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                       SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549
                               __________________

                                   FORM 10-K

                       FOR ANNUAL AND TRANSITION REPORTS
                    PURSUANT TO SECTIONS 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

(MARK ONE)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934

    FOR THE FISCAL YEAR ENDED JULY 25, 1998
                                       OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______ TO ________

                         COMMISSION FILE NUMBER 0-26114

                                 TELTREND INC.
             (Exact Name of Registrant as Specified in Its Charter)

                 DELAWARE                                13-3476859
       (State or Other Jurisdiction                   (I.R.S. Employer
    of Incorporation or Organization)              Identification Number)
                         
                               620 STETSON AVENUE
                          ST. CHARLES, ILLINOIS 60174
               (Address of Principal Executive Offices)(Zip Code)

      REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:  (630) 377-1700

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:  NONE

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

                               COMMON STOCK, $.01 PAR VALUE PER SHARE
                               PREFERRED SHARE PURCHASE RIGHTS
                                    (Title of Class)

     Indicate by check mark whether the registrant:  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
                                   Yes  X    No
                                      -----     -----

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

     As of October 16, 1998, there were outstanding 5,948,990 shares of the
registrant's Common Stock, $.01 par value per share ("Common Stock"), and no
shares of the registrant's Class A Common Stock, $.01 par value per share.  On
that date, the aggregate market value of voting and non-voting common equity
(based upon the last sale price of the registrant's Common Stock on October 16,
1998) held by non-affiliates of the registrant was $76,519,902 (5,775,087 shares
at $13.25 per share).


                      DOCUMENTS INCORPORATED BY REFERENCE

PORTIONS OF THE REGISTRANT'S ANNUAL REPORT TO STOCKHOLDERS FOR THE FISCAL YEAR
ENDED JULY 25, 1998 ARE INCORPORATED BY REFERENCE INTO PART II OF THIS ANNUAL
REPORT ON FORM 10-K.

PORTIONS OF THE REGISTRANT'S DEFINITIVE PROXY STATEMENT FOR THE ANNUAL MEETING
OF STOCKHOLDERS TO BE HELD DECEMBER 10, 1998 ARE TO BE INCORPORATED BY REFERENCE
INTO PART III OF THIS ANNUAL REPORT ON FORM 10-K.

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CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995

     This Annual Report on Form 10-K, including "Management's Discussion and
Analysis of Financial Condition and Results of Operations" incorporated herein
by reference, contains "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995 concerning, among other things:
(i) the Company's (as defined below) prospects, developments and business
strategies for its operations, including the development and sale of certain new
and established products; (ii) the Company's expectations regarding product
pricing and the impact of product pricing on gross profit margins; and (iii) the
Company's expectations regarding the upcoming year 2000. These forward-looking
statements are identified by their use of such terms and phrases as "believes,"
"anticipates," "planned," "will"  and "expects," are subject to risks and
uncertainties and represent the Company's present expectations or beliefs
concerning future events.  The Company cautions that the forward-looking
statements are qualified by important factors that could cause actual results to
differ materially from those in the forward-looking statements, including,
without limitation: (i) risks of general market conditions, including demand for
the Company's products, product mix, competition and the Company's historical
dependence on relatively few customers; (ii) risks related to the Company's
historical dependence on relatively few product lines (such as the Company's T1
product line, which faces competition from suppliers of alternate methods of
delivering repeatered T1 services); (iii) the extent to which the Company's
principal customers continue to exert pricing pressures on the Company; (iv)
risks inherent in the telecommunications industry, including rapidly changing
technology, evolving industry standards, changes in customer requirements,
frequent product introduction and changing government regulation; and (v) the
timing and occurrence (or non-occurrence) of transactions and events which may
be subject to circumstances beyond the Company's control.  A reader of this
Report should understand that it is not possible to predict or identify all such
risk factors.  Consequently, the reader should not consider such a list to be a
complete statement of all potential risks or uncertainties.  The Company does
not assume the obligation to update any forward-looking statements.  Results
actually achieved may differ materially from expected results included in these
statements.  See Subparagraph d. of Item 1 - "Factors That May Affect Future
Results."

                                     PART I

ITEM 1.  BUSINESS.


A.   GENERAL DEVELOPMENT OF BUSINESS

     (I) BACKGROUND

     Teltrend designs, manufactures and markets a broad range of transmission
products, such as channel units, repeaters and termination units, used by
telephone companies ("Telcos") to provide voice and data service over the
telephone network.  Historically, substantially all of Teltrend's products have
been sold directly to the Regional Bell Operating Companies and their local
affiliates (collectively, the "RBOCs") for use with the copper wireline in the
local telephone subscriber loop (the "Local Loop").  The Company's strong
reliance on the RBOCs continues, but the Company's purchase of U.K.-based
Securicor 3net Limited in September 1997 (since renamed Teltrend Limited) has
expanded the Company's markets and product lines.  With the addition of Teltrend
Limited, the Company is now a leading developer of Integrated Services Digital
Network ("ISDN") products for communications equipment and service providers and
also supplies local area network ("LAN") internetworking, ISDN remote access and
secure virtual private networking solutions for business customers worldwide.


     The Company's principal executive offices are located at 620 Stetson
Avenue, St.  Charles, Illinois, 60174 and its telephone number at that location
is (630) 377-1700.  Unless the context otherwise requires, (i) all references to
the "Company" or "Teltrend" in this Annual Report on Form 10-K (the "Report")
collectively refer to Teltrend Inc. and its wholly owned subsidiaries, and (ii)
all references herein to "Teltrend Ltd." refer to Teltrend Limited and its
wholly owned subsidiaries.  The Company's fiscal year ends on the last Saturday
of July each year.  All references to fiscal years in this Report refer to
fiscal years ending in the calendar year indicated (e.g., fiscal 1998 refers to
the year ended July 25, 1998).


     (II) TELTREND LTD. ACQUISITION


     On September 18, 1997, the Company consummated the purchase of all the
outstanding shares of Securicor 3net Limited of Basingstoke, England and its
U.S. affiliate Securicor 3Net Inc. from 3 Net Holdings Limited of Surrey,






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England ("3Net Holdings") for a total acquisition cost of approximately $14.5
million.  3Net Holdings is a subsidiary of Securicor Communications Limited of
Surrey, England ("Securicor Communications").  Following the acquisition, the
name of Securicor 3net Limited was changed to Teltrend Limited.  With operations
in England, New Zealand and China, Teltrend Ltd. is a leading developer of ISDN
products for communications equipment and service providers. Teltrend Ltd. also
supplies LAN internetworking, ISDN remote access and secure virtual private
networking solutions for business customers worldwide.


     (III) TELTREND INC. RIGHTS AGREEMENT


     On January 16, 1997, the Board of Directors of the Company declared a
dividend of one preferred share purchase right (a "Right") for each outstanding
share of Common Stock.  The dividend was payable on January 27, 1997 to the
holders of record of the Common Stock as of the close of business on that date.
Each Right entitles the registered holder to purchase from the Company, under
certain circumstances involving the acquisition or the announcement of the
intent to acquire 20% or more of the Company's Common Stock, one one-hundredth
of a share of Series A Junior Participating Preferred Stock, par value $.01 per
share, of the Company (the "Preferred Stock") at a price of $160.00 per one
one-hundredth of a share of Preferred Stock, subject to adjustment.  The
description and terms of the Rights are set forth in a Rights Agreement dated as
of January 16, 1997, as amended on June 1, 1998 and as the same may be further
amended from time to time (the "Rights Agreement"), between the Company and
LaSalle National Bank, as Rights Agent (the "Rights Agent"), a copy of which is
included as an exhibit to this Report.

b.   FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS

     During each of the last three fiscal years, the Company has operated in
only one industry segment.

c.   NARRATIVE DESCRIPTION OF BUSINESS


     (I) GENERAL


     The Company designs, manufactures and markets a broad range of transmission
products, such as channel units, repeaters and termination units, that are used
by Telcos to provide voice and data services over the existing telephone
network, primarily in the Local Loop. The Company also manufactures a wide range
of remote LAN internetworking, ISDN remote access and virtual private networking
products and services.  In recent years, the demand for high speed digital
transmission over the telephone network has increased as a result of the demand
for high capacity voice lines and the growing communications requirements of LAN
interconnections, wide area networks ("WANs"), on-line data networks (which
typically connect point-of-sale credit card authorization terminals, automatic
teller machines, lottery terminals and reservation stations to a central
computer), the Internet, other on-line data services and, to a lesser extent,
video conferencing.  The Company's products enhance the transmission of voice
and data over the copper network and permit the Telcos to maximize use of the
existing infrastructure of copper wireline.


     The Company's principal customers are the RBOCs.  The Company also sells
its products to certain independent U.S. and international Telcos.  The
Company's principal products are as follows: (i) Tl products which allow Telcos
to deploy 1.544 Mbit/sec digital services; (ii) Voice Frequency ("VF") products
which are primarily used to provide analog data transmission services via
dedicated lines; (iii) Dataphone Digital Services ("DDS") products which are
used to provide switched and dedicated line digital transmissions at rates from
2.4 to 64 Kbit/sec; (iv) ISDN products which provide switched digital
transmission of voice or data at rates of up to 128 Kbit/sec over copper
wireline; (v) digital loop carrier ("DLC") products which are cabinets and
plug-in channel units that are compatible with D4, SLC(R)*-5 and SLC(R) 96
systems (DLC products include plain old telephone service ("POTS") and special
plain old telephone service ("SPOTS") products, which are used to provide
traditional analog voice and modem services); (vi) High bit-rate Digital
Subscriber Line ("HDSL") products which allow Telcos to provide T1 service
without the need to condition the copper wireline or install mid-span repeaters
for distances up to 12,000 feet; and (vii) circuit switched products (which
provide the ability for various telephone switches to interwork with and support
dissimilar protocols) and packet switched products (a line of routers).


______________
* SLC is a registered trademark of Lucent Technologies, Inc. ("Lucent").



                                        
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     (II) INDUSTRY BACKGROUND

     OVERVIEW.  Transmission through the telephone network has traditionally
been accomplished by analog transmission.  Analog transmission, however, has
been unable to provide the requisite data rates and reliability to support the
growing communications requirements of LAN interconnections, WANs, on-line data
networks and services and, to a lesser extent, video conferencing.  Digital
transmission emerged in the 1970s as a reliable high bandwidth alternative to
analog transmission.  As a result, demand for digital communications service by
end-users is growing, and will likely continue to grow.

     INCREASING DEPLOYMENT OF DIGITAL SERVICE IN THE LOCAL LOOP.  While Telcos
generally utilize fiber optic or other systems to permit high speed digital
transmission between their switching facilities ("Central Offices") and from
their Central Offices to DLC systems within the Local Loop, transmission over
copper wireline remains the principal method by which telecommunication services
are provided in the "last mile," the final link between the Central Office or
DLC and the end-user.  Increasing demand for digital transmission by end-users
has given the Telcos considerable incentive to upgrade service in the Local
Loop.  Although replacement of the "last mile" copper wireline in the Local Loop
with fiber optic, coaxial cable, hybrid fiber-coax, wireless and other higher
bandwidth and quality transmission media has occurred to a certain extent,
widespread replacement of the copper wireline has not occurred because of the
labor and capital intensive nature of the replacement process. Consequently,
technologies have emerged which enhance the transmission capabilities of the
copper wireline and allow the Telcos to respond to customer demand for digital
service in the Local Loop at affordable rates and at a level of quality
approaching that of fiber.

     TECHNOLOGICAL DEVELOPMENTS AND TRENDS.  DDS, when introduced in the early
1970s, was one of the first digital transmission services offered by Telcos in
the Local Loop.  DDS provides dedicated service at rates up to 64 Kbit/sec and
has typically been deployed for point-of-sale applications and other on-line
data networks.  The next digital service to be widely deployed in the Local Loop
was T1, which is a 1.544 Mbit/sec dedicated service that can be provided over
two twisted pair of copper telephone wires.  Applications for T1 service include
connections between the Central Office and customer private branch exchanges
("PBXs") and T1 multiplexers and, more recently, cellular base-stations.
Traditional T1 service is provided by "conditioning" the existing copper
wireline to meet the standards for T1 service.  This conditioning requires the
removal of all bridge taps, the separation of the wire pairs and the
installation of mid-span repeaters to regenerate the signal every 3,000 to 6,000
feet (which is necessary because the T1 signal degrades as it passes along the
copper wireline).  Consequently, installation and maintenance of repeatered T1
lines is labor intensive and can be costly, depending on the length of the loop
and the amount of conditioning required along the copper wireline.  HDSL
technology is an accepted alternate method of providing T1 service across the
copper network which does not require conditioning the lines or the installation
of line repeaters for distances of up to 12,000 feet.

     Switched digital services are increasingly being deployed in the Local Loop
in response to customer demand for flexible, high-bandwidth transmission
services.  Whereas dedicated lines are fixed connections between two points,
switched services permit the flexibility of connecting with any similarly
equipped location.  A newer DDS-based service provides switched 56 Kbit/sec
digital transmission.  In addition, basic rate ISDN technology allows a Telco to
deliver switched digital transmission over the copper network at rates up to 128
Kbit/sec (plus an additional 16 Kbit/sec for special services).  These
technologies can support telecommuting, video conferencing and remote-LAN
access.  Although basic rate ISDN technology has been available for over ten
years, it had not been widely deployed by Telcos until recently.  Its recent
increase in popularity is largely attributable to the emergence of widespread
Internet usage, and to cost effective customer premises equipment ("CPE") which
utilizes ISDN capabilities and features.

     Other emerging technologies that provide high-bandwidth digital services
include primary rate ISDN, a switched digital line which operates at T1 speeds,
and Asynchronous Digital Subscriber Line ("ADSL"), which provides sufficient
capacity for delivery of video-on-demand over the copper wireline.

     OTHER INDUSTRY TRENDS.  Faced with increasing competition for customers,
Telcos are demanding enhanced functionality in the equipment they deploy to
deliver telecommunications services.  In response, equipment manufacturers have
developed, and will likely continue to develop, products which can be tested,
adjusted and reconfigured from a remote location (i.e., "intelligent" products)
to assist Telcos in achieving labor cost savings and efficiency gains.  For
instance, Telcos are now deploying sophisticated T1 transmission gear that
includes inherent performance monitoring ("PM") capabilities.  These PM systems
allow the Telcos to constantly monitor the quality of service being delivered to
their T1 customers.






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     The technologies which have emerged to replace the existing copper
infrastructure (such as fiber optic, coaxial cable, hybrid fiber-coax and
wireless systems) remain relatively costly to install.  While the transition
from copper wireline to telecommunications networks based on newer technology is
generally expected to be gradual, it is anticipated that the markets for and the
pace of deployment of these technologies will grow as their costs decrease.
Accordingly, demand for products applicable to the copper wireline will decrease
and new products and services will need to be developed to address the demands
of these growing markets.  See Subparagraph d. (ii) of this Item 1 -- "Factors
That May Affect Future Results -- Rapid Technological Changes and Dependence on
New Products" and Subparagraph d. (i) of this Item 1 -- "Factors That May Affect
Future Results--Dependence on T1 Products."

     (III) PRODUCTS

     (A)   GENERAL

     Digital and analog signals from each subscriber are gathered at a Telco's
Central Office.  While most of these lines are connected directly to the Central
Office switch, special service lines are attached to an assembly which provides
the speed and functionality of the particular circuit.  These circuit
assemblies, known as channel units, connect the subscriber line to a channel
bank or similar equipment which converts voice and data transmission signals as
required (e.g., from analog to digital), combines or separates them as necessary
(e.g., into or from a single digital stream for T1 service) and directs the
signals through the telephone network.  Channel banks are typically located in
the Central Offices.  A DLC within the Local Loop performs the same function as
a channel bank and typically interfaces fiber optic or some other medium which
has been deployed between the Central Office and the copper wireline that runs
to the end-user's premises.  Along the copper wireline in the Local Loop,
electronic equipment such as repeaters may be required to restore and amplify
the signal.  In the case of dedicated lines, a Telco typically installs a
termination unit at the end-user's premises which allows testing and adjustment
of the subscriber line.

     The Company manufactures a broad range of products necessary to provision
the Local Loop which are designed for installation either at the end-user's
premises, along the Local Loop or at the Central Offices.  The Company's
products include channel units, repeaters and termination units used by the
Telcos for the provisioning, testing and termination of analog and digital
transmission services in the Local Loop at speeds of up to 1.544 Mbit/sec. The
Company also manufactures ISDN integrated access systems for many of the largest
telecommunications equipment and service providers worldwide.

     Most of the Company's products consist of a single printed circuit board
upon which a microprocessor and other electronic components are mounted.  These
units generally plug into a housing at either the customer's location, the
Central Office or an intermediate point along the telephone network.  While the
Company offers many of the housings into which these units plug, some of the
units are designed specifically to plug into housings or systems manufactured by
others, and virtually all of the units are plug compatible with various
industry-standard systems, such as the Lucent SLC(R)-5 DLC system.  To meet
customer requirements, the Company regularly produces customized versions of its
standard products to incorporate customer-specific "firmware" (embedded memory)
or unique hardware (such as a customized electronic assembly) or to mount unique
parts on an otherwise standard printed circuit board.  Many of the Company's
products enhance traditional voice and data transmission products, incorporating
onboard microprocessors which allow them to perform many functions automatically
and to be provisioned and tested from a remote location, thereby reducing labor
costs and achieving efficiency gains.

     (B) THE COMPANY'S PRODUCTS

     T1/HDSL PRODUCTS.  The Company is a supplier of intelligent repeatered T1
products for the Local Loop.  These products allow Telcos to quickly deploy high
speed (1.544 Mbit/sec) digital service over the existing infrastructure of
copper wireline in the Local Loop.  T1 service is frequently deployed for PBX
and dedicated lines.  The Company was the first to successfully introduce
cost-effective intelligent T1 repeaters, which spurred the sales growth of the
Company's T1 products.  Sale of T1 products accounted for 48.7%, 55.2% and 53.9%
of the Company's total net sales in fiscal 1998, 1997 and 1996, respectively.


     Within its T1 product line the Company currently offers intelligent
network interface units ("NIUs"), intelligent office repeaters, intelligent
line repeaters and T1 mountings.  The Company's NIUs are installed by Telcos to
terminate a T1 line at the customer's premises and to allow testing of the
circuit.  The Company's T1 repeater products are installed by Telcos to
regenerate a T1 signal that has degraded due to transmission over a long
distance 





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of copper wireline.  These repeaters contain addressable loopback circuits that
allow rapid fault isolation from a remote location.  This remote testing
capability allows Telcos to offer improved service at a lower cost in the
increasingly competitive telecommunications environment.

     Teltrend introduced a new generation of NIUs to Telcos throughout the
United States during late fiscal 1997 and fiscal 1998.  These new NIUs contain
extensive performance monitoring ("PM") capabilities for both directions of T1
transmission (toward the customer and toward the network).  The PM NIUs provide
crucial information to the network provider regarding the quality and
availability of their delivered T1 services.  PM NIUs can be deployed at the
network interface, terminating all forms of T1 transmission facilities --
repeatered T1, HDSL or fiber-based.  While there is no assurance that the
Company will be able to successfully compete in the PM NIU market, the Company
believes that its PM NIU sales and the market for PM NIU products will show
moderate growth over the next several years.

     HDSL technology is an accepted alternate method of providing T1 service
over the copper wireline in the Local Loop.  HDSL is easier to provision than
traditional T1 service because it eliminates the need to condition the wireline
and to install line repeaters for distances of up to 12,000 feet.  Despite the
use of HDSL, Telcos continue to deploy traditional repeatered T1 service, since
it is presently more cost-effective than HDSL on short lines and on established
repeatered T1 routes.  However, the Company expects that demand for its T1
products (which provide traditional repeatered T1 service) will decline as the
cost of HDSL systems declines.  The Company manufactures a 4-wire HDSL product
line which has been approved and purchased by two Telcos. See Subparagraph d.
(i) of this Item 1 -- "Factors That May Affect Future Results--Dependence on T1
Products."  The HDSL market in the United States is highly competitive and
currently dominated by three companies:  PairGain Technologies, Inc.
("PairGain"); ADC Telecommunications, Inc. ("ADC"); and ADTRAN, Inc. ("ADTRAN").
See Subparagraph c. (ix) of this Item 1 -- "Narrative Description of Business --
Competition."

     The CellPak(TM) product line  provides T1 transport in a completely
self-contained, pre-tested, outdoor package for providing a Telco demarcation to
cellular or personal communications services providers via metallic or fiber
optic lines.  Coordination problems that are often encountered between the
wireless operator and the Telco are greatly reduced by the CellPak(TM), both in
original installation and in maintenance situations.  Teltrend's  CellPak(TM)
systems are available with HDSL, conventional T1 or fiber optic feeds.

     DLC/VF PRODUCTS.  Within its DLC product line, the Company manufactures an
advanced 2-wire foreign exchange unit ("2FXO") for the Lucent SLC(R)96 and D4
systems.  The 2FXO uses microprocessor control to compensate for network
anomalies caused by variations in PBX's and Central Office switches.  It
thereby eliminates various operational and billing problems commonly
experienced with foreign exchange lines.

     The Company also manufactures a 2-wire dial pulse terminate unit with gain
transfer ("DPT/GT") for D4 channel bank systems.  The DPT/GT uses microprocessor
control to provide an automated precision balance.  This saves time and manpower
in provisioning service and eliminates operational performance problems (such as
"howling") due  to maladjustment from manual trial-and-error balancing.

     In the past, the Company has competed in the DLC market largely by
supplying special service channel units for the existing infrastructure of
Lucent DLC systems (SLC(R)96, SLC(R)5).  The Company is now in the process of
also becoming an original equipment manufacturer of channel units by selling
channel units to Next Level System, Inc., another DLC systems company.

     The Company is a supplier of intelligent VF products.  Within its VF
product line, the Company currently offers data station termination ("DST")
units and VF channel units and mountings, which Telcos use primarily to provide
dedicated analog data lines.  The Company's DST and VF channel units are
installed by Telcos at the customer's premises and in a channel bank or DLC
system, respectively, to terminate both ends of an analog data line.  These
units contain onboard microprocessors which allow all testing and adjustment to
be performed from a remote location.

     The Company's VF products are principally used by Telcos to provision the
4-wire analog data lines typically leased by Telco customers to connect
geographically dispersed computer terminals (such as point-of-sale credit card
authorization terminals, automatic teller machines, lottery terminals and
reservation stations) to a central computer.  Although there are several other
ways to link these terminals to a central computer (most notably DDS), analog
data 





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lines remain, for several reasons, a commonly utilized method for accomplishing
these links.  An analog data line is the only practical way to add a terminal to
an existing analog data network (of which there is a large installed base).  In
addition, analog data line transmission in certain locations is the only means
of transmission available.

     The Company believes that the domestic market for its VF products is
decreasing, and will likely continue to decrease, as digital data transmission
services within the Local Loop become less costly and more widely deployed.
However, the Company will endeavor to partially offset the effects of this
decline by expanding its marketing efforts for its VF products to independent
Telcos and to international markets.  Sales of VF products accounted for 11.0%,
15.2% and 21.0% of the Company's total net sales in fiscal 1998, 1997 and 1996,
respectively.

     ISDN/DDS PRODUCTS. The Company is currently manufacturing, developing and
marketing products based on basic rate ISDN technology.  This technology allows
Telcos to provide their customers with two 64 Kbit/sec digital channels for
voice or data, plus an additional data channel for special purposes, over a
single twisted pair of copper wires.  Whereas most digital transmission services
require a dedicated line, ISDN is a switched service.  This offers the end-user
the flexibility of conventional dial-up service with the speed and quality of
digital transmission.  In addition, multiple ISDN lines can be aggregated to
provide the bandwidth required for applications such as video conferencing.

     The Company currently manufactures and markets an ISDN channel unit which
plugs into Lucent's SLC(R)-5 DLC system, an ISDN line repeater unit which is
used to extend service beyond 16,000 feet and an ISDN channel unit for use with
Lucent's SLC(R)96 DLC system.  The Company also manufactures channel banks for
use at Telco Central Offices.  These channel banks are used to interface the
ISDN signal for interoffice transport when the local Central Office switch
cannot support ISDN service.

     The Company's acquisition of Teltrend Ltd. in September 1997 has increased
its ISDN product offerings.  Teltrend Ltd. supplies ISDN access solutions such
as protocol conversion, port concentration, routing and remote management units.
These enable telecommunications service and equipment providers to facilitate
basic rate and primary rate delivery by providing support for interfaces and
services not otherwise available to them.  The Company now also offers a total
networking solution that makes ISDN more attractive to the end-user.  The
product range encompasses the Network iQ(TM) family of routers -- including
routers with built-in PBX functionality and a solution to provide secure or
encrypted virtual private networks (VPNs) across the Internet--and the Connect
iQ family of terminal adaptors for ISDN access.

     The Company's DDS products are used by Telcos to deliver digital service
across copper wires in the Local Loop at speeds from 2.4-64 Kbit/sec.  The
majority of DDS service is provided by means of a dedicated line, but switched
56 Kbit/sec service is also available.  As with the Company's analog VF data
transmission products, DDS service is typically used by customers to connect
geographically dispersed computer terminals to a central computer.  In recent
years, DDS has benefited from the trend toward digital service described above,
including frame relay service for Internet access.

     The Company is currently a market leader in DDS channel units which plug
into Lucent's SLC(R)-5 DLC systems. The Company manufactures intelligent DDS
termination units, which are installed by Telcos at the end-user's premises to
configure and maintain a DDS line.  A trend toward labor-saving Local Loop
equipment has increased the demand for this type of unit.  The Company's DDS
products are sold to all of the RBOCs and to Southern New England Telephone.

     (IV) CUSTOMERS

     The Company has historically sold substantially all of its products to the
RBOCs and a small portion of its products to independent Telcos, such as GTE and
Sprint and international Telcos.  Sales to the RBOCs accounted for approximately
81.7%, 95.8% and 95.2% of the Company's total net sales in fiscal 1998, 1997 and
1996, respectively.  In fiscal 1998, sales to SBC Communications Inc. (which
merged with Pacific Bell in fiscal 1998), BellSouth Telecommunications Inc.,
Bell Atlantic (which merged with NYNEX in fiscal 1998), Ameritech Corp., and US
WEST Inc. accounted for 30.1%, 16.8%, 13.8%, 10.8%, and 10.3%, respectively, of
the Company's total net sales.  No other customer accounted for more than 10% of
the Company's total net sales in fiscal 1998.  The acquisition of Teltrend Ltd.
has given the Company an opportunity to expand its customer base to include
international Telcos and international small businesses, distributors and other
end-users of networking routers, thereby somewhat reducing the 




                                       7
<PAGE>   8


Company's overall dependence on sales to the RBOCs.  See Subparagraph d. (iii)
of this Item 1 -- "Factors That May Affect Future Results--Reliance on Certain
Customers."

     Prior to selling a product to a Telco customer, the Company generally must
first submit that product for qualification by the customer.  Accordingly, the
Company is continually submitting successive generations of its current products
as well as new products to its customers for qualification.  Although the
qualification process varies somewhat among customers, the Company's experience
is that the process can take anywhere from a few weeks to a year or more and
generally consists of the following three phases:

      *    Laboratory Evaluation.  The product's function and performance are
           tested against all relevant industry standards, such as those set by
           Bell Communications Research, Inc. ("Bellcore").


      *    Field Trial.  A number of telephone lines are equipped with the
           product for simulated operation in a field trial.  The field trial is
           used to evaluate performance, assess ease of installation and
           establish troubleshooting procedures.


      *    Product Selection and Deployment.  Prior to product selection and
           deployment, the customer develops and implements a variety of methods
           and procedures relating to ordering, stocking, installation,
           maintenance, returns and all other activities associated with the use
           of the product.


     (V)   MARKETING, SALES AND DISTRIBUTION


     The majority of the Company's sales in the United States are made by its
field sales organization, which is deployed throughout the United States.  The
marketing, sales and customer service employees based at the Company's
headquarters support these field salespersons and often become involved in the
sales process.  Teltrend Ltd.'s salesforce consists of 8 salespersons based in
the U.K., New Zealand and China.  The Company also sells its products through
distributors.  Although the Company has agreements with many of these
distributors, these agreements do not establish minimum purchase commitments and
are generally terminable by either party upon 60 days notice.  For each of the
Company's last five fiscal years, no distributor has accounted for more than
1.5% of the Company's total net sales.  The Company believes that its success
has, to a significant degree, been due to the performance of its sales and
distribution teams and that its future success will depend, in part, on its
ability to attract and retain qualified sales and marketing personnel who can
successfully increase the Company's sales revenue in the highly competitive
telecommunications equipment marketplace.

     The Company has or is in the process of negotiating multi-year supply
agreements with virtually all of its major customers, which cover products
representing a majority of the Company's sales.  These agreements only govern
the terms and conditions applicable to purchases of the Company's products,
including prices, and generally do not establish any minimum purchase
commitments.  Sales of the Company's products under these agreements are made on
a purchase order basis.  Because these contracts generally prohibit the Company
from increasing the price of its products sold thereunder for stated periods of
time, any significant increase in the Company's costs during such periods which
the Company is unable to offset with a corresponding increase in prices due to
such prohibitions could have a material adverse effect on the Company.  See
Subparagraph d. (iii) of this Item 1--"Factors That May Affect Future
Results--Reliance on Certain Customers."  In addition, the Company has
arrangements with three of its customers which require the Company to maintain a
portion of its finished goods inventory at the various locations of such
customers.  As of July 25, 1998, approximately 37% of the Company's finished
goods inventory was maintained at these locations.  See Subparagraph d. (vi) of
this Item 1--"Factors That May Affect Future Results--Inventory Levels and Need
to Make Advance Purchase Commitments" and Subparagraph d. (ix) of this Item 1 --
"Factors That May Affect Future Results--Potential Product Recalls and Warranty
Expenses."

     (VI) RESEARCH AND PRODUCT DEVELOPMENT

     The Company is market driven and works closely with its current and
potential customers  in connection with product development.  Using feedback
received from such customers, the Company identifies and develops new products
and enhancements to its existing products.






                                       8
<PAGE>   9


     The Company's research and product development is carried out by engineers
and engineering support personnel located in the U.S., U.K. and New Zealand.
These individuals are organized into teams corresponding to the Company's
product lines, with each team being responsible for providing technical support
for the Company's existing products and conceiving new products in cooperation
with others within the Company.  Utilizing computer-aided design tools, each
product team also implements the Company's ongoing "value engineering" programs
which are designed to periodically replace all of the Company's major products
with successive generations having additional product features, such as
"intelligence," or new mechanics and/or lower costs.

     All product development expenses are charged to operations as incurred. The
Company's expenditures on research and product development were approximately
$14.3 million, $9.7 million,  and $7.9 million in fiscal 1998, 1997 and 1996,
respectively.  The Company believes its future success will depend in part on
its ability, on a cost effective and timely basis, to continue to enhance its
products, develop and introduce new products for the telephone network
transmission market and other markets, address new industry standards and
changing customer needs and achieve market acceptance for its products.
Accordingly, the Company intends to continue to make significant investments in
research and product development.  See Subparagraph d. (ii) of this Item 1--
"Factors That May Affect Future Results--Rapid Technological Changes and
Dependence on New Products." See also Item 7--"Management's Discussion and
Analysis of Financial Condition and Results of Operations--Fiscal 1998
Compared with Fiscal 1997."

     (VII) CUSTOMER SERVICE AND SUPPORT

     The majority of service, repair and technical support of the Company's
products is performed at the Company's headquarters.  Under certain
circumstances, the Company also provides comprehensive on-site field support to
its customers.  The Company offers telephone technical support to its domestic
customers 24 hours a day, seven days a week and also provides training to its
principal customers with respect to its products.

     Most of the Company's products carry a limited warranty of 12 months to
seven years, which generally covers defects in materials or workmanship and
failure to meet published specifications, but excludes damages caused by
improper use.  For each of the past five fiscal years, the Company's warranty
expense has been relatively insignificant, representing less than 1.0% of the
Company's annual net sales.  See Subparagraph d.(ix) of this Item 1--"Factors
That May Affect Future Results--Potential Product Recalls and Warranty
Expenses."

     (VIII) MANUFACTURING AND SUPPLIERS

     To successfully compete for Telco business, telecommunications equipment
manufacturers must offer products which assist Telcos in meeting customer demand
for high quality, reliable transmission services.  The Company is committed to
customer satisfaction in the design and manufacture of its products and
maintains comprehensive quality control systems to monitor product and service
quality throughout all of its processes.  This commitment has resulted in the
Company's domestic operations achieving CSQPSM (Customer Supplier Quality
Process) and ISO 9001 Registration recognition from Bellcore.

     The Company's domestic manufacturing process consists of several distinct
phases: material planning and procurement, assembly, burn-in, testing and
quality audit.  The Company procures electronic and mechanical components from
outside manufacturers and assembles them using a substantially automated
production process.  Incoming components are subject to quality inspection and
testing.  In addition, the products manufactured by the Company are tested prior
to shipment to customers.

     All of the products offered and sold by the Teltrend Ltd. operations are
manufactured by independent contractors, generally pursuant to manufacturing
agreements entered into with Teltrend Ltd.  These manufacturers have all
achieved ISO 9002 recognition, and Teltrend Ltd.'s software products have
achieved "Ticket" recognition for quality performance.

     Historically, the Company has used industry standard components for its
products.  Some components, however, including application specific integrated
circuits ("ASICs"), are custom made to the Company's specifications.  In
addition, the Company uses proprietary design integrated circuits ("PDICs") in
the manufacture of its products which are the design and property of the
manufacturer from which they are purchased.  Certain key components required to
manufacture the Company's products, principally its ASICs and PDICs, are
currently available from only one source.  The Company continually evaluates its
sources of supply and will establish additional supply 





                                       9
<PAGE>   10


relationships where available and advisable to increase the reliability of
receipt of components. The Company generally obtains its components on a
purchase order basis. Components that currently are readily available may become
difficult to obtain in the future.  See Subparagraph d. (v) of this Item 1 --
"Factors That May Affect Future Results--Dependence on Certain Suppliers."

     The Company's customers typically require delivery of products shortly
after an order is placed, which requires the Company to maintain relatively high
inventory levels and increases the risk of inventory obsolescence. In addition,
certain of the components used by the Company require an order lead time of up
to six months and the Company must regularly make advance, non-cancelable
commitments to purchase relatively large quantities of such components.  The
Company continually monitors and reviews its inventories and purchasing
practices in an effort to minimize inventory related costs and the risk of
obsolescence.  See Subparagraph d. (vi) of this Item 1 -- "Factors That May
Affect Future Results -- Inventory Levels and Need to Make Advance Purchase
Commitments."  See also Item 7 -- "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."

     (IX) COMPETITION

     The markets for the Company's products are highly competitive and
characterized by rapid technological change, evolving industry standards,
changes in customer requirements, price-competitive bidding and frequent product
introductions and enhancements.  With the development of the worldwide
telecommunications market and increasing demand for high speed digital
transmission over the existing telephone network, many companies have emerged to
offer products for these markets.  Moreover, the Company expects competition to
increase both from existing competitors and from other companies which may enter
the Company's existing or future markets.  The Company competes for customers on
the basis of price, product features, conformance with industry standards and
specifications, performance and reliability, technical support and the
maintenance of close customer relationships.

     The Company's competitors in the United States and elsewhere are numerous
and, in many cases, have significantly greater financial, technological,
manufacturing, marketing and personnel resources than the Company.  In addition,
certain of the Company's competitors have long-standing relationships with
certain Telcos which may adversely affect the Company's ability to successfully
compete for business at these Telcos.  The Company's principal competitors with
respect to T1 products are Charles Industries, Troncom and Westell, Inc. In
addition, because HDSL is easier to provision than traditional T1 service, the
Company faces competition with respect to its repeatered T1 products from
suppliers of HDSL systems, which is an accepted alternate method of delivering
T1 services in the Local Loop. The HDSL market is dominated by PairGain, ADC and
ADTRAN.  The Company's principal competitor with respect to VF products is
Tellabs, Inc. and the domestic market for VF products generally is experiencing
decreasing demand as higher speed digital data transmission services become less
costly and more widely deployed. The Company's principal competitor with respect
to DDS products is ADTRAN.  Lucent, Pulse Communications, Inc. ("Pulsecom"), a
subsidiary of Hubbell Incorporated, and XEL are the Company's principal
competitors with respect to the Company's DLC products.  With respect to the
Company's ISDN products, the Company's principal competitor is ADTRAN.  See
Subparagraph d. (i) of this Item 1 -- "Factors That May Affect Future
Results--Dependence on T1 Products" and Subparagraph d. (iv) of this Item 1 --
"Factors That May Affect Future Results -- Highly Competitive Industry."

     The Company's principal competitors with respect to its circuit-switched
products are Aculab and Telspec.  With respect to the Company's pocket-switched
products, there are numerous competitors, although the market is dominated by
Cisco Systems.

     (X) REGULATION

     The telecommunications industry is subject to regulation in the United
States, the United Kingdom and other countries.  Federal and state regulatory
agencies regulate most of the Company's domestic customers.  While such
regulation does not typically affect the Company directly, the effects of such
regulation on the Company's customers may adversely impact the Company's sales
and operating results.  For example, the sale of the Company's products may be
affected by the imposition upon certain of the Company's customers of common
carrier tariffs, the taxation of telecommunications services, and regulatory
policies affecting the terms upon which common carriers conduct their business.
These policies are under continuous review and are subject to change.  See
Subparagraph d. (vii) of this Item 1 -- "Factors That May Affect Future
Results--Government Regulation."






                                       10
<PAGE>   11


     (XI) PROPRIETARY RIGHTS

     The name "Teltrend" is a registered trademark of the Company in the U.S.
The Company has also registered six of its product names and has applied for
trademark registration for ten additional product identifiers or names in the
U.S.  The Company has pursued and intends to continue to pursue patent
protection of inventions that it considers important to the Company's business
and for which such protection is available.  The Company presently holds patents
on seventeen inventions relating to its products and has thirteen patent
applications pending in the U.S.  Also, the Company is a party to various
agreements (which generally continue for the life of the underlying patent)
whereby the Company licenses certain telecommunications technology, including
digital channel banks and signal decoding systems, in connection with the
manufacture of its products.  The Company has a registered copyright in the U.S.
with respect to a certain software program used in a number of its products.  In
addition, as part of its confidentiality procedures, the Company generally
enters into nondisclosure agreements with its key employees and certain
suppliers, and limits access to and distribution of its proprietary information.
Despite these precautions, it may be possible for a third party to copy or
otherwise obtain and use the Company's technology without authorization.
Accordingly, there can be no assurance that the Company will be successful in
protecting its proprietary rights or that the Company's proprietary rights will
preclude competitors from developing products or technology equivalent or
superior to the products and technology of the Company.  Moreover, the laws of
some foreign countries do not protect the Company's proprietary rights in its
products to the same extent as do the laws of the United States.

     The telecommunications industry is characterized by an increasing number of
patents and frequent litigation based on allegations of patent infringement.
From time to time, third parties may assert exclusive patent, copyright and
other intellectual property rights to technologies which are important to the
Company.  Moreover, a substantial number of the Company's products are intended
to plug into telephone network equipment manufactured by third parties, some of
which are also competitors of the Company.  Such equipment may be originally
designed or subsequently modified so that it is incompatible with the Company's
existing or future products.  Further, intellectual property rights may be
associated with certain of such equipment and the Company may not be able to
design products so that they do not infringe these rights, or to license such
rights on commercially favorable terms.

     (XII)  EMPLOYEES

     As of July 25, 1998, the Company had 519 full-time employees.  The
Company's future success will depend largely upon its ability to attract and
retain highly qualified personnel.  The Company's employees are not represented
by any collective bargaining agreements, and the Company has never experienced a
work stoppage.  The Company believes that its employee relations are good.

     (XIII) BACKLOG

     At July 25, 1998, the Company's backlog of orders believed to be firm was
approximately $3.7 million, compared to approximately $2.1 million at July 26,
1997. The Company believes that backlog is not a meaningful indicator of net
sales that can be expected for any future period.

D. FACTORS THAT MAY AFFECT FUTURE RESULTS

     (I)   DEPENDENCE ON T1 PRODUCTS

     The Company's T1 products, which include T1 line and office repeaters and
Tl network units, accounted for 48.7%, 55.2% and 53.9% of the Company's total
net sales in fiscal 1998, 1997 and 1996, respectively. The Company expects to
derive a large percentage of its net sales for the foreseeable future from the
sale of these products. Consequently, the Company's inability to maintain or
increase net sales of its T1 products in the future, or to offset any shortfall
in sales of such products with sales of other existing or future products, could
have a material adverse effect on the Company.

     The Company is facing, and expects to continue to face, increasing
competition with respect to its repeatered T1 products from suppliers of systems
based on HDSL technology as an alternate method of delivering repeatered T1
services in the Local Loop.  Because HDSL is easier to provide than traditional
T1 service, the Company expects that HDSL products will continue to adversely
affect the demand for its repeatered  T1 products as the cost of HDSL 






                                       11
<PAGE>   12


systems declines.  If increasing competition or other factors cause the Company
to reduce selling prices for its repeatered T1 products (as has recently
occurred due to pricing pressure from certain of the Company's customers), there
can be no assurance that the Company will be able to increase unit sales volumes
of such products or reduce its costs of sales of such products so as to offset
in full or in part the reduced revenue and gross profit margin effects of such
selling price reductions.  See "Reliance on Certain Customers" and Item 7 --
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

     (II)  RAPID TECHNOLOGICAL CHANGES AND DEPENDENCE ON NEW PRODUCTS

     The market for the Company's products is characterized by rapidly changing
technology, evolving industry standards, changes in customer requirements,
price-competitive bidding and frequent product introductions and enhancements.
The introduction of telephone network voice and data transmission products
involving new technologies, the emergence of new industry standards or changes
in customer requirements or service offerings could adversely affect the
Company's ability to sell its existing products and products currently under
development.  Most of the Company's existing products are designed to facilitate
and enhance the delivery of communications over the existing copper wireline in
the Local Loop and the Company expects that Telcos will increasingly replace the
installation of copper wireline with the installation of fiber optic, coaxial
cable, wireless and other technologies (each of which uses a significantly
different method of delivery).  The Company believes that the continued
installation of new technologies in the Local Loop will adversely affect demand
for certain of its existing products and that its future success will largely
depend upon its ability, on a cost-effective and timely basis, to continue to
enhance its existing products and develop and achieve commercial acceptance of
new products.  See "-- Dependence on T1 Products."  There can be no assurance
that developments by others will not render the Company's products or
technologies obsolete or unmarketable or that the Company will be able to
successfully anticipate or adapt to changing technology, industry standards or
customer requirements on a timely basis.  Any failure by the Company to
anticipate and respond to technological developments or changes in industry
standards or customer requirements could have a material adverse effect on the
Company.

     (III)  RELIANCE ON CERTAIN CUSTOMERS

     The Company has historically depended on the RBOCs for substantially all of
its net sales and, although the Company's customer base has become less
concentrated in the RBOCs as a result of the Teltrend Ltd. acquisition,
dependence on the RBOCs for the preponderance of the Company's net sales is
likely to continue for the foreseeable future.  The Company has no supply
agreements with any of the RBOCs which establish minimum purchase  commitments
and there can be no assurance that sales of the Company's products to the RBOCs
or to other customers will continue or that the Company's customer base will
become materially  less concentrated.  The RBOCs and most of the Company's other
customers are significantly larger than, and are able to exert a high degree of
influence over, the Company.  For example, recent negotiations with the RBOCs
have resulted in the Company offering reduced prices for selected products.  The
loss of one or more of the RBOCs as a customer, a further reduction in the
number of RBOCs as a result of mergers or consolidations, or a failure or delay
in the deployment of the Company's products by the RBOCs could materially and
adversely affect the Company.

     (IV)  HIGHLY COMPETITIVE INDUSTRY

     The markets for the Company's products are highly competitive, especially
with respect to price, product features, quality and conformance to industry
standards.  The Company's competitors in the United States and elsewhere are
numerous and the Company expects its competition to increase in the future both
from existing and new competitors.  Increased competition could lead to reduced
gross profit margins and may necessitate increased spending by the Company on
product development and sales and marketing in order to remain competitive, or
may otherwise adversely affect the Company.  The Company has generally been
required to reduce the selling prices of its products over time and will likely
be required to do so in the future.  See "-- Reliance on Certain Customers." The
Company's ability to maintain or increase net sales will depend largely upon its
ability to increase unit sales volumes of its products to counter declines in
the average sales prices of its products.  Declining average sales prices would
also adversely affect gross margins on the Company's products if not offset by
corresponding reductions in product costs.  See Item 7 -- "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Fiscal 1998 Compared to Fiscal 1997 -- Gross Profit."  Many of the Company's
competitors have significantly greater financial, technological, manufacturing,
marketing and personnel resources than the Company.  In addition, certain of the
Company's competitors have long-standing relationships with certain Telcos which
may adversely affect the Company's ability to successfully compete for business
at these Telcos.






                                       12
<PAGE>   13

     (V)  DEPENDENCE ON CERTAIN SUPPLIERS

     Certain key components which are required to manufacture the Company's
products are available from only one source.  Such components include the
Company's ASICs, which are built to Company specifications, and its PDICs, which
are the design and property of the manufacturer from which they are purchased.
The Company generally obtains its components on a purchase order basis.
Accordingly, there can be no assurance that the Company will be able to continue
to obtain sufficient quantities of key components as required or that such
components, if obtained, will be available to the Company on commercially
favorable terms.  Further, certain components require an order lead time of up
to six months.  Failure by the Company to order sufficient quantities of
components in advance could prevent the Company from meeting customer demand for
its products.

     The Company has been able to adjust its order lead times and/or promised
delivery dates to avoid material delivery delays of its products.  However,
there can be no assurance that the Company will be able to do so in the future.
Under certain of the Company's supply contracts, a delay in the delivery of
products would permit the customer to cancel the purchase order or, in limited
circumstances, assess a late delivery charge.  In addition, late deliveries
could adversely affect the Company's ability to obtain additional sales from a
particular customer.  The Company's inability to obtain sufficient quantities of
key components or products, or to develop alternative sources of such components
or alternative contract manufacturing relationships (in the case of Teltrend
Ltd.) on commercially favorable terms if and as required in the future, could
result in delays or reductions in product shipments or could otherwise have a
material adverse effect on the Company's customer relationships and,
consequently, on its business, results of operations and financial condition.
See "-- Reliance on Certain Customers."

     (VI)  INVENTORY LEVELS AND NEED TO MAKE ADVANCE PURCHASE COMMITMENTS

     The Company maintains inventory levels consistent with anticipated customer
demand.  In addition, at the request of several of its customers, the Company
has entered into arrangements to maintain certain of its finished goods
inventory at various locations of such customers.  Although the Company believes
these arrangements facilitate sales to its customers, they result in higher
levels of inventory than are necessary in the absence of such arrangements.
Accordingly, there is a risk that the Company's profitability and results of
operations may from time to time be materially and adversely affected by
inventory obsolescence.  To procure adequate supplies of certain components, the
Company must regularly make advance commitments to purchase relatively large
quantities of such components.  The inability of the Company to incorporate such
components in its products could have a material adverse effect on the Company.

     (VII)  GOVERNMENT REGULATION

     The telecommunications industry is subject to regulation in the United
States, the United Kingdom and other countries.  Federal and state regulatory
agencies regulate most of the Company's domestic customers.  While such
regulation does not typically affect the Company directly, the effects of such
regulation on the Company's customers may adversely impact the Company's sales
and operating results.  For example, the sale of the Company's products may be
affected by the imposition upon certain of the Company's customers of common
carrier tariffs, the taxation of telecommunications services and regulatory
policies affecting terms on which common carriers conduct their business.  In
addition, certain countries may have or may develop rules and regulations that
will adversely affect the Company's ability to effectively compete in some
markets.  Thus, there is no assurance that markets that are now open to the
Company's products will not be limited by government regulation in the future.

     (VIII)  PROPRIETARY RIGHTS AND RISKS OF THIRD-PARTY CLAIMS OF INFRINGEMENT

     The telecommunications industry is characterized by an increasing number of
patents and frequent litigation based on allegations of patent infringement.
From time to time, third parties may assert exclusive patent, copyright and
other intellectual property rights to technologies which are important to the
Company.  While the Company does not believe that its present products and
technology infringe the intellectual property rights of others, there can be no
assurance that third parties will not assert infringement claims against the
Company or that any such assertions will not result in costly litigation. There
can be no assurance that the Company would prevail against any such claims or
that licenses of any third-party intellectual property would be available to the
Company on commercially reasonable terms.  In addition, a substantial number of
the Company's products are intended to plug into telephone network equipment
designed and manufactured by third parties, some of which are competitors of the
Company.  The design 





                                       13
<PAGE>   14



or modification of such equipment so that it is incompatible with the Company's
products could adversely affect the Company's ability to maintain its current
level of, or achieve additional, net sales.  The inability of the Company to
develop products for such equipment which do not infringe the intellectual
property rights associated with such equipment, or to obtain the right to use
such intellectual property on commercially reasonable terms, could have a
material adverse effect on the Company.  In addition, any infringement claims or
litigation against the Company could have a material adverse effect on the
Company.

     (IX)  POTENTIAL PRODUCT RECALLS AND WARRANTY EXPENSES

     The Company's products are required to meet rigorous standards imposed by
its customers, including written technical requirements and various mechanical,
electrical performance, environmental operating and storage conditions, and to
interface in a complex and changing environment with telecommunication network
equipment produced by numerous other suppliers.  In the event there are material
deficiencies or defects in the design or manufacture of the Company's products
or if such products become incompatible with existing third-party network
equipment, the affected products could be subject to a recall. Although the
Company has not experienced any complete recall of a product from the field in
the past, the Company has from time to time agreed to upgrade certain of its
products in response to product design issues raised by certain of its
customers.  There can be no assurance that the Company will not experience a
material product recall in the future.  Any product recall and associated
negative publicity could have a material adverse effect on the Company.

     (X)   POSSIBLE VOLATILITY OF STOCK PRICE

     The Company believes factors such as announcements of new products or
technological innovations by the Company or third parties, as well as variations
in the Company's results of operations, gain or loss of significant customers,
legislative or regulatory changes, changes in analysts' estimates, stock market
volatility and other events or factors may cause the market price of the
Company's Common Stock to fluctuate significantly.

ITEM 2.    PROPERTIES.

     The Company's headquarters and principal administrative, engineering and
manufacturing facilities are located in a facility containing approximately
105,000 square feet located on approximately seven acres of land in St. Charles,
Illinois.  The Company leases this building under an operating lease arrangement
which expires on September 30, 2000.  In March 1998, the Company finalized the
purchase of another building in St. Charles, Illinois to provide 19,800 square
feet of office and lab space for marketing and engineering personnel.

     Teltrend Ltd.'s principal administrative and engineering offices are
located in a 16,000 square foot facility in an office complex in Basingstoke,
England under two leases which expire in December 2005. Teltrend Ltd. also
leases sales and engineering offices in Christchurch, New Zealand
(approximately 8,000 square feet under a lease that expires in March 2000,
subject to a four-year renewal right) and Beijing, China (approximately 2,000
square feet under a lease that expires in 2007).

     The Company believes that anticipated growth through September 2000 can be
accommodated by these facilities and, if necessary, by leasing additional space.

     On March 5, 1997, the Company purchased 22.65 acres of land located in
Geneva, Illinois for approximately $1.8 million.  The Company purchased the land
for the construction of a new office, research and manufacturing facility, but
currently has no plans to commence construction of such a facility in fiscal
1999.

ITEM 3.    LEGAL PROCEEDINGS.

     The Company is from time to time involved in various legal proceedings
arising in the ordinary course of its business.  In addition, the Company has
from time to time been notified by others who assert exclusive rights to certain
technology.  The Company evaluates these claims on a case-by-case basis and
enters into licensing arrangements when it appears necessary or desirable to do
so.  The Company believes the resolution of any pending matters will not
materially affect the Company's financial position or results of operations. See
Subparagraph d. (viii) of Item 1 -- "Factors That May Affect Future Results --
Proprietary Rights and Risks of Third-Party Claims of 







                                       14
<PAGE>   15


Infringement."

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


        No matter was submitted in the fourth quarter of fiscal 1998 to a vote
of security holders, through solicitation of proxies or otherwise.


Pursuant to General Instruction G(3) of Form 10-K and Instruction 3 to Item
401(b) of Regulation S-K, the following information is included as an unnumbered
item in Part I of this Report in lieu of being included in the Proxy Statement
for the Company's annual meeting of stockholders to be held on December 10,
1998.

                      EXECUTIVE OFFICERS OF THE REGISTRANT

        HOWARD L. KIRBY, JR., PRESIDENT, CHIEF EXECUTIVE OFFICER AND CHAIRMAN OF
THE BOARD OF DIRECTORS--Mr. Kirby has served as the President, the Chief
Executive Officer and a director of the Company since January 1990.   Mr. Kirby
was named Chairman of the Board of Directors in February 1997.  Mr. Kirby began
his career in the telecommunications industry in 1962 with Collins Radio Company
(which subsequently became a part of Rockwell International Corporation
("Rockwell")), where he spent 20 years in various management positions in
engineering, marketing and sales.  From 1982 to 1984, Mr. Kirby was the Director
of Planning and Business Development for U.S. Telephone, now part of Sprint
Corporation.  In 1984, Mr. Kirby became the Vice President and General Manager
at Pulse Communications, Inc. ("Pulsecom"), a subsidiary of Hubbell
Incorporated, and held that position until he joined the Company in 1990.  Mr.
Kirby is 62 years old.

        CRAIG D. ECKERT, SENIOR VICE PRESIDENT, SALES AND BUSINESS
DEVELOPMENT--Mr. Eckert joined the Company in June 1998.  He has 25 years of
experience in the telecommunications industry.  He has an extensive background  
in engineering, marketing and sales with the telephone operating companies, as
well as with their vendors, such as NEC, Stromberg-Carlson and NORTEL.  Mr.
Eckert joined the Company from CenturyTel where as Vice President of Marketing
and Sales he was instrumental in the restructuring of the marketing groups and
the turnarounds of the Long Distance and Call Center companies.  He also led
the formation of its Internet Service company.  Most recently he was Vice
President and CEO of CenturyTel's Call Center Business. Mr. Eckert is 49 years
old.

        DOUGLAS P. HOFFMEYER, SENIOR VICE PRESIDENT, FINANCE, CHIEF FINANCIAL
OFFICER, SECRETARY AND TREASURER--Mr. Hoffmeyer joined the Company in 1986 and
has served as the Company's Vice President, Finance, Secretary and Treasurer
since 1988.  In October 1998, Mr. Hoffmeyer was appointed Senior Vice President,
Finance, Chief Financial Officer, Secretary and Treasurer.  Mr. Hoffmeyer began
his career in 1969 with the public accounting firm of Arthur Andersen & Co.,
where he remained for five years before joining a Chicago-area accounting firm
as a partner.  Mr. Hoffmeyer is 51 years old.

        JACK C. PARKER, SENIOR VICE PRESIDENT/GENERAL MANAGER, HIGH CAPACITY
COMMUNICATIONS PRODUCTS--Mr. Parker joined the Company in September 1996 as the
Company's Vice President/General Manager, VF/DLC Products.  In May 1997, Mr.
Parker was also made Vice President/General Manager, T1/Wireless Products, in
addition to the VF and DLC Products.  In June 1998, Mr. Parker was appointed
Vice President/General Manager of T1/HDSL Products.  In October 1998, Mr. Parker
was appointed Senior Vice President/General Manager of High Capacity
Communications Products.  Mr. Parker began his career with Harris Corporation's
Aerospace Group in 1969.  From 1972 to 1980, Mr. Parker was employed by General
Electric's Telecommunications Division (which was later acquired by Wescom
Telephone Products ("Wescom"), which was, in turn, later acquired by Rockwell),
where he served as an electronic design engineer and supervisor.  In 1980, Mr.
Parker joined Tellabs Inc. as the Manager of Digital Processing.  In 1985, Mr.
Parker joined Pulsecom as a Vice President of Engineering, before returning to
Harris Corporation as the Vice President of the Loop Systems Business Unit of
the Dracon division and later as the Vice President of Engineering.  Most
recently, Mr. Parker was the Vice President of Engineering and Marketing at
Canoga Perkins, a division of Inductotherm Inc.  Mr. Parker is 52 years old.

        MICHAEL S. GRZESKOWIAK, VICE PRESIDENT, OPERATIONS--Mr. Grzeskowiak has
served as the Company's Vice President, Operations since February 1990.  He
began his career as an engineer at Western Electric Company (now Lucent) in
1967, supporting the factory and field installations for switching systems.  In
1975, he joined Wescom where he held various positions, including Director of
Manufacturing, Director of Production Operations and Director of Manufacturing
Planning, until he joined the Company in 1990.  Mr. Grzeskowiak is 53 years old.






                                       15
<PAGE>   16



        GILBERT H. HOSIE, VICE PRESIDENT, RBOC SALES--Mr. Hosie has served as
Vice President, RBOC Sales since March 1997.  Mr. Hosie began his career as a
technician for New York Telephone Company in 1964.  In 1969, he became District
Sales Manager for General Electric Company and held that position for six years.
In 1975, Mr. Hosie joined the Wescom division of Rockwell as its Midwest
Regional Manager and remained at Wescom until 1985.   Mr. Hosie joined the
Company in 1985 and served in various sales and marketing positions until he was
elected to serve as the Company's Vice President, Sales in August 1994. Mr.
Hosie is 57 years old.

        LAURENCE L. SHEETS, VICE PRESIDENT AND CHIEF TECHNICAL OFFICER--Mr.
Sheets has served as the Company's Vice President and Chief Technical Officer
since March 1997.  Mr. Sheets joined Bell Telephone Laboratories ("Bell Labs")
as a member of its technical staff in 1966 and left in 1984 as a Distinguished
Member of Technical Staff.  At that time, Mr. Sheets joined Rockwell (Wescom)
where he held various progressive positions, including Manager and later
Director of Advanced Technology as well as Director of Engineering.  From
January 1991 to July 1996, Mr. Sheets was the Vice President, Engineering for
the Company.  Mr. Sheets is 55 years old.

        JANICE LOLLINI, ASSISTANT VICE PRESIDENT, HUMAN RESOURCES-- Ms. Lollini
joined Teltrend in 1995 as Director of Human Resources.  In October 1998, Ms.
Lollini was appointed Assistant Vice President, Human Resources.  She has
fifteen years experience in management in the field of human resources, working
for both sales and manufacturing organizations, most recently with World Book
Educational Products.  Ms. Lollini's career began in education, where she taught
and worked as a counselor at the college level.  Ms. Lollini is 54 years old.

        THEODOR A. MAXEINER, CHIEF ACCOUNTING OFFICER, ASSISTANT VICE PRESIDENT,
FINANCE, CONTROLLER, ASSISTANT SECRETARY, AND ASSISTANT TREASURER--Mr. Maxeiner
joined the Company as its Accounting Manager in 1985 and has served as the
Company's Controller, Assistant Secretary and Assistant Treasurer since 1988. In
May 1997, Mr. Maxeiner became the Chief Accounting Officer.  Mr. Maxeiner is 53
years old.

        MICHAEL A. SAMOCKI, ASSISTANT VICE PRESIDENT, QUALITY--Mr. Samocki
joined Teltrend in 1988 as Senior Quality Engineer.  From September 1995 to
November 1997 he was the Company's In-Process Quality Manager.  He has served as
the Company's Assistant Vice President of Quality since November 1997.  Mr.
Samocki began his career as a quality professional in 1980 at Shure Electronics,
and has subsequently held quality staff positions at Mylstar Inc. and Williams
Electronics, manufacturers of electronic amusement arcade games.  Mr. Samocki
has been in the telecommunications industry since 1985 after being employed by
Reliable Electric Utility Products (now RELTEC Corporation) at which he held
quality management and quality engineering positions.  Mr. Samocki is 46 years
old.

        MICHAEL BURGESS, MANAGING DIRECTOR OF TELTREND LIMITED-- Mr. Burgess has
served as Managing Director of Teltrend Ltd. (formally Securicor 3net Limited)
since November 1996 (and was made an officer of Teltrend Inc. in October 1998),
having joined the company as Operations Director in July 1994.  Mr. Burgess
began his career as a telecommunications technician in 1961 with A.E.I. Ltd. In
1967, he commenced his data communications career after joining R.C.A. as a
field service engineer.  After joining SCICON in 1973 as a field service
engineer and having installed the company's data communications network, he
became associated with MICOM and was employed in a variety of roles.  In 1988,
he was appointed Managing Director of Micom-Borer until it was acquired by
Tricom in 1989, at which time he was appointed Operations Director.  In 1992, he
joined Black Box as the International Product Marketing Director, and
subsequently joined Securicor 3net.  Mr. Burgess is 53 years old.






                                       16
<PAGE>   17


                                    PART II


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

         The Market for Company's Securities and Related Matters contained on
page 40 of the Company's Annual Report to Stockholders for the fiscal year ended
July 25, 1998 is incorporated herein by reference.

ITEM 6.  SELECTED FINANCIAL DATA.

         The five-year Selected Historical Financial Data and accompanying notes
contained on pages 17-18 of the Company's Annual Report to Stockholders for the
fiscal year ended July 25, 1998 are incorporated herein by reference.

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 contained on pages 19 through 25, inclusive, of the Company's
Annual Report to Stockholders for the fiscal year ended July 25, 1998 is
incorporated herein by reference.

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

         Quantitative and Qualitative Disclosures About Market Risk contained on
page 25 of the Company's Annual Report to Stockholders for the fiscal year ended
July 25, 1998 is incorporated herein by reference.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

     a.  The table presenting unaudited quarterly financial data for the Company
for the fiscal years ended July 25, 1998 and July 26, 1997 contained on page 39
of the Company's Annual Report to Stockholders for the fiscal year ended July
25, 1998 is incorporated herein by reference.

     b.  The report of independent auditors, financial statements and notes to
financial statements of the Company contained on pages 26 through 39, inclusive,
of the Company's Annual Report to Stockholders for the fiscal year ended July
25, 1998 are herein incorporated by reference.


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

         There were no disagreements on any matters of accounting principles or
financial statement disclosure with the Company's independent accountants in
fiscal 1998 or 1997.

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

          The section entitled "Election of Directors" contained in the
Company's Proxy Statement for the Annual Meeting of Stockholders to be held on
December 10, 1998 is incorporated herein by reference.  The section entitled
"Executive Officers of the Registrant" appearing immediately after Part I of
this Report is incorporated herein by reference.

ITEM 11.  EXECUTIVE COMPENSATION.

          The section entitled "Executive Compensation" contained in the
Company's Proxy Statement for the Annual Meeting of Stockholders to be held on
December 10, 1998 is incorporated herein by reference.







                                       17
<PAGE>   18



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

          The section entitled "Security Ownership of Certain Beneficial Owners
and Management" contained in the Company's Proxy Statement for the Annual
Meeting of Stockholders to be held on December 10, 1998 is incorporated herein
by reference.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     None.


                                    PART IV


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


a.   (1)  Financial Statements

     The following financial statements of the Company, included in the
Company's Annual Report to Stockholders for the fiscal year ended July 25, 1998,
are incorporated by reference in Part II, Item 8 of this Report.

Balance Sheets as of July 25, 1998 and July 26, 1997

Statements of Income for the years ended July 25, 1998, July 26, 1997 and July
27, 1996

Statements of Changes in Stockholders' Equity for the years ended July 25,
1998, July 26, 1997 and July 27, 1996

Statements of Cash Flows for the years ended July 25, 1998, July 26, 1997 and
July 27, 1996

Notes to Financial Statements

     (2)  Financial Statement Schedules

     Schedules are omitted because of the absence of the conditions under which
they are required or because the information called for is included in the
consolidated financial statements or notes thereto.

     (3)  Exhibits

                                 EXHIBIT INDEX


 Exhibit
 Number   Description
 -------  ------------

 2        None.

 3.1      Restated Certificate of Incorporation of Registrant, as amended.(11)

 3.2      Amended and Restated Bylaws of the Registrant.(2)






                                       18
<PAGE>   19

3.3    Certificate of Designation of Series A Junior Participating Preferred
       Stock, filed January 23, 1997.(11)

4.1    Specimen form of Common Stock certificate.(2)

4.2    Articles Fourth, Seventh, Eighth, Tenth and Twelfth of the Restated
       Certificate of Incorporation of the Registrant, as amended (incorporated
       by reference to the Restated Certificate of Incorporation included in
       Exhibit 3.1 herewith).

4.3    Articles I, II (Sections 1 and 3), IV (Sections 1 through 6), V (Section
       3) and VI of the Amended and Restated Bylaws of the Registrant
       (incorporated by reference to the Amended and Restated Bylaws included in
       Exhibit 3.2 herewith).

4.4    Credit Agreement between the Registrant and LaSalle National Bank, dated
       June 14, 1995.(1)

4.5    Rights Agreement between the Registrant and LaSalle National Bank, as
       Rights Agent, dated January 16, 1997.(6)

4.6    Form of Rights Certificate (incorporated by reference to Exhibit B to the
       Rights Agreement included in Exhibit 4.5 herewith).

4.7    Amendment No. 1 to Rights Agreement, dated June 1, 1998, between the
       Registrant and LaSalle National Bank, as rights agent.(10)

4.8    First Amendment to Credit Agreement, dated June 30, 1998, between the
       Registrant and LaSalle National Bank.

9      None.

*10.1  Indemnification Agreement, dated June 8, 1995, between the Registrant and
       Howard L. Kirby, Jr.(1)

*10.2  Schedule of each of the directors and executive officers of the
       Registrant with whom the Registrant has entered into an Indemnification
       Agreement.(7)

*10.3  Teltrend Inc. 1995 Stock Option Plan.(2)

*10.4  Form of Nonqualified Stock Option Agreement under the Teltrend Inc. 1995
       Stock Option Plan.(1)

*10.5  Schedule of Nonqualified Stock Option Agreements which have been entered
       into by directors or executive officers of the Registrant.(7)

*10.6  TI Investors Inc. Stock Option Plan.(2)

*10.7  Forms of Nonqualified Stock Option Agreement under the TI Investors Inc.
       Stock Option Plan, dated August 1, 1994, between Donald G. Bozeman,
       together with Amended and Restated Nonqualified Stock Option Agreement
       under the TI Investors Inc. Stock Option Plan, dated May 13, 1994,
       between the Registrant and Donald G. Bozeman.(1)

*10.8  Teltrend Inc. 1997 Non-Employee Director Stock Option Plan.(5)





                                       19
<PAGE>   20



*10.9  Amended and Restated Stock Option Agreements, dated May 13, 1994, between
       the Registrant and Gilbert H. Hosie.(1) 

10.10  Registration Rights and Lock-Up Agreement between the Registrant, The
       Prudential Insurance Company of America, Pruco Life Insurance Company,
       AEA Investors Inc. and Stockholders of the Registrant prior to
       consummation of the Registrant's initial public offering.(1)

10.11  Lease, dated April 22, 1983, between CMD Corporation and the Registrant,
       together with First Amendment to Lease, dated August 9, 1985, between
       Morgan Guaranty Trust Company of New York and the Registrant and
       Memorandum of Lease, First Amendment to Lease and Ratification of First
       Amendment to Lease, dated August 29, 1988.(2)

10.12  Second Amendment to Lease, dated September, 1995, between Morgan Guaranty
       Trust Company of New York and the Registrant.(4)

10.13  Real Estate Sale Agreement, dated August 20, 1996, between the Registrant
       and Itasca Bank & Trust Co., as Trustee under Trust Agreement dated June
       29, 1992 and known as Trust No. 11038 and The Kautz Road Business Park
       Joint Venture.(7)

*10.14 Teltrend 1996 Stock Option Plan.(9)


10.15  Share Purchase Agreement among Security Services PLC, Securicor
       Communications Limited, 3 Net Holdings Limited, Securicor 3 Net Limited
       and Teltrend Inc.(3)

10.16  Third Amendment to Lease between Morgan Guaranty Trust Company of New
       York and the Registrant.

10.17  Fourth Amendment to Lease, dated July 2, 1998, between Morgan Guaranty
       Trust Company of New York and the Registrant.

11     None.

12     None.

13     1998 Annual Report to Stockholders.

16     None.

18     None.

21     Subsidiaries of Teltrend Inc.

23     Consent of Ernst & Young LLP.

24     None.

27     Financial Data Schedule.

99     None.






                                       20
<PAGE>   21

_________________________________


(1)  Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q
for the quarterly period ended April 29, 1995 (Commission File No. 0-26114).

(2)  Incorporated by reference to the Registrant's Registration Statement on
Form S-1, as amended (Registration No. 33-91104), originally filed with the
Securities and Exchange Commission April 11, 1995.

(3)  Incorporated by reference to the Registrant's Current Report on Form 8-K
dated September 18, 1997 (Commission File No. 0-26114).

(4)  Incorporated by reference to Registrant's Report on Form 10-K for the
fiscal year ended July 29, 1995 (Commission File No. 0-26114).

(5)  Incorporated by reference to the Registrant's Definitive Proxy Statement
for the Annual Meeting of Stockholders held on December 11, 1997 (Commission
File No. 0-26114).

(6)  Incorporated by reference to the Registrant's Current Report on Form 8-K
dated January 16, 1997 (Commission File No. 0-26114).

(7)  Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the fiscal year ended July 27, 1996 (Commission File No. 0-26114).

(8)  Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q
for the quarterly period ended January 27, 1996 (Commission File No. 0-26114).

(9)  Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q
for the quarterly period ended April 26, 1997 (Commission File No. 0-26114).

(10) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated June 1, 1998 (Commission File No. 0-26114).

(11) Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the fiscal year ended July 26, 1997 (Commission File No. 0-26114).

*    Indicates a management contract or compensatory plan or arrangement
required to be filed as an exhibit to this Report pursuant to Item 14(c).


     TELTREND INC. WILL FURNISH ANY OF THE ABOVE EXHIBITS TO ITS STOCKHOLDERS
UPON WRITTEN REQUEST ADDRESSED TO THE SECRETARY AT THE ADDRESS GIVEN ON THE
COVER PAGE OF THIS FORM 10-K.  THE CHARGE FOR FURNISHING COPIES OF THE EXHIBITS
IS $.25 PER PAGE, PLUS POSTAGE.

b.   Report on Form 8-K

     The Company filed a current report on Form 8-K dated June 1, 1998 reporting
under Item 5 thereof the amendment of the Company's Rights Agreement.

     This report contains the following trademarks of the Company, some of which
are registered: Teltrend, Connect iQ, Network iQ and CellPak.  Any other product
or brand names are trademarks, registered trademarks or service marks of their
respective companies.






                                       21
<PAGE>   22


                                   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, on October 23, 1998.


                                      TELTREND INC.


                                      By /s/ Howard L. Kirby, Jr. 
                                        ----------------------------
                                        Howard L. Kirby, Jr.
                                           President and Chief Executive Officer


     Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed by the following persons on behalf of the Registrant in
the capacities indicated on October 23, 1998

<TABLE>
<CAPTION>

         SIGNATURE                                 CAPACITY
        -----------                               ----------                     
<S>                                <C>                                                                   
/s/  Howard L. Kirby, Jr.             President and Chief Executive Officer and Chairman
-------------------------             of the Board of Directors
Howard L. Kirby, Jr.                  (Principal Executive Officer)

/s/ Douglas P. Hoffmeyer              Sr. Vice President, Finance, Secretary and Treasurer
------------------------              (Principal Financial Officer)
Douglas P. Hoffmeyer

/s/ Frank T. Cary
-----------------                     Director
Frank T. Cary

/s/ Harry Crutcher, III
-----------------------               Director
Harry Crutcher, III

/s/ William R. Delk
-------------------                   Director
William R. Delk

/s/ Donald R. Hollis
--------------------                  Director
Donald R. Hollis

/s/ Susan B. Major
------------------                    Director
Susan B. Major

/s/ Bernard F. Sergesketter
---------------------------           Director
Bernard F. Sergesketter
</TABLE>






                                       22
<PAGE>   23
                                 EXHIBIT INDEX


 Exhibit
 Number   Description
 -------  ------------

 2        None.

 3.1      Restated Certificate of Incorporation of Registrant, as amended.(11)

 3.2      Amended and Restated Bylaws of the Registrant.(2)



 3.3    Certificate of Designation of Series A Junior Participating Preferred
        Stock, filed January 23, 1997.(11)

 4.1    Specimen form of Common Stock certificate.(2)

 4.2    Articles Fourth, Seventh, Eighth, Tenth and Twelfth of the Restated
        Certificate of Incorporation of the Registrant, as amended (incorporated
        by reference to the Restated Certificate of Incorporation included in
        Exhibit 3.1 herewith).

 4.3    Articles I, II (Sections 1 and 3), IV (Sections 1 through 6), V (Section
        3) and VI of the Amended and Restated Bylaws of the Registrant
        (incorporated by reference to the Amended and Restated Bylaws included
        in Exhibit 3.2 herewith).

 4.4    Credit Agreement between the Registrant and LaSalle National Bank, dated
        June 14, 1995.(1)

 4.5    Rights Agreement between the Registrant and LaSalle National Bank, as
        Rights Agent, dated January 16, 1997.(6)

 4.6    Form of Rights Certificate (incorporated by reference to Exhibit B to
        the Rights Agreement included in Exhibit 4.5 herewith).

 4.7    Amendment No. 1 to Rights Agreement, dated June 1, 1998, between the
        Registrant and LaSalle National Bank, as rights agent.(10)

 4.8    First Amendment to Credit Agreement, dated June 30, 1998, between the
        Registrant and LaSalle National Bank.

 9      None.

 *10.1  Indemnification Agreement, dated June 8, 1995, between the Registrant
        and Howard L. Kirby, Jr.(1)

 *10.2  Schedule of each of the directors and executive officers of the
        Registrant with whom the Registrant has entered into an Indemnification
        Agreement.(7)

 *10.3  Teltrend Inc. 1995 Stock Option Plan.(2)

 *10.4  Form of Nonqualified Stock Option Agreement under the Teltrend Inc. 1995
        Stock Option Plan.(1)

 *10.5  Schedule of Nonqualified Stock Option Agreements which have been entered
        into by directors or executive officers of the Registrant.(7)

 *10.6  TI Investors Inc. Stock Option Plan.(2)

 *10.7  Forms of Nonqualified Stock Option Agreement under the TI Investors Inc.
        Stock Option Plan, dated August 1, 1994, between Donald G. Bozeman,
        together with Amended and Restated Nonqualified Stock Option Agreement
        under the TI Investors Inc. Stock Option Plan, dated May 13, 1994,
        between the Registrant and Donald G. Bozeman.(1)

 *10.8  Teltrend Inc. 1997 Non-Employee Director Stock Option Plan.(5)







<PAGE>   24



*10.9  Amended and Restated Stock Option Agreements, dated May 13, 1994, between
       the Registrant and Gilbert H. Hosie.(1) 

10.10  Registration Rights and Lock-Up Agreement between the Registrant, The
       Prudential Insurance Company of America, Pruco Life Insurance Company,
       AEA Investors Inc. and Stockholders of the Registrant prior to
       consummation of the Registrant's initial public offering.(1)

10.11  Lease, dated April 22, 1983, between CMD Corporation and the Registrant,
       together with First Amendment to Lease, dated August 9, 1985, between
       Morgan Guaranty Trust Company of New York and the Registrant and
       Memorandum of Lease, First Amendment to Lease and Ratification of First
       Amendment to Lease, dated August 29, 1988.(2)

10.12  Second Amendment to Lease, dated September, 1995, between Morgan Guaranty
       Trust Company of New York and the Registrant.(4)

10.13  Real Estate Sale Agreement, dated August 20, 1996, between the Registrant
       and Itasca Bank & Trust Co., as Trustee under Trust Agreement dated June
       29, 1992 and known as Trust No. 11038 and The Kautz Road Business Park
       Joint Venture.(7)

*10.14 Teltrend 1996 Stock Option Plan.(9)


10.15  Share Purchase Agreement among Security Services PLC, Securicor
       Communications Limited, 3 Net Holdings Limited, Securicor 3 Net Limited
       and Teltrend Inc.(3)

10.16  Third Amendment to Lease between Morgan Guaranty Trust Company of New
       York and the Registrant.

10.17  Fourth Amendment to Lease, dated July 2, 1998, between Morgan Guaranty
       Trust Company of New York and the Registrant.

11     None.

12     None.

13     1998 Annual Report to Stockholders.

16     None.

18     None.

21     Subsidiaries of Teltrend Inc.

23     Consent of Ernst & Young LLP.

24     None.

27     Financial Data Schedule.

99     None.





<PAGE>   25

_________________________________


(1)  Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q
for the quarterly period ended April 29, 1995 (Commission File No. 0-26114).

(2)  Incorporated by reference to the Registrant's Registration Statement on
Form S-1, as amended (Registration No. 33-91104), originally filed with the
Securities and Exchange Commission April 11, 1995.

(3)  Incorporated by reference to the Registrant's Current Report on Form 8-K
dated September 18, 1997 (Commission File No. 0-26114).

(4)  Incorporated by reference to Registrant's Report on Form 10-K for the
fiscal year ended July 29, 1995 (Commission File No. 0-26114).

(5)  Incorporated by reference to the Registrant's Definitive Proxy Statement
for the Annual Meeting of Stockholders held on December 11, 1997 (Commission
File No. 0-26114).

(6)  Incorporated by reference to the Registrant's Current Report on Form 8-K
dated January 16, 1997 (Commission File No. 0-26114).

(7)  Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the fiscal year ended July 27, 1996 (Commission File No. 0-26114).

(8)  Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q
for the quarterly period ended January 27, 1996 (Commission File No. 0-26114).

(9)  Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q
for the quarterly period ended April 26, 1997 (Commission File No. 0-26114).

(10) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated June 1, 1998 (Commission File No. 0-26114).

(11) Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the fiscal year ended July 26, 1997 (Commission File No. 0-26114).

*    Indicates a management contract or compensatory plan or arrangement
required to be filed as an exhibit to this Report pursuant to Item 14(c).