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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-K

    (Mark One)
        X       Annual Report  Pursuant to Section 13 or 15(d) of the Securities
     -------    Exchange  Act of 1934 for the Fiscal  Year Ended  September  27,
                1998.
                                       OR

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

                        Commission File Number 000-26690
                                               ---------

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

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

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

       Registrant's telephone number, including area code: (408) 945-1323
                                                                            
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           Securities registered pursuant to Section 12(b) of the Act:

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

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

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

                          YES    X     NO            
                               -----        -----

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

Aggregate  market  value  of the  voting  stock  held by  non-affiliates  of the
registrant, based upon the closing sale price of the common stock on October 30,
1998 as reported on the Nasdaq National  Market:  $25,295,677.  This calculation
does not  include a  determination  that  persons are  affiliates  for any other
purpose.

Number of shares outstanding of the registrant's  common stock as of October 30,
1998: 9,198,428

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

                       Documents Incorporated By Reference

Items 10, 11, 12 and 13 of Part III  incorporate  information  by  reference  to
portions of the  registrant's  definitive  proxy  statement  to be  delivered to
stockholders  in connection  with the annual meeting of  stockholders to be held
January 22, 1999.

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<PAGE>
<TABLE>

                                            ELANTEC SEMICONDUCTOR, INC.
                                                     FORM 10-K
                                   For the Fiscal Year Ended September 30, 1998
                                                 Table of Contents
<CAPTION>
                                                      PART I
                                                                                                            Page
                                                                                                            ----

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

Item 2.       Properties.........................................................................             13

Item 3.       Legal Proceedings..................................................................             13

Item 4.       Submission of Matters to a Vote of Security Holders................................             13

                                                      PART II

Item 5.       Market for Registrant's Common Equity and Related Stockholder Matters..............             14

Item 6.       Selected Financial Data............................................................             15

Item 7.       Management's Discussion and Analysis of Financial Condition and Results
              of Operations......................................................................             16

Item 7A.      Quantitative and Qualitative Disclosures about Market Risk.........................             22

Item 8.       Financial Statements and Supplementary Data........................................             24

Item 9.       Changes in and Disagreements with Accountants on Accounting and Financial
              Disclosure.........................................................................             25

                                                     PART III

Item 10.      Directors and Executive Officers of the Registrant.................................             26

Item 11.      Executive Compensation.............................................................             26

Item 12.      Security Ownership of Certain Beneficial Owners and Management.....................             26

Item 13.      Certain Relationships and Related Transactions.....................................             26

                                                      PART IV

Item 14.      Exhibits, Financial Statement Schedules and Reports on Form 8-K....................             27

Signatures    ...................................................................................             48
</TABLE>

                                       2
<PAGE>


                                     PART I

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

ITEM 1:  BUSINESS

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

Industry Overview

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

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

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

                                       3
<PAGE>

products, particularly in the video/multimedia, data processing, instrumentation
and communications markets.

Product Markets and Applications

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

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

    ------------------------------- ----------------------------------------
                Market                       Typical Applications
    =============================== ========================================
    Video/Multimedia                Overhead Displays
                                    Set Top Converters
                                    Special Effects Generators
                                    Switchers/Routers
                                    Video Cameras
                                    Video Distribution Networks
                                    Video Signal Processing
                                    Workstations
    ------------------------------- ----------------------------------------
    Data Processing                 Copiers
                                    Document Scanners
                                    Optical Storage
                                    Personal Computers
                                    Power Supplies
    ------------------------------- ----------------------------------------
    Instrumentation                 Analyzers
                                    Automatic Testers
                                    Measuring Instruments
                                    Medical Instrumentation
    ------------------------------- ----------------------------------------
    Communications                  ADSL Transceivers
                                    HDSL Transceivers
                                    Video Teleconferencing
    ------------------------------- ----------------------------------------

Primary Markets

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

Data  Processing.  The  growth  of data  processing,  particularly  in  personal
computers, has been driven by advances in digital technology, which have in turn
created new applications  for analog  functions.  In this market,  the Company's
products include amplifiers for document scanners,  copiers and power management
circuits  targeted for new  generations of  microprocessors  that operate at low
voltages.  An emerging  area  targeted  by the  Company is the  optical  storage
market. The Company is currently providing products that control the laser diode
driver for optical disk drives and products for CD read/write and DVD read/write
applications.

                                       4
<PAGE>

Instrumentation.  The detection and  measurement of analog  information  such as
light, sound, temperature,  pressure and speed in industrial,  medical and other
measurement systems have been a traditional focus of analog circuits. As systems
grow more  complex and  information  is processed  at higher  rates,  there is a
concomitant  requirement  for  higher  speed  analog  circuits  to  process  the
information  in analog  format.  The Company  supplies  products  for high speed
instrumentation,   automatic  testers  and  medical  instrumentation,   such  as
ultrasound scanners.

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

Other Markets

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

Military.  The  Company  has  historically  offered  products  for a variety  of
military  applications and continues to offer certain products to meet the needs
of customers of these products.  However,  on July 1, 1997 the Company announced
that it would  discontinue  its  military  hybrid  products.  This  product line
accounted for 8.4% and 7.9% of product revenues in 1998 and 1997,  respectively.
Orders for these discontinued  products were accepted through the middle of 1998
with last  shipments  from the factory  extending  throughout  fiscal 1999.  The
Company  expects  higher gross margins from last-buy  orders during fiscal 1999.
However,  the Company does not expect the discontinuance of this product line to
have a material impact on the Company's fiscal 1999 results from operations.

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

Products

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

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

                                       5
<PAGE>

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

Sales and Distribution

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

In North America,  the Company sells its products  through 21 independent  sales
representative  organizations  having a total of more than 38  offices  and five
distributors  having a total of more than 90 locations.  These  distributors are
entitled to price rebates on unsold  inventory if the Company  lowers the prices
of its products.  In addition,  on a semi-annual  basis,  these distributors are
permitted to return for credit against  purchases of an equivalent  dollar value
of  products up to 5% of their total  product  purchases  during the most recent
six-month period.

In  fiscal  1998  and  1997,  sales to  Insight  Electronics,  Inc.  represented
approximately 11% and 12% of the Company's net revenues, respectively. In fiscal
1996, no single domestic  representative  or distributor  accounted for sales in
excess of 10% of the Company's net revenues. See Note 1 of Notes to Consolidated
Financial Statements.

Outside  North  America,  the Company  sells its  products  through a network of
international  distributors.  Such international sales represented approximately
53%, 54% and 48% of the Company's net product revenues, excluding Aisin contract
revenues, in fiscal 1998, 1997, and 1996, respectively.

Sales to Microtek  International,  Inc. in Japan represented  approximately 23%,
14% and 15% of net product revenues in fiscal 1998, 1997 and 1996, respectively.
See Note 1 of Notes to Consolidated Financial Statements.

In connection with its international sales, the Company is subject to the normal
risks of conducting  business  internationally.  These risks include  unexpected
changes in  regulatory  requirements,  changes  in  legislation  or  regulations
relating to the import or export of  semiconductor  products,  delays  resulting
from difficulty in obtaining  export licenses for certain  technology,  tariffs,
quotas and other barriers and restrictions,  and the burdens of complying with a
variety of foreign  laws.  The Company is also  subject to general  geopolitical
risks, such as political and economic  instability and changes in diplomatic and
trade relationships,  in connection with its international  operations.  Because
sales of the  Company's  products  are  denominated  in United  States  dollars,
fluctuations  in the value of the  dollar  could  increase  the  prices in local
currencies of the Company's  products in foreign  markets and make the Company's
products   relatively  more  expensive  than  competitors'   products  that  are
denominated in local currencies.  Additionally,  currency exchange  fluctuations
could reduce the cost of products from the Company's foreign competitors.

                                       6
<PAGE>

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

Backlog

At September 30, 1998, the Company's  product  backlog was  approximately  $12.9
million,  compared to $12.7 million at September 30, 1997. The Company  includes
all orders  scheduled for delivery  within six months in backlog.  The Company's
business,  and  to  a  large  extent  the  entire  semiconductor   industry,  is
characterized  by  short-term  orders and shipment  schedules.  These orders can
generally  be  cancelled  or  rescheduled  without  significant  penalty  to the
customers. As a result, the quantities of the Company's products to be delivered
and their  delivery  schedules  are  frequently  revised by customers to reflect
changes in their  needs.  Since  backlog can be cancelled  or  rescheduled,  the
Company's backlog at any time is not necessarily indicative of future revenues.

Design Methodology and Process Technology

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

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

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

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

                                       7
<PAGE>

technology.  For low voltage, high speed applications such as certain amplifiers
and video  ASSPs,  the Company uses  junction  isolation  complementary  bipolar
technologies  provided by an outside foundry.

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

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

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

Manufacturing

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

Sales of  dieletric  isolation  products  represented  approximately  47% of the
Company's net product  revenues in fiscal 1998 and 67% in 1997.  The process for
manufacturing  dielectrically  isolated integrated circuits is more complex than
processes  for  junction  isolation  bipolar  manufacturing,  and the  number of
foundries   that  have  the  capability  to  produce   dielectrically   isolated
semiconductor  wafers is  limited.  The Company  was  informed  that the current
dielectric isolation foundry would discontinue  supplying this technology in the
fourth  fiscal  quarter of 1998.  As a result of this  information,  the Company
converted production to its in-house capability during the fourth fiscal quarter
of 1998 and secured a supplier for one key process step.

The Company uses different  third-party foundries to supply semiconductor wafers
for its  complementary  bipolar and its CMOS  products.  Sales of these products
collectively represented  approximately 44% and 23% of the Company's net product
revenues  in fiscal  1998 and fiscal  1997,  respectively.  Because of delays in
developing  bonded  wafer  technology,  the Company is planning to increase  the
percentage  of products  built by third  party  foundries  and is  strengthening
long-term  manufacturing  contracts to  facilitate  this  strategy.  The Company
believes  that it has had  good  long-term  relationships  with  its  foundries.
However,  any interruption in the supply of wafers from the Company's  foundries
would have a negative impact on the Company's business and results of operations
until an alternate  source could be established.  Although the Company  believes
that it could develop alternative  sources of supply,  there can be no assurance
that the  Company  could do so in a timely  manner to  prevent  such a  material
adverse impact.

                                       8
<PAGE>

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

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

Environmental Laws

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

Research and Development

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

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

As part of its future  bipolar  product  development  strategy,  the  Company is
developing a form of silicon on insulator (SOI) technology called bonded wafers.
Bonded wafer technology uses two flat oxidized silicon wafers that are thermally
bonded to one another, after which one wafer is precisely ground and polished to
form a thin silicon layer  supported by the  insulating  oxide and the remaining
silicon  wafer.  This thin  silicon  layer is  suitable  for  making  individual
elements of the semiconductor  circuits that are electrically isolated from each
other by insulating  oxide to provide  performance  characteristics  superior to
those  achievable  with other  technologies  such as  dielectric  isolation  and
junction isolation.  The Company believes that, if successful,  the bonded wafer
technology  could provide many of the same benefits as dielectric  isolation but
with lower wafer cost and improved  performance  due to higher speed and smaller
device size.  This  technology  could provide the Company with the capability to
provide  

                                       9
<PAGE>

products  with higher levels of  integration  and  performance  to the Company's
target markets.  However,  there can be no assurance that the development of the
bonded wafer  technology can be successfully  accomplished in a timely manner or
that it will  provide  the  desired  improvements  over  the  Company's  current
technology or that the bonded wafer  technology  being  developed by the Company
will not be supplanted by alternative new  technologies.  Significant  delays or
cancellation of the development of the bonded wafer  technology or manufacturing
problems associated with transferring the Company's current product line to this
technology  would have a material  adverse effect on the Company's  business and
results of operations.

In fiscal 1998, 1997 and 1996, the Company spent $7.2 million,  $6.2 million and
$6.4 million,  respectively,  on research and  development.  The Company expects
that it will  continue to spend  substantial  funds on research and  development
activities.

Patents and Licenses

The Company  seeks to protect its  proprietary  technology  through  patents and
trade secret protection.  Currently,  the Company holds 35 United States patents
and four foreign  patents,  expiring on various dates between the years 2005 and
2015 and has  additional  pending  United States patent  applications,  although
there can be no assurance that any patents will result from these  applications.
While the Company  intends to continue to seek patent  coverage for its products
and manufacturing  technology where  appropriate,  the Company believes that its
success depends more heavily on the technical expertise and innovative abilities
of its  personnel  than on its patent  position.  Accordingly,  the Company also
relies on trade secrets and confidential  technological  know-how in the conduct
of its  business.  There  can be no  assurance  that the  Company's  patents  or
applicable  trade  secret laws provide  adequate  protection  for the  Company's
technology  against  competitors who may develop or patent similar technology or
reverse  engineer  the  Company's  products.  In  addition,  the laws of certain
territories   in  which  the  Company's   products  are  or  may  be  developed,
manufactured or sold,  including Asia, Europe and Latin America, may not protect
the Company's  products and  intellectual  property rights to the same extent as
the laws of the United States.

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

Competition

The  semiconductor  industry is intensely  competitive and is  characterized  by
rapid  technological  change,  product  obsolescence  and price  erosion in many
markets. The analog integrated circuit segment of the semiconductor  industry is
also intensely  competitive,  and many major  semiconductor  companies presently
compete or could compete in some segment of the Company's market.  Most of these
competitors have  substantially  greater  financial,  technical,  manufacturing,
marketing,  distribution  and other  resources  and broader  product  lines than
Elantec. The Company also competes indirectly with the in-house design staffs of
certain  of  its  customers,   which  often  provide  alternative  solutions  to
individual   analog  systems   requirements.   The  Company's   current  primary
competitors are Analog  Devices,  Inc., 

                                       10
<PAGE>

Linear Technology  Corporation,  Maxim Integrated  Products,  Inc., and National
Semiconductor  Corporation.  As the Company expands its product line, it expects
that  competition  will  increase  with  these and other  domestic  and  foreign
companies. Although foreign companies have not traditionally focused on the high
performance analog market,  many foreign companies,  particularly  certain Asian
companies, have the financial and other resources to participate successfully in
these  markets,  and  there  can be no  assurance  that  they  will  not  become
formidable competitors in the future.

The  Company  believes  that its  ability to compete  successfully  depends on a
number of factors,  including  the breadth of its product  line,  the ability to
develop and introduce new products rapidly, product innovation,  product quality
and reliability,  product  performance,  price,  technical  service and support,
adequacy of  manufacturing,  the ability to introduce new process  technologies,
capacity  and  sources of raw  materials,  efficiency  of  production,  delivery
capabilities and protection of the Company's  products by intellectual  property
laws.  The Company  believes  that  product  innovation,  quality,  reliability,
performance  and the ability to  introduce  products  and  process  technologies
rapidly are more important  competitive factors than price in its target markets
because the Company  competes  primarily at the stage when system  manufacturers
design analog products into their systems. At the design-in stage, there is less
price competition, particularly where there is only one source of an application
specific  product.  The Company believes that, by virtue of its analog expertise
and rigorous  design  methodology,  it competes  favorably in the areas of rapid
product introduction,  product innovation, quality, reliability and performance,
but it may be at a disadvantage  in comparison to larger  companies with broader
product lines, greater technical and financial resources and greater service and
support capabilities. There can be no assurance that the Company will be able to
compete successfully in the future.

Employees

At September  30,  1998,  the Company had 182 full time  employees.  The Company
believes that its future success will depend, in part, on its ability to attract
and retain qualified technical and manufacturing personnel. This is particularly
important in the areas of product design and development,  where competition for
skilled personnel,  particularly those with analog experience,  is intense. None
of the Company's employees is subject to a collective bargaining agreement,  and
the Company has never experienced a work stoppage. The Company believes that its
relations with its employees are good.

In November 1998,  David O'Brien,  the Company's  President and Chief  Executive
Officer  resigned  from the Company.  The Company is currently  searching  for a
replacement.  However there can be no assurance that a qualified  candidate will
be hired in the near  future.  James V.  Diller,  Director  and  Chairman of the
Board, is acting as President and Chief Executive Officer in the interim.

Executive Officers and Directors of the Company

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

        Name                            Age    Positions
        ----                            ---    ---------

        James V. Diller (1)             63     Chairman of the Board, acting 
                                               President and Chief Executive
                                               Officer

        Ephraim  Kwok                   44     Vice President of Finance &
                                               Administration and Chief
                                               Financial Officer

        Richard E. Corbin               63     Vice President of Technology

        Ralph S. Granchelli, Jr.        43     Vice President of Marketing

        Chuck K. Chan (2)               48     Director

        B. Yeshwant Kamath (2)          50     Director

        Alan V. King (1)                63     Director

                                       11
<PAGE>

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

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

James V. Diller has been acting  President  and Chief  Executive  Officer  since
November 1998 and Chairman of the Board since 1997.  Mr. Diller was previously a
Director of the  Company  since 1986.  Mr.  Diller was a Founder of  PMC-Sierra,
Inc.,  a  communications  semiconductor  company,  was its  President  and Chief
Executive  Officer from 1983 to 1997 and is currently its Chairman of the Board.
Mr. Diller holds a B.S. degree in physics from the University of Rhode Island.

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

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

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

Chuck K. Chan has been a director of the  Company  since  January  1992 and also
served as a director  from 1983 to 1984.  Dr.  Chan has been a partner in Alpine
Technology  Ventures,  a venture  capital  firm,  since  December 1994 and was a
partner in Associated  Venture  Investors,  a venture  capital firm from 1982 to
1996.  Dr.  Chan  holds  B.S.,  M.S.  and  Ph.D.  degrees  in  physics  from the
Massachusetts   Institute  of  Technology  and  a  M.B.A.  degree  from  Harvard
University.

B.  Yeshwant  Kamath has been a director  of the  Company  since July 1993.  Dr.
Kamath is the Division  President of the KUB  division of  Videonics  Inc..  KUB
Systems,  a company that  manufactures  video  special  effects  equipment,  was
founded by Dr.  Kamath in February  1992 and  acquired by Videonics in May 1996.
Previously, Dr. Kamath was a founder of Abekas Video Systems, Inc., a subsidiary
of Carlton  Communications PLC, where he was President from 1982 to August 1990.
Dr.  Kamath is also a director of Euphonix,  Inc.,  a company that  manufactures
digitally  controlled  analog audio consoles for the music industry.  Dr. Kamath
holds a B.Tech.  degree in electrical  engineering  from the Indian Institute of
Technology,  and M.S.  and Ph.D.  degrees  in  electrical  engineering  from the
University of California, Berkeley.

Alan V. King was appointed a Director of the Company in December  1997. Mr. King
has  been  Chairman  of the  Board  and  Chief  Executive  Officer  of  Volterra
Semiconductor  Corporation,  a start-up 

                                       12
<PAGE>

company developing battery management integrated circuits, since September 1996.
Mr. King has also been a Director of Smartflex Systems, Inc., a turnkey contract
assembler, since October 1993 and Information Storage Devices, Inc., a specialty
semiconductor  company,  since  May  1997.  Mr.  King was  President  and  Chief
Executive  Officer of Silicon  Systems,  Inc.,  a  semiconductor  company,  from
September 1991 to November 1994 and was President and Chief Executive Officer of
Precision  Monolithics,  Inc., a semiconductor  company,  from September 1987 to
September  1991,  and from September 1986 to September 1987 he was its Executive
Vice  President.  Mr.  King  holds a BS degree in ceramic  engineering  from the
University of Washington.

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

ITEM 2:  PROPERTIES

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

ITEM 3:  LEGAL PROCEEDINGS

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

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

No matters were submitted to a vote of security holders during the quarter ended
September 30, 1998.

                                       13
<PAGE>

                                     PART II

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

Price Range Of Common Stock
<TABLE>

Elantec's  Common Stock has been traded on the Nasdaq  National Market under the
Nasdaq symbol "ELNT" since the Company's  initial public offering on October 11,
1995. The high and low closing sales prices  indicated  below are as reported on
the Nasdaq National Market.  As of September 30, 1998, there were  approximately
240  stockholders  of record,  and the Company  believes  there are in excess of
3,400 beneficial stockholders of its Common Stock.
<CAPTION>
                               Common Stock Prices
         ------------------------------------------------------ --------------- ---------------
                                                                     HIGH            LOW
                                                                --------------- ---------------
<S>                                                              <C>             <C>        
         Quarter ended September 30, 1998                        $     5.750     $     3.000
         Quarter ended June 30, 1998                             $    10.750     $     5.000
         Quarter ended March 31, 1998                            $     9.750     $     5.375
         Quarter ended December 31, 1997                         $     7.875     $     5.250

         Quarter ended September 30, 1997                        $     7.250     $     4.000
         Quarter ended June 30, 1997                             $     4.625     $     3.125
         Quarter ended March 31, 1997                            $     6.125     $     3.125
         Quarter ended December 31, 1996                         $     7.000     $     4.750

         Quarter ended September 30,1996                         $     9.125     $     5.500
         Quarter ended June 30,1996                              $    13.250     $     6.750
         Quarter ended March 31,1996                             $    10.250     $     7.125
         Quarter ended December 31,1995 (Starting on 10/11/95)   $    11.875     $     7.000
</TABLE>

Dividend Policy

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

                                       14

<PAGE>


ITEM 6:  SELECTED FINANCIAL DATA
<TABLE>

The following selected consolidated  financial data is qualified by reference to
and should be read in conjunction with the consolidated financial statements and
related notes thereto and the section  captioned  "Management's  Discussion  and
Analysis of Financial  Condition and Results of Operations"  and other financial
information included elsewhere in this Annual Report on Form 10-K.
<CAPTION>
                                                                          September 30 (1)
                                                             1998      1997      1996      1995      1994
                                                            -------   -------   -------   -------   ------- 
                                                                 (in thousands, except per share data)
<S>                                                         <C>       <C>       <C>       <C>       <C>    
Statement of Income Data:
     Net revenues                                           $46,210   $35,388   $36,806   $26,884   $22,937
     Gross profit                                            21,379    15,277    18,798    13,928    10,819
     Income from operations                                   4,261       177     4,300     2,887     1,859
     Income before taxes                                      4,522       647     4,761     2,951     1,568
     Net income (3)                                         $ 7,205   $   566   $ 4,389   $ 2,713   $ 1,125
     Net income per basic share (2)                         $  0.79   $  0.06   $  0.52   $  1.46   $  0.63
     Net income per diluted share (2)                       $  0.75   $  0.06   $  0.47   $  0.34   $  0.15
     Number of shares used in computing diluted per
        share amounts (2)                                     9,636     9,323     9,332     7,874     7,736

                                                                          September 30, (1)
                                                              1998     1997      1996      1995     1994
                                                            -------   -------   -------   -------   ------- 
                                                                           (in thousands)
Balance Sheet Data:
     Working capital                                        $16,786   $18,287   $17,638   $ 6,854   $ 6,018 
     Total assets                                            47,544    37,091    35,246    20,910    14,919
     Long-term debt and capital lease                       
     obligations                                              4,354     3,336     1,566     1,313       517
     Total stockholders' equity                              32,277    24,803    24,074    11,142     8,318
                                                            
<FN>
-----------------
                                        
(1)    The Company's  fiscal periods end on the Sunday closest to the end of the
       calendar period.  For ease of  presentation,  each fiscal period has been
       presented as though it ended on the final day of the calendar period.

(2)    See  Note  1  of  Notes  to  Consolidated  Financial  Statements  for  an
       explanation  of the  determination  of  the  number  of  shares  used  in
       computing net income per share.

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


                                       15
<PAGE>

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

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

Results of Operations
<TABLE>

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

                                                                           September 30,
                                                                   1998         1997        1996
                                                                ------------ ----------- -----------
<S>                                                                 <C>         <C>         <C>   
          Net revenues                                             100.0%      100.0%      100.0%
          Gross profit                                              46.3        43.2        51.1
          Operating expenses:
               Research and development                             15.6        17.6        17.4
               Marketing, sales, general and administrative         21.4        25.1        22.0
          Income from operations                                     9.2         0.5        11.7
          Income before income taxes                                 9.8         1.8        12.9
          Net income                                                15.6         1.6        11.9
</TABLE>

Net Revenues. Net revenues were $46.2 million in fiscal 1998, an increase of 31%
over net revenues of $35.4 million in fiscal 1997.  The increase in net revenues
was due to an increase in unit  shipments,  while the average  selling price for
the Company's products remained relatively constant during the year. The Company
experienced  strong  revenue  growth  in  each  of its  major  end  markets  and
particularly in the data processing area which  represented 20% of net revenues,
up from  approximately 14% of net revenues in fiscal 1997.  Geographically,  the
Company  experienced  broad  revenue  growth  with  U.S.  revenues  up  38%  and
international revenues up 25% over fiscal 1997.

International  revenues represented 53% of net revenues,  down slightly from 56%
of net  revenues  in fiscal  1997.  Revenues  from Japan and other  Pacific  Rim
countries  increased  25% over fiscal 1997 despite the  economic  and  financial
difficulties  experienced by Japan and other countries in this region.  However,
as discussed  more fully under  "Factors  Affecting  Future  Operating  Results"
below,  in late fiscal  1998 the  Company's  incoming  order rate began to slow,
reflecting lower  end-customer  demand.  The Company currently  anticipates that
continued  lower product  demand will cause fiscal 1999 to begin with lower unit
volume and revenues than the fourth quarter of fiscal 1998.

Domestic revenues  represented 47% of net revenues,  an increase from 44% of net
revenues in fiscal 1997,  primarily due to strong domestic  shipments during the
last two quarters of fiscal 1998.

Net  revenues of $35.4  million in fiscal 1997 were down 3.9% as compared to net
revenues of $36.8 million in fiscal 1996.  Increase in unit volumes primarily in
the video/multimedia,  communications and data processing markets were more than
offset by a 14.4%  decrease in average  selling  prices.  Net revenues in fiscal
1996 reflected a period of  significant  revenue growth that began to decelerate
for the Company and much of the semiconductor industry during the fourth quarter
of fiscal 1996. Excess inventory levels in end customer channels entering fiscal
1997 lead to generally flat quarterly sequential revenue growth until the second
half of the fiscal year when end customer channel inventory levels declined.

                                       16
<PAGE>

International  revenues  represented  56% and 52% of net revenues in fiscal 1997
and 1996,  respectively.  International  revenues  increased  in fiscal 1997 due
primarily to increased revenues from Japan and other Pacific Rim countries. This
increase  was also  partially  due to a slight  increase  in  revenues  from the
European market.

In July 1997, the Company  announced that it would  discontinue its military and
commercial  hybrid product.  This product line accounted for 8.6%, 7.9% and 8.9%
of product  revenues in fiscal  1998,  1997 and 1996,  respectively.  Orders for
these  discontinued  products were accepted  through the middle of 1998 and last
shipments  from the factory  will extend  throughout  fiscal  1999.  The Company
expects higher gross margins from last-buy  orders during fiscal 1999.  However,
the Company  does not expect the  discontinuance  of this product line to have a
material impact on the Company's fiscal 1999 results from operations.

Gross Margin.  Gross margin was $21.4 million or 46.3% of net revenues in fiscal
1998.  The increase in gross margin as a percentage of revenues,  as compared to
43.2% in fiscal 1997,  was due primarily to the absorption of fixed costs over a
larger revenue base and improved manufacturing yields and pricing at third-party
foundries.  This was partially offset by higher  unfavorable  overhead variances
relating  to  internal  production  as  product  mix  shifted  towards  products
manufactured by third party foundries during the second half of fiscal 1998, and
increased  provisions  for  inventory  excess  and  obsolescence.   However,  as
discussed more fully under "Factors  Affecting Future Operating  Results" below,
the Company expects to complete an extensive production expansion at its primary
manufacturing  facility during the second fiscal quarter of 1999. This expansion
is expected to significantly increase manufacturing expenses, which could reduce
gross  margins.  While the Company is working on programs to continue to improve
manufacturing efficiencies,  there can be no assurance that the Company will not
encounter difficulties due to delays with technology introduction, over capacity
caused by expanding the Company's Milpitas wafer fabrication  facility,  changes
in  product  mix,  unfavorable   manufacturing  yields  or  other  manufacturing
difficulties in the future.  Gross margin may continue to fluctuate from quarter
to quarter.

Gross margin as a percentage of revenues of 43.2% in fiscal 1997 fell from 51.1%
of net revenues in fiscal 1996. The decrease in gross margin from fiscal 1996 to
1997 resulted from continued  reductions in average selling prices combined with
increasingly   unfavorable   manufacturing  yield  and  overhead  variances  and
increased provisions for excess and obsolete inventory.

Research and Development Expenses.  Research and development (R&D) expenses were
$7.2  million,  $6.2 million and $6.4  million in fiscal 1998,  1997 and 1996 or
15.6%,  17.6% and  17.4% of net  revenues,  respectively.  The  increase  in R&D
expenses in fiscal 1998 as compared to 1997 was due  primarily to an increase in
staffing, particularly design engineering personnel and higher spending for test
and prototype.  The decrease in R&D expenses in fiscal 1997 over 1996 was due to
lower  spending  on  prototype  materials,   consulting  services  and  contract
services.

Marketing, Sales, General and Administrative Expenses. Marketing, sales, general
and  administrative  (SG&A)  expenses were $9.9  million,  $8.9 million and $8.1
million or 21.4%, 25.1% and 22.0% of net revenues in fiscal 1998, 1997 and 1996,
respectively.  The  increase  in SG&A  expenses in fiscal 1998 over 1997 was due
primarily  to an  increase in staffing  and related  payroll and benefit  costs,
increased  legal expenses and higher  consulting  costs.  As a percentage of net
sales,  SG&A  decreased  in fiscal 1998 as such costs  increased at a lower rate
than net  revenue  growth.  The  increase  in SG&A  expenses  in fiscal  1997 as
compared to 1996 was due  primarily to added costs  related to the Company's new
administrative offices.  

                                       17
<PAGE>

Interest and Other  Income.  Interest and other  income was $0.7  million,  $0.8
million and $0.7 million in 1998, 1997 and 1996, respectively. The decrease from
fiscal 1997 to 1998 was due to lower cash equivalents and short-term investments
resulting  primarily  from cash disbursed and lease payments made in conjunction
with the  Company's  fabrication  facility  expansion.  The increase in interest
income  from fiscal  1996 to 1997  resulted  from  investing  proceeds  from the
Company's  initial  public  offering  in October  1995 in cash  equivalents  and
short-term investments.

Provision  for Taxes on Income.  Results for the fourth  fiscal  quarter of 1998
included a $3.1 million  favorable tax adjustment  resulting  primarily from the
reversal of the Company's valuation allowance for certain deferred tax assets at
September 30, 1998.  This  accounting  adjustment  was made in  accordance  with
Statement of Financial  Accounting Standards 109, "Accounting for Income Taxes."
Provisions  for taxes on income  for  fiscal  1997 and 1996 were  lower than the
statutory   rate   principally   due  to  the  benefit  of  net  operating  loss
carryforwards  offset by  alternative  minimum  taxes,  state  taxes and foreign
withholding taxes. See Note 6 of Notes to Consolidated Financial Statements.

Net Income. Net income was $7.2 million,  $0.6 million and $4.4 million in 1998,
1997 and 1996, respectively, due to the factors described above.

Factors Affecting Future Operating Results

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

The Company  achieved  record  revenues and  earnings in fiscal  1998.  However,
during the fourth quarter demand weakened for the Company's  products  resulting
in a decrease in the Company's  order backlog as compared with the third quarter
of fiscal 1998. The lower order  activity  appears to be  industry-wide  and has
resulted from several factors including prolonged weakness in the Asian markets.
Looking forward to the fiscal first quarter 1999, management expects revenues to
be impacted by an overall  weak demand for analog  semiconductor  products.  The
Company believes weaker demand for the Company's core products will be partially
offset by increases in the  Company's  optical  storage  products.  In addition,
management  expects  overall  margins to decline  due to changing  product  mix,
pricing pressures and under-utilization of manufacturing capacity as the Company
adjusts production to meet weakened product demands.

During the first fiscal quarter of 1999, prior to the filing of this report, the
Company was notified  that one of its  suppliers  of CMOS wafers  located in San
Jose, California was abruptly closed.  Management is moving quickly to secure an
alternative  manufacturing  source  and is  confident  that  it  will be able to
transition  affected CMOS products to another foundry quickly.  However,  in the
event that the transition takes longer than  anticipated,  the Company's revenue
could be  negatively  impacted  by as much as $1.0  million  per quarter for the
second and third quarters of fiscal 1999.

In November 1998,  David O'Brien,  the Company's  President and Chief  Executive
Officer  resigned  from the Company.  The Company is currently  searching  for a
replacement.  However there can be no 

                                       18
<PAGE>

assurance that a qualified candidate will be hired in the near future.  James V.
Diller,  Director  and Chairman of the Board,  is acting as President  and Chief
Executive Officer in the interim.

The  Company  sells its  products to  distributors  and  manufacturers  in Asian
countries that are currently  experiencing an economic recession.  Additionally,
23% of 1998 net revenues were to Microtek International, Inc. in Japan. See Note
1 of Notes to  Consolidated  Financial  Statements.  The Company  experienced  a
slight  decrease in revenues from these  countries  during the fourth quarter of
fiscal  1998,  but the Company does not expect that the  financial  difficulties
experienced in Asia will have a material adverse impact on the Company's results
of operations in the near term. However, should the financial conditions in this
region worsen,  become  prolonged,  or affect other  countries where the Company
generates  significant  revenues,  there can be no assurance  that the Company's
results of operations will not be adversely impacted in the future.

The Company utilizes  various external  foundries for the production of CMOS and
bipolar  wafers  as  well as  certain  process  steps  in the  manufacturing  of
dielectric isolation wafers. The number of foundries that have the capability to
process dielectrically isolated semiconductor wafers is limited. The Company has
developed internal capability for a number of these dielectric isolation process
steps and has secured an alternate  vendor for one key process step. The Company
was informed that the current  dielectric  isolation  foundry would  discontinue
supplying  this  technology  in the fourth fiscal  quarter of 1998.  The Company
converted  production  of  most  process  steps  and  secured  a  vendor  for an
additional key process step during the fiscal fourth quarter of 1998.

To mitigate potential problems during the transition,  the company increased its
inventory of processed DI wafers during the second half of fiscal 1998. However,
there can be no assurance  that this  manufacturing  change can be  successfully
made in a timely manner or that the increased levels of dielectrically  isolated
wafers will be sufficient to meet the Company's requirements. Significant delays
in  the  transition  to  the  new  supply  of  dielectric   isolated  wafers  or
manufacturing  problems  encountered with either the internal process or the new
supplier  would have a material  adverse  effect on the  Company's  business and
results of operations.

In early fiscal 1999,  due to  significant  over-capacity  caused by  continuing
decreased  demand in the  semiconductor  industry  and  changes in  product  mix
towards products  manufactured by third party foundries,  the Company  evaluated
its long-term  manufacturing and process  technology  strategies.  Based on this
evaluation,  the Company concluded that projected production volumes and related
cash flows from the  fabrication  facility  are not  sufficient  to recover  its
carrying  value.  Consequently,  the Company  announced it will  write-down  the
carrying value related to its wafer  fabrication  facility  located in Milpitas,
California  in  accordance  with  Statement  of Financial  Accounting  Standards
("FAS")  No.121,  "Accounting  for the  Impairment of Long-Lived  Assets and for
Long-Lived  Assets to be Disposed Of." FAS 121 adjustments,  in conjunction with
other  non-recurring  charges  related  to  restructuring  initiatives  aimed at
improving  profitability,  will result in a  non-recurring  charge  estimated at
between $13 to $15 million  (on a pretax  basis) in the first  quarter of fiscal
1999.

The   semiconductor   industry  is  extremely  capital   intensive.   To  remain
competitive,   the  Company  may  have  to   continue   investing   in  advanced
manufacturing  equipment  and process  technologies.  While the Company does not
expect capital  expenditures  to be material during the fiscal 1999, the Company
anticipates  significant  continuing capital  expenditures  during the following
several  years.  There can be no assurance that the Company will not be required
to seek debt or equity  financing to satisfy its cash and capital  needs or that
such financing will be available on terms  satisfactory to the Company.  If such
financing  is  required  and if such  financing  were  not  available  on  terms
satisfactory  to the  Company,  its  operations  would be  materially  adversely
affected.

                                       19
<PAGE>

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

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

Significant  delays or  cancellation  of the  development  of the  bonded  wafer
technology  and/or  manufacturing  problems  associated  with  transferring  the
Company's  current product line to this technology would have a material adverse
affect on the Company's business and results of operations.  In addition, delays
or cancellation of the development of this technology could adversely affect the
Company's new product  development  program.  From time to time, the Company has
experienced production difficulties that have caused delivery delays and quality
problems.  There  can be no  assurance  that the  Company  will  not  experience
manufacturing problems and product delivery delays in the future as a result of,
among other things,  changes to its process  technologies,  ramping  production,
installing new equipment at its facilities  and  constructing  new facilities in
Milpitas, California.

During the fourth  fiscal  quarter of 1998,  the Company  reversed its valuation
allowance  for certain  deferred  tax assets in  accordance  with  Statement  of
Financial Accounting Standards 109, "Accounting for Income Taxes." This resulted
in a non-recurring  income tax benefit for fiscal 1998 of $3.93 million or $0.32
per diluted share.  The Company expects the effective tax rate to range from 36%
to 39% for fiscal 1999.

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

The  Company is subject to a variety of  federal,  state and local  governmental
regulations  related  to the use,  storage,  discharge  and  disposal  of toxic,
volatile or otherwise  hazardous  chemicals used in its  manufacturing  process.
Although  the  Company  believes  that  its  activities   conform  to  presently
applicable  environmental  regulations,  the failure to comply  with  present or
future  regulations  could  result  in  fines  being  imposed  on  the  Company,
suspension of production or a cessation of operations. There can be no assurance
that regulatory  changes or changes in regulatory  interpretation or enforcement
will 

                                       20
<PAGE>

not render  compliance more difficult and costly.  Any failure of the Company to
control  the  use  of,  or  adequately  restrict  the  discharge  of,  hazardous
substances, or otherwise comply with environmental regulations, could subject it
to significant future liabilities.

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

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

Year 2000 Readiness

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

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

The Company's  current revenue is generated from products that will not generate
any product warranty or product defect liability issues related to the year 2000
compliance.  However, the Company could be negatively affected to the extent its
major suppliers, vendors and customers have not successfully addressed year 2000
issues  and  the  Company  has  initiated  formal  communications  with  all its
significant suppliers, vendors and customers to assess this exposure.

The cost of  implementing  such a plan is being funded by income from operations
and  capital  leases  has not been and is not  expected  to be  material  to the
Company's  operating  results.  The cost to address  and

                                       21
<PAGE>

remedy the Company's  remaining year 2000 issues is estimated to be $0.3 million
in  fiscal  1999.  The cost of the year 2000  project  and the date on which the
Company  believes  it will  complete  the year  2000  modification  are based on
management's best estimates,  which were derived utilizing numerous  assumptions
of future events,  including the continued availability of certain resources and
other factors.  However,  there can be no guarantee that these estimates will be
achieved and actual results could differ materially from those anticipated.

Liquidity and Capital Resources

The Company's  primary sources of liquidity are cash and short-term  investments
of $9.5 million at September 30, 1998.  At September 30, 1998,  the Company also
had a  non-revolving  lease line of credit for up to $6.5  million  which can be
utilized for up to 100% of the value of financed equipment.  Amounts drawn under
this line represent  five-year capital leases.  The non-revolving  lease line of
credit  expires  February 28,  1999.  At  September  30, 1998,  $4.1 million was
outstanding,  and approximately  $2.4 million remained available under the line.
See Note 3 of Notes to Consolidated Financial Statements.

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

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


ITEM 7A:   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS.

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

Interest  Rate  Sensitivity.  The  Company  maintains  a  short-term  investment
portfolio  consisting  mainly of income  securities with an average  maturity of
less than one year. These available-for-sale  securities are subject to interest
rate risk and will fall in value if market  interest rates  increase.  If market
interest  rates were to increase  immediately  and  uniformly by 10 percent from
levels at September 30, 1998, the fair value of the  approximately  $3.7 million
portfolio would decline by an immaterial  amount.  The Company presently intends
to hold its fixed income  investments until maturity,  and therefore the Company
would not expect its  operating  results  or cash  flows to be  affected  to any
significant  degree  by the  effect  of a sudden  short-term  change  in  market
interest rates on its securities portfolio.

                                       22
<PAGE>

At September 30, 1998, the Company had approximately $5.8 million of outstanding
obligations  under capital lease  arrangements and long-term debt. If short-term
interest  rates were to  increase  10  percent,  the  increased  lease  payments
associated  with  these  arrangements  would not have a  material  impact on the
Company's  net income or cash flows as these  borrowings  do not carry  variable
interest rates. The Company does not hedge any interest rate exposures.

Foreign Currency Exchange Risk. Yen is the functional  currency of the Company's
subsidiary in Japan.  The Company does not currently enter into foreign exchange
forward  contracts to hedge  certain  balance sheet  exposures and  intercompany
balances  against  future  movements in foreign  exchange  rates.  However,  the
company does  maintain  cash balances  denominated  in Yen. If foreign  exchange
rates were to weaken  against the U.S.  dollar  immediately  and uniformly by 10
percent from the exchange  rate at September  30, 1998,  the fair value of these
foreign currency amounts would decline by an immaterial amount.

















                                       23
<PAGE>
ITEM 8:  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

1.       INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
              The  following  Financial  Statements  are  filed  as part of this Report.
<CAPTION>
                                                                                                     Page No.

<S>                                                                                                     <C>
              Report of Deloitte & Touche LLP, Independent Auditors..............................       29

              Report of Ernst & Young LLP, Independent Auditors..................................       30

              Consolidated Balance Sheets as of September 30, 1998 and 1997......................       31

              Consolidated Statements of Income for each of the three fiscal years
              in the period ended September 30, 1998.............................................       32

              Consolidated Statements of Stockholders' Equity for each of the three
              fiscal years in the period ended September 30, 1998................................       33

              Consolidated Statements of Cash Flows for each of the three fiscal
              years in the period ended September 30, 1998.......................................       34

              Notes to Consolidated Financial Statements.........................................       35

2.            INDEX TO SUPPLEMENTAL FINANCIAL INFORMATION

              Unaudited Interim Financial Information............................................       46

3.            INDEX TO FINANCIAL STATEMENT SCHEDULE

              The following financial statement schedule of Elantec  Semiconductor,  Inc. for the
              years ended  September 30, 1998,  1997 and 1996 is filed as part of this report and
              should be read in conjunction with the Consolidated Financial Statements of Elantec
              Semiconductor, Inc.

                  Schedule II - Valuation and Qualifying Accounts for each of the
                  three fiscal years in the period ended September 30, 1998......................       47

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

                                       24

<PAGE>


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

On May 29, 1998, the Board of Directors of the Company approved the dismissal of
the Company's independent accountants, Ernst & Young LLP, and the appointment of
Deloitte & Touche LLP  ("Deloitte & Touche") for the fiscal year ended 1998. The
report of Ernst & Young LLP for the fiscal  years ended 1996 and 1997  contained
no adverse opinion, disclaimer of opinion or qualification or modification as to
uncertainty, audit scope or accounting principles. During the fiscal years ended
1996 and 1997, and the interim period from October 1, 1997 through May 29, 1998,
there were no  disagreements  between  the  Company and Ernst & Young LLP on any
accounting  principles or practices,  financial statement disclosure or auditing
scope or procedure,  which, if not resolved to the satisfaction of Ernst & Young
LLP  would  have  caused  it to make  reference  to the  subject  matter  of the
disagreement in connection with its report. No "reportable  events" as described
in paragraph (a) (1) (v) of Item 304 of Regulation S-K have occurred  within the
Company's  fiscal years ending 1996 and 1997, or the period from October 1, 1997
through May 29, 1998.


The Company did not consult with Deloitte & Touche during the fiscal years ended
1996 and 1997, and the interim period from October 1, 1997 through May 29, 1998,
on any matter which was the subject of any  disagreement or any reportable event
or on the  application  of  accounting  principles  to a specified  transaction,
either completed or proposed.

                                       25
<PAGE>

                                    PART III

ITEM 10:  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information  required by this Item with  respect to Directors of the Company may
be found in the section captioned  "Election of Elantec Directors"  appearing in
the definitive  Proxy  Statement to be delivered to  stockholders  in connection
with the Annual  Meeting of  Stockholders  to be held on January 22, 1999.  Such
information is incorporated  herein by reference.  Information  required by this
Item with  respect to  executive  officers  may be found in Part I hereof in the
section  captioned  "Executive  Officers of the Company."  Such  information  is
incorporated herein by reference.

ITEM 11:  EXECUTIVE COMPENSATION

Information  with  respect  to this Item may be found in the  section  captioned
"Executive  Compensation"  appearing  in the  definitive  Proxy  Statement to be
delivered to  stockholders in connection with the Annual Meeting of Stockholders
to be held on January 22,  1999.  Such  information  is  incorporated  herein by
reference.

ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information  with  respect  to this Item may be found in the  section  captioned
"Security  Ownership of Certain  Beneficial Owners and Management"  appearing in
the definitive  Proxy  Statement to be delivered to  stockholders  in connection
with the Annual  Meeting of  Stockholders  to be held on January 22, 1999.  Such
information is incorporated herein by reference.

ITEM 13:  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information  with  respect  to this Item may be found in the  section  captioned
"Certain  Transactions"  appearing  in  the  definitive  Proxy  Statement  to be
delivered to  stockholders in connection with the Annual Meeting of Stockholders
to be held on January 22,  1999.  Such  information  is  incorporated  herein by
reference.


                                       26
<PAGE>

                                     PART IV

ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K

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

     1.  Financial  Statements and Financial  Statement Schedule -- See Index to
         Consolidated  Financial  Statements and Financial Statement Schedule at
         Item 8 on page 24 of this Report.

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

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

3.01    --  Company's Certificate of Incorporation. (1)

3.02    --  Certificate  of  Designations  specifying  the terms of the Series A
            Junior  Participating  Preferred Stock of Registrant,  as filed with
            the Secretary of State of Delaware o September 15, 1998. (2)

3.03    --  Company's Bylaws. (1)

4.01    --  Registration Rights Agreement dated August 12, 1988 by and among the
            Company  and certain  Stockholders  and  Warrantholders,  as amended
            January 12, 1990 and as of August 4, 1995. (1)

4.02    --  Rights Agreement dated September 14, 1998 between  Registrant,  Bank
            Boston,  N.A., as Rights Agent, which includes as Exhibit A the from
            of  Certificate  of  Designations  of Series A Junior  Participating
            Preferred Stock, as Exhibit B the Form of Rights  Certificate and as
            Exhibit C the Summary of Rights to Purchase Preferred Shares. (2)

10.01   --  Company's 1983 Stock Option Plan, as amended, and related documents.
            (1)/+

10.02   --  Company's  1994  Equity  Incentive  Plan,  as  amended,  and related
            documents. (1)/+

10.03   --  Form of Company's 1995 Equity Incentive Plan and related  documents.
            (3)/+

10.04   --  Form of  Company's  1995  Directors  Stock  Option  Plan and related
            documents. (1)/+

10.05   --  Form of Company's  1995  Employee  Stock  Purchase  Plan and related
            documents. (1)/+

10.06   --  Form of  Indemnification  Agreement entered into by the Company with
            each of its directors and executive officers. (1)

10.07   --  Form of Executive Compensation Agreement dated as of March 22, 1991,
            by and between the Company and David O'Brien. (1)/+

10.08   --  Form of Executive Compensation Agreement dated as of March 22, 1991,
            by and between the  Company  and each of Ralph  Granchelli,  Richard
            Corbin, and Barry Siegel. (1)/+

10.09   --  Standard  Industrial/Commercial  Single-Tenant  Lease dated June 23,
            1993,  by and  between the  Company  and Robert  Ruggles,  including
            amendments one through five thereto. (1)

10.10   --  Technology  Transfer  Agreement dated February 24, 1993, between the
            Company and Aisin Seiki Co., Ltd. ("Aisin"). (1)

10.11   --  Product  Development  Agreement No. 1 dated March 24, 1993,  between
            the Company and Aisin. (1)

10.12   --  Product  Development  Agreement No. 2 dated March 24, 1995,  between
            the Company and Aisin. (1)

10.13   --  Distributor  Agreement  dated December 8, 1986,  between the Company
            and Insight Electronics, Inc. ("Insight"). (1)

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

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

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

                                       27
<PAGE>

10.17   --  Amendment  to  Standard  Industrial/Commercial  Single-Tenant  Lease
            dated June 23, 1993. (4)

10.18   --  Standard  Industrial/Commercial  Single-Tenant  Lease dated February
            20, 1996. (4)

10.19   --  Amendment  to  Standard  Industrial/Commercial  Single-Tenant  Lease
            dated February 20, 1996. (4)

10.20   --  Distributor  Agreement dated August 1, 1996, between the Company and
            Microtek Inc. (5)

16.01   --  Letter regarding change of certifying accountants (6)

21.01   --  Subsidiary  of the Company.  (1)

23.01   --  Consent of Deloitte & Touche LLP,  Independent Auditors (see page 51
            of this Report).

23.02   --  Consent of Ernst & Young LLP,  Independent  Auditors (see page 52 of
            this Report).

24.01   --  Powers  of  Attorney  (see  page 48 of this  Report).  

27.01   --  Financial  Data Schedule.

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

   (1)   Incorporated  by reference to the Company's  Registration  Statement on
         Form S-1, filed August 24, 1995, as amended (File No. 33-96136).

   (2)   Incorporated  by reference to the Company's  Registration  Statement on
         Form 8-A, filed September 16, 1998.

   (3)   Incorporated  by reference to the Company's  Registration  Statement on
         Form S-8, filed March 17, 1998 (File No. 333-48101).

   (4)   Incorporated  by reference to the  Company's  Quarterly  Report on Form
         10-Q for the quarter ended September 30, 1996.

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

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

   +     Represents a management contract or compensatory plan or arrangement.

(b)      Reports on Form 8-K

The Company filed a Report on Form 8-K on September  16, 1998,  making an Item 5
disclosure related to the adoption of a Shareholder Rights Plan.

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

(d)  Financial Statement Schedules:
         The  Registrant  hereby  files  as part of this  Report  the  financial
         statement schedules listed in Item 14(a)(1), as set forth above.

                                       28
<PAGE>


Independent Auditor's Report

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

We  have  audited  the  accompanying   consolidated  balance  sheet  of  Elantec
Semiconductor,  Inc. and  subsidiaries  ("Company") as of September 30, 1998 and
the related consolidated  statements of income,  stockholders'  equity, and cash
flows for the year then ended.  Our audit also included the financial  statement
schedule listed in the index at Item 8(3).  These  financial  statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audit.

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

In our opinion,  the 1998 consolidated  financial  statements present fairly, in
all material respects, the financial position of Elantec Semiconductor,  Inc. at
September  30, 1998,  and the results of its  operations  and its cash flows for
each of the year then ended in conformity  with  generally  accepted  accounting
principles.  Also,  in our opinion,  such  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.




DELOITTE & TOUCHE LLP
October 22, 1998
(December 3, 1998 as to Note 10.)

                                       29
<PAGE>


                Report of Ernst & Young LLP, Independent Auditors

The Board of Directors and Stockholders
Elantec Semiconductor, Inc.

We  have  audited  the  accompanying   consolidated  balance  sheet  of  Elantec
Semiconductor,  Inc.  as of  September  30,  1997 and the  related  consolidated
statements of income,  stockholders'  equity, and cash flows for each of the two
years in the period  ended  September  30,  1997.  Our audits also  included the
financial statement schedule for the two years in the period ended September 30,
1997  listed in the  index at Item  14(a)(1).  These  financial  statements  and
schedule are the responsibility of the Company's management.  Our responsibility
is to express an opinion on these financial statements and schedule based on our
audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Elantec
Semiconductor, Inc. at September 30, 1997 and 1996, and the consolidated results
of its  operations  and its cash  flows for each of the two years in the  period
ended  September 30, 1997,  in conformity  with  generally  accepted  accounting
principles.  Also, in our opinion the related financial statement schedule, when
considered  in  relation  to the basic  financial  statements  taken as a whole,
presents fairly in all material respects the information set forth therein.



                                                   ERNST & YOUNG LLP


San Jose, California
October 22, 1997

                                       30
<PAGE>

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

                                                             September 30,
                                                           1998         1997
                                                          --------    --------
Assets
Current assets:
   Cash and cash equivalents                              $  5,815    $  9,839
   Short-term investments                                    3,651       6,089
   Accounts receivable, net of allowances
     of $1,076 in 1998 and $840 in 1997                      5,207       3,315
   Inventories                                               9,059       7,369
   Deferred income taxes                                     3,367        --
   Prepaid expenses and other current assets                   600         627
                                                          --------    --------
Total current assets                                        27,699      27,239
Property and equipment:
   Machinery and equipment                                  16,672      16,085
   Furniture and fixtures                                      652         563
   Leasehold improvements                                    1,494       2,970
   Construction-in-process                                  10,637        --
                                                          --------    --------
                                                            29,455      19,618
   Accumulated depreciation and amortization               (10,830)    (10,388)
                                                          --------    --------
                                                            18,625       9,230
Other assets, net                                              657         622
Non-current deferred income taxes                              563        --
                                                          --------    --------
Total assets                                              $ 47,544    $ 37,091
                                                          ========    ========

Liabilities and stockholders' equity 
Current liabilities:
   Accounts payable                                       $  4,108    $  3,368
   Income taxes payable                                        779         339
   Accrued salaries and benefits                             1,462       1,231
   Other accrued liabilities                                   458         429
   Deferred revenue                                          2,626       2,094
   Current portion of long-term debt and capital lease 
     obligations                                             1,480       1,491
                                                          --------    --------
Total current liabilities                                   10,913       8,952
Long-term debt and capital lease obligations                 4,354       3,336
Commitments and contingencies (Note 3)                        --          --
Stockholders' equity:
   Preferred stock, $.01 par value:
     Authorized shares - 5,000,000 in 1998 and 1997           --          --
     Issued and outstanding shares - none
   Common stock, $.01 par value: Authorized shares -
     25,000,000 in 1998 and 1997 Issued and
     outstanding shares - 9,188,000 in 1998 and
     9,019,000 in 1997                                          92          90
   Additional paid-in capital                               33,902      33,635
   Accumulated deficit                                      (1,717)     (8,922)
                                                          --------    --------
Total stockholders' equity                                  32,277      24,803
                                                          --------    --------
Total liabilities and stockholders' equity                $ 47,544    $ 37,091
                                                          ========    ========

                             See accompanying notes.

                                       31
<PAGE>
<TABLE>

                           Elantec Semiconductor, Inc.
                                and Subsidiaries
                        Consolidated Statements of Income
                    (in thousands, except per share amounts)
<CAPTION>
                                                            September 30,
                                                     1998        1997        1996
                                                   --------    --------    --------
<S>                                                <C>         <C>         <C>     
Net revenues                                       $ 46,210    $ 35,388    $ 36,806
Cost of revenues                                     24,831      20,111      18,008
                                                   --------    --------    --------
Gross profit                                         21,379      15,277      18,798

Operating expenses:
   Research and development                           7,228       6,234       6,413
   Marketing, sales, general, and administrative      9,890       8,866       8,085
                                                   --------    --------    --------
        Total operating expenses                     17,118      15,100      14,498
                                                   --------    --------    --------
Income from operations                                4,261         177       4,300
Interest and other income, net                          674         759         687
Interest expense                                       (413)       (289)       (226)
                                                   --------    --------    --------
Income before taxes                                   4,522         647       4,761

Provision for (benefit from) taxes on income         (2,683)         81         372
                                                   --------    --------    --------
Net income                                         $  7,205    $    566    $  4,389
                                                   ========    ========    ========

Earnings per share:
     Basic                                         $   0.79    $   0.06    $   0.52
     Diluted                                       $   0.75    $   0.06    $   0.47

Shares used in computing per share amounts:
     Basic                                            9,135       8,881       8,505
     Diluted                                          9,636       9,323       9,332
<FN>

                             See accompanying notes.
</FN>
</TABLE>

                                       32
<PAGE>

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

<CAPTION>
                                        Convertible                              
                                      Preferred Stock         Common Stock      Additional               Total     
                                   --------------------    -------------------    Paid-In Accumulated Stockholders' 
                                    Shares      Amount      Shares     Amount     Capital   Deficit      Equity
                                   --------    --------    --------   --------   --------   --------    --------

<S>                                  <C>       <C>            <C>     <C>        <C>        <C>         <C>     
Balance at September 30, 1995         4,937    $ 24,543       2,017   $     20   $    456   $(13,877)   $ 11,142
   Conversion of preferred stock     (4,937)    (24,543)      4,937         49     24,494       --          --
   Proceeds from IPO, net of           --          --         1,400         14      8,189       --         8,203
   offering expenses of $911
   Exercise of stock options           --          --           369          4        293       --           297
   Exercise of warrants                --          --            22       --           43       --            43
    Net income                         --          --          --         --         --        4,389       4,389
                                   --------    --------    --------   --------   --------   --------    --------
Balance at September 30, 1996          --          --         8,745         87     33,475     (9,488)     24,074
   Exercise of stock options           --          --           274          3        160       --           163
    Net income                         --          --          --         --         --          566         566
                                   --------    --------    --------   --------   --------   --------    --------
Balance at September 30, 1997          --          --         9,019         90     33,635     (8,922)     24,803
   Exercise of stock options           --          --           169          2        267       --           269
    Net income                         --          --          --         --         --        7,205       7,205
                                   --------    --------    --------   --------   --------   --------    --------
Balance at September 30, 1998          --      $   --         9,188   $     92   $ 33,902   $ (1,717)   $ 32,277
                                   ========    ========    ========   ========   ========   ========    ========
<FN>

                             See accompanying notes.
</FN>
</TABLE>

                                       33

<PAGE>

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

<CAPTION>
                                                                    September 30,
                                                            1998         1997        1996
                                                         ---------    ---------    ---------
<S>                                                      <C>          <C>          <C>      
Operating activities
Net income                                               $   7,205    $     566    $   4,389
Adjustments to reconcile net income to net cash
   provided by operating activities:
      Depreciation and amortization                          2,610        2,022        1,677
      Deferred tax benefit                                  (3,930)        --           --
      Loss on  disposition  of property and  equipment         389
      Changes in operating assets and liabilities:
       Accounts receivable                                  (1,892)         860          (50)
       Inventories                                          (1,690)        (894)      (1,885)
       Prepaid expenses and other current assets                27          (73)          31
       Payables and accrued liabilities                      1,440           32        1,217
       Deferred revenue                                        532       (1,049)        (273)
                                                         ---------    ---------    ---------
Net cash provided by operating activities                    4,691        1,464        5,106

Investing activities
Purchase of available for sale investments                 (79,487)    (114,576)    (108,457)
Sale and maturity of available for sale investments         81,925      115,150      101,794
Purchase of property and equipment                          (9,756)        (425)      (2,144)
Decrease (increase) in other assets                            (73)          20          238
                                                         ---------    ---------    ---------
Net cash provided by (used in) investing activities         (7,391)         169       (8,569)

Financing activities
Payments on capital lease obligations                         (936)        (426)        (145)
Payments on long-term debt                                    (657)        (908)      (1,567)
Issuance of common stock                                       269          163        8,543
                                                         ---------    ---------    ---------
Net cash  provided by (used in)  financing activities       (1,324)      (1,171)       6,831
                                                         ---------    ---------    ---------

Increase (decrease) in cash and cash equivalents            (4,024)         462        3,368
Cash and cash equivalents at beginning of period             9,839        9,377        6,009
                                                         ---------    ---------    ---------
Cash and cash equivalents at end of period               $   5,815    $   9,839    $   9,377
                                                         =========    =========    =========

Supplemental disclosures of cash flow information
Lease and installment financing for capital equipment    $   2,600    $   3,467    $   2,172
                                                         =========    =========    =========
Interest paid                                            $     378    $     285    $     202
                                                         =========    =========    =========
Taxes paid                                               $     808    $      57    $     236
                                                         =========    =========    =========
<FN>

                             See accompanying notes.
</FN>
</TABLE>

                                       34
<PAGE>


1. Business and Significant Accounting Policies

Nature  of  Business.  Elantec  Semiconductor,  Inc.  (the  "Company")  designs,
manufactures and markets high performance analog integrated circuits used in the
video/multimedia,  data processing,  instrumentation and communications markets.
Principal  markets  include  sales in North  America,  Asia,  Europe  and  other
countries.

Fiscal Year.  The Company's  fiscal year ends on the Sunday closest to September
30. Fiscal years 1998,  1997, and 1996 ended on September 27,  September 28, and
September 29,  respectively.  For  convenience,  the  accompanying  consolidated
financial  statements  have been shown as ending on September 30 for each fiscal
year. Fiscal years 1998, 1997, and 1996 included 52 weeks per year.

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

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

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

Short-Term Investments.  The Company's policy is to invest in various short-term
instruments  with investment  grade credit ratings.  Generally such  investments
have  contractual  maturities  of  less  than  one  year.  All of the  Company's
marketable  investments are classified as  "available-for-sale"  and the Company
views its  available-for-sale  portfolio  as  available  for use in its  current
operations. At September 30, 1998, short-term investments consisted of corporate
debt of $1,901,000,  auction-rate  securities of $450,000, and US Treasury bills
of  $1,300,000.  At September  30,  1997,  short-term  investments  consisted of
corporate  debt of  $3,888,000,  auction-rate  securities  of  $901,000,  and US
Treasury bills of $1,300,000. The following table is a summary of debt and money
market auction  preferred  securities by  contractual  maturity at September 30,
1998 (in thousands):

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

In accordance  with Statement of Financial  Accounting  Standards (FAS) No. 115,
"Accounting for Certain  Investments in Debt and Equity Securities," the Company
classifies its short-term investments as "available-for-sale" securities and the
cost of  securities  sold is based on the  specific  identification  method.  At
September 30, 1998 there was no significant  difference  between the fair market
value,  determined  by quoted market  prices,  and the  underlying  cost of such
investments. Realized gains and losses were immaterial.

                                       35
<PAGE>

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

Financial  instruments that potentially subject the Company to concentrations of
credit risk consist principally of cash investments and trade receivables.

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

The  Company's  products  are  sold  to a wide  variety  of  original  equipment
manufacturers through a direct sales force and to a network of distributors. The
Company generally does not require collateral from its trade creditors. However,
the Company  performs  ongoing credit  evaluations  of its customer's  financial
condition and requires collateral, primarily letters of credit, as required. The
concentration of credit risk in the Company's trade receivables is substantially
mitigated  by  the   Company's   credit   evaluation   process   combined   with
geographically dispersed sales transactions.

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

                                                           September 30,
                                                     1998       1997      1996  
                                                   --------- --------- ---------

        Microtek International, Inc. - Japan          23%        14%       15%
        Insight Electronics, Inc. - United States     11%        12%        -

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

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

Long-Lived Assets. The Company accounts for long-lived assets in accordance with
Statement of Financial Accounting Standards ("FAS") No. 121, "Accounting for the
Impairment of Long-Lived  Assets and for  Long-Lived  Assets to be Disposed Of."
FAS No. 121 requires  long-lived assets to be evaluated for impairment  whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be  recoverable.  Adoption of FAS No. 121 did not have a material effect
on the Company's financial  position,  results of operation or cash flows during
each of the three years ended September 30, 1998.

                                       36
<PAGE>

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

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

Foreign Currency.  The functional currency of the Company's foreign subsidiaries
is the local currency of that country.  Gains and losses  resulting from foreign
currency  translations and net foreign currency  transactions were immaterial in
1998. There were no gains or losses resulting from foreign currency translations
or net foreign currency transaction in 1997 and 1996.

Advertising  Expense. The Company expenses the costs of advertising as incurred.
Advertising expense was approximately  $555,000,  $552,000, and $617,000 for the
fiscal years ended September 30, 1998, 1997, and 1996, respectively.

Net Income  Per Share.  Net  income  per share is  computed  using the  weighted
average number of shares of common stock and dilutive common  equivalent  shares
from convertible  preferred stock (using the if-converted method) and from stock
options (using the treasury stock method).

Recent Accounting Pronouncements

Comprehensive  Income.  In June 1997, the Financial  Accounting  Standards Board
("FASB")  released  Statement  of  Financial   Accounting   Standards  No.  130,
"Reporting  Comprehensive  Income" (FAS 130). FAS 130 establishes  standards for
the reporting and display of  comprehensive  income and its components in a full
set of general purpose financial statements.  Components of comprehensive income
include net income and certain transactions that have generally been reported in
the consolidated  statement of shareholders' equity. FAS 130 requires that these
transactions   be  included  with  net  income  and   presented   separately  as
comprehensive  income in the  financial  statements.  The Company is required to
adopt FAS 130 during fiscal 1999. At the time of adoption,  the Company  expects
that comprehensive income will not be materially different from net income.

Segment  Information.  In June 1997,  the FASB  released  Statement of Financial
Accounting  Standards No. 131,  "Disclosures about Segments of an Enterprise and
Related  Information"  (FAS 131).  FAS 131 will change the way companies  report
selected segment  information in annual  financial  statements and also requires
those  companies to report  selected  segment  information in interim  financial
reports to stockholders.  The Company is required to adopt FAS 131 during fiscal
1999. The Company has not completed the  determination  of the impact of the new
standard on the Company's consolidated financial statements.

Derivative  Investments  and Hedging  Activities.  In June 1998, the FASB issued
Statement of Financial Accounting  Standards No.133,  "Accounting for Derivative
Investments and Hedging  Activities" (FAS 133). FAS 133 provides a comprehensive
and consistent  standard for the recognition and measurements of derivatives and
hedging activities.  The Company is required to adopt FAS 133 during fiscal 2000
and does not expect the statement to have a significant  effect on the Company's
operating results.

2. Inventories
Inventories consisted of the following (in thousands):
                                                      September 30,
                                                   1998            1997
                                              --------------- ---------------
        Raw materials                                 $  498          $  431
        Work-in-process                                6,481           5,039

                                       37
<PAGE>

        Finished goods                                 2,080           1,899
                                              --------------- ---------------
                                                      $9,059          $7,369
                                              =============== ===============
3. Commitments and Contingencies

The Company leases its principal  facilities  under operating leases that expire
at various dates through the year 2005. The Company is generally responsible for
taxes,  assessments,  maintenance and insurance  under its leases.  In addition,
machinery and equipment  included  approximately  $7,064,000  and  $4,491,000 of
equipment  acquired  under  capital  leases  and  approximately  $1,662,000  and
$705,000 of related  accumulated  amortization  at September  30, 1998 and 1997,
respectively.  Amortization  of capital leases is included in  depreciation  and
amortization expense.

The  following  is a schedule by year of future  minimum  lease  payments  under
capital and operating leases as of September 30, 1998 (in thousands):

                                                      Capital Leases  Operating

     1999                                               $ 1,750       $   752  
     2000                                                 1,726           710
     2001                                                 1,611           714
     2002                                                 1,103           733
     2003                                                   478           740
     Thereafter                                              -            834
     Total minimum lease payments                         6,668       $ 4,483
     Amount representing interest                          (961)            -
                                                     -------------   ----------
     Present value of net minimum lease payments        $ 5,707       $ 4,483
                                                                     
     Note Payable                                       $   127       
                                                     -------------   
     Total debt and capital lease obligations             5,834       
     Current portion                                     (1,480)      
                                                     =============   
     Long-term debt and capital lease obligations       $ 4,354       
                                                     =============

Total  rental  expense  on all  operating  leases  was  approximately  $812,000,
$689,000,  and $339,000 for the fiscal years ended  September 30, 1998, 1997 and
1996, respectively.  At September 30 1998, outstanding cancelable commitments to
purchase capital equipment totaled  approximately $1.3 million.  The Company has
$2.4 million remaining available under a non-revolving lease line of credit.

Note payable as of September 30, 1998, consists of a three-year note which bears
interest at prime plus 0.25% (8.50% at September  30, 1998) and is due in fiscal
1999. This note originated from previously expired nonrevolving  equipment lines
of credit.  This note contains financial covenants that were fully complied with
at September 30, 1998.

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

4. Stockholders' Equity

                                       38
<PAGE>

Initial Public  Offering.  On October 11, 1995, the Company  effected an initial
public  offering  of its shares  pursuant  to which it issued  1,400,000  common
shares for net  proceeds of  approximately  $8,203,000.  Upon the closing of the
initial public offering,  each outstanding share of Series 1 preferred stock was
converted to common stock on a share-for-share basis.

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

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

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

Employee  Stock  Purchase  Plan.  The Company has reserved and the  stockholders
approved 225,000 shares of common stock for issuance to eligible employees under
the 1995 Purchase Plan (the Purchase  Plan).  Under the Purchase Plan,  eligible
employees, subject to certain restrictions,  may purchase shares of common stock
at a price  equal to the  lesser of 85% of the fair  market  value at either the
beginning  of each  six-month  offering  period  or the  end of  each  six-month
offering period.  As of September 30, 1998, no shares have been issued under the
Purchase Plan.

Stock  Option  Plans.  In August 1995,  the Board of  Directors  approved and in
September  1995, the  stockholders  approved (i) the adoption of the 1995 Equity
Incentive  Plan (the 1995 Equity Plan) as the  successor  to the 1994  Incentive
Plan (the Predecessor  Plan),  pursuant to which 550,000 shares of the Company's
common stock,  plus the number of shares  remaining  unissued and not subject to
outstanding  options  under the  Predecessor  Plan and any shares  issuable upon
exercise of options  granted  under the  Predecessor  Plan that expire or become
unexercisable  for any reason without  having been exercised in full,  have been
reserved for future issuance, and (ii) the adoption of the 1995 Directors' Stock
Option Plan (the 1995  Directors'  Plan) pursuant to which 150,000 shares of the
Company's common stock have been reserved for future issuance.  Each outstanding
option under the Predecessor  Plan will continue to be governed by the terms and
conditions  of such  plan;  no  additional  options  will be  granted  under the
Predecessor  Plan.  In December  1996,  the Board of  Directors  approved and in
February  1997,  the  stockholders  approved the adoption of an amendment to the
1995 Equity Plan pursuant to which an additional 400,000 shares of the Company's
Common Stock have been reserved for future issuance. In December 1997, the Board
of  Directors  approved  and in February  1998,  the  stockholders  approved the
adoption of an amendment to the 1995 Equity Plan pursuant to which an additional
400,000  shares of the  Company's  Common  Stock have been  reserved  for future
issuance.

                                       39
<PAGE>

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

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

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

1998  Employees and  Consultants.  In August 1998,  the  Compensation  Committee
approved an  option-repricing  program for all employees and  consultants to the
Company who were not executive officers of the Company.  Under this program, the
eligible  optionees  were  permitted to exchange  their then  outstanding  stock
options  for new stock  options  having an  exercise  price of $3.625  per share
(equal to the fair  market  value on August 28,  1998),  with  vesting  annually
during the subsequent four years. Approximately 453,900 options were repriced by
employees (excluding executive officers) and consultants.

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

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

                                       40
<PAGE>

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

                                                        Options Outstanding
                                                     ---------------------------
                                                                      Weighted
                                          Shares         Number    Average Price
                                         Available      of Shares     Per Share
                                       -----------------------------------------

Balance at September 30, 1995             523,143       1,684,857
   Options granted                       (204,000)        204,000
   Options exercised                         --          (369,240)
   Options canceled                       147,465        (147,465)
   Options expired                        (23,865)           --            --
                                       -----------------------------------------
Balance at September 30, 1996             442,743       1,372,152      $   4.60
   Additional share reservation           400,000            --        $   --
   Options granted                     (1,422,457)      1,422,457      $   4.76
   Options exercised                         --          (273,772)     $   0.58
   Options canceled                       936,251        (936,251)     $   6.90
   Options expired                           (882)           --        $   --
                                       ----------------------------------------
Balance at September 30, 1997             355,655       1,584,586      $   4.09
   Additional share reservation           400,000            --        $   --
   Options granted                     (1,195,856)      1,195,856      $   5.86
   Options exercised                         --          (169,475)     $   1.62
   Options canceled                       655,494        (655,494)     $   7.07
   Options expired                           (375)           --        $   --
                                       ----------------------------------------
Balance at September 30, 1998             214,918       1,955,473      $   4.39
                                       ========================================
<TABLE>

The following table summarizes  information  about stock options  outstanding at
September 30, 1998:
<CAPTION>
--------------------------------------------------------------------------------- -----------------------------------
                              Options Outstanding                                        Options Exercisable
--------------------------------------------------------------------------------- -----------------------------------
                                          Weighted Average         Weighted                             Weighted
                                              Remaining             Average                              Average
 Range of Exercise         Number            Contractual           Exercise            Number           Exercise
       Prices           Outstanding         Life (Years)             Price          Exercisable          Price
--------------------- ----------------- ---------------------- ------------------ ----------------- -----------------
<S>                       <C>                   <C>                 <C>                 <C>              <C>   
$ 0.20 -  $ 1.00            119,372             1.79                $ 0.59              119,372          $ 0.59
$ 1.50  - $ 3.75            648,961             8.94                $ 3.50              138,518          $ 3.10
$ 4.00  - $ 4.88            723,783             8.70                $ 4.26              218,080          $ 4.27
$ 5.00 -  $ 7.75            371,741             8.59                $ 6.32               91,404          $ 5.91
$ 8.00 -  $ 9.00             91,616             9.06                $ 8.80               16,128          $ 8.78
                      ----------------- ---------------------- ------------------ ----------------- -----------------
$ 0.20 -  $ 9.00          1,955,473             8.35                $ 4.39              583,502          $ 3.62
--------------------- ================= ====================== ================== ================= =================
</TABLE>

At September 30, 1997 525,807  options were  exercisable  at a weighted  average
exercise price of $2.58.

                                       41
<PAGE>

Stock-Based  Compensation.  Under APB 25, the Company  generally  recognizes  no
compensation expense with respect to stock-based awards to employees.  Pro forma
information  regarding net income and earnings per share is required by FAS 123,
"Accounting  for Stock-Based  Compensation",  for awards granted in fiscal years
that begin after  December 31,  1994,  as if the Company had  accounted  for its
stock-based awards to employees under the fair value method of FAS 123. The fair
value of the Company's  stock-based  awards to employees  was estimated  using a
Black-Scholes option pricing model. The Black-Scholes option valuation model was
developed  for use in estimating  the fair value of traded  options that have no
vesting  restrictions  and  are  fully  transferable.  The  Black-Scholes  model
requires the input of highly subjective assumptions including the expected stock
price  volatility.  Because the Company's  stock-based  awards to employees have
characteristics  significantly  different  from  those of  traded  options,  and
because changes in the subjective  input  assumptions can materially  affect the
fair  value  estimate,  in  management's  opinion,  the  existing  models do not
necessarily  provide  a  reliable  single  measure  of  the  fair  value  of its
stock-based  awards to employees.  The fair value of the  Company's  stock-based
awards to  employees  was  estimated  assuming  no  expected  dividends  and the
following weighted-average assumptions:

                                                   Options
                                    1998             1997             1996
                              ----------------- ---------------- ---------------

    Expected life (years)           6.7               5.0              5.0
    Expected volatility            80.0%             75.3%            75.3%
    Risk-free interest rate         6.0%              6.0%             6.0%

The  weighted-average  fair value of stock options granted during 1998, 1997 and
1996 was  $3.72,  $3.44  and  $5.68,  respectively.  For  purposes  of pro forma
disclosures,  the estimated  fair value of the options is amortized to pro forma
net income (loss) over the options' vesting period. The Company's historical and
pro forma information follows (in thousands, except for per share information):

                                                  September 30,
                                         1998          1997          1996
                                    ------------- ------------- --------------

     Net income (loss):                            
          Historical                   $ 7,205        $   566       $ 4,389
          Pro Forma                    $ 4,980        $  (283)      $ 4,111

     Net income (loss) per share:
          Historical                   $  0.75        $  0.06       $  0.47
          Pro Forma                    $  0.52        $ (0.03)      $  0.44

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

5. Earnings Per Share

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

                                       42

<PAGE>

<TABLE>

The following  table sets forth the  reconciliation  of weighted  average common
shares  outstanding  used in the  computation of basic and diluted  earnings per
share computations for the years ended September 30:
<CAPTION>
                                                                       September 30,
                                                                 1998     1997     1996
                                                                ------   ------   ------
<S>                                                             <C>      <C>      <C>   
  Net income (Numerator):
    Net income basic and diluted                                $7,205   $  566   $4,389
                                                                ======   ======   ======
  Shares (Denominator):
    Weighted average shares of common stock outstanding
    used in computation of basic net income per share            9,135    8,881    8,505
    Dilutive effect of stock options                               501      442      827
                                                                ------   ------   ------

   Shares used in computation of diluted net income per share    9,636    9,323    9,332
                                                                ======   ======   ======

   Basic net income per share                                   $ 0.79   $ 0.06   $ 0.52
                                                                ======   ======   ======

   Diluted net income per share                                 $ 0.75   $ 0.06   $ 0.47
                                                                ======   ======   ======
</TABLE>

6. Taxes on Income

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

                                                       September 30,
                                           1998             1997         1996
                                        -------          -------         -------
Current:
   Federal                              $   815          $    24         $   207
   State                                    383                7              90
   Foreign                                   50               50              75
                                        -------          -------         -------
Total Current                             1,248               81             372
Deferred:
   Federal                               (3,685)            --              --
   State                                   (245)            --              --
   Foreign                                 --               --              --
                                        -------          -------         -------
Total Deferred                           (3,930)            --              --
                                        -------          -------         -------
Total Provision                         $(2,682)         $    81         $   372
                                        =======          =======         =======


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

                                       43
<PAGE>

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

                                                               September 30,
                                                            1998          1997
                                                           -------      -------
Net deferred tax asset
   Net operating loss carryforwards                        $  --        $ 1,253
   Tax credit carryforwards                                  1,085        1,581
   Distributor reserves                                      1,067          776
   Deferred revenue                                            248          107
   Depreciation                                               (133)        (257)
   Capitalized research and development cost                   195          223
   Other accruals and reserves not currently                 1,978        1,176
     deductible
                                                           -------      -------
Total net deferred tax assets                                4,430        4,859
Less valuation allowance                                      (500)      (4,859)
                                                           -------      -------
Net deferred tax asset                                     $ 3,930      $  --
                                                           =======      =======


The  valuation  allowance  decreased  by  approximately  $4,389,000  in 1998 and
increased by approximately  $609,000 in 1997.  Management determined that a full
valuation  allowance is not  necessary at September 30, 1998 as it was concluded
that it was more  likely  than not that  certain  deferred  tax  assets  will be
recovered  in the  future.  Accordingly,  the  Company  reversed  the  valuation
allowance  for those  deferred tax assets at September  30, 1998.  The effect of
such  reversal  resulted in the  recognition  in fiscal 1998 of a  non-recurring
income tax benefit of $3,930,000, or $0.32 per diluted share.

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

                                                          September 30,
                                                  1998        1997        1996
                                                -------     -------     -------

Expected provisions at statutory rates          $ 1,538     $   220     $ 1,619
State taxes, net of federal benefit                 262           4          59
Foreign taxes                                        50          33          75
Benefit of net operating loss
  Carryforwards                                    --          (190)     (1,418)
Other                                              (143)         14          37
Reversal of valuation allowance                  (4,389)       --          --
                                                -------     -------     -------
                                                $(2,682)    $    81     $   372
                                                =======     =======     =======

In addition,  the Company had federal general  business credit  carryforwards of
approximately  $199,000 that expire in the years 1999 through 2011,  foreign tax
credit  carryforwards  of  $625,000  that  expire  in  1998  through  2001,  and
alternative  minimum tax credit  carryforwards  of $260,000  with no  expiration
date.

                                       44
<PAGE>

7. Employee Benefit Plan

The Company has a 401(k)  savings plan that covers  substantially  all full-time
employees.  Eligible  employees  are permitted to make fully vested tax deferred
contributions  of up to 15% of  their  annual  gross  compensation,  subject  to
certain  Internal  Revenue Service  limitations.  The plan provides for employer
contributions at the discretion of the Board of Directors. Contributions made by
the  Company  for the  years  ended  September  30,  1998,  1997,  and 1996 were
approximately $133,000, $18,000, and $20,000, respectively.

8. Industry and Geographic Information

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

                                                  September 30,
                                        1998           1997         1996
                                    -----------------------------------------
                Domestic                 47%            44%          48%
                Export:
                   Europe                13%            14%          13%
                   Asia                  40%            42%          39%
                                    -----------------------------------------
                                        100%           100%         100%
                                    =========================================


9. Fair Value of Financial Instruments

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

10. Subsequent Events

In early fiscal 1999,  due to  significant  over-capacity  caused by  continuing
decreased  demand in the  semiconductor  industry  and  changes in  product  mix
towards products  manufactured by third party foundries,  the Company  evaluated
its long-term  manufacturing and process  technology  strategies.  Based on this
evaluation,  the Company concluded that projected production volumes and related
cash flows from the  fabrication  facility  are not  sufficient  to recover  its
carrying value. Consequently,  the Company announced on December 3, 1998 that it
will  write-down  the carrying value related to its wafer  fabrication  facility
located in  Milpitas,  California  in  accordance  with  Statement  of Financial
Accounting   Standards  ("FAS")  No.121,   "Accounting  for  the  Impairment  of
Long-Lived  Assets  and  for  Long-Lived  Assets  to be  Disposed  Of."  FAS 121
adjustments,   in  conjunction  with  other  non-recurring  charges  related  to
restructuring  initiatives  aimed at improving  profitability,  will result in a
non-recurring charge estimated at between $13 to $15 million (on a pretax basis)
in the first quarter of fiscal 1999.

                                       45
<PAGE>
<TABLE>

                                            Elantec Semiconductor, Inc.

                                      Unaudited Interim Financial Information

<CAPTION>
Selected Quarterly Financial Data:
                        1998                                  1st              2nd             3rd            4th
                                                           ---------------------------------------------------------
                                                               (Unaudited, in thousands except per share data)
<S>                                                          <C>             <C>              <C>            <C>    
Revenue                                                      $11,234         $11,660          $11,815        $11,501
Gross profit                                                   5,376           5,661            5,692          4,650
Income from operations                                         1,147           1,343            1,255            516
Net income (1)                                                 1,137           1,373            1,168          3,527

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

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

                        1997                                  1st              2nd             3rd            4th
                                                           ---------------------------------------------------------
                                                                (Unaudited, in thousands except per share data)

Revenue                                                       $8,001          $8,494           $9,195         $9,698
Gross profit                                                   3,191           3,791            3,972          4,323
Income (loss) from operations                                   (198)            (39)             (11)           425
Net income (loss)                                                (97)             67               98            498

Earnings (loss) per share:
     Basic                                                    $(0.01)         $ 0.01           $ 0.01         $ 0.05
     Diluted                                                  $(0.01)         $ 0.01           $ 0.01         $ 0.05

Shares used in computing per share amounts:
     Basic                                                     8,759           8,804            8,962          8,999
     Diluted                                                   8,759           9,281            9,239          9,476

<FN>

-----------------
(1)  During  the  fourth  fiscal  quarter  of 1998,  the  Company  reversed  its
     valuation  allowance  for certain  deferred tax assets in  accordance  with
     Statement of Financial  Accounting  Standards 109,  "Accounting  for Income
     Taxes." This resulted in a non-recurring  income tax benefit for the fourth
     fiscal quarter of 1998 of $3,930, 000 or $0.32 per basic and diluted share.
</FN>
</TABLE>
                                       46
<PAGE>
<TABLE>

                                                                                                             Schedule II

                                            Elantec Semiconductor, Inc.

                                         Valuation And Qualifying Accounts

                                   Year ended September 30, 1998, 1997, and 1996

<CAPTION>
                                                                               Additions                                      
                                                                 Balance at    Charged to                                     
                                                                 Beginning      Cost and                      Balance at      
                                                                  of Year       Expense       Deductions      End of Year     
                                                                -----------------------------------------------------------
<S>                                                                  <C>        <C>             <C>             <C>   
Year ended September 30, 1998
   Allowance   for   doubtful   accounts  and  product
     returns (deducted from accounts receivable)                     $840        $  242          ($  6)         $1,076
                                                                ===========================================================
Year ended September 30, 1997
   Allowance   for   doubtful   accounts  and  product
     returns (deducted from accounts receivable)                     $340        $1,447          ($947)         $  840
                                                                ===========================================================
Year ended September 30, 1996
   Allowance   for   doubtful   accounts  and  product
     returns (deducted from accounts receivable)                     $265        $  566          ($491)         $  340
                                                                ===========================================================
</TABLE>
                                       47
<PAGE>

                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended,  the Registrant has duly caused this report to
be signed on its behalf by the undersigned,  thereunto duly  authorized,  in the
City of Milpitas, State of California, on the 8th day of December, 1998.

                                   ELANTEC SEMICONDUCTOR, INC.

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

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

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

Principal Executive Officer: 

/s/ James V. Diller                      Acting President and Chief Executive Officer,            December 8, 1998
------------------------------------     Chairman of the Board of Directors
     James V. Diller                     

Principal Financial Officer: 

/s/ Ephraim Kwok                         Vice President of Finance and Administration             December 8, 1998
------------------------------------     and Chief Financial Officer
     Ephraim Kwok                       

Additional Directors: 

/s/ Chuck K. Chan                        Director                                                 December 8, 1998
------------------------------------
     Chuck K. Chan

/s/ Alan V. King                         Director                                                 December 8, 1998
------------------------------------
     Alan V. King

/s/ B. Yeshwant Kamath                   Director                                                 December 8, 1998
------------------------------------
     B. Yeshwant Kamath


</TABLE>
                                       48
<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION


                             Washington, D.C. 20549


                                   -----------


                                    EXHIBITS

                                       to

                                    Form 10-K


                                      Under

                           THE SECURITIES ACT OF 1933


                                   -----------


                           ELANTEC SEMICONDUCTOR, INC.



                                       49

<PAGE>

                                INDEX TO EXHIBITS



Exhibit                                                                  Page
Number      Description                                                   No.
------      -----------                                                   ---
 23.01      Consent of Deloitte & Touche LLP, Independent Auditors.       51
 23.02      Consent of Ernst & Young LLP, Independent Auditors.           52
 27.01      Financial Data Schedule                                       53



                                       50