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SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





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FORM 10-K


(Mark One)


|x |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934
|- |  | ----------------------------------------------------------------------------------------




For the fiscal year ended June 29, 2002.





| ̈ |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934
|- |  | --------------------------------------------------------------------------------------------




For the transition period
fromto





Commission File Number 0-27026





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PERICOM SEMICONDUCTOR CORPORATION


(Exact name of registrant as specified in its charter)





California

77-0254621(State or Other Jurisdiction

(I.R.S. Employerof Incorporation or Organization)

Identification No.)





2380 Bering Drive San Jose, California 9513195131(Address of Principal Executive Offices)

(Zip Code)





Registrants Telephone Number, Including Area Code: (408) 435-0800





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





None





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





Common Stock





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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
disclosures 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.  x





The
aggregate market value of voting stock held by non-affiliates of the Registrant, based on the closing price of the Common Stock on September 9, 2002 as reported by the Nasdaq National Market was approximately $245,492,000.





As of September 9, 2002 the Registrant had outstanding 25,759,908 shares of Common Stock.





DOCUMENTS INCORPORATED BY REFERENCE





Parts of the Registrants Proxy Statement for the Annual Meeting of Shareholders to be held December 11, 2002, which will be filed subsequently, are incorporated by reference in Part III of this
report on Form 10-K.





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PERICOM SEMICONDUCTOR CORPORATION





Form 10-K for the Year Ended June 29, 2002





INDEX








PagePART IItem 1:     
Business

3Item 2:     
Properties

20Item 3:     
Legal Proceedings

20Item 4:     
Submission of Matters to a Vote of Security Holders

21PART IIItem 5:     
Market for Registrants Common Stock and Related Stockholder Matters

22Item 6:     
Selected Financial Data

24Item 7:     
Managements Discussion and Analysis of Financial Condition and Results of Operations

25Item 7A: 
Quantitative and Qualitative Disclosures about Market Risk

32Item 8:     
Financial Statements and Supplementary Data

33Item 9:     
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

33PART IIIItem 10:    
Directors and Executive Officers of the Registrant

34Item 11:    
Executive Compensation

36Item 12:    
Security Ownership of Certain Beneficial Owners and Management

36Item 13:    
Certain Relationships and Related Transactions

36PART IVItem 14:    
Exhibits, Financial Statement Schedules and Reports on Form 8-K

37Signatures

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PART I





ITEM 1.    
BUSINESS





We design, develop and market high-performance interface integrated circuits,
or ICs, used in many of todays advanced electronic systems. Interface ICs, such as interface logic, switches and timing management products, transfer, route and time electrical signals among a systems microprocessor, memory and various
peripherals and between interconnected systems. Our interface products increase system bandwidth in applications such as notebook computers, servers, network switches and routers, storage area networks and wireless base stations. We offer products
that increase bandwidth by widening the data path, or bus (enlarging the pipe), increasing the data rate (increasing the flow rate through the pipe), or allowing multiple, simultaneous transactions on the bus.





We have combined our extensive design technology and applications knowledge with our responsiveness to the specific needs of electronic
systems developers to become a leading supplier of high-performance interface ICs. We have evolved from one product line in fiscal 1992 to four developed and growing product linesSiliconSwitch  , SiliconInterface  Logic, SiliconClock  and SiliconConnect  aimed at providing an increasing breadth of interface IC solutions to our current and target customers. We
currently offer over 700 products, 92 of which were introduced during fiscal year 2002 and 64 of which were proprietary. Our worldwide customers include leading OEMs, contract manufacturers and distributors.





Industry Background





Overview





The presence of electronic systems and subsystems permeates our everyday
life, as evidenced by the growth of the personal computer, mobile communications, networking and consumer electronics markets. The growth of these markets has been driven by systems characterized by ever-improving performance, flexibility,
reliability and multi-functionality, as well as decreasing size, weight and power consumption. Advances in ICs through improvements in semiconductor technology have contributed significantly to the increased performance of, and demand for,
electronic systems and to the increasing representation of ICs as a proportion of overall system cost. This technological progress has occurred at an accelerating pace, while the cost of electronic systems has remained steady or declined.





The development of high-performance personal computers, the requirement for higher network performance and the
increased level of connectivity among different types of electronic devices have driven the demand for high-speed, high-performance interface circuits to handle the transfer, routing and timing of digital and analog signals at high speeds with
minimal loss of signal quality. High-speed signal transfer is essential to fully utilize the speed and bandwidth of the microprocessor, the memory and the LAN or WAN. High signal quality is equally essential to achieve optimal balance between high
data transmission rates and reliable system operation. Without high signal quality, transmission errors occur as bandwidth increases. Market requirements for interface circuits are driven by the same market pressures as those imposed on
microprocessors, including higher speed, reduced power consumption, lower-voltage operation, smaller size and higher levels of integration.





Our interface products serve to increase system bandwidth in applications such as servers, network switches and routers, storage area networks, wireless basestations, and notebook computers. Bandwidth
can be increased by widening the datapath (widening the pipe), increasing the clock rate (increase the flowrate through the pipe) or allowing multiple, simultaneous transactions on the bus using a crossbar switch. We are pioneering technology in
each of these areas.





The problems associated with signal quality that must be addressed by the interface ICs are
magnified by increases in the speeds at which interface ICs must transfer, route and time electrical signals, the number of interconnected devices that send or receive signals and the variety of types of signals processed by the




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interface ICs. The most significant performance challenges faced by designers of interface ICs are the
requirements to transfer signals at high speed with low propagation delay, minimize signal degradation such as noise, jitter, and skew and reduce electromagnetic interference (EMI). Minimizing
propagation delay, sources of signal degradation and interference is needed to enable todays state-of-the-art electronic systems to function reliably.





We believe that several major market trends make reliable operations of systems at high frequency and high data transfer rates critical. Internet and high-performance network applications continue to
push for more data bandwidth on system buses and across system boundaries. Computer and networking system clock frequencies continue to increase at a very rapid rate, shortening the time available to perform data transfers. While the data transfer
rate has typically increased every few years, the continuing desire for higher system reliability with minimal system downtime creates increasing pressure to achieve lower data error rates. Increasing system-wide EMI emissions resulting from
higher-frequency ICs compels system designers to develop and implement new ways to further reduce these emissions. These factors all increase the need for very high-speed interface circuits with outstanding performance specifications.





With processing power continuing to double every 18 months (Moores law) the speed at which microprocessors can access
memory becomes the system bandwidth constraint in high-speed computing. We have developed solutions with market leaders to support higher speed processor-memory interfacing to support the Double Data Rate (DDR) SDRAM and PC133 SDRAM,
both on the system motherboard and memory modules. We are also developing products for DDR II.





In server
applications, we support higher system bandwidth through the use of bus switches to isolate the systems memory modules from the bus when they are not being addressed. Our interface products are also used to enable live insertion of PCI boards
(hot swapping). This prevents system downtime when boards need to be replaced. We have similar products for hot-docking notebook computers and our products are used in the majority of the notebook computers on the market today.





In high-bandwidth systems data transfer needs to be synchronized, creating a high demand for timing products. Our
timing products provide the precise timing signals needed to ensure reliable data transfer at high speeds in applications ranging from notebook computers to network switches. As systems continue to grow in processing power and complexity the demand
for these products will accelerate. The demand for higher precision will also continue to increase as timing margins shrink in higher bandwidth systems.





Electronic systems designers and OEMs have increasingly required solutions to the technical challenges described above in order to take advantage of continuing speed and performance enhancements in
microprocessor and memory ICs. These customers have also continued to migrate from single-part vendors to suppliers who can provide multiple parts for their systems, both to reduce the number of vendors they must deal with and to address
interoperability requirements among the interface ICs within the system. Due to the short design times and product life cycles these customers face for their own products, they are requiring rapid response time and part availability from interface
IC vendors. Interface IC vendors are further required to accomplish these tasks in a cost-effective manner that flexibly responds to specific customer needs.





The Pericom Strategy





We are a leading supplier of high-performance interface ICs.
While our products address a wide spectrum of applications, we have focused our resources on solving bandwidth bottlenecks in customers systems using our high performance interface technology. With processing power doubling every 18 months
historically, the speed at which microprocessors can access memory becomes the bandwidth constraint in high speed computing. We have developed solutions with Intel, IBM and other market leaders to support higher-speed processor-memory interfacing,
which support the latest memory standards, on both the system motherboard and the memory modules. In server applications, we support higher system bandwidth through the use of high frequency clock products, which provide timing signals to
synchronize data transfer, and bus switches that isolate a systems memory modules from the bus when they are not being addressed.




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Products are defined in collaboration with the industry-leading OEMs and industry enablers such as Intel
and IBM, and our modular design methodology shortens our time to market and time to volume relative to our competitors. The key elements of our strategy are:





Market Focus.    Our market strategy is to focus on the high-growth, high-performance segments of the computing, networking and telecommunications markets.
Currently, we design and sell products for specific high-volume applications within these target markets, including notebook computers, computer servers, local area network (LAN), and wide area network (WAN), switches, routers and hubs and
multi-function office peripherals such as printers and copiers. Our customers and end-users of our products include a number of leading OEMs in each market:





| |  |  | Laptop market: Acer, Apple, HP/Compaq, Dell, Fujitsu, IBM and Toshiba
| | - |  | ---------------------------------------------------------------------




| |  |  | Telecommunications equipment market: Huawei, Lucent, Motorola, Samsung and ZTE
| | - |  | ------------------------------------------------------------------------------




| |  |  | PC Server market: HP/Compaq, Dell, Intel, IBM and Sun
| | - |  | -----------------------------------------------------




| |  |  | Network equipment market: Cisco, HP, Lucent and Nortel
| | - |  | ------------------------------------------------------




| |  |  | Printer and copier market: Canon, HP, Lexmark and Xerox
| | - |  | -------------------------------------------------------




We intend to pursue new opportunities in markets where our rapid-cycle IC design and development expertise and understanding of the product evolution of our customers gives
us the opportunity to become a leading solution supplier.





Customer
Focus.    Our customer strategy is to use a superior level of responsiveness to customer needs to continually expand our customer base as well as sell a wider range of products to our existing and targeted new customers.
Key elements of our customer strategy are:





| |  |  | Penetrate target accounts through joint product development. We approach prospective customers primarily by working with their system design engineers at the
product specification stage with the goal that one or more Pericom ICs will be incorporated into a new system design. Our understanding of our customers requirements combined with our ability to develop and deliver reliable, high-performance
products within our customers product introduction schedules has enabled us to establish strong relationships with many leading OEMs.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  |  | Solidify customer relationships through superior responsiveness. We believe that our customer service orientation is a significant competitive advantage. We
seek to maintain short product lead times and provide our customers with excellent on-schedule delivery, in part by having available adequate finished goods inventory for anticipated customer demands. We emphasize product quality for our products
and have been ISO-9001 certified since March 1995.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  |  | Expand customer relationships through broad-based solutions. We aim to grow our business with existing customers by offering product lines that provide
increasingly extensive solutions for our customers high-speed interfacing needs. By providing our customers with superior support in existing programs and anticipating our customers needs in next- generation products, we have often been
able to substantially increase our overall volume of business with those customers. With larger customers we have also initiated electronic data interchange, or EDI, and remote warehousing programs, annual purchase and supply programs, joint
development projects and other services intended to enhance our position as a key vendor.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  |  | Responding to our customer requirements is one of the highest priorities of Pericom. In order to accomplish this, we have implemented an automated quoting
system from Azerity, a leader in e-business solutions. Pericom can respond very quickly to our customer needs and offer them superior service. With the implementation of Azeritys ProChannel, Pericom has also been able to streamline a number of
internal procedures.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




Technology Focus.    Our technology
strategy is to maintain a leading position in the development of new, higher-performance interface ICs by continuing to design additional core cells that address the more challenging problems of signal interface as electronic systems become faster
and require lower power and




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voltages. Our primary efforts are in the creation of additional proprietary digital, analog and
mixed-signal functionality. We are working closely with our wafer suppliers to incorporate their advanced CMOS process technologies to improve our ability to introduce next generation products expeditiously. We intend to expand our patent portfolio
with the goal of providing increasingly proprietary product lines.





Manufacturing
Focus.    Our manufacturing strategy is closely integrated with our focus on customer needs. Central to this strategy is our intent to support high-volume shipment requirements on short notice from customers. We design
products so that we may manufacture many different ICs from a single partially-processed wafer. Accordingly, we keep inventory in the form of wafer banks, from which wafers can be completed to produce a variety of specific ICs in as little as two to
four weeks. This approach has enabled us to reduce our overall work-in-process inventory while providing increased availability to produce a variety of finished products. In addition, we keep some inventory in the form of die banks, which can become
finished product in two weeks or less. We have established relationships with three leading foundries, Chartered Semiconductor Manufacturing Pte, Ltd. (Chartered), Taiwan Semiconductor Manufacturing Corporation (TSMC), and
Hynix Semiconductor America, Inc (Hynix). We are maintaining our relationship with New Japan Radio Corporation (NJRC) for some of our products that are manufactured in high-voltage CMOS processes.





Strategic and Collaborative Relationships Focus.    We pursue a strategy of entering into new
relationships and expanding existing relationships with companies that engage in the product design, manufacturing and marketing of ICs. We believe that these relationships have enabled us to access additional design and application expertise,
accelerate product introductions, reduce costs and obtain additional needed capacity. In product design, we have engaged Pericom Technology, Inc., an affiliated company, and other design houses to develop interface ICs as a means of rapidly
expanding our product portfolio. We have established collaborative relationships with leading wafer manufacturers that have high performance digital core libraries that we can use in our future products. We have also made strategic investments in
several companies with whom we have obtained rights to certain technologies and are engaged in collaborative research and development.





Products





We have used our expertise in high-performance digital, analog and mixed-signal
IC design, our reusable core cell library and our modular design methodology to achieve a rapid rate of new product introductions. Within each of our four product lines, the product portfolio has evolved from a standard building block into both
standard products of increasing performance and application-specific standard products, or ASSPs, which are tailored to meet a specific high volume application. Within each product family we continue to address the common trends of decreasing supply
voltage, higher integration and faster speeds.





SiliconSwitch 





Through our SiliconSwitch  product line, we offer a
broad range of high-performance ICs for switching digital and analog signals. The ability to switch or route high-speed digital or analog signals with minimal delay and signal distortion is a critical requirement in many high-speed computers,
networking and multimedia applications. Historically, systems designers have used mechanical relays and solid-state relays which have significant disadvantages as compared to IC switches: mechanical relays are bulky, dissipate significant power and
have very low response times; solid-state relays are expensive.





Digital
Switches.    We offer a family of digital switches in 8-, 16- and 32-bit densities that address the switching needs of high-performance systems. These digital switches offer performance and cost advantages over
traditional switch functions, offering both low on-resistance and capacitance, low propagation delay (less than 250 picoseconds), low standby current (less than 1 microamp) and series resistor options that support low electromagnetic interference,
or EMI, emission requirements. Applications for our digital switches include 5-volt to 3.3-volt signal translation, high-speed data transfer and switching between microprocessors, PCI slots, and multiple memories, and hot plug interfaces in notebook
and desktop computers, servers and switching hubs and routers. We also have two families of 3.3-volt switches




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offering industry-leading performance in switching times, and low capacitance for bus isolation applications. We continued to expand the number
of devices and the performance of these families during fiscal 2002.





Analog
Switches.    We offer a family of analog switches for low-voltage (2- to 7-volt) applications such as multimedia audio and video signal switching with enhanced characteristics such as low power, high bandwidth, low
crosstalk and low distortion to maintain analog signal integrity. Our analog switches have significantly lower distortion than traditional analog switches due to our advanced CMOS switch design. To support space-constrained applications, such as
wireless handsets and global positioning system receivers, several of these switches have recently been introduced in the tiny SOT-23 and SC 70 packages. To complement this low-voltage family we also offer a higher voltage (17-volt) analog switch
family for applications requiring higher signal range, such as instrumentation, telecommunications and industrial control.





LAN Switches and Video Switches.    We offer a line of application specific standard products (ASSP) switches that address the high performance demands of 10/100/1000 Ethernet LANs and
high bandwidth video switches that enable the switching between different video sources associated with video graphic cards and flat panel displays. We continue to expand our innovations in this area to address next generation Networking and Media
platform.





SiliconInterface 





Through our SiliconInterface  product line, we offer a broad range of high-
performance 5-volt, 3.3-volt, 2.5-volt, and 1.8-volt CMOS logic interface circuits. These products provide logic functions to handle data transfer between microprocessors and memory, bus exchange, backplane interface and other logic interface
functions where high-speed, low-power, low-noise and high-output drive characteristics are essential.





5-Volt Interface Logic.    Our high-speed 5-volt interface logic products in 8- and 16-bit configurations address specific system applications, including a Quiet Series family for
high-speed, low-noise, point-to-point data transfer in computing and networking systems and a Balanced Drive family with series resistors at output drivers to reduce switching noise in high-performance computers. We continue to provide a
complete portfolio of 5-volt products that supports many legacy data communications and telecommunications switch platforms.





3.3-Volt Interface Logic.    To support the trend toward lower system voltages for higher silicon integration, from 8-Bit to 32-Bits, system performance and power savings we offer five families of
3.3-volt interface logic to address a range of performance and cost requirements with very low power consumption. As the industry continues to migrate to 3.3-volt interface, we will continue to enhance and expand our 3.3-volt logic product portfolio
to meet the industry need. Our ASIC design methodology and existing cell based designs contribute to our rapid product development in this area.





2.5-Volt Interface Logic.    Our 2.5-volt product families include three new logic families to address 2.5- and 1.8-volt operation. We have a family of products with
high output current offering sub-2.5 nanosecond propagation delays and the lowest power consumption in its class. We also have a lower balanced drive family with a propagation delay of less than 2 nanoseconds to support high-speed processor-memory
interfacing and a balanced drive family optimized for low-noise operation at very low voltages. Increasingly, networking, PC and memory module manufacturers are demanding application specific logic products. We have met this challenge in 2002 by
introducing new logic functions that support both voltage level and I/O translation to enable customers to interface between legacy and next generation ASIC solutions. Our 2.5-volt Register products meet the demands of current and next generation
DDR I memory module applications associated with the PC & Server markets.





SOTiny
Gates.    To address the growing needs of the marketplace requirements of sourcing single and dual gate logic solutions, we introduced two new product families. These products operate from 1.65v to 5v to




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address the interface needs associated in many applications. We are now positioned to tap into new product markets in the areas of
communication, PC peripherals, and consumer digital systems.





SiliconClock 





In high bandwidth systems data transfer needs to be synchronized, creating a demand for timing products. Our timing products provide the precise timing signals needed to
ensure reliable data transfer at high speeds in applications ranging from notebook computers to network switches. As systems continue to grow in processing power and complexity, the demand for these products is expected to accelerate. The demand for
precision will also increase as timing margins shrink in higher bandwidth systems.





Through our
SiliconClock  product line, we offer a broad range of general-purpose solutions including clock
buffers, zero-delay clock drivers and frequency synthesizer products for a wide range of microprocessor systems, as well as a number of ASSP timing products for laser printers, registered memory modules, storage area networks, servers, networking,
and set-top box applications.





Clock Buffers and Zero-Delay Clock
Drivers.    Clock buffers receive a clock signal from a frequency source and create multiple copies of the same frequency for distribution across system boards. We offer 2.5-volt, 3.3-volt and 5-volt clock buffers for
high-speed, low-skew applications in computers and networking equipment. Zero-delay clocks virtually eliminate propagation delays by synchronizing the clock outputs with the incoming frequency source. Our 5-volt and 3.3-volt zero-delay clock drivers
offer frequencies of up to 266 MHz for applications in networking switches, routers and hubs, computer servers, and memory modules. Timing products to support the emerging double date rate (DDR) are available today and future DDR II memory
technologies are in development.





Clock Frequency Synthesizers.    Clock
frequency synthesizers generate various output frequencies using a single input frequency source. Clock frequency synthesizers are used to provide critical timing signals to microprocessors, memory and peripheral functions. Our clock synthesizers
support a wide range of microprocessor systems and their associated integrated chipsets for server, notebook and desktop PC products. We also offer a clock synthesizer developed specifically for laser printer products.





Programmable Clocks.    In large computing and communications systems customers need to provide precise
timing across large printed circuit boards, or PCBs. At the very high frequencies used today these large PCB traces can result in significant timing delays and matching these delays (or timing skew) can be a significant challenge for the system
designer. We have responded to this challenge with the introduction of a family of programmable skew clock products.





SiliconConnect 





SiliconConnect  is our newest product line and offers the highest level of complexity and integration among our products. It consists of our LVDS family of high-speed differential drivers, receivers, and
transceivers, PCI Bridges, and most recently our first SERDES product.





To support higher system bandwidth at
acceptable noise and power levels customers are increasingly moving to serial rather than parallel architectures and using differential signaling to reduce noise and EMI. We have responded to this trend with the development of a family of drivers,
receivers and transceivers offering data rates of 660 megabits per second, or Mbps, and allowing point-to-point connections over distances up to 10 meters. This new low-voltage differential signaling, or LVDS, standard offers a number of
improvements over the older emitter-coupled logic, or ECL, and pseudo emitter-coupled logic, or PECL, in applications requiring lower power consumption and noise. Pericom now has approximately 50 products in this family.





We made additional investments in development during fiscal 2002 to expand our PCI bridge family of products. We started development on
three new products which are compatible with the Intel 21xxx family of PCI products. All three devices are expected to be introduced in fiscal 2003. This expands on our




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proprietary enhanced 3-port bridge versions. Moving into fiscal 2003 we are evaluating other advanced standards including PCI-X, PCI-X DDR, and
PCI Express. Bridges are used in industrial PCs and certain other computers; on RAID and Fibre Channel cards in the Storage Area Network space; Multi-channel Ethernet NICs; and routers and switches. We also started to sample our first Gigabit SERDES
device. This is expected to be the first of several products.





We are continuing to enhance and refine our
existing product lines, while working to add next-generation products that address new market opportunities on a timely basis. Our failure to complete and introduce new products in a timely manner at competitive price/performance levels would
materially and adversely affect our business and results of operations. See Risk Factors; Factors That May Affect Operating ResultsIf we do not develop products that our customers and end-users design into their products, or if their
products do not sell successfully, our business and operating results could be harmed.





Customers





The following is a list of some of our customers and end-users:





Computer

Telecommunications

Networking EquipmentAcer

Alcatel

3ComApple

Huawei

CiscoAsustek

Marconi

LucentCompal

Motorola

Nortel NetworksDell

SamsungFujitsu

ZTEHitachi



Contract ManufacturingHewlett Packard / Compaq



CelesticaIBM

OEMs & Peripherals

FoxconnIntel

Canon

Jabil CircuitInventec

Hewlett Packard / Compaq

Sanmina/SCINEC

Lexmark

SolectronQuanta

Philips / GrundigSun

SeagateToshiba

SharpXerox





Our customers include a broad range of end-user customers and OEMs
in the computer, peripherals, networking and telecommunications markets as well as the contract manufacturers that service these markets. Our direct sales are billings directly to a customer who may in turn sell through to an end-user customer. Our
end-user customers may buy directly or through our distribution or contract manufacturing channels. In fiscal 2002, our direct sales to Techmosa, an international distributor, accounted for approximately 14% of net revenues and direct sales to our
top five customers accounted for approximately 44% of net revenues. In fiscal 2002, three end-user customers each accounted for more than 10% of gross revenues. Dell Computer, Compaq Computer, and Cisco Systems accounted for 15%, 12% and 11% of
gross revenues, respectively and sales to our top five end-user customers were approximately 50% of gross revenues. In fiscal 2001, our direct sales to Techmosa accounted for approximately 10% of net revenues, and direct sales to our top five
customers accounted for approximately 36% of net revenues. In fiscal 2001 one end-user customer, Cisco Systems, accounted for approximately 12% of gross revenues and sales to our top five end-user customers were approximately 39% of gross revenues.
In fiscal 2000, our direct sales to Techmosa accounted for approximately 11% of net revenues, and direct sales to our top five customers accounted for approximately 37% of net revenues. In fiscal 2000 one end-user customer, Cisco Systems, accounted
for approximately 14% of gross revenues and sales to our top five end-user customers were approximately 35% of gross revenues. See  Risk Factors; Factors That May Affect Operating ResultsThe demand for our products depends on the growth
of our end-user customer markets and Risk Factors; Factors That May Affect Operating ResultsA large portion of our revenues is derived from sales to a few customers, who may cease purchasing from us at any time.




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Contract manufacturers have become important customers for us as systems designers in our target markets
are increasingly outsourcing portions of their manufacturing. In addition, these contract manufacturers are playing an increasingly vital role in determining which vendors ICs are incorporated into new designs.





Design and Process Technology





Our design efforts focus on the development of high-performance digital, analog and mixed-signal ICs. To minimize design cycle times of high-performance products, we use a modular design methodology that has enabled us to produce
many new products each year and to meet our customers need for fast time-to-market response. This methodology uses state-of-the-art computer-aided design software tools such as high-level description language, or HDL, logic synthesis,
full-chip mixed-signal simulation, and automated design layout and verification and uses our library of high-performance digital and analog core cells. This family of core cells has been developed over several years and contains high-performance,
specialized digital and analog functions not available in commercial ASIC libraries. Among these cells are our proprietary mixed-voltage input/output, or I/O, cells, high-speed, low-noise I/O cells, analog and digital phase-locked loops, or PLLs,
charge pumps and data communication transceiver circuits using low voltage differential signaling. We have been granted 43 U.S. patents and have at least 22 U.S. patent applications pending. Another advantage of this modular design methodology is
that it allows the application of final design options late in the wafer manufacturing process to determine a products specific function. This option gives us the ability to use pre-staged wafers, which significantly reduces the design and
manufacturing cycle time and enables us to respond rapidly to a customers prototype needs and volume requirements.





We use advanced CMOS processes to achieve higher performance and lower die cost. Our process and device engineers work closely with our independent wafer foundry partners to develop and evaluate new process technologies. Our process
engineers also work closely with circuit design engineers to improve the performance and reliability of our cell library. We currently manufacture a majority of our products using 0.8-, 0.6-, 0.5- and 0.35-micron CMOS process technologies and are
currently developing new products using 0.25- and 0.18-micron technology. We are also using a high-voltage CMOS process developed by one of our wafer suppliers in the design of higher voltage switch products.





Sales and Marketing





We market and distribute our products through a worldwide network of independent sales representatives and distributors supported by our internal and field sales organization. Sales to domestic and international distributors
represented 50% of our net revenues in fiscal 2002, 54% of our net revenues in fiscal 2001 and 56% of our net revenues in fiscal 2000. Our major distributors in the United States include All American Semiconductor, Bell Microproducts, Future
Electronics, Nu Horizons Electronics, and Pioneer Standard. Our major international distributors include Chinatronics (Hong Kong), Desner Electronics (Singapore), EPCO Technology Co., Ltd (Taiwan), Internix (Japan), MCM (Japan) and Techmosa
(Taiwan).





We have five regional sales offices in the United States and international sales offices in Taiwan,
Korea, Singapore, Japan and the United Kingdom. International sales comprised approximately 67% of our net revenues in fiscal 2002, approximately 49% of our net revenues in fiscal 2001, and approximately 46% of our net revenues in fiscal 2000. We
also support field sales design-in and training activities with application engineers. All marketing and product management personnel are located at our corporate headquarters in San Jose, California.





We focus our marketing efforts on market knowledge, product definition, new product introduction, product marketing, advertising and
public relations. We use advertising both domestically and internationally to market our products independently and in cooperation with our distributors. Pericom product information is available on our web site, which contains overview
presentations, technical information on our products, and offers design modeling/applications support plus sample-request capabilities online. We also publish and circulate technical briefs relating to our products and their applications.




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We believe that contract manufacturing customers are strategically important and
we employ sales and marketing personnel who focus on servicing these customers and on expanding our product sales via these customers to OEMs. In addition, we use programs such as EDI, bonded inventories and remote warehousing to enhance our service
and attractiveness to contract manufacturers.





Manufacturing





We have adopted a fabless manufacturing strategy by subcontracting our wafer production to independent wafer foundries. We have established collaborative relationships with
selected independent foundries with whom we can develop a strategic relationship to the benefit of both parties. We believe that our fabless strategy enables us to introduce high performance products quickly at competitive cost. To date, our
principal manufacturing relationships have been with Chartered Semiconductor Manufacturing Pte, Ltd., Taiwan Semiconductor Manufacturing Corporation and Hynix Semiconductor America, Inc. We have also used New Japan Radio Corporation, Austria Mikro
Systeme GmbH and Peregrine Semiconductor Australia as foundries.





We rely on foreign subcontractors primarily for
the assembly and packaging of our products and, to a lesser extent, for the testing of our finished products. Some of these subcontractors are our single source supplier for certain new packages.





Competition





The semiconductor industry is
intensely competitive. Significant competitive factors in the market for high-performance ICs include the following:





| |  |  | product features and performance;
| | - |  | ---------------------------------




| |  |  | product quality;
| | - |  | ----------------




| |  |  | price;
| | - |  | ------




| |  |  | success in developing new products;
| | - |  | -----------------------------------




| |  |  | adequate wafer fabrication capacity and sources of raw materials;
| | - |  | -----------------------------------------------------------------




| |  |  | efficiency of production;
| | - |  | -------------------------




| |  |  | timing of new product introductions;
| | - |  | ------------------------------------




| |  |  | ability to protect intellectual property rights and proprietary information; and
| | - |  | --------------------------------------------------------------------------------




| |  |  | general market and economic conditions.
| | - |  | ---------------------------------------




Our competitors include Cypress Semiconductor Corporation, Fairchild Semiconductor Corporation, Integrated Circuit Systems, Inc., Integrated Device Technology, Inc., Maxim Integrated Products, Inc.,
Philips and Texas Instruments, Inc. Most of those competitors have substantially greater financial, technical, marketing, distribution and other resources, broader product lines and longer-standing customer relationships than we do. We also compete
with other major or emerging companies that sell products to certain segments of our markets. Competitors with greater financial resources or broader product lines may have a greater ability to sustain price reductions in our primary markets in
order to gain or maintain market share. We also face competition from the makers of ASICs and other system devices. These devices may include interface logic functions, which may eliminate the need or sharply reduce the demand for our products in
particular applications.





Research and Development





We believe that the continued timely development of new interface ICs is essential to maintaining our competitive position. Accordingly, we have assembled a team of highly
skilled engineers whose activities are focused on the development of signal transfer, routing and timing technologies and products. Research and development expenses were $11.7 million in fiscal 2002, $11.0 million in fiscal 2001 and $8.1 million in
fiscal 2000. Additionally, we actively seek cooperative product development relationships.




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Intellectual Property





In the United States, we hold 43 patents covering certain aspects of our product designs and have at least 22 additional patent applications pending. We expect to continue
to file patent applications where appropriate to protect our proprietary technologies; however, we believe that our continued success depends primarily on factors such as the technological skills and innovation of our personnel, rather than on our
patents.





Employees





As of June 30, 2002, we had 240 full-time employees (2 are temporary employees) and 1 part-time employee, including 43 in sales, marketing and customer support, 97 in manufacturing, assembly and testing, 78 in engineering
and quality assurance and 23 in finance and administration, including information systems. We have never had a work stoppage and no employee is represented by a labor organization. We consider our employee relations to be good.





Risk Factors; Factors That May Affect Operating Results





In addition to other information contained in this Form 10-K, investors should carefully consider the following factors that could adversely affect our business, financial condition and operating
results as well as adversely affect the value of an investment in our common stock. This Form 10-K includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact are forward-looking statements for purposes of these provisions, including any statements regarding projections of earnings, revenues or
other financial items; plans and objectives of management for future operations; future expenditures; proposed new products or services and their development schedule; industry, technological or market trends; our ability to address the need for
application specific logic products; our ability to respond rapidly to customer needs; expanding product sales; future economic conditions or performance, and any statement of assumptions underlying any of the foregoing. In some cases,
forward-looking statements can be identified by the use of terminology such as may, will, expects, plans, anticipates, estimates, potential, or continue,
or the negative thereof or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements contained herein are reasonable, there can be no assurance that such expectations or any of the
forward-looking statements will prove to be correct, and actual results could differ materially from those projected or assumed in the forward-looking statements. Some of the factors that could cause our actual results to differ materially are set
forth below and elsewhere in this report. All forward-looking statements and reasons why results may differ included in this Form 10-K are made as of the date hereof, and we assume no obligation to update any such forward-looking statement or reason
why actual results may differ.





Our results of operations have been adversely affected by the ongoing slowdown
in the global economy.





Over the past year, the global economy has been experiencing a slowdown due to many
factors, including decreased consumer confidence, unemployment, the ongoing threat and cost of terrorism and reduced corporate profits and capital spending. As a result of these unfavorable economic conditions, we continue to experience reduced new
customer order rates. If these economic conditions in the United States continue or worsen or if a wider or global economic slowdown occurs, our business, financial condition and results of operations may be materially and adversely affected.





Downturns in the semiconductor industry, rapidly changing technology and evolving industry standards can harm
our operating results.





The semiconductor industry has historically been cyclical and periodically subject to
significant economic downturnscharacterized by diminished product demand, accelerated erosion of selling prices and overcapacityas well as rapidly changing technology and evolving industry standards. The semiconductor




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industry is currently in such a downturn period. Our operating results have been harmed by excess supply in the semiconductor industry. We
believe our net revenues fell from $108.3 million in fiscal 2001 to $47.6 million in fiscal 2002 primarily due to the current cyclical downturn in the semiconductor industry. Accordingly, we may in the future experience substantial period-to-period
fluctuations in our business and operating results due to general semiconductor industry conditions, overall economic conditions or other factors. Our business is also subject to the risks associated with the effects of legislation and regulations
relating to the import or export of semiconductor products.





If we do not develop products that our customers
and end-users design into their products, or if their products do not sell successfully, our business and operating results would be harmed.





We have relied in the past and continue to rely upon our relationships with our customers and end-users for insights into product development strategies for emerging system requirements. We generally
incorporate new products into a customers or end-users product or system at the design stage. However, these design efforts, which can often require significant expenditures by us, may precede product sales, if any, by a year or more.
Moreover, the value to us of any design win will depend in large part on the ultimate success of the customers or end-users product and on the extent to which the systems design accommodates components manufactured by our
competitors. If we fail to achieve design wins or if the design wins fail to result in significant future revenues, our operating results would be harmed. If we have problems developing or maintaining our relationships with our customers and
end-users, our ability to develop well-accepted new products may be impaired.





The trading price of our common
stock and our operating results are likely to fluctuate substantially in the future.





The trading price of our
common stock has been and is likely to continue to be highly volatile. Our stock price could fluctuate widely in response to factors some of which are not within our control, including:





| |  |  | changes in earnings estimates by analysts; and price and volume fluctuations in the overall stock market, which have particularly affected the market prices of
many high technology companies;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  |  | general conditions in the semiconductor and electronic systems industries;
| | - |  | --------------------------------------------------------------------------




| |  |  | quarter-to-quarter variations in operating results; and
| | - |  | -------------------------------------------------------




| |  |  | announcements of technological innovations or new products by us or our competitors.
| | - |  | ------------------------------------------------------------------------------------




In the past, our quarterly operating results have varied significantly and are likely to fluctuate in the future. A wide variety of factors affect our operating
results. These factors might include the following:





| |  |  | general conditions in the semiconductor industry;
| | - |  | -------------------------------------------------




| |  |  | changes in our product mix;
| | - |  | ---------------------------




| |  |  | a decline in the gross margins of our products;
| | - |  | -----------------------------------------------




| |  |  | expenses incurred in obtaining, enforcing, and defending intellectual property rights;
| | - |  | --------------------------------------------------------------------------------------




| |  |  | the timing of new product introductions and announcements by us and by our competitors;
| | - |  | ---------------------------------------------------------------------------------------




| |  |  | customer acceptance of new products introduced by us;
| | - |  | -----------------------------------------------------




| |  |  | delay or decline in orders received from distributors;
| | - |  | ------------------------------------------------------




| |  |  | growth or reduction in the size of the market for interface ICs;
| | - |  | ----------------------------------------------------------------




| |  |  | the availability of manufacturing capacity with our wafer suppliers;
| | - |  | --------------------------------------------------------------------




| |  |  | changes in manufacturing costs;
| | - |  | -------------------------------




| |  |  | fluctuations in manufacturing yields;
| | - |  | -------------------------------------




| |  |  | the ability of customers to pay us; and
| | - |  | ---------------------------------------




| |  |  | increased research and development expenses associated with new product introductions or process changes.
| | - |  | ---------------------------------------------------------------------------------------------------------



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All of these factors are difficult to forecast and could seriously harm our
operating results. Our expense levels are based in part on our expectations regarding future sales and are largely fixed in the short term. Therefore, we may be unable to reduce our expenses fast enough to compensate for any unexpected shortfall in
sales. Any significant decline in demand relative to our expectations or any material delay of customer orders could harm our operating results. In addition, if our operating results in future quarters fall below public market analysts and
investors expectations, the market price of our common stock would likely decrease.





Intense competition
in the semiconductor industry may reduce the demand for our products or the prices of our products, which could reduce our revenues.





The semiconductor industry is intensely competitive. Our competitors include Cypress Semiconductor Corporation, Fairchild Semiconductor Corporation, Integrated Circuit Systems, Inc., Integrated Device Technology, Inc., Maxim
Integrated Products, Inc., Philips and Texas Instruments, Inc. Most of those competitors have substantially greater financial, technical, marketing, distribution and other resources, broader product lines and longer-standing customer relationships
than we do. We also compete with other major or emerging companies that sell products to certain segments of our markets. Competitors with greater financial resources or broader product lines may have a greater ability to sustain price reductions in
our primary markets in order to gain or maintain market share.





We believe that our future success will depend on
our ability to continue to improve and develop our products and processes. Unlike us, many of our competitors maintain internal manufacturing capacity for the fabrication and assembly of semiconductor products. This ability may provide them with
more reliable manufacturing capability, shorter development and manufacturing cycles and time-to-market advantages. In addition, competitors with their own wafer fabrication facilities that are capable of producing products with the same design
geometries as ours may be able to manufacture and sell competitive products at lower prices. Any introduction of products by our competitors that are manufactured with improved process technology could seriously harm our business. As is typical in
the semiconductor industry, our competitors have developed and marketed products that function similarly or identically to ours. If our products do not achieve performance, price, size or other advantages over products offered by our competitors,
our products may lose market share. Competitive pressures could also reduce market acceptance of our products, reduce our prices and increase our expenses.





We also face competition from the makers of ASICs and other system devices. These devices may include interface logic functions, which may eliminate the need or sharply reduce the demand for our
products in particular applications.





Product price declines and fluctuations may cause our future financial
results to vary.





Historically, selling prices in the semiconductor industry generally, as well as for our
products, have decreased significantly over the life of each product. We expect that selling prices for our existing products will continue to decline over time and that average selling prices for our new products will decline significantly over the
lives of these products. Declines in selling prices for our products, if not offset by reductions in the costs of producing these products or by sales of new products with higher gross margins, would reduce our overall gross margins and could
seriously harm our business.





The markets for our products are characterized by rapidly changing technology,
and our financial results could be harmed if we do not successfully develop and implement new manufacturing technologies or develop, introduce and sell new products.





The markets for our products are characterized by rapidly changing technology, frequent new product introductions and declining selling prices over product life cycles. We
currently offer over 700 products. Our future success depends upon the timely completion and introduction of new products, across all of our product lines, at competitive price and performance levels. The success of new products depends on a variety
of factors, including the following:




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| |  |  | product performance and functionality;
| | - |  | --------------------------------------




| |  |  | customer acceptance;
| | - |  | --------------------




| |  |  | competitive pricing;
| | - |  | --------------------




| |  |  | successful and timely completion of product development;
| | - |  | --------------------------------------------------------




| |  |  | sufficient wafer fabrication capacity; and
| | - |  | ------------------------------------------




| |  |  | achievement of acceptable manufacturing yields by our wafer suppliers.
| | - |  | ----------------------------------------------------------------------




We may also experience delays, difficulty in procuring adequate fabrication capacity for the development and manufacture of new products or other difficulties in achieving
volume production of these products. Even relatively minor errors may significantly affect the development and manufacture of new products. If we fail to complete and introduce new products in a timely manner at competitive price and performance
levels, our business would be significantly harmed.





The demand for our products depends on the growth of our
end users markets.





Our continued success depends in large part on the continued growth of markets for
the products into which our semiconductor products are incorporated. These markets include the following:





| |  |  | computers and computer related peripherals;
| | - |  | -------------------------------------------




| |  |  | data communications and telecommunications equipment;
| | - |  | -----------------------------------------------------




| |  |  | electronic commerce and the Internet; and
| | - |  | -----------------------------------------




| |  |  | consumer electronics equipment.
| | - |  | -------------------------------




Any decline in the demand for products in these markets could seriously harm our business, financial condition and operating results. These markets have also historically experienced significant
fluctuations in demand. We may also be seriously harmed by slower growth in the other markets in which we sell our products.





Our contracts with our wafer suppliers do not obligate them to a minimum supply or set prices. Any inability or unwillingness of our wafer suppliers generally, and Chartered Semiconductor Manufacturing Ltd. in particular, to meet
our manufacturing requirements would delay our production and product shipments and harm our business.





In
fiscal 2002, 2001 and 2000 we purchased approximately 68%, 59% and 75%, respectively, of our wafers from Chartered Semiconductor Manufacturing Ltd. In fiscal 2002 and 2001, only five other suppliers manufactured the remainder of our wafers. In
fiscal 2000, only four other suppliers manufactured the remainder of our wafers. Our reliance on independent wafer suppliers to fabricate our wafers at their production facilities subjects us to possible risks such as:





| |  |  | lack of adequate capacity;
| | - |  | --------------------------




| |  |  | lack of available manufactured products;
| | - |  | ----------------------------------------




| |  |  | quality or other technical difficulties;
| | - |  | ----------------------------------------




| |  |  | lack of control over delivery schedules; and
| | - |  | --------------------------------------------




| |  |  | unanticipated changes in wafer prices.
| | - |  | --------------------------------------




Any inability or unwillingness of our wafer suppliers generally, and Chartered in particular, to provide adequate quantities of finished wafers to meet our needs in a timely manner would delay our
production and product shipments and seriously harm our business.





At present, we purchase wafers from our
suppliers through the issuance of purchase orders based on our rolling six-month forecasts. The purchase orders are subject to acceptance by each wafer supplier. We do not have long-term supply contracts which obligate our suppliers to a minimum
supply or set prices. We also depend upon our wafer suppliers to participate in process improvement efforts, such as the transition to




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finer geometries. If our suppliers are unable or unwilling to do so, our development and introduction of new products could be delayed.
Furthermore, sudden shortages of raw materials or production capacity constraints can lead wafer suppliers to allocate available capacity to customers other than us or for the suppliers internal uses, interrupting our ability to meet our
product delivery obligations. Any significant interruption in our wafer supply would seriously harm our operating results and our customer relations. Our reliance on independent wafer suppliers may also lengthen the development cycle for our
products, providing time-to-market advantages to our competitors that have in-house fabrication capacity.





In the
event that our suppliers are unable or unwilling to manufacture our key products in required volumes, we will have to identify and qualify additional wafer foundries. The qualification process can take up to six months or longer. Furthermore, we are
unable to predict whether additional wafer foundries will become available to us or will be in a position to satisfy any of our requirements on a timely basis.





We depend on single or limited source assembly subcontractors with whom we do not have written contracts. Any inability or unwillingness of our assembly subcontractors to meet our assembly
requirements would delay our product shipments and harm our business.





We primarily rely on foreign
subcontractors for the assembly and packaging of our products and, to a lesser extent, for the testing of finished products. Some of these subcontractors are our single source supplier for some of our new packages. In addition, changes in our or a
subcontractors business could cause us to become materially dependent on a single subcontractor. We have from time to time experienced difficulties in the timeliness and quality of product deliveries from our subcontractors and may experience
similar or more severe difficulties in the future. We generally purchase these single or limited source components or services pursuant to purchase orders and have no guaranteed arrangements with these subcontractors. These subcontractors could
cease to meet our requirements for components or services, or there could be a significant disruption in supplies from them, or degradation in the quality of components or services supplied by them. Any circumstance that would require us to qualify
alternative supply sources could delay shipments, result in the loss of customers and limit or reduce our revenues.





We may have difficulty accurately predicting revenues for future periods.





Our expense
levels are based in part on anticipated future revenue levels, which can be difficult to predict. Our business is characterized by short-term orders and shipment schedules. We do not have long-term purchase agreements with any of our customers, and
customers can typically cancel or reschedule their orders without significant penalty. We typically plan production and inventory levels based on forecasts of customer demand generated with input from customers and sales representatives. Customer
demand is highly unpredictable and can fluctuate substantially. If customer demand falls significantly below anticipated levels, our profit would be reduced.





We compete with others to attract and retain key personnel, and any loss of, or inability to attract, key personnel would harm us.





To a greater degree than non-technology companies, our future success will depend on the continued contributions of our executive officers and other key management and
technical personnel. None of these individuals has an employment agreement with us and each one would be difficult to replace. We do not maintain any key person life insurance policies on any of these individuals. The loss of the services of one or
more of our executive officers or key personnel or the inability to continue to attract qualified personnel could delay product development cycles or otherwise harm our business, financial condition and results of operations.





Our future success also will depend on our ability to attract and retain qualified technical, marketing and management
personnel, particularly highly skilled design, process and test engineers, for whom competition is intense. In particular, the availability of qualified engineers is limited and competition among companies for skilled and experienced engineering
personnel is very strong. During strong business cycles, we expect to experience difficulty in filling our needs for qualified engineers and other personnel.




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Our limited ability to protect our intellectual property and proprietary
rights could harm our competitive position.





Our success depends in part on our ability to obtain patents and
licenses and preserve other intellectual property rights covering our products and development and testing tools. In the United States, we hold 43 patents covering certain aspects of our product designs and have at least 22 additional patent
applications pending. Copyrights, mask work protection, trade secrets and confidential technological know-how are also key to our business. Additional patents may not be issued to us or our patents or other intellectual property may not provide
meaningful protection. We may be subject to, or initiate, interference proceedings in the U.S. Patent and Trademark Office. These proceedings can consume significant financial and management resources. We may become involved in litigation relating
to alleged infringement by us of others patents or other intellectual property rights. This type of litigation is frequently expensive to both the winning party and the losing party and takes up significant amounts of managements time
and attention. In addition, if we lose such a lawsuit, a court could require us to pay substantial damages and/or royalties or prohibit us from using essential technologies. For these and other reasons, this type of litigation could seriously harm
our business. Also, although we may seek to obtain a license under a third partys intellectual property rights in order to bring an end to certain claims or actions asserted against us, we may not be able to obtain such a license on reasonable
terms or at all. See Item 3, Legal Proceedings.





Because it is important to our success that we are
able to prevent competitors from copying our innovations, we intend to continue to seek patent, trade secret and mask work protection for our technologies. The process of seeking patent protection can be long and expensive, and we cannot be certain
that any currently pending or future applications will actually result in issued patents, or that, even if patents are issued, they will be of sufficient scope or strength to provide meaningful protection or any commercial advantage to us.
Furthermore, others may develop technologies that are similar or superior to our technology or design around the patents we own.





We also rely on trade secret protection for our technology, in part through confidentiality agreements with our employees, consultants and third parties. However, these parties may breach these agreements. In addition, the laws of
some territories in which we develop, manufacture or sell our products may not protect our intellectual property rights to the same extent as do the laws of the United States.





The process technology used by our independent foundries, including process technology that we developed with our foundries, can generally be used by them to produce their
own products or to manufacture products for other companies including our competitors. In addition, we may not have the right to implement key process technologies used to manufacture some of our products with foundries other than our present
foundries.





We may not provide adequate allowances for exchanges, returns and concessions.





We recognize revenue from the sale of products when shipped, less an allowance based on future authorized and historical
patterns of returns, price protection, exchanges and other concessions. We believe our methodology and approach are appropriate. However, if the actual amounts we incur exceed the allowances, it could decrease our revenue and corresponding gross
profit. We also may choose, at our discretion, to expand our price protection or stock rotation programs beyond our contractual obligations or previous estimates. For example, in the quarter ended December 31, 2001, we recorded a charge of
approximately $3.2 million against revenue to address inventory and pricing issues in our distribution channel that were due to the significant drop off in business activity that we had experienced.





The complexity of our products makes us highly susceptible to manufacturing problems, which could increase our costs and delay our
product shipments.





The manufacture and assembly of our over 700 products are highly complex and sensitive to
a wide variety of factors, including:




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| |  |  | the level of contaminants in the manufacturing environment;
| | - |  | -----------------------------------------------------------




| |  |  | impurities in the materials used; and
| | - |  | -------------------------------------




| |  |  | the performance of manufacturing personnel and production equipment.
| | - |  | --------------------------------------------------------------------




In a typical semiconductor manufacturing process, silicon wafers produced by a foundry are cut into individual die. These die are assembled into individual packages and
tested for performance. Our wafer fabrication suppliers have from time to time experienced lower than anticipated yields of suitable die. In the event of such decreased yields, we would incur additional costs to sort wafers, an increase in average
cost per usable die and an increase in the time to market for our products. These conditions could reduce our net revenues and gross margin and harm our customer relations.





We do not manufacture any of our products. Therefore, we are referred to in the semiconductor industry as a fabless producer. Consequently, we depend upon third
party manufacturers to produce semiconductors that meet our specifications. We currently have third party manufacturers that can produce semiconductors that meet our needs. However, as the industry continues to progress to smaller manufacturing and
design geometries, the complexities of producing semiconductors will increase. Decreasing geometries may introduce new problems and delays that may affect product development and deliveries. Due to the nature of the industry and our status as a
fabless semiconductor company, we could encounter fabrication-related problems that may affect the availability of our products, delay our shipments or increase our costs.





A large portion of our revenues is derived from sales to a few customers, who may cease purchasing from us at any time.





A relatively small number of customers have accounted for a significant portion of our net revenues in each of the past several fiscal
years. We expect this trend to continue for the foreseeable future. Techmosa, an international distributor that in turn ships to many end users, accounted for approximately 14% of net revenues during fiscal 2002. Sales to our top five direct
customers accounted for approximately 44% of net revenues in fiscal 2002. Of our end-user customers, Dell Computer accounted for approximately 15% of gross revenues, Compaq Computer accounted for approximately 12% of our gross revenues and Cisco
Systems accounted for approximately 11% of our gross revenues during fiscal 2002. Sales to our top five end-user customers accounted for approximately 50% of gross revenues in fiscal 2002.





We do not have long-term sales agreements with any of our customers. Our customers are not subject to minimum purchase requirements, may reduce or delay orders periodically
due to excess inventory and may discontinue selling our products at any time. Our distributors typically offer competing products in addition to ours. In fiscal 2002, sales to domestic and international distributors represented approximately 50% of
net revenues. The loss of one or more significant customers, or the decision by a significant distributor to carry the product lines of our competitors, could decrease our revenues.





Almost all of our wafer suppliers and assembly subcontractors are located in southeast Asia, which exposes us to the problems associated with international operations.





Almost all of our wafer suppliers and assembly subcontractors are located in southeast Asia, which exposes us
to risks associated with international business operations, including the following:





| |  |  | disruptions or delays in shipments;
| | - |  | -----------------------------------




| |  |  | import and export controls;
| | - |  | ---------------------------




| |  |  | changes in economic conditions in the countries where these subcontractors are located;
| | - |  | ---------------------------------------------------------------------------------------




| |  |  | currency fluctuations;
| | - |  | ----------------------




| |  |  | changes in political conditions;
| | - |  | --------------------------------




| |  |  | potentially reduced protection for intellectual property;
| | - |  | ---------------------------------------------------------




| |  |  | foreign governmental regulations; and
| | - |  | -------------------------------------




| |  |  | changes in tax laws, tariffs and freight rates.
| | - |  | -----------------------------------------------



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In particular, there is a potential risk of conflict and further instability in
the relationship between Taiwan and the Peoples Republic of China. Conflict or instability could disrupt the operations of one of our principal wafer suppliers and several of our assembly subcontractors located in Taiwan.





Because we sell our products to customers outside of the United States, we face foreign business, political and economic
risks that could seriously harm us.





In fiscal 2002, approximately 53% of our net revenues derived from sales
in Asia excluding Japan, approximately 8% from sales in Europe and approximately 5% from sales in Japan. We expect that export sales will continue to represent a significant portion of net revenues. We intend to expand our sales efforts outside the
United States. This expansion will require significant management attention and financial resources and further subject us to international operating risks. These risks include:





| |  |  | tariffs and other barriers and restrictions;
| | - |  | --------------------------------------------




| |  |  | unexpected changes in regulatory requirements;
| | - |  | ----------------------------------------------




| |  |  | the burdens of complying with a variety of foreign laws; and
| | - |  | ------------------------------------------------------------




| |  |  | delays resulting from difficulty in obtaining export licenses for technology.
| | - |  | -----------------------------------------------------------------------------




We are also subject to general geopolitical risks in connection with our international operations, such as political and economic instability and changes in diplomatic and
trade relationships. In addition, because our international sales are denominated in U.S. dollars, increases in the value of the U.S. dollar could increase the price in local currencies of our products in foreign markets and make our products
relatively more expensive than competitors products that are denominated in local currencies. Regulatory, geopolitical and other factors could seriously harm our business or require us to modify our current business practices.





Our potential future acquisitions may not be successful because we have not made acquisitions in the past.





We have depended on internal growth in the past and have not made any acquisitions. As part of our business strategy, we expect
to seek acquisition prospects that would complement our existing product offerings, improve market coverage or enhance our technological capabilities. Although we are evaluating acquisition and strategic investment opportunities on an ongoing basis,
we may not be able to locate suitable acquisition or investment opportunities. Future acquisitions could result in the following:





| |  |  | large one-time write-offs;
| | - |  | --------------------------




| |  |  | diversion of managements attention from other business concerns;
| | - |  | -----------------------------------------------------------------




| |  |  | risks of entering geographic and business markets in which we have no or limited prior experience and potential loss of key employees of acquired organizations;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  |  | potentially dilutive issuances of equity securities;
| | - |  | ----------------------------------------------------




| |  |  | the incurrence of debt and contingent liabilities or amortization expenses related to goodwill and other intangible assets; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------




| |  |  | difficulties in the assimilation of operations, personnel, technologies, products and the information systems of the acquired companies.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------




We are not certain that we will be able to successfully integrate any businesses, products, technologies or
personnel that may be acquired in the future. Our failure to do so could seriously harm our business. In addition, from time to time, we invest in other companies, without actually acquiring them, and such investments involve many of the same risks
as are involved with acquisitions. For example, we previously made a bridge loan investment in a start up, high technology company, and we have recently had to write off this loan in light of the financial condition of that company.




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Our shareholder rights plan may adversely affect existing shareholders.





On March 6, 2002, we adopted a shareholder rights plan that may have the effect of deterring, delaying, or
preventing a change in control that otherwise might be in the best interests of our shareholders. Under the rights plan, we issued a dividend of one preferred share purchase right for each share of our common stock held by shareholders of record as
of March 21, 2002. Each right entitles shareholders to purchase one one-hundredth of our newly created Series D Junior Participating Preferred Share.





In general, the share purchase rights become exercisable when a person or group acquires 15% or more of our common stock or a tender offer of 15% or more of our common stock is announced or commenced.
After such event, our other stockholders may purchase additional shares of our common stock at 50% off of the then-current market price. The rights will cause substantial dilution to a person or group that attempts to acquire us on terms not
approved by our Board of Directors. The rights should not interfere with any merger or other business combination approved by our Board of Directors since the rights may be redeemed by us at $0.001 per right at any time before any person or group
acquire 15% or more of our outstanding common stock. These rights expire in March 2012.





Our operations and
financial results could be severely harmed by natural disasters.





Our headquarters and some of our major
suppliers manufacturing facilities are located near major earthquake faults. One of the foundries we use is located in Taiwan, which has suffered severe earthquakes in the past. We have not experienced significant disruption to our operations
due to earthquakes in the past. However, if a major earthquake or other natural disaster were to affect our suppliers, our sources of supply could be interrupted, which would seriously harm our business.





ITEM 2.    
PROPERTIES





We lease approximately 66,300 square feet of space in San Jose, California
in which our headquarters, technology and product development and testing facilities are located. Approximately 53,400 square feet of this facility is leased through July 2004, with renewal options. The remaining 12,900 square feet of this space is
leased through May, 2005, with renewal options and has been subleased for 18 months effective October 1, 2001. We also have North American sales offices located in California, Texas, Illinois, and North Carolina as well as International sales
offices in Taiwan, Korea, Japan, Singapore and the United Kingdom. We believe our current facilities are adequate to support our needs through the end of fiscal 2003.





ITEM 3.    
LEGAL PROCEEDINGS





The semiconductor industry is characterized by frequent litigation
regarding patent and other intellectual property rights, and there can be no assurance that we will not be subject to infringement claims by other parties. In July 2001, a complaint was filed with the U.S. International Trade Commission on behalf of
Cypress Semiconductor Corporation (Cypress), a competitor, alleging that we imported into the United States products that infringed on certain Cypress patents. Also in July 2001, Cypress Semiconductor Corporation (Cypress)
brought a lawsuit against us, claiming patent infringement and seeking injunctive relief and monetary damages. We settled both of these matters in fiscal 2002 without material adverse effect on our financial position or results of operations.
However, any litigation, whether or not determined in our favor, can result in significant expense to us and can divert the efforts of our technical and management personnel from productive tasks. In the event of an adverse ruling in any litigation
involving intellectual property, we might be required to discontinue the use of certain processes, cease the manufacture, use and sale of infringing products, expend significant resources to develop non-infringing technology or obtain licenses to
the infringed technology, and may suffer significant monetary damages, which could include treble damages. In the event we attempt to license any allegedly infringed technology, there can be no assurance that such a license would be available on
reasonable terms or at all. In the event of a successful claim against us and our failure to develop or license a substitute technology on commercially reasonable terms, our business and results of operations would be materially and adversely




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affected. There can be no assurance that any potential infringement claims by other parties (or claims for indemnity from customers resulting
from any infringement claims) will not materially and adversely affect our business, financial condition and results of operations.





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





No matters were submitted to a vote
of security holders during the fourth quarter of the fiscal year covered by this report.




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PART II





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





Equity Compensation Plans





The following table summarizes share and exercise price information about our equity compensation plans as of
June 30, 2002.





Plan Category

Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights

Weighted Average Exercise Price of Outstanding Options, Warrants and Rights

Number of Securities Remaining Available For Future Issuance Under PlansEquity Compensation Plans Approved by ShareholdersOption Plans

5,648,057

$
11.57

866,824Employee Stock Purchase Plan






494,157





Note:  Pericom has no equity compensation plans not
approved by shareholders.





Common Stock Price Range





The Common Stock of the Company began trading publicly on the Nasdaq National Market on October 31, 1997 under the symbol PSEM. Prior to that date, there was no public
market for the Common Stock. The Companys fiscal years have been shown as ending on June 30. Fiscal years 2002, 2001, 2000, 1999 and 1998 ended on June 29, 2002, June 30, 2001, July 1, 2000, July 3, 1999 and June 27, 1998, respectively. The
Company has not paid cash dividends and has no present plans to do so. It is the policy of the Company to reinvest earnings of the Company to finance expansion of the Companys operations. The following table sets forth for the periods
indicated the high and low sale prices of the Common Stock on the Nasdaq National Market. As of June 30, 2002 there were approximately 6,300 holders of record of the Companys Common Stock. During fiscal year 2002, the Company did not sell any
unregistered securities.





High

LowFiscal year ended June 30, 2001:First Quarter

42.63

22.50Second Quarter

44.50

13.00Third Quarter

27.00

11.31Fourth Quarter

18.82

10.13Fiscal year ended June 30, 2002:First Quarter

18.88

12.00Second Quarter

17.03

12.30Third Quarter

16.20

10.80Fourth Quarter

15.27

10.58




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Shareholder Rights Plan





On March 6, 2002, the Company adopted a shareholder rights plan and, in connection with the plan, the Company has filed a Certificate of Designation designating the rights,
preferences and privileges of a new Series D Junior Participating Preferred Share. Pursuant to the plan, the Company issued rights to its stockholders of record as of March 21, 2002, entitling each stockholder to the right to purchase one
one-hundredth of a Series D Junior Participating Preferred Share for each share of Common Stock held by the stockholder. Such rights are exercisable only under certain circumstances in connection with a proposed acquisition or merger of the Company.





Stock Repurchase Plan





On October 22, 2001, the Board of Directors authorized the repurchase of up to 2,000,000 shares of the Companys common stock. The Company may repurchase the shares from time to time in open
market or private transactions, at the discretion of the Companys management. The Company began repurchasing shares on July 23, 2002. As of September 11, 2002, the Company had repurchased 57,000 shares.




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ITEM 6.    
SELECTED FINANCIAL DATA





The following selected financial data of the Company is
qualified by reference to and should be read in conjunction with the Financial Statements, including the Notes thereto, and Managements Discussion and Analysis of Financial Condition and Results of Operations included elsewhere herein. The
Statement of Operations Data for each of the years in the three-year period ended June 30, 2002 and the Balance Sheet Data as of June 30, 2002 and 2001 are derived from, and are qualified by reference to, the Financial Statements included herein.
The Statement of Operations Data for the years ended June 30, 1999, and 1998 and the Balance Sheet Data as of June 30, 2000, 1999 and 1998 are derived from audited financial statements not included herein.





Fiscal Year Ended June 30,2002


2001

2000

1999

1998(in thousands, except per share data)Statement of Operations Data:Net revenues

$
47,589


$
108,313

$
90,977

$
59,797

$
49,198Cost of revenues


33,871



62,388


52,540


35,484


29,285Gross profit


13,718



45,925


38,437


24,313


19,913Operating expenses:Research and development


11,663



10,993


8,118


5,976


5,065Selling, general and administrative


11,778



15,150


12,449


9,175


7,793Restructuring charge






522








Total operating expenses


23,441



26,665


20,567


15,151


12,858Income (loss) from operations


(9,723
)


19,260


17,870


9,162


7,055Other income, net


1,494



7,888


3,263


1,098


738Income (loss) before income taxes


(8,229
)


27,148


21,133


10,260


7,793Income tax provision (benefit)


(2,962
)


9,789


7,918


3,488


2,629Net income (loss)

$
(5,267
)

$
17,359

$
13,215

$
6,772

$
5,164Basic earnings (loss) per share

$
(0.21
)

$
0.70

$
0.63

$
0.36

$
0.36Diluted earnings (loss) per share

$
(0.21
)

$
0.64

$
0.56

$
0.33

$
0.27Shares used in computing basic earnings (loss) per share(1)


25,339



24,914


20,906


18,790


14,166Shares used in computing diluted earnings (loss) per share(1)


25,339



27,242


23,578


20,558


18,824As of June 30,2002


2001

2000

1999

1998(in thousands)Balance Sheet Data:Working capital

$
167,517


$
168,066

$
153,273

$
37,642

$
32,751Total assets


193,745



196,427


180,366


55,925


47,401Shareholders equity


185,722



187,190


164,772


46,380


38,611





|(1) |  | See Note 1 of Notes to Financial Statements for an explanation of the method used to determine the number of shares used in computing basic and diluted earnings
per share.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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





MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION


AND RESULTS OF OPERATIONS





This Annual Report includes forward-looking statements within the meaning of Section 27A of the Securities Act if 1933, as
amended and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact are forward-looking statements for purposes of these provisions, including any statements regarding
projections of earnings, revenues or other financial items; plans and objectives of management for future operations; future expenditures; proposed new products or services and their development schedule; industry, technological or market trends,
our ability to address the need for application specific logic products; our ability to respond rapidly to customer needs; expanding product sales; future economic conditions or performance, and any statement of assumptions underlying any of the
foregoing. In some cases, forward-looking statements can be identified by the use of terminology such as may, will, expects, plans, anticipates, estimates,
potential, or continue, or the negative thereof or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements contained herein are reasonable, there can be no assurance
that such expectations or any of the forward-looking statements will prove to be correct, and actual results could differ materially from those projected or assumed in the forward-looking statements. Some of the factors that could cause our actual
results to differ materially are set forth herein under the heading Risk Factors and elsewhere in this report. All forward-looking statements and reasons why results may differ included in this Annual Report are made as of the date
hereof, and we assume no obligation to update any such forward-looking statement or reason why actual results may differ.





Critical
Accounting Policies





Our consolidated financial statements have been prepared in accordance with accounting
principles generally accepted in the United States of America. The preparation of such statements requires us to make estimates and assumptions that affect the reported amounts of revenues and expenses during the reporting period and the reported
amounts of assets and liabilities as of the date of the financial statements. Our estimates are based on historical experience and other assumptions that we consider to be reasonable given the circumstances. Actual results may vary from our
estimates.





We consider the following accounting policies are critical as defined by the Securities
and Exchange Commission, in that they are both highly important to the portrayal of our financial condition and results, and require us to make difficult judgements and assumptions about matters that are inherently uncertain. We also have other
important policies that are discussed in Note 1 to the Consolidated Financial Statements.





REVENUE
RECOGNITION.    We recognize revenue from the sale of our products upon shipment, provided title and risk of loss has passed to the customer, the fee is fixed and determinable and collection of the revenue is reasonable
assured. A provision for estimated future returns and other charges against revenue is recorded at the time of shipment. Approximately 50% of our sales are to distributors. We have agreements for price adjustment and stock rotation programs with our
distributors. The revenue we record for sales to our distributors is net of estimated provisions for these programs. When determining this net revenue, we must make significant judgements and estimates. Our estimates are based on historical
experience rates, inventory levels in the distribution channel, current trends and other related factors. However, because of the inherent nature of estimates, there is a risk that there could be significant differences between actual amounts and
our estimates. Our financial condition and operating results depend on our ability to make reliable estimates and we believe that our estimates are reasonable. We also may choose, at our discretion, to expand our price protection or stock rotation
programs beyond our contractual obligations or previous estimates. For example, in the quarter ended December 31, 2001, we recorded a charge of approximately $3.2 million against revenue to address inventory and pricing issues in our distribution
channel that were due to the significant drop off in business activity that we had experienced.




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INVENTORIES.    Inventories are recorded at the
lower of standard cost (which generally approximates actual cost on a first-in, first-out basis) or market value. We record reserves for excess and obsolete inventory based on inventory age, shipment history and our forecast of demand over a
specific future period of time. The reserve is reduced when product is sold or otherwise disposed of. Actual market conditions in the volatile semiconductor markets that we serve may vary from our forecast or other assumptions, potentially impacting
our inventory reserves and resulting in material effects on our gross margin. The net change to inventory reserves in the fiscal year ended June 30, 2002 was an increase of approximately $2.3 million.





INVESTMENTS.    As required by SFAS No. 142, Goodwill and Other Intangible Assets, which we adopted in
fiscal 2002 we ceased amortizing Goodwill with a net carrying value of $1,323,000 and annual amortization of $338,000 that resulted from business combinations initialed prior to the adoption of SFAS No. 141, Business Combinations. SFAS No. 142 also
requires that goodwill be tested for impairment at least annually. We determined that no impairment of this goodwill existed in fiscal 2002, and we will continue to evaluate such goodwill at least annually.





We also made other investments in fiscal 2002 including bridge loans convertible to equity as well as direct equity investments. These
investments are included in other long-term assets in the Balance Sheet and are carried at the lower of cost, or market if the investment has experienced an other than temporary decline in value. We monitor these investments quarterly and make
appropriate reductions in carrying value if a decline in value is deemed to be other than temporary.





Overview





Pericom Semiconductor Corporation was incorporated in June 1990. We completed our first profitable fiscal year on June 30,
1993. We design, manufacture and market high performance digital, analog and mixed-signal integrated circuits used for the transfer, routing, and timing of digital and analog signals within and between computer, networking, data communications and
telecommunications systems. Our first volume sales occurred in fiscal 1993 and consisted exclusively of 5-volt 8-bit interface logic circuits. Since then we have expanded our product offering by introducing the following products, among others:





| |  |  | 3.3-volt 16-bit logic circuits and 8-bit digital switches in fiscal 1994;
| | - |  | -------------------------------------------------------------------------




| |  |  | clock generators, 3.3-volt clock synthesizers and buffers, and high-speed interface products for the networking industry in fiscal 1995;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------




| |  |  | 32-bit logic, 16-bit digital switches and Pentium, 56K modem and laser printer clock synthesizers in fiscal 1996;
| | - |  | -----------------------------------------------------------------------------------------------------------------




| |  |  | an analog switch family, mixed-voltage logic and a family of clock generators in fiscal 1997;
| | - |  | ---------------------------------------------------------------------------------------------




| |  |  | a family of advanced 3.3-volt CMOS logic; timing devices for Pentium and Pentium II mobile computers; a complete solution for the PC100 memory module standard;
and a 3.3-volt bus switch family offering the fastest bus switches on the market in fiscal 1998;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  |  | three families of 2.5-volt zero-delay clock drivers for the networking and telecommunications markets; a family of application-specific bus switches and
integrated clock generators to support the latest Intel processors and a complete interface solution for the PC133 memory module standard in fiscal 1999; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  |  | a crossbar switch for backplane applications like server clusters, networking, industrial computing and Storage Area Networks; a family of drivers, receivers,
and transceivers supporting the Low Voltage Differential Signaling interface standard; the SuperClock programmable skew timing product family
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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targeting networking, telecommunications and Storage Area Network applications; a complete interface solution for the new double data rate (DDR) SDRAM memory standard; a family of LVDS
cross-point switches to route signals in OC12 networks; and the AVC+ family of high speed interface logic in fiscal 2000.





| |  |  | in fiscal 2001 2.5 volt switch products and complimentary complete timing interface solution for use in Double Data Rate (DDR) synchronous DRAM modules; LVDS
products for the networking market including both dual and quad crosspoint switches for both point-to-point and bus communications; several hot-plug switches that support the growing demand for 24/7 operations; expansion of the 2.5 volt
AVC family; and low voltage bus switch products that provide 3.3 volt to 2.5 volt and 2.5 volt to 1.8 volt level translation.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  |  | In fiscal 2002, advanced AVC products that allow voltage shifting (between 3.3 volts and 1.5 Volts) and I/O translation (from HSTL to LVTTL) commonly needed
between the latest state of the art ASICs and other legacy products; enhancements to its DDR memory module solutions; Active Termination Clamp that help to clean up signaling overshoot common at fast clock rates; additional family of seven analog
multiplexers and switches with improved performance and are used in a wide range of space constrained mobile and handheld computing applications; and a family of 25 single, dual, and triple gate logic devices in extremely small packaging that
address a very broad range of applications and systems requirements.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




As is typical in the
semiconductor industry, we expect selling prices for our products to decline over the life of each product. Our ability to increase net revenues is highly dependent upon our ability to increase unit sales volumes of existing products and to
introduce and sell new products in quantities sufficient to compensate for the anticipated declines in selling prices of existing products. We seek to increase unit sales volume through increased wafer fabrication capacity allocations from our
existing foundries, qualification of new foundries, increased number of die per wafer through die size reductions and improved yields of good die through the implementation of advanced process technologies, but there can be no assurance that we will
be successful in these efforts.In fiscal 2002, 2001 and 2000, respectively, approximately 68%, 59%, and 75% of the wafers for our semiconductor products were manufactured by Chartered.We qualified AMS as a wafer supplier in fiscal
1991, NJRC in fiscal 1995, TSMC in fiscal 1997, Hyundai/Hynix in 1998 and Peregrine Semiconductor Australia in fiscal 2001.





Declining selling prices will adversely affect gross margins unless we are able to offset such declines with the sale of new higher margin products or achieve commensurate reductions in unit costs. We seek to improve our overall
gross margin through the development and introduction of selected new products that we believe will ultimately achieve higher gross margins. A higher gross margin for a new product is typically not achieved until some period after the initial
introduction of the productafter start-up expenses for that product have been incurred and once volume production begins. In general, costs are higher at the introduction of a new product due to the use of a more generalized design schematic,
lower economies of scale in the assembly phase and lower die yield. Our ability to decrease unit cost depends on our ability to shrink the die sizes of our products, improve yields, obtain favorable subcontractor pricing, and make in-house test and
assembly operations more productive and efficient. There can be no assurance that these efforts, even if successful, will be sufficient to offset declining selling prices.




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Results of Operations





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





Fiscal Year Ended June 30,2002


2001


2000Net revenues

100.0
%

100.0
%

100.0
%Cost of revenues

71.2


57.6


57.8Gross margin

28.8


42.4


42.2Operating expenses:Research and development

24.5


10.1


8.9Selling, general and administrative

24.7


14.0


13.7Restructuring charge




0.5


Total operating expenses

49.2


24.6


22.6Income (loss) from operations

(20.4
)

17.8


19.6Other income, net

3.1


7.3


3.6Income (loss) before income taxes

(17.3
)

25.1


23.2Income tax provision (benefit)

(6.2
)

9.1


8.7Net income (loss)

(11.1
)%

16.0
%

14.5
%





Comparison of Fiscal 2002, 2001 and 2000





NET REVENUES.    Net revenues decreased 56% from $108.3 million in fiscal 2001 to $47.6 million in
fiscal 2002. The decrease in net revenues resulted primarily from the prolonged worldwide semiconductor industry downturn and a decline in the weighted average selling prices of our products. Net revenues increased 19.0% from $91.0 million in fiscal
2000 to $108.3 million in fiscal 2001. The increase in net revenues resulted from overall strength in the semiconductor industry through the first six months of fiscal 2001, continued market acceptance of our existing products and sales of new
products in our SiliconSwitch  , SiliconClock  and SiliconInterface  product lines, offset in part by a decline in the weighted average selling price of all products.





GROSS PROFIT.    Gross profit decreased 70% from $46.0 million in fiscal 2001 to $13.7 million in fiscal 2002. Gross margin decreased from 42.4% in fiscal 2001 to 28.8% in fiscal 2002. The decrease
in gross margin resulted from decreases in the average selling prices of our various product lines and from under-absorption of factory overhead due to reduced unit volumes. These decreases were partially offset by cost reductions achieved through
reduced wafer, assembly and test costs. Gross profit increased 19.8% from $38.4 million in fiscal 2000 to $46.0 million in fiscal 2001. Gross margin increased slightly from 42.2% in fiscal 2000 to 42.4% in fiscal 2001. The increase in gross margin
resulted from the introduction and sale of new products at higher gross margins, a shift in mix towards a higher margin product line, and cost reductions achieved through reduced wafer, assembly and test costs. These margin increases were partially
offset by decreases in average selling prices in our various product lines.





RESEARCH AND
DEVELOPMENT.    Research and development expenses increased 6.4% from $11.0 million in fiscal 2001 to $11.7 million in fiscal 2002. As a percentage of net revenues, research and development increased from 10.1% in fiscal
2001 to 24.5% in fiscal 2002. Research and development expenses increased 35.4% from $8.1 million in fiscal 2000 to $11.0 million in fiscal 2001. As a percentage of net revenues, research and development expenses increased from 8.9% in fiscal 2000
to 10.1% in fiscal 2001. The increase in absolute dollars in research and development spending in each year was primarily attributable to development costs for new products in each of our product lines and, to a lesser extent, expansion of
engineering staff and related infrastructure as we continued our commitment to new product




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development. We believe that continued investment in research and development is critical to attaining our strategic objectives, and as a result
we expect research and development expenses to increase in absolute dollars in future periods.





SELLING,
GENERAL AND ADMINISTRATIVE.    Selling, general and administrative expenses consist primarily of personnel and related overhead costs for sales, marketing, finance, human resources and general management. Selling, general
and administrative expenses decreased 22.4% from $15.2 million in fiscal 2001 to $11.8 million in fiscal 2002, but increased as a percentage of sales from 14.0% in fiscal 2001 to 24.7% in fiscal 2002. The expense decrease was primarily due to
decreased staffing levels and decreases in commissions and other incentives resulting from the decline in sales and profitability. Selling, general and administrative expenses increased 21.7% from $12.4 million in fiscal 2000 to $15.2 million in
fiscal 2001 and increased as a percentage of net revenues from 13.7% to 14.0%. The increase in expense was primarily attributable to increased staffing levels and increases in commissions and other incentives due to sales and profitability growth.





RESTRUCTURING CHARGE.    In fiscal 2001 there was a non-recurring restructuring
charge of $522,000 related to an unused leased facility. The facility has subsequently been subleased and the terms of that sublease indicate that the restructuring charge was sufficient to cover the net costs of the lease through the term of the
sublease. There were no restructuring charges in fiscal 2002 or 2000.





OTHER INCOME,
NET.    Other income, net includes interest income and expense, investment write-offs and our allocated portion of net losses of Pericom Technology, Inc. (PTI), a British Virgin Islands corporation based in
Shanghai, Peoples Republic of China. PTI was formed by Pericom and certain Pericom shareholders in 1994 to develop and market semiconductors in China and certain other Asian countries (see Note 4 of Notes to Financial Statements). Other
income, net decreased from $7.9 million in fiscal 2001 to $1.5 million in fiscal 2002. Interest income decreased from $8.3 million in fiscal 2001 to $5.6 million in fiscal 2002 primarily due to declines in short-term interest rates. Our share in the
net losses of PTI increased from $323,000 in fiscal 2001 to $1.4 million in fiscal 2002 as PTIs losses increased due to the global semiconductor industry downturn. In addition, we wrote off $2.7 million in investments in fiscal 2002. No
investments were written off in fiscal 2001 or 2000. Other income, net increased from $3.3 million in fiscal 2000 to $7.9 million in fiscal 2001. Interest income increased from $3.6 million in fiscal 2000 to $8.3 million in fiscal 2001 primarily as
a result of investment of the net proceeds from our follow-on public offering in March 2000. Our share of the net losses of PTI decreased from $323,000 in fiscal 2000 to $68,000 in fiscal 2001, excluding $331,000 in goodwill amortization in fiscal
2001.





PROVISION FOR INCOME TAXES.    The income tax benefit in fiscal 2002 was
$3.0 million compared with a provision of $9.8 million and $7.9 million in fiscal 2001 and 2000, respectively. The fiscal 2002 income tax benefit was the result of the carry back of the fiscal 2002 net loss to prior fiscal years. The provision for
income taxes differed from the federal statutory rate primarily due to state income taxes, the utilization of research and development tax credits and a change in the deferred asset valuation allowance.





Liquidity and Capital Resources





Operating activities provided approximately $9.1 million in cash in fiscal 2002, $19.4 million in fiscal 2001 and $18.2 million in fiscal 2000. The decrease in cash flows provided by operating activities in fiscal 2002 from fiscal
2001 was primarily due to the net loss of $5.3 million for fiscal 2002 compared to net income of $17.4 million for fiscal 2001. For fiscal 2002 our cash flows provided by operating activities were the result of the net loss of $5.3 million offset by
depreciation and amortization of $4.1 million investment write offs of $2.7 million, our share of the net loss of PTI of $1.4 million and decreases in accounts receivable and inventory of $2.3 million and $5.1 million, respectively. Net cash used
for investing activities was $87.4 million, $57.0 million and $5.5 million in fiscal 2002, 2001 and 2000, respectively. The increase in net cash used for investing activities in fiscal 2002 was primarily due to net purchases of short-term
investments of $80.9 million and purchases of property and equipment of $2.2 million. Financing activities provided approximately $1.9 million in cash in fiscal 2002, $2.5 million in fiscal 2001 and $103 million in fiscal 2000. In each year, cash
flows from financing activities resulted from the issuance of common stock, net of issuance costs. We made capital




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##### Table of Contents

expenditures of approximately $2.2 million in fiscal 2002, $5.8 million in fiscal 2001 and $4.2 million in fiscal 2000.





Our cash, cash equivalents and short-term investments increased by $4.9 million to $155.8 million on June 30, 2002 from $150.9 million on
June 30, 2001. The increase was primarily due to cash flows from operating activities and investment income. In March of 2000, we received $100.9 million in net proceeds from a follow on public offering, which were invested in short-term money
market funds. We believe that cash generated from operations and existing cash balances will be sufficient to fund necessary purchases of capital equipment and leasehold improvements, to fund our repurchase of common stock and to provide working
capital at least through the next 12 months. However, there can be no assurance that future events will not require us to seek additional capital sooner or, if so required, that adequate capital will be available at all or on terms acceptable to us.





Our Board of Directors has approved the repurchase of up to 2,000,000 shares of common stock. As of September 11,
2002, we have repurchased 57,000 shares at a cost of approximately $515,000.





A portion of our cash may be used to
acquire or invest in complementary businesses or products or to obtain the right to use complementary technologies. From time to time, in the ordinary course of business, we may evaluate potential acquisitions of such businesses, products or
technologies.





Recently Issued Accounting Standards





In June 1998, the Financial Accounting Standards Board, or the FASB, issued Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative
Instruments and Hedging Activities, or SFAS 133. This statement requires companies to record derivatives on the balance sheet as assets and liabilities, measured at fair value. Gains and losses resulting from changes in the fair market values of
those derivative instruments would be accounted for depending on the use of instrument and whether it qualifies for hedge accounting. We adopted SFAS 133, as amended, on July 1, 2000. The adoption of this statement did not have an effect on our
financial position, results of operations or cash flows as we had no derivative financial instruments as of June 30, 2002 and have not entered into any derivative transactions historically.





As a matter of policy, we do not currently enter into transactions involving derivative financial instruments. In the event we enter into such transactions in the future,
we will account for those transactions in accordance with SFAS 133, in which case we will formally document all relationships between the hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking
such hedge transactions.





In June 2001, the FASB issued SFAS No. 141, Business Combinations. SFAS No. 141 requires
that all business combinations initiated after June 30, 2001 be accounted for under the purchase method and addresses the initial recognition and measurement of goodwill and other intangible assets acquired in a business combination. Business
combinations originally accounted for under the pooling of interest method will not be changed. Adoption of SFAS No. 141 did not have an impact on our financial position, results of operations, or cash flows.





In June 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible Assets. SFAS No. 142 addresses the initial recognition and
measurement of intangible assets acquired outside of a business combination and the accounting for goodwill and other intangible assets subsequent to their acquisition. SFAS No. 142 provides that intangible assets with finite useful lives be
amortized and that goodwill and intangible assets with indefinite lives will not be amortized, but will rather be tested at least annually for impairment. Pericom adopted SFAS No. 142 for its fiscal year beginning July 1, 2001. On that date, we
ceased amortizing goodwill with a net carrying value of $1,323,000 at June 30, 2001 and annual amortization of $338,000 that resulted from business combinations initiated prior to the adoption of SFAS 141, Business Combinations. We determined that
no impairment of this goodwill existed in fiscal 2002. We will continue to evaluate such goodwill at least annually.




30




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##### Table of Contents

Years Ended June 30,2002


2001

2000(In thousands, except per share amounts)Reported net income (loss)

$
(5,267
)

$
17,359

$
13,215Add: Goodwill amortization






331


35Adjusted net income (loss)

$
(5,267
)

$
17,690

$
13,250Reported basic earnings (loss) per share

$
(0.21
)

$
0.70

$
0.63Add:  Goodwill amortization per basic share






.01


Adjusted basic earnings (loss) per share

$
(0.21
)

$
0.71

$
0.63Reported diluted earnings (loss) per share

$
(0.21
)

$
0.64

$
0.56Add:  Goodwill amortization per diluted share






.01


Adjusted diluted earnings (loss) per share

$
(0.21
)

$
0.65

$
0.56





In August 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. SFAS No. 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets. It supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of, and the accounting and reporting provisions of Accounting Principles Board No. 30, Reporting the results of OperationsReporting the Effects of Disposal of a Segment of a Business and Extraordinary, Unusual
and Infrequently Occurring Events and Transactions for the disposal of a segment of a business. We are required to adopt SFAS No. 144 on July 1, 2002. We are currently in the process of determining the impact that the adoption of SFAS No. 144 will
have on our results of operations, financial position or liquidity.





In April 2002, the FASB issued SFAS No. 145,
Rescission of FASB Statement No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections. SFAS 145 requires the any gains or losses on extinguishment of debt that were classified as an extraordinary item in prior periods that
are not unusual in nature and infrequent in occurrence be reclassified to other income (expense), beginning in fiscal 2003, with early adoption encouraged. We are required to adopt SFAS No. 145 on July 1, 2002. We are currently in the process of
determining the impact that the adoption of SFAS No. 145 will have on our results of operations or financial position.





In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities, which addresses accounting for restructuring and similar costs. SFAS No. 146 supersedes previous accounting guidance,
principally Emerging Issues Task Force Issue No. 94-3. We will adopt the provisions of SFAS No. 146 for restructuring activities initiated after December 31, 2002. SFAS No. 146 requires that the liability for costs associated with an exit or
disposal activity be recognized when the liability is incurred. Under Issue 94-3, a liability for an exit cost was recognized at the date of our commitment to an exit plan. SFAS No. 146 also establishes that the liability should initially be
measured and recorded at fair value. Accordingly, SFAS No. 146 may affect the timing of recognizing future restructuring costs as well as the amounts recognized. We are required to adopt SFAS No. 146 on January 1, 2003. We are currently in the
process of determining the impact that the adoption of SFAS No. 146 will have on our results of operations or financial position.




31




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ITEM 7A.    
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





Market Risk Disclosure





At June 30, 2002, our investment portfolio consisted of fixed income securities, excluding those classified as cash
equivalents, of $143.2 million (see Note 1 of Notes to Financial Statements). These securities are subject to interest rate risk and will decline in value if market interest rates increase. Due to the short duration and conservative nature of these
instruments, we do not believe that we have a material exposure to interest rate risk. For example, if market interest rates were to increase immediately and uniformly by 10% from levels as of June 30, 2002, the decline in the fair value of the
portfolio would not have a material effect on our results of operations over the next fiscal year.




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ITEM 8.    
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA





1.    INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS





The following Consolidated Financial Statements are filed as part of this report.





Page No.Independent Auditors Report

39Consolidated Balance Sheets as of June 30, 2002 and 2001

40Consolidated Statements of Operations for each of the three fiscal years in the period ended June 30, 2002

41Consolidated Statements of Shareholders Equity and Comprehensive Income for each of the three fiscal years in the
period ended June 30, 2002

42Consolidated Statements of Cash Flows for each of the three fiscal years in the period ended June 30, 2002

43Notes to Consolidated Financial Statements

44





2.    INDEX TO SUPPLEMENTAL FINANCIAL INFORMATION





Unaudited Interim Financial Information

58





3.    INDEX TO FINANCIAL STATEMENT SCHEDULE





The following financial statement schedule of Pericom Semiconductor Corp. for the years ended June 30, 2002, 2001, and 2000 is
filed as part of this report and should be read in conjunction with the Financial Statements of Pericom Semiconductor Corp.





Schedule IIValuation and Qualifying Accounts for each of the three fiscal years in the period ended June 30,
2002

63


---

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




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





Not Applicable.




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##### Table of Contents




PART III





ITEM 10.    
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT





The executive officers and
directors of the Company and their respective ages as of June 30, 2002 are as follows:





Name

Age

Position(s)Alex Chi-Ming Hui

45

Chief Executive Officer, President and Chairman of the Board of DirectorsChi-Hung (John) Hui, Ph.D.

47

Vice President, Technology and DirectorPatrick B. Brennan

64

Vice President, Investor RelationsMichael D. Craighead

56

Vice President, Finance and Administration and Chief Financial OfficerTat C. Choi, Ph.D.

47

Vice President, Design EngineeringDavid K. Raun

40

Vice President, MarketingGerald V. Beemiller

58

Vice President, SalesShujong (John) Cheng

52

Vice President, OperationsHau L. Lee, Ph.D.(1) (3)

49

DirectorMillard (Mel) Phelps(1) (3)

74

DirectorTay Thiam Song(1) (2)

47

DirectorJeffrey Young(2) (3)

53

Director


---

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

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

|(3) |  | Member of Nominating Committee.
|--- |  | -------------------------------




Alex Chi-Ming Hui has been Chief Executive Officer, President and a member of the Board of Directors of the Company since its inception in June 1990, and was elected Chairman of the Board of Directors
of the Company in July 1999. From August 1982 to May 1990, Mr. Hui was employed by LSI Logic Corporation, most recently as its Director of Advanced Development. From August 1980 to July 1982, Mr. Hui was a member of the technical staff of
Hewlett-Packard Company. Mr. Hui holds a B.S.E.E. from the Massachusetts Institute of Technology and an M.S.E.E. from the University of California at Los Angeles.





Chi-Hung (John) Hui, Ph.D., has been Vice President, Technology and a member of the Board of Directors of the Company since its inception in June 1990. From August 1987 to
June 1990, Dr. Hui was employed by Integrated Device Technology, most recently as Manager of its Research and Development Department. From August 1984 to August 1987, Dr. Hui was a member of the technical staff of Hewlett-Packard Company. Dr. Hui
holds a B.S.E.E. from Cornell University and an M.S.E.E. and a Ph.D. in Electrical Engineering from the University of California at Berkeley.





Patrick B. Brennan has been Vice President, Investor Relations since October 2000. Mr. Brennan joined the Company in March 1993 as the Vice President, Finance and Administration. From February 1991 to
March 1993, Mr. Brennan was employed by Datacord, Inc., a subsidiary of Newell Research, Inc., as its Vice President, Finance, and from July 1985 to February 1991, he was employed as the Vice President, Finance of SEEQ Technology, Inc. From January
1980 to June 1985, he was employed by National Semiconductor Corporation, most recently as Vice President and Treasurer. Mr. Brennan holds a B.S. in Business Administration from Arizona State University.




34




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##### Table of Contents




Michael D. Craighead has been Vice President, Finance and Administration and
Chief Financial Officer of the Company since October 2000. From July 1999 through October 2000 he was Corporate Controller of the Company. Previously, Mr. Craighead was Corporate Controller of GSS/Array Technology, Inc. from June 1998 to July 1999
and from November 1997 to June 1998 he was Corporate Controller of DSP Technology. Mr. Craighead was also Vice President, Finance and Administration and Chief Financial Officer of ComputerWare from April 1996 to November 1997 and was Vice President,
Finance and Operations at Utah Scientific from September 1995 to April 1996. Previously, Mr. Craighead has held positions as Controller of Grass Valley Group from March 1989 through May 1996 and Vice President, Finance and Administration and Chief
Financial Officer of Drexler Technology Corporation from June 1982 to March 1989. Mr. Craighead holds a BS degree in Accounting from San Jose State University.





Tat C. Choi, Ph.D., joined the Company in April 1998 as Vice President, Design Engineering. From September 1996 to March 1998, Dr. Choi was employed by Anacor, Inc., an engineering design service
consulting firm that he founded. Prior to working at Anacor, Inc. Dr. Choi was employed by Chrontel, Inc. most recently as its Vice President, Engineering from September 1989 to August 1996. Dr. Choi was employed by Advanced Micro Devices from
February 1983 to August 1989 as a Senior Member of Technical Staff. Dr. Choi holds a B.S. and M.S. in Electrical Engineering from the University of Minnesota and a Ph.D. in EECS from the University of California at Berkeley.





David Raun joined Pericom in January 2002 as Vice President of Strategic Marketing. In July of 2002, Pericom consolidated all Marketing
and Applications function under him as Vice President of Marketing. In 2001, Mr. Raun was Executive Vice President & General Manager at Actovate. Prior to Actovate he held several positions at Waferscale Integration Inc. including Vice President
of PSD & Memory Products (97-00), Vice President of Sales (96-97), and Director of Sales (94-96). From 1985 to 1995, Mr. Raun held other sales, sales management and marketing positions at Waferscale and AMD.
He holds a B.S.E.E. degree from the University of California, Santa Barbara





Gerald V. Beemiller joined Pericom in
December of 2000 as Vice President of Worldwide Sales. From July 1997 to May 2000, Mr. Beemiller was employed by Sony Semiconductor Company of America originally as Vice President of Sales and later as Vice President of Sales and Marketing. Prior to
Sony, he was the Founder, CEO and President of Infant Advantage, a medical device company (89-97). Prior to Infant Advantage, he was the Owner/Partner of I Squared, a semiconductor manufacturers representative firm (74-89).
Previously, he held engineering and sales positions at Motorola Semiconductor (66-73). Mr. Beemiller was educated at Arizona State University and holds a BS Degree in Mathematics.





Shujong (John) Cheng joined Pericom in August of 2001 as Vice President of Operations. From July 1999 to August 2001, Mr. Cheng was employed by Payton Technology, Inc.
as Vice President of Operations. Prior to Payton, he was employed from March 1997 to July 1999 as Vice President of Global Product and Test Engineering by Kingston Technology. Previously, he was the President of Evergreen Testing Services from June
1995 to March 1997 and Director of Manufacturing for Hyundai Electronics, America from April 1994 to June 1995. Mr. Cheng has also held product and test engineering management positions with ESS Technology (93-94), Cypress Semiconductor
(89-93), IDT (84-89), and Atari (81-84). Mr. Cheng holds a BSEE from Tatung Institute of Technology, Taipei, Taiwan and a MSEE from Lamar University, Beaumont, Texas.





Hau L. Lee, Ph.D, has been a member of the Board of Directors since July 1999. From February 1997 through the present Dr. Lee has been
Kleiner Perkins, Mayfield, Sequoia Capital Professor in the Department of Industrial Engineering and Engineering Management and from September 1998 through the present has been Professor of Operations, Information and Technology Management at the
Graduate School of Business at Stanford University. From September 1992 through the present he has been Professor of Industrial Engineering and Engineering Management at Stanford University. He is the founding and current director of the Stanford
Global Supply Chain Management Forum, and has consulted extensively for companies such as Hewlett Packard, Sun Microsystems, IBM, Xilinx Corporation, Motorola, and Andersen Consulting. Dr. Lee is a graduate of the University of Hong Kong and earned
his M.S. in Operational




35




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##### Table of Contents

Research from the London School of Economics and his M.S. and Ph.D. degrees in Operations Research from the Wharton School at the University of
Pennsylvania.





Millard (Mel) Phelps has been a member of the Board of Directors since July 1999. Mr. Phelps is a
retired advisory director of Hambrecht and Quist (H&Q), a position he held from September 1994 to July 1997. Prior to joining H&Q in 1984 as a Principal in the firm and Senior Semiconductor Analyst, Mr. Phelps spent 23-years in the
semiconductor industry in various management and corporate officer positions. Mr. Phelps is currently serving as a Director of Trident Microsystems and is also a director of four privately held companies.Mr. Phelps holds a BSEE degree with
honors from Case Reserve University.





Tay Thiam Song has been a member of the Board of Directors since June 1992.
Mr. Tay resides in Singapore, and, since 1985, has been serving as the Executive Director of various companies in Singapore and Malaysia, including Daiman Group (a Malaysian public company) and Chye Seng Tannery (Pte) Ltd. Mr. Tay holds a B.A. in
Accounting from the North East London Polytechnic University.





Jeffrey Young has been a member of the Board of
Directors since August 1995. Since 1988, Mr. Young has been a resident of Singapore and from 1990 to the present has served as the Executive Director of Daiman Roof Tiles Sdn. Bhd., a subsidiary of the Daiman Group, and from 1989 to the present as a
Director of Great Wall Brick Work Sdn. Bhd., and from 1993 to the present as a Director of Daiman Singapore (Pte) Ltd., and has been a Director of Daiman Investments (Australia) Pty. Ltd. from 1993 to the present. Mr. Young holds a B.S. from the
Electronic College of Canton, Peoples Republic of China.





All directors of the Company serve until the next
annual meeting of the shareholders of the Company and until their successors have been duly elected and qualified. Each officer serves at the discretion of the Board of Directors. Mr. Hui and Dr. Hui are brothers, and Mr. Young and Mr. Tay are
brothers-in-law. There are no other family relationships among any of the directors, officers or key employees of the Company.





Information regarding delinquent filers pursuant to Item 405 of Regulation S-K will be included in the section captioned Section 16(a) Beneficial Ownership Reporting Compliance in the Proxy Statement and is incorporated
herein by reference.





ITEM 11.    
EXECUTIVE COMPENSATION





The information required by this item is incorporated by
reference to the section captioned Executive Compensation contained in the Companys Definitive Proxy Statement related to the Annual Meeting of Shareholders to be held December 11, 2002, to be filed by the Company with the
Securities and Exchange Commission (the Proxy Statement).





ITEM 12.    
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT





The information
required by this item is incorporated by reference to the section captioned Security Ownership of Certain Beneficial Owners and Management contained in the Proxy Statement.





ITEM 13.    
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS





The information required by this item
is incorporated by reference to the section captioned Certain Transactions contained in the Proxy Statement.




36




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##### Table of Contents




PART IV





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





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





(1)  Financial Statements and
Financial Statement ScheduleSee Index to Financial Statements and Financial Statement Schedule at Item 8 on Page 33 of this report.





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





3.1

Restated Articles of Incorporation of the Registrant(1)3.2

Amended and Restated Bylaws of the Registrant(2)3.3

Certificate of Determination of the Series D Junior Participating Preferred Shares. Incorporated by reference to
Exhibit 3.1 to the Registrants Quarterly Report on Form 10-Q for the quarter ended March 30, 20024.1

Rights Agreement between Pericom Semiconductor Corporation and Equiserve Trust Company, N.A. dated as of March 6,
2002 including Form of Right Certificate attached thereto as Exhibit B. Incorporated by reference to Exhibit 4 to Registration Statement on Form 8-A filed by the Registrant dated March 12, 2002.10.1

Registrants 1990 Stock Option Plan, including Forms of Agreements thereunder(3)10.2

Registrants 1995 Stock Option Plan, including Forms of Agreements thereunder(3)10.3

Registrants 1997 Employee Stock Purchase Plan, including Forms of Agreements thereunder(3)10.4

Lease, dated November 29, 1993, by and between Orchard Investment Company Number 510 as Landlord and Registrant as
Tenant, as amended(3)10.5

Third Amendment to Lease, dated April 23, 1999, by and between CarrAmerica Realty Corporation as Landlord and
Registrant as Tenant(2)10.6

Fourth Amendment to Lease, dated January 21, 2000, by and between CarrAmerica Realty Corporation as Landlord and
Registrant as Tenant(4)10.7

Fifth Amendment to Lease, dated May 1, 2000, by and between CarrAmerica Realty Corporation as Landlord and Registrant
as Tenant(4)10.8

Sixth Amendment to Lease, dated October 31, 2000, by and between CarrAmerica Realty Corporation as Landlord and
Registrant as Tenant(6)10.11

Form of Indemnification Agreement(3)10.12

Pericom Technology Agreement, dated March 17, 1995 by and between the Registrant and Pericom Technology,
Inc.(3)10.13

Registrants 2000 Employee Stock Purchase Plan, including forms of Agreement thereunder(5)10.14

Registrants 2001 Stock Incentive Plan, including forms of Agreement thereunder(5)10.15

Sublease of 2249 Zanker Road, San Jose, California. Incorporated by reference to the Companys Quarterly report
on Form 10-Q for the quarter ended September 29, 2001 in which the exhibit bears the same number.10.16

Change of Control Agreement23.1

Consent of Independent Auditors


---

|(1) |  | Incorporated herein by reference to the Companys Quarterly Report on Form 10-Q for the quarter ended March 31, 2001 in which the exhibit bears the same
number.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Incorporated herein by reference to the Companys fiscal 1999 Annual Report on Form 10-K in which the exhibit bears the same number.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | Incorporated herein by reference to the Companys Registration Statement on Form S-1 in which the exhibit bears the same number.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------



37




---

##### Table of Contents

|(4) |  | Incorporated herein by reference to the Companys fiscal 2000 Annual Report on Form 10-K in which the exhibit bears the same number.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------

|(5) |  | Incorporated herein by reference to the Companys Quarterly Report on Form 10-Q for the quarter ended December 30, 2000 in which the exhibit bears the same
number.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) |  | Incorporated herein by reference to the Companys fiscal 2001 Annual Report on Form 10-K in which the exhibit bears the same number.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------




(b)  Reports on Form 8-K: The Company filed no reports on Form 8-K during the fourth quarter ended
June 30, 2001.





(c)  Exhibits: See list of exhibits under (a)(2) above.





(d)  Financial Statement Schedules: See list of schedules under (a)(1) above.




38




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##### Table of Contents




INDEPENDENT AUDITORS REPORT





To the Board of Directors and Shareholders of


Pericom Semiconductor Corporation:





We have audited the
accompanying balance sheets of Pericom Semiconductor Corporation as of June 30, 2002 and 2001, and the related statements of operations, shareholders equity and comprehensive income, and cash flows for each of the three years in the period
ended June 30, 2002. 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 auditing standards generally accepted in the United States of America. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.





In our opinion, such financial statements present fairly, in all material respects, the
financial position of Pericom Semiconductor Corporation at June 30, 2002 and 2001, and the results of its operations and its cash flows for each of the three years in the period ended June 30, 2002, in conformity with accounting principles generally
accepted in the United States of America.





DELOITTE & TOUCHE
LLP





San Jose, California


July 22, 2002 (September 11, 2002 as to Note 15)




39




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##### Table of Contents




PERICOM SEMICONDUCTOR CORPORATION





CONSOLIDATED BALANCE SHEETS


(In thousands,
except share data)





June 30,2002

2001ASSETSCurrent assets:Cash and cash equivalents

$
12,656

$
89,076Short-term investments


143,156


61,811Accounts receivable:Trade (net of allowances of $4,376 and $4,296)


3,981


7,096Other


1,871


1,050Inventories


9,339


14,440Prepaid expenses and other current assets


1,298


732Deferred income taxes


2,600


1,776Total current assets


174,901


175,981Property and equipmentnet


8,608


10,473Investment in and advances to joint venture


5,920


7,330Goodwillnet


1,325


1,325Other assets


2,991


1,318Total

$
193,745

$
196,427LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable

$
4,544

$
4,168Accrued liabilities


2,840


3,747Total current liabilities


7,384


7,915Deferred income taxes


639


1,322Commitments and contingencies (Notes 8 and 9)Shareholders equity:Common stock, 60,000,000 shares authorized; Shares outstanding: 2002, 25,660,209; 2001, 25,141,102


139,345


136,007Accumulated other comprehensive income (loss)


257


(204
)Retained earnings


46,120


51,387Total shareholders equity


185,722


187,190Total

$
193,745

$
196,427





See notes to financial statements.




40




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##### Table of Contents




PERICOM SEMICONDUCTOR CORPORATION





CONSOLIDATED STATEMENTS OF OPERATIONS


(In
thousands, except per share amounts)





Years Ended June 30,2002


2001


2000Net revenues

$
47,589


$
108,313


$
90,977Cost of revenues


33,871



62,388



52,540Gross profit


13,718



45,925



38,437Operating expenses:Research and development


11,663



10,993



8,118Selling, general and administrative


11,778



15,150



12,449Restructuring charge


0



522



0Total


23,441



26,665



20,567Income (loss) from operations


(9,723
)


19,260



17,870Equity in net loss of joint venture and related goodwill amortization


(1,410
)


(399
)


(358
)Interest income


5,554



8,287



3,621Other than temporary decline in the value of investments


(2,650
)






Income (loss) before income taxes


(8,229
)


27,148



21,133Income tax provision (benefit)


(2,962
)


9,789



7,918Net income (loss)

$
(5,267
)

$
17,359


$
13,215Basic earnings (loss) per share

$
(0.21
)

$
0.70


$
0.63Diluted earnings (loss) per share

$
(0.21
)

$
0.64


$
0.56Shares used in computing basic earnings (loss) per share


25,339



24,914



20,906Shares used in computing diluted earnings (loss) per share


25,339



27,242



23,578





See notes to financial statements.




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##### Table of Contents




PERICOM SEMICONDUCTOR CORPORATION





CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY AND COMPREHENSIVE INCOME


(In thousands)





Common Stock

Retained Earnings


Accumulated Other Comprehensive Income (Loss)


Total Shareholders Equity


Comprehensive IncomeShares

AmountBALANCES, July 1, 2000

19,038

$
25,600

$
20,813


$
(33
)

$
46,380Net income







13,215







13,215


$
13,215Unrealized loss on investments











(57
)


(57
)


(57
)Comprehensive income


















$
13,158Issuance of common stock In secondary offering net of issuance costs of $427

4,400


100,949










100,949Issuance of common stock under employee stock plans

1,056


2,200










2,200Tax benefit resulting from stock option transactions




2,085










2,085BALANCES, June 30, 2000

24,494


130,834


34,028



(90
)


164,772Net income







17,359







17,359


$
17,359Unrealized loss on investments











(114
)


(114
)


(114
)Comprehensive income


















$
17,245Issuance of common stock under employee stock plans

647


2,549










2,549Issuance of common stock options to non-employees




137










137Tax benefit resulting from stock option transactions




2,487










2,487BALANCES, June 30, 2001

25,141


136,007


51,387



(204
)


187,190Net income







(5,267
)






(5,267
)

$
(5,267
)Unrealized gain on investments











461



461



461Comprehensive income (loss)


















$
(4,806
)Issuance of common stock under employee stock plans

519


1,862










1,862Stock based compensation




253










253Tax benefit resulting from stock option transactions




1,223










1,223BALANCES, June 30, 2002

25,660

$
139,345

$
46,120


$
257


$
185,722





See notes to financial statements.




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##### Table of Contents




PERICOM SEMICONDUCTOR CORPORATION





CONSOLIDATED STATEMENTS OF CASH FLOWS


(In
thousands)





Years Ended June 30,2002


2001


2000CASH FLOWS FROM OPERATING ACTIVITIES:Net income (loss)

$
(5,267
)

$
17,359


$
13,215Adjustments to reconcile net income (loss) to net cash provided by operating activities:Depreciation and amortization


4,084



3,519



2,470Other than temporary decline in the value of investments


2,650







Loss on disposal of assets


3



1



2Stock-based compensation


253



137



Equity in net loss of joint venture and related goodwill amortization


1,410



399



358Deferred income taxes


(1,507
)


(618
)


(27
)Changes in assets and liabilities:Accounts receivable


2,294



4,243



(2,324
)Inventories


5,101



(1,274
)


(3,331
)Prepaid expenses and other current assets


657



(523
)


372Accounts payable


376



(4,815
)


1,688Accrued liabilities


(907
)


186



1,958Income taxes payable






778



3,773Net cash provided by operating activities


9,147



19,392



18,154CASH FLOWS FROM INVESTING ACTIVITIES:Purchases of property and equipment


(2,222
)


(5,779
)


(4,209
)Purchase of short-term investments


(301,168
)


(57,214
)


(6,209
)Maturities of short-term investments


220,284



11,761



7,000Increase in other assets


(4,323
)


(1,012
)


(64
)Advances to and investments in joint venture






(4,768
)


(2,034
)Proceeds from sale of property and equipment






32



Net cash used for investing activities


(87,429
)


(56,980
)


(5,516
)CASH FLOWS FROM FINANCING ACTIVITIES:Issuance of common stock, net of issuance costs


1,862



2,549



103,149NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS


(76,420
)


(35,039
)


115,787CASH AND CASH EQUIVALENTS:Beginning of period


89,076



124,115



8,328End of period

$
12,656


$
89,076


$
124,115SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Cash paid (received) during the period for:Income taxes

$
(2,081
)

$
8,986


$
4,171SUPPLEMENTAL NONCASH FINANCING ACTIVITIES:Tax benefit from stock option transactions

$
1,223


$
2,487


$
2,085





See notes to financial statements.




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PERICOM SEMICONDUCTOR CORPORATION





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Fiscal Years Ended June 30, 2002, 2001 and 2000





1.    BUSINESS AND SIGNIFICANT ACCOUNTING
POLICIES





Pericom Semiconductor Corporation (the Company) was incorporated in June 1990. The
Company designs, manufactures and markets high performance digital, analog and mixed-signal integrated circuits used for the transfer, routing, and timing of digital and analog signals within and between computer, networking, datacom and telecom
systems.





FINANCIAL STATEMENT ESTIMATESThe preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses during the reporting period. Actual
results could differ from those estimates.





BASIS OF PRESENTATIONThese
consolidated financial statements include the accounts of Pericom Semiconductor Corporation and its wholly owned subsidiary, Pericom Semiconductor (HK) Limited. Pericom Semiconductor (HK) Limited was incorporated in Hong Kong on May 31, 2000 and is
engaged in circuit design services solely for Pericom Semiconductor Corporation. All significant intercompany balances and transactions are eliminated in consolidation.





FISCAL PERIODThe Companys fiscal years in the accompanying financial statements have been shown as ending on June 30. Fiscal years 2002,
2001, and 2000 ended on June 29, 2002, June 30, 2001 and July 1, 2000, respectively.





CASH EQUIVALENTSThe Company considers all highly liquid debt instruments purchased with a remaining maturity of three months or less to be cash equivalents. The recorded carrying amounts of the Companys cash
and cash equivalents approximate their fair market value.





SHORT-TERM
INVESTMENTSThe Companys policy is to invest in short-term instruments with investment grade credit ratings. The Company classifies its short-term investments as available-for-sale securities and the cost of securities
sold is based on the specific identification method. At June 30, 2002 short-term investments, and any difference between the fair market value and the underlying cost of such investments, consisted of the following (in thousands):





Amortized Cost

Gross Unrealized Gains

Gross Unrealized Losses


Market ValueCorporate bonds and notes

$
88,935

$


$
(84
)

$
88,851Government securities


37,084


207






37,291Asset backed securities


16,881


133






17,014$
142,900

$
340

$
(84
)

$
143,156




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At June 30, 2001 short-term investments, and any difference between the fair
market value and the underlying cost of such investments, consisted of the following (in thousands):





Amortized Cost

Gross Unrealized Gains

Gross Unrealized Losses


Market ValueCorporate bonds and notes

$
10,682

$


$
(289
)

$
10,393Government securities


44,233


9






44,242Equities


3,776









3,776Certificates of deposit


3,400









3,400$
62,091

$
9

$
(289
)

$
61,811





At June 30, 2002, these investments had the following maturities
(in thousands):





Market ValueOne year or less

$
31,213Between one and three years


106,172Greater than three years


5,771$
143,156





INVENTORIES are stated at the lower of cost
(first-in, first-out) or market.





PROPERTY AND EQUIPMENT are stated at cost.
Depreciation and amortization are computed using the straight-line method over estimated useful lives of three to five years. Leasehold improvements are depreciated over the lesser of the lease term or the estimated useful life.





INVESTMENT IN JOINT VENTURE is accounted for using the equity method. The difference
between the carrying value and the underlying equity in net assets of the investment will be tested for impairment at least annually (see Note 4).





LONG-LIVED ASSETSThe Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be
recoverable. The Companys policy is to review the recoverability of all intangible assets based upon undiscounted cash flows on an annual basis at a minimum, and in addition, whenever events or changes indicate that the carrying amount of an
asset may not be recoverable.





INCOME TAXESThe Company accounts for income taxes
under SFAS No. 109, Accounting for Income Taxes, which requires an asset and liability approach to recording deferred taxes.





STOCK-BASED COMPENSATIONThe Company accounts for stock-based awards to employees using the intrinsic value method in accordance with Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees, and all of its interpretations and presents pro forma disclosures required by SFAS No. 123, Accounting for Stock-Based Compensation.





The Company accounts for equity instruments issued to nonemployees in accordance with the provisions of SFAS No. 123 and Emerging Issues
Task Force (EITF) Issue No. 96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services, which requires that the fair value of such instruments be
recognized as an expense over the period in which the related services are received.




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REVENUE RECOGNITIONRevenue from product sales is recognized
upon shipment provided title and risk of loss has passed to the customer, when persuasive evidence of an arrangement exists, the fee is fixed and determinable and collectibility is probable. Estimated costs for sales returns, price protection, stock
rotation and other allowances are accrued as a reduction of revenue in the period that sales are recognized. Domestic distributors are permitted a return allowance of up to 10% of their net purchases every six months.





CONCENTRATION OF CREDIT RISK AND CERTAIN SIGNIFICANT RISKS AND UNCERTAINTIESThe Company sells its products
primarily to large organizations and generally does not require its customers to provide collateral or other security to support accounts receivable. The Company maintains allowances for estimated bad debt losses.





The Company participates in a dynamic high technology industry and believes that changes in any of the following areas could
have a material adverse effect on the Companys future financial position or results of operations: advances and trends in new technologies; competitive pressures in the form of new products or price reductions on current products; changes in
product mix; changes in the overall demand for products and services offered by the Company; changes in customer relationships; litigation or claims against the Company based on intellectual property, patent, product, regulatory or other factors;
risks associated with having a concentration of a few suppliers; risks associated with changes in domestic and international economic and/or political conditions or regulations; availability of necessary components; and the Companys ability to
attract and retain employees necessary to support its growth.





COMPREHENSIVE INCOMEIn fiscal
year 1999, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 130, Reporting Comprehensive Income, which requires an enterprise to report, by major components and as a single total, the change in net assets during the period
from nonowner sources. Comprehensive income for the years ended June 30, 2002, 2001 and 2000 has been disclosed within the statement of shareholders equity and comprehensive income.





RECENTLY ISSUED ACCOUNTING STANDARDSIn June 1998, the Financial Accounting Standards Board, or the FASB, issued
Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities, or SFAS 133. This statement requires companies to record derivatives on the balance sheet as assets and liabilities, measured
at fair value. Gains and losses resulting from changes in the fair market values of those derivative instruments would be accounted for depending on the use of instrument and whether it qualifies for hedge accounting. The Company adopted SFAS 133,
as amended, on July 1, 2000. This statement did not have an effect on the Companys financial position, results of operations or cash flows as the Company had no derivative financial instruments as of June 30, 2002 and has not entered into
any derivative transactions historically.





As a matter of policy, the Company does not currently
enter into transactions involving derivative financial instruments. In the event that the Company enters into such transactions in the future, the Company will account for those transactions in accordance with SFAS 133, in which case the Company
will formally document all relationships between the hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking such hedge transactions.





In June 2001, the FASB issued SFAS No. 141, Business Combinations. SFAS No. 141 requires that all business combinations initiated after June 30, 2001 be accounted for under
the purchase method and addresses the initial recognition and measurement of goodwill and other intangible assets acquired in a business combination. Business combinations originally accounted for under the pooling of interest method will not be
changed. The adoption of SFAS No. 141 did not have an impact on the Companys financial position, results of operations, or cash flows.





In June 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible Assets. SFAS No. 142 addresses the initial recognition and measurement of intangible assets acquired outside of a business
combination and the accounting for goodwill and other intangible assets subsequent to their acquisition. SFAS No. 142 provides that intangible assets with finite useful lives be amortized and that goodwill and




46




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##### Table of Contents

intangible assets with indefinite lives will not be amortized, but will rather be tested at least annually for impairment. Pericom adopted SFAS
No. 142 for its fiscal year beginning July 1, 2001. On that date, the Company ceased amortizing goodwill with a net carrying value of $1,323,000 at June 30, 2001 and annual amortization of $338,000 that resulted from business combinations initiated
prior to the adoption of SFAS 141, Business Combinations. The Company determined that no impairment of goodwill existed in fiscal 2002. The Company will continue to evaluate such goodwill at least annually.





Years Ended June 30,2002


2001

2000(In thousands, except per share amounts)Reported net income (loss)

$
(5,267
)

$
17,359

$
13,215Add: Goodwill amortization






331


35Adjusted net income (loss)

$
(5,267
)

$
17,690

$
13,250Reported basic earnings (loss) per share

$
(0.21
)

$
0.70

$
0.63Add: Goodwill amortization per basic share






.01


Adjusted basic earnings (loss) per share

$
(0.21
)

$
0.71

$
0.63Reported diluted earnings (loss) per share

$
(0.21
)

$
0.64

$
0.56Add: Goodwill amortization per diluted share






.01


Adjusted diluted earnings (loss) per share

$
(0.21
)

$
0.65

$
0.56





In August 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. SFAS No. 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets. It supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of, and the accounting and reporting provisions of Accounting Principles Board No. 30, Reporting the results of OperationsReporting the Effects of Disposal of a Segment of a Business and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions for the disposal of a segment of a business. The Company is required to adopt SFAS No. 144 on July 1, 2002. The Company is currently in the process of determining the
impact that the adoption of SFAS No. 144 will have on its results of operations, financial position or liquidity.





In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statement No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections. SFAS 145 requires the any gains or losses on extinguishment of debt that were
classified as an extraordinary item in prior periods that are not unusual in nature and infrequent in occurrence be reclassified to other income (expense), beginning in fiscal 2003, with early adoption encouraged. The Company is required to adopt
SFAS No. 145 on July 1, 2002. The Company is currently in the process of determining the impact that the adoption of SFAS No. 145 will have on its results of operations or financial position.





In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities, which addresses accounting for restructuring and similar
costs. SFAS No. 146 supersedes previous accounting guidance, principally Emerging Issues Task Force Issue No. 94-3. The Company will adopt the provisions of SFAS No. 146 for restructuring activities initiated after December 31, 2002. SFAS No. 146
requires that the liability for costs associated with an exit or disposal activity be recognized when the liability is incurred. Under Issue 94-3, a liability for an exit cost was recognized at the date of the Companys commitment to an exit
plan. SFAS No. 146 also establishes that the liability should initially be measured and recorded at fair value. Accordingly, SFAS No. 146 may affect the timing of recognizing future restructuring costs as well as the amounts recognized. The Company
is required to adopt SFAS No.




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##### Table of Contents

146 on January 1, 2003. The Company is currently in the process of determining the impact that the adoption of SFAS No. 146 will have on its
results of operations or financial position.





RECLASSIFICATIONSCertain reclassifications have
been made to conform prior year amounts to the current years presentation.





EARNINGS PER
SHAREBasic earnings per share is based upon the weighted average number of common shares outstanding. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock.





Basic and diluted earnings per share for each of the
three years in the period ended June 30, 2002 are as follows:





Years Ended June 30,2002


2001

2000Net income (loss)

$
(5,267
)

$
17,359

$
13,215Computation of common shares outstandingbasic earnings (loss) per share:Weighted average common stock


25,339



24,914


20,906Basic earnings (loss) per share

$
(0.21
)

$
0.70

$
0.63Computation of common shares outstandingdiluted earnings (loss) per share:Weighted average common stock


25,339



24,914


20,906Dilutive options using the treasury stock method






2,328


2,672Shares used in computing diluted earnings (loss) per share


25,339



27,242


23,578Diluted earnings (loss) per share

$
(0.21
)

$
0.64

$
0.56





Options to purchase 5,468,057 share of Common Stock were
outstanding as of June 30, 2002 and were excluded from the computation of net loss per share because such options were antidilutive. Options to purchase 1,486,189 shares of Common Stock at prices ranging from $22.03 to $42.75 and options to purchase
236,472 shares of Common Stock at prices ranging from $15.50 to $35.00 were outstanding as of June 30, 2001 and June 30, 2000, respectively, but not included in the computation of diluted net income per share because the options exercise
prices were greater that the average market price of the common shares as of such dates and therefore, would be anti-dilutive under the treasury stock method.





2.    INVENTORIES





Inventories consist of (in thousands):





As of June 30,2002

2001Finished goods

$
2,523

$
5,425Work-in-process


3,921


3,341Raw materials


2,895


5,674$
9,339

$
14,440




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3.    PROPERTY AND EQUIPMENT





Property and equipment consist of (in thousands):





As of June 30,2002


2001Machinery and equipment

$
12,602


$
11,617Computer equipment and software


8,586



7,220Furniture and fixtures


769



746Leasehold improvements


1,087



1,087Construction-in-progress






555Total


23,044



21,225Accumulated depreciation and amortization


(14,436
)


(10,752
)Property and equipmentnet

$
8,608


$
10,473





Construction-in-progress is primarily software that has not been
placed in service, and machinery and equipment that has not been accepted.





4.    JOINT VENTURE AND OTHER
INVESTMENTS





In fiscal 1994, the Company purchased 1,500,000 shares of Series A Convertible Preferred Stock
issued by Pericom Technology, Inc. (PTI) for $750,000 (an 18.4% equity investment at the time). Such preferred stock is convertible at the option of the Company into 1,500,000 shares of PTI common stock, does not bear dividends, has a
liquidation preference up to the purchase price and votes based on the number of common shares into which it is convertible. In fiscal 2000, the Company purchased an additional 909,090 shares of Series B Convertible Preferred Stock for $1 million
and converted $3.5 million in debt to purchase an additional 3,181,818 shares of Series B Convertible Preferred Stock. The Series B issue has liquidation preference over the Series A issue and all common shares. With the fiscal 2000 additional
investment, the Company had a 43.3% equity investment in PTI. After the additional investment there was approximately a $1.7 million difference between the carrying value and the underlying equity in net assets of the investment which was being
amortized over five years. The last month of amortization was June of 2001. In fiscal 2001, the Company purchased an additional 3,000,000 shares of Series C Convertible Preferred Stock for approximately $5 million. The Series C issue has liquidation
preference over all other classes of stock. With the fiscal 2001 additional investment, the Company now has a 45.0% equity investment in PTI. The investment in PTI is accounted for using the equity method due to the Companys significant
influence over its operations. In addition, several of the directors of the Company are also directors of PTI, and certain shareholders of the Company are also shareholders of PTI. PTI was incorporated in 1994 and in 1995 established a design center
and sales office to pursue opportunities and participate in joint ventures in China. During the years ended June 30, 2002 and 2000, the Company sold $66,000 and $29,000 respectively, in services to PTI. During the year ended June 30, 2001, the
Company did not sell any services to PTI. During the years ended June 30, 2002, 2001 and 2000, the Company purchased $689,000, $1,300,000 and $890,000 in services from PTI, respectively. At June 30, 2002, 2001 and 2000, $98,000, $134,000 and
$233,000 respectively, was owed to the Company by PTI for reimbursement of certain administrative expenses incurred by the Company on behalf of PTI and for advances made to PTI by the Company. Condensed financial information of the joint venture at
June 30, 2002 and June 30, 2001 is as follows (in thousands):




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##### Table of Contents




2002


2001Total assets

$
12,768


$
14,479Total liabilities

$
1,137


$
865Total equity

$
11,631


$
13,614Revenue

$
3,515


$
5,640Cost of revenues


2,732



3,600Gross profit


783



2,040Expenses


2,972



2,283Operating Loss


(2,189
)


(243
)Interest and other income


282



114Income tax provision


21



Net loss

$
(1,928
)

$
(129
)





The Company has investments in certain privately held companies,
which it accounts for under the cost method. The carrying amount of such investments was approximately $2.7 million and $1.0 million at June 30, 2002 and 2001 and these amounts are recorded in other assets. The Company recorded a write off of
certain investments in 2002 totaling approximately $2.7 million, as the Company determined that these investments had experienced an other than temporary decline in value.





5.    ACCRUED LIABILITIES





Accrued
liabilities consist of (in thousands):





As of June 30,2002

2001Accrued compensation

$
1,132

$
1,598External sales representative commissions


727


819Other accrued expenses


981


1,330$
2,840

$
3,747





6.    SHAREHOLDERS EQUITY





In March 2000, the Company completed a secondary public offering of 4,400,000 shares of its common stock at a price of $24.25 per share.





Preferred Stock





The number of shares of preferred stock authorized to be issued is 5,000,000. The Board of Directors is authorized to issue the preferred
stock from time to time in one or more series and to fix the rights, privileges and restrictions of the shares of such series. As of June 30, 2002, no shares of preferred stock were outstanding.





Stock Option Plans





Under the Companys 2001, 1995, and 1990 Stock Option Plans, incentive and nonqualified stock options to purchase up to 6,514,881 shares of common stock have been reserved at June 30, 2002 for
issuance to employees, officers, directors, independent contractors and consultants of the Company.




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##### Table of Contents




The options may be granted at not less than the fair value and not less than 85%
of the fair value on grant date for incentive stock options and nonqualified stock options, respectively. Options vest over periods of up to 48 months as determined by the Board of Directors. Options granted under the Plans expire 10 years from
grant date.





Activity in the Companys option plans is summarized below:





Shares


Weighted Average Exercise PriceBalance, June 30, 1999 (1,769,834 exercisable at a weighted average price of $1.50)

3,845,690


$
2.20Granted (weighted average fair value of $14.09 per share)

1,805,000



16.33Exercised

(836,154
)


1.94Canceled

(287,672
)


4.37Balance, June 30, 2000 (1,886,648 exercisable at a weighted average price of $2.38)

4,526,864



7.76Granted (weighted average fair value of $18.91 per share)

1,897,555



22.62Exercised

(534,216
)


2.92Canceled

(1,143,702
)


24.22Balance, June 30, 2001 (2,397,294 exercisable at a weighted average price of $5.24)

4,746,501



10.28Granted (weighted average fair value of $7.83 per share)

1,553,255



13.49Exercised

(423,609
)


1.74Canceled

(228,090
)


15.95Balance, June 30, 2002

5,648,057


$
11.57





At June 30, 2002, 866,824 shares were available for future issuance
under the option plans.





Additional information regarding options outstanding as of June 30, 2002 is as follows:





Options Outstanding

Options ExercisableRange of Exercise Prices

Number Outstanding

Weighted Average Remaining Contractual Life (Years)

Weighted Average Exercise Price

Number Exercisable

Weighted Average Exercise Price$  0.10  2.40

1,293,085

4.61

$  1.82

1,282,346

$  1.82$  2.4411.50

1,557,193

7.66

7.29

868,910

5.26$11.5614.20

1,172,028

9.06

13.76

341,886

13.67$14.4024.56

1,193,506

8.49

18.80

528,537

20.17$24.6939.03

432,245

8.04

30.31

235,260

30.11$  0.1039.03

5,648,057

7.46

$11.57

3,256,939

$  9.00





On April 6, 2001, the Company announced a voluntary stock option
exchange program for our employees. Under the program, employees were given the opportunity to elect to cancel outstanding stock options held by them with an exercise price of $15.00 or more per share in exchange for an equal number of replacement
options to be granted at a future date not less than six months and a day after the options were canceled. Board members were not eligible. The elections to cancel options were effective on May 4, 2001. The exchange resulted in the voluntary
cancellation by 60 employees of 611,405 employee stock options with exercise prices ranging from $18.50 to $42.75 in exchange for the same number of replacement options.




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The replacement options were granted on November 5, 2001. The replacement options have the same terms and conditions as each optionees
cancelled options, including the expiration date of the cancelled options, except that: (1) 12.5% of the replacement options will vest on the grant date and the remainder will vest at a rate of 1/48 per month for 42 months, (2) the replacement
options will have an exercise price equal to the fair market value of our common stock on the date of the grant and (3) the optionee must be an employee of the Company on the date of grant of the replacement options in order to receive replacement
options.





In December 2001, the Company recorded of a stock compensation charge of $253,000 related to certain
stock options that were allowed an extended vesting period from that which was allowed in the original option agreement in conjunction with a reduction in force, which the Company undertook in that quarter. The offset of this charge was to
shareholders equity.





1997 Employee Stock Purchase Plan





In 1997, the Company approved the 1997 Employee Stock Purchase Plan (the Stock Purchase Plan),
which allows eligible employees of the Company to purchase shares of Common Stock through payroll deductions. A total of 600,000 shares of the Companys Common Stock was reserved for issuance under the Stock Purchase Plan. The Stock Purchase
Plan permits eligible employees to purchase Common Stock at a discount through payroll deductions, during 24-month purchase periods, except that the first purchase period of the plan will be 27 months. Each purchase period will be divided into eight
consecutive three-month accrual periods, except that the first accrual period will be six months. The price at which stock is purchased under the Stock Purchase Plan is equal to 85% of the fair market value of the Common Stock on the first day of
the purchase period or the last day of the accrual period, whichever is lower. The initial purchase period commenced upon the effective date of the Companys initial public offering of Common Stock in October 1997 and ended on January 30, 2000.
The maximum number of shares of Common Stock that any employee may purchase under the Stock Purchase Plan during any accrual period is 1,000 shares. During fiscal year 2001 and 2000, the Company issued 80,223 and 219,358 shares of common stock under
the Stock Purchase Plan at weighted average prices of $5.42 and $2.63, respectively. The weighted average fair value of the fiscal 2001 and 2000 awards for each year was $9.66 and $2.21 per share. The last issuance under the 1997 Employee Stock
Purchase Plan was on July 31, 2000.





2000 Employee Stock Purchase Plan





In 2000, the Company approved the 2000 Employee Stock Purchase Plan (the Stock Purchase Plan),
which allows eligible employees of the Company to purchase shares of Common Stock through payroll deductions. A total of 600,000 shares of the Companys Common Stock has been reserved for issuance under the Stock Purchase Plan. The Stock
Purchase Plan permits eligible employees to purchase Common Stock at a discount through payroll deductions, during 24-month purchase periods. Each purchase period will be divided into eight consecutive three-month accrual periods. The price at which
stock is purchased under the Stock Purchase Plan is equal to 85% of the fair market value of the Common Stock on the first day of the purchase period or the last day of the accrual period, whichever is lower. The maximum number of shares of Common
Stock that any employee may purchase under the Stock Purchase Plan during any accrual period is 1,000 shares. During fiscal year 2002 and 2001, the Company issued 95,498 and 32,669, shares of common stock under the Stock Purchase Plan at weighted
average prices of $11.77 and $16.90, respectively. The weighted average fair value of the fiscal 2002 and fiscal 2001 awards for each year was $7.83 and $9.21 per share.





Additional Stock Plan Information





As discussed in Note 1, the Company continues to account for its stock based awards using the intrinsic value method in accordance with Accounting Principles Board No. 25, Accounting for Stock Issued
to Employees, and its related interpretations. Accordingly, no compensation expense has been recognized in the financial statements for employee stock arrangements.




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SFAS No. 123, Accounting for Stock-Based Compensation, (SFAS 123), requires the
disclosure of pro forma net income as if the Company had adopted the fair value method as of the beginning of fiscal 1996. Under SFAS 123, the fair value of stock-based awards to employees is calculated through the use of option pricing models, even
though such models were developed to estimate the fair value of freely tradable, fully transferable options without vesting restrictions, which significantly differ from the terms of the Companys stock option awards. These models also require
subjective assumptions, including expected time to exercise, which greatly affect the calculated values. The Companys calculations were made using the Black-Scholes option pricing model with the following weighted average assumptions for the
Companys stock option grants:





2002


2001


2000Expected life

5 years


5 years


5 yearsRisk-free interest rate

4.37
%

5.35
%

6.21
%Volatility

64
%

118
%

91
%Dividend yield

0.00
%

0.00
%

0.00
%





The following weighted average assumptions are included in the
estimated grant date fair value calculations for rights to purchase stock under the Stock Purchase Plan:





2002


2001


2000Expected life

3 months


3 months


3 monthsRisk-free interest rate

1.8-3.6
%

4.5-6.3
%

4.7-5.8
%Volatility

55%-70
%

101%-139
%

66%-99
%Dividend yield

0.00
%

0.00
%

0.00
%





Pro Forma Net Income and Earnings Per Share





Had the Company amortized to expense the computed fair values of the 2002, 2001 and 2000 awards under the
1990 Stock Option Plan, 1995 Stock Option Plan, 2001 Stock Option Plan, 2000 Employee Stock Purchase Plan, and 1997 Employee Stock Purchase Plan, the Companys pro forma net income and earnings per share for the three fiscal years in the period
ended June 30, 2002 would have been as follows:





2002


2001

2000Pro forma net income (loss)

$
(12,919,000
)

$
10,930,000

$
11,297,000Pro forma earnings (loss) per share:Basic earnings (loss) per share

$
(0.51
)

$
0.44

$
0.54Diluted earnings (loss) per share

$
(0.48
)

$
0.40

$
0.48





Issuance of Stock Options to Non-Employees





In 2001, the Company issued nonstatutory options to a non-employee for the purchase of 20,000 shares of
common stock at an exercise price of $18.19. These options vest over four years. In accordance with SFAS No. 123, its related interpretations and EITF 96-18, the Company accounted for this award under the fair value method and as a variable award.
Accordingly, the Company records stock compensation equal to the fair value of the options and the vesting schedule (using the Black-Scholes option pricing model and the following assumptions: contractual life of ten years; risk free interest rate
of 5.35%; volatility of 91%; and dividend yield of zero) and remeasures the compensation expense at the end of each period until the award vests. The related compensation expense of $137,000 was recognized as selling, general and administrative
expense in the accompanying statement of operations in 2001. The nonemployee became an employee in 2002 and the unvested options are accounted for in accordance with APB No. 25. No options were issued to non-employees during the year ended
June 30, 2002.




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7.    INCOME TAXES





The provision for income taxes consists of (in thousands):





Fiscal Year Ended June 30,2002


2001

2000Federal:Current

$
(2,682
)

$
5,863

$
5,428Deferred


(230
)


585


(116
)(2,912
)


6,448


5,312State:Current


4



744


432Deferred


(1,048
)


110


89(1,044
)


854


521Foreign:Deferred


(229
)





Charge in lieu of taxes attributable to employee stock plans


1,223



2,487


2,085Provision for income taxes

$
(2,962
)

$
9,789

$
7,918





A reconciliation between the Companys effective tax rate and
the U.S. statutory rate is as follows:





Fiscal Year Ended June 30,2002


2001


2000Tax at federal statutory rate

35.0
%

35.0
%

35.0
%State income taxes, net of federal benefit

3.8


2.1


2.9Tax exempt investment income

2.4


(1.8
)

Research and development tax credits

6.2


(2.3
)

(2.1
)Change in valuation allowance

(15.1
)




Other

3.7


3.1


1.7Provision for income taxes

36.0
%

36.1
%

37.5
%





The components of the net deferred tax assets were as follows (in
thousands):





As of June 30,2002


2001Deferred tax assets:Accruals and reserves recognized in different periods

$
2,109


$
1,099Other


491



6772,600



1,776Deferred tax liabilities:Basis difference in fixed assets


(1,206
)


(702
)Other


567



(620
)(639
)


(1,322
)Net deferred tax assets

$
1,961


$
454





As of June 30, 2002, the Company has tax credit carryforwards of
approximately $600,000 available to offset future state taxable income. The state tax credit carryforwards do not have an expiration date and may be carried forward indefinitely.




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The Company provides a valuation allowance for deferred tax assets when it is
more likely than not, based upon currently available evidence and other factors, that some portion or all of the deferred tax asset will not be realized. Due to the uncertainty surrounding the Companys ability to offset the cumulative equity
losses in Pericom Technology, Inc. (PTI) and writedowns in investments that took place during the year, the Company has provided for a partial valuation allowance in the amount of approximately $1,867,000 against the tax effect of these
losses as of year-end. However, the valuation allowance has been reduced by the tax effect of any realized and unrealized capital gains that are available to offset such losses as of year-end.





8.    LEASES





The Company
leases certain facilities under operating leases through May 2005, with two consecutive options to extend for an additional three years each upon termination of the original lease term. The future minimum operating lease commitments at June 30, 2002
are as follows (in thousands):





Fiscal Year:2003

$
1,6572004


1,6682005


649$
3,974





The Company anticipates receiving approximately $241,000 of
sublease proceeds in the year ended June 30, 2003.





Rent expense for the years ended June 30, 2002, 2001 and 2000
was $1,468,000, $1,322,000 and $1,081,000, respectively. This is net of sublease proceeds received of approximately $237,000 for the year ended June 30, 2002.





9.    CONTINGENCIES





The semiconductor industry is
characterized by frequent claims and related litigation regarding patent and other intellectual property rights. The Company settled an outstanding claim of this nature in fiscal 2002 without material adverse effect on the Companys financial
position, results of operations or cash flows.





10.    INDUSTRY AND SEGMENT INFORMATION





In fiscal year 1999, the Company adopted SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information,
which establishes annual and interim reporting standards for an enterprises business segments and related disclosures about its products, services, geographical areas and major customers. The Company operates in one reportable segment.





11.    MAJOR CUSTOMERS AND GEOGRAPHIC OPERATING INFORMATION





In fiscal 2002 three end customers who purchase through distribution and contract manufacturing channels represented 15%, 12% and 11% of
net revenues. At June 30, 2002, two customers each represented 10% of trade accounts receivable. In fiscal 2001 one end customer who purchases through distribution and contract manufacturing channels represented 12% of net revenues, one end customer
who purchases directly from the company and through the contract manufacturing channel represented 11% of net revenues and one distributor who sells to multiple end customers represented 10% of net revenues. At June 30, 2001, one customer
represented 13% of trade accounts receivable. In fiscal 2000 one end customer who purchases through distribution and contract manufacturing channels represented 14% of net revenues, and one distributor who sells to multiple end customers represented
11% of net revenues. At June 30, 2000, three customers represented 14%, 11% and 11%, respectively, of trade accounts receivable.




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##### Table of Contents




For geographical reporting, net sales are attributed to the region where
customers are located. Long-lived assets consist of property and equipment and are attributed to the region where they are located. The following presents net sales for the years ended June 30, 2002, 2001 and 2000; and long-lived assets as of June
30, 2002, 2001 and 2000 (in thousands):





Fiscal Year Ended June 30,2002

2001

2000Net sales to geographic regions:United States

$
15,817

$
54,850

$
48,850Europe


3,982


12,228


7,852Asia


27,790


41,235


34,275Total Net Sales

$
47,589

$
108,313

$
90,977Long-lived assets:United States

$
6,267

$
7,761

$
6,626China


2,335


2,702


1,615Other (less than 10%)


6


10


5Total long-lived assets

$
8,608

$
10,473

$
8,246





12.    EMPLOYEE BENEFIT PLAN





The Company has a 401(k) tax-deferred savings plan under which eligible employees may elect to have a portion of their salary deferred and
contributed to the plan. Employer matching contributions are determined by the Board of Directors and are discretionary. There were no employer matching contributions in fiscal 2002, 2001 or 2000.





13.    RESTRUCTURING CHARGE





In fiscal 2001 there was a restructuring charge of $522,000 related to an unused leased facility. The facility has subsequently been subleased and the terms of that sublease indicate that the
restructuring charge was sufficient. On June 30, 2002 and June 30, 2001, the remaining balance of the restructuring charge was $522,000 and $197,000, respectively. The restructuring charge is expected to be fully depleted in the fourth quarter of
fiscal 2003. There were no restructuring charges in fiscal 2002 or 2000.





14.    SHAREHOLDER RIGHTS PLAN





Pericom has adopted a Shareholder Rights Plan and declared a dividend distribution of one right for each
outstanding share of the Companys common stock. The record date for the distribution was March 21, 2002. The plan is designed to protect the long-term value of the company for its shareholders during any future unsolicited acquisition attempt.
Adoption of the plan was not made in response to any specific attempt to acquire the Company or its shares and the Company is not aware of any current efforts to do so. These rights will become exercisable only upon the occurrence of certain events
specified in the plan, including the acquisition of 15% of the Companys outstanding common stock by a person or group. After a person or group acquires 15% or more of the outstanding common stock or announces a tender offer, the consummation
of which would result in ownership by a person or group of 15% or more of the outstanding common stock, the rights will become exercisable by persons other than the acquiring person, unless the Board of Directors has approved the transaction in
advance. Each right entitles the holder, other than an acquiring person, to acquire shares of the Companys common stock (or, in the event that there are insufficient authorized common stock shares, substitute consideration such as cash,
property, or other securities of the Company, such as Preferred Stock) at a 50% discount to the then prevailing market price. Prior to the acquisition by a person or group of 15% or more of the outstanding common stock, the rights




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##### Table of Contents

are redeemable for $0.001 per right at the option of the Board of Directors. The rights will expire on March 6, 2012. As of June 30, 2002, there
were 25,660,209 rights outstanding.





15.    SUBSEQUENT EVENTS





On October 22, 2001 our Board of Directors authorized a stock repurchase program to repurchase up to 2,000,000 shares of our common stock.
Purchases may be made in the open market or in privately negotiated transactions from time to time at managements discretion. We began repurchasing shares of our stock on July 23, 2002. As of September 11, 2002 we have purchased 57,000 shares
at a total cost of approximately $515,000.




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PERICOM SEMICONDUCTOR CORPORATION





QUARTERLY FINANCIAL DATA


(Amounts in thousands,
except per share data)


(Unaudited)





Three Months EndedJune 30 2002


Mar 31 2002


Dec 31 2001


Sep 30 2001


June 30 2001


Mar 31 2001

Dec 31 2000

Sep 30 2000Net revenues

$
12,967


$
12,546


$
8,962


$
13,114


$
13,326


$
25,908

$
35,719

$
33,360Cost of revenues


8,294



7,926



9,018



8,633



8,524



14,564


20,250


19,050Gross profit (loss)


4,673



4,620



(56
)


4,481



4,802



11,344


15,469


14,310Operating expenses:Research and development


2,958



2,996



3,160



2,579



2,767



2,885


2,754


2,587Selling, general and administrative


2,949



2,701



3,185



2,943



3,145



3,788


4,232


3,985Restructuring charge


















522









Total operating expenses


5,907



5,667



6,345



5,522



6,434



6,673


6,986


6,572Income (loss) from operations


(1,234
)


(1,047
)


(6,401
)


(1,041
)


(1,632
)


4,671


8,483


7,738Other income (loss), net


152



(922
)


1,113



1,151



1,502



2,197


2,191


1,998Income (loss) before income taxes


(1,082
)


(1,969
)


(5,288
)


110



(130
)


6,868


10,674


9,736Income tax provision (benefit)


(388
)


(709
)


(1,904
)


39



(577
)


2,610


4,056


3,700Net income (loss)

$
(694
)

$
(1,260
)

$
(3,384
)

$
71


$
447


$
4,258

$
6,618

$
6,036Basic earnings (loss) per share

$
(0.03
)

$
(0.05
)

$
(0.13
)

$
0.00


$
0.02


$
0.17

$
0.27

$
0.24Diluted earnings (loss) per share

$
(0.03
)

$
(0.05
)

$
(0.13
)

$
0.00


$
0.02


$
0.16

$
0.24

$
0.22Shares used in computing basic earnings (loss) Per share


25,530



25,394



25,242



25,189



25,104



24,984


24,875


24,694Share used in computing diluted earnings (loss) Per share


25,530



25,394



25,242



27,114



27,111



27,111


27,272


27,475





During the three months ended December 31, 2001, the company
recorded a charge of approximately $3.2 million against revenue to address inventory and pricing issues in our distribution channel that were due to the significant drop-off in business activity; additional inventory reserves of approximately $1.1
million due to the prolonged decline in end market demand; and charges of approximately $534,000 related to a workforce reduction and legal expenses associated with a patent infringement suit initiated by a competitor.





During the three months ended March 31, 2002, the Company wrote off a loan and accrued interest receivable of approximately $1.8 million
as the Company determined that this loan was uncollectible. During the three months ended June 30, 2002, the Company wrote off an investment of approximately $900,000 as the Company determined the investment had experienced an other than temporary
decline in value.




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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.





PERICOM SEMICONDUCTOR CORPORATIONBy:

/s/    ALEX C. HUIAlex C. Hui Chief Executive
Office, President and Chairman of the Board of DirectorsDate:

September 26, 2002








Pursuant to the
requirements of the Securities and 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/    ALEX C. HUI Alex C. Hui

Chief Executive Officer, President and Chairman of the Board of Directors (Principal Executive
Officer)

September 26, 2002/s/    MICHAEL D. CRAIGHEAD Michael D. Craighead

Vice President, Finance & Administration (Principal Financial Officer and Accounting Officer)

September 26, 2002/s/    JOHN CHI-HUNG HUI John Chi-Hung Hui

Vice President, Technology and Director

September 26, 2002/s/    JEFFREY YOUNG Jeffrey Young

Director

September 26, 2002/s/    TAY THIAM SONG Tay Thiam Song

Director

September 26, 2002/s/    MILLARD PHELPS Millard Phelps

Director

September 26, 2002/s/    HAU L LEE. Hau L. Lee

Director

September 26, 2002




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CERTIFICATION





I, Alex C. Hui, certify that:





1.  I have reviewed this annual report on Form 10-K of Pericom Semiconductor Corporation;





2.  Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period covered by this annual report; and





3.  Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report.





/s/     ALEX C. HUIAlex C. Hui Chief Executive
Officer





Date:  September 26, 2002





CERTIFICATION





I, Michael D. Craighead, certify that:





1.  I have reviewed
this annual report on Form 10-K of Pericom Semiconductor Corporation;





2.  Based on my
knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this annual report; and





3.  Based on my knowledge, the
financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in
this annual report.





/s/    MICHAEL D. CRAIGHEADMichael D. Craighead Chief
Financial Officer


Date:  September 26, 2002




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##### Table of Contents




CERTIFICATION





In connection with this annual report of Pericom Semiconductor Corporation (the Company) on Form 10-K for the period ended June 29, 2002 (the
Report), I, Alex C. Hui, Chief Executive Officer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:





(1)  the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the
Securities Exchange Act of 1934, and





(2)  the information contained in the Report
fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.





/s/    ALEX C. HUIAlex C. Hui Chief Executive
Officer





Date:  September 26, 2002





CERTIFICATION





In connection with this annual report of Pericom Semiconductor Corporation (the Company) on Form 10-K for the period ended June 29, 2002 (the Report), I, Michael D. Craighead, Chief Financial Officer
of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:





(1)  the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and





(2)  the information contained in the Report fairly presents, in all material respects,
the financial condition and results of operations of the Company at the dates and for the periods indicated.





/s/    MICHAEL D. CRAIGHEADMichael D. Craighead Chief
Financial Officer


Date:  September 26, 2002




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INDEPENDENT AUDITORS REPORT ON SCHEDULE





We have audited the financial statements of Pericom Semiconductor Corporation as of June 30, 2002 and 2001 and for each of the three years
in the period ended June 30, 2002 and have issued our report thereon dated July 22, 2002; such financial statements and report are included in this 2002 Annual Report on Form 10-K. Our audits also included the financial statement schedule of Pericom
Semiconductor Corporation, listed in Item 14(a)(2). Such financial statement schedule is the responsibility of the Companys management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement
schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.





DELOITTE & TOUCHE LLP





San Jose, California


July 22, 2002




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Schedule II





PERICOM SEMICONDUCTOR CORPORATION





VALUATION AND QUALIFYING ACCOUNTS


(In Thousands)





Balance at Beginning Of Period

Charged to Costs
and Expenses (a)

Deductions (b)

Balance at End
of PeriodAccounts receivable allowances June 30,2002

$
4,296

$
14,299

$
14,219

$
4,3762001


3,343


17,059


16,106


4,2962000


2,570


13,852


13,079


3,343


---

|(a) |  | Primarily related to sales reserves
|--- |  | -----------------------------------

|(b) |  | Charges for which allowances were created
|--- |  | -----------------------------------------



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SECURITIES AND EXCHANGE COMMISSION





Washington, D.C. 20549





---




EXHIBITS


to


FORM 10-K


Under


THE SECURITIES EXCHANGE ACT OF 1934





---




PERICOM SEMICONDUCTOR CORPORATION




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##### Table of Contents




INDEX TO EXHIBITS








Exhibit Number

Description10.16

Change of Control Agreement23.1

Consent of Independent Auditors