<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

[X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934 [NO FEE REQUIRED, EFFECTIVE OCTOBER 7, 1996]

                    FOR THE FISCAL YEAR ENDED MARCH 31, 1997

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______________ TO
     ______________ [NO FEE REQUIRED]
  
                         Commission file number: 0-27016

                              ROSS TECHNOLOGY, INC.
             (Exact name of registrant as specified in its charter)

         DELAWARE                                        74-2507960
(State or other jurisdiction of                       (I.R.S. Employer
incorporation or organization)                        Identification No.)


                        5316 HIGHWAY 290 WEST, SUITE 500
                            AUSTIN, TEXAS 78735-8930
          (Address of principal executive offices, including zip code)

                                 (512) 436-2000
              (Registrant's telephone number, including area code)

           SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

                                      None

           SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

                          Common Stock, $.001 par value

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. [X] Yes [ ] No


<PAGE>   2
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

The aggregate market value of the voting stock held by non-affiliates of the
Registrant, as of June 16, 1997, was approximately $20,200,000 based upon the
last sale price reported for such date on the NASDAQ National Market System. For
purposes of this disclosure, shares of Common Stock held by persons who hold
more than 5% of the outstanding shares of Common Stock and shares held by
executive officers and directors of the Registrant have been excluded because
such persons may be deemed to be affiliates. This determination is not
necessarily conclusive.

The number of shares of the Registrant's Common Stock outstanding as of June 16,
1997, was 23,534,123.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for Registrant's 1997 Annual Meeting of
Stockholders (to be filed within 120 days following the end of the fiscal year)
are incorporated herein by reference in Part III.

Portions of the following documents are incorporated herein by reference in
Parts I, II and IV: Registrant's Registration Statement on Form S-1
(Registration No. 33-95878) effective as of November 6, 1995 and Registrant's
Final Prospectus dated November 6, 1995.


<PAGE>   3
                              ROSS TECHNOLOGY, INC.

                           ANNUAL REPORT ON FORM 10-K

                        FISCAL YEAR ENDED MARCH 31, 1997


<TABLE>
<CAPTION>
Caption                                                                  Page
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<S>                                                                      <C>
PART I

Item 1.      Business.................................................    2

Item 2.      Properties..............................................    15

Item 3.      Legal Proceedings.......................................    16

Item 4.      Submission of Matters to a Vote of Security Holders.....    17

PART II

Item 5.      Market for the Registrant's Common Stock and
             Related Stockholder Matters..............................   18

Item 6.      Selected Consolidated Financial Data....................    19

Item 7.      Management's Discussion and Analysis of Financial
             Condition and Results of Operations......................   20

Item 8.      Financial Statements and Supplementary Data...............  29

Item 9.      Changes in and Disagreements with Accountants on
             Accounting and Financial Disclosure.......................  30

PART III

Item 10.     Directors and Executive Officers of the Registrant........  31

Item 11.     Executive Compensation....................................  31

Item 12.     Security Ownership of Certain Beneficial Owners and
             Management................................................  31

Item 13.     Certain Relationships and Related Transactions............  31

PART IV

Item 14.     Exhibits, Financial Statement Schedules, and
             Reports on Form 8-K.......................................  32
</TABLE>


                                      -i-
<PAGE>   4

CAUTIONARY STATEMENT

     This Annual Report contains forward looking statements, within the meaning
of the Private Securities Litigation Reform Act of 1995, with respect to the
financial condition, results of operations and business of ROSS Technology, Inc.
and its subsidiary (collectively, unless the context otherwise requires, "ROSS",
the "Company", or the "Registrant"). Such statements are subject to certain
risks and uncertainties that could cause actual results to differ materially and
adversely from those set forth in the forward-looking statements, including
without limitation the availability of financial resources adequate to the
Company's short-, medium- and long-term needs, the Company's dependence on the
timely development, pre-production qualification, manufacture, introduction and
customer acceptance of new higher speed, higher-margin products, the ability of
the Company to successfully implement its strategy of diversifying into the
system products business, the various effects on revenue, margins, inventories
and operation expenses of repositioning the Company's product lines and overall
business, the effects of building and maintaining product inventories in the
Company's hands and in its distribution channels, product return and credit
risks with distributors, resellers and other customers, the Company's dependence
on distributors and resellers for certain product sales to end-users, the impact
on revenue, margins and inventories of rapidly changing technology, competition,
downward pricing pressures and allocations of product among different
distribution channels, the effects of routine price degradation over time in
each of the Company's product lines, varying customer demand for the Company's
products, supply and manufacturing constraints and costs, the Company's
dependence on outside suppliers for wafer fabrication and raw materials,
components and certain manufacturing services, changes in plans, programs or
expenses for research, development, sales or marketing, the Company's ability to
build and maintain adequate staff infrastructures in the areas of microprocessor
design, product engineering and development, sales and marketing, finance,
accounting and administration, supplier disputes, customer warranty claims,
general economic conditions, and the other risks and uncertainties described
from time to time in the Company's public announcements and SEC filings,
including without limitation the Form S-1 and Final Prospectus filed in November
1995 and the Company's Current, Quarterly, and Annual Reports on Forms 8-K,
10-Q, and 10-K, respectively. The Company cautions that the foregoing list of
important factors is not exclusive. The Company does not undertake to update any
written or oral forward-looking statement that may be made from time to time by
or on behalf of the Company.



                                       1

<PAGE>   5

                                     PART I


ITEM 1.     BUSINESS

GENERAL

      The Company designs, manufactures and markets high-performance
microprocessors and associated semiconductor products and system boards,
workstations and servers based upon the SPARC(TM) architecture, a reduced
instruction set computing ("RISC") architecture that was originally developed by
Sun Microsystems, Inc. ("Sun Microsystems" or "Sun"). The SPARC architecture
maintains the largest installed base, and continues to have the largest market
share of new systems sales, of all RISC workstations and servers. The Company
targets its semiconductor and system board products to manufacturers of SPARC
computer systems, including Sun, Fujitsu Limited ("Fujitsu") and other original
equipment manufacturers ("OEMs"), and as upgrades to end-users of SPARC
workstations. Its workstation and server sales are targeted to distributors and
value added resellers ("VARs") which then sell these products to end-users.

      ROSS was originally incorporated in Texas in August 1988 and was acquired
by Cypress Semiconductor Corporation ("Cypress Semiconductor" or "Cypress") in
February 1990, at which time the Company became a Delaware-incorporated
subsidiary of Cypress. The Company was a subsidiary of Cypress until July 1993,
at which time the Company was acquired by, and became a wholly-owned subsidiary
of, Fujitsu. The Company consummated the initial public offering of its common
stock (the "Common Stock") in November 1995, at which time it also sold a
minority interest to Sun. As of June 16, 1997, Fujitsu and Sun owned
approximately 59.8% and 4.5%, respectively, of the outstanding Common Stock. As
used in this Annual Report, unless the context requires otherwise, all
references to "ROSS", the "Company", or the "Registrant" refer to ROSS
Technology, Inc., a Delaware corporation and its predecessor Texas corporation
and consolidated subsidiaries.

      "ROSS" is a registered trademark of the Company in the United States, and
the marks "hyperCACHE" and "hyperSTATION" are trademarks for which the Company
has applied for registration. The names "hyperSPARC" and "SPARCplug" are
trademarks licensed for use exclusively by the Company from SPARC International,
Inc. All SPARC trademarks are trademarks or registered trademarks of SPARC
International, Inc. All other product or service names mentioned herein are
trademarks of their respective owners. Products bearing the SPARC trademarks are
based on an architecture developed by Sun Microsystems.

PRODUCTS

      The Company's principal semiconductor product line is the hyperSPARC(TM)
family of microprocessors. Microprocessors, integrated circuits that contain
millions of transistors, serve as the central processing unit ("CPU") of
computer systems such as workstations and personal computers ("PCs").
Microprocessors are responsible for controlling data flow through the
workstation or PC, manipulating such data as specified by software running on
the system, and coordinating all hardware functions within the system.



                                       2
<PAGE>   6

      Since its inception, the Company has developed four generations of
advanced RISC (Reduced Instruction Set) microprocessor products. The first of
these products was the Company's 40 megahertz ("MHz") microprocessor, which was
selected for use by Sun in its SPARCstation(TM) 2, introduced in 1990. Among the
Company's design wins have been the inclusion of its 100 MHz hyperSPARC
microprocessor in Sun's SPARCstation 20 Model HS11 in late 1994, its 125 MHz
hyperSPARC microprocessor in Sun's SPARCstation 20 Model HS21 in early 1995, and
its 150 MHz hyperSPARC microprocessor in Sun's SPARCstation 20 Models 151 and
152MP in October 1995. Other OEMs have selected the Company's advanced RISC
microprocessors for use in their products. Fujitsu, the Company's second largest
customer, and its majority stockholder, introduced systems based on three new
derivatives of the Company's 'Colorado 3' hyperSPARC microprocessor in 1996. The
DS90 7500 and 7700 server systems from Fujitsu, and the S4-20H workstations from
Fujitsu and PFU Limited, incorporate the Company's single and dual 150 MHz
microprocessors with 512 kilobytes of second-level cache as well as 142 MHz
microprocessors with a full megabyte of cache.

      The Company's hyperSPARC products feature high-performance integer,
floating-point and memory-management capabilities for multi-tasking operating
environments. The hyperSPARC architecture is well-suited for applications that
are floating-point intensive, such as many scientific, computer-aided design
("CAD"), computer-aided engineering ("CAE") and seismic modeling applications.
All hyperSPARC products conform to the SPARC Version 8 Architecture
specification and offer complete compatibility (including multiprocessing) with
both the SunOS(TM) (Version 4.1.x) and Solaris(TM) operating systems.

      The Company sells its hyperSPARC products as single- or dual-processor
MBus(TM) modules (plug-in "daughtercards" containing one or two multi-die
packages and other components on a small printed circuit board) and, to a lesser
extent, as single-processor multi-die packages (single integrated circuit
packages containing multiple bare semiconductor die connected by an advanced
substrate).

Multi-Die Packages

      The Company's hyperSPARC multi-die packages ("MDPs") integrate multiple,
discrete die into a single pin-grid-array ("PGA") package. Interconnection among
the die is accomplished through a silicon or other electronic substrate, so that
the entire chipset operates as a single integrated circuit ("IC"). The
hyperSPARC MDPs integrate four to ten die, including a single complete CPU
chipset and a tightly-coupled second level cache, into a single package. The
hyperSPARC second-level caches are offered in 256 kilobyte, 512 kilobyte, and
one megabyte configurations. All hyperSPARC MDPs are fully multiprocessing
capable. MDPs are purchased by OEMs on a stand-alone basis for incorporation
into space- and power-sensitive applications such as small footprint
workstations, I/O subsystems, and process control systems.



                                       3
<PAGE>   7

MBus Modules

      MDPs are typically sold as part of an integrated solution: the MBus CPU
module. ROSS introduced the industry's first MBus module in 1990 to facilitate
the open architectural, or "plug-and-play," advantages of the SPARC
architecture. The Company's MBus modules mount one or two hyperSPARC MDPs onto a
CPU daughtercard that plugs into one of the MBus "sockets" of the system
motherboard via a SPARC-standard MBus connector.

      The Company sells its MBus modules into both the OEM and upgrade markets.
The MBus module approach allows the Company's OEM customers to be flexible in
the machine configurations they offer to their end-user customers. The same
motherboard design, which typically contains two MBus sockets, can accommodate
one, two or four processors at a variety of speed/cache combinations to achieve
the targeted price/performance point. The installed base of MBus-based machines
also provides the foundation for the Company's upgrade business, in which
end-users of SPARCstation 10 and 20 class workstations and SPARCserver(TM) 600
class servers can preserve and enhance their system investment by adding to or
replacing the MBus modules in their existing machines with the Company's higher
performance hyperSPARC MBus modules.

      The Company's MBus support ASICs provide a high speed interface between
the CPU/cache, memory and I/O subsystems. Currently, the ASICs are capable of 50
MHz operation, and offer performance enhancements, such as support for larger
memory subsystems. The ASICs are sold as stand-alone components, as well as part
of an integrated motherboard.

      The Colorado 4 hyperSPARC is based on .35 micron four-layer metal pure
CMOS process technology and operates at 180 and 200 MHz. In addition to the
improvement in clock frequency over the 150 MHz Colorado 3, the Colorado 4
integrates a 16 kilobyte data cache onto the processor chip and increases the
instruction cache from 8 to 16 kilobytes. In June 1997 the Company announced 200
MHz quad upgrades, providing multiprocessing upgrades for users of Sun's
SPARCstation 20 systems.

       SPARCplug(TM) is a SPARCstation 20-compatible workstation/server that
fits into the dual-height drive bay of a standard tower PC. Sharing system
resources with the PC, such as the power supply, monitor, keyboard, and mouse,
SPARCplug enables a single machine to combine a complete SPARC/Solaris system
with a standard PC environment, providing full "cut-and-paste" Windows(TM)
interoperability. In June 1997 the Company announced a SPARCplug Station, which
fits into a "four-high" drive bay tower, and may be used in both workstation and
server configurations.

      ROSS also offers system-level SPARC solutions including complete
workstations as well as motherboard upgrades with a range of speed and
performance solutions. The Company's near-term strategy is to leverage the
Company's core technologies to offer value-added system solutions to the 32-bit
SPARC market. Its products integrate hyperSPARC modules with the Company's MBus
support ASICs.


                                       4
<PAGE>   8
      System level products include the hyperSTATION family of 32-bit systems,
which is based on the SPARC architecture and MBus technology and supports up to
two hyperSPARC modules. Each module can have up to two processors. The
workstations are compatible with the SunOS 4.x and Solaris operating systems. In
June 1997 the Company announced the hyperSTATION 30 system, configured with quad
- 200 MHz processors, providing multiprocessing and compatibility with SunOS and
Solaris operating systems.

Dependence on SPARC Architecture

      At present, substantially all of the Company's products, as well as most
of the Company's products currently under development, are based on the SPARC
architecture. The continued acceptance of the SPARC architecture by Sun, Fujitsu
and other major computer system manufacturers, as well as by the end users of
these systems, the adoption of SPARC by new OEMs in desktop and non-desktop
markets, the success of the Company and the Company's OEM customers in selling
SPARC-based products to end users, the growth in sales of products incorporating
the SPARC architecture, and the continuing willingness of computer software
vendors to develop and enhance applications compatible with SPARC-based systems
are all critical to the Company's future success.

      In 1995 Sun introduced a new line of workstations based upon a new 64-bit
bus architecture and SME's UltraSPARC(TM) microprocessor designs. These products
are incompatible with the MBus architecture on which all of the Company's
current products are based. Although the Company believes that market
opportunities for new MBus-related products will continue for at least the next
several years, Sun has announced its intention to adopt the 64-bit
architecture over time for its entire product line, and accordingly there can be
no assurance that Sun will continue to develop or market MBus-compatible
products in the future. Sun's decision to focus future product development
efforts on 64-bit systems combined with significant market acceptance of such
systems could significantly limit the total available market for the Company's
MBus-based products over a period of years. Should other SPARC OEMs likewise
make a decision to shift development efforts to the new bus, the Company's total
available market would be further reduced unless it can develop new products
that are compatible with the 64-bit architecture and receive market acceptance.
The Company has begun research and development associated with a 64-bit
architecture.

CUSTOMERS

      The Company sells its semiconductor and board products to manufacturers of
SPARC computer systems, including Sun Microsystems, Fujitsu and other OEMs, and
to distributors, VARS, and end-users desiring to upgrade the power and
performance of their existing SPARC workstations and servers.



                                       5
<PAGE>   9
OEM Customers

      The Company's semiconductor OEM customers include a number of companies in
several market segments that use the Company's SPARC products in a variety of
end products. The largest of these OEM market segments, processors for
workstations and servers, historically has accounted for a major portion of the
Company's OEM revenues. Other OEM market segments for the Company's products
include high-performance network file servers, massively parallel systems,
telecommunications, data communications and embedded systems.

      Historically, the Company's sales have been concentrated among a limited
number of large customers. Although sales to Sun increased in dollar terms in
fiscal 1997, Sun's percentage share of the Company's total net sales is
significantly below its 1992 peak. Sun accounted for 28%, 45% and 26%,
respectively, of the Company's net sales in the fiscal years ended March 31,
1997, ("fiscal 1997"), April 1, 1996 ("fiscal 1996") and April 3, 1995 ("fiscal
1995"), followed by Fujitsu, which accounted for 22% of net sales in fiscal 1997
and 19% of net sales during each of fiscal 1996 and 1995.

      The Company expects a significant portion of its future sales to remain
concentrated within a limited number of customers. There can be no assurance
that the Company will be able to retain its major customers or that such
customers will not otherwise cancel or reschedule orders, or in the event of
canceled orders, that such orders will be replaced by other sales. In addition,
sales to any particular customer may fluctuate significantly from quarter to
quarter. The occurrence of any such events could have a material adverse effect
on the Company's business and operating results.

      It is the Company's intention to grow its business at the systems board,
embedded system, and box level to supplement its existing system integrator and
OEM businesses. Over the next several quarters, the Company intends to position
itself to move in this direction to grow the Company. The Company recognizes the
need to expand and diversify its business beyond its existing customer base.

Upgrade Customers

      The Company's upgrade customer base is composed of the end-users of
SPARCstation 5, 10 and 20 class workstations and SPARCserver 600 class servers
who wish to upgrade the performance of their existing machines. This customer
base spans a wide range of applications and industries that reflect the variety
of SPARC workstation and server users. By replacing the CPU daughtercard of
their machines with one or two of the Company's hyperSPARC upgrade modules,
SPARCstation 10 and 20 and SPARCserver 600 users can experience a significant
increase in the performance of their workstations (as measured by certain
standard benchmarks). SPARCstation 5 customers can upgrade their performance by
installing replacement hyperSTATION motherboards which are in turn further
upgradable with hyperSPARC upgrade modules.



                                       6
<PAGE>   10
SALES, MARKETING AND SUPPORT

Sales and Marketing

      The Company employs various channels of sales and distribution for its
hyperSPARC product family. OEM and upgrade sales are conducted through a direct
sales force and through manufacturer representatives. Upgrade sales are
conducted through a domestic and international network of VARs and distributors.
As of March 31, 1997, the Company's internal sales force consisted of nine
individuals who shared responsibility for direct sales and the support of
manufacturer representatives and VARS.

      The Company's strategy for upgrade sales has been to focus its resources
on the training and support of distributors and VARs, which the Company believes
is a cost-effective alternative to establishing a large, internal, direct sales
force.

      As is common in the semiconductor industry, the Company may grant price
protection to distributors. Under this policy, distributors receive a credit for
the difference, at the time of a price reduction, between the price they were
originally charged for products in inventory and the reduced price which the
Company subsequently charges distributors. From time to time, distributors also
receive credit on an individual basis for Company-approved price reductions on
specific transactions. The Company also grants some distributors limited rights
to return products. The Company defers recognition of net sales and profit on
sales to distributors that have rights of return and price protection until
those distributors have resold the products to end-customers.

      The Company's marketing communications activities include communications
through articles and press releases in trade magazines and journals, advertising
in technical computer publications and the business press, periodic direct
mailings and fax campaigns to customers and prospects, and attendance at trade
shows. The Company also publishes hyperACTIVITY(TM), a periodic newsletter which
is mailed to customers, prospective customers and others.

Warranties

      The Company offers a warranty on its products consistent with standard
industry practice. Under the terms of this warranty, the Company is obligated to
replace or refund the purchase price of any unit that fails to operate to the
Company's published specifications when the unit is used within specified
environmental and other operating parameters. The duration of this warranty for
the Company's CPU products and for its workstation and server products is one
year for OEM customers, and two years for upgrade customers. Under its warranty
obligations, the Company could be required to recall a product that does not
conform to published specifications, and such a recall could have a material
adverse effect on the Company's business and operating results.



                                       7
<PAGE>   11
Export Sales

      Export sales, primarily to customers in Japan and Europe, accounted for
34%, 36% and 29% of the Company's sales in the fiscal years 1997, 1996, and
1995, respectively. Substantially all of the Company's foreign sales are
denominated in US dollars.

Service and Technical Support

      The Company has two distinct channels of technical support to service its
OEM and upgrade customer bases. Technical support for OEMs is provided through
the Company's Applications Engineering Department, which provides in-depth
technical expertise to assist in the design, debug, and performance analysis of
systems under development by the Company's OEM customers. The upgrade technical
support department includes a 1-800-ROSS-YES line directly into the Company's
support personnel that provides phone support from 7:30 AM to 7:30 PM Central
Time. This group provides pre- and post-sales assistance to the Company's
upgrade prospects and customer base. In order to improve the market appeal of
the Company's upgrade products, the Company has engaged a number of key service
providers, such as Digital Equipment Corporation, to provide hardware support
for hyperSPARC-upgraded machines.

      The primary channel for technical support to service workstation customers
is via service providers such as Computervision and Polaris.

BACKLOG

      As of March 31, 1997, the Company's total backlog was approximately $11
million. The Company's backlog consists of customers' purchase orders that have
been received, acknowledged by the Company and scheduled for shipment within the
next 12 months.

      Sales of the Company's products generally are made pursuant to standard
customer purchase orders that are cancelable without significant penalty subject
to certain criteria. In addition, customer purchase orders are subject to price
re-negotiations and changes in product quantities and delivery schedules caused
by changes in customers' requirements and manufacturing availability. The
Company's business, and to a large and growing extent that of the entire
semiconductor industry, is characterized by a requirement for short lead times
and quick delivery schedules. In addition, the Company's shipments depend on the
manufacturing capacity of the Company's suppliers. As a result of the foregoing
factors, the Company believes that backlog at any given time may not be a
meaningful indicator of future sales.



                                       8
<PAGE>   12

MANUFACTURING

      The Company's microprocessor manufacturing strategy is to outsource the
physical manufacture of its raw materials, work in process and final products to
third-parties that possess state-of-the-art process technologies, while
performing test and verification functions internally to ensure product quality
and yields. Specifically, the Company outsources wafer fabrication, die
packaging and module assembly. Before qualifying a third-party manufacturer, the
Company places its personnel on site, as required, to provide technical
assistance and oversight, to ensure development of processes that conform to
Company specifications and requirements. This manufacturing strategy is intended
to give the Company access to advanced manufacturing processes while minimizing
the substantial capital expenditures that would otherwise be required to develop
its own manufacturing capabilities. Furthermore, the Company believes that this
strategy enables it to operate more efficiently with fewer personnel, while
capitalizing on the latest advances in semiconductor process technology and
manufacturing techniques.

      Fabrication of the Company's anticipated future microprocessor products
requires advanced manufacturing technology that is currently available from only
a small number of manufacturers. The Company's reliance on third-party
manufacturers involves a number of material risks, including shortages of
manufacturing capacity, unavailability of, or delays in obtaining access to,
certain process technologies, and the absence of controllable product delivery
schedules, quality assurance, production yields and costs. There can be no
assurance that the Company will be able to obtain a sufficient quantity of
products from its manufacturers on a timely basis and at competitive prices, and
the failure to do so would have a material adverse effect on the Company's
business and results of operations.

      The Company's manufacturing strategy with respect to workstations and
servers, which is similar to its microprocessor strategy, is to outsource the
manufacturing and integration of its products to third parties that possess
state-of-the-art technologies, while performing test and verification functions
internally to ensure product quality and yields. Specifically, the Company
outsources the manufacturing and assembling of its motherboards. Before
qualifying a third-party manufacturer, the Company's personnel are placed on
site as required to provide technical assistance and oversight to ensure
development of processes that conform to Company specifications and
requirements. This strategy is intended to give the Company access to advanced
manufacturing processes while minimizing the substantial capital expenditures
that would otherwise be required to develop its own manufacturing capabilities.

Wafer Fabrication

      Wafers for the semiconductor chips utilized by the Company in its products
are fabricated by outside manufacturers. At present, Fujitsu manufactures wafers
for all of the Company's microprocessor logic chips and SRAMs. The Company has
recently established a relationship with NEC for the potential production of
microprocessor logic chips. During fiscal 1997 and fiscal 1996, Fujitsu supplied
100% of the dollar amount of the Company's silicon wafer purchases for
production.



                                       9
<PAGE>   13

      The wafers for the Company's Colorado 3 hyperSPARC microprocessor logic
chips are currently being manufactured using Fujitsu's 0.35 - 0.4 micron, triple
layer metal CMOS process technology, while the Colorado 4 hyperSPARC
microprocessor logic chips utilize a 0.35 micron process. The Company is working
with Fujitsu to migrate production of future versions of hyperSPARC products to
processes with increasingly finer circuit geometries, which the Company expects
will support increases in clock speeds and manufacturing yields. Furthermore,
the Company from time to time holds discussions with other wafer manufacturers
in order to explore additional sources of wafers. However, there can be no
assurance that the Company will be able to migrate successfully its wafer
production to finer circuit geometries or that it will be able to obtain from
Fujitsu or others adequate advanced silicon wafer production capacity. There can
be no assurance that the Company will be able to obtain a sufficient quantity of
wafers from its wafer manufacturers on a timely basis and at competitive prices,
and the failure to do so would have a material adverse effect on the Company's
business and results of operations.

      The Company and Fujitsu have reached an agreement in principle on a wafer
pricing model that reflects fair market values based upon current and future
industry wafer pricing standards. The parties intend to incorporate this model
into a definitive supply agreement in the near future.

Packaging and Assembly

      The Company also relies on third parties for the production of its
multi-die packages. The Company obtains a majority of its multi-die package
requirements for its current hyperSPARC products from MMS using MMS' advanced
substrate technology. The Company's multi-die packages are also manufactured by
nChip, Fujitsu, and W. L. Gore on a purchase order basis. The Company's MBus
modules -- which incorporate multi-die packages, connectors, clock chips, heat
sinks and other components on a small printed circuit board -- are currently
assembled by Solectron of Austin and Marco, Inc. of Austin on a purchase order
basis.

Testing

      At each stage of the production cycle, the Company's work-in-process and
final products are tested for defects and functionality at the Company's Austin,
Texas manufacturing facility. The Company believes it employs certain testing
procedures that are more sophisticated and rigorous than those generally
employed in the semiconductor industry, and believes that its commitment to
testing has enabled it to introduce products of superior reliability.

      Although the Company's products undergo extensive testing prior to their
introduction, design and manufacturing errors may be discovered after initial
product sampling or volume shipment, which may result in delays in volume
production or the recall of products sold. The occurrence of such errors could
have a material adverse effect on the Company's product introduction schedule,
business and operating results.



                                       10
<PAGE>   14

COMPETITION

      The market for the Company's products is intensely competitive and
characterized by rapidly accelerating advances in processor and system
technologies. These advances result in frequent product introductions, regular
price reductions, short product life cycles, and increased product capabilities
that may result in significant performance improvements.

      Competition in the sale of microprocessor products is based on price,
performance, product quality and reliability, software compatibility, marketing
and distribution capability, brand recognition, financial strength and ability
to deliver in large volumes on a timely basis. Given the Company's reliance on
third parties for product manufacturing, the Company's competitive position may
also be affected by the reliability and performance of its outside manufacturers
and the availability from such manufacturers of adequate state-of-the-art
production capacity. There can be no assurance that the Company will be able to
compete successfully with respect to any of these factors.

      The Company faces competition in the sale of high performance SPARC
microprocessor chipsets and modules from Sun Microelectronics (SME), a division
of Sun Microsystems. Because of its affiliation with Sun, SME has substantially
greater technical, financial, sales and marketing resources and experience and
brand name recognition than the Company, and may be in a better position than
the Company to obtain significant design wins from Sun. In addition, substantial
marketing and promotional costs, most likely in excess of what the Company can
currently afford, may be required to achieve wider acceptance of the Company's
products. There can be no assurance that the Company will be able to overcome
such barriers. As long as competitors remain in the SPARC market, their product
introduction timing and product pricing will materially, and at times adversely,
affect the Company's business and future operating results. There can be no
assurance that the Company will have the resources and capabilities to compete
effectively. Furthermore, other companies may offer competitive high-performance
SPARC products in the future. For example, Fujitsu Microelectronics, Inc., which
manufactures microprocessors for SPARCstation 4 and 5 class machines, may decide
to manufacture microprocessors that compete directly with the Company's
products. The Company's success will depend, among other things, on its ability
to deliver, on a timely basis and at competitive prices, processor performance
that is comparable to or greater than that provided in SPARC compatible products
manufactured by others. There can be no assurance that the Company will be able
to deliver such performance.

      The Company, along with other manufacturers of SPARC-based products, also
faces indirect competition from workstations and PCs that are based on
microprocessor architectures other than SPARC. The Company's success will depend
upon the ability of its SPARC OEM customers to compete effectively with the
manufacturers of machines based on such alternative architectures. These
manufacturers include RISC workstation vendors such as Digital Equipment
Corporation, Hewlett-Packard, IBM and Silicon Graphics, and PC vendors such as
Apple, Compaq and IBM. Competition in the sale of workstations is based on
factors such as system performance, price/performance, availability of
application software, system upgradability and expandability, graphics features
and performance, and product quality and reliability. Although 


                                       11
<PAGE>   15

Sun has continued to be the leading vendor of computer workstations, thus
causing SPARC to remain the leading workstation architecture, there can be no
assurance that Sun or any of the Company's OEM customers will be able to compete
effectively against these other manufacturers of workstations. In addition,
competition from PCs is expected to increase in the future as newer generations
of PC microprocessors, notably Intel's Pentium II(TM) and Pentium Pro(TM),
deliver performance comparable to that of workstation microprocessors. There can
be no assurance that the Company and the Company's OEM customers will in the
future compete effectively against PC manufacturers, especially in the sale of
lower performance workstations. A failure by the Company's OEM customers to
maintain market share or otherwise compete effectively against other
manufacturers of workstations, or the manufacturers of PCs, would have a
material adverse effect on the Company's business and operating results.

      In non-workstation markets, the Company's products compete with the RISC
and CISC microprocessors manufactured by semiconductor companies such as
Hitachi, Intel and Motorola. There can be no assurance that the Company's
products will be able to compete effectively in these non-workstation
businesses.

      The Company's workstation and server products face competition from Sun
Microsystems Computer Company (SMCC), a division of Sun Microsystems. Because of
its affiliation with Sun, SMCC has substantially greater technical, financial,
sales and marketing resources and experience and brand name recognition than the
Company, and may be in a better position to obtain significant orders. In
addition, substantial marketing and promotional costs, possibly in excess of
what the Company can currently afford, may be required to achieve wider
acceptance of the Company's products. There can be no assurance that the Company
will be able to overcome such barriers. The failure to gain significant customer
acceptance of its hyperSTATION products would have a material adverse effect on
the Company. As long as workstation and server competitors remain in the SPARC
market, their product introduction timings and product pricing will materially,
and at times adversely, affect the Company's business and future operating
results. There can be no assurance that the Company will have the resources and
capabilities to compete effectively. Furthermore, SMCC is now offering
competitive high-performance 64-bit SPARC workstations based upon SME's
UltraSPARC microprocessor technology and is seeking to convert the existing
32-bit SPARC customer base to the new 64-bit architecture. The Company's success
in the workstation and server markets will depend, among other things, on how
rapidly SMCC can convert the SPARC customer base to 64-bit technology and the
Company's ability to develop products compatible with the 64-bit technology.

      The Company, along with other manufacturers of SPARC-based products, also
faces indirect competition from workstations and PCs that are based on
microprocessor architectures other than SPARC. The Company's success will depend
in part upon its ability to compete effectively with the manufacturers of
machines based upon such alternative architectures. Moreover, Microsoft is
attempting to convert the UNIX operating system customer base to the Windows
NT(TM) operating system which runs on systems based upon Pentium(TM), Pentium
Pro, Pentium II and certain non-SPARC RISC microprocessors. The success of
Windows NT may result in the reduction of the total available market for
SPARC-based workstations. If this were 


                                       12
<PAGE>   16

to occur, the Company would lose market share to PCs and there would be a
material adverse effect on the Company's business and operating results.

RESEARCH AND DEVELOPMENT

      The Company's research and development efforts are currently focused on
introducing next-generation hyperSPARC products, other microprocessor
technologies and associated semiconductors. In both manufacturing and assembly,
the Company is constantly working to improve yields and reduce the cost of its
products.

      Another focus of the Company's development efforts is the diversification
and expansion of its product portfolio. The Company has expanded its product
offerings beyond microprocessors and modules to new products such as SPARC
motherboards and complete SPARC workstations. SPARCplug is another example of
this new product diversification effort.

      The Company expects to conduct research and development under its own
auspices and through its subsidiary, as well as through strategic partnerships
or joint ventures.

      The Company's research and development expenditures were $24.7 million,
$15.9 million and $13.2 million during fiscal 1997, 1996 and 1995, respectively.

PATENTS AND PROPRIETARY RIGHTS

      The Company endeavors to protect and maintain its competitive position by
placing a high priority on the protection of its intellectual property,
including its inventions, trademarks, trade secrets and technical know-how. The
Company files and prosecutes patent applications for those key patentable
designs, innovations and inventions that it believes are most relevant to its
product line and most valuable in terms of cost and technological advantages.
The Company also takes steps to prevent the loss to competitors of valuable
proprietary information such as trade secrets and technical know-how.

      Since its inception, the Company has filed a number of patent applications
in the United States Patent and Trademark Office ("PTO") and counterparts to
certain of those U.S. applications in the patent offices of other countries. The
Company currently owns several issued United States patents. Of the issued
patents, one covers the Company's technology concerning the fast registering of
data in a microprocessor, another covers certain techniques for automated
circuit design, and a third covers the Company's proprietary RISC superscalar
microprocessor architecture.

      An assessment of the Company's patent position, as with that of any
technology company, involves complex issues of law and fact that render such an
assessment uncertain. There can be no guarantee that any of the Company's patent
applications will issue, nor can assurances be given as to the level of
protection that any of its issued patents will provide to the technology and/or
products intended to be covered by them. In addition, there can be no 


                                       13
<PAGE>   17

assurance that any of the Company's issued or pending patents will create
effective barriers to entry into the markets in which the Company and
its products compete.

      The Company's competitors have filed applications for and received issued
patents related to microprocessors, multiprocessing architectures and related
circuits as well as board and system designs and techniques. There is a
possibility that these competitors might assert claims against the Company that
their patents cover technologies employed by the Company in its current or
future products. If such claims are determined to cover technologies employed by
the Company and such claims are ultimately held to be valid, no assurance can be
given that the Company would be able to acquire the right to use such
technologies regardless of the terms, nor can any assurance be given that the
Company could acquire or develop alternative technologies that are not covered
by the asserted claims. Further, even if the grounds for such claims are without
merit or deficient, there is no guarantee that a competitor would not
nevertheless bring a suit for patent infringement against the Company, or its
customers or its affiliates. Such litigation could have a material adverse
effect on the Company's business and results of operations despite its lack of
merit or its final disposition because of its cost to, and its diversion of
effort and management time from, the Company.

      The Company requires employees, consultants and independent contractors to
execute confidentiality and invention/copyright assignment agreements prior to
engaging in any service to the Company. The Company further requires, whenever
possible, that companies engaged in sensitive discussions with the Company
involving its proprietary technologies execute nondisclosure agreements. These
agreements are intended to protect the Company's trade secrets, technical
know-how and patentable and copyrightable subject matter by restricting
disclosure and by requiring those creating intellectual property on behalf of
the Company or using the Company's resources to assign ownership of the
intellectual property to the Company. No assurance can be made, however, that
such contracts will provide the Company with adequate protection in the event
that such agreements are breached through the unauthorized disclosure or use of
such intellectual property.

ENVIRONMENTAL MATTERS

      To the Company's present knowledge, compliance with federal, state and
local provisions enacted or adopted for protection of the environment has had no
material adverse effect upon its operations.

EMPLOYEES

      As of March 31, 1997, the Company's domestic work force consisted of 221
full-time employees and 44 employees who worked on a temporary or part-time
basis. In addition, the Company had three full-time employees in its European
office. The Company's design subsidiary, ROSS Semiconductors (Israel), Ltd.
("ROSS Israel"), had a workforce consisting of 14 full-time employees.


                                       14
<PAGE>   18

RECENT DEVELOPMENTS

      As set forth in the Company's Current Report on Form 8-K dated March 21,
1997, Roger D. Ross, Chairman, President, Chief Executive Officer, and founder,
resigned as an officer of the Company on March 3, 1997. The Company and Mr. Ross
are negotiating the terms and conditions of a severance arrangement. Mr. Ross
continues to serve as a member of the Company's Board of Directors. On May 3,
1997, Fred T. May was elected Chairman and Acting President and Chief Executive
Officer. Effective May 21, 1997, Jack W. Simpson, Sr. was hired as President and
Chief Executive Officer of the Company and was appointed as a member of the
Company's Board of Directors; Mr. May continued as Chairman of the Board.

      On April 16, 1997, Francis S. (Kit) Webster III was hired as Chief
Financial Officer and Secretary of the Company; on April 28, 1997, Frank A.
Baffi was hired as Vice President, Worldwide Sales.

      On June 25, 1997, the Company and Fujitsu entered into a Development
Agreement, pursuant to which, among other things, Fujitsu would pay the Company
an aggregate of $34.5 million in partial funding for the Company's Viper 64-bit
microprocessor chip development project and for a license of associated
intellectual property. The resulting technology will be co-owned by the Company
and Fujitsu, and each company will have the right to exploit the technology into
its own derivative products and to grant sublicenses on a limited basis.
Payments are to be made periodically through March 31, 1999, upon the attainment
of certain milestones, and are subject to reduction, and the contract is subject
to cancellation under certain conditions, if milestones are not met.

ITEM 2.     PROPERTIES

      The Company's principal administrative, sales, marketing, customer
applications support, design, product engineering, production control, quality,
manufacturing and testing facilities are currently located in Austin, Texas in
three leased buildings containing an aggregate of 73,000 square feet. One 33,000
square foot building includes a 3,000 square foot clean room wafer processing
area, houses all manufacturing, testing and quality control facilities, and has
delivery, receipt and storage facilities for unfinished wafers, gases, chemicals
and other raw materials used by the Company. The second building, in which the
Company occupies 29,000 square feet, provides facilities for all administration,
sales and marketing personnel and houses the majority of the Company's design,
product engineering and production control personnel. The third building is
11,000 square feet and houses a portion of the Company's product development
personnel.



                                       15
<PAGE>   19

      The Company leases approximately 5,000 square feet in Longmont, Colorado,
for a software group that supports the Company's product development personnel.

      The Company also leases 1,100 square feet of office space in Brussels,
Belgium, for its European office.

      ROSS Israel occupies a building of approximately 4,500 square feet in
Herzelia, Israel, which provides facilities for the design and development of
electronic and computer products, as well as administrative functions.

ITEM 3.     LEGAL PROCEEDINGS

      Rao Cherukuri et al. v. PeQuR Technology, Inc., et al., Civil No. CV757267
(Santa Clara Superior Court). On April 11, 1996, this action was filed against,
among others, the Company in the Superior Court of California (the "Action").
The Action was brought by three former employees of PeQuR Technology, Inc.
("PeQuR"), a Texas corporation which on January 4, 1995 sold substantially all
of its assets to a then wholly-owned subsidiary of the Company, ROSS Computer
Corp., now Reliance Computer Corp. ("RCC"). Plaintiffs allege, among other
causes of action, fraud, deceit, and breach of fiduciary duty in connection with
certain alleged agreements by PeQuR to provide compensation to the plaintiffs in
the form of vested PeQuR stock which agreements, in turn, allegedly would have
entitled plaintiffs to a share of the proceeds of the asset sale to RCC, to
employment with the Company or RCC, and/or to receive shares of the Company's
Common Stock. The Company transferred its entire equity interest in RCC to
Fujitsu on March 26, 1996.

      The Company believes that the plaintiffs' claims against it are without
merit and intends to defend this case vigorously. The Company successfully
demurred in whole or in part to two successive Complaints. The Company filed an
Answer to the plaintiffs' Third Amended Complaint on June 4, 1997. This case is
not yet at issue and, by order of a special master, discovery is stayed until
all defendants file answers. Currently, the Company is the only defendant that
has done so; the remaining defendants have demurred to the Third Amended
Complaint. Given the stage of the proceedings, the fact that the ultimate
outcome will depend upon the resolution of disputed issues of fact and law, and
the inherent uncertainties of complex, multi-party litigation such as this, it
is not possible at this time to predict the ultimate outcome of the matter with
any degree of certainty, although based on information presently known to
management, the Company does not believe that the ultimate resolution of this
lawsuit will have a material adverse effect upon the financial condition or
results of operations of the Company. 

      Kris Vorm v. ROSS Technology, Inc. Cause No. 9704693 (District Court of
Travis County, Texas). On April 18, 1997, the above-referenced action was filed
against the Company in the 353rd Judicial District Court of Travis County,
Austin, Texas (the "Vorm Action"). The Vorm Action was brought by Kris Vorm, a
former employee of the Company, alleging that in late May 1996 the Company,
through false and material representations and promises, prevented him from
selling shares of common stock of the Company owned by him. Plaintiff further
contends that the Company misrepresented that it would provide him a low
interest loan to cover his tax liability in connection with his having purchased
his shares. Plaintiff seeks compensation in an unspecified amount which the
Company estimates, based upon Plaintiff's allegations, to approximate $500,000.
Plaintiff also seeks exemplary damages, as well as attorneys' fees, costs, and
pre-judgment and post-judgment interest.

      The Company has answered the Complaint in this matter, and has noticed
plaintiff's deposition. The Company believes that it has meritorious defenses to
the Vorm Action and intends to defend it vigorously. Given the stage of the
proceedings, the fact that the ultimate outcome will depend upon the resolution
of disputed issues of fact and law and the 



                                       16
<PAGE>   20

inherent uncertainties of litigation such as this, it is not possible at this
time to predict the ultimate outcome of the matter with any degree of certainty,
although based on information presently known to management, the Company does
not believe that the ultimate resolution of this lawsuit will have a material
adverse effect upon the financial condition or results of operations of the
Company. 

      The Company is involved in routine litigation arising in the ordinary
course of business, and, while the results of such proceedings cannot be
predicted with certainty, the Company believes that the final outcome of the
proceedings will not be material.

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

      Not applicable.



                                       17
<PAGE>   21

                                   PART II

ITEM 5.     MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

      (a) Market Information. Since its initial public offering in November
1995, the Common Stock has traded on the NASDAQ National Market System under the
symbol "RTEC." The following table sets forth, for the periods indicated, the
high and low sale prices for the Common Stock as reported by the NASDAQ National
Market System.

<TABLE>
<CAPTION>
                  Quarter Ended                 High        Low
                  -------------                 ----        ---
                  <S>                           <C>         <C>
                  January 1, 1996*              17 1/8      9
                  April 1, 1996                 15          6 1/2

                  June 30, 1996                 15 1/8      8 1/4
                  September 30, 1996            12 1/8      5 1/2
                  December 31, 1996              6 7/8      2 3/16
                  March 31, 1997                 5 5/8      2 3/16
</TABLE>

            (*)   Quotations from November 7, 1995, the date of the Company's
                  initial public offering.

      (b) Holders. As of June 16, 1997, there were approximately 203 holders of
record of the Company's Common Stock.

      (c) Dividends. The Company has never paid any dividends on its Common
Stock and does not anticipate paying any dividends in the foreseeable future.
The Company currently intends to retain its earnings, if any, to finance the
development of its business. Any future dividend policy will be determined by
the Company's Board of Directors based upon conditions then existing, including
the Company's earnings, financial condition and capital requirements, as well as
such economic and other conditions as the Board of Directors may deem relevant
at the time.



                                       18
<PAGE>   22




ITEM 6.     SELECTED CONSOLIDATED FINANCIAL DATA

      The Selected Consolidated Financial Data for Ross Technology, Inc. and
subsidiary set forth below is derived from, and should be read in conjunction
with, the Company's Consolidated Financial Statements, including the Notes
thereto, beginning at page F-1, and Item 7 -- Management's Discussion and
Analysis of Financial Condition and Results of Operations.

ROSS TECHNOLOGY, INC. AND SUBSIDIARY

SELECTED CONSOLIDATED FINANCIAL DATA

<TABLE>
<CAPTION>
                                      PREDECESSOR COMPANY (1)                        COMPANY (2)
                                    ----------------------------                     -----------                           
                                                  PERIOD FROM     PERIOD FROM JULY
                                     YEAR ENDED   DECEMBER 29,       28, 1993 TO
                                    DECEMBER 28,    1992 TO            APRIL 4,      YEAR ENDED        YEAR ENDED      YEAR ENDED
                                       1992      JULY 27, 1993           1994       APRIL 3, 1995    APRIL 1, 1996   MARCH 31, 1997
                                    -----------  -------------     ---------------  -------------    -------------   --------------
                                                                (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 
<S>                                 <C>              <C>               <C>              <C>             <C>             <C>     
STATEMENT OF OPERATIONS DATA:
Net sales                           $ 38,145         $ 7,023           $ 10,373         $ 39,021        $100,805        $ 83,104
Gross profit (loss)                   18,142             301              1,605           12,293          46,884         (24,847)
                                                                                                                    
Income (loss) from operations         (2,272)         (9,202)           (21,222)          (8,939)         19,317         (84,280)
                                                                                                                    
Income (loss) before income taxes     (2,240)         (9,223)           (21,515)         (10,581)         17,843         (85,752)
                                                                                                                    
Net income (loss)                   $ (1,478)        $(7,641)           (21,515)         (10,669)         18,160         (86,705)
                                                                                                                    
Net income (loss) per common                                                                                                   
 share (3)                                                             $  (2.92)        $  (1.47)       $   0.83        $  (3.71)
                                                                                                                    
Weighted average common                                                                                            
and common equivalent                                                                                               
shares outstanding(3)                                                     7,356            7,356          20,880           23,396


<CAPTION>
                                     PREDECESSOR  COMPANY                                COMPANY
                                   ------------------------                              -------
                                   DECEMBER 28,     JULY 27,           APRIL 4,          APRIL 3,        APRIL 1,        MARCH 31,
                                      1992            1993               1994              1995           1996             1997
                                   ------------     -------            --------         ----------      --------        ----------
                                                                         (IN THOUSANDS)
<S>                                 <C>              <C>               <C>              <C>             <C>             <C>
BALANCE SHEET DATA:
Cash and cash equivalents           $    316         $   457           $  2,458         $  1,936        $ 17,941        $   2,811
Working capital (deficit)              1,881          (1,791)           (15,581)         (25,932)         44,336          (37,977)
Total assets                          14,883           9,363             24,069           39,489          97,893           54,819
Notes payable                             --           4,000             20,500           36,344              --           43,500
Accumulated deficit                   (1,478)         (9,119)           (21,515)         (32,184)        (14,856)        (101,561)
Total stockholders's equity
(deficit)                           $  8,352         $ 1,638           $ (3,615)        $(14,284)       $ 66,274        $ (20,225)
</TABLE>


      (1) References to the "Predecessor Company" refer to ROSS prior to its
acquisition by Fujitsu.

      (2) Effective July 28, 1993, the Company's fiscal year was changed to end
on the Monday closest to March 31 to coincide with the fiscal year of its
parent, Fujitsu. As used in this Annual Report, "fiscal 1995," "fiscal 1996" and
"fiscal 1997" refer to the Company's fiscal years ended April 3, 1995, April 1,
1996, and March 31, 1997, respectively. The Company's operating results for
fiscal 1997 are included in Fujitsu's consolidated financial statements for
Fujitsu's "fiscal 1996." Under Japanese convention, the fiscal year is
denominated by the calendar year in which the fiscal year commences; under
United States convention it is denominated by the calendar year in which the
fiscal year ends. Thus the Company's "fiscal 1997" and Fujitsu's "fiscal 1996"
both refer to the year ended March 31, 1997.

      (3) See Note 1 of Notes to Consolidated Financial Statements for an
explanation of the computation of net income (loss) per common share. The
Predecessor Company's net income (loss) per common share for the periods ended
prior to the Fujitsu Acquisition is not comparable to subsequent periods due to
the different capitalization of the Predecessor Company and, therefore, has not
been presented.



                                       19
<PAGE>   23



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

RESULTS OF OPERATIONS

  The following tables set forth, in dollars and as a percentage of net sales,
the historical results of operations for the fiscal year ended April 3, 1995
("fiscal 1995"), the fiscal year ended April 1, 1996 ("fiscal 1996"), and the
fiscal year ended March 31, 1997 ("fiscal 1997").


<TABLE>
<CAPTION>
                                    FISCAL          FISCAL          FISCAL
                                     1995            1996            1997
                                   ---------      ----------      ----------
                                               (IN THOUSANDS)

<S>                                <C>            <C>             <C>       
STATEMENT OF OPERATIONS DATA:
Net sales ......................     $  39,021      $  100,805      $   83,104
Cost of sales ..................        26,728          53,921         107,951
                                     ---------      ----------      ----------
  Gross profit (loss) ..........        12,293          46,884         (24,847)
                                     ---------      ----------      ----------
Operating expenses:
  Research and development,
    net ........................        13,154          15,906          24,659
  Selling, general and
    administrative .............         5,143          10,495          31,137
  Acquisition of in-process    
    R&D ........................         1,821              --              --
  Amortization of goodwill .....         1,114           1,166           3,637
                                     ---------      ----------      ----------
  Total operating expenses .....        21,232          27,567          59,433
                                     ---------      ----------      ----------
Income (loss) from operations...        (8,939)         19,317         (84,280)
Interest income (expense),
    net ........................        (1,642)         (1,474)         (1,472)
                                     ---------      ----------      ----------
Income (loss) before
  income taxes .................       (10,581)         17,843         (85,752)
Income tax provision
  (benefit) ....................            88            (317)            953
                                     ---------      ----------      ----------
Net income (loss) ..............     $ (10,669)     $   18,160      $  (86,705)
                                     =========      ==========      ==========

                         (As a percentage of net sales)

Net sales ......................         100.0           100.0           100.0
Cost of sales ..................          68.5            53.5           129.9
                                     ---------      ----------      ----------
  Gross profit (loss) ..........          31.5            46.5           (29.9)
                                     ---------      ----------      ----------
Operating expenses:
  Research and development .....          33.7            15.8            29.7
  Selling, general and  
    administrative .............          13.2            10.4            37.5
  Acquisition of in-process
    R&D ........................           4.7              --              --
  Amortization of goodwill .....           2.9             1.2             4.3
                                     ---------      ----------      ----------

  Total operating expenses .....          54.5            27.4            71.5
                                     ---------      ----------      ----------

Income (loss) from operations ..         (23.0)           19.1          (101.4)
Interest income (expense),
  net ..........................          (4.2)           (1.5)           (1.8)
                                     ---------      ----------      ----------
Income (loss) before
  income taxes .................         (27.2)           17.6          (103.2)
Income tax expense
  (benefit) ....................           0.2            (0.3)            1.1
                                     ---------      ----------      ----------
Net income (loss) ..............         (27.4)           17.9          (104.3)
                                     =========      ==========      ==========
</TABLE>



                                       20
<PAGE>   24

      General Overview - 1997. In 1997 the Company recorded a $44.1 million
charge against cost of goods sold relating to a reduction in the value of its
microprocessor-related and other inventory, primarily due to obsolescence. In
addition sales of the Company's products in aggregate declined from
approximately $30.9 million in the first quarter of the year to approximately
$11.5 million in the fourth quarter of the year. The reduction in sales was
primarily attributable to a reduction in orders from the Company's primary
customer and to changes in executive and sales personnel, which diminished the
Company's ability to both sell its products and monitor credit and collections.
The Company's inability to monitor credit and collections resulted in a charge
of $16.5 million for accounts receivable write-offs. The reduction in the level
of sales resulted in an increase in the manufacturing overhead associated with
parts assembled by the Company, reducing the Company's gross profit margin. The
aggregate losses incurred by the Company were funded by bank loans guaranteed by
Fujitsu. As a result of the losses and the deterioration of the Company's
financial condition and liquidity, remaining goodwill of approximately $2.5
million was written off and a valuation reserve of approximately $27.9 million
was established against the Company's deferred tax asset. During the third
quarter, the Company's Chief Financial Officer resigned, and during the fourth
quarter, the Company's Chairman, President, Chief Executive Officer and founder
resigned. Subsequent to year end the Company hired a President and Chief
Executive Officer, a Chief Financial Officer, and a Vice President of Sales.
Subsequent to year end, the Company received assurances from Fujitsu that "In 
accordance with our plan for ROSS Technology, we (Fujitsu) are ready to 
provide the necessary trading through debt guarantees or other types of
financing for ROSS Technology not to incur cash flow shortages through 
April 1, 1998."

      Net Sales. Net sales decreased to $83.1 million in fiscal 1997 from $100.8
million in fiscal 1996, which increased from $39.0 million in fiscal 1995. The
decrease in net sales from 1996 to 1997 is primarily attributable to a decrease
in sales to OEM microprocessor chip customers reflecting the lack of a major
design win for its leading edge Colorado 4 microprocessor products; turnover in
sales and executive management; and to a lack of new products to match Sun's
introduction of 64-bit products. The increase in net sales from fiscal 1995 to
fiscal 1996 resulted primarily from increases in unit volumes of the Company's
100 MHz and 125 MHz hyperSPARC products and introduction and increasing sales of
the Company's 150 MHz 512 kilobyte cache and 142 MHz one megabyte cache products
to OEM customers. In addition, the Company's ability to ship product was
significantly enhanced throughout fiscal 1996 as a result of improved
manufacturing yields over fiscal 1995. In 1997 the Company entered the systems
market for workstations and servers in addition to its traditional business of
providing microprocessor components. Sales of such systems were below the
Company's expectations.

      During fiscal 1997, 66% of the Company's net sales were derived from OEM
customers (with Sun, Fujitsu and other OEMs accounting for 28%, 22%, and 16%,
respectively, of total net sales). During fiscal 1996, 81% of the Company's net
sales were derived from OEM customers (with Sun, Fujitsu and other OEMs
accounting for 45%, 19% and 17%, respectively, of total net sales) and 19% from
upgrade customers. During fiscal 1995, by comparison, 72% of net sales were
derived from OEM customers (with Sun, Fujitsu and other OEMs accounting for 26%,
19% and 27%, respectively, of total net sales) and 28% from upgrade customers.
The change in OEM sales mix for fiscal 1997 resulted from reduced demand from
Sun and the Company's diversification into other markets, including the systems
market. The change in OEM sales mix for fiscal 1996 resulted from 



                                       21
<PAGE>   25

the introduction of the high-end 150 MHz hyperSPARC and the resultant design
wins at Sun and Fujitsu. The change in OEM sales mix for fiscal 1995 resulted
from the introduction of the 100 MHz hyperSPARC and the subsequent design wins
at Sun and Fujitsu. In addition, the Company continued to develop its upgrade
business during fiscal 1995. Because Sun and Fujitsu currently account for a
significant percentage of the Company's net sales, a loss of either of these
companies as a significant customer could have a material adverse effect on the
Company's business and operating results.

      Gross Profit (Loss). The Company's gross profit as a percentage of net
sales decreased to a loss of 29.9% in fiscal 1997 from a profit 46.5% in fiscal
1996, which was an increase from a profit of 31.5% in fiscal 1995. This decrease
is primarily the result of a $38.9 charge for the write-down of inventory
associated with lower speed microprocessor chips and associated semiconductors
and MBus modules, including routine price degradation on older products; and to
reductions in the valuation of inventory associated with workstation and server
products which were ordered in anticipation of customer acceptance, which did
not materialize to the degree anticipated by the Company, as well as a $5.2
million charge for the costs to cancel excess inventory purchase orders. In
addition gross profit was adversely affected by the Company's lack of new,
higher-margin microprocessor and upgrade subsystem products, and also by an
increase in manufacturing overhead associated with the assembly of fewer units
in the later quarters of 1997 in a larger manufacturing space occupied during
the fourth quarter of 1996. The improvement in gross profit margins in fiscal
1996 compared to fiscal 1995 is primarily attributable to several factors
relating to both net sales and cost of sales. As a result of the Company's
introduction of the 150 MHz hyperSPARC and the subsequent design wins at Sun and
Fujitsu, net sales in fiscal 1996 increased 158% over fiscal 1995. With respect
to net sales, in the early stages of their product life cycles, high performance
products such as the 150 MHz hyperSPARC typically carry higher average selling
prices and, consequently, higher gross profit. Furthermore, gross profit was
adversely impacted during the first two quarters of fiscal 1995 because the
Company was required to significantly decrease the prices of its existing
products (which were at the end of their life cycle) to maintain market
presence. As a result of the Company's introduction of the 100 MHz and 125 MHz
hyperSPARC products, as well as significant design wins from Sun and Fujitsu,
the Company was able to increase its average selling prices in the second half
of fiscal 1995 and first half of fiscal 1996. Furthermore, the introduction and
sale of 150 MHz hyperSPARC products during the third quarter of fiscal 1996
enabled the Company to again increase its average selling prices in the second
half of fiscal 1996. With respect to cost of sales, improving manufacturing
yields from the Company's wafer supplier during fiscal 1996 had a positive
impact on the Company's unit costs. Unit costs also declined in fiscal 1996 due
to significant volume increases which resulted in increased efficiency and
utilization of fixed manufacturing costs. Gross profit was also helped in fiscal
1996 by the continued contribution from upgrade products, which typically
generate higher selling prices and gross profit than products sold to Sun,
Fujitsu and other OEM customers.

      Research and Development. Research and development ("R&D") expense
includes costs associated with the definition, design and development of new
products. R&D expenses increased to $24.7 million (29.7% of sales) in fiscal
1997 from $15.9 million (15.8% of sales) in fiscal 1996, which was an increase
from $13.2 million (33.7% of sales) in fiscal 1995. The increase in R&D expenses
was primarily attributable to the addition of new personnel and related overhead
in the areas of new product design, new product development and increased
pre-production cost associated with 


                                       22
<PAGE>   26

qualifying new generation microprocessor products for production, and for new
personnel and related overhead and outside contractor expenses for new product
design and development related to the Company's Colorado 5 hyperSPARC and next
generation Viper microprocessor designs. In 1997 $2 million of payments from
Fujitsu pursuant to a development agreement were applied against R&D expenses.
The Company believes that its R&D activities are crucial to its future success
and, therefore, expects R&D expense to continue to rise in dollar terms, and
potentially as a percentage of sales.

      Selling, General and Administrative. Selling, general and administrative
("SG&A") expenses increased to $31.1 million (37.5% of sales) in fiscal 1997
from $10.5 million (10.4% of sales) in fiscal 1996, which was an increase from
$5.1 million (13.2% of sales) in fiscal 1995. The increase in SG&A expenses
during fiscal 1997 was primarily attributable to approximately $16.5 million in
write-offs and increase in reserves associated with uncollectable accounts and
also to increases in legal and consulting expenses relating to the negotiation
of significant contracts and the hiring of new executive management and to
increased expenses relating to advertising and promotion. In 1996 and 1997 the
Company also experienced increased fees and expenses relating to its reporting
obligations and other responsibilities as a publicly-held company. The increase
in SG&A expenses during fiscal 1996 was primarily attributable to the Company's
expansion of its sales and marketing staff and an increase in advertising
activity in connection with the Company's efforts to expand its OEM market share
and build sales of upgrade products. The Company expects that its SG&A expense
will decrease from fiscal 1997 levels in both dollar terms and as a percentage
of net sales, primarily due to the unusual amount of delinquent accounts
receivable recorded in SG&A expense in fiscal 1997, partially offset by an
increase in sales-related employees.

      Acquisition of In-Process Research and Development. The acquisition of the
assets of PeQuR in fiscal 1995 resulted in an allocation of $1.8 million of the
purchase price to in-process R&D which was expensed in fiscal 1995.

      Amortization of Goodwill. Goodwill of $6.5 million arose in connection
with the Company's acquisition by Fujitsu in 1993 and $0.6 million arose from
the acquisition of the assets of PeQuR by RCC. These amounts are amortizable
over six years resulting in $1.2 million of amortization in fiscal 1996 and $1.1
million in fiscal 1995. During the fourth quarter of fiscal 1996, the Company
transferred its entire interest in RCC to Fujitsu resulting in the removal of
$0.5 million of goodwill related to the acquisition of the assets of PeQuR. In
fiscal 1997 the Company amortized the remainder of the goodwill ($2.5 million)
after reviewing its value in light of the losses incurred by the Company in
fiscal 1997 and cash flow projections.

      Net Interest Expense. Net interest expense of $1.5 million in fiscal 1997
was approximately equal to the $1.5 million of net interest expense in fiscal
1996 (net of $.5 million in interest income) and $1.6 million in fiscal 1995. In
the fourth quarter of fiscal 1996 the Company used $35.5 million of the proceeds
of its initial public offering to retire the outstanding balance under its line
of credit with Dai-Ichi Kangyo Bank (DKB). In fiscal 1997 the Company again
borrowed under a New Credit Facility with DKB. See "Liquidity and Capital
Resources."


                                       23
<PAGE>   27


      Income Tax Expense. In fiscal 1997 the Company incurred a significant
loss. Based on the Company's losses in fiscal 1997 and its continuing losses in
the first quarter of fiscal 1998, the Company determined that it was more likely
than not that it would not be able to use its entire income tax benefit in
subsequent years. The Company also determined that it could not reasonably
forecast the amount of such benefit it could use due to the significant changes
being made with respect to its management and products. Accordingly, the Company
applied a reserve of approximately $27.9 million against its deferred income tax
asset. As of April 1, 1996, the Company had completely utilized its net
operating loss carryforwards to that point for federal income tax purposes and,
as a result, began accruing and paying regular federal income taxes. Current
income tax expense for fiscal 1996 was $1.9 million. Due to timing differences
between book income and tax income, the Company recognized a deferred tax
benefit of $2.2 million for book purposes during fiscal 1996. During the fourth
quarter of fiscal 1995, the Company began accruing and paying federal taxes as a
result of the corporate alternative minimum tax.

      Future Operating Results. The Company's financial condition deteriorated
significantly during fiscal 1997, and at the end of the year, the Company was
continuing to experience significant losses from operations. Subsequent to the
end of fiscal 1997, the Company hired a new senior management team to assess the
Company's business and to implement changes necessary to restore the Company to
a sound financial condition. The Company depends solely upon its parent, Fujitsu
Limited, for additions to capital necessary to continue its operations. While
Fujitsu has stated that, "In accordance with our plan for ROSS Technology, we
(Fujitsu) are ready to provide the necessary funding through debt guarantees or
other types of financing for ROSS Technology not to incur cash flow shortages
through April 1, 1998", there can be no assurances that the Company will not in
the future require capital in addition to that committed by Fujitsu. See
"Liquidity and Capital Resources."

      The Company's operating results have in the past and may in the future
vary due to a number of factors, including market acceptance of new or enhanced
versions of the Company's products, the Company's success in entering new
markets, the timing and extent of product development costs, changes in the mix
of products sold and in the mix of sales by distribution channel, competitive
pricing pressures, anticipated decreases in unit average selling prices of the
Company's products, availability and cost of products (particularly silicon
wafers) from the Company's suppliers, fluctuations in manufacturing yields, the
gain or loss of significant customers, new product introductions by the Company
or the Company's competitors, the competitiveness of the SPARC architecture and
the timing of significant orders, order cancellations or rescheduling, all as
more fully described in the Company's Registration Statement on Form S-1 which
became effective November 6, 1995, and the Final Prospectus of the same date,
and in the Company's subsequent SEC Reports. Any unfavorable change in the
foregoing or other factors could have a material adverse effect on the Company's
business, operating results and financial condition.

      The Company operates in an industry characterized by increasing
competition, rapidly changing technology, and increasingly aggressive pricing.
As a result, the Company's future operating results will depend to a
considerable extent on its ability to rapidly and continuously, develop and
introduce new microprocessor technologies that offer its customers enhanced
performance at competitive prices. The development of new high-performance
computer products is a complex and uncertain process requiring high levels of
innovation from the Company's designers and suppliers, as well as 


                                       24
<PAGE>   28

accurate anticipation of customers' requirements and technological trends. The
Company is also increasingly dependent on the ability of its suppliers to
design, manufacture, and deliver advanced components required for the timely
introduction of new products. The failure of any of these suppliers to deliver
components on time or in sufficient quantities, or the failure of any of the
Company's designers to develop advanced innovative products on a timely basis,
could result in significant adverse impact on the Company's operating results.

      Once a hardware product is developed, the Company must rapidly bring it to
volume manufacturing, a process that requires accurate forecasting of both
volumes and configurations, among other things, in order to achieve competitive
yields and costs. Upon introduction of new products, the Company must also
manage the transition from older, displaced products to minimize disruptions in
customer ordering patterns, reduce levels of existing product inventory, and
ensure that adequate supplies of new products can be delivered to meet customer
demand.

      Historically, average selling prices for microprocessors in general, and
for the Company's products in the time period during which they have been
commercially available, have decreased over the life of each specific product.
The Company expects that the average selling prices of its products will
continue to be subject to significant downward pressure in the future. If the
Company is unable to introduce and gain market acceptance of new products with
higher average selling prices or reduce its costs sufficiently to offset
decreases in prices of existing products, the Company's gross profits and
operating results would be adversely affected. In addition, because the Company
is continuing to increase its operating expenses for new product development in
anticipation of increasing sales levels, the Company's business and operating
results would be adversely affected if such sales levels were not achieved.

      The Company is currently involved in a significant effort to diversify its
product lines and sources of revenue. In fiscal 1996 and prior years,
substantially all of the Company's revenues were derived from sales of
microprocessor chips, associated semiconductors and MBus modules. In the second
quarter of fiscal 1997, the Company shipped hyperSTATION motherboards and
systems in volume, which was the first time that the Company had engaged in
commercial sales of board and system products. The Company intends to pursue and
expand its board and systems businesses, which will focus on performance- and
value-enhanced products incorporating the SPARC-industry-standard V8
architecture. The Company also intends to continue its microprocessor chip and
MBus module businesses.

      The Company believes that diversification of its product lines and revenue
sources will provide additional engines for future revenues and profits. There
can be no assurance, however, that this diversification effort will be
successful or profitable, and the Company's entry into this new business area
entails new product acceptance, inventory and accounts receivable collection



                                       25
<PAGE>   29

risks as well as longer payment terms. It also requires the development of new
distribution channels and new marketing strategies. The Company anticipates that
the gross profit margins of these new product lines will be lower than those it
has historically experienced in the OEM microprocessor chip and upgrade
subsystem module businesses. Also, for sales of certain products through
distributors, the Company is able to recognize revenue from such sales only upon
resale to end-users.

      As noted above, the Company has recently experienced lower than expected
demand for a number of its products, especially its lower speed microprocessor
chips and associated semiconductors and MBus modules, as well as routine price
degradation on older products. These trends are continuing and are expected to
continue for the foreseeable future.

      In addition, operating results could be adversely affected by general
economic and other conditions affecting the timing of customer orders and
capital spending or a downturn in the markets for microprocessors or
high-performance computer workstations.

      In order to increase competitiveness and market share, in January 1997 the
Company announced significant price reductions for its existing hyperSTATION and
SPARCplug systems and upgrade subsystem module products, reflecting a thorough
cost analysis and adjustments to the Company's pricing model to adopt the lower
margins of the computer systems industry.

      Sales to Sun, historically the Company's largest OEM customer, have varied
substantially on a year-to-year and quarter-to-quarter basis over the periods
since fiscal 1991. As previously advised, the Company anticipates that sales to
Sun will continue to fluctuate significantly in the future. The Company
continues to pursue sales to Sun of its current and future microprocessor
products, but there can be no assurance that the Company will achieve any future
design wins with Sun.

      During the recent past, the Company's revenues and gross profit margins
have been substantially impacted by the mix of OEM, system and upgrade subsystem
module customers, as well as by the mix of high-end and low-end products sold
and the availability of new, higher-priced and higher-margin microprocessor and
upgrade subsystem module products. In addition, because the Company is
continuing to incur substantial operating expenses for new product development
in anticipation of increasing sales levels and to remain competitive, the
Company's business and results of operations would be materially and adversely
affected if such sales levels were not achieved.

      Although the Company is taking actions to improve operating margins, it is
anticipated that gross profit will continue to remain under pressure for the
foreseeable future due to a variety of factors, including lower margins for
system products, continued industry-wide pricing pressures, increased
competition, and compressed product life cycles.

      R&D expenses are expected to increase, reflecting pre-production
qualification of the Colorado 5 hyperSPARC microprocessor and new product design
and development related to the Viper generation of microprocessors that the
Company expects to introduce in 1999. The Company expects that the level of SG&A
expenses will vary depending upon the overall sales effort undertaken and the
Company's distribution strategies. Although R&D and SG&A expenses can be reduced
over time if the Company's revenues are less than anticipated, the Company
believes that it is building an infrastructure that is critical to the
Company's future success and 


                                       26
<PAGE>   30

that represents a long-term investment in the Company's future. Therefore, as in
the recent past, the Company may decide to undertake such expenses even if the
result would be an increase in such categories of expense as a percentage of net
sales in a given fiscal quarter or for a fiscal year as a whole.

      The Company expects interest expenses to be substantially higher on a
quarterly basis during fiscal 1998 as a result of the Company's increased
borrowing requirements. See "Liquidity and Capital Resources."

      The Company has lost a number of executives, engineers and other employees
due to voluntary resignations. The loss of executives and other key employees
has negatively affected the overall quality and depth of the Company's staff
infrastructure and its management and accounting controls. The Company is
seeking to remedy these shortcomings as a priority matter through new hiring and
the use of consultants and outside contractors. However, the impaired
infrastructure and controls may have a material adverse effect on the Company's
business, results of operations and financial condition. The Company has
recently filled key management positions, including a Chief Executive Officer
and President, a Chief Financial Officer, a Vice President of Sales and other
key positions in sales, product engineering, finance and accounting. Given the
Company's recent performance and financial condition, hiring staff is difficult.

      Although no decisions have been made, the Company anticipates that it may
need to implement additional incentive compensation programs in order to attract
and retain key employees and to motivate employees.

LIQUIDITY AND CAPITAL RESOURCES

      The Company experienced significant negative cash flows during fiscal 1997
and at the end of that year had negative working capital and negative
stockholders' equity. The Company is dependent on its parent company, Fujitsu,
for its capital requirements. In November 1996 the Company established a "New
Credit Facility" with Dai-Ichi Kangyo Bank, Limited ("DKB") for a maximum of $25
million; in February 1997 such New Credit Facility was increased to a maximum of
$50 million. The New Credit Facility expires on December 31, 1997, as a result
of an extension in June 1997, and is guaranteed by Fujitsu. At March 31, 1997,
and June 30, 1997, the amounts outstanding under the New Credit Facility were
$43.5 and $50.0 million, respectively. On June 18, 1997, the Company received a
commitment from Fujitsu that, "In accordance with our plan for ROSS Technology,
we (Fujitsu) are ready to provide the necessary funding through debt guarantees
or other types of financing for ROSS Technology not to incur cash flow shortages
through April 1, 1998." Accordingly, the Company believes that it will have
adequate capital for its business through April 1, 1998. However, there can be
no assurance that the Company will not experience negative cash flow from
operations and the Company may in the future be required to seek additional
external sources of financing for its operating needs. There can be no assurance
that additional capital, including capital from bank borrowings, will be
available on terms favorable to the Company, if at all, or that Fujitsu would be
willing to provide additional loan guarantees, equity infusions or other
financial assistance to the Company in the future. To the extent that additional
capital is raised through the sale of additional equity or convertible debt
securities, the issuance of such securities would likely result in substantial
dilution to the 


                                       27
<PAGE>   31


Company's then existing stockholders. In view of its position as the Company's
controlling stockholder, Fujitsu's concurrence is necessary for the issuance of
any additional debt or equity financing by the Company. The Company's failure to
obtain sufficient additional financing could make it impossible for it to
continue operations, force the Company to seek protection under Federal
bankruptcy law and/or affect the Company's listing on the NASDAQ National
Market.

      The Company's principal source of liquidity as of March 31, 1997,
consisted of $2.8 million of cash and cash equivalents and $6.5 million of
unused credit availability pursuant to its loan with DKB. As of March 31, 1997,
the Company had negative working capital of $38.0 million, an accumulated
deficit of $101.6 million, and stockholders' deficit of $20.2 million.

      During fiscal 1997 the Company extended payment terms with many suppliers
in order to increase the availability of on-hand cash. As a result the Company
experienced difficulty in procuring inventory and subcontract manufacturing
services from some suppliers. At the present time the Company is not in
compliance with the agreed payment terms with many of its suppliers and there
can be no assurance that such suppliers will continue to ship supplies to the
Company if the Company does not comply with such terms.

      During fiscal 1997, operating activities used cash of $52.5 million,
compared with generating $2.6 million of cash in fiscal 1996, due primarily to a
net loss of $86.7 million in fiscal 1997 compared with net income of $18.2
million in fiscal 1996. Net inventory decreased $16.0 million as a result of
write-downs for obsolete and slow moving inventory. Accounts payable increased
$9.6 million due to the Company's taking longer to pay amounts due. The
Company's payable to Fujitsu decreased $14.9 million due primarily to payment of
overdue invoices.

      The Company's investing activities in fiscal 1997 used $6.3 million of
cash, a decrease from approximately $13.3 million for fiscal 1996. The higher
amount in fiscal 1996 was primarily attributable to the Company's occupying a
larger manufacturing facility, resulting in associated higher equipment and
leasehold improvement costs.

      Cash generated by financing activities increased by $17.1 million to $43.7
million in fiscal 1997 from $26.6 million in fiscal 1996. In fiscal 1997 the
Company borrowed $43.5 million under the New Credit Facility from DKB. In fiscal
1996 the Company completed its initial public offering, which generated $64.3
million and was used in part to repay the original DKB credit facility of $35.5
million.

      During the fourth quarter of fiscal 1996, the Company repaid the
outstanding principal amount of $35.5 million under its revolving line of credit
with DKB using proceeds from the Company's initial public offering on November
7, 1995. From July 1993 to November 7, 1996, all of the Company's bank
borrowings were pursuant to the DKB Credit Facility. The DKB Credit Facility
expired upon repayment. All of the Company's current borrowings are pursuant to
the New Credit Facility.

      The Company's payment terms with Fujitsu for purchases of silicon wafers
and MDPs are longer than those generally available from other suppliers.
Although the Company believes that such payment terms will not change in the
near future, there can be no assurance that Fujitsu will continue 


                                       28
<PAGE>   32

to extend such favorable payment terms to the Company. Shorter payment terms
would increase the Company's cash requirements.

      The Company anticipates that total payments under all operating leases
currently in place will be approximately $1.8 million and $1.0 million for each
of fiscal 1998 and 1999, respectively. These leases primarily cover the
Company's existing administrative and test facilities.

      The Company intends to incur additional capital expenditures of
approximately $8 million during the next 12 months, principally for computer
hardware and software, lab equipment and general office equipment and
furnishings.

      Because the Company must order raw materials, silicon wafers and
components and build finished goods inventory substantially in advance of
product shipments, there is continued risk that the Company will forecast
quantity and product mix incorrectly and, therefore, produce excess or
insufficient inventories. Because the markets for the Company's microprocessor,
module and system products are subject to rapid technological and price changes,
inventory may be subject to rapid obsolescence. The inventory risk is heightened
because the Company's customers usually place orders with short lead times. If
the Company forecasts incorrectly and produces insufficient inventory of
particular products, the Company may face order cancellations from or loss of
customers, who may seek to satisfy their needs from other suppliers. In general,
the Company's customers may change delivery schedules or cancel orders without
penalty. To the extent that the Company produces excess or insufficient
inventories of particular products, or inventory becomes obsolete, the Company's
results of operations and financial condition could be materially and adversely
affected.

      Based on the commitment from Fujitsu and the Company's current operating
plan, the Company believes that its cash requirements will be met through April
1, 1998. Beyond that time, the Company may require additional equity or debt
financing. There can be no assurance that additional capital, including capital
from bank borrowings, will be available on terms favorable to the Company, if at
all. To the extent that additional capital is raised through the sale of
additional equity or convertible debt securities, the issuance of such
securities could result in additional dilution to the Company's stockholders.
Moreover, the Company's cash requirements may vary materially from those now
planned because of changes in the Company's business or capital expenditure
plans, product plans or technology roadmap, changes in the Company's level of
product and manufacturing integration, results of research and development,
relationships with suppliers and customers, changes in the focus and direction
of the Company's research and development programs, competitive and
technological advances, the level of working capital required to sustain planned
growth, operating results (including the extent and duration of operating
losses), facilities, employment matters, and other factors.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

      The Consolidated Financial Statements of ROSS Technology, Inc. and
Subsidiary, and the report of independent auditors, are listed at Item 14 and
are included beginning on page F-1.


                                       29
<PAGE>   33


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

   Not applicable.



                                       30
<PAGE>   34
                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

   Information regarding directors and executive officers of the Registrant is
incorporated by reference from the sections entitled "Election of Directors" and
"Executive Officers of the Company" in the Proxy Statement for the Registrant's
1997 Annual Meeting of Stockholders.

ITEM 11. EXECUTIVE COMPENSATION

   The information required by this item is incorporated by reference from the
sections entitled "Certain Information Concerning the Board of Directors and its
Committees" and "Executive Compensation" in the Proxy Statement for the
Registrant's 1997 Annual Meeting of Stockholders.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

   The information required by this item is incorporated by reference from the
section entitled "Security Ownership of Certain Beneficial Owners and
Management" in the Proxy Statement for the Registrant's 1997 Annual Meeting of
Stockholders.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

   The information required by this item is incorporated by reference from the
sections entitled "Executive Compensation" and "Certain Relationships and
Related Transactions" in the Proxy Statement for the Registrant's 1997 Annual
Meeting of Stockholders.



                                       31
<PAGE>   35



                                 PART IV

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

(a) (1) and (2) Financial Statements and Schedules

          Index to Financial Statements                                    F - 1

         All other schedules for which provision is made in the applicable rules
and regulations of the Securities and Exchange Commission have been omitted as
the schedules are not required under the related instructions, are not
applicable, or the information required thereby is set forth in the consolidated
financial statements or notes thereto.

    

    (3)     Exhibits

<TABLE>
<CAPTION>
   Exhibit
     No.                         Description
   -------                       -----------
<S>           <C>
   3.1-       Restated Certificate of Incorporation of Registrant*

   3.2-       Restated By-Laws of the Registrant*

   4.1-       Specimen of Common Stock Certificate**

   4.2-       Stock Purchase Warrant issued by the Registrant to Sun
              Microsystems, Inc.*

   10.1-      Stock Option Plan and Restricted Stock Purchase Plan 2.0**

   10.2-      Form of Incentive Stock Option Agreement for options granted under
              Stock Option and Restricted Stock Purchase Plan 2.0 prior to
              August, 1995, to employees hired before June 28, 1993**

   10.3-      Form of Incentive Stock Option Agreement for options granted under
              Stock Option and Restricted Stock Purchase Plan 2.0 prior to
              September, 1995, to employees hired on or after June 28, 1993**

   10.4-      Form of Incentive Stock Option Agreement for options granted under
              Stock Option and Restricted Stock Purchase Plan 2.0 prior to
              September, 1995, to employees hired on or after January 1, 1995**

   10.5-      Employment Agreement of Roger Ross**

   10.6-      Employment Agreement of Mitchell Alsup**
</TABLE>


                                       32
<PAGE>   36
<TABLE>
<S>           <C>
   10.7-      Employment Agreement of Trevor Smith**

   10.8-      Employment Agreement of John Horner**

   10.9-      Purchase and Support Agreement, dated January 27, 1995, between
              the Registrant and SunService Division of Sun Microsystems,
              Inc.**+

   10.10-     Letter dated October 13, 1994, to the Registrant from Sun
              Microsystems, Inc.**+

   10.11-     Contractor Design Agreement, dated July 15, 1995, between the
              Registrant, Fujitsu Limited and PUYALLUP Integrated Circuit
              Company, Inc.**+

   10.12-     Procurement Agreement, dated November 16, 1994, between the
              Registrant and MicroModule Systems**+

   10.13-     Security Agreement, dated December 14, 1994, between the
              Registrant and MicroModule Systems**

   10.14-     General SPARC Trademark License Amendment, dated July 1, 1992,
              between the Registrant and SPARC International**

   10.15-     Specific SPARC Trademark License Amendment, dated July 1, 1992,
              between the Registrant and SPARC International**

   10.16-     Compliance Testing Agreement, dated September 2, 1993, between the
              Registrant and SPARC International**

   10.17-     Software License Agreement, dated April 7, 1995, between the
              Registrant and Fujitsu Limited**

   10.18-     Lease Agreement for Office Space, dated May 20, 1991, and first
              amendment and second addendum thereto, between the Registrant and
              Texas Commerce Bank, dated January 24, 1992 and June 19, 1992,
              respectively**

   10.18.1-   Second Amendment to Lease Agreement, dated December 7, 1995,
              between the Registrant and Oak Hill Office Partners, Ltd. ***


   10.18.2-   Third Amendment to Lease Agreement, dated April 23, 1996, between
              the Registrant and Oak Hills Office Partners, Ltd. ***

   10.19-     Commercial Lease Agreement, dated April 30, 1990, between the
              Registrant and Texas Commerce Bank**
</TABLE>



                                       33
<PAGE>   37
<TABLE>
<S>           <C>
   10.20-     Lease Agreement, dated May 19, 1995, between the Registrant and
              Security Capital Industrial Trust**

   10.21-     Master Lease Agreement, dated January 25, 1995, with amendments
              thereto, between the Registrant and Comdisco, Inc.**

   10.22-     Purchase and Assignment Agreement, dated January 27, 1995, between
              the Registrant and Capitol Resource Funding, Inc.**

   10.23-     Second Amended and Restated Loan Agreement, dated March 15, 1995,
              between the Registrant and The Dai-Ichi Kangyo Bank, Limited**

   10.24-     Letter of Guaranty dated February 7, 1995, from Fujitsu Limited to
              The Dai-Ichi Kangyo Bank, Limited**

   10.25-     Form of Incentive Stock Option Agreement approved for options
              granted during and after September, 1995**

   10.26-     Form of Nonqualified Stock Option Agreement for options granted
              during and after September, 1995**

   10.27-     1995 Qualified Employee Stock Purchase Plan**

   10.28-     Securities Purchase Agreement between the Registrant and Sun
              Microsystems, Inc.*

   10.29-     Shareholders Agreement among the Registrant, Roger D. Ross,
              Fujitsu Limited and Sun Microsystems, Inc.*

   10.30-     Indemnity Agreement between the Registrant and Fujitsu Limited*

   10.31-     Form of Indemnity Agreement between the Registrant and certain
              Directors and Officers**

   10.32-     Underwriting Agreement, dated as of November 6, 1995, between the
              Registrant, on the one hand, and Robertson, Stephens & Company,
              L.P. and Paine Webber Incorporated as representatives of the
              several underwriters named therein, on the other hand*

   10.33-     Office Lease Agreement, dated February 1, 1996, between the
              Registrant and NationsBank of Texas, N.A. ***

   10.34-     Sublease, dated February 1, 1996, between the Registrant and UHC
              Management Company, Inc. ***
</TABLE>


                                       34
<PAGE>   38
<TABLE>
<S>           <C>
   10.35-     Letter dated December 5, 1995, to the Registrant from Sun
              Microsystems, Inc. ***+

   10.36-     Credit Agreement dated as of September 23, 1996, by and among
              Registrant, The Chase Manhattan Bank and Texas Commerce Bank
              National Association ****

   10.37-     Promissory Note between the Company and The Dai-Ichi Kangyo Bank
              Limited, dated November 18,1996 *****

   10.38-     Letter of Guaranty between Fujitsu Limited and The Dai-Ichi 
              Kangyo Bank Limited, dated November 19, 1996*****

   10.39-     Letter Agreement between the Registrant and Francis "Kit" Webster
              III, dated April 1, 1997

   10.40-     Letter Agreement between the Registrant and Frank A. Baffi, dated
              April 12, 1997.

   10.41-     Letter Agreement between the Registrant and Jack W. Simpson, Sr.
              dated May 5, 1997, and associated addendum dated May 13, 1997

   10.42-     Amended and Restated Loan Agreement, dated April 24, 1997, by and
              between Registrant and The Dai-Ichi Kangyo Bank, Limited
              (including form of Promissory Note).

   10.43-     Development Agreement, dated as of March 31, 1997, by and between
              Fujitsu Limited and Registrant++

   10.44-     Development Agreement, dated as of June 25, 1997, by and between
              Fujitsu Limited and Registrant++

   10.45-     Loan Agreement dated as of November 15, 1996 by and between 
              Ross Technology, Inc. and The Dai-Ichi Kangyo Bank, Limited

   10.46-     Termination and Release Agreement dated as of February 26, 1997
              between the Company and The Chase Manhattan Bank******

   10.47-     Letter of Guarantee dated February 20, 1997 from Fujitsu Limited
              to The Dai-Ichi Kangyo Bank, Limited******

   11-        Earnings per share computations

   21-        Subsidiaries of the Registrant

   23-        Consent of KPMG Peat Marwick LLP

   27-        Financial Data Schedule
</TABLE>


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

*Incorporated by reference to identically numbered exhibits to the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended January 1, 1996.



                                       35
<PAGE>   39

**Incorporated by reference to identically numbered exhibits to the Registrant's
Registration Statement on Form S-1 (Registration No. 33-95878) effective as of
November 6, 1995.

***Incorporated by reference to identically numbered exhibits to the
Registrant's Annual Report on Form 10-K for the fiscal year ended April 1, 1996.

****Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q
for the fiscal quarter ended September 30, 1996.

*****Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q
for the fiscal quarter ended December 30, 1996.

******Incorporated by reference to the Registrant's Current Report on
Form 8-K dated March 21, 1997.

+Certain portions of this Exhibit were omitted and filed separately with the
Securities and Exchange Commission under an application for confidential 
treatment, which application was granted by the Commission.

++Certain portions of this Exhibit have been omitted and filed separately under
an application for confidential treatment.

(b)  Reports on Form 8-K

      A Current Report on Form 8-K was filed on March 21, 1997, and included the
resignation of Roger D. Ross, Chairman, President, and Chief Executive Officer
of the Company, and the establishment of a $25 million credit facility with
Dai-Ichi Kangyo Bank, Limited, guaranteed by Fujitsu.





                                       36
<PAGE>   40
                                   SIGNATURES

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

June 30, 1997                       ROSS TECHNOLOGY, INC.
                                    a Delaware corporation


                                    By:. /s/ Jack W. Simpson, Sr
                                        ------------------------------------
                                        Jack W. Simpson, Sr.
                                        Director, Chief Executive Officer and
                                        President






                                       37
<PAGE>   41
      Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
Signature                        Title                                     Date
---------                        -----                                     ----
<S>                              <C>                                       <C> 
By:  /s/ Fred T. May             Chairman of the Board                     June 24, 1997
   ----------------------------
     Fred T. May

By:  /s/ Francis S. Webster III   Chief Financial Officer                  June 24, 1997
   ----------------------------
     Francis S. Webster III

By:  /s/ Carter L. Godwin         Chief Accounting Officer and             June 24, 1997
   ----------------------------   Corporate Controller
     Carter L. Godwin         

By:  /s/ Ryusuke Hoshikawa        Director                                 June 24, 1997
   ----------------------------
      Ryusuke Hoshikawa

By:  /s/ William J. Raduchel      Director                                 June 24, 1997
   ----------------------------
     William J. Raduchel

By:  /s/ Roger D. Ross            Director                                 June 24, 1997
   ----------------------------
     Roger D. Ross

By:  /s/ Masahiro Saida           Director                                 June 24, 1997
   ----------------------------
     Masahiro Saida

By:  /s/ Yasushi Tajiri           Director                                 June 24, 1997
   ----------------------------
     Yasushi Tajiri

By:  /s/ Edward F. Thompson       Director                                 June 24, 1997
   ----------------------------
     Edward F. Thompson

By:  /s/ Seiichi Yoshikawa        Director                                 June 24, 1997
   ----------------------------
     Seiichi Yoshikawa
</TABLE>




                                       38
<PAGE>   42

                      Ross Technology, Inc. and Subsidiary
                   Index to Financial Statements and Schedule

<TABLE>
<CAPTION>
                                                                            Page Number
                                                                            -----------
<S>                                                                         <C>
         Independent Auditors' Report                                          F-2

         Consolidated Balance Sheets as of March 31, 1997 and April 1, 1996    F-3

         Consolidated Statements of Operations for the years ended
         March 31, 1997, April 1, 1996 and April 3, 1995                       F-4

         Consolidated Statements of Stockholders' Equity (Deficit) for the 
         years ended March 31, 1997, April 1, 1996 and April 3, 1995           F-5

         Consolidated Statements of Cash Flows for the years ended
         March 31, 1997, April 1, 1996 and April 3, 1995                       F-6

         Notes to Consolidated Financial Statements                            F-7

 2. Financial Statement Schedules

         Schedule II - Valuation and Qualifying Accounts                       F-17
</TABLE>



                                      F-1
<PAGE>   43
                          INDEPENDENT AUDITORS' REPORT



The Board of Directors
ROSS Technology, Inc.:


We have audited the accompanying consolidated balance sheets of ROSS Technology,
Inc. and subsidiary as of March 31, 1997 and April 1, 1996, and the related
consolidated statements of operations, stockholders' equity (deficit) and cash
flows for each of the years in the three-year period ended March 31, 1997. In
connection with our audits of the consolidated financial statements, we also
have audited financial statement schedule II. These consolidated financial
statements and financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedule based on our
audits.

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

As discussed in note 1, the Company is dependent on its Parent, Fujitsu Limited,
for its cash and capital requirements.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of ROSS Technology,
Inc. and subsidiary as of March 31, 1997 and April 1, 1996, and the results of
their operations and their cash flows for each of the years in the three-year
period ended March 31, 1997, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, 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.





                                                      KPMG Peat Marwick LLP




Austin, Texas
June 23, 1997




                                      F-2
<PAGE>   44
                              ROSS TECHNOLOGY, INC.
                                 AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEETS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

                                     ASSETS

<TABLE>
<CAPTION>
                                                                    MARCH 31,    APRIL 1,
                                                                      1997         1996
<S>                                                                <C>            <C>     
Current assets:
  Cash and cash equivalents ..................................     $   2,811      $ 17,941
  Trade accounts receivable, net (note 4) ....................        11,297        16,207
  Receivable from Fujitsu (note 12) ..........................         3,320         6,780
  Inventory (note 5) .........................................        16,308        32,321
  Prepaid expenses ...........................................         3,331         2,706
                                                                   ---------      --------
          Total current assets ...............................        37,067        75,955
Property and equipment, net (note 6) .........................        17,752        16,119
Deferred tax asset (note 10) .................................            --         2,182
Intangible assets, net (note 7) ..............................            --         3,637
                                                                   ---------      --------

                   Total assets ..............................     $  54,819      $ 97,893
                                                                   =========      ========


                           LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:
  Trade accounts payable .....................................     $  19,194      $  9,587
  Accrued liabilities (note 5) ...............................         8,307         3,103
  Payable to Fujitsu (note 12) ...............................         4,043        18,929
  Notes payable (note 8) .....................................        43,500            --
                                                                   ---------      --------

          Total current liabilities ..........................        75,044        31,619
                                                                   ---------      --------
Commitments and contingencies (note 11)

Stockholders' equity (deficit) (note 14):
  Series A preferred stock, $.001 par value,
    75,000 shares authorized, none issued or outstanding .....            --            --
  Common stock, $.001 par value, 100,000
    shares authorized, 23,843 shares issued and 23,522
    outstanding at March 31, 1997, and
    23,421 shares issued and 23,100 outstanding
    at  April 1, 1996 ........................................            23            23
  Additional paid-in capital .................................        82,564        82,358
  Accumulated deficit ........................................      (101,561)      (14,856)
                                                                   ---------      --------
                                                                     (18,974)       67,525
  Less treasury stock, 321 shares, at cost ...................        (1,251)       (1,251)
                                                                   ---------      --------
          Total stockholders' equity (deficit)
            (note 11) ........................................       (20,225)       66,274
                                                                   ---------      --------
          Total liabilities and
            stockholders' equity (deficit) ...................     $  54,819      $ 97,893
                                                                   =========      ========
</TABLE>

            See accompanying notes to consolidated financial statements.



                                      F-3
<PAGE>   45
                              ROSS TECHNOLOGY, INC.
                                 AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)


<TABLE>
<CAPTION>
                                     YEAR ENDED     YEAR ENDED    YEAR ENDED
                                       MARCH 31,       APRIL 1,      APRIL 3,
                                           1997           1996          1995
                                      ---------      ---------      --------
<S>                                   <C>            <C>            <C>     
Net sales (note 12) .............     $  83,104      $ 100,805      $ 39,021
Cost of sales (note 12) .........       107,951         53,921        26,728
                                      ---------      ---------      --------
  Gross profit (loss) ...........       (24,847)        46,884        12,293
                                      ---------      ---------      --------
Operating expenses:
   Research and development,
     net (note 12) ..............        24,659         15,906        13,154
  Selling, general and
    administrative ..............        31,137         10,495         5,143
  In-process research
    and development (note 3) ....            --             --         1,821
  Amortization of
    intangibles (note 7).........         3,637          1,166         1,114
                                      ---------      ---------      --------
       Total operating expenses .        59,433         27,567        21,232
                                      ---------      ---------      --------
      Income (loss) from
         operations .............       (84,280)        19,317        (8,939)
Other income (expense):
  Interest income ...............            --            527            --
  Interest expense ..............        (1,472)        (2,001)       (1,642)
                                      ---------      ---------      --------
      Income (loss) before
         income taxes ...........       (85,752)        17,843       (10,581)
Income tax expense
  (benefit) (note 10) ...........           953           (317)           88
                                      ---------      ---------      --------
      Net income (loss) .........     $ (86,705)     $  18,160      $(10,669)
                                      =========      =========      ========

Net income (loss)  ..............     $ (86,705)     $  18,160      $(10,669)
Dividends related to
  preferred shares ..............            --           (832)         (176)
                                      ---------      ---------      --------
Net income (loss) applicable 
  to common shareholders ........     $ (86,705)     $  17,328      $(10,845)
                                      =========      =========      ========
Net income (loss) per
  common share ..................     $   (3.71)     $    0.83      $  (1.47)
                                      =========      =========      ========
Weighted average common and
  common equivalent shares 
  outstanding ...................        23,396         20,880         7,356
                                      =========      =========      ========
</TABLE>

          See accompanying notes to consolidated financial statements.



                                      F-4
<PAGE>   46
                              ROSS TECHNOLOGY, INC.
                                 AND SUBSIDIARY

            CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                     SERIES A                                                                         TOTAL
                                  PREFERRED STOCK        COMMON STOCK      ADDITIONAL                             STOCKHOLDERS'
                                 -----------------     -----------------     PAID-IN    ACCUMULATED    TREASURY       EQUITY
                                 SHARES     AMOUNT     SHARES     AMOUNT     CAPITAL      DEFICIT        STOCK       (DEFICIT)
<S>                              <C>         <C>        <C>       <C>        <C>         <C>            <C>          <C>      
Balances at April 4, 1994        18,000      $ 18       7,200     $    7     $17,875     $ (21,515)     $    --      $ (3,615)
Net loss                             --        --          --         --          --       (10,669)          --       (10,669)
                                 ------      ----       -----     ------     -------     ---------      -------      -------- 
Balances at April 3, 1995        18,000        18       7,200          7      17,875       (32,184)          --       (14,284)

Conversion of preferred
  stock                         (18,000)      (18)      7,200          7          11            --           --            --

Issuance of common
  stock in initial public
  offering, net of
  offering expenses
  of $1,844                          --        --       5,082          5      64,341            --           --        64,346
Payment of preferred 
  stock dividends                    --        --          --         --          --          (832)          --          (832)
Treasury stock received 
  through sale of 
  subsidiary                         --        --          --         --          --            --       (1,251)       (1,251)
Exercise of stock options            --        --       3,939          4         131            --           --           135
Net income                           --        --          --         --          --        18,160           --        18,160
                                 ------      ----       -----     ------     -------     ---------      -------      -------- 

Balances at April 1, 1996            --        --      23,421         23      82,358       (14,856)      (1,251)       66,274

Stock issuances under
  employee plans                     --        --         422         --         206            --           --           206
Net loss                             --        --          --         --          --       (86,705)          --       (86,705)
                                 ------      ----       -----     ------     -------     ---------      -------      -------- 
Balances at March 31, 1997           --   $    --      23,843     $   23     $82,564     $(101,561      $(1,251)     $(20,225)
                                 ======      ====       =====     ======     =======     =========      =======      ======== 
</TABLE>


            See accompanying notes to consolidated financial statements.



                                      F-5
<PAGE>   47
                              ROSS TECHNOLOGY, INC.
                                 AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                         YEAR ENDED   YEAR ENDED     YEAR ENDED
                                          MARCH 31,     APRIL 1,       APRIL 3,
                                            1997          1996          1995
                                          --------      --------      -------- 
<S>                                       <C>           <C>           <C>      
Cash flows from operating activities:
  Net income (loss) .................     $(86,705)     $ 18,160      $(10,669)
  Adjustments to reconcile
      net income (loss) to
      net cash provided by (used in)
      operating activities:
    Deferred income taxes ...........        2,182        (2,182)           --
    Depreciation ....................        5,077         3,525         2,616
    Amortization of goodwill ........        3,637         1,166         1,114
    Acquisition of in-process
      research and development ......           --            --         1,821
    Gain on disposal of assets ......         (392)           --            --
    Change in assets and
        liabilities:
      Trade accounts receivable .....        4,910        (6,587)       (7,144)

      Receivable from Fujitsu .......        3,460        (4,658)         (912)
      Inventory .....................       16,013       (18,559)       (8,852)
      Prepaid expenses ..............         (625)       (2,305)          503
      Trade accounts payable ........        9,607         2,358         1,918
      Payable to Fujitsu ............      (14,886)       10,919         8,010
      Accrued liabilities ...........        5,204           809          (163)
                                          --------      --------      -------- 
          Net cash provided
           by (used in) operating
           activities ...............      (52,518)        2,646       (11,758)
                                          --------      --------      -------- 
Cash flows from investing activities:
   Capital expenditures .............       (6,968)      (13,267)       (2,630)
   Proceeds from disposal of
     assets .........................          650            --            --

  Acquisition of PeQuR
    Technology, Inc. ................           --            --          (271)
  Issuance of note receivable .......           --            --          (372)
                                          --------      --------      -------- 
         Net cash used in investing
          activities ................       (6,318)      (13,267)       (3,273)
                                          --------      --------      -------- 
Cash flows from financing
activities:
  Stock issuances under
    employee plans ..................          206           135            --
  Payments on notes payable .........           --       (37,023)         (491)
  Proceeds from borrowings on
    notes payable ...................       43,500            --        15,000

  Proceeds from issuance of
    common stock ....................           --        64,346            --

  Payment of preferred stock
    dividends .......................           --          (832)           --
                                          --------      --------      -------- 

        Net cash provided by
          financing activities ......       43,706        26,626        14,509
                                          --------      --------      -------- 

        Net increase (decrease)   
          in cash and cash 
          equivalents ...............      (15,130)       16,005          (522)
Cash and cash equivalents at
  beginning of year .................       17,941         1,936         2,458
                                          --------      --------      -------- 
Cash and cash equivalents at end
   of year ..........................     $  2,811      $ 17,941      $  1,936
                                          ========      ========      ======== 

SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:

 Taxes paid .........................     $  1,225      $    997      $    --
 Interest paid .....................      $    458      $  2,001      $ 1,256
</TABLE>


            See accompanying notes to consolidated financial statements.



                                      F-6
<PAGE>   48
                              ROSS TECHNOLOGY, INC.
                                 AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

      ROSS Technology, Inc. and subsidiary (the "Company") is an affiliate of
Fujitsu Limited ("Fujitsu"), a Japanese corporation. The Company designs,
manufactures and markets high performance microprocessor and system products
utilizing the SPARC architecture, the dominant RISC architecture. The principal
market for the Company's products is the OEM market for computer workstations,
primarily in the U.S. and Japan.

Fujitsu owned approximately 60% of the outstanding shares of the common stock of
the Company as of March 31, 1997.

In fiscal 1997 the Company incurred an operating loss of approximately $84.3
million, negative working capital of approximately $38 million and cash used in
operating activities was approximately $52.5 million, and as of March 31, 1997,
stockholders' deficit was approximately $20.2 million. The Company is dependent
on its parent, Fujitsu, for its cash and capital requirements. In June 1997, the
Company received a letter from Fujitsu stating that, "In accordance with our 
plan for ROSS Technology, we (Fujitsu) are ready to provide the necessary 
funding through debt guarantees or other types of financing for ROSS 
Technology not to incur cash flow shortages through April 1, 1998."

Summary of Significant Accounting Policies

Principles of Consolidation -- The consolidated financial statements of the
Company include the accounts of ROSS Technology, Inc. and its wholly-owned
subsidiaries ROSS Semiconductors (Israel), Ltd. and ROSS Computer Corp. ("RCC")
(see note 2 for discussion of sale of RCC in 1996). All significant intercompany
balances and transactions have been eliminated.

 Accounting Period -- The Company's fiscal year ends on the Monday closest to
March 31.

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 amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Significant Accounting Estimates - Inventory and Inventory Purchase Orders - The
Company's estimate for lower of cost or market for inventory and the accrual for
excess inventory purchase orders are based on the Company's best estimates of
product sales prices and customer demand patterns and/or its plans to transition
its product mix. However, the Company participates in a highly competitive
industry that is characterized by aggressive pricing practices, downward
pressures on gross margins, rapid technological advances, continual improvement
in product price-performance characteristics, and price sensitivity and changing
demand patterns on the part of customers. As a result of the industry's
ever-changing and dynamic nature, it is at least reasonably possible that the
estimates used by the Company to determine lower of cost or market for inventory
amounts and the accrual for excess inventory purchase orders will be materially
different from the actual amounts recorded. These differences could result in
materially higher or lower than expected inventory costs, which could have a
material effect on the Company's results of operations and financial condition
in the near term.

Cash Equivalents -- The Company considers all highly liquid investments
purchased with original maturities of three months or less to be cash
equivalents.


                                      F-7
<PAGE>   49


Inventory -- Inventory is stated at the lower of cost (principally standard cost
which approximates actual cost on a first-in, first-out basis) or market.
Provisions are made currently for the difference between the cost and the
estimated market value of inventory.

Property and Equipment -- Property and equipment are stated at cost, which
approximated fair market value at the date of acquisition. Depreciation on
property and equipment is calculated on the straight-line method over the
estimated useful lives of the assets which range from three to six years.

Intangible Assets -- Intangible assets consist of goodwill arising in the
purchase of the Company by Fujitsu, and, in 1996 and 1995 to RCC's purchase of
substantially all of the assets of PeQuR Technology, Inc. ("PeQuR") (see note
2), and are being amortized on the straight-line method over six years. The
Company assesses the recoverability of its intangible assets by determining
whether the amortization of the intangible asset balance over its remaining life
can be recovered through undiscounted projected future cash flows over the
remaining amortization period. The amount of goodwill impairment, if any, is
measured based on projected discounted future operating cash flows.

Income Taxes -- Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in years in which those
temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
the period that includes the enactment date. A valuation allowance is
provided for deferred tax assets which are not considered more likely than
not to be realized.

The Company files a separate income tax return from Fujitsu, and accordingly it
accounts for income taxes as if it were a stand-alone company.

Revenue Recognition -- The Company recognizes revenue when product is shipped to
customers. Shipments to distributors are not recognized as revenue until the
product is sold by the distributor.

Warranty Expense -- The Company generally offers a one-year warranty on the
majority of its products sold. Warranty costs are accrued and expensed when the
related product is sold.

Stock Option Plan - Prior to April 2, 1996, the Company accounted for its stock
option plan in accordance with the provisions of Accounting Principles Board
("APB") Opinion No. 25, Accounting for Stock Issued to Employees, and related
interpretations. As such, compensation expense would be recorded on the date of
grant only if the current market price of the underlying stock exceeded the
exercise price. On April 2, 1996, the Company adopted SFAS No. 123, Accounting
for Stock-Based Compensation, which permits entities to recognize as expense
over the vesting period the fair value of all stock-based awards on the date of
grant. Alternatively, SFAS No. 123 also allows entities to continue to apply the
provisions of APB Opinion No. 25 and provide pro forma net income and pro forma
earnings per share disclosures for employee stock option grants made in fiscal
year 1996 and future years as if the fair-value-based method defined in SFAS No.
123 had been applied. The Company has elected to continue to apply the
provisions of APB Opinion No. 25 and provide the pro forma disclosure provisions
of SFAS No. 123.

Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of - The
Company adopted the provisions of SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of, on April 2, 1996.
This Statement requires that long-lived assets and certain identifiable
intangibles be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceed the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying amount or fair value less costs to
sell. Adoption of this Statement did not have a material impact on the Company's
financial position, results of operations, or liquidity.


                                      F-8
<PAGE>   50


Earnings (Loss) Per Share - Earnings (loss) per share are computed using the
weighted average number of common and common equivalent shares outstanding
during each period. Common equivalent shares include stock options and
convertible preferred shares. For fiscal 1996 and 1995, pursuant to Securities
and Exchange Commission Staff Accounting Bulletin No. 83, stock options issued
during the twelve months immediately preceding the Company's initial public
offering filing date have been included in the calculation of common and common
equivalent shares using the treasury stock method and the initial public
offering price as if they were outstanding for all periods. The number of shares
of common stock and common equivalent shares outstanding for fiscal 1997 was
computed on a basis consistent with APB Opinion No. 15. Common stock equivalents
resulting from convertible preferred shares and other stock options are excluded
during loss periods when their result is anti-dilutive.

In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 128, Earnings Per Share. FASB
Statement No. 128 supersedes APB Opinion No. 15, Earnings Per Share, and
specifies the computation, presentation, and disclosure requirements for
earnings per share ("EPS"). It replaces Primary EPS and Fully Diluted EPS with
Basic EPS and Diluted EPS, respectively. Basic EPS, unlike Primary EPS, excludes
all dilution while Diluted EPS, like Fully Diluted EPS, reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock or resulted in the issuance of
common stock that then shared in the earnings of the entity. Statement No. 128
is effective for financial statements for both interim and annual periods
ending after December 15, 1997. Earlier adoption is not permitted. Basic loss
per share calculated in accordance with Statement No. 128 would have been
$3.71 for the fiscal year ended March 31, 1997.

Reclassification -- Certain reclassifications have been made to conform prior
years data to the current presentation.

(2) ACQUISITION OF ASSETS OF PEQUR TECHNOLOGY, INC. AND SUBSEQUENT DISPOSITION

On January 4, 1995, RCC, then a wholly owned subsidiary of the Company,
purchased substantially all of the assets of PeQuR, a company which designs
microprocessor support products. The purchase price consisted of amounts to be
paid to the stockholders of PeQuR consisting of a promissory note of $1,334,836,
future cash consideration of $480,000, legal fees of $270,872 and the
forgiveness of a promissory note receivable from PeQuR of $372,000. Through the
application of the purchase method of accounting, the $2,457,708 purchase price
was allocated based on the estimated fair values of assets purchased, consisting
of certain property and equipment and acquired in-process research and
development costs (see note 3). The operations of RCC, which were not
significant, have been included in the Company's consolidated financial
statements from the date of acquisition until its disposition.

On March 26, 1996, the Company transferred all of the outstanding stock of RCC
to Fujitsu, for which the Company received 321,429 shares of the Company's
common stock from Fujitsu. The Company treated the common stock received as
treasury stock and valued it under the cost method. The cost of the treasury
stock consisted of approximately $700,000 representing the net book value of
non-cash assets transferred to Fujitsu, a consideration payable for $200,000 by
the Company to RCC, and liabilities assumed of $351,000. Subsequent to the sale
of RCC to Fujitsu, RCC changed its name from ROSS Computer Corp. to Reliance
Computer Corporation.

(3) ACQUISITION OF IN-PROCESS RESEARCH AND DEVELOPMENT

In connection with the Company's acquisition of PeQuR, the Company completed an
extensive review of the acquired company's existing products, in-process
research and development (projects that had not reached technological
feasibility), customers, sales channels, sales personnel and financial and other
matters in order to determine the fair market value. PeQuR was acquired
primarily for its research in-process, and not acquired for its earnings, cash
flow and net worth.

Although the Company believed this acquisition would enhance its access to
markets and customers, PeQuR's research and development in process were the
primary reasons for the acquisition.


                                      F-9
<PAGE>   51


The Company's technical staff placed a value of $1,821,000 on PeQuR's projects
in process, based on the expected future earnings to be derived from those
projects in process. The Company believes that the allocation is reasonable,
fair and supported by the facts. The amounts allocated to in-process research
and development were expensed immediately after the consummation of the
transaction.

(4) TRADE ACCOUNTS RECEIVABLE

Trade accounts receivable consists of the following:

<TABLE>
<CAPTION>
                                                  MARCH 31,      APRIL 1,
                                                      1997          1996
                                                  --------      --------
                                                      (IN THOUSANDS)
         <S>                                      <C>           <C>     
         Trade accounts receivable                $ 12,852      $ 18,264
         Less allowance for doubtful accounts       (1,555)       (2,057)
                                                  --------      --------
                                                  $ 11,297      $ 16,207
                                                  ========      ========
</TABLE>

The Company recorded a $16.5 million charge to write-off accounts receivable
in fiscal 1997. This amount is recorded in selling, general and administrative
expenses in fiscal 1997 in the accompanying financial statements.


(5) INVENTORY

   Inventory consists of the following:

<TABLE>
<CAPTION>
                             MARCH 31,   APRIL 1,
                                 1997        1996
                              -------     -------
                                 (IN THOUSANDS)
         <S>                  <C>         <C>    
         Die bank             $ 4,496     $ 6,282
         Work in progress       6,236      20,585
         Finished goods         5,576       5,454
                              -------     -------
                              $16,308     $32,321
                              =======     =======
</TABLE>

Die bank inventory, consisting of silicon wafers and cut and tested die, is
comparable to raw material inventory in other manufacturing industries. Work in
progress inventory includes work in process as well as the Company's inventories
of multi-die packages (MDPs) and components and sub-systems to be incorporated
into module, board, and system products. Finished goods inventory includes
finished module, board and system products as well as MDPs and ASICs offered for
sale to OEM customers.

The Company recorded a $38.9 million charge for its write-down of inventory in
fiscal 1997. This amount is recorded in cost of sales in fiscal 1997 in the
accompanying financial statements. In addition, the Company recorded a $5.2 
million accrual for the costs to cancel excess inventory purchase orders. 
This amount is recorded in accrued liabilities and cost of sales in fiscal 
1997 in the accompanying financial statements.

(6) PROPERTY AND EQUIPMENT

   Property and equipment consists of the following:

<TABLE>
<CAPTION>
                                                  MARCH 31,      APRIL 1,
                                                      1997          1996
                                                  --------      --------
                                                    (IN THOUSANDS)
         <S>                                      <C>           <C>     
         Buildings and leasehold improvements     $  2,699      $  2,127
         Equipment and tooling                      19,706        18,005
         Software                                    5,634         3,102
         Furniture and fixtures                        685           454
                                                  --------      --------
                                                    28,724        23,688
         Less accumulated depreciation             (10,972)       (7,569)
                                                  --------      --------
                                                  $ 17,752      $ 16,119
                                                  ========      ========
</TABLE>



                                      F-10
<PAGE>   52

(7) INTANGIBLE ASSETS

   Intangible assets consists of the following:


<TABLE>
<CAPTION>
                                          MARCH 31,     APRIL 1,
                                              1997         1996
                                           -------      -------
                                              (IN THOUSANDS)
         <S>                               <C>          <C>    
         Goodwill                          $ 6,530      $ 6,530
         Less accumulated amortization      (6,530)      (2,893)
                                           -------      -------
                                           $    --      $ 3,637
                                           =======      =======
</TABLE>

During 1997, the Company determined that projected future cash flows did not
support the goodwill amount and amortized the remainder of the goodwill in 1997.

(8) NOTES PAYABLE

   Notes payable consists of the following:

<TABLE>
<CAPTION>
                                               MARCH 31,   APRIL 1,
                                                   1997       1996
                                               --------    -------
                                                    (IN THOUSANDS)
     <S>                                         <C>        <C>    
     Notes payable to bank                       $43,500    $    --
                                                 =======    =======
</TABLE>

The notes payable to a bank at March 31, 1997, were outstanding under a
$50,000,000 revolving credit facility with a bank, due June 30, 1997 (since
extended to December 31, 1997). Interest accrues at the bank's quoted rate (5.8%
at March 31, 1997). The notes payable are guaranteed by Fujitsu.

(9) FAIR VALUE OF FINANCIAL INSTRUMENTS

The following method and assumptions were used to estimate the fair value of
each class of financial instrument for which it is practicable to estimate
value:

Receivables, Accounts Payable, Accrued Liabilities, Payable to Fujitsu and 
Notes Payable - The carrying amount approximates fair value because of the 
short maturity of these instruments.

(10) INCOME TAXES

A net income tax provision of $953,000 was recorded for the year ended March 31,
1997. The tax provision consists of a current income tax benefit of $1,229,000
and deferred tax expense of $2,182,000. The current income tax benefit is the
net of $1,300,000 attributable to a carryback of net operating loss to the year
ended April 1, 1996, and $71,000 of state taxes due for fiscal 1997. The
deferred tax expense resulted from the re-establishment of the April 1, 1996,
valuation allowance of $2,182,000 for the deferred tax asset. The net operating
loss carryback to the year ended April 1, 1996, resulted in an alternative
minimum tax credit.

For the year ended April 1, 1996, a $317,000 income tax benefit was recorded,
which consisted of current and deferred Federal income tax expense (benefit) of
$1,865,000 and ($2,182,000), respectively.

For the year ended April 3, 1995, an $88,000 provision was recorded, consisting
entirely of Federal alternative minimum tax.

The components of the net deferred tax asset as of March 31, 1997 and April 1,
1996, were as follows:



                                      F-11
<PAGE>   53

<TABLE>
<CAPTION>
                                                               1997        1996
                                                           --------      ------
                                                                (IN THOUSANDS)
<S>                                                        <C>        <C>      
Deferred tax asset:
     Net operating loss carryforwards                      $  5,710   $      --
     Property and equipment, principally due to
        difference in depreciation                              280         257
     Inventory write-downs                                   14,791         833
     Other accruals                                           3,033         393
     Accounts receivable, principally due to allowance
        for doubtful accounts                                 3,651         699
     Tax credit carryforwards                                   500          --
                                                           --------      ------
           Subtotal                                          27,965       2,182
     Valuation allowance                                    (27,965)         --
                                                           --------      ------
          Net deferred tax asset                           $     --      $2,182
                                                           ========      ======
</TABLE>

The net change in the total valuation allowance for the years ended March 31,
1997, and April 1, 1996, was an increase (decrease) of $27,965,000 and
($6,896,000), respectively. The Company has a Federal income tax net operating
loss carryforward of approximately $16,794,000 at March 31, 1997, expiring in
2011. Additionally, the Company has an alternative minimum tax credit
carryforward of approximately $500,000. At March 31, 1997, the Company has
provided a 100% valuation allowance of $27,965,000 against the deferred tax
asset due to the Company's recent losses and the lack of objective evidence
indicating that it is more likely than not that the asset will be recovered.

For the years ended March 31, 1997, April 1, 1996, and April 3, 1995, the tax
provision varies from the amounts computed by applying the statutory Federal
income tax rate to income (loss) before income taxes, primarily due to the
change in the beginning of the year valuation allowance for deferred tax assets.

(11) COMMITMENTS AND CONTINGENCIES

The Company leases its operating facility and certain equipment under
noncancelable operating leases with terms expiring in 1999 through 2002. Future
minimum lease payments under these leases at March 31, 1997, are:

<TABLE>
<CAPTION>
YEAR ENDING:                                        (IN THOUSANDS)
------------                                        --------------
<S>                                                  <C>   
1998                                                         $1,804
1999                                                          1,018
2000                                                            912
2001                                                            891
2002                                                            436
                                                             ------
                                                             $5,061
                                                             ======
</TABLE>

Rent expense for the Company was as follows:

<TABLE>
<S>                                                                 <C>       
Year ended March 31, 1997                                           $1,191,000
Year ended April 1, 1996                                               718,690
Year ended April 3, 1995                                               346,184
</TABLE>

The Company is subject to lawsuits and other claims arising in the ordinary
course of business. In the opinion of management, the effect of such matters 
will not have a material adverse effect on the Company's financial position 
or results of operations.


                                      F-12
<PAGE>   54
(12) TRANSACTIONS WITH AFFILIATES

The Company has transactions with Fujitsu arising in the normal course of
business. Included in revenue and purchases for the year ended March 31, 1997,
is approximately $17.9 million and $27.6 million relating, respectively, to
sales to and purchases from Fujitsu. The Company also paid to Fujitsu a guaranty
fee relating to Fujitsu's guaranty of the Company's bank debt equal to .5% of
the guaranty amount and interest on the intercompany payable at a rate of
LIBOR+3%. Included in revenue and purchases for the year ended April 1, 1996, is
approximately $18.9 million and $34.0 million, relating, respectively, to sales
to and purchases from Fujitsu. Included in revenue and purchases for the year
ended April 3, 1995, is approximately $7.6 million and $12.2 million relating,
respectively, to sales to and purchases from Fujitsu. Fujitsu provides
significant wafer fabrication resources to the Company.

In fiscal 1997 the Company entered into a Development Agreement with Fujitsu
whereby Fujitsu would partially fund the development of a derivative of the
Company's Colorado 4 microprocessor. During 1997 the Company received $3.5
million pursuant to this agreement, $2 million of which was applied against
research and development expenses and $1.5 million of which was recorded in
accrued liabilities. The Development Agreement provides for future payments to
the Company upon completion of certain milestones and acceptance by Fujitsu.

During the Company's initial public offering, Sun Microsystems, Inc. purchased
approximately five percent of the outstanding common stock of the Company.  In
addition, Sun Microsystems, Inc. is a significant customer of the Company.

(13) 401(k) PLAN

The Company has an employee benefit plan (the Plan) qualifying under Section
401(k) of the Internal Revenue Code for all eligible employees. Eligible
employees may defer a portion of their annual compensation under the Plan
subject to maximum limitations. The requirements for eligibility include a
minimum age of 21. Contributions to the Plan are made at the discretion of the
Company and amounted to $0, $215,000 and $115,000 for the years ended March 31,
1997, April 1, 1996, and April 3, 1995, respectively.

(14) STOCKHOLDERS' EQUITY

1994 Plan of Recapitalization

 On August 18, 1994, the Board of Directors adopted a plan of recapitalization
which converted the 1,000 shares of common stock authorized at $1 par value, all
of which were issued and outstanding to Fujitsu, into 100,000,000 shares of
common stock at $.001 par value and 75,000,000 shares of Series A preferred
stock at $.001 par value. Of the newly authorized stock, 7,200,000 shares of the
common stock and 18,000,000 shares of preferred stock were issued to Fujitsu,
which remains the Company's principal shareholder.

Reverse Stock Split

On November 2, 1995, the Company's common stock underwent a two-for-five reverse
stock split. All share and per share information in the accompanying
consolidated financial statements have been adjusted to reflect this reverse
stock split.

Series A Preferred Stock

Series A preferred shares are subject to the rights, preferences, restrictions
and other matters set forth in the Company's Restated Certificate of
Incorporation. The holder of these preferred shares is entitled to, among other
things, cumulative dividends, liquidation preferences, conversion rights, and
voting rights.


                                      F-13
<PAGE>   55


The holders of Series A preferred stock are entitled to receive dividends, when
declared, which accrue annually from the issue date at the rate of $.0588 per
share. In addition, the holders of Series A preferred stock are entitled to
receive payment of $.9804 per share, plus an amount equal to all unpaid cash
dividends, prior to any payment to a holder of common stock in the event of
liquidation of the Company. All of the outstanding Series A preferred stock was
converted into 7,200,000 shares of common stock at the time of the Company's
initial public offering at which time a $832,000 dividend was paid.

Stock Option Plans

The Company has adopted a Stock Option and Restricted Stock Plan (the Plan)
under which a maximum aggregate of 5,575,000 shares of common stock has been
reserved for grant to employees, Directors, consultants and advisors. The Plan
provides for grants of incentive stock options, nonstatutory stock options and
restricted common stock. Under the Plan the option price for incentive stock
options may not be less than the fair market value of the stock at the time the
options are granted.

Under the terms of the Plan options can be granted for no more than ten years
and expire on the earlier of the expiration date or six months after termination
of employment, unless termination of employment is due to death or disability,
whereby the options expire eighteen months after the termination of employment.
Vesting is determined by the Stock Option Committee of the Board of Directors.
The majority of stock options granted under the Plan vest 40% two years
following the later of the optionee's hire date or June 30, 1993, with the
remaining 60% vesting monthly over the following three years.  The stock options
granted prior to August 1995 for persons who became employees prior to January
1, 1995 vested 100% as a result of the initial public offering of the Company's
stock.

The Company applies APB Opinion No. 25 and related interpretations in accounting
for its stock option and stock purchase plans.  Had compensation cost been
recognized consistent with SFAS No. 123 the Company's net income (loss) and
income (loss) per share would have been reduced to pro forma amounts indicated
below for the years ended March 31, 1997 and April 1, 1996 (in thousands, except
net income (loss) per share amounts):

<TABLE>
<CAPTION>
                                              1997                    1996
                                              ----                    ----
<S>                                         <C>                     <C>
  Net income (loss)           As reported  ($86,705)               $17,328
                              Pro forma    ($88,276)               $17,241
  Net income (loss) per share As reported    ($3.71)                 $0.83
                              Pro forma      ($3.77)                 $0.83  

</TABLE>

The per share weighted average value of stock options issued by the Company
during fiscal 1997 and 1996 was $1.61 and $5.77, respectively, on the date of
grant using the Black-Scholes option-pricing model.  The Company used the
following weighted-average assumptions to determine the fair value of stock
options granted for the years ended March 31, 1997 and April 1, 1996:

<TABLE>
<CAPTION>
                                              1997                    1996
                                              ----                    ----
<S>                                         <C>                     <C>
  Dividend yield                               --                     --
  Expected volatility                         50.0%                  50.0%
  Risk-free rate of return                    6.4%                   6.2% 
  Average expected option life              5 years                5 years
</TABLE>

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




                                      F-14
<PAGE>   56
A summary of option activity under the Plan for the fiscal years ended
March 31, 1997, April 1, 1996 and April 3, 1995, is as follows:

<TABLE>
<CAPTION>
                                                1997                            1996                            1995
                                        ----------------------         -----------------------         -----------------------
                                                      Weighted                        Weighted                        Weighted
                                                      Average                         Average                         Average
                                                      Exercise                        Exercise                        Exercise   
                                        Shares          Price           Shares          Price           Shares          Price
                                        ------        --------          ------        --------          ------        --------
                                   (in thousands)                   (in thousands)                  (in thousands)
<S>                                    <C>            <C>              <C>             <C>             <C>            <C>
Outstanding at beginning of year        1,249         $  6.33           4,466           $0.035          4,941           $0.035
Granted                                   665            4.09             753            10.88            --               --
Exercised                                (389)          0.035          (3,939)           0.035            --               --
Cancelled                                (623)          10.25             (31)            9.68           (475)           0.035
                                        -----         --------          -----         --------          -----         --------
Outstanding at year-end                   902         $  4.69           1,249           $ 6.33          4,466           $0.035  
                                        =====                           =====                           =====
Options exercisable at year end           289         $  2.40             497           $0.035            --            $  --
Shares available for future grant         345                             387                           1,109
</TABLE>

The following summarizes information regarding the Company's stock options
outstanding at March 31, 1997:

<TABLE>
<CAPTION>
                                     Weighted-           Weighted-                         Weighted-
  Range of             Number         Average             average          Number           average
  Exercise           Outstanding      Remaining           exercise       exercisable        exercise
   Prices           (in thousands)  Contractual Life        price     at March 31, 1997       price
--------------      -------------   ----------------      -------     ----------------      --------
                                                                        (in thousands)
<S>                   <C>               <C>                <C>             <C>               <C>
 $.035-$2.5             132               7.3              $ 1.13              98             $0.57
 $3.125-$4.8            565               8.8                3.38             191              3.34
$6.125-$9.375            85                 9                8.52             --               --
$10.00-$12.76           112               8.8                11.8             --               --
$13.38-$14.5              8               8.8               14.17             --               --
--------------      -------         ---------             -------      ----------          --------
 $.035-$14.5            902               8.6              $ 4.69             289             $2.40 
=============       =======                                            ==========
</TABLE>

On February 19, 1997 the Company's Board of Directors resolved that all
employees of the Company as of that date who were granted options between
January 1, 1995, and February 18, 1997, at an exercise price greater than $3.125
per share are eligible to receive an equivalent number of options at an exercise
of $3.125 per share in replacement of their current options. As of March 31,
1997, employees of the Company had not yet been given the ability to choose to
replace their old options.

Employee Qualified Stock Purchase Plan

In 1995 the Company approved an Employee Qualified Stock Purchase Plan ("ESPP"),
which was amended in 1996, and which as amended allows eligible employees of the
Company and its subsidiary to purchase shares of common stock through payroll
deductions. The ESPP consists of consecutive 24-month offering periods composed
of four 6-month exercise periods. The shares can be purchased at the lower of
85% of the fair market value of the common stock at the date of commencement of
this one year offering period or at the last day of each 6-month exercise
period. Purchases are limited to 10% of an employee's eligible compensation,
subject to a maximum annual employee contribution limited to $25,000 market
value of common stock (calculated as employee's enrollment price multiplied by
purchased shares). 33,175 such shares were issued during the year ended March
31, 1997, and no shares were issued during the year ended April 1, 1996.

(15) BUSINESS CONCENTRATION

The Company's sales are concentrated in the computer industry, however its
customers operate in different markets and geographic areas. Fujitsu, Sun
Microsystems, and users of Sun Microsystems products are the principal consumers
of the Company's products. The following table summarizes the percentage of
gross revenues generated by sales to customers which account for more than 10%
of net sales for the years ended March 31, 1997, April 1, 1996, and April 3,
1995:

<TABLE>
<CAPTION>
            CUSTOMER               1997    1996    1995
            --------               ----    ----    ----
     <S>                           <C>     <C>     <C>
     A.......................        28%     45%     26%
     B......................         22      19      19
</TABLE>

During the years ended March 31, 1997, April 1, 1996, and April 3, 1995, export
sales were approximately $27,840,000, $36,230,000, and $11,334,000, 
respectively.


                                      F-15
<PAGE>   57

(16)   FOURTH QUARTER ADJUSTMENTS

In the fourth quarter of fiscal 1997, the Company revised several of its
estimates related to its allowance for trade accounts receivable, valuation of
its deferred tax asset, accrual for excess inventory purchase orders, estimate
for lower of cost or market of inventory, and amortization of remaining goodwill
as follows:

<TABLE>
<CAPTION>
                                                        (IN THOUSANDS)
     <S>                                                 <C>   
     Allowance for trade accounts receivable                 $4,163
     Accelerated amortization of goodwill                     2,540
     Inventory, lower of cost or market 
       adjustment                                             1,954
     Excess inventory purchase orders                         5,179
     Adjustment to valuation allowance for the 
       deferred tax asset                                    20,812
                                                            -------

          Total                                             $34,648
                                                            =======
</TABLE>

These adjustments increased the net loss by $34.6 million ($1.48) per share for
the year ended March 31, 1997.

(17) SUBSEQUENT EVENTS

Effective May 21, 1997, Jack W. Simpson, Sr. was hired as the Company's
President and Chief Executive Officer. In conjunction with his employment, the
Company entered into a letter agreement pursuant to which the Company would
enter into a 4-year employment agreement with Mr. Simpson. Among other things,
the letter agreement obligates the Company, subject to the approval of the Board
of Directors, and, where required, the Company's shareholders, to award Mr.
Simpson with 100,000 stock options or restricted stock at an exercise price (or
purchase price) of $.05 per share, vesting 50% on April 1, 1998, and 50% on
April 1, 1999; 400,000 stock options at an exercise price equal to the closing
price on Mr. Simpson's date of hire, which price was $2.437, and vesting 100,000
immediately, and the remainder at a rate of 6,250 per month over the next four
years; and 100,000 stock options or restricted stock at an exercise price (or
purchase price) of $.05 per share, vesting 50% when the average closing price of
the Company's stock exceeds the price on Mr. Simpson's date of hire by $5.00 (or
a stock price of $7.437), and 50% when such average closing price exceeds the
price on Mr. Simpson's date of hire by $10.00 (or a stock price of $12.437).
Certain of these options will be compensatory. In addition the Company agreed to
fund a deferred annuity targeted to yield approximately $150,000 at age 60 and
to purchase life insurance of approximately $1.2 million for Mr. Simpson.

On June 25, 1997, the Company and Fujitsu entered into a Development Agreement,
pursuant to which, among other things, Fujitsu would pay the Company an
aggregate of $34.5 million in partial funding for the Viper project and for a
license for associated intellectual property. Payments are to be made
periodically through March 31, 1999, upon the attainment of certain milestones,
and are subject to reduction. The contract is subject to cancellation under
certain conditions if milestones are not met.




                                      F-16
<PAGE>   58
                                                                     SCHEDULE II

                              ROSS TECHNOLOGY, INC.

                        VALUATION AND QUALIFYING ACCOUNTS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>

                                 BALANCE AT   ADDITIONS   DEDUCTIONS  BALANCE AT
                                  BEGINNING   CHARGED TO     FROM       END OF
            DESCRIPTION           OF PERIOD    EXPENSE     ACCOUNTS     PERIOD
            -----------          ----------   ----------  ----------  ----------
<S>                                  <C>        <C>         <C>         <C>   
Allowance for doubtful accounts:
  Year ended April 3, 1995 .....     $   70     $   728     $   303     $  495
  Year ended April 1, 1996 .....        495       1,576          14      2,057
  Year ended March 31, 1997 ....      2,057      10,613      11,115      1,555
</TABLE>





                                      F-17

<PAGE>   59
                                  EXHIBIT INDEX

<TABLE>
<CAPTION>

                                                                    Sequentially
Exhibit No.       Description                                      Numbered Page
-----------       -----------                                      -------------
<S>               <C>                                              <C>
10.39             Letter Agreement between the Registrant
                  and Francis ("Kit") Webster III, dated
                  April 1, 1997.

10.40             Letter Agreement between the Registrant
                  and Frank A. Baffi, dated April 12, 1997.

10.41             Letter Agreement between the Registrant
                  and Jack W. Simpson, Sr. dated May 5, 1997,
                  and associated addendum dated May 13,
                  1997.

10.42             Amended and Restated Loan Agreement,
                  dated April 24, 1997, by and between
                  Registrant and The Dai-Ichi Kangyo Bank,
                  Limited.

10.43             Development Agreement, dated as of
                  March 31, 1997, by and between the
                  Registrant and Fujitsu Limited.

10.44             Development Agreement, dated as of June
                  25, 1997, by and between the Registrant and 
                  Fujitsu Limited.

10.45             Loan Agreement dated as of November 15, 1996
                  by and between the Registrant and The 
                  Dai-Ichi Kangyo Bank, Limited.

11                Earnings Per Share Calculation

21                Subsidiaries of the Registrant

23                Consent of KPMG Peat Marwick LLP

27                Financial Data Schedule

</TABLE>

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