|UNITED STATESSECURITIES
AND EXCHANGE COMMISSIONWashington,
D.C. 20549FORM 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 1, 2000.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------

|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(State or other jurisdiction ofincorporation or organization) | 77-0408929(I.R.S. EmployerIdentification 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(Title of each class) | None(Name of each exchange on which registered)
|------------------------- | -----------------------------------------------

|Securities registered
pursuant to Section 12(g) of the Act:Common Stock, par value $0.01 per sharePreferred 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. [_]


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 27, 2000 as reported on the
Nasdaq National Market: $2,355,465,618. 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 27, 2000: 21,936,816




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 12, 2001.
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|ELANTEC
SEMICONDUCTOR, INC.FORM 10-K



For the Fiscal
Year Ended September 30, 2000.



Table of
Contents
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|PART I | 
|------ | 
|Page   | 

|           |  |                                                                                      
|---------- |  | -------------------------------------------------------------------------------------
|
|Item 1     |  | Business                                                                             
|           | 
|Item 2     |  | Properties                                                                           
|           | 
|Item 3     |  | Legal Proceedings                                                                    
|           | 
|Item 4     |  | Submission of Matters to a Vote of Security Holders                                  
|           | 
|PART II    | 
|           | 
|           | 
|Item 5     |  | Market for Registrants Common Equity and Related Stockholder Matters                
|           | 
|Item 6     |  | Selected Financial Data                                                              
|           | 
|Item 7     |  | Managements Discussion and Analysis of Financial Condition and Results of Operations
|           | 
|Item 7A    |  | Quantitative and Qualitative Disclosures about Market Risk                           
|           | 
|Item 8     |  | Financial Statements and Supplementary Data                                          
|           | 
|Item 9     |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
|           | 
|           | 
|PART III   | 
|           | 
|Item 10    |  | Directors and Executive Officers of the Registrant                                   
|           | 
|Item 11    |  | Executive Compensation                                                               
|           | 
|Item 12    |  | Security Ownership of Certain Beneficial Owners and Management                       
|           | 
|Item 13    |  | Certain Relationships and Related Transactions                                       
|           | 
|PART IV    | 
|           | 
|Item 14    |  | Exhibits, Financial Statement Schedules and Reports on Form 8-K                      
|           | 
|Signatures |  |                                                                                      

|PART 1


The following discussion
contains forward looking statements that involve risks and uncertainties. Our
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


We are a leading designer,
manufacturer and marketer of high performance analog integrated circuits, which
provide specific analog solutions to manufacturers in the high growth markets
for video, optical storage, communications and power management products. The
rapid advances in digital technology and increasing demand for digital
integrated circuits are driving the need for high speed, high precision, low
distortion and power efficient analog circuits. Electronic systems manufacturers
in these high growth markets require analog circuits with precision, linearity,
speed, power and signal amplification capabilities specific to their
applications. We believe we fulfill these circuit requirements with our standard
line of products and with our application specific standard products, or ASSPs,
which are designed to satisfy the needs of specific applications within our
targeted markets.


We presently offer
approximately 150 products, including amplifiers, drivers, faders, transceivers
and multiplexers. We manufacture our products at our facilities in Milpitas,
California and utilize third party wafer foundries. We sell our proprietary
products to leading original equipment manufacturers, or OEMs, such as
Globespan, Hitachi, Lucent, Lucky Goldstar, Motorola, Olympus, Philips, Ricoh,
Samsung, Sanyo, Sony, Toshiba and Yamaha, either directly or through our
distributors, such as Microtek International, Inc. and Insight Electronics, Inc.



Industry
Overview


Semiconductors, also known
as integrated circuits, can be divided into two broad categories: digital and
analog. Digital circuits, such as memory devices and microprocessors, function
as on and off switches expressed in binary code as 1s and
0s. In contrast, analog semiconductors monitor, regulate,
amplify or transform signals associated with physical properties, such as
temperature, pressure, weight, speed, sound and electrical current. Analog
circuits play an important role in bridging the real world phenomena with a
variety of electronic systems. The analog integrated circuit represents these
real world properties by generating continuously varying voltages and currents
that better reflect the items measured. There is a wide variation in the
performance characteristics of analog integrated circuits generally. High
performance analog integrated circuits are characterized by their high speed,
high precision, low distortion and power efficiency.


Demand for analog
integrated circuits has increased in recent years as the use of embedded digital
circuits in a wide variety of communications, consumer and industrial products
has accelerated. In turn, this has created the need for high performance analog
products that enable digital circuits, such as computers, microprocessors,
microcontrollers and signal processors, to interact with electronic signals
derived from physical or analog phenomena. For example, flat panel displays, CD
recordable devices, optical camcorders and digital subscriber line transceivers
use both digital and high performance analog circuits.


The
market for analog integrated circuits differs from the digital circuit market in
several significant ways. Analog applications involve more complex signals than
digital applications, with analog signals having continuous variations in
resolution, speed, power, signal amplitude and other specifications. Competition
in analog integrated circuit markets is based primarily on performance,
functionality, quality, reliability and power consumption. Analog circuits
generally have longer life cycles than digital circuits because customers
typically design the analog function block of their systems to span multiple
generations of product. This is because switching analog components may cause
unexpected problems with the rest of the products circuitry. As a result,
the critical point of competition for analog integrated circuit manufacturers is
at the design-in stage when a systems designer evaluates various alternative
components for implementing the system architecture.


Designers of analog
circuits must typically take into account complex interrelationships among the
physical layout of the circuit elements, the manufacturing process and the
finished products packaging, all of which can significantly affect
performance. The high performance characteristics required by new and emerging
applications for analog circuits involve increasingly advanced designs, which
require highly skilled engineers, 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 tools for analog circuit design typically
require substantial customization in order to provide adequate utility for
complex analog circuit design.
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|The Elantec
Solution


We design, manufacture and
sell high performance analog integrated circuits primarily to designers and
manufacturers of systems and subsystems in our targeted markets. We believe our
products provide the precision, linearity, speed, power and signal amplification
capabilities required by OEMs in these high growth markets. We provide ASSPs to
satisfy the needs of a broad range of customers within our target markets and
standard products to meet the needs of our broad customer base. The key elements
of our solution include:


High
Performance Analog Expertise.Over the past 11 years, we have accumulated
significant design and process technology expertise in producing high speed,
high precision, low distortion and power efficient analog integrated circuits.
We utilize our expertise to deliver high performance solutions that are
cost-efficient and adhere to our customers demands.


System
Level Expertise.In addition to our design and process technology expertise
in analog integrated circuits, we have accumulated system level expertise in our
targeted markets whereby we can approach ASSP projects with an advanced
understanding of the system constraints. This understanding facilitates the
design process, allowing us to design optimal ASSP solutions that our customers
can easily integrate into their products, thereby reducing their time-to-market
cycle. Once our integrated circuits are designed into our customers
products, we maintain a strong position to be considered for our customers
next generation products.


Proprietary
Manufacturing Process Technology. We manufacture all of our digital
subscriber line, or DSL, line drivers using our proprietary
silicon-on-insulator, or SOI, technology. We believe our SOI process technology
provides an optimal solution for satisfying the requirements of DSL equipment by
reducing power consumption, while maintaining low distortion transmission
quality.


ASSP
Design Capability. We develop ASSPs that are designed as solutions to the
requirements of particular applications, and because these solutions are not
custom designed for a specific customer, they potentially can be used by
multiple customers in their products. They can therefore be easily integrated
into multiple customers products with the same or similar application
requirements. As a result, we believe our ASSPs are highly scalable and
cost-efficient and meet the needs of a broad customer base, resulting in high
volume.



The Elantec
Strategy


Our goal is to be the
leading provider of analog integrated circuits for the high growth video,
optical storage, communications and power management markets. In order to
achieve this goal, we are pursuing the following strategies:


Offer
Market Driven Proprietary Products. We will continue to supply market driven
proprietary products to our target markets and develop general purpose standard
products that are performance driven and address multiple markets with broad
customer bases. Additionally, we will continue to develop ASSPs for specific
high growth applications used in products such as flat panel displays, optical
storage devices and asymmetrical digital subscriber line, or ADSL, modems.


Strengthen
Position in Selected High Growth Commercial Markets. We focus our design
expertise on specific functions within our four target markets. As a result, we
believe we have acquired a greater expertise in these areas and have developed a
reputation for high performance products. We intend to leverage our existing
customer relationships to supply them with successive generations of products
for their systems and to identify new product opportunities within their
systems. In addition, we believe there is significant growth potential within
our target markets and we plan to leverage our systems expertise to penetrate
new customer opportunities within these markets.


Work
Closely with Leading OEMs. We plan to continue to work closely with leading
OEMs by developing products to address their specific applications. We plan to
apply our systems level expertise and our relationships with the engineering
teams of our OEMs to anticipate opportunities during the design of their
products. We believe that by continuing to achieve reference design
relationships with industry leaders we will further validate our products and
will enhance our ability to accelerate acceptance of our product standards
within the specific markets we target.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Expand
Design Team and Continue to Improve Design Productivity.To capitalize on
the growth of our target markets and expand our position with existing
customers, we plan to continue our investment in research and development. We
intend to hire more engineers with experience in the design of analog integrated
circuits and continue to make significant investments in design tools and other
research and development equipment and applications that will complement the
needs of our design teams. This commitment should allow us to increase the
number of new products introduced per year.



Markets and
Applications


We design and manufacture
our products for four high growth commercial markets that we believe are
increasingly demanding high performance and low power consumption analog
solutions: video, optical storage, communications and power management. In each
of our target markets, we offer a suite of standard products and ASSPs that are
designed to provide effective solutions for electronic systems designers by
addressing a number of common component requirements. Most of our 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 our products in each of our target
commercial markets:
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| |                 
| | ----------------
| | Market          
| |                 
| | Video           
| |                 
| | Optical Storage 
| |                 
| | Communications  
| |                 
| | Power Management
| |                 

|Video.
Video images are incorporated into electronic applications such as multimedia
computing and communications. This trend has increased demand for high speed
amplifiers and specialty analog circuits for the processing and display of video
signals. We focus on manufacturing components for several segments of the video
market, including displays such as cathode ray tubes and flat panels, set top
converters, special effects generators, studio equipment and video distribution
networks.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Optical
Storage.Optical storage, in the form of CD-ROM, has become the medium of
choice for software and music. More recently, optical recordable devices such as
CD read, CD read/write, and DVD read/write are being adopted in the marketplace.
We currently provide products that control the laser diode contained in the
optical pick-up unit of optical disk drives.


Communications.
Higher data transmission rates are important for emerging communications
applications related to Internet access. The convergence of communications and
computers has 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 that information. In this
market, we supply transceivers and high speed amplifiers for ADSL and high bit
rate digital subscriber line, or HDSL, for increasing the data transmission rate
over conventional telephone lines.


Power
Management. The proliferation of high density, small, digital integrated
circuits has increased demand for DC:DC converters which adjust the input
voltages to meet the needs of the various components within the system. Current
solutions for DC:DC converters are mostly comprised of stand alone components.
We believe that the demand for single chip integrated converter solutions will
increase as smaller portable devices become more prevalent. Our strategy is to
provide highly integrated DC:DC converters in a single chip design that is cost
competitive within a multiple chip implementation. Our integrated DC:DC products
are used in products such as printed circuit boards, test and measurement
equipment, and other devices.



Products


We offer both ASSPs and
standard products for our four target markets. Our portfolio of approximately
150 high performance analog products, most of which are available in multiple
pin-out configurations, provide our customers with a comprehensive choice of
products in our targeted high growth markets.


Application Specific
Standard Products. For the video market we offer 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. Our ASSPs include sync
separators, DC restoration circuits, video multiplexers, faders, laser diode
drivers, DC:DC converter circuits and transceivers. Sync separators are timing
circuits that control the position and stability of the video image on a video
display. DC 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. 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 we offer laser diode drivers that control the
performance of the laser diode used in the read/write mode in optical storage
pick-up heads. In the communications market, we offer transceivers that are used
to transmit and receive high speed analog signals containing encoded digital
information over conventional telephone lines. Our integrated DC:DC converter
circuits convert supply voltages to a lower voltage required by modern
microprocessors and digital signal processors.


Standard Products.
Our standard products consist of amplifiers, buffers, comparators and
metal-oxide-semiconductor field effect transistor, or MOSFET, drivers.
Amplifiers and buffers are used to amplify or reproduce analog electrical
signals, either voltage or current, with minimal 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 with minimal 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 metal-oxide-semiconductor field effect
transistors.



Sales,
Distribution and Marketing


Sales and
Distribution. We sell our products directly with the assistance of
independent sales representatives, and indirectly through independent
distributors. Our direct sales force consists of sales managers and field
application engineers who support customers, sales representatives and
distributors in major markets. The sales staff and field application engineers
are located at our Milpitas, California headquarters and in field offices in
Massachusetts, New Hampshire, United Kingdom and Japan.
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|In North America, we sell
our products through our direct sales force, approximately 18 independent sales
representative organizations and four distributors. These distributors are
entitled to price rebates on unsold inventory if we lower the prices of our
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 five percent of their total product purchases during the most recent
six-month period.


Outside North America, we
sell our products through our direct sales force and approximately 20
international distributors. These distributors are primarily located in Japan,
Korea, Taiwan and Europe. Our international distributors are entitled to rebates
and price protection according to local practices. International sales have
typically represented over half of our net revenues.


Marketing. Our
marketing strategy is focused on building market awareness and acceptance of
current and future products. Our marketing activities include advertising in
print and Internet media and marketing programs to support our direct sales
force, distributors and independent sales representatives.


Our sales force has a high
level of product knowledge and industry background. Our technical support team
is available to provide our distributors and independent representatives with
ongoing technical support through help desks, detailed technical information on
our website, application notes and technical briefs. We also employ a team of
field application engineers to assist our customers in defining their needs,
propose customized solutions and qualifying our products as part of their
product definition.



Design
Methodology and Process Technology


Design Methodology.
Our 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
computer-aided design tools on a network of computer workstations and applies
standardized design rules in order to facilitate the integration of different
designs or design elements. We promote 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 development. We
have developed proprietary computer models of circuit elements to assist in the
modeling, simulation, layout and verification of circuit designs.


Our approach to new product
development is driven by specific market requirements and by advances in
technology and design methodology. We have adopted a systematic approach of
using our field application engineers and strategic marketing personnel to
identify new market opportunities for ASSPs applicable to a broad range of
customers within our targeted markets. We then consult with our circuit
designers to determine whether it is technically feasible to develop such ASSPs.


Manufacturing Process Technology. We
use a variety of semiconductor process technologies for our products in order to meet the
particular requirements of different customers and applications. Our manufacturing
process technologies include:


Dielectric
Isolation (DI) Complementary Bipolar 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. We fabricate wafers for our products using our DI technology at
our own facilities.


Junction
Isolation Complementary Bipolar Technology. We use junction isolation
complementary bipolar technologies primarily for high speed applications such as
video amplifiers and video ASSPs. Junction isolation complementary bipolar
technology uses two different types of transistors 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. We fabricate wafers for our
products using junction isolation complementary bipolar technology at a third
party foundry.


Complementary
Metal-Oxide-Semiconductor (CMOS) Technology. Since 1992, we have 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. We use several third party foundries to
supply wafers for our CMOS products.
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--

|Silicon-On-Insulator
(SOI) Technology. We recently introduced a silicon-on-insulator technology
called bonded wafer. Bonded wafer technology uses two flat oxidized silicon
wafers that are thermally bonded to one another. After the bonding process, 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 most other technologies. We
fabricate wafers for our products using SOI technology at our own facilities.



Manufacturing


Fabrication. The
number of foundries that have the capability to produce DI wafers is limited.
Currently, we manufacture wafers for our DI and SOI products in our own
facilities at Milpitas, California, except for the poly deposition process step.
We supplement our manufacturing capabilities by using third party foundries to
produce junction isolation complementary bipolar wafers and CMOS wafers. Using
third party foundries enables us to focus on our design strengths and minimize
fixed costs and capital expenditures while providing access to diverse
manufacturing technologies without bearing the full risk of obsolescence.


Testing and
Assembly. We initially test each integrated circuit on the wafers produced
by us and our foundries for compliance with performance specifications before
assembly. Our products are then assembled by a variety of subcontractors in
Asia. Following assembly, the packaged units are returned to us for final
testing and inspection prior to shipment to customers. We then perform extensive
testing on all circuits using advanced automated test equipment to ensure that
the circuits satisfy specified performance levels. All testing is performed on
standard test equipment using proprietary test programs developed by our test
engineers.


Quality Assurance.
We prequalify each third party foundry and subcontractor prior to entering into
full production. We also participate in quality monitoring of our wafer
manufacturing and assembly subcontractors. We closely monitor wafer
manufacturing production to enhance product quality and yield levels.


Reliability.Prior
to full scale production of new products, we perform a number of tests to
determine the reliability of the production units. For example, we perform
burn-in, scanning electron microscope examination, and environmental and motion
stress tests. During full scale production, we also audit our products to ensure
that they continue to meet our reliability standards.



Research and
Development


Our ability to compete
depends, in part, upon our continued introduction of technologically innovative
products on a timely basis. Our product development strategy emphasizes a family
of products for our target markets. Our 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. We
continually upgrade our internal technology while also utilizing the technology
from third party foundries to develop new generations of products. In addition,
we continually refine our manufacturing practices and technology to improve the
yields of our products.


We have assembled a team of
highly skilled analog design engineers. The majority of our design engineers
work in our Milpitas facilities, while additional engineers work in our European
design facility which we recently launched in the United Kingdom. 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. We support our design engineers with an infrastructure
of process engineers, product engineers and test engineers.


Our research and
development expenses were $14.9 million or 14.7% of net revenues for fiscal
2000, $7.8 million or 15.4% of net revenues for fiscal 1999,and $7.2 million or
15.6% of net revenues for fiscal 1998. These expenses consisted primarily of
salaries and related personnel costs, fees paid to consultants and outside
service providers, prototype costs and depreciation associated with development
tools.
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|Patents and
Licenses


We seek to protect our
proprietary technology through patents and trade secret protection. Currently,
we hold 45 United States patents and five foreign patents, expiring between the
years 2008 and 2017. We also have six pending United States patent applications,
although we cannot assure you that any patents will result from these
applications. While we intend to continue seeking patent coverage for our
products and manufacturing technology where appropriate, we believe that our
success depends more heavily on the technical expertise and innovative abilities
of our personnel. Accordingly, we also rely on trade secrets and confidential
technological know-how in the conduct of our business. We generally enter into
confidentiality agreements with our employees, consultants and other parties. We
cannot assure you that our patents or applicable trade secret laws provide
adequate protection for our technology against competitors who may develop or
patent similar technology or reverse engineer our products. In addition, the
laws of certain territories in which our products are or may be developed,
manufactured or sold, including Africa, Asia, Europe and Latin America, may not
protect our products and intellectual property rights to the same extent as the
laws of the United States.



Customers


We sell our products
worldwide to OEMs such as Globespan, Hitachi, Lucent, Lucky Goldstar, Motorola,
Olympus, Philips, Ricoh, Samsung, Sanyo, Sony, Toshiba and Yamaha, both directly
and through distributors such as Microtek and Insight. Our products are used in
applications such as CD recordable devices, flat panel displays, optical
camcorders and digital subscriber line transceivers.


We sell our products
worldwide through direct sales efforts and independent distributors. In some
countries, it is customary for OEMs to purchase our products through
distributors even though our sales office maintains the customer relationship.
We have direct business relationships with all major original equipment
manufacturers using our products.



Historically, a small
number of our customers have accounted for a significant portion of our net
revenues. In fiscal 2000, Microtek accounted for 32% of our net revenues and
Samsung accounted for 12% of our net revenues. Microtek and Insight accounted
for 30% and 10% of our net revenues in the year ended September 30, 1999, and
23% and 11% of our net revenues in the year ended September 30, 1998,
respectively. We have no long-term purchase contracts with these or any of our
other important customers.



Competition


The semiconductor industry
is intensely competitive and is characterized by rapid technological change,
product obsolescence and price erosion. 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
our market. Most of these competitors have substantially greater financial,
technical, manufacturing, marketing and other resources than we do. In addition,
many of our competitors have greater name recognition, broader product lines in
some markets than us and greater service and support capabilities.


Competition within our
industry is based on a variety of factors, including:
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | - |  | product
features, including product functionality and performance;
| | - |  | ------------------------------------------------------------------

| | - |  | product
quality and reliability;
| | - |  | --------------------------------

| | - |  | price;
| | - |  | ------

| | - |  | technical
support and customer service; and
| | - |  | -------------------------------------------

| | - |  | manufacturing
efficiency and capacity.
| | - |  | --------------------------------------

|We believe that we compete
favorably with respect to each of these factors. We intend to continue to
address these competitive factors by working to introduce product enhancements
and new products, seeking to establish our products as industry standards in
their respective markets, and working to reduce the manufacturing cost of our
products.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Competition among analog
semiconductor providers is intense at the design-in stage, when a manufacturer
is selecting a component provider for potential generations of future products.
We believe that, by virtue of our design expertise, manufacturing process
technology expertise and specialized application knowledge, we compete favorably
in the areas of rapid product introduction, product innovation, quality,
reliability and performance.


Our primary competitors are
Analog Devices, Inc., Burr-Brown Corporation, Linear Technology Corporation,
National Semiconductor Corporation, Maxim Integrated Products, Inc., Texas
Instruments and Toshiba. We also compete indirectly with the in-house design
staffs of some of our customers, which often provide alternative solutions for
individual analog systems requirements. As we expand our product lines, we
expect that competition will increase with these and other domestic and foreign
companies. Although foreign companies traditionally have not focused on the high
performance analog market, many foreign companies, particularly Asian companies,
have the financial and other resources to participate successfully in these
markets. These companies may become formidable competitors in the future.



Employees


As of September 30, 2000,
we had 337 full-time employees. Of the total, 41 are in sales and marketing, 201
in manufacturing, 71 in engineering and product development, and 24 in finance
and administration. None of our employees are represented by any collective
bargaining agreement, and we have never experienced a work stoppage. We consider
our relations with our employees to be good.



Executive
Officers and Directors of the Company


The following table sets
forth information regarding our executive officers and directors.
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|Name                    | Age | Position
|----------------------- | --- | --------
|Richard Beyer           |     | 52      
|Ephraim  Kwok           |     | 46      
|                        |     |         
|Alden J. Chauvin, Jr    |     | 54      
|Ralph S. Granchelli, Jr |     | 46      
|James V. Diller         |     | 65      
|Chuck K. Chan (1,2)     |     | 50      
|Alan V. King (1,2)      |     | 65      
|Umesh Padval (1)        |     | 43      

---

|(1) |  | Member
of the Audit Committee
|--- |  | -----------------------------

|(2) |  | Member
of the Compensation Committee
|--- |  | ------------------------------------

|Richard
Beyer has been the Companys President, Chief Executive Officer and
director since July 2000. From January 1999 through July 2000, Mr. Beyer served
as President and Chief Executive Officer at FVC.COM, Inc. From July 1996 through
August 1998, Mr. Beyer served as President, Chief Operating Officer, and
director of VLSI Technology, Incorporated. From June 1995 through June 1996, Mr.
Beyer served as Executive Vice President and Chief Operating Officer at National
Semiconductor Corporation, and from February 1993 through May 1995 he held the
position of President of the Communications and Computing Group of National
Semiconductor Corporation. Prior to this, Mr. Beyer served in a number of senior
managerial positions in the telecommunications and computer industries. Richard
Beyer served three years as an officer in the United States Marine Corps. He
holds a B.S. degree and a M.S. degree in Russian from Georgetown University as
well as a M.B.A. degree in marketing and international business from Columbia
University.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Ephraim
Kwok has served as our Vice President of Finance and Administration, Chief Financial
Officer and Secretary 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 in physiology from the University of California, Davis and a M.B.A. degree
from the University of California, Berkeley.


Alden
J. Chauvin, Jr. has served as our Vice President of Worldwide Sales since
April 1999. Prior to this, Mr. Chauvin served as Vice President of Worldwide
Sales (based in Singapore) of Tritech Microelectronics, a division of Singapore
Technologies from August 1997 through July 1998. Prior to this, Mr. Chauvin
served as Vice President of Worldwide Sales for Sierra Semiconductor (now
PMC-Sierra) from April 1995 through June 1997 and previously, he served as Vice
President of North America Sales from June 1986 through March 1995. Prior to
Sierra Semiconductor, Mr. Chauvin held various sales and marketing management
positions over a 17 year period at Texas Instruments, Inc. Mr. Chauvin holds a
B.S. degree in industrial technology from Louisiana State University.


Ralph
S. Granchelli, Jr. has served as our Vice President of Marketing since September 1994 and
previously served as Vice President of Marketing and Sales from November 1990 to August
1994. From 1985 to October 1990 he served as our 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.


James
V. Diller has been Chairman of the Board since 1997 and a director of the Company since
1986. From November 1998 to July 2000, he served as our President and Chief Executive
Officer. 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 Vice Chairman of the Board. Mr. Diller has been a director of Sierra Wireless, a
provider of wireless data communications hardware and software products, since 1993. Mr.
Diller holds a B.S. degree in physics from the University of Rhode Island.


Chuck
K. 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 Directors 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 an M.B.A.
degree from Harvard University.


Alan
V. King has been a Director of the Company since December 1997. Mr. King has been
Chairman of the Board of Volterra Semiconductor Corporation, a start-up Company
developing power management integrated circuits, since September 1996. In addition, Mr.
King was previously the Chief Executive Officer of Volterra from September 1996 to August
2000. 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. In addition, Mr. King serves on the Board of Directors of a number of
privately held companies. Mr. King holds a B.S. degree in engineering from the University
of Washington.


Umesh Padval
has been a Director of the Company since November 1999. Mr. Padval has been the
President of C-Cube Microsystems Semiconductor Division since October 1998 and was named
Chief Executive Officer and Director of C-Cube Microsystem Incorporated in May 2000.
Prior to joining C-Cube, Mr. Padval served as Senior Vice President and General Manager
of the Consumer Digital Entertainment Division at VLSI Technology, Inc. from May 1997 to
October 1998, and as Senior Vice President and General Manager for VLSIs Computing
Solution Division from 1987 to April 1997. Before joining VLSI Technology, Mr. Padval
worked for Advanced Micro Devices, where he held a variety of marketing and engineering
positions. Mr. Padval holds a B.S. degree in engineering from the Indian Institute of
Mumbai, India, a M.S. degree in 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


Our corporate headquarters,
which serve as our principal administrative, sales, marketing, manufacturing,
and research and development offices, are located in three buildings in
Milpitas, California. We lease approximately 39,000 square feet of space in one
building for our manufacturing and engineering functions pursuant to a lease
that expires on June 30, 2005. We have a seven year lease expiring on October 1,
2003 for a total of approximately 21,500 square feet of space located in another
building adjacent to our manufacturing facility for administrative functions. We
also have a lease expiring on May 15, 2005 for a total of approximately 21,000
square feet of space in a third building adjacent to our manufacturing facility
for testing, quality assurance and product engineering.


In addition to our
headquarters and our manufacturing facilities, we have field offices for some of
our sales staff and field application engineers located in Massachusetts, New
Hampshire, United Kingdom and Japan. We lease approximately 1,331 square feet of
space for our sales office in the Boston, Massachusetts metropolitan area,
approximately 300 square feet for our sales office in Nashua, New Hampshire,
approximately 1,112 square feet for our sales office in Wokingham, United
Kingdom, and approximately 1,457 square feet for our technical sales support
center in Yokohama, Japan. We also lease approximately 3,434 square feet for our
design center in Harlow, United Kingdom. We believe that our existing facilities
are adequate to meet our current needs.



ITEM 3: LEGAL
PROCEEDINGS


The Company is not a party
to any material legal proceedings.



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, 2000.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|PART II



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



Price Range Of Common
Stock


Our common stock has been
traded on the Nasdaq National Market under the Nasdaq symbol ELNT
since our initial public offering on October 11, 1995. As of
September 30, 2000, there were approximately 176 stockholders of
record, and we believe there are in excess of 12,700 beneficial stockholders of
our common stock. The high and low closing sale prices of Elantecs Common
Stock on the Nasdaq National Market for each fiscal quarter for our last two
fiscal years were as follows:
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Common Stock Prices
| | -------------------
|
| |                    
| |                    
| |                    
| |                    
| |                    
| |                    
| |                    
| |                    
| |                    

|Dividend Policy


We have never declared or
paid any cash dividends on our common stock, and do not anticipate paying any
cash dividends on our common stock in the foreseeable future. We currently
intend to retain future earnings, if any, to finance our operations and
expand our business. Any future determination to pay cash dividends will
be at the discretion of our board of directors in light of our earnings,
financial condition, operating results, capital requirements and other factors,
as our board of directors may deem relevant.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|ITEM 6:
SELECTED FINANCIAL DATA


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.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                           | September 30 (1)
|------------------------------------------ | ----------------
|
|
|Consolidated Statement of Operations Data: |                 
|Net revenues                               |                 
|Gross profit                               |                 
|Income (loss) from operations              |                 
|Income (loss) before taxes                 |                 
|Net income (loss) (2)                      |                 
|Earnings (loss) per basic share (3)        |                 
|Earnings (loss) per diluted share (3)      |                 
|                                          
|Number of shares used in                   |                 
|computing:                                 |                 
|Basic per share amounts (3)                |                 
|Diluted per share amounts (3)              |                 
|                                          

|                                 | 2000 | 1999     | 1998 | 1997    | 1996
|-------------------------------- | ---- | -------- | ---- | ------- | ----
|
|Consolidated Balance Sheet Data: |      |          |      |         |     
|Working capital                  |      | $176,564 |      | $21,528 |     
|Total assets                     |      | 228,926  |      | 43,871  |     
|Long-term obligations            |      | 3,339    |      | 4,585   |     
|Total stockholders equity       |      | 200,650  |      | 29,526  |     
|                                

---

|(1) |  | Our
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) |  | Financial
data for fiscal 1999 include unusual pre-tax charges of $13.0 million resulting from our
conclusion that projected production volume and related cash flow from the our internal
fabrication facility were not sufficient to recover its carrying value.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Financial data
for fiscal 1998 includes a reversal of valuation allowance for certain deferred tax
assets resulting in an income tax benefit of $3.9 million.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------

|(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.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Item 7: Managements
Discussion and Analysis of Financial Condition and Results of Operation


The following discussion and
analysis of our financial condition and results of operations should be read in
conjunction with the consolidated financial statements and the related notes included
elsewhere in this Form 10-K. This discussion and analysis contains forward-looking
statements that involve risks and uncertainties. Our actual results may differ from those
anticipated in those forward-looking statements as a result of a number of factors,
including those set forth in factors affecting future operating results and elsewhere
in this form 10-K.


Overview


We are a leading designer,
manufacturer and marketer of high performance analog integrated circuits. Through our
design expertise, process technology expertise and specialized application knowledge, we
have developed and sell approximately 150 innovative products, including amplifiers,
drivers, faders, transceivers and multiplexers, to a large and diverse group of customers
worldwide. We target four high growth commercial markets: video, optical storage,
communications and power management.


We were incorporated in California
in July 1983 as Elantec, Inc. In September 1995, we reincorporated in Delaware as Elantec
Semiconductor, Inc., and in October 1995, we completed our initial public offering. We
introduced our first products in fiscal 1984, and, during the period from fiscal 1984 to
fiscal 1989, military and commercial hybrid product sales represented the majority of our
net revenues. Beginning in fiscal 1989, we changed our strategy to focus on high growth
commercial markets. We announced the discontinuance of our military and commercial hybrid
products in July 1997, and shipments of these products ended in September 1999. Beginning
in fiscal 1999, we narrowed our product focus, concentrating on our current markets where
we could exploit our design and process technology expertise. We opened a design center
in the United Kingdom in the third quarter of fiscal 2000.


In the first quarter of fiscal 1999,
we took an unusual charge of $13.0 million under a plan to restructure our manufacturing
operations by moving towards a primarily outsourced model. We restructured our operations
in response to a shift in the mix of products fabricated internally compared to products
fabricated by outside foundries, which caused significant over-capacity in our internal
4-inch fabrication facility.


Our net revenues are derived from
the sale of analog integrated circuits. We have developed a broad range of high
performance application specific standard products, or ASSPs, and standard products for
our four target markets. In fiscal 2000, video represented 41%, optical storage
represented 42%, communications represented 11%, and power management and others
represented 6% of net revenues.


We sell our products both
domestically and internationally to a large and diverse group of original equipment
manufacturers, or OEMs, through a combination of direct sales offices, independent sales
representatives and distributors. In fiscal 2000, sales to Microtek International in
Japan and Samsung Electronics in Korea accounted for 32% and 12%, respectively of our net
revenues. Microtek is a distributor who sells to a diverse base of OEMs, while Samsung is
one of our direct customers.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|We have focused our sales and
marketing efforts in Asia, North America and Europe. During the year ended September 30,
2000 and for fiscal 1999 and fiscal 1998, approximately 75%, 57% and 53%,respectively, of
our net revenues were derived from customers outside of North America. Our customers are
both distributors and OEMs. The majority of our international net revenues are derived
from sales through our distributors. We work with 11 distributors in Asia and nine
distributors covering Europe, Africa, South America and Australia, each selling to OEMs
within their own territory. We also work with four distributors and 18 independent sales
representatives in North America. While we are continuing to expand our sales
organizations worldwide, we expect that the majority of our net revenues will continue to
be derived from Asia in the foreseeable future. Some of our net revenues from sales in
Japan are denominated in Japanese Yen while the remaining net revenues from sales
worldwide are denominated in United States Dollars.


We recognize revenue at the time of
shipment to direct customers, at the time of shipment to foreign distributors, and at the
time domestic distributors sell our products to their customers. Allowances are provided
for estimated returns at the time of shipment. Our domestic distributors have rights of
return and price protection privileges on unsold merchandise. Net revenues are stated net
of estimated discounts and allowances.


We work with our customers to
achieve design wins whereby our products will be incorporated into our customers
product. Our customers then complete the design, testing and evaluation of their products
and begin the marketing process. Several months may elapse between our sales efforts and
our realization of revenues, if any, from volume purchases of our products. The duration
of the actual lapse depends upon the product type and market segment. Our customers are
not obligated by long-term contracts to purchase our products and can generally cancel or
reschedule orders on short notice.


We manufacture semiconductor wafers
using our proprietary dielectric isolation and silicon-on-insulator technologies. In
addition, we utilize a limited number of third party foundries for the manufacture of our
junction isolation complementary bipolar and complementary metal-oxide semiconductor, or
CMOS, wafers. We use third party subcontractors for assembly and packaging services. We
place purchase orders for specific quantities of wafers, and assembly and packaging
services. We test all wafers produced by us and our third party foundries. In addition,
we perform final testing on all packaged units. Accordingly, a significant portion of our
cost of revenues consists of payments to our manufacturing subcontractors. Costs of
revenues also encompass our internal manufacturing and operations functions and a portion
of our information systems and facilities costs.


Research and development expenses
consist primarily of salaries and related personnel costs, fees paid to consultants and
outside service providers, prototype costs related to the fabrication of our integrated
circuits, and depreciation associated with development tools. We expense our research and
development costs as they are incurred. Several components of our research and
development initiatives require significant expenditures, such as prototype expenses, the
timing of which can cause significant quarterly variability in our expenses. Because our
research and development is critical to our future success, we expect to continue to
increase our research and development expenditures.


Marketing, sales, general and
administrative expenses consist primarily of salaries and commissions and related
expenses for executives, finance, accounting, information services, human resources,
recruiting, professional fees and other corporate expenses, and costs associated with
promotional and other marketing activities. We expect to continue to expand our direct
and indirect sales operations in an attempt to secure more design wins and increase
product orders. We expect these expenses will increase over the next year as we hire
additional sales and marketing personnel, initiate additional marketing programs to
support our products, establish new sales offices, amortize deferred compensation
associated with the hiring of our new chief executive officer, add personnel and incur
additional costs related to the continued growth of our business. We will continue to
expand our use of independent sales representatives. In addition, the complexity of
integrating our products within our customers systems requires highly trained field
application engineers, customer service and support personnel. We plan to continue to
expand our field application engineering and our customer service and support
organization.



Results of Operations


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

|                                             | Year ended September 30,
|-------------------------------------------- | ------------------------
|
|Net revenues                                 |                         
|Gross profit                                 |                         
|Operating expenses:                          |                         
|Research and development                     |                         
|Marketing, sales, general and administrative |                         
|Unusual charges                              |                         
|Income (loss) from operations                |                         
|Income (loss) before income taxes            |                         
|Net income (loss)                            |                         

|Years
ended September 30, 2000, 1999 and 1998.


Net Revenues. In
fiscal 2000, net revenues were $101.2 million, an increase of 100.0% from the
$50.7 million reported in fiscal 1999. This increase over the prior year was due
to a significant increase in total units shipped despite a decline in average
selling prices. Sales increased in all geographic areas, especially in Asia.


In fiscal 2000,
international net revenues were 75.1% compared to 57.4% in fiscal 1999. This
increase was due primarily to strong demand for our video and optical storage
products resulting from improved demand as well as improved conditions in Asia.


Domestic net revenues in
fiscal 2000 increased slightly to $25.2 million from $21.6 million in fiscal
1999 as a result of increased sales of our products despite the discontinuation
of our military and commercial hybrid product line at the end of fiscal 1999.
This product line accounted for $5.0 million or 9.8% of our product revenues in
fiscal 1999. As a percentage of total net revenues, domestic net revenues in
fiscal 2000 decreased from 42.6% in fiscal 1999 to 24.9%.


Net revenues were $50.7
million in fiscal 1999, an increase of 9.6% 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 our products remained relatively
constant during the year. We experienced strong revenue growth in the optical
storage market, which represented 26.0% of net revenues, up from approximately
8.2% of net revenues in fiscal 1998.


International net revenues
represented 57.4% of net revenues in fiscal 1999, up slightly from 53.0% of net
revenues in fiscal 1998. Net revenues from Japan and other Pacific Rim countries
increased 23.9% over fiscal 1998 as a result of improvement in the economic and
financial situation in the region.


In fiscal 1999, domestic
net revenues remained flat in absolute dollars compared to 1998, but as a
percentage of our net revenues decreased to 42.6% compared to 47.0% in fiscal
1998.


Gross Margin. Gross
margin was 60.8% for fiscal 2000 compared to 47.1% in the corresponding period
in fiscal 1999. The improvement in gross margin reflects the allocation of fixed
manufacturing costs across a higher revenue base and improvements in
manufacturing efficiencies and yields as well as the write-down of inventory in
the first quarter of fiscal 1999.


During the first quarter of
fiscal 1999, we implemented a plan to restructure our manufacturing operations
by moving towards a primarily outsourced model through a period of several
years. We further decided to discontinue development of future dielectric
process technology in favor of the silicon-on-insulator technology, where volume
production is expected to be outsourced if a suitable foundry is qualified. As a
result of that decision, we concluded that certain quantities of dielectric
inventory in excess of known customer demand might become obsolete. Of the $1.0
million write-down of inventory 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 amount of dielectric inventory on the
balance sheet, after the write-down, at September 30, 2000 was $4.1 million in
work in process and $0.5 million in finished goods.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|While we are working on
programs to continue to improve manufacturing efficiencies, we may 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 $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
increase 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. The
improvement in gross margin in fiscal 1999 compared to fiscal 1998 also resulted
from our change in strategy, discussed above.


Research and Development
Expenses. Research and development expenses increased by $7.1 million or
91.0% for fiscal 2000 as compared to fiscal 1999. In fiscal 2000, research and
development expenses were 14.7% of net revenue. The increase in research and
development expenses in fiscal 2000 as compared to fiscal 1999 was due primarily
to an increase in staffing and related compensation of $3.4 million,
particularly design engineering personnel, fees paid to consultants and outside
service providers of $1.4 million and prototype costs and depreciation
associated with development tools of $2.3 million. During the third quarter of
fiscal 2000, we also opened a design center in the United Kingdom.


Research and development
expenses were $7.8 million or 15.4% of net revenues in fiscal 1999 and $7.2
million or 15.6% of net revenues in fiscal 1998. The increase in research and
development 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, and higher spending of $0.3 million on new product
designs.


Marketing, Sales,
General and Administrative Expenses. Marketing, sales, general and
administrative expenses increased by $5.5 million or 50.7% for fiscal 2000 as
compared to fiscal 1999. In fiscal 2000, marketing, sales, general and
administrative expenses were 16.1% of net revenue. The increase in these
expenses in fiscal 2000 as compared to fiscal 1999 was due primarily to an
increase in staffing and related compensation of $3.1 million, particularly
sales and marketing personnel, fees paid to consultants of $0.2 million and
higher commissions paid to outside manufacturers representatives and other
selling expenses of $2.2 million due to the increase in net revenues.


Marketing, sales, general
and administrative expenses were $10.8 million or 21.4% of net revenues in
fiscal 1999 and $9.9 million or 21.4% of net revenues in fiscal 1998. The
increase in these expenses in fiscal 1999 over fiscal 1998 was due primarily to
an increase in staffing and related compensation of $0.5 million and higher
outside services costs of $0.4 million. As a percentage of net sales, marketing,
sales, general and administrative expenses remained flat in fiscal 1999 as such
costs increased at the same rate as net revenue growth.


Unusual Charges. Our
unusual charges, as discussed in gross margin for fiscal 2000 and fiscal 1999,
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 $0.3 million was utilized in fiscal
2000 and $12.7 million was utilized in fiscal 1999.


Interest and Other
Income, Net. Interest and other income, net was $1.6 million in fiscal 2000,
an increase of $1.1 million over fiscal 1999. The increase in interest and other
income was due primarily to higher levels of cash, cash equivalents and
short-term investments and gains from the sale of foreign exchange forward
contracts.


Interest and other income,
net was $0.5 million in fiscal 1999 and $0.7 million in fiscal 1998. Interest
income for fiscal 1999 decreased from fiscal 1998 due to a lower rate of return
on cash equivalents and short-term investments.


Provision for (Benefit
From) Taxes on Income. Our effective tax rate for fiscal 2000 was 37.0%
compared to (41.7%) for the comparable prior year period. The fiscal 1999
provision for taxes on income reflected the benefit from the unusual charges we
recorded in the first quarter of fiscal 1999. In addition, we reversed the
remaining valuation allowance of $0.5 million 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 our
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 us or our 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 and other factors
described below.


THE MARKETS IN WHICH WE
PARTICIPATE ARE INTENSELY COMPETITIVE, AND IF WE ARE UNABLE TO COMPETE
EFFECTIVELY, OUR OPERATING RESULTS COULD BE HARMED.


The analog semiconductor
industry is intensely competitive and is characterized by rapid technological
change, product obsolescence and price erosion. Competition among analog
semiconductor providers is intense at the design-in stage, when a manufacturer
is selecting a component provider for potential generations of future products.
Increased competition has in the past, and could in the future, result in price
reductions, reduced gross margins or loss of market share, any of which could
harm our operating results. In our primary markets, we compete with Analog
Devices, Inc., Burr-Brown Corporation, Linear Technology Corporation, Maxim
Integrated Products, Inc., National Semiconductor Corporation, Texas Instruments
and Toshiba. We also compete indirectly with the in-house design staffs of some
of our customers, which often provide alternative solutions for individual
analog systems requirements. Many of our current and potential competitors have
greater name recognition, larger customer bases and greater financial,
technical, manufacturing, marketing and other resources than we do. As a result,
they may be able to respond more quickly to new or emerging technologies and
changes in customer requirements, devote greater resources to the development,
promotion, sale and support of their products, and reduce prices to increase
market share. Moreover, there has been significant merger and acquisition
activity among our competitors and potential competitors. These combinations may
provide our competitors and potential competitors with a competitive advantage
over us by enabling them to expand their product offerings and service
capabilities to meet a broader range of customer needs. In addition, the
introduction of new technologies and new market entrants may increase
competitive pressures.


CYCLICALITY
IN THE SEMICONDUCTOR INDUSTRY HAS HISTORICALLY LED TO SUBSTANTIAL DECREASES IN
DEMAND FOR OUR PRODUCTS AND TECHNOLOGIES AND MAY DO SO IN THE FUTURE.


Although the semiconductor
industry has recently experienced strong demand, the industry may experience
severe or prolonged downturns in the future. As a result, our operating results
are subject to significant variation. The semiconductor industry experienced a
downturn in 1998 and 1999 that seriously harmed our operating results during
that period. Our business depends upon the current and anticipated market demand
for analog semiconductors and products using analog semiconductors. Future
downturns in the semiconductor industry will likely lead to proportionately
greater downturns in our net income or increases in net losses.


OUR OPERATING RESULTS ARE
LIKELY TO FLUCTUATE, WHICH COULD CAUSE US TO MISS EXPECTATIONS ABOUT THOSE
RESULTS AND CAUSE THE TRADING PRICE OF OUR COMMON STOCK TO DECLINE.


Our operating results are
likely to fluctuate, and if we fail to meet or exceed the expectations of
securities analysts or investors, the trading price of our common stock could
decline. Some of the important factors that could cause our net revenues and
operating results to fluctuate from period to period include:
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|- |  | shifts
in demand for, and average selling prices of, our products;
|- |  | ------------------------------------------------------------------

|- |  | the
reduction, rescheduling or cancellation of orders by our customers;
|- |  | -----------------------------------------------------------------------

|- |  | the
timing and success of product introductions and new technologies by our competitors and
us;
|- |  | -----------------------------------------------------------------------------------------------

|- |  | the
quantities of our products which we or third parties can manufacture and deliver in a
quarter;
|- |  | --------------------------------------------------------------------------------------------------

|
|

|- |  | the
timing of our investments in research and development;
|- |  | ----------------------------------------------------------

|- |  | the
timing and provision of pricing protections and returns from our customers;
|- |  | -------------------------------------------------------------------------------

|- |  | competitive
pressures on selling prices;
|- |  | ----------------------------------------

|- |  | the
length of our sales cycle;
|- |  | ------------------------------

|- |  | availability
of manufacturing capacity for our products;
|- |  | --------------------------------------------------------

|- |  | fluctuations
in manufacturing yields; and
|- |  | -----------------------------------------

|- |  | changes
in product mix.
|- |  | -----------------------

|Although
our net revenues have increased in recent quarters, fluctuations in our net
revenues and operating results due to these factors could prevent us from
sustaining these growth rates. As a result, we believe that period-to-period
comparisons of our net revenues and operating results are not necessarily
meaningful and, accordingly, that these comparisons should not be relied upon as
indications of future performance.


WE DEPEND UPON THE
CONTINUED DEMAND FOR OUR PRODUCTS IN THE VIDEO AND OPTICAL STORAGE MARKETS FOR A
SIGNIFICANT PORTION OF OUR NET REVENUES.


We have derived, and expect
to continue to derive, a significant portion of our net revenues from products
that we sell in the video and optical storage markets. Therefore, our success
depends in part on the continued acceptance of our products within these markets
and our ability to continue to develop and introduce new products on a timely
basis for these markets. In addition, although the video and optical storage
markets have grown rapidly in the last few years, we cannot be certain that
these markets will continue to grow or that a significant slowdown in these
markets will not occur. Any downturn in these markets could harm our business
and operating results.


THE FAILURE TO MANAGE AND SUSTAIN
OUR GROWTH MAY HARM OUR BUSINESS.


Our ability to continue to
grow successfully requires an effective planning and management process. Since
September 30, 1999, we increased our headcount substantially, from 175 employees
to 337 employees as of September 30, 2000. Our growth has placed, and the
recruitment and integration of additional employees will continue to place, a
significant strain on our infrastructure, internal systems and other resources.
To manage our growth effectively, we must continue to improve and expand our
operational, financial and management information systems in a timely and
efficient manner and invest the necessary capital. We cannot assure you that
those resources will be available when we need them or that we will have
sufficient capital to invest when required. If we are unable to manage and
sustain our growth, our operating results may be harmed.


DIFFICULTIES
IN ESTIMATING THE AMOUNT AND TIMING OF SALES TO OUR CUSTOMERS COULD HARM OUR OPERATING
RESULTS.



It is difficult for us to forecast
accurately the timing and amount of sales to our customers, which include distributors
and original equipment manufacturers, or OEMs. Our customers generally take a long time
to evaluate our products and technologies before committing to design our products into
their systems. In addition, some of the OEMs who purchase products from us or our
distributors require a set of related products from multiple manufacturers to be
delivered to them together for a complete bill of materials. Delays in delivery by other
vendors could result in delayed or cancelled sales of our products. Moreover, our
business is characterized by short-term orders and shipment schedules, and customer
orders typically can be canceled or rescheduled on short notice to us and without
significant penalty. We do not have substantial noncancellable backlog and often we are
forced to obtain inventory and materials from our manufacturing subcontractors in advance
of anticipated customer demand. Because we incur expenses, many of which are fixed, based
in part on our forecasts of future product sales, our operating results could be harmed
if sales levels are below our expectations.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|OUR NET REVENUES MAY
DECREASE IF WE LOSE ANY OF OUR SIGNIFICANT CUSTOMERS, THEREBY HARMING OUR
OPERATING RESULTS.


A relatively small number
of customers account for a significant portion of our net revenues in any
particular period. In fiscal 2000, Microtek International, Inc. accounted for
32% of our net revenues and Samsung accounted for 12%. In fiscal 1999, Microtek
accounted for 30% of our net revenues and Insight (a domestic distributor)
accounted for 10%. The loss of any significant customer coupled with our
inability to obtain orders from new customers to compensate for such loss could
cause our net revenues to decline, thereby harming our operating results.


We have no long-term
purchase commitments with these or any of our other important customers. These
customers, therefore, could cease purchasing our products with short notice to
us and without significant penalty. In addition, Microtek and Insight are
distributors of our products to various OEMs, any of whom could choose to reduce
or eliminate orders that would reduce our distributors orders for our
products.


Because we anticipate that
sales of our products to a relatively small number of customers will continue to
account for a significant portion of our net revenues, the following may reduce
our operating results:
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|- |  | reduction,
delay or cancellation of orders from one or more of our significant distributors or OEMs;
|- |  | ----------------------------------------------------------------------------------------------------

|- |  | development
by one or more of our significant customers of other sources of supply;
|- |  | -----------------------------------------------------------------------------------

|- |  | selection
by one or more of our significant OEMs of devices manufactured by one or more of our -
competitors for inclusion in future product generations;
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------

|- |  | sales
of competing products by our distributors; or
|- |  | ---------------------------------------------------

|- |  | failure
of one of our significant customers to make timely payment of our invoices.
|- |  | -----------------------------------------------------------------------------------

|WE MUST ACHIEVE NEW DESIGN
WINS, AND THESE DESIGN WINS MUST TRANSLATE INTO CUSTOMER PURCHASES.


Our success depends in part
upon achieving design wins for our products with current and future customers.
Design wins are indications by existing and potential customers that they intend
to incorporate our products into their new product designs. To achieve design
wins, we must continually increase the performance levels of our products, keep
pace with evolving industry standards and introduce new products in a timely
manner. If we fail to achieve design wins, we may lose potential sales
opportunities. Design wins also do not necessarily result in purchase orders for
our products. In addition, it could take up to several months before a design
win translates into a purchase order, if at all. The value of any design win,
moreover, will largely depend upon the commercial success of our customers
product and on the extent to which the design of the customers electronic
system accommodates components manufactured by our competitors.


IF WE FAIL TO DEVELOP AND
INTRODUCE NEW PRODUCTS ON A TIMELY BASIS, WE MAY NOT BE ABLE TO ATTRACT AND
RETAIN CUSTOMERS.


We operate in an industry
that is characterized by rapidly changing technology, frequent product
introductions, product obsolescence, and ongoing demands for greater performance
and functionality. We, therefore, must continually design, develop and introduce
on a timely basis new products with improved features to retain and attract
customers and be competitive. Successful product development and introduction on
a timely basis requires that we:
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|- |  | design
innovative and performance-enhancing features that differentiate our products from those
of our competitors;
|- |  | -------------------------------------------------------------------------------------------------------------------

|- |  | transition
our products to new manufacturing technologies;
|- |  | ----------------------------------------------------------

|- |  | identify
emerging technological trends in our target markets, including new standards for our
products;
|- |  | -------------------------------------------------------------------------------------------------------

|
|

|- |  | accurately
identify and design new products to meet market needs;
|- |  | -----------------------------------------------------------------

|- |  | bring
products to market on a timely basis at competitive prices and maintain effective
marketing strategies;
|- |  | -------------------------------------------------------------------------------------------------------------

|- |  | maintain
a high level of investment in research and development;
|- |  | ----------------------------------------------------------------

|- |  | respond
effectively to technological changes or product announcements by others; and
|- |  | ------------------------------------------------------------------------------------

|- |  | adjust
to changing market conditions as quickly and cost-effectively as necessary to compete
successfully.
|- |  | ----------------------------------------------------------------------------------------------------------

|We cannot assure you that
we will be able to meet the design and market introduction schedules for our new
products or enhancements to our existing products or that these products will
achieve market acceptance.


IN ORDER TO REMAIN
COMPETITIVE IN THE ANALOG SEMICONDUCTOR INDUSTRY, WE MUST DEVELOP AND INTRODUCE
NEW SEMICONDUCTOR DESIGN AND MANUFACTURING PROCESS TECHNOLOGIES ON A TIMELY
BASIS.


Our future success depends
upon our ability to:
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|- |  | design
and develop products that utilize new manufacturing process technologies;
|- |  | --------------------------------------------------------------------------------

|- |  | secure
the availability of our new manufacturing process technologies from our foundries;
|- |  | -----------------------------------------------------------------------------------------

|- |  | introduce
new manufacturing process technologies to the marketplace earlier than our - competitors
do; and
|- |  | ----------------------------------------------------------------------------------------------------------

|- |  | transfer
our product design to multiple foundries efficiently.
|- |  | --------------------------------------------------------------

|Semiconductor design and
manufacturing process technologies are subject to rapid technological change,
and require large expenditures for research and development. We incurred
research and development expenses of $14.9 million for the year ended September
30, 2000, $7.8 million for the year ended September 30, 1999 and $7.2 million
for the year ended September 30, 1998. We expect that our expenses for research
and development will continue to increase because we continuously attempt, on a
product-by-product basis, to migrate to smaller geometry process technologies.
Other companies in the industry have experienced difficulty in transitioning to
new manufacturing processes and, consequently, have suffered reduced yields or
delays in product deliveries. While we believe that transitioning our products
to smaller geometries will be important for us to remain competitive, we cannot
be certain that we can make these transitions successfully and on a
cost-effective basis.


DUE TO OUR SIGNIFICANT
LEVEL OF INTERNATIONAL NET REVENUES AND THE UTILIZATION OF FOREIGN MANUFACTURERS
AND SUBCONTRACTORS, WE ARE SUBJECT TO INTERNATIONAL OPERATIONAL, FINANCIAL AND
POLITICAL RISKS.


Sales of our products to
customers outside the United States have accounted for a significant part of our
net revenues. Our total international net revenues, as a percentage of our net
revenues, were 75% for the year ended September 30, 2000, 57% for the year ended
September 30, 1999 and 53% for the year ended September 30, 1998. We expect our
international net revenues, particularly into Japan, Taiwan and Korea, to
continue to account for a significant percentage of our net revenues in the
future. In addition, we expect to continue to rely on manufacturers and
subcontractors located in Taiwan, Malaysia and Thailand. Accordingly, we will be
subject to risks and challenges that we would not otherwise face if we conducted
our business only in the United States. These include:
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|- |  | compliance
with a wide variety of foreign laws and regulations;
|- |  | ---------------------------------------------------------------

|- |  | changes
in laws and regulations relating to the import or export of semiconductor products;
|- |  | -------------------------------------------------------------------------------------------

|- |  | legal
uncertainties regarding taxes, tariffs, quotas, export controls, export licenses and
other trade barriers;
|- |  | ----------------------------------------------------------------------------------------------------------------

|
|

|- |  | political
and economic instability in or foreign conflicts involving the countries of our customers,
|- |  | ----------------------------------------------------------------------------------------------------

|- |  | manufacturers
and subcontractors causing
|- |  | ----------------------------------------

|- |  | delays
or reductions in orders for our products;
|- |  | ------------------------------------------------

|- |  | difficulties
in collecting accounts receivable and longer accounts
|- |  | ------------------------------------------------------------------

|- |  | receivable
payment cycles;
|- |  | --------------------------

|- |  | difficulties
in staffing and managing personnel, distributors and
|- |  | -----------------------------------------------------------------

|- |  | representatives
in foreign countries;
|- |  | -------------------------------------

|- |  | reduced
protection for intellectual property rights in some countries,
|- |  | ----------------------------------------------------------------------

|- |  | particularly
in Asia;
|- |  | ---------------------

|- |  | currency
exchange rate fluctuations, which could increase the price of our
|- |  | --------------------------------------------------------------------------

|- |  | products
in local currencies and thereby reduce our net revenues from
|- |  | ---------------------------------------------------------------------

|- |  | these
sales;
|- |  | ------------

|- |  | seasonal
fluctuations in purchasing patterns in other countries; and
|- |  | --------------------------------------------------------------------

|- |  | fluctuations
in freight rates and transportation disruptions.
|- |  | -------------------------------------------------------------

|Any of these factors could
harm our existing international operations and business or impair our ability to
continue expanding into international markets. To the extent we are unable to
expand our international net revenues in a timely and cost-effective manner, our
business could be harmed. We cannot assure you that we will be able to maintain
or increase international market demand for our products.


WE DEPEND ON A LIMITED
NUMBER OF THIRD PARTY FOUNDRIES TO MANUFACTURE MOST OF OUR PRODUCTS, WHICH
REDUCES OUR CONTROL OVER THE PRODUCTION, SUPPLY AND DELIVERY OF OUR PRODUCTS.


We depend on a limited
number of third party foundries for the production of most of our products. In
particular, Lucent Technologies Inc. manufactures all of our junction isolation
complementary bipolar wafers, and American Microsystems, Inc. and United
Microelectronics Corporation manufacture all of our complementary
metal-oxide-semiconductor wafers. In addition, another foundry provides poly
deposition on all of our dielectric isolation wafers and silicon-on-insulator
wafers. Our dependence on third parties to fabricate our products has
significant risks that could potentially harm our operating results, including:
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|- |  | We
have no long-term contracts with any foundry and we do not have a guaranteed level of
production capacity at any foundry. The ability of each foundry to provide wafers to us
is limited by its available capacity and our foundry suppliers could provide that limited
capacity to its other customers. In addition, our foundry suppliers could reduce or even
eliminate the capacity allocated to us on short notice. Moreover, such a reduction or
elimination is possible even after we have submitted a purchase order.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|- |  | To
obtain foundry capacity, we may be forced to enter into equity and debt financing
arrangements. These arrangements could result in the dilution of our earnings or in the
ownership of our stockholders.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|- |  | We
provide the foundries with rolling forecasts of our production requirements; however, our
forecasts of production requirements may prove to be inaccurate.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------

|
|

|- |  | We
have limited control over product delivery schedules, and we may not receive products
within the time frames and in the volumes required by our customers.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------

|- |  | We
could face delays in obtaining, or we might not be able to obtain, access to foundries
with key fabrication process technologies, such as the fabrication process necessary to
manufacture dielectric isolation wafers and silicon-on-insulator wafers.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|- |  | We
have limited control over quality assurance and production costs.
|- |  | --------------------------------------------------------------------

|- |  | We
have limited control over manufacturing yields and our foundries occasionally experience
lower than anticipated manufacturing yields, particularly in connection with the
introduction of new products and enhancements to existing products, and the design,
installation and initiation of new process technologies.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|We cannot be certain that
we will be able to maintain our good relationships with our existing foundries.
In addition, we cannot be certain that we will be able to form relationships
with other foundries as favorable as our current ones. Moreover, transferring
from our existing foundries to another foundry could require a significant
amount of time and loss of revenue, and we cannot assure you that we could make
a smooth and timely transition. If foundries are unable or unwilling to continue
to supply us with these semiconductor devices in required time frames and
volumes or at commercially acceptable costs, our business may be harmed.


WE ARE RESPONSIBLE FOR THE
PRODUCTION OF OUR DIELECTRIC ISOLATION WAFERS AND SILICON-ON-INSULATOR WAFERS
AND OUR RESULTS OF OPERATIONS COULD BE HARMED IF OUR SUPPLY OF THOSE WAFERS DOES
NOT MEET THE DEMAND.


Our own fabrication
facilities are the only facilities currently available to us that are capable of
manufacturing dielectric isolation wafers and silicon-on-insulator wafers for
our products. If we experience a reduction or interruption in the supply, or a
degradation in the quality of any of the wafers, we may be forced to discontinue
products based upon those wafers until we can contract with third party
foundries that are qualified to produce those wafers. As a result, our
relationships with our customers could be harmed if we are unable to deliver
sufficient quantities of wafers. We intend to outsource the high-volume
production of silicon-on-insulator wafers in the future. We intend to transfer
the process to a suitable foundry, but we cannot provide any assurance that a
suitable foundry can be qualified for this production. If we are unable to
locate and qualify a suitable foundry, we will be required to make significant
capital investments in our internal foundry capacity, which is likely to
increase our costs of doing business.


IF WE FAIL TO DEVELOP OUR
NEXT GENERATION SILICON-ON-INSULATOR TECHNOLOGY IN A TIMELY MANNER, OUR BUSINESS
AND OPERATING RESULTS COULD BE HARMED.


Part of our future product
development strategy includes the development of an advanced
silicon-on-insulator technology. As with the development of any process
technology, we cannot assure you that this new technology can be successfully
implemented in a timely manner or that it will provide the desired improvements
over our current technology. In addition, our next generation
silicon-on-insulator technology could be supplanted by alternative new
technologies and may not be able to be transferred to third party foundries.
Significant delays or cancellation of the development of this new generation of
technology or manufacturing problems associated with transferring our current
product line to this technology could harm our business and results of
operations. Significant delays or cancellation of the development of this
technology also could harm our new product development program.


WE RELY ON A LIMITED NUMBER
OF PACKAGING SUBCONTRACTORS THAT MAY NOT HAVE ADEQUATE CAPACITY TO MEET OUR
PRODUCT DELIVERY REQUIREMENTS.


We rely on a limited number
of packaging subcontractors with whom we do not have long-term contracts. In
general, the wafers we manufacture at our fabrication facilities and the wafers
we purchase from our outside foundries are tested at our facilities. The wafers
are then sent to our packaging subcontractors for packaging and assembling. Our
reliance on these subcontractors involves significant risks, including a lack of
adequate capacity, the possibility that they may eliminate the necessary
manufacturing process technologies, and reduced control over quality and
delivery schedules. These independent subcontractors may discontinue doing
business with us for a variety of reasons. As a result, we may experience
product delivery and quality assurance problems, which in turn may harm our
reputation and operating results.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|IF OUR PRODUCTS CONTAIN
DEFECTS OR FAIL TO ACHIEVE INDUSTRY RELIABILITY STANDARDS, OUR REPUTATION MAY BE
HARMED, AND WE MAY INCUR SIGNIFICANT UNEXPECTED EXPENSES AND LOSE SALES
OPPORTUNITIES.


Our products have in the
past occasionally contained, and may in the future contain, undetected errors or
defects. Any similar problem in the future may:
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|- |  | cause
delays in product introductions and shipments;
|- |  | ----------------------------------------------------

|- |  | result
in increased costs and diversion of development resources;
|- |  | -----------------------------------------------------------------

|- |  | cause
us to incur increased charges due to obsolete or unusable inventory;
|- |  | --------------------------------------------------------------------------

|- |  | require
design modifications; or
|- |  | --------------------------------

|- |  | decrease
market acceptance or customer satisfaction with these products, which could result in
product returns.
|- |  | ---------------------------------------------------------------------------------------------------------------

|In addition, we may not
find defects or failures in our products until after commencement of commercial
shipments, which may result in loss or delay in market acceptance and could
significantly harm our operating results. Our current or potential customers
also might seek to recover from us any losses resulting from defects or failures
in our products. Liability claims could require us to spend significant time and
money in litigation or to pay significant damages. Any of these claims, whether
or not successful, could seriously damage our reputation and business.


EARTHQUAKES, OTHER NATURAL
DISASTERS AND POWER SHORTAGES MAY DAMAGE OUR FACILITIES OR THE FACILITIES OF
THIRD-PARTIES ON WHICH WE DEPEND.


Our corporate headquarters
are located in California near major earthquake faults which have experienced
earthquakes in the past. In addition, some of the foundries, suppliers and other
third parties upon which we rely are located near fault lines. In the event of
an earthquake or other natural disaster near one or more of the facilities of
third parties upon which we rely, like the earthquake in Taiwan in September
1999, could disrupt the operations of those parties. Additionally, the loss of
power, such as the temporary loss of power caused by power shortages in the grid
servicing our facilities in Northern California, could disrupt our operations or
impair our critical systems. None of these disruptions would be covered by
insurance, so the supply of our products could be limited and our business could
be hampered.


IF WE FAIL TO ATTRACT AND
RETAIN QUALIFIED PERSONNEL, OUR BUSINESS MAY BE HARMED.


Our future success depends
largely upon the continued service of our key management and technical
personnel, and on our continued ability to hire, integrate and retain qualified
management and technical personnel, particularly engineers. Competition for
these employees in the analog semiconductor industry is intense, and we may not
be successful in attracting or retaining these personnel. In addition, even if
we are able to attract qualified personnel, it is difficult to obtain work visas
for foreign professionals trained in the United States. The loss of any key
employee, the failure of any key employee to perform in his or her current
position or our inability to attract and retain skilled employees as needed
could impair our ability to meet customer and technological demands. The loss of
the services of any executive officer or other key technical or management
personnel could harm our business. To help retain the continued services of some
of our key executives, we have entered into employment agreements with some of
them. We do not have key person life insurance on any of our key personnel.


IF DIGITAL INTEGRATED
CIRCUITS REPLACE ANALOG INTEGRATED CIRCUITS, OUR BUSINESS, WHICH DEPENDS ON THE
DEMAND FOR PRODUCTS BASED ON ANALOG TECHNOLOGIES, MAY FAIL.


All of our products are
based on analog technologies. However, 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. We cannot assure you that further
advances in digital processing power will not eventually supplant analog
technologies in those new applications, which could harm our business and
results of operations.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|IF WE FAIL TO PROTECT OUR
INTELLECTUAL PROPERTY, OUR COMPETITORS COULD MARKET PRODUCTS WITH SIMILAR
FEATURES, REDUCING DEMAND FOR OUR PRODUCTS AND HARMING OUR OPERATING RESULTS.


Our success depends in part
on our ability to protect our intellectual property rights covering our products
and technologies. We rely on a combination of patent, copyright, trademark,
trade secret laws and confidentiality procedures to protect our proprietary
rights. Despite our efforts to protect our proprietary rights, unauthorized
parties may attempt to copy aspects of our products or to obtain and use
information that we regard as proprietary. In addition, the laws of some foreign
countries, and the enforcement of those laws, do not protect proprietary rights
to as great an extent as do the laws of the United States. We also cannot assure
you that:
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|- |  | our
means of protecting our proprietary rights will be adequate;
|- |  | ----------------------------------------------------------------

|- |  | patents
will issue from our currently pending or future applications;
|- |  | ---------------------------------------------------------------------

|- |  | our
existing patents or any new patents will be sufficient in scope or strength to provide
any meaningful protection or commercial advantage to us;
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------

|- |  | any
patent or registered trademark owned by us will not be invalidated, circumvented or
challenged in the United States or foreign countries; or
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------

|- |  | others
will not misappropriate our proprietary technologies or independently develop similar
technology, duplicate our products or design around any patent issued to us or other
intellectual property rights of ours.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|In addition, we may
initiate claims or litigation against third parties for infringement of our
proprietary rights to establish the validity of our proprietary rights. This
litigation, whether or not it is resolved in our favor, could result in
significant expense to us and divert the efforts of our technical and management
personnel.


FROM TIME TO TIME WE MAY BE
SUBJECT TO CLAIMS OF INFRINGEMENT OF OTHER PARTIES PROPRIETARY RIGHTS, OR
TO CLAIMS THAT OUR INTELLECTUAL PROPERTY RIGHTS ARE INVALID, WHICH COULD RESULT
IN SIGNIFICANT EXPENSE AND LOSS OF INTELLECTUAL PROPERTY RIGHTS.


From time to time we have
received, and, in the future, may receive claims that we are infringing third
parties intellectual property rights or claims that our trademarks,
patents or other intellectual property rights are invalid. The semiconductor
industry is characterized by uncertain and conflicting intellectual property
claims and vigorous protection and pursuit of these rights. The resolution of
any claims of this nature, with or without merit, could be time consuming,
result in costly litigation or cause product shipment delays. In the event of an
adverse ruling, we might be required to discontinue the use of certain
processes, cease the manufacture and sale of infringing products, expend
significant resources to develop non-infringing technology or enter into royalty
or licensing agreements. Royalty or licensing agreements, if required, might not
be available on terms acceptable to us or at all. The loss of access to any
intellectual property could harm our business.


OUR FAILURE TO COMPLY WITH
ENVIRONMENTAL LAWS AND REGULATIONS COULD SUBJECT US TO SIGNIFICANT FINES AND
LIABILITIES, AND NEW LAWS AND REGULATIONS OR CHANGES IN REGULATORY
INTERPRETATION OR ENFORCEMENT COULD MAKE COMPLIANCE MORE DIFFICULT AND COSTLY.


We are subject to a variety
of federal, state, local and foreign governmental laws and regulations related
to the use, storage, discharge and disposal of toxic, volatile or otherwise
hazardous chemicals used in our manufacturing of semiconductor wafers. Our
failure to comply with present or future environmental laws and regulations
could result in fines being imposed on us, suspension of our production or a
cessation of our operations. Any failure by us to comply with these laws and
regulations could subject us to significant liabilities, thereby harming our
business and operating results. In addition, new environmental laws and
regulations or changes in regulatory interpretation and enforcement could render
compliance more difficult and costly and require significant capital
expenditures.


WE MAY REQUIRE ADDITIONAL
CAPITAL TO FUND OUR CAPITAL EXPENDITURES AND OPERATIONS, HOWEVER, SUCH CAPITAL
MAY NOT BE AVAILABLE.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|The operation of our
fabrication facility requires the continued investment of substantial capital.
We intend to make capital investments to support business growth and achieve
manufacturing cost reductions and improved yields. We may need equity or debt
financing to fund further expansion of our wafer fabrication capacity or to fund
other projects. The timing and amount of these capital requirements cannot be
precisely determined at this time and will depend on a number of factors,
including demand for our products, our product mix, changes in semiconductor
industry conditions and competitive factors. Debt or equity financing may not be
available when needed or, if available, may not be available on terms
satisfactory to us.


WE MAY ENGAGE IN FUTURE
ACQUISITIONS, WHICH COULD HARM OUR PROFITABILITY, PUT A STRAIN ON OUR RESOURCES,
OR CAUSE DILUTION TO OUR STOCKHOLDERS.


While we have made no
acquisitions of businesses in the past, we may make acquisitions of
complementary businesses, products or technologies in the future. Integrating
newly acquired organizations, products or technologies into our business could
be expensive, time consuming and may not be successful. Future acquisitions
could divert our managements attention from other business concerns and
expose our business to unforeseen liabilities or risks associated with entering
new markets. In addition, we may lose key employees while integrating new
organizations. Consequently, we may not be successful in integrating any
acquired business, products or technologies and may not achieve anticipated
revenue and cost benefits. In addition, future acquisitions could result in
customer dissatisfaction, performance problems with an acquired company,
potentially dilutive issuances of equity securities or the incurrence of debt,
contingent liabilities, amortization expenses related to goodwill and other
intangible assets or other unanticipated events or circumstances, any of which
could harm our business.


THE TRADING PRICE OF OUR COMMON
STOCK MAY BE VOLATILE.


The market for securities
of technology companies in general, and of companies in the semiconductor
industry, including us in particular, has been highly volatile. It is likely
that the trading price of our common stock will continue to fluctuate in the
future. Factors affecting the trading price of our common stock include:
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|- |  | responses
to fluctuations in our operating results;
|- |  | ---------------------------------------------------

|- |  | announcements
of technological innovations, new products or product enhancements, joint ventures or
significant agreements by us or our competitors;
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------

|- |  | our
sales of common stock or other securities in the future;
|- |  | ------------------------------------------------------------

|- |  | general
conditions in the video, optical storage, communications and power management markets; and
|- |  | --------------------------------------------------------------------------------------------------

|- |  | changes
in financial estimates or recommendations by market analysts regarding us and our
competitors.
|- |  | ------------------------------------------------------------------------------------------------------

|In addition, the stock
market has experienced substantial price and volume volatility that has
particularly affected the trading prices of equity securities of many technology
companies and that often has been unrelated or disproportionate to the operating
results of these companies. As a result, any broad market fluctuations may
adversely affect the trading price of our common stock.


PROVISIONS OF OUR
CERTIFICATE OF INCORPORATION AND BYLAWS OR DELAWARE LAW MAY DELAY OR PREVENT A
CHANGE OF CONTROL OF ELANTEC OR CHANGES IN OUR MANAGEMENT AND THEREFORE, DEPRESS
THE TRADING PRICE OF OUR COMMON STOCK.


Delaware corporate law and
our certificate of incorporation and bylaws contain provisions that could delay,
defer or prevent a change in control of our company or changes in our management
that you may deem advantageous. These provisions could also limit the price that
investors might be willing to pay in the future for shares of our common stock.
These provisions:
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|- |  | authorize
the issuance of blank check preferred stock, which is preferred stock that our board of
directors can create and issue without prior stockholder approval with rights senior to
those of common stock;
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|
|

|- |  | limit
the ability of stockholders to call special meetings of stockholders;
|- |  | ---------------------------------------------------------------------------

|- |  | prohibit
cumulative voting in the election of directors, which would allow less than a majority of
stockholders to elect director candidates; and
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------

|- |  | establish
advance notice requirements for submitting nominations for election to the board of
directors and for proposing matters that can be acted upon by stockholders at a meeting.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|In addition, our board of
directors declared a dividend of one preferred share purchase right for each
share of our common stock outstanding, subject to limitations stated in the
stockholder rights plan. These rights may delay, defer or prevent a change of
control of our company.



Liquidity and
Capital Resources


Our primary sources of
liquidity are cash, cash equivalents and short-term investments of $160.6
million at September 30, 2000.


Cash and cash equivalents
were $159.5 million at September 30, 2000, representing an increase of $142.1
million from September 30, 1999. The increase is primarily a result of net
proceeds of $135.1 million from a secondary stock offering in September 2000,
cash generated from operations of $20.3 million and proceeds from the exercise
of employee stock options and issuance of stock under our employee stock
purchase plan of $3.5 million. These cash inflows were offset by capital
expenditures of approximately $15.7 million primarily for new process
development, assembly and test facilities and payments on capital leases of
approximately $1.4 million.


Cash and cash equivalents
at September 30, 1999 increased by $11.6 million from September 30, 1998 to
$17.4 million. The primary source of cash during fiscal 1999 was $12.9 million
from operations. Investing activities used $0.8 million 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 available for sale securities 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 the exercise of employee stock options of $1.2
million.


We believe that our
existing cash and cash equivalents, our short-term Investments and cash from
operations will be sufficient to support our operating and capital needs for at
least the next 12 months. Any major change in the nature of our 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 our capital requirements. To the extent we require additional cash, we
cannot assure you that we will be able to obtain financing on favorable terms,
or at all.



ITEM 7A:
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS



Interest Rate
Sensitivity


We maintain a short-term
investment portfolio consisting mainly of income securities with an average
maturity of less than one year. These 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 10.0% from levels
at September 30, 2000, the fair value of the portfolio would decline by an
immaterial amount. We presently intend to hold our fixed income investments
until maturity, and therefore we do not expect our 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 our securities portfolio.


At September 30, 2000, we
had approximately $2.9 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 10.0% in short-term interest rates
would not have a material impact on our net income or cash flows. We do not
hedge any interest rate exposures.


Since we do not have any
significant exposure to changing interest rates because of the low levels of
marketable securities with maturities more than 90 days, we did not undertake
any specific actions to cover exposure to interest rate risk and we are not a
party to any interest rate risk management transactions. We did not purchase or
hold any derivative financial instruments for trading purposes.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Foreign
Currency Exchange Risk


The Japanese Yen and
British Pound are the functional currencies of our subsidiaries in Japan and the
United Kingdom, respectively. We also denominate certain sales transactions in
Yen. We have established a foreign currency-hedging program, utilizing foreign
currency forward exchange contracts or forward contracts of various durations to
hedge trade receivables denominated in 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 our foreign
currency receivables. We do not use forward contracts for trading purposes. We
believe that the use of foreign currency financial instruments should reduce the
risks that arise from conducting business in international markets.


We do not currently enter
into foreign exchange forward contracts to hedge balance sheet exposures of our
subsidiaries in Japan and the United Kingdom, and intercompany balances against
future movements in foreign exchange rates. However, we do maintain cash
balances denominated in Yen and Pound Sterling. If foreign exchange rates were
to weaken against the United States Dollar immediately and uniformly by 10.0%
from the exchange rate at September 30, 2000, the fair value of these foreign
currency amounts would decline by an immaterial amount.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|ITEM 8:
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|---------------------------------------------------

|1. |  | INDEX TO CONSOLIDATED FINANCIAL STATEMENTS                                                 |  |  | 
|-- |  | ------------------------------------------------------------------------------------------ |  |  | 
|  
|   |  | The following Consolidated Financial Statements are filed as part of this Report.          |  |  | 
|  
|   |  | Independent Auditors Report                                                               |  |  | 
|  
|   |  | Consolidated Balance Sheets as of September 30, 2000 and 1999                              |  |  | 
|  
|   |  | Consolidated Statements of Operations for each of the three fiscal years                   | 
|   |  | in the period ended September 30, 2000                                                     |  |  | 
|  
|   |  | Consolidated Statements of Stockholders Equity and comprehensive                          | 
|   |  | income (loss) for each of the three fiscal years in the period ended September 30, 2000    |  |  | 
|  
|   |  | Consolidated Statements of Cash Flows for each of the three fiscal                         | 
|   |  | years in the period ended September 30, 2000                                               |  |  | 
|  
|   |  | Notes to Consolidated Financial Statements                                                 |  |  | 
|  
|2  |  | INDEX TO SUPPLEMENTAL FINANCIAL INFORMATION                                                | 
|  
|   |  | Unaudited Interim Financial Information                                                    |  |  | 
|  
|3  |  | INDEX TO FINANCIAL STATEMENT SCHEDULE                                                      | 
|  
|   |  | The following financial statement schedule of Elantec Semiconductor, Inc. for the years    | 
|   |  | ended September 30, 2000, 1999 and 1998 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, 2000                                  |  |  | 
|  
|   |  | Schedules other than that listed above have been omitted since they are either not   | 
|   |  | required, not applicable, or the information is otherwise included.                        | 

|Item 9: CHANGES IN AND
DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES


Not
applicable
|--------------------------------------------------------------------------------------------------------------

|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
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 12, 2001. 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 12,
2001. 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 12, 2001. 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 12,
2001. Such information is incorporated herein by reference.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|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 30 of this Report.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

|ExhibitNumber |  | Exhibit Title
|------------- |  | -------------

|3.01 |  | Registrants Certificate of Incorporation (incorporated by reference from Exhibit 3(I).01 to the Registrants Registration Statement on Form S-1,
filed on August 24, 1995, as amended (Reg. No. 33-96136)
|---- | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3.02 |  | Registrants Certificate of Amendment to its Certificate of Incorporation
(incorporated by reference from Exhibit 4.1 to the Registrants Quarterly Report on Form 10-Q for the quarter ended June30, 2000).
|---- | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3.03 |  | Registrants
Certificate of Designation (incorporated by reference from Exhibit 3.2 to the
Registrants Registration Statement on Form 8-A, filed on September 16, 1998 (Reg. No.
000-26690)).
|---- | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3.04 |  | Registrants
Bylaws (incorporated by reference from Exhibit 3(ii).02 to the Registrants Registration
Statement on Form S-1, filed on August 24, 1995, as amended (Reg. No. 33-96136).
|---- | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3.05 |  | Specimen
Certificate for Registrants Common Stock. (5)
|---- | - | -------------------------------------------------------

|4.01 |  | Rights
Agreement dated September 14, 1998 between Registrant, Bank Boston, N.A., as Rights
Agent, which includes as Exhibit A the form 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. (4)/+
|----- | - | -------------------------------------------------------------------------

|10.04 |  | Form
of Companys 1995 Directors Stock Option Plan and related documents. (4)/+
|----- | - | -------------------------------------------------------------------------------

|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 Agreements dated as of March 22, 1991, by and between the
Company and Ralph Granchelli. (1)/+
|----- | - | ----------------------------------------------------------------------------------------------------------------------------

|10.08 |  | 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)
|----- | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.09 |  | Distributor
Agreement dated October 1, 1989, between the Company and Insight. (1)
|----- | - | ---------------------------------------------------------------------------------

|10.10 |  | Distributor
Agreement dated November 1, 1987, between the Company and Marshall Industries. (1)
|----- | - | ----------------------------------------------------------------------------------------------

|10.11 |  | Distributor
Agreement dated March 7, 1994, between the Company and Internix, Inc. (1)
|----- | - | -------------------------------------------------------------------------------------

|10.12 |  | Amendment
to Standard Industrial/Commercial Single-Tenant Lease dated June 23, 1993. (6)
|----- | - | ----------------------------------------------------------------------------------------

|10.13 |  | Standard
Industrial/Commercial Single-Tenant Lease dated February 20, 1996. (6)
|----- | - | -------------------------------------------------------------------------------

|10.14 |  | Amendment
to Standard Industrial/Commercial Single-Tenant Lease dated February 20, 1996. (6)
|----- | - | --------------------------------------------------------------------------------------------

|10.15 |  | Distributor
Agreement dated August 1, 1996, between the Company and Microtek Inc. (7)
|----- | - | -------------------------------------------------------------------------------------

|10.16 |  | Employment
Agreement between the Company and Richard Beyer dated July 12, 2000.+
|----- | - | --------------------------------------------------------------------------------

|21.01 |  | Subsidiaries
of the Company.
|----- | - | ----------------------------

|23.01 |  | Consent
of Deloitte & Touche LLP, Independent Auditors (see page 56 of this Report).
|----- | - | ------------------------------------------------------------------------------------

|24.01 |  | Powers
of Attorney (see page 53 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 filed February 26, 1999
(File No. 333-73031)
|--- |  | --------------------------------------------------------------------------------------------------------------------------

|(4) |  | Incorporated
by reference to the Companys Registration Statement on Form S-8, filed February 25, 2000
(File No. 333-31126)
|--- |  | ---------------------------------------------------------------------------------------------------------------------------

|
|

|(5) |  | Incorporated
by reference to the Companys Registration Statement on Form S-3, filed August 23, 2000
(File No. 333-43864).
|--- |  | --------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

|(6) |  | Incorporated
by reference to the Companys Quarterly Report on Form 10-Q for the quarter ended June
30, 1996.
|--- |  | -------------------------------------------------------------------------------------------------------------

|(7) |  | Incorporated
by reference to the Companys Annual Report on Form 10-K for the quarter ended September
30, 1996.
|--- |  | ---------------------------------------------------------------------------------------------------------------

|(8) |  | Incorporated
by reference to the Companys Current Report on Form 8-K filed on June 5, 1998.
|--- |  | --------------------------------------------------------------------------------------------

|(9) |  | Incorporated
by reference to the Companys Current Report on Form 8-K filed on November 12, 1998.
|--- |  | -------------------------------------------------------------------------------------------------

|(10) |  | Incorporated
by reference to the Companys Current Report on Form 8-K filed on July 27, 2000.
|---- |  | ---------------------------------------------------------------------------------------------

| | + |  | Represents
a management contract or compensatory plan or arrangement.
| | - |  | ---------------------------------------------------------------------

| | (b) |  | Exhibits:
The Registrant hereby files as part of this Report the exhibits listed in Item 14(a)(2),
as set forth above.
| | --- |  | ----------------------------------------------------------------------------------------------------------------------

| | (c) |  | 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.
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

|Independent
Auditors Report


To the Board of Directors and
Stockholders ofElantec Semiconductor, Inc.Milpitas, California:


We have audited the
accompanying consolidated balance sheets of Elantec Semiconductor, Inc. and
subsidiaries as of September 30, 2000 and 1999, and the related consolidated
statements of operations, stockholders equity and comprehensive income
(loss), and cash flows for each of the three years in the period ended September
30, 2000. Our audits also included the consolidated financial statement schedule
listed in 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 auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.


In our opinion, such
consolidated financial statements present fairly, in all material respects, the
financial position of Elantec Semiconductor, Inc. and subsidiaries at
September 30, 2000 and 1999, and the results of their operations and their
cash flows for each of the three years in the period ended September 30, 2000,
in conformity with accounting principles generally accepted in the United States
of America. Also, in our opinion, the consolidated financial statement schedule
listed in Item 8(3), 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,
CaliforniaOctober 18, 2000
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Elantec Semiconductor, Inc. and Subsidiaries Consolidated Balance Sheets (in thousands, except share and per share amounts)
|---------------------------------------------------------------------------------------------------------------------------

|                                                                          | September 30,
|------------------------------------------------------------------------- | -------------
|
|Assets                                                                    |              
|Current assets:                                                           |              
|Cash and cash equivalents                                                 |              
|Short-term investments                                                    |              
|Accounts receivable, net of allowances of $3,121 in 2000                  |              
|and $1,384 in 1999                                                        |              
|Inventories                                                               |              
|Deferred income taxes                                                     |              
|Prepaid expenses and other current assets                                 |              
|                                                                         
|Total current assets                                                      |              
|Property and equipment:                                                   |              
|Machinery and equipment                                                   |              
|Furniture and fixtures                                                    |              
|Leasehold improvements                                                    |              
|                                                                         
|                                                                          |              
|Accumulated depreciation and amortization                                 |              
|                                                                         
|                                                                          |              
|Other assets, net                                                         |              
|Non-current deferred income taxes                                         |              
|                                                                         
|Total assets                                                              |              
|                                                                         
|Liabilities and stockholders equity                                      |              
|Current liabilities:                                                      |              
|Accounts payable                                                          |              
|Accrued salaries and benefits                                             |              
|Other accrued liabilities                                                 |              
|Deferred revenue                                                          |              
|Current portion of capital lease obligations                              |              
|                                                                         
|Total current liabilities                                                 |              
|Long-term capital lease obligations                                       |              
|Other long-term liabilities                                               |              
|Commitments and contingencies (Note 4)                                    |              
|Stockholders equity:                                                     |              
|Preferred stock, $.01 par value:                                          |              
|Authorized shares  5,000,000 in 2000 and 1999                            |              
|Issued and outstanding shares  none                                      |              
|Common stock, $.01 par value:                                             |              
|Authorized shares  50,000,000 in 2000 and 25,000,000 in 1999             |              
|Issued and outstanding shares  21,930,000 in 2000 and 18,770,000 in 1999 |              
|Additional paid-in capital                                                |              
|Deferred stock compensation                                               |              
|Retained earnings (accumulated deficit)                                   |              
|Accumulated other comprehensive loss                                      |              
|                                                                          |              
|                                                                         
|Total stockholders equity                                                |              
|                                                                         
|Total liabilities and stockholders equity                                |              
|                                                                         

|See accompanying notes
to consolidated financial statements.
|------------------------------------------------------------

|Elantec
Semiconductor, Inc.and
SubsidiariesConsolidated
Statements of Operations(in
thousands, except per share amounts)
|------------------------------------------------------------------------------------------------------------------------

|                                              | Year ended September 30,
|--------------------------------------------- | ------------------------
|
|Net revenues                                  |                         
|Cost of revenues                              |                         
|Cost of revenues - inventory write-down       |                         
|                                             
|Gross profit                                  |                         
|Operating expenses:                           |                         
|Research and development                      |                         
|Marketing, sales, general, and administrative |                         
|Unusual charges                               |                         
|                                             
|Total operating expenses                      |                         
|                                             
|Income (loss) from operations                 |                         
|Interest and other income, net                |                         
|Interest expense                              |                         
|                                             
|Income (loss) before taxes                    |                         
|Provision for (benefit from) taxes on income  |                         
|                                             
|Net income (loss)                             |                         
|                                             
|Earnings (loss) per share:                    |                         
|Basic                                         |                         
|Diluted                                       |                         
|Shares used in computing per share amounts:   |                         
|Basic                                         |                         
|Diluted                                       |                         

|See accompanying notes
to consolidated financial statements.
|------------------------------------------------------------

|Elantec Semiconductor, Inc. and Subsidiaries Consolidated Statements of StockholdersEquity andComprehensive Income (Loss) (in thousands)
|-----------------------------------------------------------------------------------------------------------------------------------------

|                                         | Common Shares | Stock    Amount | AdditionalPaid-in Capital | Deferred StockCompensation | RetainedEarnings(Accumulated)(Deficit) | AccumulatedOtherCompre-hensiveloss | TotalStock-holdersEquity | TotalCompre-hensiveIncome (Loss)
|---------------------------------------- | ------------- | --------------- | ------------------------- | -------------------------- | -------------------------------------- | ---------------------------------- | ------------------------- | --------------------------------
|Balance at September 30, 1997            |               | 18,038          |                           | $180                       |                                        | $33,545                            |                           |                                 
|Exercise of stock options                |               | 338             |                           | 4                          |                                        | 265                                |                           |                                 
|Net income and comprehensive income      |               |                |                           |                           |                                        |                                   |                           |                                 
|                                        
|Balance at September 30, 1998            |               | 18,376          |                           | 184                        |                                        | 33,810                             |                           |                                 
|Exercise of stock options                |               | 394             |                           | 4                          |                                        | 606                                |                           |                                 
|Tax benefit of stock option transactions |               |                |                           |                           |                                        | 551                                |                           |                                 
|Net loss                                 |               |                |                           |                           |                                        |                                   |                           |                                 
|Foreign currency translation adjustment  |               |                |                           |                           |                                        |                                   |                           |                                 
|                                        
|Total comprehensive loss                 |               |                 |                           |                            |                                        |                                    |                           |                                 
|                                         |              
|Balance at September 30, 1999            |               | 18,770          |                           | 188                        |                                        | 34,967                             |                           |                                
|Exercise of stock options                |               | 1,277           |                           | 13                         |                                        | 3,002                              |                           |                                
|Tax benefit of stock option transactions |               |                |                           |                           |                                        | 12,377                             |                           |                                
|Proceeds from secondary stock offering   |               | 1,760           |                           | 18                         |                                        | 135,033                            |                           |                                
|Employee stock purchase                  |               | 36              |                           |                           |                                        | 456                                |                           |                                
|Deferred stock compensation              |               | 87              |                           | 1                          |                                        | 5,016                              |                           | $(5,017                         
|Amortization of deferred stock           |              
|compensation                             |               |                |                           |                           |                                        |                                   |                           | 250                             
|Net Income                               |               |                |                           |                           |                                        |                                   |                           |                                
|Unrealized loss on available for sale    |              
|Investments, net of tax                  |               |                |                           |                           |                                        |                                   |                           |                                
|Foreign currency translation adjustment  |               |                |                           |                           |                                        |                                   |                           |                                
|                                         |              
|Total comprehensive income               |               |                 |                           |                            |                                        |                                    |                           |                                 
|                                        
|Balance at September 30, 2000            |               | 21,930          |                           | $220                       |                                        | $190,851                           |                           | $(4,767                         
|                                        

|See accompanying notes
to consolidated financial statements.
|------------------------------------------------------------

|Elantec Semiconductor, Inc. and Subsidiaries Consolidated Statements of Cash Flows (in thousands)
|-------------------------------------------------------------------------------------------------

|                                                           
|-----------------------------------------------------------
|
|
|Operating activities                                       
|Net income (loss)                                          
|Reconciliation of net income (loss) to net cash provided by
|operating activities:                                      
|Depreciation and amortization                              
|Amortization of deferred stock compensation                
|Deferred income taxes                                      
|Loss on disposition of property and equipment              
|Inventory write-down                                       
|Asset impairment                                           
|Changes in operating assets and liabilities:               
|Accounts receivable                                        
|Inventories                                                
|Prepaid expenses and other current assets                  
|Payables and other accrued liabilities                     
|Deferred revenue                                           
|Tax benefit of stock option transactions                   
|                                                           
|Net cash provided by operating activities                  
|Investing activities                                       
|Purchase of available for sale investments                 
|Sale and maturity of available for sale investments        
|Purchase of property and equipment                         
|Decrease (increase) in other assets                        
|                                                           
|Net cash used in investing activities                      
|Financing activities                                       
|Payments on capital lease obligations                      
|Payments on long-term debt                                 
|Decrease in other long-term liabilities                    
|Proceeds from issuance of common stock                     
|Proceeds from exercise of stock options and employee stock 
|purchase plan                                              
|                                                           
|Net cash (used in) provided by financing activities        
|                                                           
|Effect of exchange rate changes on cash                    
|                                                           
|Increase (decrease) in cash and cash equivalents           
|Cash and cash equivalents at beginning of period           
|                                                           
|Cash and cash equivalents at end of period                 
|                                                           
|Supplemental disclosures of cash flow information          
|Taxes paid                                                 
|                                                           
|Interest paid                                              
|                                                           
|Deferred stock compensation                                
|                                                           
|Lease and installment financing for capital equipment      
|                                                           

|See accompanying notes
to consolidated financial statements.
|------------------------------------------------------------

|ELANTEC
SEMICONDUCTOR, INC. AND SUBSIDIARIESNOTES 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. The Companys principal markets include North America, Asia, Europe and other
countries.


Fiscal
Year.The Companys fiscal year ends on the Sunday
closest to September 30. Fiscal years 2000, 1999, and 1998 ended on October 1,
October 3, and September 27, 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 2000 and
1998 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.


Basis of Presentation.All share amounts and per share calculations in the accompanying
consolidated financial statements give effect to the two-for-one stock split
effected on April 21, 2000.


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
cash equivalents.


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, 2000,
short-term investments consisted of corporate debt of $1,023,000, all maturing
within one year. At September 30, 1999, short-term investments consisted of
corporate debt of $1,204,000, all maturing within one year.


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, 2000 carrying value exceeded fair value, determined by quoted
market prices by $9,000. 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, cash equivalents and short term investments, trade
receivables and foreign exchange forward contracts.


The Companys policy
is to place its cash, cash equivalents 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.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|ELANTEC
SEMICONDUCTOR, INC. AND SUBSIDIARIESNOTES TO
CONSOLIDATED FINANCIAL STATEMENTS  (Continued)


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 accounts receivable. 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:
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                          | Year ended September 30,
|----------------------------------------- | ------------------------
|
|Microtek International, Inc. - Japan      |                         
|Samsung Electronics - Korea               |                         
|Insight Electronics, Inc. - United States |                         

|* |  | less
than 10%
|- |  | -------------

|Microtek International, located in
Japan, and Insight Electronics, Inc., located in North America, are distributors who are
supporting our sales to a large number of customers.


At September 30, 2000,
Microtek International and Samsung Electronics accounted for 32% and 13%,
respectively, of the Companys trade receivables. At September 30, 1999,
Microtek International and Insight Electronics accounted for 44% and 11%,
respectively, of the Companys trade receivables.


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


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
Translation.The functional currencies of our foreign subsidiaries are their
respective local currencies. Accordingly, gains and losses from the translation
of the financial statements of the foreign subsidiaries are reported as a
separate component of accumulated other comprehensive income. Foreign currency
transaction gains and losses are included in net earnings.


Income Taxes.The
Company accounts for income taxes using the asset and liability method. Deferred
tax assets and liabilities are recognized for the future tax consequences of
temporary differences between the financial statement carrying amounts and the
tax basis of assets and liabilities. A valuation allowance is established to
reduce the deferred tax asset if it is more likely than not that the
related tax benefits will not be realized in the future.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|ELANTEC
SEMICONDUCTOR, INC. AND SUBSIDIARIESNOTES TO
CONSOLIDATED FINANCIAL STATEMENTS  (Continued)


Advertising
Expense.The Company expenses the costs of advertising as
incurred. Advertising expense was approximately $600,000, $671,000, and $555,000
for the fiscal years ended September 30, 2000, 1999, and 1998,
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 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.


Reclassifications. Certain prior
year amounts have been reclassified to conform to current year presentation. Such
reclassifications had no impact on net income (loss) or stockholders equity.



2. Recent
Accounting Pronouncements


Derivative Investments
and Hedging Activities. Statement of Financial Accounting Standards (SFAS)
133, Accounting for Derivative Instruments and Hedging Activities, as amended is
effective for the Company as of October 1, 2000. SFAS 133 requires that an
entity recognize all derivatives as either assets or liabilities measured at
fair value. The accounting for changes in the fair value of a derivative depends
on the use of the derivative. Management does not believe that adoption of this
new accounting standard will have a material effect on our consolidated results
of operations or cash flows. The adoption will impact assets and liabilities
recorded on the balance sheet.


Revenue Recognition.
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin (SAB) No. 101, Revenue Recognition, which provides guidance
on the recognition, presentation and disclosure of revenue in financial
statements filed with the SEC. SAB No. 101 outlines the basic criteria that must
be met in order to recognize revenue and provides guidance for disclosures
related to revenue recognition policies. We are required to adopt SAB No. 101,
as amended, in the fourth quarter of fiscal 2001. Although we have not fully
assessed the implications of SAB No. 101, our management does not believe that
adoption of this bulletin will have a material impact on our consolidated
financial position, results of operations or cash flows.



3. Inventories


Inventories consisted of
the following (in thousands):
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                | September 30,
|--------------- | -------------
|
|Raw materials   |              
|Work-in-process |              
|Finished goods  |              
|               
|                |              
|               

|ELANTEC
SEMICONDUCTOR, INC. AND SUBSIDIARIESNOTES TO
CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



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 $6,795,000 and $7,058,000 of equipment acquired under capital
leases and approximately $5,410,000 and $4,857,000 of related accumulated
amortization at September 30, 2000 and 1999, 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):
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                            | CapitalLeases | OperatingLeases
|------------------------------------------- | ------------- | ---------------
|2001                                        |               | $ 1,692        
|2002                                        |               | 1,073          
|2003                                        |               | 427            
|2004                                        |               |               
|2005                                        |               |               
|Thereafter                                  |               |               
|                                           
|Total minimum lease payments                |               | 3,192          
|Amount representing interest                |               | (265           
|                                           
|Present value of net minimum lease payments |               | 2,927          
|                                           
|Current portion                             |               | (1,355         
|                                           
|Long-term capital lease obligations         |               | $ 1,572        
|                                           

|Total rental expense on all
operating leases was approximately $1,028,000, $1,177,000, and $812,000 for the
fiscal years ended September 30, 2000, 1999 and 1998, respectively. At September
30 2000, outstanding commitments to purchase capital equipment totaled
approximately $5.3 million.


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


Stock Split. On
April 21, 2000, the Company effected a two-for-one stock split of the
outstanding shares of common stock. All share and per share amounts in these
consolidated financial statements have been adjusted to give effect to the stock
split.


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 the Company stock held as of September 21,
1998. In addition subsequent to September 21, 1998, one right will be issued
with each newly issued and outstanding share of our common stock issued, except
in certain circumstances. Each preferred share purchase right entitles the
registered holder to purchase one four-hundredth of the Companys Series A
Junior Participating Preferred Stock, par value $0.01 per share, at a price of
$12.50. 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 rights may be exchanged at an
exchange ratio of one common share or one four-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
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|ELANTEC
SEMICONDUCTOR, INC. AND SUBSIDIARIES NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS  (Continued)


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 450,000 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, 2000, 35,862 shares have been issued under the Purchase Plan.


Restricted Stock Awards.The compensation committee may grant participants restricted stock awards to
purchase stock either in addition to, or in tandem with, other awards under the
1995 Equity Incentive Plan, under such terms, conditions and restrictions as the
compensation committee may determine. A Restricted Stock Purchase Award for
86,500 shares of common stock was issued to Richard Beyer in July 2000. The
Company has a right of repurchase on these shares that expires ratably over a
five-year period. In accordance with APB No. 25, the Company recorded $5,017,000
as deferred compensation in the year ended September 30, 2000. This amount is
being amortized on a straight-line basis over 5 years. During the year ended
September 30, 2000 the related amortization expense amounted to $250,000.


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 Equity Incentive Plan (the
Predecessor Plan), pursuant to which 1,100,000 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 Plan (the 1995 Directors Plan) pursuant to which 300,000
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
800,000 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 800,000 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
2,000,000 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 200,000 shares of the
Companys Common Stock have been reserved for future issuance. In November
1999, the Board of Directors approved and in January 2000, the stockholders
approved the adoption of an amendment to the 1995 Equity Plan pursuant to which
an additional 940,000 shares of the Companys Common Stock have been
reserved for future issuance. Also, in July 2000, the Board of Directors
approved the adoption of an amendment to the 1995 Equity Plan pursuant to which
an additional 613,500 shares of the Companys common stock have 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 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 outstanding stock options for new stock
options having an exercise price of $1.81 per share (equal to the fair market
value on August 28, 1998), with vesting annually during the subsequent four
years. Approximately 907,800 options were repriced by employees (excluding
executive officers) and consultants.


Additional information with
respect to the Companys stock option plans follows:
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                              |  | Options Outstanding
|----------------------------- |  | -------------------
|
|Balance at September 30, 1997 |  | 711,310            
|Additional share reservation  |  | 800,000            
|Options granted               |  | (2,391,712         
|Options exercised             |  |                   
|Options canceled              |  | 1,310,988          
|Options expired               |  | (750               
|                             
|Balance at September 30, 1998 |  | 429,836            
|Additional share reservation  |  | 2,200,000          
|                             
|Options granted               |  | (1,931,000         
|Options exercised             |  |                   
|Options canceled              |  | 361,836            
|Options expired               |  | (504               
|                             
|Balance at September 30, 1999 |  | 1,060,168          
|Additional share reservation  |  | 1,553,500          
|                             
|Options granted               |  | (2,333,044         
|Options exercised             |  |                   
|Options canceled              |  | 139,553            
|                             
|Balance at September 30, 2000 |  | 420,177            
|                             

|ELANTEC
SEMICONDUCTOR, INC. AND SUBSIDIARIESNOTES TO
CONSOLIDATED FINANCIAL STATEMENTS  (Continued)


The following table
summarizes information about stock options outstanding at September 30, 2000:
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Options Outstanding | Options Exercisable
|------------------- | -------------------
|
|$ 0.10$ 2.13       |                    
|$ 2.19$ 3.44       |                    
|$ 3.50$13.75       |                    
|$15.97$58.00       |                    
|$61.31$91.25       |                    
|                   
|$0.10$91.25        |                    
|                   

|At September 30, 1999 and
1998, 1,861,828 and 1,167,004 options were exercisable at weighted average
exercise prices of $2.24 and $1.81, 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:
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                        | Year ended September 30,
|----------------------- | ------------------------
|
|Expected life (years)   |                         
|Expected volatility     |                         
|Risk-free interest rate |                         

|ELANTEC
SEMICONDUCTOR, INC. AND SUBSIDIARIESNOTES TO
CONSOLIDATED FINANCIAL STATEMENTS  (Continued)


The weighted-average fair
value of stock options granted during 2000, 1999 and 1998 was $34.31, $3.48 and
$2.93, 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):
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                     | Year ended September 30,
|------------------------------------ | ------------------------
|
|Net income (loss):                   |                         
|Historical                           |                         
|Pro Forma                            |                         
|Diluted Net income (loss) per share: |                         
|Historical                           |                         
|Pro Forma                            |                         

|6. Earnings
(Loss) Per Share


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:
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                | Year ended September 30,
|--------------------------------------------------------------- | ------------------------
|
|Net income (loss) (Numerator):                                  |                         
|Net income (loss) basic and diluted                             |                         
|                                                               
|Shares (Denominator):                                           |                         
|Weighted average shares of common stock outstanding             |                         
|used in computation of basic earnings (loss) per share          |                         
|Dilutive effect of stock options                                |                         
|                                                               
|Shares used in computation of diluted earnings (loss) per share |                         
|                                                               
|Basic earnings (loss) per share                                 |                         
|                                                               
|Diluted earnings (loss) per share                               |                         
|                                                               

|ELANTEC
SEMICONDUCTOR, INC. AND SUBSIDIARIESNOTES TO
CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



7. Taxes on
Income


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

|                          | Year ended September 30,
|------------------------- | ------------------------
|
|Current:                  |                         
|Federal                   |                         
|State                     |                         
|Foreign                   |                         
|                         
|Total Current             |                         
|Deferred:                 |                         
|Federal                   |                         
|State                     |                         
|                         
|Total Deferred            |                         
|                         
|Total Provision (Benefit) |                         
|                         

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

|                                          | September 30,
|----------------------------------------- | -------------
|
|Net deferred tax asset                    |              
|Restructuring reserves                    |              
|Tax credit carryforwards                  |              
|Distributor reserves                      |              
|Deferred revenue                          |              
|Depreciation                              |              
|Capitalized research and development cost |              
|Inventory reserves                        |              
|General reserves                          |              
|Other accruals and reserves not currently |              
|deductible                                |              
|                                         
|Total net deferred tax assets             |              
|                                         

|ELANTEC
SEMICONDUCTOR, INC. AND SUBSIDIARIESNOTES TO
CONSOLIDATED FINANCIAL STATEMENTS  (Continued)


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):
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                           | Year ended September 30,
|------------------------------------------ | ------------------------
|
|Expected provisions at statutory rates     |                         
|State taxes, net of federal benefit        |                         
|Foreign taxes                              |                         
|General business credits                   |                         
|Benefit of Foreign Sales Corporation       |                         
|Provision for foreign losses not benefited |                         
|Other                                      |                         
|Reversal of valuation allowance            |                         
|                                          
|                                           |                         
|                                          

|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.
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.



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
22.5% 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, 2000, 1999, and 1998 were approximately $305,000,
$241,000, and $133,000 respectively.



9. Fair Value
of Financial Instruments


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


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, 2000 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 $8.7 million and $116,000, respectively.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|ELANTEC
SEMICONDUCTOR, INC. AND SUBSIDIARIESNOTES TO
CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



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 FAS 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:
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                            | Year ended September 30,
|--------------------------- | ------------------------
|
|Domestic                    |                         
|Export:                     |                         
|Europe                      |                         
|Japan                       |                         
|Other Pacific Rim Countries |                         
|                           
|                            |                         
|                           

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



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
|---------------------- | -----------------------------
|
|Machinery & equipment  |                              
|Furniture & Fixtures   |                              
|Leasehold Improvements |                              
|                      
|Total                  |                              
|                      

|ELANTEC
SEMICONDUCTOR, INC. AND SUBSIDIARIESNOTES TO
CONSOLIDATED FINANCIAL STATEMENTS  (Continued)


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.


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. At September
30, 2000, there were no remaining cash payments related to these activities.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Elantec Semiconductor, Inc.and Subsidiaries


Unaudited Interim
Financial Information
|-------------------------------------------------------------------------------------

|2000                                        | 1st | 2nd        | 3rd | 4th      
|------------------------------------------- | --- | ---------- | --- | ---------
|
|
|Revenue                                     |     | $ 15,712   |     | $20,020  
|Gross profit                                |     | 9,571      |     | 12,326   
|Income from operations                      |     | 4,109      |     | 5,231    
|Net income                                  |     | 2,760      |     | 3,353    
|Earnings  per share:                        |    
|Basic                                       |     | $     0.15 |     | $    0.18
|Diluted                                     |     | $     0.13 |     | $    0.14
|Shares used in computing per share amounts: |    
|Basic                                       |     | 18,864     |     | 19,144   
|Diluted                                     |     | 22,362     |     | 23,386   
|
|
|
|
|Revenue                                     |     | $ 10,653   |     | $12,721  
|Gross profit                                |     | 3,244      |     | 5,726    
|Income (loss) from operations (1)           |     | (12,905    | )   | 1,446    
|Net income (loss) (1)                       |     | (8,024     | )   | 926      
|Earnings  per share:                        |    
|Basic                                       |     | $  (0.44   | )   | $    0.05
|Diluted                                     |     | $  (0.44   | )   | $    0.05
|Shares used in computing per share amounts: |    
|Basic                                       |     | 18,394     |     | 18,424   
|Diluted                                     |     | 18,394     |     | 19,210   

|
|

|1. |  | Financial data for the first quarter of fiscal 1999 include unusual pre-tax
charges of $13.0 million resulting from our conclusion that projected production
volume and related cash flow from our internal fabrication facility were not
sufficient to recover its carrying value.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Schedule II




Elantec Semiconductor,
Inc.and Subsidiaries



Valuation and
Qualifying Accounts



Year ended September
30, 2000, 1999, and 1998
|-------------------------------------------------------------------------------------------------------------------------------------------------

|                                                     | Balance atBeginning ofYear | AdditionsCharged toCost andExpense | Deductions | Balance atEnd of Year
|---------------------------------------------------- | -------------------------- | ---------------------------------- | ---------- | ---------------------
|Year ended September 30, 2000                        |                            |                                    |            |                      
|Allowance for doubtful accounts and product returns  |                           
|(deducted from accounts receivable)                  |                            | $1,384                             |            | $1,790               
|                                                    
|Year ended September 30, 1999                        |                           
|Allowance for do ubtful accounts and product returns |                           
|(deducted from accounts receivable)                  |                            | $1,076                             |            | $   475              
|                                                    
|Year ended September 30, 1998                        |                           
|Allowance for doubtful accounts and product returns  |                           
|(deducted from accounts receivable)                  |                            | $   840                            |            | $   242              
|                                                    

|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 27th day of November, 2000.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | ELANTEC SEMICONDUCTOR, INC.By: /s/ Richard M. BeyerRichard M. BeyerPresident, Chief Executive Officer,and Director
| |  | ------------------------------------------------------------------------------------------------------------------

|KNOW
ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Richard M. Beyer 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.


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.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                             | Name                                         | Title                                                                   | Date             
|---------------------------- | -------------------------------------------- | ----------------------------------------------------------------------- | -----------------
|Principal Executive Officer:
|/s/                          | Richard M. Beyer
 Richard M. Beyer | President, Chief Executive Officer and Director                         | November 27, 2000
|                            
|Principal Financial Officer:
|                            
|/s/                          | Ephraim Kwok
  Ephraim Kwok        | Vice President of Finance and Administration and ChiefFinancial Officer | November 27, 2000
|                            
|Additional Directors:       
|                            
|/s/                          | James V. Diller
  James V. Diller  | Chairman of the Board of Directors                                      | November 27, 2000
|                            
|/s/                          | Chuck K. Chan
  Chuck K. Chan      | Director                                                                | November 27, 2000
|                            
|/s/                          | Alan V. King
  Alan V. King        | Director                                                                | November 27, 2000
|                            
|/s/                          | Umesh Padval
  Umesh Padval        | Director                                                                | November 27, 2000

---

|SECURITIES AND
EXCHANGE COMMISSION




Washington, D.C. 20549




EXHIBITS


to


Form 10-K




Under


THE SECURITIES
EXCHANGE ACT OF 1934




ELANTEC SEMICONDUCTOR,
INC.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

|INDEX TO EXHIBITS
|-----------------

|ExhibitNumber |  | Description
|------------- |  | -----------
|             

|10.16 |  | Employment
Agreement between the Company and Richard M. Beyer
|----- |  | -------------------------------------------------------------

|21.01 |  | Subsidiaries
of the Company
|----- |  | ---------------------------

|23.01 |  | Consent
of Deloitte & Touche LLP, Independent Auditors
|----- |  | ------------------------------------------------------

|27.01 |  | Financial
Data Schedule
|----- |  | -----------------------