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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 DECEMBER 31, 1997

                                      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 NO. 0-27232

                       BENCHMARQ MICROELECTRONICS, INC.
            (Exact name of registrant as specified in its charter)

                   DELAWARE                            74-2532442
          (State or other jurisdiction of            (I.R.S. employer
          incorporation or organization)           identification no.)


                 17919 WATERVIEW PARKWAY
                       DALLAS, TEXAS                        75252
          (Address of principal executive offices)        (Zip Code)

     Registrant's telephone number, including area code:   (972) 437-9195

          Securities Registered Pursuant to Section 12(b) of the Act:

        TITLE OF EACH CLASS  NAME OF EACH EXCHANGE ON WHICH REGISTERED
        -------------------  -----------------------------------------
                NONE                           NONE

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

                                TITLE OF CLASS
                                --------------

                    COMMON STOCK, PAR VALUE $.001 PER SHARE

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

     The aggregate market value of the voting stock held by non-affiliates of
the registrant (based on the closing price of such stock as reported on March
26, 1998 on the Nasdaq National Market of The Nasdaq Stock Market, Inc.) was
approximately $94,435,952.

     As of March 26, 1998, 7,115,344 shares of the registrant's Common Stock
were outstanding.
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                             CAUTIONARY STATEMENT
                             ====================

     The Company wishes to caution readers that the following important factors,
among others, in some cases have affected, and in the future could affect, the
Company's actual results and could cause the Company's actual results for the
first quarter of 1998, and beyond, to differ materially from those expressed in
any forward-looking statements made by, or on behalf of, the Company:

     --an accelerated decline in the average selling prices for the Company's
Battery Management Products (as defined herein), NVSRAM Products (as defined
herein) and RTC Products (as defined herein);

     --insufficient expansion of the Company's production capacity to meet the
sales demand for Battery Management Products;

     --slower or declining acceptance of Battery Management Products, NVSRAM
Products or RTC Products by customers;

     --competitive disadvantage resulting from technical unfeasibility of the
Company's new product designs;

     --an accelerated growth of inventory leading to excess inventory and
salability and/or obsolescence write-downs;

     --inability to utilize option wafers as specified under the terms of the
Company's Option Agreement with Taiwan Semiconductor Manufacturing Company;

     --increases in the prices of materials and components, especially wafers,
static random access memories and batteries used for NVSRAM Products or RTC
Products;

     --timing or delay of new product introductions by the Company or its
competitors;

     --loss of key personnel;

     --excess production capacity;

     --decline in demand due to industry factors;

     --inability to achieve acceptable margins on the non-proprietary components
included in Battery Management Products;

     --product defects resulting in significant returns for credit or
replacement;

     --timing and size of significant orders;

     --competitive pricing pressures;

     --changes in product mix;

     --advances in technologies;

     --growth of selling, general and administrative expense at a rate faster
than that of sales and revenues;

     --patent infringement and product liability litigation;

     --labor disputes;

     --failure to comply with government regulations;
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     --the effects of foreign currency exchange rate fluctuation on expenses,
average selling prices and market share;

     --with respect to the "Year 2000" issue, the availability and cost of
personnel trained in this area, the ability to locate and correct all relevant
computer codes, and similar uncertainties; and

     --the inability to realize the anticipated benefits of the proposed Merger
(as defined herein) or the disruption of the Company's business resulting from
the proposed Merger.

                                      -2-
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                                    PART I

ITEM 1.   BUSINESS

GENERAL

     BENCHMARQ Microelectronics, Inc. (the "Company" or "BENCHMARQ") is engaged
principally in the design, manufacture, and marketing of integrated circuits and
electronic modules for portable and power-sensitive electronic applications.
BENCHMARQ's principal focus is on the market opportunity for battery management
products, on which it is concentrating the majority of its research and
development activities. BENCHMARQ's battery management integrated circuits and
modules (collectively, "Battery Management Products") control charging,
conditioning and monitoring of rechargeable batteries, principally for portable
electronic systems, including personal computers, cellular telephones,
camcorders, power tools, personal care devices, electronic games and audio
devices.

     The Company also produces a family of non-volatile static random access
memory ("NVSRAM") modules and controller integrated circuits (collectively,
"NVSRAM Products") that provide battery backed-up memory to devices such as
telecommunications equipment, including network routers, hubs and memory boards.
Real time clock ("RTC") integrated circuits and battery backed RTC modules
(collectively, "RTC Products") that provide non-volatile time and date functions
to various computer or control electronics systems, comprise the Company's other
product group.  (The NVSRAM and RTC Products are collectively, "Integrated
Battery Products.")

     In each of the years 1992 through 1996, the Company derived the majority of
its revenues from sales of Integrated Battery Products.  In 1997, the Company's
strategic focus, Battery Management Products, was its highest revenue generating
product line.  Although the Company expects a material portion of its total net
revenues to come from sales of Integrated Battery Products through at least
1998, long-term growth is not anticipated from these product lines.  The Company
operates in a single industry segment.  The geographic distribution of the
Company's revenues as a percent of total revenues may be found in Note 9 of the
Notes to Financial Statements.

     The Company has entered into an Agreement and Plan of Merger, dated as of
March 2, 1998, by and among Unitrode Corporation, a Maryland corporation
("Unitrode"), Merrimack Corporation, a Delaware corporation and wholly owned
subsidiary of Unitrode ("Merrimack"), and the Company (the "Merger Agreement").
Under the Merger Agreement, Merrimack will merge (the "Merger") with and into
the Company, and the Company will survive as a wholly owned subsidiary of
Unitrode.  If the Merger is consummated, each outstanding share of common stock
of the Company will be converted into the right to receive shares of common
stock of Unitrode.  The initial exchange ratio is one share of Unitrode common
stock for one share of BENCHMARQ common stock.  However, if the average of the
mean high or low per share trading prices on the New York Stock Exchange for a
share of Unitrode common stock for the twenty trading days ending on the tenth
day prior to the special meeting of the stockholders of the Company to consider
the Merger is less than $16 or more than $24, the exchange ratio will be
adjusted proportionately but in no event will the exchange ratio be greater than
1.33 to 1.  See Note 12 of Notes to Consolidated Financial Statements.

     The Company was incorporated in Delaware in 1989.

BATTERY MANAGEMENT INTEGRATED CIRCUIT BUSINESS

     The market for portable electronic systems is large and growing rapidly.
Many portable electronic systems use rechargeable batteries as their power
source.

                                      -3-
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     In portable electronic systems, battery technology plays a critical role in
determining overall system performance and design. To address original equipment
manufacturer ("OEM") and end-user demands, battery manufacturers seek to improve
the price/performance characteristics, convenience and reliability of their
rechargeable batteries. To improve price/performance characteristics,
manufacturers seek to achieve higher energy density, which results in smaller
and lighter portable systems. To increase convenience, manufacturers seek to
reduce charging time, increase charging ease and provide users with the ability
to monitor capacity. To enhance reliability, manufacturers seek to control
charging levels, to improve battery life by increasing the number of
charge/discharge cycles, and to provide safe batteries by correctly monitoring
charge and discharge activity. Finally, manufacturers work to develop less toxic
battery technologies to minimize the environmental impact.

     Over the years, a variety of battery chemistries have been developed to
meet the rechargeable battery power needs of a wide range of portable electronic
systems. The four principal rechargeable battery chemistries that are currently
widely available in the market are lead acid, nickel cadmium ("NiCd"), nickel
metal hydride ("NiMH") and lithium ion ("Li-Ion").  Rechargeable alkaline and
lithium polymer ("Li-polymer") may become the fifth and sixth categories. Of
these, lead acid is the least expensive rechargeable battery chemistry for
delivering high currents, but its size and weight make it poorly suited for many
portable applications. NiCd battery chemistry offers increased energy density by
weight over lead acid chemistry, making it more suitable for a wider range of
portable applications, but at an increased cost. NiMH batteries offer
incremental increases in energy density by weight over NiCd, with a more
environmentally acceptable chemistry, but at a further increase in cost. Li-Ion
batteries, which are increasingly used in notebook computer and other portable
electronic systems, offer substantially greater energy density by weight than
NiMH and certain other advances in battery life, but are typically more
expensive and require more sophisticated charge management subsystems. In recent
years, the increasing variety (and varying battery needs) of portable electronic
systems using rechargeable battery technology has resulted in the development of
additional battery chemistries, including rechargeable alkaline and Li-polymer.

     As the variety of end-user requirements has increased and the number and
complexity of battery chemistries has evolved, the need for sophisticated
components to manage rechargeable batteries has increased as well. Batteries
must be charged (and end-users are increasingly demanding systems that do so
quickly with a minimum of end-user intervention), conditioned to operate at peak
efficiency and monitored (typically through ''gas gauging'') so the user can be
kept apprised of available battery power. Microelectronic components therefore
are playing a growing role in the rechargeable battery subsystem in controlling
all aspects of the battery management function, from charging to conditioning to
monitoring.

     There are two major types of battery management microelectronic products:
microcontroller/discrete-based and dedicated integrated circuit solutions. The
microcontroller/discrete-based solutions incorporate microcontrollers programmed
with specific algorithms which are combined with additional analog-to-digital
conversion and voltage regulator integrated circuits. Dedicated integrated
circuit solutions have the necessary algorithms designed into the silicon and
incorporate more of the required supporting circuitry. Compared to
microcontroller/discrete-based solutions, dedicated integrated circuits are more
highly integrated and therefore have the potential for cost and size savings. In
addition, in many applications dedicated integrated circuit solutions are able
to provide higher performance. Dedicated integrated circuits may allow OEM
customers to bring their products to market more rapidly by reducing the need
for ''in-house'' expertise in programming, testing and system-level hardware
design.

     The market for battery management electronics has been developed in large
part by both OEMs that use microcontroller based products to internally develop
their own proprietary solutions and independent providers of more highly
integrated and specialized semiconductor solutions, such as BENCHMARQ.
Initially, this market developed relatively slowly due to the market
fragmentation caused by proprietary solutions, the slow migration of feature
richness from higher-priced to lower-priced portable electronic products and the
unique combination of technical skills and capabilities required to develop such

                                      -4-
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products.  However, the Company believes that a large portion of the battery
management market is at a point of change that will define expanded market
opportunities for the next few years.  The computer industry continues in a
state of technology transition.  The Company believes that compliance and
interface with both SMBus, an industry hardware interface standard, and Advanced
Configuration and Power Interface, a software interface and methodology
standard, are likely to become a requisite for computers using future versions
of Windows(R).  Modern notebook computers using fast Pentium(R) processors with
MMX (TM) (signal processing) extensions and sophisticated power management
techniques present a much wider range of power consumption levels and therefore
require more accurate analog measurement circuitry. Increasing intelligence and
communication between the battery packs, system controllers, and charging
elements require more electronics than before. These factors should serve to
both focus and expand the growth of battery management market opportunities in
notebook computers.

     The large portable communications market, including the global digital
cellular and personal communication systems (PCS), and cordless phones, is
poised for a market transition demanding modern battery management techniques
currently found in higher priced portable computing applications but at
significantly lower incremental system cost.  Standards for hardware and
software interfaces are less likely to develop but there are fewer large OEM's
in this market than the computer sector.  These factors should serve to expand
the growth of battery management opportunities in the portable communications
market.

     The Company's principal battery management challenge is the timely
introduction of its next generation of capacity monitoring devices ("Gas Gauge")
products that are compatible with the evolving technology and the successful
introduction of capacity measurement solutions to the portable communications
market.

INTEGRATED BATTERY PRODUCTS BUSINESS

     There are two general classifications of integrated circuit memories
employed within electronic systems, volatile memory and non-volatile memory
("NVM"). Unlike their volatile counterparts, NVM devices typically do not
require continuous application of main system power to retain and protect data.
Within the NVM classification of memory are NVSRAM modules and battery backed
controller integrated circuits. The primary components of an NVSRAM module are a
static random access memory ("SRAM"), a controller integrated circuit to detect
main system power loss and to redirect power from a backup source, and a lithium
button cell battery for backup power. NVSRAM modules are often used in network
routers, hubs and memory boards, specifically to protect data in instances of
main system power outages.

     RTC integrated circuits and modules provide non-volatile time and date
functions.  RTC integrated circuits are designed to write-protect the clock,
calendar and storage registers during interruption of main system power. During
main system power interruption, a backup battery is accessed to maintain data
and operate the clock and calendar functions.

     Other non-PC RTC products incorporate the RTC function with varying
densities of NVSRAM into a module.  These modules are designed to provide both
non-volatile time and date functions with increased storage space for data or
programs.  These modules can typically be found in workstations, servers and
telecommunication systems.

     The Company's principal Integrated Battery Product challenge is the timely
introduction of new proprietary products and successful marketing/sales of its
current multi-sourced commodity products.

PRODUCTS

     The Company's products are divided into two primary categories: Battery
Management Products, and Integrated Battery Products.

                                      -5-
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     Battery Management Products

     Battery Management Products comprised 52% of the Company's total net
revenues in 1997, 45% in 1996 and 28% in 1995.  Battery Management Products are
used in the charging, conditioning and capacity monitoring of rechargeable
batteries. In applications requiring fast charging, Battery Management Products
are utilized to monitor and control the rate and termination of charging. This
capability is particularly critical for battery chemistries such as NiMH and Li-
Ion, which are extremely sensitive to overcharging and can lose cycle life or
become unstable if overcharged. Fast charge control microelectronics provide
specialized features that determine when to safely fast charge a battery, when
to switch to a slower rate of charge in some cases to complete the charge and
when to reduce the rate of charge even further to maintain a full charge to
compensate for the batteries' self-discharge.  In some cases, batteries require
conditioning, which involves the use of battery management products to control
the execution of a specified program of initial charges and discharges that
allows the battery to operate at peak efficiency. Battery management products
enable accurate capacity determination by monitoring both the charge going into
the battery and the charge being consumed from the battery as well as estimating
self-discharge.

     Among the Company's current fast charge control Battery Management Products
are products designed to support the fast charge and conditioning of NiCd, NiMH,
lead acid, rechargeable alkaline, Li-Ion and Li-polymer battery chemistries. The
Company also has Battery Management Products used for capacity monitoring that
are compatible with NiCd, NiMH, Li-Ion and Li-polymer chemistries, as well as
lead acid under certain operating conditions. Some of these Battery Management
Products are capable of resolving voltages to 12.5 microvolts and are designed
to have a non-linearity error of less than 1%. With an operating current of less
than 150 microamps and an operating voltage range of 2.8 volts to 5.5 volts, the
Battery Management Products for capacity monitoring are also designed for
reduced power consumption.  New capacity monitoring products that are compatible
with evolving standards for communication between battery and power management
peripherals and the main system are currently under development.

     Integrated Battery Products

     Integrated Battery Products produced 47% of the Company's total net
revenues in 1997, 54% in 1996 and 66% in 1995. The Company entered the NVSRAM
market in 1990. The Company assembles its NVSRAM modules internally and has its
controller integrated circuits fabricated by Taiwan Semiconductor Manufacturing
Company ("TSMC"). NVSRAM modules are often used in network routers, hubs and
memory boards, specifically to protect data in instances of main system power
outages. The Company's NVSRAM modules are designed to retain data for up to ten
years in most applications. Controller integrated circuits used in non-volatile
memory applications are designed to detect power loss and to redirect power from
a backup source. Although they are a primary component of a NVSRAM module,
controller integrated circuits also can be used in an OEM system in conjunction
with independent volatile memory sources, providing the designer with increased
flexibility in SRAM selection.

     RTC integrated circuits and modules provide non-volatile time and date
functions. RTC integrated circuits are designed to write-protect the clock,
calendar and storage registers during interruption of main system power. A
backup battery is then connected to maintain data and operate the clock and
calendar functions.  RTC Module products include this backup battery.
Substantially all personal computers have this function.

     In 1991, the Company entered the market for personal computer RTC products.
The RTC Product line is IBM AT (TM)-compatible, which the Company believes to be
the dominant industry standard. For most applications, BENCHMARQ RTC module
products are designed to provide date and time for up to 10 years in the absence
of main system power. RTC modules differ from integrated circuit solutions only
in that the module assembly incorporates a crystal and a backup battery. Modules
are popular with OEMs

                                      -6-
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that want to reduce system parts count and motherboard form factors and to
insulate the back-up battery from inadvertent mishandling in the assembly
process.  In March 1996, the Company introduced a family of parallel access
clocks that address timekeeping requirements for such diverse applications as
copiers, fax machines and workstations.  In 1997, the Company introduced
products that integrate the clock function with system accessible NVSRAM.

PRODUCT DESIGN AND TECHNOLOGY

     The Company believes that it can reduce the time to market for its
customers' products and leverage the activity of its design engineers and
research and development expenditures through the use of its core of internally
designed proprietary integrated circuit cells. With these standard integrated
circuit cells, the Company seeks to rapidly develop and bring to volume
production a wide range of application-specific integrated circuit solutions.
The small die size requirements of many Battery Management Products often
require the use of standard circuits as opposed to standard cells. A standard
circuit is one that is tuned for process, layout and application requirements to
perform a required function. The standard circuit is derived from a previously
designed/proven circuit thereby enhancing time to market by further leveraging
previous designs.  The Company also believes that its integration of
microcontroller cores with embedded volatile and non-volatile memory offers more
programmable solutions for fast time to market.

MANUFACTURING

     Wafer Fabrication

     The Company does not own a facility for the manufacture of semiconductor
wafers ("Wafers"), but instead subcontracts the manufacture of the Wafers used
to make the Company's products to third parties.  The Company currently obtains
substantially all of its Wafers for use in its products from TSMC.  The Company
expects to remain dependent on TSMC for substantially all of its Wafer capacity
for the foreseeable future.  In May 1996, the Company entered into an Option
Agreement with TSMC (the "Option Agreement").  Pursuant to the Option Agreement,
the Company committed to purchase and TSMC committed to provide specified
quantities of Wafers at prevailing market prices during the years 1997 through
2000.  Additionally, the Company has an option to purchase and TSMC committed to
provide certain additional Wafers to be purchased during the years 1997 through
2000.  See Note 9 of Notes to Consolidated Financial Statements.  Other
subcontract sources of Wafer supply are used from time-to-time and are being
considered for future use by the Company.

     BENCHMARQ currently uses a complementary metallic oxide silicon ("CMOS")
fabrication process for most of its Wafer supply.  Although the process
geometries typically used by the Company are 1.2 and .8 micron, at least two new
products have been designed for a .6 micron CMOS process and one new product for
a .5 micron CMOS process.  Other more technologically advanced processes are
being considered for other new product projects.

     No assurance can be given that the Company will be able to utilize all of
the Wafers it has committed to under the terms of the Option Agreement or that
it will be able to reach an acceptable arrangement for other more
technologically advanced processes on a timely basis, if at all.  The Company's
business, financial condition and operating results could be materially and
adversely affected in either case.

     Manufacturing Processes

     Upon receipt from the Company's Wafer vendor, Wafers are probed in-house
for electrical functionality.  Wafers successfully completing the probe are then
sent to outside vendors for die packaging.  Upon return to the Company, selected
packaged devices are subjected to abbreviated

                                      -7-
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electrical testing, followed in most cases by burn-in testing.  Packaged devices
that successfully complete such testing are then subjected to final electrical
testing.  Other packaged devices, upon return from the Company's semiconductor
vendor, go directly from receiving to final electrical testing.  Once the final
electrical test is passed, parts are routed through quality control for visual
inspection and then on to finished goods for sale.

     The Company employs three assembly processes to build modules.  For Battery
Management Product modules, the Company typically uses a process that consists
of automated pick and place equipment to attach one or more of the Company's
Battery Management Products, along with several support components, to a printed
circuit board.  For NVSRAM modules, the Company uses a process that is mainly
manual to populate a printed circuit board with one of the Company's nonvolatile
controller devices, a button cell battery and SRAM memory device(s).  For RTC
modules, the Company also uses a process that is mainly manual to attach  two
external components, a crystal and a button cell battery, to the RTC packaged
device.  For durability both NVSRAM and RTC module products are encapsulated
into plastic housings.  Once the modules are encapsulated, they are routed to
final electrical testing.

     In addition to risks associated with Wafer supply, the Company is subject
to the risk of shortages or delays in or quality problems with the supply of
components and raw materials used by third parties and the Company in the
assembly and manufacture of the Company's products. These deficiencies can be
the result of, among other things, increased market competition, increased
demand for raw materials, manufacturing yields and natural disasters. From time
to time, the Company has experienced supply shortfalls. Future supply
shortfalls, delays, quality problems or increased costs related to raw materials
or components or a failure to achieve and maintain manufacturing process
competitiveness could have a material adverse effect on the Company's business,
financial condition and operating results.

GOVERNMENT REGULATION AND OTHER FACTORS

     Certain of the Company's Wafer fabrication suppliers are subject to a
variety of U.S. and foreign government regulations, including regulations
related to the discharge or disposal of toxic, volatile or otherwise hazardous
chemicals used in their manufacturing processes. The failure by the Company or
its suppliers to comply with present or future governmental regulations could
result in fines, suspension of production or cessation of operations.
Environmental regulations could also require the acquisition of equipment or the
incurrence of other substantial expenses to comply with environmental
regulations. If substantial additional expenses were incurred by the Company or
its suppliers (and such costs were passed on to the Company), the Company's
costs to manufacture its products could significantly increase, thus materially
and adversely affecting the Company's business, financial condition and
operating results. Additionally, the Company is subject to a variety of
government regulations relating to its operations, including environmental,
labor and export control regulations. The failure to maintain compliance with
present or future regulations could result in fines being imposed on the Company
or suspension or cessation of its operations. Any failure by the Company to
comply with applicable regulations or to control the use of, or adequately
restrict the discharge of, hazardous substances could subject it to future
liabilities, and could have a material adverse effect on the Company's business,
financial condition and operating results.

MARKETING AND SALES

     The Company focuses its marketing efforts on prospective customers' system
design engineers and purchasing personnel. To make its technology customer
friendly and design wins easier to achieve, the Company provides customers with
comprehensive design notes, user friendly development boards for battery
management applications, in-house engineering support, turnkey module solutions
(where applicable) and proactive field and factory sales support. This effort is
coordinated by the Company's direct sales managers, who are supported by a
worldwide network of independent distributors and manufacturers' representatives
and in-house technical services engineers and marketing personnel. The

                                      -8-
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Company's technical services engineers frequently work with existing and
potential customers to assist them with their design effort.

     As of February 28, 1998, the Company sold its products in the United States
and Canada through 4 distributors and 21 independent sales representative
organizations.  BENCHMARQ maintains field sales staff in the metropolitan
Atlanta and Dallas areas. As of February 28, 1998, the Company sold its products
internationally through 25 independent distributors. BENCHMARQ also has a sales
support presence in the Asia-Pacific region.  Export sales also are supported by
the Company's domestic support organization. In 1997, 1996 and 1995, the
Company's export sales accounted for 66%, 67% and 51% respectively, of its net
revenues.  See Note 9 of Notes to Financial Statements.

     During 1997, the Company's distributor in Taiwan accounted for
approximately $9.2 million, or 21%, of total net revenues and the Company's
distributor in Japan accounted for approximately $5.4 million, or 12%, of total
net revenues.  No other customer directly accounted for greater than 10% of the
total net revenues.

     Export sales are subject to a variety of risks, including those arising
from fluctuations in currency exchange rates, tariffs, import restrictions and
other trade barriers, unexpected changes in regulatory requirements, longer
accounts receivable payment cycles, potentially adverse tax consequences and
export license requirements.  Because the Company's international sales have to
date been denominated in U.S. dollars, increases in the value of the U.S. dollar
could increase the price in local currencies of the Company's products in
foreign markets and make the Company's products relatively more expensive than
competitive products that are denominated in local currencies.

     The Company selects its distributors and sales representatives based on a
subjective evaluation of a combination of factors, including potential sales
volume, viability and anticipated financial stability, expertise in the
industry, potential distribution channel conflicts and geographic scope. The
Company's distributors and sales representatives generally offer products of
several different companies. Accordingly, there is a risk that distributors and
sales representatives may give higher priority to products of other suppliers,
thus reducing their efforts to sell the Company's products, which could have a
material adverse effect on the Company's business, financial condition and
operating results. The Company's agreements with its distributors and sales
representatives generally are terminable at either party's option. The Company's
distributors generally have rights of return and price protection rights.

     The Company's customers generally specify short delivery times when placing
their product orders. As a result, backlog at the beginning of a quarter
generally is not representative of the product sales that are anticipated for
that quarter. Most orders in the Company's backlog are subject to rescheduling
or cancellation without penalty by the customer at any time prior to 30 days
before scheduled shipment. As of December 31, 1997, the Company's backlog was
approximately $7.7 million, of which $4.7 million represented orders for Battery
Management Products. The Company's backlog as of December 31, 1996 was
approximately $9.5 million, of which $3.1 million represented orders for Battery
Management Products. The Company includes in its reported backlog all released
written purchase orders scheduled for shipment within the next six months.

RESEARCH AND DEVELOPMENT

     Extensive interface with customers and strategic alliance partners, such as
certain battery and semiconductor manufacturers, plays a critical role in the
Company's research and development direction. The Company's research and
development efforts are organized into three basic groups:  product development,
design engineering and product and test engineering.  The Company's expenditures
for research and development totalled approximately $3.1 million in 1997,
approximately $2.9 million in 1996, and approximately $2.2 million in 1995.

                                      -9-
<PAGE>

     The markets for the Company's products are characterized by rapidly
changing technology, new product introductions, short to moderate product life
cycles and aggressive price competition. The introduction by competitors of
NVSRAM, RTC or Battery Management Products involving superior price/performance
characteristics or the emergence of alternative technologies or new industry
standards could render the Company's existing or future products obsolete and
unmarketable. In addition, the products or systems into which the Company's
products currently are incorporated may be redesigned so that they no longer
require the Company's products.

     The Company is engaged in development projects primarily intended to result
in the introduction of new Battery Management Products over the next few years.
Over the long term, the Company's business, financial condition and operating
results will be substantially dependent on the timely completion, introduction
and market acceptance of these and other future products.  The successful
development and commercialization of new products involves many risks, including
risks with respect to the identification of new product opportunities, the
successful and timely completion of the development process and market
acceptance of the resulting products. There can be no assurance that the Company
will be able to successfully develop and market new products or that products or
technologies developed by others will not render the Company's products or
technologies noncompetitive or obsolete. If the Company is unable to design,
develop and introduce competitive products on a timely basis, its business,
financial condition and operating results will be materially and adversely
affected.

COMPETITION

     The markets for the Company's products are extremely competitive, and the
Company expects this competition to increase. In the battery management market,
the Company competes primarily with battery manufacturers that provide
integrated circuits offering battery management functionality along with their
batteries (particularly to larger customers), other independent suppliers of
dedicated battery management integrated circuits and suppliers of programmable
microcontrollers used for battery management. Major competitors in the battery
management market include National Semiconductor Corporation, Philips
Electronics N.V., Mitsubishi Electric Semiconductor, Mitsumi Electric
Corporation and Maxim Integrated Products, Inc. The major suppliers in the
NVSRAM market include Dallas Semiconductor Corporation ("Dallas Semiconductor")
and SGS-Thomson Microelectronics N.V. ("SGS-Thomson"). In this market, the
Company also competes with less expensive technologies such as ''flash memory.''
In the RTC market, the Company competes primarily with Dallas Semiconductor and
with chipset manufacturers who have incorporated RTC functionality into their
products, including the Company's licensee. In the battery management market,
the principal bases of competition include performance, ease of integration into
portable electronic systems, functionality, product flexibility, reliability and
price. In the NVSRAM and RTC markets, the principal bases of competition are
price, reliability, adherence to standards, performance and functionality. The
Company believes that it is competitive with respect to each of these factors.

     Many of the Company's current and prospective competitors have
substantially greater financial, technical, manufacturing and marketing
resources than the Company. The Company also anticipates that additional
competitors may enter certain of the Company's markets, resulting in even
greater competition. Many of the Company's principal competitors own, or have
investments in, Wafer fabrication facilities, which provide dedicated capacity
to those competitors and enable them to influence or control costs more
effectively than the Company. Increased competition could result in significant
price reductions with negative effects upon the Company's gross margins and a
loss of market share, which could materially and adversely affect the Company's
business, financial condition and operating results.

INTELLECTUAL PROPERTY AND PATENTS

     The Company's future success depends in part on its intellectual property
rights, which the Company attempts to protect through patents, trademarks and a
variety of other measures. There can be no assurance, however, that such
measures will be adequate to prevent misappropriation or that others

                                      -10-
<PAGE>

will not independently develop competitive technologies or products. There also
can be no assurance that any patent owned by the Company will not be
invalidated, circumvented or challenged, that the rights granted thereunder will
provide competitive advantages to the Company or that any of the Company's
pending or future patent applications will be issued within the scope of the
claim sought by the Company, if at all. As of March 26, 1998, the Company had
applied for 41 U.S. and six foreign patents, of which 26 have been granted or
allowed and four have been abandoned. These patents expire at various times
between 2010 and 2016. Also, as of such date, the Company had filed 18 U.S. and
foreign trademark applications, of which nine have been registered, four have
been allowed and three have been abandoned.

     Litigation may be necessary to protect the Company's intellectual property
rights and trade secrets and to defend against claims of infringement or
invalidity. From time to time, the Company has received communications from
third parties alleging that the Company may be in violation of such third
parties' intellectual property rights.  The Company is currently in litigation
with Dallas Semiconductor regarding allegations by Dallas Semiconductor that
certain of the Company's products may infringe upon various patents asserted by
Dallas Semiconductor.  There can be no assurance that the Company will be
successful in such litigation.  See "Item 3. Legal Proceedings" of this Form 10-
K.  Furthermore, there can be no assurance that additional claims against the
Company, or claims for indemnification resulting from infringement claims
asserted against the Company's customers, will not be asserted in the future.
Should the Company be required to litigate any such claims, or if the Company
should otherwise initiate litigation to protect its intellectual property
rights, such litigation could be expensive and time consuming, could divert
management resources and could have a material adverse effect on the Company's
business, financial condition and operating results, regardless of the outcome
of the litigation.

EMPLOYEES

     As of February 28, 1998, the Company had approximately 218 full-time and
contract employees.

     The Company's employees are not currently represented by any collective
bargaining agreements and the Company has never experienced a work stoppage due
to a strike. The Company believes that its employee relations are good.


ITEM 2.   PROPERTIES

     The Company currently leases and operates a facility totalling
approximately 71,000 square feet in Dallas, Texas. This facility houses all of
the Company's manufacturing, administrative, engineering and marketing functions
and certain of its sales functions. The Company is currently negotiating a lease
for a new design center to be located in Austin, Texas.


ITEM 3.   LEGAL PROCEEDINGS

     The Company has filed a declaratory judgment action against Dallas
Semiconductor in the United States District Court for the Eastern District of
Texas, Sherman Division to resolve certain allegations of patent infringement
asserted by Dallas Semiconductor.  The Company had previously sought declaratory
relief in a similar action filed in December 1995, which was dismissed in June
1996 based on Dallas Semiconductor's assurance to the court that it had not
charged the Company with patent infringement.  Since the filing of the suit by
the Company in January 1997 in Sherman, Texas, Dallas Semiconductor has filed a
lawsuit against the Company in February 1997 in the United States District Court
for the Northern District of Texas, Dallas Division alleging patent infringement
of some patents at issue in the Sherman litigation filed in December 1995 and
January 1997 by the Company.  In its lawsuit, Dallas Semiconductor is seeking an
injunction against patent infringement, damages for lost profit (which may under
certain circumstances be trebled), pre and post judgment interest and attorney's
fees.  To date, Dallas

                                      -11-
<PAGE>

Semiconductor has not specified an amount of monetary damages to which it
alleges it is entitled.  Subsequently, the courts ordered that the two cases be
combined into one case in the United States District Court for the Eastern
District of Texas.  At present, 11 Dallas Semiconductor patents are included in
this case.  The Company is confident that it has not violated any of the patents
asserted by Dallas Semiconductor and intends to vigorously pursue its case.
However, due to the uncertainties associated with any litigation, the ultimate
outcome cannot presently be determined.


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

     There were no matters submitted to a vote of the Company's stockholders
during the fourth quarter of the fiscal year ended December 31, 1997.


                     EXECUTIVE OFFICERS OF THE REGISTRANT
          [PURSUANT TO INSTRUCTION 3 TO REGULATION S-K, ITEM 401(B)]

     The executive officers of the Company are as follows:

<TABLE>
<CAPTION>
       NAME          AGE                     POSITION
-------------------  ---  -----------------------------------------------
<S>                  <C>  <C>
Derrell C. Coker...   44  Chairman of the Board
Alan R. Schuele....   51  President, Chief Executive Officer and Director
William F. Davies..   39  Vice President, Product and Market Development
R. Scott Schaefer..   33  Chief Financial Officer and Corporate Secretary
Jimmie C. Vernon...   39  Vice President, Sales
</TABLE>


     Mr. Coker has served as Chairman of the Board of the Company since May 1997
and a Director of the Company since the Company's inception in March 1989.  From
March 1989 until May 1997, Mr. Coker served as President and Chief Executive
Officer of the Company.  Prior to founding the Company, Mr. Coker was employed
by Dallas Semiconductor from 1984 to 1989, where most recently he was Vice
President for Sales.  Prior thereto, he was co-owner of Technology Sales Co., a
manufacturer's representative company, from 1982 to 1984.  He also held various
management, marketing and engineering related positions with Mostek Corporation,
a semiconductor manufacturer, from 1973 to 1982.

     Mr. Schuele has served as President, Chief Executive Officer and a Director
of the Company since May 1997.  From August 1986 until joining the Company he
was employed by Crystal Semiconductor, a wholly owned subsidiary of Cirrus
Logic, Inc. where most recently he was Vice President and General Manager of the
Industrial Products Division.  He also held various sales and marketing
management positions with Motorola Semiconductor, Mostek Corporation, and
Cypress Semiconductor from 1973 to 1986.  Mr. Schuele served as a pilot in the
United States Marine Corps. from 1968 to 1973 and received a B.S. degree in
Physics from Western Maryland College in 1968.

     Mr. Davies joined the Company as Director of Manufacturing in April 1989,
and was appointed Vice President of Manufacturing in September 1990.  Since
September 1990, Mr. Davies has served in various vice president positions
including his current position as Vice President of Product and Market
Development.  Prior to joining the Company, Mr. Davies was employed by Dallas
Semiconductor from 1984 to 1989, most recently as Director of Production
Development.  Mr. Davies is a named inventor on two of the Company's granted
patents.  He has a B.S. degree in Mechanical Engineering from the University of
Texas.

                                      -12-
<PAGE>

     Mr. Schaefer joined the Company in 1990 and has been Chief Financial
Officer since November 1997 and Corporate Secretary since December 1997.  Mr.
Schaefer's prior positions with the Company include Corporate Controller,
Assistant Secretary, and Accounting Manager.  Previously, he spent four years as
an auditor with the Dallas office of Ernst & Young LLP, where his primary client
base included various high technology companies.  He is a CPA in the State of
Texas and received his B.B.A. in Accounting from Texas Tech University.

     Mr. Vernon joined the Company as Director of Sales in April 1991 and was
appointed Vice President, Sales in April 1993.  Prior to joining the Company,
Mr. Vernon was employed by Microchip Technology, Inc., a semiconductor company,
from 1984 to 1991.  At Microchip Technology, Mr. Vernon held various sales
positions, most recently as Sales Manager for the Central Region.  He holds a
B.S. degree in Electrical Engineering from Texas Tech University.

                                      -13-
<PAGE>

                                    PART II

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

     The Company's common stock trades on the Nasdaq National Market tier of The
Nasdaq Stock Market, Inc. under the symbol BMRQ.  The following table sets forth
the quarterly high and low sales price information per share as reported on the
Nasdaq National Market for fiscal years 1996 and 1997:


        1996:                                HIGH    LOW
                                            ------  ------

        First quarter ended March 31......  $ 8.63  $ 6.25
        Second quarter ended June 30......  $16.00  $ 7.00
        Third quarter ended September 30..  $12.75  $ 6.75
        Fourth quarter ended December 31..  $27.00  $10.00

        1997:                                HIGH    LOW
                                            ------  ------
        First quarter ended March 31......  $29.88  $11.13
        Second quarter ended June 30......  $22.25  $12.75
        Third quarter ended September 30..  $36.25  $17.50
        Fourth quarter ended December 31..  $25.25  $12.00


     On March 26, 1998, there were 79 holders of record of the common stock.
The Company estimates that there are approximately 2,200 beneficial stockholders
of the Company's common stock.

     The Company has never declared or paid cash dividends on its capital stock.
The Company currently intends to retain any earnings for use in the operation
and development of its business and, therefore, does not expect to declare or
pay any cash dividends on its capital stock in the foreseeable future.
Covenants contained in one of the Company's equipment lease agreements require
the Company to maintain certain financial ratios.  Maintenance of such ratios
may restrict the ability of the Company to pay cash dividends.



ITEM 6.   SELECTED FINANCIAL DATA

     The selected financial data set forth below with respect to the Company's
consolidated statements of income for the years ended December 31, 1997, 1996
and 1995 and the Company's consolidated balance sheets at December 31, 1997 and
1996 are derived from the audited financial statements included elsewhere in
this report and should be read in conjunction with those financial statements
and their related footnotes.  The selected statements of income for the years
ended December 31, 1994 and 1993 and balance sheet data at December 31, 1995,
1994 and 1993 are derived from audited financial statements which are not
included in this report.

                                      -14-
<PAGE>

<TABLE>
<CAPTION>
                                                 YEARS ENDED DECEMBER 31,
                                     -------------------------------------------------
                                       1997      1996      1995      1994       1993
                                     --------  --------  --------  ---------  --------
<S>                                  <C>       <C>       <C>       <C>        <C>
STATEMENT OF OPERATIONS DATA:
Net revenues.......................   $44,437   $40,153   $29,215   $23,027   $15,061
Cost of sales......................    20,740    21,820    16,872    13,529     8,994
                                      -------   -------   -------   -------   -------
Gross margin.......................    23,697    18,333    12,343     9,498     6,067
Operating expenses:
    Research and development.......     3,087     2,922     2,238     1,882     1,974
   Selling, general and
    administrative.................    10,806     8,575     6,090     5,234     4,307
                                      -------   -------   -------   -------   -------
        Total operating expenses...    13,893    11,497     8,328     7,116     6,281
                                      -------   -------   -------   -------   -------
Income (loss) from operations......     9,804     6,836     4,015     2,382      (214)
Other income (expense), net........       462       457        57      (167)     (257)
                                      -------   -------   -------   -------   -------
Income (loss) before income taxes..    10,266     7,293     4,072     2,215      (471)
Provision for income taxes.........     3,595       231       270        60        --
                                      -------   -------   -------   -------   -------
Net income (loss)..................   $ 6,671   $ 7,062   $ 3,802   $ 2,155   $  (471)
                                      =======   =======   =======   =======   =======
Net income per common
      share/(1)/...................      $.97     $1.06      $.70      $.40
                                      =======   =======   =======   =======
Net income per common share
      assuming dilution/(1)/.......      $.86      $.96      $.61      $.35
                                      =======   =======   =======   =======
Weighted average shares
      outstanding/(1)/.............     6,867     6,640     5,451     5,323
                                      =======   =======   =======   =======
Weighted average shares
      assuming dilution/(1)/.......     7,752     7,391     6,273     6,094
                                      =======   =======   =======   =======

                                                       DECEMBER 31,
                                      -----------------------------------------------
                                         1997      1996      1995      1994      1993
                                      -------   -------   -------   -------   -------
BALANCE SHEET DATA:
Cash and cash equivalents..........   $ 2,883   $ 2,575   $12,653   $ 5,599   $ 4,756
Working capital....................    26,532    15,695    15,383     7,590     6,010
Total assets.......................    40,848    36,809    23,885    14,608    10,296
Long-term debt and obligations
    under capital leases
    (excluding current portion)....       702     1,260       891     2,632     2,402
Stockholders' equity...............    34,224    26,330    18,255     7,694     5,505
</TABLE>

______________________
/(1)/  Per share data for the year ended December 31, 1993 has not been
presented because such share information is not comparable or meaningful.

                                      -15-
<PAGE>

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

OVERVIEW

     BENCHMARQ was incorporated in 1989 and is engaged in the design,
development and marketing of mixed-signal integrated circuits and electronic
modules for portable and power-sensitive electronic systems.  The Company
introduced its first products in October 1990, and made its first shipments,
principally of NVSRAM modules, in December 1990.  In August 1991, the Company
shipped its initial Battery Management Product and in December 1991 shipped its
first RTC Product.

     BENCHMARQ currently is directing the majority of its research and
development expenditures to the development of Battery Management Products.  The
Company believes that its revenues from Integrated Battery Products will not
increase materially over the long-term and may decline.  Accordingly, the
Company expects that favorable future operating results will be substantially
dependent upon its ability to expand sales of Battery Management Products.  The
Company experienced significant sales of Battery Management Products in 1997 and
believes that battery management market opportunities will grow over time.
However, much of this anticipated growth is expected to result from certain
technological advances currently underway in the personal computer and portable
communications markets.  As a result, the Company's most significant challenges
are the timely introduction of its next generation of Gas Gauge products that
are compatible with and take advantage of these technological advances and
acceptance of its newly introduced product for the communications market.
Although the Company's management is optimistic about the prospects for its next
generation of Gas Gauge products, there can be no assurance that the Company
will be able to successfully develop and market these new products.

     A general softness in the industry began in late 1997 which has continued
into 1998, and may continue in the future.  This market condition has resulted
in reduced longer term scheduled orders; therefore, the Company's visibility, as
to future revenues, has been reduced for all of its product lines.  As a result,
the Company entered 1998 with a backlog of orders which was reduced from the
beginning of 1997.  The market conditions are in part precipitated by the
current Asian economic crisis, because the Company's products are sold on a U.S.
dollar basis.  As such, customers are taking a cautious approach to placing
longer term orders to control costs in the face of the uncertainty of the
currency exchange ratios.  The Company's manufacturing cycles are significantly
longer than the short delivery notice currently being given by customers.  The
Company must rely on its forecasts to build certain products in quantities it
believes will represent the future demand.  If forecasts are not accurate the
Company's ability to successfully negotiate orders with customers may be
adversely affected.

     The Company expects that the general softness in the industry will result
in a 10% to 15% decline in revenues in the first quarter of 1998 as compared to
the fourth quarter of 1997. Income from operations for the first quarter of
1998, excluding merger related expense items, is expected to be about half that
of the prior quarter due to lower revenues and margin declines. Margin declines
are attributable mainly to the combined effects of price pressure, in large
part due to the Asian currency devaluation, and reduced factory utilization.
With the addition of merger related expenses, consisting primarily of legal and
financial costs, the Company expects to report a nominal profit for the first
quarter of 1998 .

     Due in large part to competitive pressures, which in some cases are
amplified by foreign currency fluctuations, the Company's average selling prices
for its products generally have declined over time, often significantly.  These
trends have had a particularly significant impact on Integrated Battery Products
and the Company expects that average selling prices for these products will
continue to decline in the future.  The Company's ability to maintain or
increase revenues will be highly dependent on the Company's ability to increase
unit volumes of existing products and to introduce and sell new Battery
Management Products and other products in quantities sufficient to compensate
for the anticipated declines in average selling prices.

     A significant portion of the Company's product costs are controlled by
vendors.  Consequently, the Company generally has not been able to reduce costs
to the extent necessary to offset generally lower product selling prices.  In
1997, however, certain product costs benefited from market conditions that led
to lower prices from vendors.  Although these favorable market conditions are
likely to continue into 1998, changes could occur in the future that result in
higher vendor prices.  The Company's principal means of maintaining or
increasing gross margins in the future is the continued successful introduction
of new

                                      -16-
<PAGE>

Battery Management Products.  If the Company is not able to do so, the Company's
business, financial condition and operating results would be materially and
adversely affected.

     The Company's customers generally specify short delivery times when placing
their product orders. As a result, backlog at the beginning of a quarter
generally is not representative of the product sales that are anticipated for
that quarter. Accordingly, a shortfall in sales in any quarter in comparison to
expectations may not be identifiable until late in the quarter. Notwithstanding
the difficulty of forecasting future sales, the Company generally must plan
production, order Wafers and components, undertake sales and marketing and
general and administrative activities and make other commitments months in
advance of the receipt of orders. As a result, the adverse impact of any
shortfall in orders, and the consequent reduction in revenues, could be
magnified by the inability to reduce operating expenses on a timely basis. Due
to the foregoing, it is possible that the Company's operating results in the
future may from time to time be below the expectations of analysts and
investors.  In such event, the market price of the Company's Common Stock could
be adversely affected.

     The Company has signed the definitive Merger Agreement with Unitrode and
Merrimack.  See Note 12 of the Notes to Consolidated Financial Statements.  The
combined company plans to concentrate efforts in BENCHMARQ's battery management
business in addition to Unitrode's power management and power conversion
businesses to create a more complete portable power product line.  The Company
believes that the combination of the two companies should expand the market
opportunities in portable power products faster and further than those which
would have been accessible independently.  The combined company plans to
continue to pursue its other currently established businesses.  The combined
resources of the two companies will offer an opportunity to pursue other new
high growth markets to be targeted by the combined companies.  An effect of the
Merger will be a reduction in the percent of net revenue contribution to the
combined company from the Integrated Battery Products of BENCHMARQ.  Unitrode
has a substantially larger established customer base and sale organization.
However, there can be no assurance that these facts will have a positive effect
on the sale of existing BENCHMARQ products.  Significant administrative expense
will be realized in the Merger effort.  The Merger requires the approval of the
stockholders of BENCHMARQ, and the issuance of the shares of Unitrode common
stock contemplated by the Merger requires the approval of the stockholders of
Unitrode.  There can be no assurances that the Merger will be completed.

RESULTS OF OPERATIONS

     The following table sets forth certain financial data as a percentage of
total net revenues for the periods indicated:

<TABLE>
<CAPTION>
                                           YEARS ENDED DECEMBER 31,
                                          ---------------------------
                                            1997      1996     1995
                                          --------  --------  -------

<S>                                       <C>       <C>       <C>
Net revenues............................    100.0%    100.0%   100.0%
Cost of sales...........................     46.7      54.3     57.8
                                            -----     -----    -----
Gross margin............................     53.3      45.7     42.2
Operating expenses:.....................
   Research and development.............      6.9       7.3      7.7
   Selling, general and administrative..     24.3      21.4     20.8
                                            -----     -----    -----
   Total operating expenses.............     31.2      28.7     28.5
                                            -----     -----    -----
Income from operations..................     22.1      17.0     13.7
Other income (expense), net.............      1.0       1.2       .2
                                            -----     -----    -----
Income before taxes.....................     23.1      18.2     13.9
Provision for income taxes..............      8.1       0.6       .9
                                            -----     -----    -----
Net income..............................     15.0%     17.6%    13.0%
                                            =====     =====    =====
</TABLE>

                                      -17-
<PAGE>

     The following tables set forth the amount and percentage of total net
revenues by type of product for the periods indicated:

<TABLE>
<CAPTION>
                                  YEARS ENDED DECEMBER 31,
                               -------------------------------
                                 1997       1996       1995
                               ---------  ---------  ---------
<S>                            <C>        <C>        <C>
                                       (in thousands)
Battery Management Products..  $  23,321  $  18,035  $   8,242
Integrated Battery Products..     20,824     21,839     19,281
Royalties/Other..............        292        279      1,692
                               ---------  ---------  ---------
Total net revenues...........  $  44,437  $  40,153  $  29,215
                               =========  =========  =========

                                  YEARS ENDED DECEMBER 31,
                               -------------------------------
                                 1997       1996       1995
                               ---------  ---------  ---------
Battery Management Products..       52.5%      44.9%      28.2%
Integrated Battery Products..       46.9       54.4       66.0
Royalties/Other..............        0.6        0.7        5.8
                               ---------  ---------  ---------
Total net revenues...........      100.0%     100.0%     100.0%
                               =========  =========  =========
</TABLE>


Years Ended December 31, 1997, 1996 and 1995

     Net Revenues.  Total net revenues increased 11%, to approximately $44.4
million, for the year ended December 31, 1997, from approximately $40.2 million
for the year ended December 31, 1996.  This increase was primarily attributable
to increased unit sales of Gas Gauge integrated circuits ("IC") into the
portable PC market, and to a lesser extent increased sales of Charger IC devices
into cellular, consumer, power tool and portable computer applications and
increased sales of high density NVSRAM modules into the networking/telecom
markets.  Battery Management Product revenues represented approximately 52% of
total revenues in 1997, compared to approximately 45% in 1996.  Revenues from
the sale of Gas Gauge ICs represented a majority of battery management revenues
in 1997 and a majority of total revenue growth from 1996.  Revenue generated
from RTC royalties and other miscellaneous sources, which consist of design
service fees, nonrecurring engineering payments, miscellaneous product sales and
certain allowances for doubtful accounts, represented 0.6% and 0.7% of total
revenue in 1997 and 1996, respectively.

     The 37% increase in total net revenues in 1996 to approximately $40.2
million as compared to 1995 total net revenues of approximately $29.2 million
was due primarily to increased unit shipments of Battery Management Products and
higher density NVSRAM modules.

     The Company's revenues from international customers accounted for
approximately $29.3 million, or 66% of total net revenues, for the year ended
December 31, 1997, approximately $27.1 million, or 67% of total net revenues,
for the comparable period in 1996, and approximately $15.0 million, or 51% of
total net revenues, in 1995.  In 1997, approximately 55% of the Company's total
net revenues were derived from customers in the Asia-Pacific region.  The
Company's distributor in Taiwan accounted for approximately $9.2 million, or
21%, of total net revenues in 1997.  The Company's distributor in Japan
accounted for approximately $5.4 million, or 12%, of total net revenues in 1997.
No other customer directly accounted for greater than 10% of the total net
revenues.

                                      -18-
<PAGE>

     Export sales are subject to a variety of risks, including those arising
from fluctuations in currency exchange rates, economic instability, tariffs,
import restrictions and other trade barriers, unexpected changes in regulatory
requirements, longer accounts receivable payment cycles, potentially adverse tax
consequences and export license requirements.  Because the Company's
international sales have to date been denominated in U.S. dollars, increases in
the value of the U.S. dollar could increase the price 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.

     Gross Margin.  The Company's gross margin represented 53% and 46% of total
net revenues for the years ended December 31, 1997 and 1996, respectively. Gross
margin increased approximately $5.4 million, or 29%, to approximately $23.7
million for 1997 as compared to $18.3 million in 1996. This increase in gross
margin and gross margin percentage was due primarily to an increase in unit
sales of higher margin Battery Management Products and, to a lesser extent,
higher density NVSRAM modules.

     The Company expects that gross margin in future periods will be adversely
affected by declines in average selling prices, particularly with respect to its
Integrated Battery Products.  If worldwide semiconductor production capacities
tighten in future periods, the Company may experience increases in certain
vendor prices.  To maintain or increase its gross margin over the long-term, the
Company believes that it will be required to increase the percentage of its
sales represented by Battery Management Products and achieve cost reductions in
its products generally. There can be no assurance that the Company will be able
to achieve any of these objectives.

     Gross margin increased approximately $6.0 million, or 49%, from $12.3
million in 1995, to approximately $18.3 million in 1996, primarily due to an
increase in unit sales of higher margin Battery Management Products and, to a
lesser extent, higher density NVSRAM modules.

     Research and Development.  The Company's research and development expenses
increased approximately 6% to $3.1 million in 1997 as compared to approximately
$2.9 million in 1996.  The increase was due primarily to increased engineering
mask tooling expenses.  As a percentage of total net revenues, research and
development expense decreased slightly to approximately 6.9% in 1997 as compared
to 7.3% in 1996.  The Company's research and development expenses for 1995 were
approximately $2.2 million, representing approximately 7.7% of total net
revenues.

     The Company intends to continue to make a significant investment in
research and development, particularly with respect to Battery Management
Product opportunities, and believes that research and development expenses will
therefore increase in absolute dollars and on a percentage basis.

     Selling, General and Administrative.  Selling, general and administrative
expense increased approximately $2.2 million to $10.8 million in 1997 as
compared to 1996.  This increase was due primarily to increases in legal,
compensation, depreciation, and other general expenses.  Much of the increase in
legal expenses was due to a declaratory judgment proceeding brought by the
Company against Dallas Semiconductor to resolve certain allegations of patent
infringement asserted by Dallas Semiconductor.  See "Item 3.  Legal Proceedings"
of this Form 10-K.  Selling, general and administrative expense represented
approximately 24% and 21% of total net revenues in 1997 and 1996, respectively.
The expense increase of approximately $2.5 million in 1996 as compared with 1995
was due primarily to increases in compensation, sales commissions, depreciation,
legal and other general expenses.

     The absolute amount of selling, general and administrative expense is
expected to continue to increase as the Company expands its product lines and
geographic infrastructure.

     Other Income (Expense), Net.  Other income (expense), net consists
primarily of interest earned on short-term investments of funds, net of interest
expense on capital lease obligations and a $2.0 million note payable in 1995.
For 1997, the Company realized net other income of approximately $462,000 as

                                      -19-
<PAGE>

compared to net other income of approximately $457,000 in 1996 and approximately
$57,000 in 1995.  This improvement was due primarily to higher average balances
of invested funds and the retirement of the $2.0 million subordinated note
payable in December 1995.  Proceeds from the Company's initial public offering
in December 1995 contributed significantly to the increase in funds available
for investment.

     Provision for Income Taxes.  The Company generated both book and taxable
income during 1997, 1996 and 1995.  The Company employed an effective tax rate
of 35% and recorded a provision for income tax of $3,595,575 during 1997.  In
July 1997, the Company established a foreign sales corporation ("FSC").  During
1997, the Company's tax provision benefitted from the establishment of the FSC
by approximately $164,000.  The Company expects the 1998 FSC benefit will be
approximately twice that of 1997 since the FSC will be in operation for the
entire year.  Conversely, the pre-tax income generated during 1996 and 1995 was
substantially offset by net operating loss carryforwards from prior operating
periods and the recognition of a net deferred tax asset in 1996.  A provision
for income tax of $231,000 was recorded in 1996, consisting primarily of federal
and state income taxes.  A provision for income tax of $270,000 was recorded in
1995, consisting primarily of alternative minimum tax and state income tax.  See
Note 5 of Notes to Consolidated Financial Statements.

LIQUIDITY AND CAPITAL RESOURCES

     The Company's principal capital needs are to finance accounts receivable,
inventories and additions of capital assets. Prior to its initial public
offering, completed in December 1995, the Company financed its operations
primarily through the private  issuance of equity securities and, to a lesser
extent, debt financing and lease lines of credit.  Approximately $9.1 million of
cash was generated by operating activities in 1997 as compared to $7.4 million
and $4.3 million in 1996 and 1995, respectively.

     Net cash used in investing activities of approximately $7.8 million during
1997 was attributable primarily to the investment of approximately $4.2 million
into marketable securities.  In addition, $3.4 million was used to prepay
certain quantities of Wafers pursuant to the Option Agreement under which TSMC
is committed to supply and the Company is committed to purchase Wafers.  This
prepayment was partially offset by the utilization of $840,000 of the prepayment
during 1997.  Finally, approximately $1.1 million was used for capital
expenditures consisting primarily of assembly and engineering equipment and
office expansion.  Comparatively, net cash used during 1996 amounted to
approximately $16.8 million and was attributable primarily to the investment of
much of the Company's cash equivalents into short-term investments with higher
expected yields, and, to a lesser extent, a $2.5 million prepayment for certain
quantities of Wafers pursuant to the Option Agreement with TSMC and capital
expenditures.  Net cash used during 1995 amounted to approximately $1.2 million
and consisted of capital expenditures.

     Financing activities have consisted primarily of the issuance of equity and
payments under capital lease obligations.  Financing activities used cash during
1997 of approximately $964,000, which consisted of proceeds of approximately
$434,000 from issuances of stock and payments of approximately $1.4 million
under capital lease obligations.  Comparatively, financing activities used cash
during 1996 of approximately $668,000, which consisted of proceeds of
approximately $668,000 from issuances of stock and payments of approximately
$1.3 million under capital lease obligations.  In 1995, financing activities
generated cash of $3.9 million and consisted primarily of the Company's initial
public offering, which provided cash of $6.7 million net of costs, and the
retirement of the $2.0 million subordinated note payable.

     The Company's principal sources of liquidity are cash generated from
operations as well as cash and cash equivalents and short-term investments of
approximately $19.9 million at December 31, 1997.  The Company's short-term
investments are in municipal and tax free bonds.  In addition, the Company has a
lease line of credit with BancBoston Leasing, Inc.  During 1997, the Company
used approximately $2.0 million of credit under its outstanding lease line
primarily for additions of test equipment.  As of

                                      -20-
<PAGE>

February 28, 1998, approximately $888,000 was available under the lease line for
additional acquisitions of equipment.

     The Company anticipates capital asset additions to range between $4.0
million and $9.0 million in 1998, a large part of which will be used to expand
test capacity for certain of its Battery Management Products and the possible
acquisition of real estate.

     The Company believes that existing cash balances and other capital
resources will be sufficient to meet the Company's cash requirements at least
through 1998. However, the Company may also seek to establish additional lines
of credit to augment its funding of operating activities during 1998. There can
be no assurance that the Company will be able to establish any such lines of
credit.

     In addition, the Company may, from time to time, as market and business
conditions warrant, invest in or acquire complementary businesses, products or
technologies. The Company, over the longer term, may seek additional equity or
debt financings to fund such activities. The sale of additional equity or
convertible debt securities could result in dilution to the Company's
stockholders. There can be no assurance that such additional financing, if
required, will be available on terms acceptable to the Company, if at all.

INFLATION

     The Company believes that inflation has not had and is not likely to have a
material impact on the Company's operations during the foreseeable future.

IMPACT OF YEAR 2000

     Some of the Company's older computer programs were written using two digits
rather than four digits to define the applicable year.  As a result, those
computer programs have time-sensitive software that recognize a date using "00"
as the year 1900 rather than the year 2000.  This feature could cause a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices, or
engage in similar normal business activities.

     The Company has completed a preliminary assessment and will have to modify
or replace portions of its software so that its computer systems will function
properly with respect to dates in the year 2000 and thereafter.  The total "Year
2000" project cost, however, is not expected to be material to the Company's
consolidated results of operations, financial position, or cash flows.

     The project is estimated to be completed not later than June 30, 1999,
which is prior to any anticipated impact on its operating systems.  The Company
believes that with modifications to existing software and conversions to new
software, the Year 2000 Issue will not pose significant operational problems for
its computer systems.  However, if such modifications and conversions are not
made, or are not completed timely, the Year 2000 Issue could have a material
impact on the operations of the Company.


ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

     Not Applicable

                                      -21-
<PAGE>

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

     The financial statements and supplementary data are listed in the Index to
Financial Statements appearing on Page F-1 and the Financial Schedule appearing
on Page S-2 of this Form 10-K.


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

     None.

                                      -22-
<PAGE>

                                   PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

     Pursuant to General Instruction G(3) of this Form 10-K, the information
required by this item will either appear in the Company's definitive Proxy
Statement relating to the Company's 1998 Annual Meeting of Stockholders or in an
amendment to this Form 10-K, one of which will be filed with the Commission on
or before the 120th day following the end of the Company's fiscal year.

     The information required by this item with respect to Executive Officers of
the Company is included in Part I of this Report under the heading "Executive
Officers of the Registrant."


ITEM 11.  EXECUTIVE COMPENSATION.

     Pursuant to General Instruction G(3) of this Form 10-K, the information
required by this item will either appear in the Company's definitive Proxy
Statement relating to the Company's 1998 Annual Meeting of Stockholders or in an
amendment to this Form 10-K, one of which will be filed with the Commission on
or before the 120th day following the end of the Company's fiscal year.


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     Pursuant to General Instruction G(3) of this Form 10-K, the information
required by this item will either appear in the Company's definitive Proxy
Statement relating to the Company's 1998 Annual Meeting of Stockholders or in an
amendment to this Form 10-K, one of which will be filed with the Commission on
or before the 120th day following the end of the Company's fiscal year.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     Pursuant to General Instruction G(3) of this Form 10-K, the information
required by this item will either appear in the Company's definitive Proxy
Statement relating to the Company's 1998 Annual Meeting of Stockholders or in an
amendment to this Form 10-K, one of which will be filed with the Commission on
or before the 120th day following the end of the Company's fiscal year.

                                      -23-
<PAGE>

                                    PART IV

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

     (a)  The following documents are filed as part of this 10-K:

          (1)  Financial Statements.  See Index to Financial Statements on Page
               F-1 hereof.

          (2)  Financial Statement Schedules.  See Schedule of Valuation and
               Qualifying Accounts on Page S-2 hereof.  (Other schedules have
               been omitted because the information required to be set forth
               therein is not applicable or is shown in the Financial Statements
               or the notes thereto.)

          (3)  Exhibits Required by Item 601 of Regulation S-K.  A list of the
               exhibits required to be filed as a part of this 10-K is set forth
               in the Index to Exhibits, which immediately precedes such
               exhibits and is incorporated herein by reference.


     (b)  Reports on Form 8-K

          None.

                                      -24-
<PAGE>

                                  SIGNATURES

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


Date:  March 30, 1998         BENCHMARQ MICROELECTRONICS, INC.

                              By:          /s/ Alan R. Schuele
                                 -----------------------------------------------
                                               Alan R. Schuele
                                 Director, President and Chief Executive Officer


                               POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Alan R. Schuele and R. Scott Schaefer, and each
or any one of them, his true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments to this Annual
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,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, or their or his
substitutes or substitute, may lawfully do or cause to be done by virtue hereof.

     PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.


       SIGNATURE                        TITLE                      DATE
       ---------                        -----                      ----

/s/  Alan R. Schuele      Director, President and Chief       March 30, 1998
------------------------  Executive Officer (Principal
*Alan R. Schuele          Executive Officer)


/s/  R. Scott Schaefer    Chief Financial Officer             March 30, 1998
------------------------  (Principal
*R. Scott Schaefer        Financial and Accounting Officer)


/s/  Derrell C. Coker     Chairman of the Board               March 30, 1998
------------------------
*Derrell C. Coker

/s/  L.J. Sevin           Director                            March 30, 1998
------------------------
*L.J. Sevin

/s/  Berry Cash           Director                            March 30, 1998
------------------------
*Berry Cash

/s/  Dietrich Erdmann     Director                            March 30, 1998
------------------------
*Dietrich Erdmann

                                      -25-
<PAGE>

       SIGNATURE                        TITLE                      DATE
       ---------                        -----                      ----

/s/  Charles Phipps       Director                            March 30, 1998
------------------------
*Charles Phipps

/s/  Jack S. Kilby        Director                            March 30, 1998
------------------------
*Jack S. Kilby

                                      -26-
<PAGE>

                                 EXHIBIT INDEX


EXHIBIT NUMBER AND DESCRIPTION


(2)  Plan of acquisition, reorganization, arrangement, liquidation or succession

     2.1  Agreement and Plan of Merger by and among Unitrode, Merrimack
          Corporation and the Company, dated as of March 2, 1998 (including the
          form of Stock Option Agreement between the Company and Unitrode)/(13)/

(3)  Articles of incorporation and bylaws

     3.1  Seventh Amended and Restated Certificate of Incorporation of the
          Company/(2)/
     3.2  Bylaws of the Company (As Amended through June 25, 1997)/(10)/

(4)  Instruments defining the rights of security holders, including debentures

     4.1  Specimen Common Stock certificate/(4)/


(10) Material contracts

     10.1 Development and Technology License Agreement dated as of March 11,
          1994, by and between the Company and Acer Laboratories, Inc.
          (confidential treatment has been granted with respect to portions of
          this Exhibit)/(2)/

     10.2 Joint Development Agreement dated as of October 14, 1993, by and
          between the Company and OPTi, Inc. (confidential treatment has been
          granted with respect to portions of this Exhibit)/(2)/

     10.3 Wafer Purchase Agreement dated as of October 14, 1993, by and between
          the Company and OPTi, Inc./(2)/

     10.4 Development Agreement dated as of April 17, 1995, by and between the
          Company and SANYO Energy (USA) Corporation (confidential treatment has
          been granted with respect to portions of this Exhibit)/(2)/

     10.5 Resolution Agreement dated as of May 22, 1995, by and between the
          Company and SGS-Thomson Microelectronics, Inc. (confidential treatment
          has been granted with respect to portions of this Exhibit)/(2)/

     10.6 Microcontroller Contract dated as of February 4, 1994, by and between
          the Company and SGS-Thomson Microelectronics, Inc./(2)/

     10.7 Joint Development Agreement dated as of September 22, 1993, by and
          between the Company and SGS-Thomson Microelectronics, Inc./(2)/

     10.8 Patent License Agreement dated as of January 14, 1992, by and between
          the Company and SGS-Thomson Microelectronics, Inc./(2)/

                                      -27-
<PAGE>

     10.9  Distribution Agreement dated as of February 1, 1991, by and between
           the Company and Prospect Technology Corporation./(2)/

     10.10 Master Equipment Lease dated as of April 23, 1992, by and between
           the Company and BancBoston Leasing Inc./(2)/

     10.11 Sublease Agreement dated as of February 23, 1995, by and between the
           Company and CONVEX Computer Corporation/(2)/

     10.12 Lease Agreement dated as of June 26, 1995, by and between the
           Company and Kancro, L.P./(2)/

     10.13 Form of Indemnity Agreement entered into with directors and certain
           officers of the Company/(2)/

*    10.14 BENCHMARQ Microelectronics, Inc. 1989 Stock Option Plan
           (Amended and Restated as of April 1, 1996)/(6)/

*    10.15 BENCHMARQ Microelectronics, Inc. 1995 Flexible Stock Option
           Plan (Amended and Restated as of September 18, 1996)/(6)/

*    10.16 1995 BENCHMARQ Microelectronics, Inc. Bonus Plan (Amended and
           Restated as of April 1, 1996)/(6)/

*    10.17 BENCHMARQ Microelectronics, Inc. Profit Sharing Program
           (Amended and Restated as of September 18, 1996)/(6)/

     10.18 Wafer Supply Agreement dated as of September 25, 1995, by and between
           the Company and Sanyo Electric Co., Ltd. (confidential treatment has
           been granted with respect to portions of this Exhibit)/(3)/

     10.19 Series F Preferred Stock Purchase Agreement dated as of September
           30, 1993 by and among the Company and other parties signatory
           thereto/(8)/

     10.20 Second Amendment and Restatement of Riders Nos. 1 and 2 to the
           Master Equipment Lease dated as of April 23, 1992, by and between the
           Company and BancBoston Leasing Inc./(8)/

     10.21 Option Agreement between Taiwan Semiconductor Manufacturing Co.,
           Ltd. and the Company dated as of May 31, 1996 (confidential treatment
           has been requested by the company for portions of this
           agreement.)/(7)/

     10.22 Wafer Production Agreement between Taiwan Semiconductor Co., Ltd.
           and the Company dated as of July 30, 1996 (confidential treatment has
           been requested by the company for portions of this agreement.)/(7)/

     10.23 Rider No. 1 to the Second Amendment and Restatement of Riders Nos. 1
           and 2 to the Master Equipment Lease dated as of April 23, 1992, by
           and between the Company and Banc Boston Leasing Inc./(12)/

                                      -28-
<PAGE>

     10.24 Amendment to the Option Agreement between Taiwan Semiconductor
           manufacturing Co., Ltd. and the Company (confidential treatment has
           been requested by the Company for portions of this Agreement)./(9)/

     10.25 BENCHMARQ Microelectronis, Inc. 1995 Flexible Stock Option Plan
           (Amended and Restated as of March 11, 1997)./(9)/

     10.26 Master Equipment Lease dated as of September 16, 1997, by and
           between the Company and BancBoston Leasing, Inc./(11)/

*    10.27 Form Employment Agreement entered into with certain officers
           and a key employee./(1)/

(21) Subsidiaries of the Registrant

     21.1  Significant Subsidiaries of the Company./(1)/

(23) Consent of experts and counsel

     23.1  Consent of Ernst & Young LLP/(1)/

(24) Power of Attorney

     24.1  Power of Attorney of each officer and director of the Company whose
           name appears on the signature page and followed by an asterisk
           (contained on pages 25 and 26).

(27) Financial Data Schedule

     27.1  Financial Data Schedule./(1)/

     27.2  Financial Data Schedule (restated for the periods ending September
           30, 1997, June 30, 1997 and March 31, 1997)./(1)/

     27.3  Financial Data Schedule (restated for the periods ending December 31,
           1996, September 30, 1996 and June 30, 1996)./(1)/

____________________
/(1)/  Filed herewith
/(2)/  Previously filed with the Company's Registration Statement on Form S-1
       (Registration No. 33-96896) filed with the Securities and Exchange
       Commission on September 13, 1995 and incorporated herein by reference.
/(3)/  Previously filed with Amendment No. 1 to the Company's Registration
       Statement on Form S-1 filed with the Securities and Exchange Commission
       on October 6, 1995 and incorporated herein by reference.
/(4)/  Previously filed with Amendment No. 2 to the Company's Registration
       Statement on Form S-1 filed with the Securities and Exchange Commission
       on November 8, 1995 and incorporated herein by reference.

                                      -29-
<PAGE>

/(5)/  Previously filed with Post-Effective Amendment No. 1 to the Company's
       Registration Statement on Form S-1 filed with the Securities and Exchange
       Commission on January 16, 1996 and incorporated herein by reference.
/(6)/  Previously filed with the Company's Quarterly Report on Form 10-Q for the
       period ended September 30, 1996 filed with the Securities and Exchange
       Commission on November 14, 1996 and incorporated herein by reference.
/(7)/  Previously filed with the Company's Quarterly Report on Form 10-Q/A for
       the period ended June 30, 1996 filed with the Securities and Exchange
       Commission on November 21, 1996 and incorporated herein by reference.
/(8)/  Previously filed with the Company's Annual Report on Form 10-K for the
       period ended December 31, 1995 filed with the Securities and Exchange
       Commission on February 20, 1996 and incorporated herein by reference.
/(9)/  Previously filed with the Company's Quarterly Report on Form 10-Q for the
       period ended March 31, 1997 filed with the Securities and Exchange
       Commission on May 6, 1997 and incorporated herein by reference.
/(10)/ Previously filed with the Company's Quarterly Report on Form 10-Q for the
       period ended June 30, 1997 filed with the Securities and Exchange
       Commission on August 5, 1997 and incorporated herein by reference.
/(11)/ Previously filed with the Company's Quarterly Report on Form 10-Q for the
       period ended September 30, 1997 filed with the Securities and Exchange
       Commission on November 10, 1997 and incorporated herein by reference.
/(12)/ Previously filed with the Company's Annual Report on Form 10-K for the
       period ended December 31, 1996 filed with the Securities and Exchange
       Commission on February 27, 1997 and incorporated herein by reference.
/(13)/ Previously filed with the Company's Current Report on Form 8-K filed with
       the Commission on March 3, 1998 and incorporated herein by reference.

*    Management Compensatory Plan

                                      -30-
<PAGE>

                       BENCHMARQ MICROELECTRONICS, INC.

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                      Page
                                                                      ----
Report of Ernst & Young LLP, Independent Auditors...................   F-2
Consolidated Balance Sheets as of December 31, 1997 and 1996........   F-3
Consolidated Statements of Income for the years ended
 December 31, 1997, 1996, and 1995..................................   F-4
Consolidated Statements of Stockholders' Equity for the years ended
 December 31, 1997, 1996, and 1995..................................   F-5
Consolidated Statements of Cash Flows for the years ended
 December 31, 1997, 1996, and 1995..................................   F-6
Notes to Consolidated Financial Statements..........................   F-7

<PAGE>

               REPORT OF ERNST & YOUNG, LLP INDEPENDENT AUDITORS

Board of Directors and Stockholders
BENCHMARQ Microelectronics, Inc.

We have audited the accompanying consolidated balance sheets of BENCHMARQ
Microelectronics, Inc. (the Company) as of December 31, 1997 and 1996, and the
related consolidated statements of income, stockholders' equity, and cash flows
for each of the three years in the period ended December 31, 1997. 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 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 financial statements referred to above present fairly, in
all material respects, the consolidated financial position of BENCHMARQ
Microelectronics, Inc., at December 31, 1997 and 1996, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1997, in conformity with generally accepted accounting
principles.


                                                        /s/ Ernst & Young LLP


Dallas, Texas
January 26, 1998
except for Notes 11 and 12, as to which the date is
March 2, 1998

                                      F-2
<PAGE>

                        BENCHMARQ MICROELECTRONICS, INC.

                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                                  DECEMBER 31,
                                                                                     -----------------------------------
                                                                                             1997              1996
                                                                                     -----------------------------------
<S>                                                                                    <C>               <C>
ASSETS
Current assets:
Cash and cash equivalents............................................................      $ 2,882,608       $ 2,575,350
Short-term investments (Note 3)......................................................       17,061,044        12,878,526
Receivables, net of allowance for doubtful accounts and estimated returns of
 $863,785 and $388,471 at December 31, 1997 and 1996.................................        4,601,796         4,410,448

Inventories (Note 4).................................................................        4,692,050         4,035,175
Prepayment for product purchases (Note 9)............................................        1,680,000                 -
Deferred income tax assets (Note 5)..................................................          857,619           660,095
Prepaid expenses.....................................................................          148,014           354,978
                                                                                     -----------------------------------
Total current assets.................................................................       31,923,131        24,914,572

Property and equipment, at cost:
Furniture and fixtures...............................................................        1,166,054           810,553
Equipment............................................................................        5,246,351         3,976,191
Computer software....................................................................          536,925           520,809
                                                                                     -----------------------------------
                                                                                             6,949,330         5,307,553
Accumulated depreciation.............................................................        4,257,801         2,806,832
                                                                                     -----------------------------------
                                                                                             2,691,529         2,500,721

Equipment under capital lease obligations (Note 6)...................................        4,154,061         4,274,173
Accumulated amortization.............................................................        1,358,815         1,067,143
                                                                                     -----------------------------------
                                                                                             2,795,246         3,207,030

Prepayment for product purchases, less current (Note 9)..............................        3,360,000         5,880,000
Noncurrent deferred income tax and other assets (Note 5).............................           78,569           306,784
                                                                                     -----------------------------------
Total assets.........................................................................      $40,848,475       $36,809,107
                                                                                     -----------------------------------

                               LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.....................................................................      $ 1,665,008       $ 1,852,516
Note payable (Note 9)................................................................                -         3,380,000
Payroll and related benefits.........................................................          239,022           618,154
Income taxes payable (Note 5)........................................................          337,347           104,271
Other accrued liabilities............................................................          670,603           732,952
Deferred income on shipments to distributors.........................................        1,250,291         1,219,800
Current obligations under capital leases (Note 6)....................................        1,229,053         1,311,905
                                                                                     -----------------------------------
Total current liabilities............................................................        5,391,324         9,219,598

Obligations under capital leases, less current obligations (Note 6)..................          701,658         1,259,927
Deferred income taxes (Note 5).......................................................          531,773                 -

Commitments and contingencies (Notes 6, 9, 11 and 12)

Stockholders' equity (Note 7)
Common stock, $.001 par value; 50,000,000 shares authorized; 7,005,417 and 6,841,808
 shares issued at December 31, 1997 and 1996, respectively...........................            7,005             6,842

Additional paid-in capital...........................................................       26,154,437        24,932,678
Retained earnings....................................................................        8,062,822         1,392,162
Net unrealized gain on short-term investments........................................           12,256            10,700
Treasury stock, 64,000 common shares, at cost........................................          (12,800)          (12,800)
                                                                                     -----------------------------------
Total stockholders' equity...........................................................       34,223,720        26,329,582
                                                                                     -----------------------------------
Total liabilities and stockholders' equity...........................................      $40,848,475       $36,809,107
                                                                                     ===================================
</TABLE>

                            See accompanying notes.

                                      F-3
<PAGE>

                        BENCHMARQ MICROELECTRONICS, INC.

                       CONSOLIDATED STATEMENTS OF INCOME


<TABLE>
<CAPTION>
                                                             YEAR ENDED DECEMBER 31,
                                           ---------------------------------------------------------
                                                    1997               1996               1995
                                           ---------------------------------------------------------
<S>                                          <C>                 <C>                <C>
Net revenues (Note 9)......................        $44,437,487        $40,152,897        $29,214,852
Cost of sales..............................         20,739,994         21,819,544         16,871,504
                                           ---------------------------------------------------------
Gross margin...............................         23,697,493         18,333,353         12,343,348

Operating expenses:
 Research and development..................          3,087,190          2,922,338          2,238,629
 Selling, general, and administrative......         10,805,686          8,574,391          6,090,115
                                           ---------------------------------------------------------
Total operating expenses...................         13,892,876         11,496,729          8,328,744
                                           ---------------------------------------------------------
Income from operations.....................          9,804,617          6,836,624          4,014,604

Other income (expense):
 Interest income...........................            671,880            705,499            402,779
 Interest expense..........................           (178,343)          (210,314)          (339,619)
 Other.....................................            (31,919)           (38,389)            (5,690)
                                           ---------------------------------------------------------
Income before provision for income taxes...         10,266,235          7,293,420          4,072,074

Provision for income taxes (Note 5)........          3,595,575            231,000            270,000
Net income.................................        $ 6,670,660        $ 7,062,420        $ 3,802,074
                                           =========================================================
Net income per common share (Note 8).......              $0.97              $1.06              $0.70
                                           =========================================================
Net income per common share -
 assuming dilution (Note 8)................              $0.86              $0.96              $0.61
                                           =========================================================
</TABLE>



                            See accompanying notes.

                                      F-4
<PAGE>

                        BENCHMARQ MICROELECTRONICS, INC.

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                   SERIES A THROUGH F
                                                                  CONVERTIBLE PREFERRED
                                           COMMON STOCK                   STOCK
                                        ----------------------------------------------------  ADDITIONAL        RETAINED
                                          NUMBER        PAR        NUMBER          PAR         PAID-IN          EARNINGS
                                         OF SHARES     VALUE      OF SHARES       VALUE        CAPITAL          (DEFICIT)
                                        ----------------------------------------------------------------------------------
<S>                                     <C>          <C>        <C>             <C>         <C>              <C>
Balance at December 31, 1994..........    298,941     $  299     20,422,575      $ 204,226   $16,974,907      $(9,472,332)
  Issuance of common stock upon
    exercise of options and warrants..     95,933         96              -              -        25,601                -
 Issuance of common stock for cash,
    net of offering costs (Note 7)....  1,000,000      1,000              -              -     6,732,238                -
 Conversion of preferred stock
    (Note 7)..........................  5,105,622      5,106    (20,422,575)      (204,226)      199,120                -
 Net income...........................          -          -              -              -             -        3,802,074
                                        ----------------------------------------------------------------------------------
Balance at December 31, 1995..........  6,500,496      6,501              -              -    23,931,866       (5,670,258)
 Issuance of common stock upon
    exercise of stock options and
    warrants, including income tax
    benefit of $333,418...............    256,312        256              -              -       416,513                -
 Issuance of common stock for cash,
    net of offering costs (Note 7)....     85,000         85              -              -       584,299                -
 Net unrealized gain on short-term
    investments.......................          -          -              -              -             -                -
 Net income...........................          -          -              -              -             -        7,062,420
                                        ----------------------------------------------------------------------------------
Balance at December 31, 1996..........  6,841,808      6,842              -              -    24,932,678        1,392,162
 Issuance of common stock upon
    exercise of stock options, including
    income tax benefit of $679,524 and
    other stock option activity.......    163,609        163              -              -     1,221,759                -
 Net unrealized gain on short-term
    investments.......................          -          -              -              -             -                -
 Net income...........................          -          -              -              -             -        6,670,660
                                        ----------------------------------------------------------------------------------
Balance at December 31, 1997..........  7,005,417     $7,005              -   $          -   $26,154,437      $ 8,062,822
                                      ==============================================================================================
</TABLE>
<TABLE>
<CAPTION>

                                           NET
                                        UNREALIZED     TREASURY STOCK
                                         GAIN ON    ----------------------
                                        SHORT-TERM    NUMBER                       STOCKHOLDERS'
                                       INVESTMENTS  OF SHARES      AMOUNT            EQUITY
                                       ---------------------------------------------------------
<S>                                    <C>         <C>          <C>             <C>
Balance at December 31, 1994..........  $     -      64,000       $(12,800)      $ 7,694,300
 Issuance of common stock upon
    exercise of options and warrants..        -          -             -              25,697
 Issuance of common stock for cash,
    net of offering costs (Note 7)....        -          -             -           6,733,238
 Conversion of preferred stock
    (Note 7)..........................        -          -             -                  -
 Net income...........................        -          -             -           3,802,074
                                       ---------------------------------------------------------
Balance at December 31, 1995..........        -      64,000        (12,800)       18,255,309
 Issuance of common stock upon
    exercise of stock options and
    warrants, including income tax
    benefit of $333,418...............        -          -             -             416,769
 Issuance of common stock for cash,
    net of offering costs (Note 7)....        -          -             -             584,384
 Net unrealized gain on short-term
    investments.......................    10,700         -             -              10,700
 Net income...........................        -          -             -           7,062,420
                                       ---------------------------------------------------------
Balance at December 31, 1996..........    10,700     64,000        (12,800)       26,329,582
 Issuance of common stock upon
    exercise of stock options, including
    income tax benefit of $679,524 and
    other stock option activity.......        -          -             -           1,221,922
 Net unrealized gain on short-term
    investments.......................     1,556         -             -               1,556
 Net income...........................        -          -             -           6,670,660
                                       ---------------------------------------------------------
Balance at December 31, 1997..........   $12,256     64,000       $(12,800)       $34,223,720
                                       ---------------------------------------------------------
</TABLE>

                            See accompanying notes.

                                      F-5
<PAGE>

                        BENCHMARQ MICROELECTRONICS, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                            YEAR ENDED DECEMBER 31,
                                                           ------------------------------------------------------
                                                                   1997              1996               1995
                                                           ------------------------------------------------------
OPERATING ACTIVITIES
<S>                                                          <C>               <C>                <C>
Net income.................................................     $  6,670,660       $  7,062,420       $ 3,802,074
Adjustments to reconcile net income to net cash
 provided by operating activities:
   Depreciation and amortization...........................        2,005,607          1,650,464         1,025,932
   Allowance for doubtful accounts and estimated
    returns................................................          475,314            208,548           169,838
   Loss on disposition of fixed assets.....................           30,158             38,389             5,690
   Tax benefit of employee stock options and other
    stock option activity..................................          788,262            333,418                 -
   Deferred income taxes...................................          560,015           (885,861)                -
   Changes in operating assets and liabilities:
    Receivables............................................         (655,662)          (462,398)          (10,078)
    Inventories............................................         (656,875)          (884,581)       (1,210,391)
    Prepaid expenses and other assets......................          209,415           (234,975)          228,777
    Accounts payable.......................................         (187,488)          (551,081)          458,102
    Accrued liabilities....................................         (208,405)           605,252          (142,885)
    Deferred income on shipments to distributors...........           30,491            549,464            (7,379)
                                                           ------------------------------------------------------
Net cash provided by operating activities..................        9,061,492          7,429,059         4,319,680

INVESTING ACTIVITIES
Prepayment for product purchases...........................       (3,380,000)        (2,500,000)                -
Reduction in prepayment for product purchases..............          840,000                  -                 -
Capital expenditures.......................................       (1,069,379)        (1,471,567)       (1,213,996)
Investment in short-term investments.......................      (59,395,883)       (39,656,725)                -
Maturities of short-term investments.......................       55,214,921         26,788,899                 -
                                                           ------------------------------------------------------
Net cash used by investing activities......................       (7,790,341)       (16,839,393)       (1,213,996)

FINANCING ACTIVITIES
Proceeds from issuance of common stock upon exercise
 of stock options and warrants.............................          433,660             83,351            25,697
Proceeds from issuance of common stock,
 net of offering costs (Note 7)............................                -            584,384         6,733,238
Principal payments under capital lease obligations.........       (1,397,553)        (1,335,311)         (802,178)
Principal payments on notes payable........................                -                  -        (2,008,271)
                                                           ------------------------------------------------------
Net cash (used) provided by financing activities...........         (963,893)          (667,576)        3,948,486
                                                           ------------------------------------------------------

Net change in cash and cash equivalents....................          307,258        (10,077,910)        7,054,170
Cash and cash equivalents at beginning of period...........        2,575,350         12,653,260         5,599,090
                                                           ------------------------------------------------------
Cash and cash equivalents at end of period.................     $  2,882,608       $  2,575,350       $12,653,260
                                                           ======================================================

SUPPLEMENTAL CASH FLOWS INFORMATION
Cash paid for interest.....................................     $    178,343       $    210,314       $   339,619
                                                           ======================================================
Cash paid for income taxes                                      $  2,122,960       $    787,103       $   222,069
                                                           ======================================================
</TABLE>
                            See accompanying notes.

                                      F-6
<PAGE>

                       BENCHMARQ MICROELECTRONICS, INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               DECEMBER 31, 1997

1. DESCRIPTION OF BUSINESS

BENCHMARQ Microelectronics, Inc. (the Company) is engaged principally in the
design, manufacture, and marketing of integrated circuits (ICs) and electronic
modules and assemblies for portable and power-sensitive electronic applications.
Net revenues consist primarily of sales of Battery Management ICs and
assemblies, Non-Volatile Static Random Access Memory modules, Non-Volatile
Controller ICs, and Real-Time Clock modules and ICs.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CONSOLIDATION POLICY

The consolidated financial statements include the accounts of the Company's
wholly-owned subsidiaries.  Intercompany balances and transactions have been
eliminated.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of cash in bank checking accounts and
commercial money market accounts.

SHORT-TERM INVESTMENTS

Short-term investments consist of municipal and other tax-free debt securities.
At December 31, 1997, all of these securities were classified as available for
sale. Accordingly, these securities are stated at fair value, with unrealized
gains and losses reported as a separate component of stockholders' equity.
Interest earned on all securities is included in interest income.

The Company's Board of Directors has approved investment guidelines with regard
to diversification, quality, maturities and allowed investments. At the time of
purchase, there can be no more than 10% of the portfolio invested per issuer or
guarantor with the exception of U.S. government backed securities, and all
securities must meet minimum investment grade standards.

INVENTORIES

Inventories are stated at the lower of standard cost, which approximates actual
cost determined on a first-in, first-out basis, or market.

                                      F-7
<PAGE>

                       BENCHMARQ MICROELECTRONICS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PROPERTY AND EQUIPMENT

Property and equipment are carried at cost. Depreciation is provided using the
straight-line method over the estimated useful lives of the assets, which are
currently from three to five years, or over the term of the lease, if shorter,
for assets recognized pursuant to capitalized leases and for leasehold
improvements. Amortization of leased assets is included in depreciation and
amortization expense.

STOCK OPTIONS

The Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) in accounting for its
employee stock options. Under APB 25, if the exercise price of an employee's
stock options equals or exceeds the market price of the underlying stock on the
date of grant, no compensation expense is recognized.

REVENUE RECOGNITION

Certain of the Company's sales are made to distributors under agreements
allowing the right to return products not yet sold by the distributor. Because
of the uncertainty associated with future returns, the Company defers
recognition of sales made to domestic distributors and the related profit in its
financial statements until the products are sold by the distributors. Sales to
international distributors and nondistributors are recognized upon shipment of
the products, less estimated returns. Sales to international distributors are
recognized upon shipment of the products because actual returns from
international distributors have not been material.

Revenue from product royalty agreements is recognized when earned. Royalty
revenues included in net revenues were approximately $194,000, $351,000 and
$962,000 in the years ended December 31, 1997, 1996 and 1995, respectively.

RESEARCH AND DEVELOPMENT COSTS

Research and development costs, consisting of the costs of designing,
developing, and testing new or significantly enhanced products, are expensed as
incurred.

INCOME TAXES

The Company computes its provision for income taxes using the asset and
liability method. Under the asset and liability method, a deferred tax asset or
liability is recognized for estimated future tax effects attributable to
temporary differences and carryforwards. The measurement of deferred income tax
assets is adjusted by a valuation allowance, if necessary, to recognize future
tax benefits only to the extent that,

                                      F-8
<PAGE>

                       BENCHMARQ MICROELECTRONICS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

based on available evidence, it is more likely than not it will be realized. The
effect of a change in income tax rates on deferred taxes is recognized in the
period that includes the enactment date.

CONCENTRATION OF CREDIT RISK

The Company markets its products for sale to original equipment manufacturers
(OEMs) and distributors primarily in the United States, Europe, and the Asia-
Pacific Region. Credit is extended based on an evaluation of the customer's
financial condition, and collateral is generally not required. The Company
maintains an allowance for losses based upon the expected collectibility of all
accounts receivable. See Note 9.

The Company believes it is adequately reserved with regard to receivables from
customers in the Asia-Pacific Region.  However, due to uncertainties related to
the economic condition of the countries in this region, the Company's
consolidated financial statements could be materially affected by the inability
to collect receivables from these customers.

EARNINGS PER SHARE

In 1997, the Financial Accounting Standards Board (FASB) issued Statement No.
128, Earnings per Share. Statement 128 replaced the calculation of primary and
fully diluted earnings per share with basic and diluted earnings per share.
Unlike primary earnings per share, basic earnings per share excludes any
dilutive effects of options, warrants and convertible securities. Diluted
earnings per share is very similar to the previously reported fully diluted
earnings per share. All earnings per share amounts for all periods have been
presented, and where appropriate, restated to conform to the Statement 128
requirements.

ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.

BASIS OF PRESENTATION

Certain prior year amounts have been reclassified to conform to the 1997
presentation.

STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 130

In 1997, the FASB issued Statement No. 130, Reporting Comprehensive Income.
Statement 130 establishes standards for the reporting and display of
comprehensive income and its components in a full set of

                                      F-9
<PAGE>

                       BENCHMARQ MICROELECTRONICS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

general-purpose financial statements. Comprehensive income is defined in FASB
Concepts Statement No. 6, Elements of Financial Statements, as, "the change in
equity of a business enterprise during a period from transactions and other
events and circumstances from non-owner sources." Statement 130 requires that
all items that are recognized under accounting standards as components of
comprehensive income be reported separately in a financial statement in the
period they are recognized. Statement 130 is effective for financial statements
for fiscal years beginning after December 15, 1997. The impact of Statement 130
on the Company's consolidated financial statements is not expected to be
material.

STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 131

In 1997, the FASB issued Statement No. 131, Disclosures about Segments of an
Enterprise and Related Information. Statement 131 establishes standards for the
way that public business enterprises report information about operating segments
in annual financial statements and requires that those enterprises report
selected information about operating segments in interim financial reports
issued to shareholders. It also establishes standards for related disclosures
about products and services, geographic areas, and major customers. Statement
131 is effective for financial statements for fiscal years beginning after
December 15, 1997. The adoption of Statement 131 will have no impact on the
Company's consolidated results of operations, financial position, or cash flows.

3. SHORT-TERM INVESTMENTS

The following is a summary of available-for-sale securities at December 31, 1997
and 1996:

<TABLE>
<CAPTION>
                                                                           UNREALIZED
                                                                            HOLDING
                                                                             GAINS                FAIR
                                                         COST               (LOSSES)             VALUE
                                                -------------------------------------------------------------
<S>                                               <C>                  <C>                 <C>
1997
----
Municipal and other tax-free debt securities              $17,048,788            $12,256          $17,061,044
                                                =============================================================

1996
----
U.S. government debt securities                           $ 2,500,459            $  (603)         $ 2,499,856
Municipal and other tax-free debt securities                3,802,201             13,997            3,816,198
Corporate debt securities                                   6,565,166             (2,694)           6,562,472
                                                -------------------------------------------------------------
Total                                                     $12,867,826            $10,700          $12,878,526
                                                =============================================================
</TABLE>

                                      F-10
<PAGE>

                       BENCHMARQ MICROELECTRONICS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

3. SHORT-TERM INVESTMENTS

The fair value of the Company's investment in debt securities at December 31,
1997, by contractual maturity, is as follows:

<TABLE>
<CAPTION>
<S>                                                                          <C>
     Due in less than 1 year                                                         $15,557,400
     Due in 1 to 2 years                                                               1,503,644
                                                                           ---------------------
     Total                                                                           $17,061,044
                                                                           =====================
</TABLE>

4. INVENTORIES

Inventories consist of the following:

<TABLE>
<CAPTION>
                                                                          DECEMBER 31,
                                                             ------------------------------------
                                                                     1997              1996
                                                             ------------------------------------
<S>                                                            <C>               <C>
     Finished goods                                                  $2,090,256        $1,737,739
     Work-in-process                                                  1,223,743         1,145,276
     Raw materials                                                    1,378,051         1,152,160
                                                             ------------------------------------
                                                                     $4,692,050        $4,035,175
                                                             ====================================
</TABLE>

5. INCOME TAXES

The significant components of the provision for income taxes are as follows:

<TABLE>
<CAPTION>
                                                  1997                1996               1995
                                          ----------------------------------------------------------
<S>                                         <C>                <C>                 <C>
     Federal:
       Current                                     $2,796,904         $1,006,861            $ 78,500
       Deferred                                       560,013           (885,861)                  -
     State                                            238,658            110,000             191,500
                                          ----------------------------------------------------------
                                                   $3,595,575         $  231,000            $270,000
                                          ==========================================================
</TABLE>

                                      F-11
<PAGE>

                       BENCHMARQ MICROELECTRONICS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


5. INCOME TAXES

The provisions for income taxes differ from the amounts computed by applying the
statutory United States federal income tax rate to income before provision for
income taxes as follows:

<TABLE>
<CAPTION>
                                                                        YEAR ENDED DECEMBER 31,
                                                      --------------------------------------------------------
                                                               1997               1996               1995
                                                      --------------------------------------------------------
<S>                                                     <C>                 <C>                <C>
Federal income tax expense at statutory rate                   $3,490,520        $ 2,479,763       $ 1,384,505
Benefit of net operating loss carryforwards                       (35,220)        (2,307,552)       (1,384,505)
Tax-exempt foreign sales corporation income                      (164,139)                 -                 -
Research and development credit                                   (73,220)          (109,561)                -
Alternative minimum tax                                                 -                  -            78,500
State income taxes, net of federal benefit                        157,514             72,600           191,500
Other                                                             220,120             95,750                 -
                                                      --------------------------------------------------------
                                                               $3,595,575        $   231,000       $   270,000
                                                      ========================================================
</TABLE>

The significant components of the Company's deferred tax assets and liabilities
are as follows:

<TABLE>
<CAPTION>
                                                                                        DECEMBER 31,
                                                                             --------------------------------
                                                                                1997                  1996
                                                                             --------------------------------
<S>                                                                         <C>                   <C>
Deferred tax assets:
 Inventories                                                                 $  279,349            $  208,199
 Property and equipment                                                         392,816               389,587
 Accrued liabilities                                                              2,958                68,449
 Deferred income on shipments to distributors                                   425,099               475,772
 Research and development credit carryforward                                    22,863               331,796
 Alternative minimum tax credit carryforward                                          -               123,274
 Net operating loss carryforwards                                                64,324                99,544
                                                                             --------------------------------
Total deferred tax assets                                                     1,187,409             1,696,621

Deferred tax liabilities:
 Prepaid expenses                                                               (50,325)             (139,486)
 Property and equipment                                                        (566,514)             (555,774)
 Other, net                                                                    (244,724)             (115,500)
                                                                             --------------------------------
Total deferred tax liabilities                                                 (861,563)             (810,760)
                                                                             --------------------------------

Deferred income tax assets, net of deferred
 income tax liabilities                                                      $  325,846            $  885,861
                                                                             ================================
</TABLE>

For federal income tax purposes, at December 31, 1997, the Company has a net
operating loss carryforward of approximately $189,000 and unused research and
development credits of approximately

                                      F-12
<PAGE>

                       BENCHMARQ MICROELECTRONICS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

5. INCOME TAXES

$23,000 both of which expire in the years 2004 through 2011. Utilization of the
net operating loss and the research and development credit carryforwards are
restricted because of a change in ownership, as defined by the Tax Reform Act of
1986, which occurred in February 1990.

6. LEASE COMMITMENTS

The Company has an equipment master lease agreement under which approximately
$888,000 was available at December 31, 1997 for additional commitments.
Obligations under this agreement remain subject to financial covenants that
require, among other things, the Company to maintain certain financial ratios.

Certain equipment is leased under capital leases. The assets and liabilities are
initially recorded at the lesser of the present value of the minimum lease
payments or the fair value of the assets. The assets are amortized over their
related lease terms or their estimated useful lives, depending on the terms of
the purchase option at the end of the lease. The Company acquired equipment
under capital leases with an aggregate cost of $756,431, $2,201,734, and
$1,235,127 during the years ended December 31, 1997, 1996, and 1995,
respectively.

The Company also leases office facilities and certain equipment under operating
leases. Operating leases that expire are generally expected to be renewed or
replaced by other leases. Rental expense under operating leases for the years
ended December 31, 1997, 1996, and 1995 was $444,822, $464,489, and $331,604,
respectively.

Future minimum lease payments as of December 31, 1997, are as follows:

<TABLE>
<CAPTION>
                                                             CAPITAL LEASES    OPERATING LEASES
                                                         ---------------------------------------

<S>                                                        <C>                 <C>
1998                                                               $1,337,351         $  631,794
1999                                                                  490,120            671,005
2000                                                                  144,387            410,907
2001                                                                   64,170            279,302
2002                                                                   58,822            238,782
                                                         ---------------------------------------
Total minimum lease payments                                        2,094,850         $2,231,790
                                                                                  ==============
Less amount representing interest                                     164,139
                                                         ----------------------
Present value of minimum lease payments                             1,930,711
Less:  Current portion                                              1,229,053
                                                         ----------------------
                                                                   $  701,658
                                                         ======================
</TABLE>

                                      F-13
<PAGE>

                       BENCHMARQ MICROELECTRONICS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

7. CAPITAL STOCK

PREFERRED STOCK

The Board of Directors has the authority, without action by the stockholders, to
designate and issue up to 22,000,000 shares of preferred stock in one or more
series and to designate the dividend rate, voting rights and other rights,
preferences and restrictions of each series, any or all of which may be greater
than the rights of the common stock.

As of December 31, 1994, the Company had outstanding 20,422,575 shares of $.01
par value convertible preferred stock designated in five series, A through D and
F. In connection with the Company's initial public offering of common stock, all
of the convertible preferred stock outstanding as of the closing date was
converted into an aggregate of 5,105,622 shares of common stock.

COMMON STOCK

In December 1995, the Company issued 1,000,000 shares of common stock in
connection with the Company's initial public offering and received net proceeds
of $6,733,238. In January 1996, the underwriters purchased an additional 85,000
shares of the Company's common stock to cover over-allotments on the same terms
and conditions as the initial public offering for which the Company received net
proceeds of $584,384.

STOCK OPTIONS

The Company adopted its 1989 Stock Option Plan (the 1989 Plan) in April 1989 and
its 1995 Flexible Stock Option Plan (the 1995 Plan) in June 1995. The 1989 Plan
and 1995 Plan provide for incentive options and nonqualified options that may be
granted to employees, officers, directors, and consultants of the Company. At
December 31, 1997, 653,268 and 1,230,481 shares of common stock were reserved
for issuance upon exercise of options granted pursuant to the 1989 Plan and the
1995 Plan, respectively. Options are granted at prices not less than the fair
value of the common stock as determined by the Compensation Committee of the
Company's Board of Directors (the Committee) at the dates of grant. Options
granted under the 1989 Plan vest at a rate of 20% at the end of the first year
after date of grant and 1.66% per month thereafter. The vesting schedule for
options granted under the 1995 Plan is established by the Committee. The Plans
shall continue in effect for a term of ten years unless terminated by the Board
of Directors.

                                      F-14
<PAGE>

                       BENCHMARQ MICROELECTRONICS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

7. CAPITAL STOCK

A summary of the Company's stock option activity, and related information for
the years ended December 31, 1997, 1996, and 1995, follows:

<TABLE>
<CAPTION>
                                           1997                           1996                            1995
                             ---------------------------------------------------------------------------------------------
                                                 WEIGHTED                       WEIGHTED                        WEIGHTED
                                                 AVERAGE                        AVERAGE                         AVERAGE
                                                 EXERCISE                       EXERCISE                        EXERCISE
                                  OPTIONS         PRICE           OPTIONS        PRICE           OPTIONS         PRICE
                             ---------------------------------------------------------------------------------------------

<S>                            <C>             <C>             <C>            <C>             <C>             <C>
Outstanding at beginning of
 year                              1,223,425     $ 5.15           1,047,845      $2.97              908,653          $1.13

 Granted                             631,690      14.58             379,700       8.83              278,656           8.55
 Exercised                          (163,609)      2.67            (184,693)      0.45              (75,450)          0.34
 Forfeited                           (36,106)     10.94             (19,427)      4.44              (64,014)          4.25
                             ---------------                ---------------                ----------------
Outstanding at end of year         1,655,400       8.86           1,223,425       5.15            1,047,845           2.97
                             ===============                ===============                ================

Exercisable at end of year           600,825     $ 3.87             491,175      $2.20              489,013          $0.72
                             ===============                ===============                ================

Weighted-average fair value
 of options granted during
 the year                              $6.20                          $3.52                           $3.32
                             ===============                ===============                ================
</TABLE>

Information related to options outstanding and exercisable at December 31, 1997,
is summarized below:

<TABLE>
<CAPTION>
                                                OPTIONS OUTSTANDING                             OPTIONS EXERCISABLE
                                 -----------------------------------------------          ------------------------------
                                                         WEIGHTED
                                                         AVERAGE          WEIGHTED                            WEIGHTED
                                     OUTSTANDING AT      REMAINING        AVERAGE          EXERCISABLE AT     AVERAGE
RANGE OF EXERCISE                     DECEMBER 31,      CONTRACTUAL       EXERCISE          DECEMBER 31,      EXERCISE
     PRICES                              1997              LIFE            PRICE                1997           PRICE
--------------------------       --------------------------------------------------------- -----------------------------
<S>                                   <C>                <C>            <C>                   <C>              <C>
$  0.28       -     $ 3.40              371,546            5.05           $ 0.69                323,692        $ 0.63
$  4.60       -     $ 8.50              392,436            8.03           $ 6.89                159,617        $ 6.49
$  8.60       -     $12.88              478,569            8.93           $10.86                109,779        $ 8.64
$13.25        -     $33.75              412,849            9.28           $15.78                  7,737        $17.59
                                 -----------------                                         ----------------
                                      1,655,400                                                 600,825
</TABLE>

Statement of Financial Accounting Standards No. 123, "Accounting For Stock Based
Compensation," (SFAS 123) requires the disclosure of pro forma net income and
earnings per share information computed as if the Company had accounted for its
employee stock options granted subsequent to December 31, 1994, under the fair
value method set forth in SFAS 123. The fair value for these options was
estimated at the

                                      F-15
<PAGE>

                       BENCHMARQ MICROELECTRONICS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

7. CAPITAL STOCK

date of grant using a Black-Scholes option pricing model with the following
weighted-average assumptions for 1997, 1996 and 1995, respectively: risk-free
interest rates of 6.1%, 6.5% and 5.9%; a dividend yield of 0%; and volatility
factors of .48, .44, and .44. In addition, the fair value of these options was
estimated based on an expected life of one year from the vesting date using the
multiple option method.

The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options 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 employee stock options.  In addition, because
options vest over several years and additional option grants are expected, the
effects of these hypothetical calculations are not likely to be representative
of similar future calculations.

For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. The Company's pro
forma information follows (in thousands except for earnings per share
information):

<TABLE>
<CAPTION>
                                                             1997             1996            1995
                                                      -------------------------------------------------

<S>                                                   <C>              <C>              <C>
Pro forma net income                                          $5,609           $6,489         $3,685
Pro forma net income per
 common share                                                 $ 0.82           $ 0.98         $ 0.68
Pro forma net income per common share - assuming
 dilution                                                     $ 0.75           $ 0.90         $ 0.60

</TABLE>

WARRANTS

During the year ended December 31, 1996, 95,625 warrants to purchase shares of
the Company's capital stock, which were originally granted prior to 1993, were
exercised. At December 31, 1997 and 1996, there were no other warrants
outstanding.

                                      F-16
<PAGE>

                       BENCHMARQ MICROELECTRONICS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

8. EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per
share:

<TABLE>
<CAPTION>
                                                                    YEAR ENDED DECEMBER 31,
                                                            1997             1996             1995
                                                     ---------------------------------------------------
<S>                                                    <C>              <C>              <C>
Numerator:
 Net income for basic and diluted earnings per share        $6,670,660       $7,062,420       $3,802,074
                                                     ===================================================

Denominator:
 Denominator for basic earnings per share
   - weighted average shares                                 6,867,247        6,639,701        5,450,984

 Effect of dilutive securities:
   Employee stock options                                      885,135          702,615          732,849
   Warrants                                                          -           48,923           89,002
                                                     ---------------------------------------------------
 Dilutive potential common shares                              885,135          751,538          821,851
                                                     ---------------------------------------------------

 Denominator for diluted earnings per share -
   adjusted weighted-average shares and assumed
   conversion                                                7,752,382        7,391,239        6,272,835
                                                     ===================================================

Net income per common share                                 $     0.97       $     1.06       $     0.70
                                                     ===================================================

Net income per common share - assuming dilution             $     0.86       $     0.96       $     0.61
                                                     ===================================================
</TABLE>

For additional disclosures regarding the employee stock options and warrants,
see Note 7.

9. OPERATIONS

The Company operates in a single industry segment. The Company markets its
products through its sales personnel, independent sales representatives, and
distributors. The distribution of the Company's revenues as a percent of total
net revenues is as follows:

<TABLE>
<CAPTION>
                                                                    YEAR ENDED DECEMBER 31,
                                                          -----------------------------------------
                                                                 1997          1996         1995
                                                          -----------------------------------------
<S>                                                         <C>             <C>          <C>
      United States                                                    34%          33%          49%
      Export:
        Asia-Pacific Region                                            55           58           44
        Europe                                                          7            6            6
        Other                                                           4            3            1
                                                          -----------------------------------------
      Total export sales                                               66           67           51
                                                          -----------------------------------------
                                                                      100%         100%         100%
                                                          =========================================
</TABLE>

                                      F-17
<PAGE>

                       BENCHMARQ MICROELECTRONICS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


9. OPERATIONS

Sales through five domestic distributors accounted for 16%, 15%, and 13% of net
revenues during the years ended December 31, 1997, 1996, and 1995, respectively.
The Company's distributor in Taiwan accounted for approximately 21%, 20% and 15%
of net revenues during the years ended December 31, 1997, 1996 and 1995,
respectively. The Company's distributor in Japan accounted for approximately 12%
of net revenue during the year ended December 31, 1997. No other customer
directly accounted for greater than 10% of net revenues.

The Company currently obtains substantially all of its semiconductor wafers for
use in its products from Taiwan Semiconductor Manufacturing Company (TSMC). The
Company expects to remain dependent on TSMC for substantially all of its wafer
capacity for the foreseeable future. In May 1996, the Company entered into an
Option Agreement with TSMC (the Option Agreement). Pursuant to the Option
Agreement, the Company has committed to purchase and TSMC committed to provide
specified quantities of wafers at prevailing market prices during the years 1997
through 2000. Additionally, the Company has an option to purchase and TSMC
committed to provide certain additional wafers (the Option Wafers) to be
purchased during the years 1997 through 2000. The Company agreed to pay
$5,880,000 as an advance payment for the Option Wafers TSMC committed to provide
during the term of the Option Agreement, of which $2,500,000 was paid in May
1996. The Company issued a promissory note due March 31, 1997, for the remaining
$3,380,000. Effective March 31, 1997, the Company and TSMC amended the Option
Agreement to incorporate the use by the Company of a proposed new TSMC
manufacturing process and to reschedule until December 31, 1997, $1,380,000 of
the note payable. The Company paid $2,000,000 as scheduled on March 31, 1997 and
$1,380,000 on December 31, 1997. The advanced payment, which is being credited
at specified amounts upon purchase of the Option Wafers, will be forfeited if
such wafers are not purchased in a given year. During 1997, the Company utilized
$840,000 of the advanced payment for the purchase of Option Wafers.
Additionally, the Company has reclassified to "prepayment for product purchases"
the portion of the advanced payment for Option Wafers from which it believes it
will benefit in 1998.  At December 31, 1997, none of the advance had been
forfeited, and none was expected to be forfeited in the future.

10. EMPLOYEE BENEFIT PLANS

EMPLOYEE SAVINGS PLAN

During 1992, the Company established a 401(k) Employee Savings Plan (the 401(k)
Plan) covering all of its employees who have completed six months of service.
The purpose of the 401(k) Plan is to provide employees with additional financial
security during retirement by providing employees with a means of making regular
tax-deferred, voluntary contributions to the 401(k) Plan. Company contributions
to the 401(k) Plan are discretionary. During the years ended December 31, 1997,
1996, and 1995, the Company made discretionary matching contributions to the
401(k) Plan totaling $118,308, $55,374, and $42,297, respectively.

                                      F-18
<PAGE>

                       BENCHMARQ MICROELECTRONICS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

10. EMPLOYEE BENEFIT PLANS

1995 BONUS PLAN

In June 1995, the Company's Board of Directors approved the 1995 Bonus Plan (the
Bonus Plan) effective July 1, 1995. The Bonus Plan is applicable to the
Company's executive officers and certain other key employees and provides
incentive toward the achievement of business objectives and goals. The Company's
Bonus Plan consists of three components: (i) annual salary increases consistent
with industry practices; (ii) cash bonuses for Company and specific area of
responsibility performance; and (iii) stock option grants rewarding long-term
Company performance. The cash bonus portion of the Bonus Plan is not allowed to
exceed 7% of pre-tax income before cash bonuses, profit sharing, and 401(k) Plan
matching contributions. At December 31, 1997 and 1996, $188,027 and $506,825,
respectively, was accrued for cash bonuses under the Bonus Plan. During 1995, no
bonuses were awarded under the Bonus Plan. However, $257,000 was accrued for
discretionary bonuses that were paid to employees during 1996.

PROFIT SHARING PROGRAM

In June 1995, the Company's Board of Directors approved a Profit Sharing Program
(PSP) effective as of July 1, 1995. The PSP is designed to provide financial
incentive and reward to all full-time regular employees for excellent
performance by the Company. To be eligible, a full-time regular employee must be
in continuous employment with the Company from the first to the last day of the
fiscal quarter. Profit sharing bonuses are paid quarterly if the Company
achieves a goal of 12% pre-tax return on sales for a given fiscal quarter. Pre-
tax return on sales is defined as pre-tax income before cash bonuses, profit
sharing, and 401(k) Plan matching contributions (PTIB) divided by net revenues.

Upon achievement of the 12% pre-tax return on sales, a profit sharing bonus pool
will be funded with up to 3.5% of the PTIB for that quarter, which will be
distributed to employees pursuant to a formula specified in the PSP. In
addition, upon achievement of the 12% pre-tax return on sales goal for a fiscal
year, the PSP authorizes the Compensation Committee of the Board of Directors
to, at its discretion, fund a 401(k) matching contribution pool of up to 2.5% of
PTIB. Discretionary matching contributions, if any, will be made annually.
During 1997, 1996, and 1995, $293,617, $246,290, and $-0-, respectively, were
charged to expense for bonuses under the PSP.

11. CONTINGENCY

The Company filed a declaratory judgment action against Dallas Semiconductor
Corporation ("DSC") in January 1997 to resolve certain allegations of patent
infringement asserted against the Company by DSC. The Company filed its action
against DSC in the United States District Court for the Eastern District of
Texas, Sherman Division. The Company had previously sought declaratory relief in
a similar action filed in December 1995 which was dismissed on June 25, 1996,
based on DSC's assurance to the court that it had not charged the Company with
patent infringement. The parties failed to reach agreement in subsequent

                                      F-19
<PAGE>

                       BENCHMARQ MICROELECTRONICS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

11. CONTINGENCY

negotiations. Since the filing of the suit by the Company in January 1997 in
Sherman, Texas, DSC filed a lawsuit against the Company in February 1997 in the
United States District Court for the Northern District of Texas, Dallas
Division, alleging infringement of some of the same patents at issue in the
Sherman litigation filed in December 1995 and January 1997 by the Company. In
its lawsuit, DSC is seeking injunction against patent infringement, damages for
lost profit (which may under certain circumstances be trebled), pre and post
judgment interest and attorney's fees. To date DSC has not specified an amount
of monetary damages to which it alleges it is entitled. Subsequently, the courts
determined that the two cases will be combined into one case in the United
States District Court for the Eastern District of Texas. At present, 11 DSC
patents are included in this case. The Company is confident that it has not
violated any of the patents asserted by DSC and intends to vigorously pursue its
case. However, due to the uncertainties associated with any litigation, the
ultimate outcome cannot presently be determined.

Pursuant to the definitive Agreement and Plan of Merger, dated March 2, 1998
(the "Merger Agreement") by and among the Company, Unitrode Corporation
("Unitrode") and Merrimack Corporation (See Note 12), if the Merger Agreement is
terminated for certain reasons provided for in the Merger Agreement, the
Company is obligated to pay Unitrode a termination fee of $4,528,000 (the
"Termination Fee").  These reasons include, but are not limited to, (i) the
Company's Board of Directors failing to recommend approval and adoption of the
Merger Agreement by the stockholders of the Company, taking certain actions to
facilitate or encourage an Acquisition Proposal (as defined in the Merger
Agreement) or making any recommendation or taking action with respect to any
Acquisition Proposal other than a recommendation to reject such Acquisition
Proposal (except under circumstances where the Pre-Closing Average of the
Unitrode common stock is less than $12.00 per share); (ii) the stockholders of
the Company fail to approve the Merger Agreement and an Acquisition Proposal had
been made prior to the stockholders meeting; or (iii) the Company materially
breaches certain provisions related to obtaining stockholder approval.

In addition, the Company granted Unitrode an option (the "Option") to purchase
955,158 shares of Common Stock at an exercise price of $17.53 per share pursuant
to the terms of a Stock Option Agreement, dated March 2, 1998 (the "Option
Agreement") (See Note 12). Upon the occurrence of certain events set forth in
the Option Agreement, the Company may be required to repurchase the Option. The
Total Profit (as defined in the Option Agreement) that Unitrode may receive
under the Option is $7,278,000 less the amount of any Termination Fee received
by Unitrode.

12. SUBSEQUENT EVENT

On March 2, 1998, The Company signed a definitive Agreement and Plan of Merger
(the "Merger Agreement") with Unitrode Corporation ("Unitrode"). In addition to
improving penetration of the portable power market, the merger should increase
growth opportunities in other rapidly growing markets targeted by the combined
company.

Under the terms of the Merger Agreement, each share of the Company's common
stock will be exchanged for one share of Unitrode common stock, subject to
adjustment under certain conditions. The exchange ratio will be subject to
adjustment in the event that the average per share trading prices of Unitrode
Common Stock over a specified period is less than $16 per share or greater than
$24 per share. Under the adjustment provision, the number of shares of Unitrode
Common Stock to be issued for each the Company's share will not exceed 1.33
shares of Unitrode Common Stock.  Based on the February 27, 1998, closing price
of Unitrode Common Stock on the New York Stock Exchange and the then current
number of shares outstanding, the transaction is valued at approximately $135
million.

The merger, approved by the Board of Directors of both companies, requires the
approval of the stockholders of the Company, as well as other customary closing
conditions.  The issuance of the shares of Unitrode Common Stock contemplated by
the Merger Agreement requires the approval of the stockholders of Unitrode.  It
is expected that the transaction will be completed in the second quarter of
1998. Stockholders of the Company holding an aggregate of approximately 20% of
the outstanding stock have committed to vote in favor of the transaction. The
transaction is expected to be tax-free and to be accounted for on a "pooling of
interests" basis.

In connection with the execution of the Merger Agreement, the Company and
Unitrode entered into the Option Agreement pursuant to which the Company has
granted Unitrode the Option to acquire up to 955,158 shares of the Company's
Common Stock at an exercise

                                      F-20
<PAGE>

                       BENCHMARQ MICROELECTRONICS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

12. SUBSEQUENT EVENT

price of $17.53 per share under terms of the Option Agreement. The Option only
becomes exercisable after occurrence of certain events, including but not
limited to a person or group commencing a tender offer for 10% or more of the
Company's Common Stock or the Company entering into an agreement to merge the
Company with any entity other than Unitrode or one of its subsidiaries.  The
Option and Option Agreement terminate upon consummation of the merger and
certain other events, including but not limited to the termination of the Merger
Agreement by the Company or Unitrode.

There can be no assurances that such merger will be approved.

13. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

<TABLE>
<CAPTION>
                                                                  THREE MONTHS ENDED
                                        ----------------------------------------------------------------------------
                                         MARCH 31,          JUNE 30,         SEPTEMBER 30,         DECEMBER 31,
                                           1997               1997                1997                 1997
                                        ----------------------------------------------------------------------------
                                                       (in thousands, except per share amounts)
<S>                                     <C>             <C>               <C>                   <C>
Net revenues                             $11,712           $11,457               $10,810             $10,458
Gross margin                               5,898             6,267                 5,924               5,607
Income before provision for income
 taxes                                     2,567             2,695                 2,497               2,506

Net income                                 1,643             1,725                 1,648               1,654
Net income per common share               $ 0.24           $  0.25               $  0.24             $  0.24
Net income per common share -
 assuming dilution                        $ 0.21           $  0.22               $  0.21             $  0.21

</TABLE>

<TABLE>
<CAPTION>
                                                                  THREE MONTHS ENDED
                                        ---------------------------------------------------------------------------
                                         MARCH 31,          JUNE 30,         SEPTEMBER 30,         DECEMBER 31,
                                           1996               1996                1996                 1996
                                        ---------------------------------------------------------------------------
                                                       (in thousands, except per share amounts)
<S>                                     <C>             <C>               <C>                   <C>
Net revenues                              $8,475            $9,068               $10,519             $12,091
Gross margin                               3,421             3,988                 4,841               6,083
Income before provision for income
 taxes                                     1,125             1,358                 2,079               2,731

Net income                                 1,057             1,259                 2,106               2,640
Net income per common share               $ 0.16            $ 0.19               $  0.32             $  0.39
Net income per common share -
 assuming dilution                        $ 0.15            $ 0.17               $  0.29             $  0.35

</TABLE>

The 1996 and first three quarters of 1997 earnings per share amounts have been
restated to comply with Statement of Financial Accounting Standards No. 128,
Earnings per Share.

                                      F-21
<PAGE>

               REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

Board of Directors and Stockholders
BENCHMARQ Microelectronics, Inc.

We have audited the accompanying consolidated balance sheets of BENCHMARQ
Microelectronics, Inc. (the Company) as of December 31, 1997 and 1996, and the
related consolidated statements of income, stockholders' equity, and cash flows
for each of the three years in the period ended December 31, 1997, and have
issued our report thereon dated January 26, 1998, except for Notes 11 and 12, as
to which the date is March 2, 1998, (included elsewhere in this Form 10-K). Our
audits also included the financial statement schedule listed in Item 14(a) of
this Form 10-K. This schedule is the responsibility of the Company's management.
Our responsibility is to express an opinion based on our audits.

In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.

                                                        /s/ Ernst & Young LLP


Dallas, Texas
January 26, 1998

                                      S-1
<PAGE>

                        BENCHMARQ MICROELECTRONICS, INC.

                SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

                 YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995


<TABLE>
<CAPTION>
                                                                ADDITIONS
                                                 BALANCE AT    CHARGED TO                         BALANCE AT
                                                 BEGINNING      COSTS AND                         END OF YEAR
                 DESCRIPTION                      OF YEAR       EXPENSES        DEDUCTIONS(1)
-------------------------------------------------------------------------------------------------------------------
<S>                                             <C>           <C>            <C>                  <C>
Year ended December 31, 1997:
Deducted from asset accounts -
 Allowance for doubtful accounts and
  estimated returns                                 $388,471       $643,035          $167,721        $863,785
                                                ------------------------------------------------------------------
Year ended December 31, 1996:
Deducted from asset accounts -
 Allowance for doubtful accounts and
  estimated returns                                 $179,923       $450,629          $242,081        $388,471
                                                ------------------------------------------------------------------
Year ended December 31, 1995:
Deducted from asset accounts -
 Allowance for doubtful accounts and
  estimated returns                                 $ 10,085       $322,898          $153,060        $179,923
                                                =================================================================
</TABLE>
___________________________
(1) Activity includes uncollectible accounts written off, net of recoveries and
product returns.