in
connection with its report. No "reportable events" as described in paragraph (a)
(1) (v) of Item 304 of Regulation S-K occurred within the Company's  fiscal year
ended 1997, or the period from October 1, 1997 through May 29, 1998.

The Company did not consult with  Deloitte & Touche during the fiscal year ended
1997,  and the interim  period from October 1, 1997 through May 29, 1998, on any
matter which was the subject of any  disagreement or any reportable  event or on
the  application  of accounting  principles to a specified  transaction,  either
completed or proposed.


                                       26

<PAGE>

                                    PART III

ITEM 10:  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information  required  by this Item with  respect  to  Directors  and  Executive
Officers  may be found  in Part I hereof  in the  section  captioned  "Executive
Officers and Directors of the Company."  Information  required by this Item with
respect to filings by the Directors and Executive  Officers  under Section 16 of
the  Securities  Exchange  Act of 1934  may be found  in the  section  captioned
"Section  16(a)  Beneficial  Ownership  Reporting  Compliance"  appearing in the
definitive  Proxy  Statement to be delivered to  stockholders in connection with
the  Annual  Meeting  of  Stockholders  to be held on  January  14,  2000.  Such
information is incorporated herein by reference.


ITEM 11:  EXECUTIVE COMPENSATION

Information  with  respect  to this Item may be found in the  section  captioned
"Proposal No. 1 - Election of Directors - Director's  Compensation",  "Executive
Compensation",  "Employment Agreements", "Severance" and "Compensation Committee
Interlocks  and  Insider  Participation"   appearing  in  the  definitive  Proxy
Statement to be delivered to  stockholders in connection with the Annual Meeting
of Stockholders to be held on January 14, 2000. Such information is incorporated
herein by reference.


ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information  with  respect  to this Item may be found in the  section  captioned
"Security  Ownership of Certain  Beneficial Owners and Management"  appearing in
the definitive  Proxy  Statement to be delivered to  stockholders  in connection
with the Annual  Meeting of  Stockholders  to be held on January 14, 2000.  Such
information is incorporated herein by reference.


ITEM 13:  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information  with  respect  to this Item may be found in the  section  captioned
"Certain  Transactions"  appearing  in  the  definitive  Proxy  Statement  to be
delivered to  stockholders in connection with the Annual Meeting of Stockholders
to be held on January 14,  2000.  Such  information  is  incorporated  herein by
reference.


                                       27

<PAGE>

                                     PART IV

Item 14: Exhibits, Financial Statement Schedule and Reports on Form 8-K

(a) The following documents are filed as part of this report:

     1.  Financial  Statements and Financial  Statement Schedule -- See Index to
         Consolidated  Financial  Statements and Financial Statement Schedule at
         Item 8 on page 25 of this Report.

     2.  Exhibits. The following  exhibits are filed as part of, or incorporated
         by reference into, this Report:


Exhibit
Number  Exhibit Title
------  -------------

3.01    --  Company's Certificate of Incorporation. (1)
3.02    --  Certificate  of  Designations  specifying  the terms of the Series A
            Junior  Participating  Preferred  Stock of Registrant, as filed with
            the Secretary of State of Delaware o September 15, 1998. (2)
3.03    --  Company's Bylaws. (1)
4.01    --  Registration Rights Agreement dated August 12, 1988 by and among the
            Company  and certain  Stockholders  and  Warrantholders,  as amended
            January 12, 1990 and as of August 4, 1995. (1)
4.02    --  Rights Agreement dated September 14, 1998 between  Registrant,  Bank
            Boston,  N.A., as Rights Agent, which includes as Exhibit A the from
            of  Certificate  of  Designations  of Series A Junior  Participating
            Preferred Stock, as Exhibit B the Form of Rights  Certificate and as
            Exhibit C the Summary of Rights to Purchase Preferred Shares. (2)
10.01   --  Company's 1983 Stock Option Plan, as amended, and related documents.
            (1)/+
10.02   --  Company's  1994  Equity  Incentive  Plan,  as  amended,  and related
            documents. (1)/+
10.03   --  Form of Company's 1995 Equity Incentive Plan and related  documents.
            (3)/+
10.04   --  Form of  Company's  1995  Directors  Stock  Option  Plan and related
            documents. (3)/+
10.05   --  Form of Company's  1995  Employee  Stock  Purchase  Plan and related
            documents. (1)/+
10.06   --  Form of  Indemnification  Agreement entered into by the Company with
            each of its directors and executive officers. (1)
10.07   --  Form of Executive Compensation Agreement dated as of March 22, 1991,
            by and between the Company and David O'Brien. (1)/+
10.08   --  Form of Executive Compensation Agreement dated as of March 22, 1991,
            by and between the  Company  and each of Ralph  Granchelli,  Richard
            Corbin and Barry Siegel. (1)/+
10.09   --  Standard  Industrial/Commercial  Single-Tenant  Lease dated June 23,
            1993,  by and  between the  Company  and Robert  Ruggles,  including
            amendments one through five thereto. (1)
10.10   --  Distributor  Agreement  dated December 8, 1986,  between the Company
            and Insight Electronics, Inc. ("Insight"). (1)
10.11   --  Distributor Agreement dated October 1, 1989, between the Company and
            Insight. (1)
10.12   --  Distributor  Agreement  dated November 1, 1987,  between the Company
            and Marshall Industries. (1)
10.13   --  Distributor  Agreement dated March 7, 1994,  between the Company and
            Internix, Inc. (1)
10.14   --  Amendment  to  Standard  Industrial/Commercial  Single-Tenant  Lease
            dated June 23, 1993. (4)
10.15   --  Standard  Industrial/Commercial  Single-Tenant  Lease dated February
            20, 1996. (4)
10.16   --  Amendment  to  Standard  Industrial/Commercial  Single-Tenant  Lease
            dated February 20, 1996. (4)
10.17   --  Distributor  Agreement dated August 1, 1996, between the Company and
            Microtek Inc. (5)
10.18   --  Employment  Agreement  between the Company and Richard  Corbin dated
            March 15, 1999.
16.01   --  Letter regarding change of certifying accountants (6)
21.01   --  Subsidiaries of the Company.


                                       28

<PAGE>

23.01   --  Consent of Deloitte & Touche LLP, Independent Auditors.
23.02   --  Consent of Ernst & Young LLP, Independent Auditors.
24.01   --  Powers of Attorney (see page 52 of this Report).
27.01   --  Financial Data Schedule.

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

   (1)   Incorporated  by reference to the Company's  Registration  Statement on
         Form S-1, filed August 24, 1995, as amended (File No. 33-96136).
   (2)   Incorporated  by reference to the Company's  Registration  Statement on
         Form 8-A, filed September 16, 1998.
   (3)   Incorporated  by reference to the Company's  Registration  Statement on
         Form S-8, February 26, 1999 (File No. 333-73031).
   (4)   Incorporated  by reference to the  Company's  Quarterly  Report on Form
         10-Q for the quarter ended September 30, 1996.
   (5)   Incorporated  by reference to the Company's  Annual Report on Form 10-K
         for the quarter ended September 30, 1996.
   (6)   Incorporated  by reference to the Company's  Current Report on Form 8-K
         filed on June 5, 1998.
   (7)   Incorporated  by reference to the Company's  Current Report on Form 8-K
         filed on November 12, 1998.

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

    +    Represents a management contract or compensatory plan or arrangement.

   (b)   The  Company  filed no reports  on Form 8-K during the last  quarter of
         this fiscal year.
   (c)   Exhibits:
         The Registrant hereby files as part of this Report the exhibits  listed
         in Item 14(a)(2), as set forth above.
   (d)   Financial Statement Schedules:
         The  Registrant  hereby  files  as part of this  Report  the  financial
         statement schedules listed in Item 14(a)(1), as set forth above.


                                       29

<PAGE>


Independent Auditor's Report

To the Board of Directors and Stockholders of
Elantec Semiconductor, Inc.

Milpitas, California:

We  have  audited  the  accompanying  consolidated  balance  sheets  of  Elantec
Semiconductor,  Inc. and  subsidiaries  ("Company") as of September 30, 1999 and
1998 and the related consolidated statements of operations, stockholders' equity
and  comprehensive  income (loss),  and cash flows for the years then ended. Our
audits  also  included  the  financial  statement  schedule  for the years ended
September  30, 1999 and 1998 listed in the index at Item 8(3).  These  financial
statements and the financial  statement  schedule are the  responsibility of the
Company's  management.  Our  responsibility  is to  express  an  opinion  on the
financial statements and the financial statement schedule 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,  such consolidated  financial  statements present fairly, in all
material  respects,  the financial position of Elantec  Semiconductor,  Inc. and
subsidiaries  at September 30, 1999 and 1998,  and the results of its operations
and its cash  flows for the years  then  ended,  in  conformity  with  generally
accepted accounting  principles.  Also, in our opinion, such financial statement
schedule for the years ended  September  30, 1999 and 1998,  when  considered in
relation  to the  basic  consolidated  financial  statements  taken  as a whole,
presents fairly in all material respects the information set forth therein.

/s/ Deloitte & Touche LLP

San Jose, California
November 1, 1999


                                       30


<PAGE>

                         Report of Independent Auditors

The Board of Directors and Stockholders
Elantec Semiconductor, Inc.

We  have  audited  the  accompanying   consolidated  balance  sheet  of  Elantec
Semiconductor,  Inc.  as of  September  30,  1997 and the  related  accompanying
consolidated statements of operations,  stockholders' equity, and cash flows for
the year then ended.  Our audit also included the financial  statement  schedule
for the year ended  September  30,  1997  listed in the index at Item  14(a)(1).
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 audit.

We conducted our audit 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 audit provides 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 Elantec
Semiconductor,  Inc. at September 30, 1997, and the consolidated  results of its
operations  and its cash  flows  for the year then  ended,  in  conformity  with
generally  accepted  accounting  principles.  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.

                                                           /s/ Ernst & Young LLP

San Jose, California
October 22, 1997


                                       31

<PAGE>

<TABLE>
                                                     Elantec Semiconductor, Inc.
                                                          and Subsidiaries
                                                     Consolidated Balance Sheets
                                         (in thousands, except share and per share amounts)

<CAPTION>
                                                                                                               September 30,
                                                                                                          1999               1998
                                                                                                        ---------------------------
<S>                                                                                                     <C>                <C>
Assets
Current assets:
   Cash and cash equivalents                                                                            $ 17,459           $  5,815
   Short-term investments                                                                                  1,204              3,651
   Accounts receivable, net of allowances of $1,384 in 1999
     and $1,076 in 1998                                                                                    4,946              5,207
   Inventories                                                                                             3,300              9,059
   Deferred income taxes                                                                                   3,278              3,367
   Prepaid expenses and other current assets                                                               1,101                600
                                                                                                        ---------------------------
Total current assets                                                                                      31,288             27,699
Property and equipment:
   Machinery and equipment                                                                                18,225             16,672
   Furniture and fixtures                                                                                    720                652
   Leasehold improvements                                                                                  3,126              1,494
   Construction-in-process                                                                                  --               10,637
                                                                                                        ---------------------------
                                                                                                          22,071             29,455
   Accumulated depreciation and amortization                                                             (13,306)           (10,830)
                                                                                                        ---------------------------
                                                                                                           8,765             18,625
Other assets, net                                                                                            946                657
Non-current deferred income taxes                                                                          2,872                563
                                                                                                        ---------------------------
Total assets                                                                                            $ 43,871           $ 47,544
                                                                                                        ===========================

Liabilities and stockholders' equity Current liabilities:

   Accounts payable                                                                                     $  3,698           $  4,108
   Income taxes payable                                                                                     --                  779
   Accrued salaries and benefits                                                                           1,538              1,462
   Other accrued liabilities                                                                                 818                458
   Deferred revenue                                                                                        2,266              2,626
   Current portion of capital lease obligations                                                            1,440              1,480
                                                                                                        ---------------------------
Total current liabilities                                                                                  9,760             10,913
Long-term capital lease obligations                                                                        2,840              4,354
Other long-term liabilities                                                                                1,745               --
Commitments and contingencies (Note 4)                                                                      --                 --
Stockholders' equity:
   Preferred stock, $.01 par value:
     Authorized shares - 5,000,000 in 1999 and 1998                                                         --                 --
     Issued and outstanding shares - none
   Common stock, $.01 par value:
     Authorized shares - 25,000,000 in 1999 and 1998
   Issued and outstanding shares - 9,385,000 in 1999 and 9,188,000 in 1998                                    94                 92
   Additional paid-in capital                                                                             35,061             33,902
   Accumulated deficit                                                                                    (5,592)            (1,717)
   Accumulated other comprehensive loss                                                                      (37)              --
                                                                                                        ---------------------------
Total stockholders' equity                                                                                29,526             32,277
                                                                                                        ===========================
Total liabilities and stockholders' equity                                                              $ 43,871           $ 47,544
                                                                                                        ===========================

<FN>
                                    See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
                                                                 32

<PAGE>

<TABLE>
                                                     Elantec Semiconductor, Inc.
                                                          and Subsidiaries
                                                Consolidated Statements of Operations
                                              (in thousands, except per share amounts)

<CAPTION>
                                                                                                  September 30,
                                                                                   1999                 1998                 1997
                                                                                 --------------------------------------------------
<S>                                                                              <C>                  <C>                  <C>
Net revenues                                                                     $ 50,662             $ 46,210             $ 35,388
Cost of revenues                                                                   25,785               24,831               20,111
Cost of revenues - inventory write-down                                             1,008                 --                   --
                                                                                 --------------------------------------------------
 Gross profit                                                                      23,869               21,379               15,277

Operating expenses:
   Research and development                                                         7,796                7,228                6,234
   Marketing, sales, general, and administrative                                   10,833                9,890                8,866
   Unusual charges                                                                 12,009                 --                   --
                                                                                 --------------------------------------------------
        Total operating expenses                                                   30,638               17,118               15,100
                                                                                 --------------------------------------------------
Income (loss) from operations                                                      (6,769)               4,261                  177
Interest and other income, net                                                        528                  674                  759
Interest expense                                                                     (400)                (413)                (289)
                                                                                 --------------------------------------------------
Income (loss) before taxes                                                         (6,641)               4,522                  647
Provision for (benefit from) taxes on income                                       (2,766)              (2,683)                  81
                                                                                 --------------------------------------------------
Net income (loss)                                                                $ (3,875)            $  7,205             $    566
                                                                                 ==================================================

Earnings (loss) per share:
     Basic                                                                       $  (0.42)            $    .79             $   0.06
     Diluted                                                                     $  (0.42)            $    .75             $   0.06

Shares used in computing per share amounts:
     Basic                                                                          9,256                9,135                8,881
     Diluted                                                                        9,256                9,636                9,323


<FN>
                                    See accompanying notes to consolidated financial statements.
</FN>
</TABLE>

                                                                 33

<PAGE>
<TABLE>
                                                     Elantec Semiconductor, Inc.
                                                          and Subsidiaries
                                         Consolidated Statements of Stockholders' Equity and
                                                     Comprehensive Income (Loss)
                                                           (in thousands)
<CAPTION>

                                                                                        Accumulate
                                           Common Stock     Additional                     Other           Total           Total
                                        ------------------   Paid-In     Accumulated   Comprehensive   Stockholders'   Comprehensive
                                        Shares   Amount      Capital      Deficit           Loss          Equity       Income (Loss)
                                        --------------------------------------------------------------------------------------------
<S>                                       <C>        <C>      <C>         <C>                             <C>
Balance at September 30, 1996             8,745      $ 87     $ 33,475    $ (9,488)         -             $ 24,074
   Exercise of stock options                274         3          160           -          -                  163
   Net income and comprehensive income        -         -            -         566          -                  566          $   566
                                        ---------------------------------------------------------------------------=================
Balance at September 30, 1997             9,019        90       33,635      (8,922)         -               24,803
   Exercise of stock options                169         2          267           -          -                  269
   Net income and comprehensive income        -         -            -       7,205          -                7,205          $ 7,205
                                         --------------------------------------------------------------------------=================
Balance at September 30, 1998             9,188        92       33,902      (1,717)         -               32,277
   Exercise of stock options                197         2          608           -          -                  610
   Tax benefit of stock option
     transactions                             -         -          551           -          -                  551
   Net loss                                   -         -            -      (3,875)         -               (3,875)         $(3,875)
   Foreign currency translation
   adjustment                                 -         -            -           -         $ (37)              (37)             (37)
                                                                                                                   -----------------
   Total comprehensive loss                                                                                                 $(3,912)
                                        --------------------------------------------------------------------------------------------
Balance at September 30, 1999             9,385      $ 94     $ 35,061    $ (5,592)        $ (37)         $ 29,526
                                        ============================================================================================

<FN>
                                    See accompanying notes to consolidated financial statements.
</FN>
</TABLE>

                                                                 34

<PAGE>

<TABLE>
                                                     Elantec Semiconductor, Inc.
                                                          and Subsidiaries
                                                Consolidated Statements of Cash Flows
                                                           (in thousands)

<CAPTION>
                                                                                                   September 30,
                                                                                      1999               1998               1997
                                                                                    -----------------------------------------------
<S>                                                                                 <C>                <C>                <C>
Operating activities
Net income (loss)                                                                   $  (3,875)         $   7,205          $     566
Adjustments to reconcile net income (loss) to net cash
   provided by operating activities:
     Depreciation and amortization                                                      3,134              2,610              2,022
      Deferred income tax                                                              (2,220)            (3,930)              --
      Loss on disposition of property and equipment                                      --                  389               --
      Inventory write-down                                                              1,008               --                 --
      Asset impairment                                                                 11,090               --                 --
     Changes in operating assets and liabilities:
       Accounts receivable                                                                261             (1,892)               860
       Inventories                                                                      4,751             (1,690)              (894)
       Prepaid expenses and other current assets                                         (501)                27                (73)
       Payables and accrued liabilities                                                  (421)             1,440                 32
       Deferred revenue                                                                  (360)               532             (1,049)
                                                                                    -----------------------------------------------
Net cash provided by operating activities                                              12,867              4,691              1,464

Investing activities
Purchase of available for sale investments                                            (78,476)           (79,487)          (114,576)
Sale and maturity of available for sale investments                                    80,923             81,925            115,150
Purchase of property and equipment                                                     (2,750)            (9,756)              (425)
Decrease (increase) in other assets                                                      (490)               (73)                20
                                                                                    -----------------------------------------------
Net cash provided by (used in) investing activities                                      (793)            (7,391)               169
Financing activities
Payments on capital lease obligations                                                  (1,427)              (936)              (426)
Payments on long-term debt                                                               (127)              (657)              (908)
Proceeds from exercise of stock options                                                 1,161                269                163
                                                                                    -----------------------------------------------
Net cash used in financing activities                                                    (393)            (1,324)            (1,171)
                                                                                    -----------------------------------------------
Effect of exchange rate changes on cash                                                   (37)              --                 --
                                                                                    -----------------------------------------------
Increase (decrease) in cash and cash equivalents                                       11,644             (4,024)               462
Cash and cash equivalents at beginning of period                                        5,815              9,839              9,377
                                                                                    -----------------------------------------------
Cash and cash equivalents at end of period                                          $  17,459          $   5,815          $   9,839
                                                                                    ===============================================
Supplemental disclosures of cash flow information
Lease and installment financing for capital equipment                               $       0          $   2,600          $   3,467
                                                                                    ===============================================
Interest paid                                                                       $     427          $     378          $     285
                                                                                    ===============================================
Taxes paid                                                                          $     220          $     808          $      57
                                                                                    ===============================================

<FN>
                                    See accompanying notes to consolidated financial statements.
</FN>
</TABLE>

                                                                 35

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Business and Significant Accounting Policies

Nature  of  Business.  Elantec  Semiconductor,  Inc.  (the  "Company")  designs,
manufactures and markets high performance analog integrated circuits used in the
video,  optical storage,  integrated DC:DC, and xDSL markets.  Principal markets
include sales in North America, Asia, Europe and other countries.

Fiscal Year.  The Company's  fiscal year ends on the Sunday closest to September
30.  Fiscal years 1999,  1998,  and 1997 ended on October 3,  September  27, and
September 28,  respectively.  For  convenience,  the  accompanying  consolidated
financial  statements  have been shown as ending on September 30 for each fiscal
year.  Fiscal  year 1999  included  53 weeks  while  fiscal  years 1998 and 1997
included 52 weeks per year.

Use of Estimates.  The  preparation of financial  statements in conformity  with
generally accepted  accounting  principles requires management to make estimates
and  assumptions  that  affect the  reported  amounts  of  assets,  liabilities,
revenues  and expenses  during the  reporting  period.  Such  estimates  include
allowance for potentially uncollectible accounts receivable, inventory reserves,
warranty  costs,  sales returns and accrued  liabilities.  Actual  results could
differ from those estimates.

Consolidation.  The accompanying  consolidated  financial statements include the
accounts of the  Company  and its wholly  owned  subsidiaries.  All  significant
intercompany accounts and transactions have been eliminated in consolidation.

Cash and Cash Equivalents.  The Company considers all highly liquid  investments
with an original  maturity  (at the date of purchase) of three months or less to
be the equivalent of cash for the purposes of the balance sheet and statement of
cash flows  presentation.  Cash and cash  equivalents  are carried at cost which
approximates market value.

Short-Term Investments.  The Company's policy is to invest in various short-term
instruments  with investment  grade credit ratings.  Generally such  investments
have  contractual  maturities  of  less  than  one  year.  All of the  Company's
marketable  investments are classified as  "available-for-sale"  and the Company
views its  available-for-sale  portfolio  as  available  for use in its  current
operations. At September 30, 1999, short-term investments consisted of corporate
debt of  $1,204,000,  all  maturing  within one year.  At  September  30,  1998,
short-term  investments consisted of corporate debt of $1,901,000,  auction-rate
securities of $450,000, and US Treasury bills of $1,300,000. The following table
is  a  summary  of  debt  and  money  market  auction  preferred  securities  by
contractual maturity at September 30, 1998 (in thousands):

                                                                       Amortized
                                                                         Cost
                                                                        ------
Maturing within one year                                                $  552
Maturing after one year and before three years                           2,649
Money market auction preferred securities                                  450
                                                                        ------
Total                                                                   $3,651
                                                                        ======


                                       36

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

In accordance  with Statement of Financial  Accounting  Standards (FAS) No. 115,
"Accounting for Certain  Investments in Debt and Equity Securities," the Company
classifies its short-term investments as "available-for-sale" securities and the
cost of  securities  sold is based on the  specific  identification  method.  At
September 30, 1999 there was no significant  difference  between the fair market
value,  determined  by quoted market  prices,  and the  underlying  cost of such
investments. Realized gains and losses were immaterial.

Significant  Risks and  Concentration of Credit.  The Company  participates in a
dynamic  high  technology  industry  and  believes  that  changes  in any of the
following  areas could have a material  adverse  effect on the Company's  future
financial  position or results of operations:  delays in new product and process
technology  announcements  and  product  introductions  by  the  Company  or its
competitors,   competitive  pricing  pressures,  fluctuations  in  manufacturing
yields,  changes in the mix or markets in which products are sold,  availability
and costs of raw materials,  reliance on subcontractors,  the cyclical nature of
the semiconductor industry,  industry-wide wafer processing capacity,  political
and economic  conditions in various  geographic areas, and costs associated with
other events,  such as  under-utilization  or expansion of production  capacity,
intellectual property disputes,  litigation,  or environmental  regulation among
other factors.

Financial  instruments that potentially subject the Company to concentrations of
credit  risk  consist  principally  of cash and short  term  investments,  trade
receivables and foreign exchange forward contracts.

The Company's  policy is to place its cash and short-term  investments with high
credit  quality  institutions  and  limit  the  amount  invested  with  any  one
institution or in any type of financial instrument. The Company does not hold or
issue financial instruments for trading purposes.

The  Company's  products  are  sold  to a wide  variety  of  original  equipment
manufacturers through a direct sales force and to a network of distributors. The
Company generally does not require collateral from its trade creditors. However,
the Company  performs  ongoing credit  evaluations  of its customers'  financial
condition and requires collateral, primarily letters of credit, if necessary.

Customers comprising 10% or greater of the Company's net revenues are summarized
as follows:

                                                      September 30,
                                               1999        1998       1997
                                             -----------------------------------
Microtek International, Inc. - Japan            30%         23%        14%
Insight Electronics, Inc. - United States       10%         11%        12%


As of  September  30, 1999 ,  Microtek  International  and  Insight  Electronics
accounted for 44% and 11%, respectively, of the Company's trade receivables. The
same customers accounted for 28% and 14%,  respectively,  of the Company's trade
receivables at September 30, 1998.

Inventories.  Inventories  are stated at the lower of cost or market with actual
cost determined using the first-in, first-out method.


                                       37

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Property  and  Equipment.  Machinery  and  equipment  as well as  furniture  and
fixtures are stated at cost and depreciated  over the estimated  useful lives of
the  assets  (three to ten  years)  using the  straight-line  method.  Leasehold
improvements are stated at cost and amortized on a straight-line  basis over the
shorter of the useful lives of the assets or the  remaining  lease term.  Assets
under  capital  leases are  recorded at the present  value of the related  lease
obligations and amortized on a straight-line basis over the lease term.

Long-lived Assets. The Company accounts for long-lived assets in accordance with
Statement of Financial Accounting Standards ("FAS") No. 121, "Accounting for the
Impairment of Long-Lived  Assets and for  Long-Lived  Assets to be Disposed Of."
FAS No. 121 requires  long-lived assets to be evaluated for impairment  whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable.

Stock-Based  Compensation.  The  Company  accounts  for  stock-based  awards  to
employees  using the  intrinsic  value  method  in  accordance  with  Accounting
Principles  Board  Opinion  ("APB")  No.  25,  "Accounting  for Stock  Issued to
Employees."

Revenue  Recognition.  Net revenues are stated net of  estimated  discounts  and
allowances.   Revenue  from  product  sales  direct  to  customers  and  foreign
distributors is generally recognized upon shipment.  However, the Company defers
the  recognition  of revenue and the  related  cost of revenue on  shipments  to
domestic  distributors  that have certain rights of return and price  protection
privileges  on  unsold   merchandise  until  the  merchandise  is  sold  by  the
distributor.

Foreign Currency.  The functional currency of the Company's foreign subsidiaries
is the local currency of that country.  Gains and losses  resulting from foreign
currency  translations and net foreign currency  transactions were immaterial in
1999 and 1998.  There were no gains or losses  resulting  from foreign  currency
translations or net foreign currency transactions in 1997.

Advertising  Expense. The Company expenses the costs of advertising as incurred.
Advertising expense was approximately  $671,000,  $555,000, and $552,000 for the
fiscal years ended September 30, 1999, 1998, and 1997, respectively.

Earnings (Loss) Per Share.  Earnings (loss) per share (EPS) is computed as basic
EPS using the weighted average number of shares of common stock  outstanding and
diluted  EPS using the  weighted  average  number of shares of common  stock and
dilutive common equivalent shares  outstanding from convertible  preferred stock
(using the if-converted method) and from stock options (using the treasury stock
method).

Comprehensive  Income.  In the first  quarter of fiscal  year 1999,  the Company
adopted  Statement  of  Financial   Accounting  Standards  No.  130,  "Reporting
Comprehensive  Income"  (FAS  130 ).  FAS  130  establishes  new  rules  for the
reporting  and  display  of  comprehensive  income  (loss)  and its  components.
Components of comprehensive  income (loss) include net income (loss) and certain
transactions  that  are  reported  directly  to the  consolidated  statement  of
stockholders' equity.


                                       38

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

2.  Recent Accounting Pronouncements

Derivative  Investments  and Hedging  Activities.  In June 1998, the FASB issued
Statement of Financial Accounting  Standards No.133,  "Accounting for Derivative
Investments and Hedging  Activities" (FAS 133). FAS 133 provides a comprehensive
and consistent  standard for the recognition and measurements of derivatives and
hedging  activities.  The Company is required to adopt FAS 133 as amended during
fiscal 2001 and does not expect the  statement to have a  significant  effect on
the Company's operating results.

3. Inventories

Inventories consisted of the following (in thousands):

                                                             September 30,
                                                          1999           1998
                                                  ------------------------------
Raw materials                                          $    45          $  498
Work-in-process                                          1,645           6,481
Finished goods                                           1,610           2,080
                                                  ------------------------------
                                                       $ 3,300          $9,059
                                                  ==============================

4. Commitments and Contingencies

The Company leases its principal  facilities  under operating leases that expire
at various dates through 2005. The Company is generally  responsible  for taxes,
assessments,  maintenance and insurance under its leases. In addition, machinery
and equipment  included  approximately  $7,058,000  and  $7,064,000 of equipment
acquired  under capital  leases and  approximately  $4,857,000 and $1,662,000 of
related accumulated  amortization at September 30, 1999 and 1998,  respectively.
Amortization  of capital  leases is included in  depreciation  and  amortization
expense.

The  following  is a schedule by year of future  minimum  lease  payments  under
capital and operating leases as of September 30, (in thousands):

                                                                   Operating
                                                Capital Leases       Leases
                                             -----------------------------------
2000                                                    $1,727          $ 954
2001                                                     1,591            915
2002                                                     1,073            853
2003                                                       428            740
2004                                                         -            476
Thereafter                                                   -            357
                                             -----------------------------------
Total minimum lease payments                             4,819          4,295
Amount representing interest                              (539)             -
                                             -----------------------------------
Present value of net minimum lease payments              4,280         $4,295
                                                               =================

Current portion                                         (1,440)
                                             ------------------
Long-term capital lease obligations                     $2,840
                                             ==================


                                       39

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Total  rental  expense on all  operating  leases was  approximately  $1,177,000,
$812,000,  and $689,000 for the fiscal years ended  September 30, 1999, 1998 and
1997,  respectively.  At September 30 1999, outstanding  commitments to purchase
capital  equipment  totaled  approximately  $0.8  million.  The  Company  has  a
revolving  credit line of $5.0 million,  all of which was unused and  available.
The line of credit  expires June 30, 2000. The line bears interest at the bank's
prime rate (8.25% at October 3, 1999).

The Company is a party to a number of legal proceedings arising in the course of
its business.  These actions include  employee-related  issues.  While it is not
feasible  to predict or  determine  the  outcome of these  matters,  the Company
believes  that the ultimate  resolution of these claims will not have a material
adverse effect on its financial position or results of operations.

5. Stockholders' Equity

Employee Stock Plans. The Company  accounts for stock-based  awards to employees
using the intrinsic value method in accordance with Accounting  Principles Board
Opinion ("APB") No. 25, "Accounting for Stock Issued to Employees."

Stockholder  Rights Plan. In September  1998,  the Company's  Board of Directors
adopted a Stockholder  Rights Plan under which the Board of Directors declared a
dividend of one preferred  share  purchase right for each  outstanding  share of
common stock,  par value $0.01 per share,  of Elantec stock held as of September
21, 1998. Each preferred share purchase right entitles the registered  holder to
purchase  one  two-hundredth  of the  Company's  Series A  Junior  Participating
Preferred  Stock,  par value $0.01 per share,  at a price of $25.00.  The rights
become  exercisable ten days following the announcement that an entity or person
has  commenced  a tender  offer to  acquire or has  acquired  20% or more of the
Company's outstanding common stock ("the Distribution Date").

After the  Distribution  Date,  the Board may exchange the rights at an exchange
ratio of one common share or one  two-hundredth  of a preferred share per right.
Otherwise,  each holder of a right, other than rights  beneficially owned by the
acquiring entity or person (which will thereafter be void),  will have the right
to receive upon  exercise  that number of common shares having a market value of
two times the exercise  price of the right.  The rights will expire on September
14, 2008.

Employee  Stock  Purchase  Plan.  The Company has reserved and the  stockholders
approved 225,000 shares of common stock for issuance to eligible employees under
the 1995 Purchase Plan (the Purchase  Plan).  Under the Purchase Plan,  eligible
employees, subject to certain restrictions,  may purchase shares of common stock
at a price  equal to the  lesser of 85% of the fair  market  value at either the
beginning  of each  six-month  offering  period  or the  end of  each  six-month
offering period.  As of September 30, 1999, no shares have been issued under the
Purchase Plan.

Stock  Option  Plans.  In August 1995,  the Board of  Directors  approved and in
September  1995, the  stockholders  approved (i) the adoption of the 1995 Equity
Incentive  Plan (the 1995 Equity Plan) as the  successor  to the 1994  Incentive
Plan (the Predecessor  Plan),  pursuant to which 550,000 shares of the Company's
common stock,  plus the number of shares  remaining  unissued and not subject to
outstanding  options  under the  Predecessor  Plan and any shares  issuable upon
exercise of options  granted  under the  Predecessor  Plan that expire or become
unexercisable  for any reason without  having been exercised in full,  have been
reserved for future issuance, and (ii) the adoption of the 1995 Directors' Stock
Option


                                       40

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Plan  (the  1995  Directors'  Plan)  pursuant  to which  150,000  shares  of the
Company's common stock have been reserved for future issuance.  Each outstanding
option under the Predecessor  Plan will continue to be governed by the terms and
conditions  of such  plan;  no  additional  options  will be  granted  under the
Predecessor Plan.

In December  1996,  the Board of Directors  approved and in February  1997,  the
stockholders  approved  the  adoption  of an  amendment  to the 1995 Equity Plan
pursuant to which an additional  400,000  shares of the  Company's  Common Stock
have been reserved for future issuance. In December 1997, the Board of Directors
approved  and in February  1998,  the  stockholders  approved the adoption of an
amendment to the 1995 Equity Plan pursuant to which an additional 400,000 shares
of the  Company's  Common  Stock  have been  reserved  for future  issuance.  In
November  1998,  the  Board of  Directors  approved  and in  January  1999,  the
stockholders  approved  the  adoption  of an  amendment  to the 1995 Equity Plan
pursuant to which an additional  1,000,000  shares of the Company's Common Stock
have been  reserved for future  issuance.  Also in November  1998,  the Board of
Directors  approved and in January 1999, the stockholders  approved the adoption
of an  amendment to the 1995  Directors'  Plan  pursuant to which an  additional
100,000  shares of the  Company's  Common  Stock has been  reserved  for  future
issuance.

Under the 1995 Equity Plan,  incentive stock options may be granted to employees
only at the  price  per share  that is not less  than the fair  market  value of
common  stock on the date of  grant.  Nonqualified  options  may be  granted  to
employees  or others at a price per share not less than 85% of fair market value
of the common stock on the date of grant.  Options are exercisable to the extent
vested.  Vesting,  as established by the Board of Directors,  generally  accrues
monthly over four years from the date of grant. The Company may also grant stock
bonuses and issue restricted stock to employees and others. The Company has made
no such grants  since the 1995  Equity  Plan's  inception.  The 1995 Equity Plan
expires ten years after adoption.

Under  the  1995  Directors'  Plan,  nonqualified  options  may  be  granted  to
nonemployee directors only at the price per share that is not less than the fair
market  value of  common  stock on the date of  grant.  Vesting  under  the 1995
Directors' Plan accrues monthly over four years from the date of grant. The 1995
Directors' Plan expires ten years after adoption.

Option  Repricing  Programs.  Competition  for skilled  engineers  and other key
employees in the  semiconductor  industry is intense and the use of  significant
stock options for retention  and  motivation of such  personnel is widespread in
the high  technology  industries.  The  Compensation  Committee  of the Board of
Directors   believes  that  stock  options  are  a  critical  component  of  the
compensation  offered  by the  Company  to promote  long-term  retention  of key
employees,   motivate  high  levels  of  performance   and  recognize   employee
contributions in the success of the Company. In light of substantial declines in
the  market  price  of  the  Company's  common  stock  in  1997  and  1998,  the
Compensation  Committee  believed  that the large numbers of  outstanding  stock
options  with an  exercise  price in excess of the actual  market  price were no
longer an effective  tool to encourage  employee  retention or to motivate  high
levels of performance.

1998  Employees and  Consultants.  In August 1998,  the  Compensation  Committee
approved an  option-repricing  program for all employees and  consultants to the
Company who were not executive officers of the Company.  Under this program, the
eligible optionees were permitted to exchange their then


                                       41

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

outstanding  stock  options for new stock  options  having an exercise  price of
$3.625  per share  (equal to the fair  market  value on August 28,  1998),  with
vesting annually during the subsequent four years.

Approximately  453,900 options were repriced by employees  (excluding  executive
officers) and consultants.

1997  Employees  and  Consultants.  In  April  1997 the  Compensation  Committee
approved an option  repricing  program for all employees and  consultants to the
Company who were not executive officers of the Company.  Under this program, the
eligible  optionees  were  permitted to exchange  their then  outstanding  stock
options for new stock options having an exercise price of $4.25 per share (equal
to the fair market value on May 7, 1997), with vesting ratably each month during
the  subsequent  four years.  Approximately  543,000  options  were  repriced by
employees (excluding executive officers) and consultants.

1997 Executive Officers.  The Compensation  Committee approved, in June 1997, an
option  repricing  program for  executive  officers of the  Company.  Under this
program,   the  executive   officers  were  permitted  to  exchange  their  then
outstanding  stock  options for new stock  options  having an exercise  price of
$4.25 per share (equal to the fair market  value on July 1, 1997),  with vesting
ratably  each month  during the  subsequent  four years.  Approximately  186,000
options were repriced by executive officers.

Additional information with respect to the Company's stock option plans follows:

                                                        Options Outstanding
                                                --------------------------------
                                                                    Weighted
                                       Shares        Number       Average Price
                                     Available     of Shares        Per Share
                                   ---------------------------------------------
Balance at September 30, 1996          442,743      1,372,152       $4.60
   Additional share reservation        400,000         -            $   -
   Options granted                  (1,422,457)     1,422,457       $4.76
   Options exercised                   -             (273,772)      $0.58
   Options canceled                    936,251       (936,251)      $6.90
   Options expired                        (882)        -            $   -
                                   ---------------------------------------------
Balance at September 30, 1997          355,655      1,584,586       $4.09
   Additional share reservation        400,000         -            $   -
   Options granted                  (1,195,856)     1,195,856       $5.86
   Options exercised                   -             (169,475)      $1.62
   Options canceled                    655,494       (655,494)      $7.07
   Options expired                        (375)        -            $   -
                                   ---------------------------------------------
Balance at September 30, 1998          214,918      1,955,473       $4.39
   Additional share reservation      1,100,000                          -
   Options granted                    (965,500)       965,500       $6.95
   Options exercised                   -             (196,932)      $3.12
   Options canceled                    180,918       (180,918)      $4.79
   Options expired                        (252)        -                -
                                   ---------------------------------------------
Balance at September 30, 1999          530,084      2,543,123       $5.43
                                   =============================================


                                       42

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

<TABLE>
The following table summarizes  information  about stock options  outstanding at
September 30, 1999:

<CAPTION>
                          Options Outstanding                                   Options Exercisable
--------------------------------------------------------------------------------------------------------
                                           Weighted
                                           Average        Weighted                         Weighted
                                          Remaining        Average                          Average
  Range of Exercise        Number        Contractual      Exercise        Number           Exercise
        Prices           Outstanding     Life (Years)       Price       Exercisable         Price
--------------------------------------------------------------------------------------------------------
<S>                        <C>               <C>           <C>             <C>              <C>
$ 0.20  -  $ 3.63            636,829         7.54          $ 3.23          315,968          $ 2.86
$ 3.75  -  $ 4.13            231,500         9.23          $ 4.11            9,613          $ 3.91
$ 4.25  -  $ 4.25            579,939         7.67          $ 4.25          323,421          $ 4.25
$ 4.38  -  $ 6.38            612,035         8.99          $ 5.74          134,055          $ 5.88
$ 6.44  -  $ 21.25           482,820         8.69          $ 9.99          147,857          $ 7.21
--------------------------------------------------------------------------------------------------------
$ 0.20  -  $ 21.25         2,543,123         8.29          $ 5.43          930,914          $ 4.48
--------------------------------------------------------------------------------------------------------
</TABLE>


At September 30, 1998 and 1997,  583,502 and 525,807 options were exercisable at
weighted average exercise prices of $3.62 and $2.58, respectively.

Stock-Based  Compensation.  Under APB 25, the Company  generally  recognizes  no
compensation expense with respect to stock-based awards to employees.  Pro forma
information  regarding net income and earnings per share is required by FAS 123,
"Accounting  for Stock-Based  Compensation",  for awards granted in fiscal years
that begin after  December 31,  1994,  as if the Company had  accounted  for its
stock-based awards to employees under the fair value method of FAS 123.

The fair value of the  Company's  stock-based  awards to employees was estimated
using a Black-Scholes  option pricing model. The Black-Scholes  option valuation
model was developed for use in estimating  the fair value of traded options that
have no vesting restrictions and are fully transferable. The Black-Scholes model
requires the input of highly subjective assumptions including the expected stock
price  volatility.  Because the Company's  stock-based  awards to employees 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  value  of its
stock-based awards to employees.

The fair value of the  Company's  stock-based  awards to employees was estimated
assuming no expected dividends and the following weighted-average assumptions:


                                                     Options
                            ---------------------------------------------------
                                  1999             1998             1997
                            ---------------------------------------------------
Expected life (years)                6.7               6.7              5.0
Expected volatility                 98.0%             80.0%            75.3%
Risk-free interest rate              6.0%              6.0%             6.0%


                                       43

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The  weighted-average  fair value of stock options granted during 1999, 1998 and
1997 was  $6.95,  $3.72  and  $3.44,  respectively.  For  purposes  of pro forma
disclosures,  the estimated  fair value of the options is amortized to pro forma
net income (loss) over the options' vesting period. The Company's historical and
pro forma information follows (in thousands, except for per share information):

                                                         September 30,
                                                1999         1998        1997
                                             ----------------------------------
Net income (loss):
     Historical                              $  (3,875)    $   7,205    $   566
     Pro Forma                               $  (6,714)    $   4,980    $  (283)
Diluted Net income (loss) per share:
     Historical                              $   (0.42)    $    0.75    $  0.06
     Pro Forma                               $   (0.73)    $    0.52    $ (0.03)


Because  FAS 123 is  applicable  to awards  granted  in fiscal  years that begin
subsequent  to  December  31,  1994,  its pro  forma  effect  will  not be fully
reflected until approximately fiscal year 2000.

6. Earnings (Loss) Per Share

In fiscal 1998 the Company adopted Statement of Financial  Accounting  Standards
No. 128  "Earnings  Per  Share"  (FAS 128.) In  accordance  with FAS 128,  basic
earnings per share and diluted earnings per share have replaced primary earnings
per share and fully  diluted  earnings  per  share  previously  reported  by the
Company.  Basic earnings per share is based upon the weighted  average number of
shares of common  shares  outstanding  during the period.  Diluted  earnings per
share includes the dilutive effect of employee stock options (using the treasury
stock  method)  and   outstanding   convertible   preferred   stock  (using  the
if-converted  method).  All  earnings  (loss) per share  amounts for the periods
presented have been restated to conform to the requirements of FAS 128.

<TABLE>
The following  table sets forth the  reconciliation  of weighted  average common
shares  outstanding  used in the  computation of basic and diluted  earnings per
share computations for the years ended September 30:

<CAPTION>
                                                                                         September 30,
                                                                            1999           1998           1997
                                                                        --------------------------------------------
<S>                                                                           <C>              <C>             <C>
  Net income (loss) (Numerator):
    Net income (loss) basic and diluted                                       $(3,875)         $7,205          $ 566
                                                                        ============================================
  Shares (Denominator):
    Weighted average shares of common stock outstanding
    used in computation of basic earnings (loss) per share                       9,256          9,135          8,881
    Dilutive effect of stock options                                                 -            501            442
                                                                        --------------------------------------------
   Shares used in computation of diluted earnings (loss) per share
                                                                                 9,256          9,636          9,323
                                                                        ============================================
  Basic earnings (loss) per share                                              $(0.42)          $0.79         $ 0.06
                                                                        ============================================
  Diluted earnings (loss) per share                                            $(0.42)          $0.75         $ 0.06
                                                                        ============================================
</TABLE>

                                                       44
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

7. Taxes on Income

The  provision  (benefit)  for taxes on income  consisted of the  following  (in
thousands):

                                                        September 30,
                                              1999          1998          1997
                                            ------------------------------------
Current:
   Federal                                     (261)      $   815       $    24
   State                                       (285)          383             7
   Foreign                                     --              50            50
                                            ------------------------------------
Total Current                                  (546)        1,248            81
Deferred:
   Federal                                   (2,170)       (3,685)         --
   State                                        (50)         (245)         --
   Foreign                                     --            --            --
                                            ------------------------------------
Total Deferred                               (2,220)       (3,930)         --
                                            ------------------------------------
Total Provision (Benefit)                   $(2,766)      $(2,682)      $    81
                                            ===================================

Foreign  income taxes are incurred on  technology  transfer fees received from a
foreign third party.

Significant  components of the Company's net deferred tax assets for federal and
state income taxes were as follows (in thousands):

                                                                September 30,
                                                             1999         1998
                                                           --------------------
Net deferred tax asset
   Restructuring Reserves                                  $ 1,779      $   --
   Tax credit carryforwards                                   --          1,085
   Distributor reserves                                        289        1,067
   Deferred revenue                                            990          248
   Depreciation                                               (203)        (133)
   Capitalized research and development cost                   239          185
   Inventory Reserves                                        1,622        1,442
   General Reserves                                            474          --
   Other accruals and reserves not currently                   960          536
                                                           --------------------
Total net deferred tax assets                                6,150        4,430
Less valuation allowance                                      --           (500)
                                                           --------------------
Net deferred tax asset                                     $ 6,150      $ 3,930
                                                           ====================


                                       45
<PAGE>


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The valuation  allowance  decreased by approximately  $500,000 and $4,389,000 in
fiscal 1999 and 1998, respectively.  Management determined that a full valuation
allowance was not  necessary at September  30, 1998 as it was concluded  that it
was more likely than not that  certain  deferred tax assets will be recovered in
the future. Accordingly,  the Company reversed the valuation allowance for those
deferred tax assets at September 30, 1998. The effect of such reversal  resulted
in the  recognition  in fiscal  1998 of a  non-recurring  income tax  benefit of
$3,930,000,  or $0.32 per diluted share. In fiscal 1999,  management  determined
that  realization of the remaining  deferred tax assets subject to the valuation
allowance  is more  likely  than  not and  reversed  the  related  allowance  of
$500,000.

The  provisions  (benefit)  for taxes on  income  differed  from the  provisions
calculated  by applying  the federal  statutory  rate to income  before taxes as
follows (in thousands):

                                                          September 30,
                                                  1999        1998        1997
                                                -------------------------------
Expected provisions at statutory rates          $(2,266)    $ 1,538     $   220
State taxes, net of federal benefit                (399)        262           4
Foreign taxes                                      --            50          33
General business credits                           (230)       --          --
Benefit of net operating loss
  Carryforwards                                    --          --          (190)
Other                                               629        (143)         14
Reversal of valuation allowance                    (500)     (4,389)       --
                                                -------------------------------
                                                $(2,766)    $(2,682)    $    81
                                                ===============================

8. Employee Benefit Plan

The Company has a 401(k)  savings plan that covers  substantially  all full-time
employees.  Eligible  employees  are permitted to make fully vested tax deferred
contributions  of up to 15% of  their  annual  gross  compensation,  subject  to
certain  Internal  Revenue Service  limitations.  The plan provides for employer
contributions at the discretion of the Board of Directors. Contributions made by
the  Company  for the  years  ended  September  30,  1999,  1998,  and 1997 were
approximately $241,000, $133,000, and $18,000 respectively.

9. Fair Value of Financial Instruments

The Company has evaluated the estimated fair value of its financial  instruments
which consist primarily of cash and cash equivalents and short-term  investments
and determined  that the carrying  amounts  approximate  fair value due to their
short-term maturities.

                                       46
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

In the normal course of business,  the Company has exposures to foreign currency
fluctuations  arising  from  foreign  currency  sales.  The Company uses foreign
exchange  forward  contracts  to limit its exposure to foreign  exchange  losses
arising from nonfunctional currency trade receivables. The Company evaluates its
net  exposure  therefrom  and enters  into  forward  contracts  to hedge the net
exposure  over a specified  amount.  These  contracts  are executed  with credit
worthy  financial  institution  and are  denominated  in Japanese Yen. Gains and
losses on these contracts serve as hedges in that they offset  fluctuations that
would otherwise  impact financial  results.  Costs associated with entering into
such contracts are generally  amortized over the life of the instruments and are
not material to the Company's financial results.

At  September  30,  1999 the  Company had  foreign  currency  forward  contracts
outstanding to hedge foreign  currency trade  receivables.  These contracts have
maturities,  which typically range from 35 to 90 days and are intended to reduce
exposure  to  foreign  currency  exchange  risk.  The  aggregate  fair value and
unrealized  loss of foreign  exchange  contracts  are $2.5  million and $80,000,
respectively.

10. Segment Information

In the fourth  quarter of fiscal year 1999,  the Company  adopted  Statement  of
Financial  Accounting  Standards  No. 131, "  Disclosures  about  Segments of an
Enterprise and Related  Information"  (FAS 131). FAS 131 establishes  annual and
interim  reporting  standards for an enterprise's  business segments and related
disclosures about its products, services,  geographic areas and major customers.
Based  upon the  criteria  of SFAS  131,  the  Company  has a single  reportable
segment.

The Company  markets its products in the United States and in foreign  countries
through   its  sales   personnel,   independent   sales   representatives,   and
distributors.  The Company's  geographic sales, as a percentage of net revenues,
were as follows:

                                                           September 30,
                                                   1999        1998        1997
                                                   -----------------------------
Domestic                                             43%         47%         44%
Export:
   Europe                                            12%         13%         14%
   Japan                                             35%         32%         21%
   Other Pacific Rim Countries                       10%          8%         21%
                                                   -----------------------------
                                                    100%        100%        100%
                                                   =============================

The Company's assets located outside the United States are insignificant.

                                       47
<PAGE>



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

11. Unusual Charges

During the first  quarter of fiscal  1999,  the  Company  implemented  a plan to
restructure  its  manufacturing  operations in response to a shift in the mix of
products  fabricated  internally  compared  to  products  fabricated  by outside
foundries.  During the several quarters preceding the restructuring,  production
volume and revenue from products  fabricated by outside  foundries had generally
increased,  while the volume and revenue  from  internally  fabricated  products
generally  declined.  As a result,  the Company was in a position of significant
over-capacity  in  its  internal   fabrication  facility  located  in  Milpitas,
California.

In response to the aforementioned,  the Company decided to move gradually toward
a primarily  outsourced  model  through a period of several  years.  The Company
further  decided  to  discontinue   development  of  future  dielectric  process
technology  in  favor  of  the  more  state  of  the  art   silicon-on-insulator
technology,  where volume production will be outsourced.  Based on the change in
manufacturing  strategy,  the Company  estimated the future  nondiscounted  cash
flows relating to the internal wafer  fabrication  facility and concluded  under
FAS No. 121 that impairment was indicated.

The Company engaged  independent  valuation  consultants to assist in evaluating
the fair value of these assets to be held and used in the facility. The Company,
based on the  valuations  wrote-down the carrying value of the equipment by $4.3
million and leasehold improvements by $6.8 million.

The book values of assets,  by category,  before and after the write-down was as
follows (in thousands):

                                             Balances at December 31, 1998
                                     Before Write-Down       After Write-Down
                                  ----------------------------------------------
        Machinery & equipment           $ 5,444                    $1,159
        Furniture & Fixtures                 51                        11
        Leasehold Improvements            8,595                     1,830
                                  ----------------------------------------------
        Total                           $14,090                    $3,000
                                  ==============================================

The Company  also  believed  that its  decision to  discontinue  development  of
future-generation  products using dielectric isolation technology would obsolete
certain  existing  products and capitalized  patents.  Accordingly,  the Company
recorded a pretax  charge of $1.0 million  related to a write-down  of inventory
and $0.2 million related to a write-down of patents.

The restructuring also included  operating  initiatives to improve the Company's
cost structure  including a reduction of approximately 10% of the Company's work
force. The Company recorded a pretax charge of $0.6 million related to severance
and $0.1 million related to a legal settlement with AMP Incorporated.


                                       48
<PAGE>


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

These unusual  charges  resulted in pretax charges of $12.0 million to operating
expenses and $1.0  million to cost of goods sold in the first  quarter of fiscal
1999.  Remaining  cash payments  related to these  activities are expected to be
$0.3 million in fiscal 2000. The following  table  summarizes the  restructuring
and other charges in thousands:

                                 Total
                             Restructuring      Utilized through    Balance at
                                Charge           Sep. 30, 1999     Sep. 30, 1999
                             ---------------------------------------------------
  Asset impairment              $11,090             $11,090             $ -
  Write-down of inventory         1,008               1,008               -
  Payments to employees
     involuntarily terminated       638                 353             285
  Write-down of patents             174                 174               -
  Legal settlement                  107                 107               -
                             ---------------------------------------------------
  Total                         $13,017             $12,732            $285
                             ===================================================


                                       49
<PAGE>


                                             Elantec Semiconductor, Inc.

                                       Unaudited Interim Financial Information
<TABLE>
Selected Quarterly Financial Data:

<CAPTION>
                         1999                                    1st             2nd            3rd            4th
                                                            -----------------------------------------------------------
                                                                  (Unaudited, in thousands except per share data)
<S>                                                            <C>             <C>             <C>           <C>
Revenue                                                        $10,653         $12,721         $13,005       $14,283
Gross profit                                                     3,244           5,726           6,821         8,078
Income (loss) from operations                                  (12,905)          1,446           2,134         2,556
Net income (loss) (1)                                           (8,024)            926           1,477         1,746

Earnings (loss)  per share:
     Basic                                                     $ (0.87)         $ 0.10          $ 0.16        $ 0.19
     Diluted                                                   $ (0.87)         $ 0.10          $ 0.14        $ 0.16

Shares used in computing per share amounts:
     Basic                                                       9,197           9,212           9,280         9,336
     Diluted                                                     9,197           9,605          10,459        10,966


                         1998                                    1st             2nd            3rd            4th
                                                            -----------------------------------------------------------
                                                                  (Unaudited, in thousands except per share data)

Revenue                                                        $11,234         $11,660         $11,815       $11,501
Gross profit                                                     5,376           5,661           5,692         4,650
Income from operations                                           1,147           1,343           1,255           516
Net income (2)                                                   1,137           1,373           1,168         3,527

Earnings  per share:
     Basic                                                      $ 0.13          $ 0.15          $ 0.13        $ 0.38
     Diluted                                                    $ 0.12          $ 0.14          $ 0.12        $ 0.37

Shares used in computing per share amounts:
     Basic                                                       9,062           9,124           9,170         9,183
     Diluted                                                     9,623           9,805           9,769         9,347
<FN>
---------------------

1.   In the first quarter of fiscal 1999, the Company  recorded  unusual pre-tax charges of $13.0 million  resulting
     from the  Company's  conclusion  that  projected  production  volume and related  cash flow from the  Company's
     internal fabrication facility were not sufficient to recover its carrying value.

2.   During the fourth quarter of fiscal 1998, the Company reversed its valuation allowance for certain deferred tax
     assets in accordance with Statement of Financial  Accounting Standards 109, "Accounting for Income Taxes". This
     resulted in an income tax benefit for fiscal 1998 of $3,930,000 or $0.32 per diluted share.
</FN>
</TABLE>
                                                         50



<PAGE>


<TABLE>
                                                                                                                 Schedule II


                                                  Elantec Semiconductor, Inc.

                                               Valuation And Qualifying Accounts

                                        Year ended September 30, 1999, 1998, and 1997
<CAPTION>
                                                                                    Additions
                                                                    Balance at     Charged to                    Balance at
                                                                   Beginning of     Cost and                      End of
                                                                       Year          Expense      Deductions       Year
                                                                   -----------------------------------------------------------
<S>                                                                    <C>            <C>            <C>            <C>
Year ended September 30, 1999
   Allowance for doubtful accounts and product returns
     (deducted from accounts receivable)                               $ 1,076        $   475        $ (167)        $1,384
                                                                   ===========================================================
Year ended September 30, 1998
   Allowance for doubtful accounts and product returns
     (deducted from accounts receivable)                               $   840        $   242        $   (6)        $1,076
                                                                   ===========================================================
Year ended September 30, 1997
   Allowance for doubtful accounts and product returns
     (deducted from accounts receivable)                               $   340        $ 1,447        $ (947)        $  840
                                                                   ===========================================================
</TABLE>


                                                              51


<PAGE>


                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended,  the Registrant has duly caused this report to
be signed on its behalf by the undersigned,  thereunto duly  authorized,  in the
City of Milpitas, State of California, on the 6th day of December, 1999.


                                   ELANTEC SEMICONDUCTOR, INC.

                                   By: /s/ James V. Diller
                                       -----------------------------------------
                                       James V. Diller
                                       President and Chief Executive Officer,
                                       Chairman of the Board of Directors


         KNOW ALL PERSONS BY THESE  PRESENTS,  that each person whose  signature
appears below  constitutes  and appoints  James V. Diller and Ephraim Kwok,  his
true and lawful attorneys-in-fact,  each with the power of substitution, for him
in any and all  capacities,  to sign amendments to this Report on Form 10-K, and
to file the same,  with all exhibits  thereto and other  documents in connection
therewith,  with the Securities and Exchange  Commission,  hereby  ratifying and
conforming  all  that  said  attorneys-in-fact,  or  his or  her  substitute  or
substitutes, may do or cause to be done by virtue thereof.

<TABLE>
         Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.

<CAPTION>
                Name                                          Title                                             Date
                ----                                          -----                                             ----

Principal Executive Officer:

<S>                                               <C>                                                       <C>
/s/ James V. Diller                               President and Chief Executive Officer,                    December 6, 1999
--------------------------------------------      Chairman of the Board of Directors
    James V. Diller

Principal Financial Officer:

/s/ Ephraim Kwok                                  Vice President of Finance and Administration              December 6, 1999
--------------------------------------------      and Chief Financial Officer
    Ephraim Kwok

Additional Directors:

/s/ Chuck K. Chan                                 Director                                                  December 6, 1999
--------------------------------------------
    Chuck K. Chan

/s/ Alan V. King                                  Director                                                  December 6, 1999
--------------------------------------------
    Alan V. King

/s/ Umesh Padval                                  Director                                                  December 6, 1999
--------------------------------------------
    Umesh Padval
</TABLE>


                                                                   52


<PAGE>



                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   -----------



                                    EXHIBITS

                                       to

                                    Form 10-K

                                      Under

                           THE SECURITIES ACT OF 1933

                                   -----------



                           ELANTEC SEMICONDUCTOR, INC.





<PAGE>


                                INDEX TO EXHIBITS

Exhibit Number       Description
--------------------------------------------------------------------------------
    10.18            Employment Agreement between the Company and Richard Corbin

    21.01            Subsidiaries of the Company

    23.01            Consent of Deloitte & Touche LLP, Independent Auditors

    23.02            Consent of Ernst & Young LLP, Independent Auditors

    27.01            Financial Data Schedule