ACTEL CORPORATION

                                       SELECTED CONSOLIDATED FINANCIAL DATA
                                       (in thousands, except per share data)

<TABLE>
<CAPTION>
                                                                      Year Ended December 31,
                                                --------------------------------------------------------------------
                                                    1997          1996          1995          1994          1993
                                                ------------  ------------  ------------  ------------  ------------
<S>                                             <C>           <C>           <C>           <C>           <C>
Statements of Operations Data:
Net revenues................................    $    155,858  $    148,779  $    108,516  $     76,007  $     59,598
Costs and expenses:
   Cost of revenues.........................          64,244        64,420        52,517        33,349        26,389
   Research and development.................          26,465        23,934        20,560        14,406        10,953
   Selling, general, and administrative.....          41,194        38,395        27,364        19,699        16,708
   In-process R&D (1).......................              --            --        16,600            --            --
                                                ------------  ------------  ------------  ------------  ------------
         Total costs and expenses...........         131,903       126,749       117,041        67,454        54,050
                                                ------------  ------------  ------------  ------------  ------------
Income (loss) from operations...............          23,955        22,030        (8,525)        8,553         5,548
Interest expense............................              --           (13)          (93)         (232)         (559)
Interest income and other, net..............           1,842         1,068           846           935           569
                                                ------------  ------------  ------------  ------------  ------------
Income (loss) before taxes..................          25,797        23,085        (7,772)        9,256         5,558
Tax provision (benefit).....................           9,029         8,147        (6,640)        1,389           555
                                                ------------  ------------  ------------  ------------  ------------
Net income (loss)...........................    $     16,768  $     14,938  $     (1,132) $      7,867  $      5,003
                                                ============  ============  ============  ============  ============
Net income (loss) per share:
   Basic (2)................................    $       0.82  $       0.84  $     (0.07)  $       0.46  $       0.33
                                                ============  ============  ============  ============  ============
   Diluted (2)..............................    $       0.76  $       0.70  $     (0.07)  $       0.45  $       0.32
                                                ============  ============  ============  ============  ============
Shares used in computing net income (loss) per share:
   Basic....................................          20,370        17,826        17,367        16,995        15,086
                                                ============  ============  ============  ============  ============
   Diluted..................................          21,968        21,485        17,367        17,579        15,811
                                                ============  ============  ============  ============  ============
</TABLE>
<TABLE>
<CAPTION>
                                                                            December 31,
                                                --------------------------------------------------------------------
                                                    1997          1996          1995          1994          1993
                                                ------------  ------------  ------------  ------------  ------------
<S>                                             <C>           <C>           <C>           <C>           <C>
 Consolidated Balance Sheet Data:
 Working capital............................    $     76,279  $     55,397  $     39,867  $     35,971  $     32,330
 Total assets...............................         159,994       136,712       107,119        67,855        61,130
 Long-term obligations (3)..................              --            --            --            72           926
 Convertible preferred stock (4)............              --        18,147        18,147            --            --
 Total shareholders' equity.................         109,010        69,357        50,920        49,311        40,223

-----------------------------------------------------------
<FN>
   (1)      Represents a charge for in-process research and development incurred
            in the  first  quarter  of 1995 in  connection  with  the  Company's
            acquisition of the field  programmable  gate array business of Texas
            Instruments Incorporated ("TI").

   (2)      The earnings per share  amounts  prior to 1997 have been restated as
            required to comply with Statement of Financial  Accounting Standards
            No.  128,  "Earnings  Per  Share."  See  Notes 1 and 13 of  Notes to
            Consolidated Financial Statements for further discussion of earnings
            per share and the impact of Statement No. 128.

   (3)      Includes   long-term   portion  of  notes  payable,   capital  lease
            obligations, and settlement payable.

   (4)      Represents  redeemable,  convertible preferred stock issued to TI in
            connection with the Company's acquisition of TI's field programmable
            gate array  business.  On March 12, 1997,  TI converted the Series A
            Preferred Stock into 2,631,578 shares of Common Stock.
</FN>
</TABLE>
<PAGE>
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     Actel Corporation is the world's leading supplier of  antifuse-based  field
programmable gate arrays ("FPGAs") and associated  software  development  tools.
FPGAs are used by  designers of  communication,  computer,  industrial  control,
military/aerospace, and other electronic systems to differentiate their products
and get them to market faster.

Results of Operations

     The following table sets forth certain financial data from the Consolidated
Statements of Operations expressed as a percentage of net revenues:
<TABLE>
<CAPTION>
                                                                                    Year Ended December 31,
                                                                            ----------------------------------------
                                                                                1997          1996          1995
                                                                            ------------  ------------  ------------
<S>                                                                            <C>           <C>           <C>
Net revenues............................................................       100.0%        100.0%        100.0%
Cost of revenues........................................................        41.2          43.3          48.4
                                                                            ------------  ------------  ------------
Gross margin............................................................        58.8          56.7          51.6
Research and development................................................        17.0          16.1          19.0
Selling, general, and administrative....................................        26.4          25.8          25.2
In-process research and development.....................................         --            --           15.3
                                                                            ------------  ------------  ------------
Income (loss) from operations...........................................        15.4          14.8          (7.9)
Interest and other income, net..........................................         1.2           0.7           0.7
                                                                            ------------  ------------  ------------
Income (loss) before taxes..............................................        16.6          15.5          (7.2)
Tax provision (benefit).................................................         5.8           5.5          (6.2)
                                                                            ------------  ------------  ------------
Net income (loss).......................................................        10.8%         10.0%         (1.0)%
                                                                            ============  ============  ============
</TABLE>

The  Company's  fiscal year ends on the Sunday  closest to December  31.  Fiscal
1997, 1996, and 1995 ended on December 28, 1997, December 29, 1996, and December
31, 1995, respectively. For ease of presentation,  December 31 has been utilized
as the fiscal year-end for all years.

     Acquisition of TI Antifuse FPGA Business

     On March 31, 1995,  the Company  completed its  acquisition of the antifuse
FPGA business of Texas Instruments  Incorporated  ("TI"), the only second-source
supplier of the Company's  products,  in a  transaction  accounted for using the
purchase method.  As consideration for the business  acquired,  the Company paid
$10.0 million in cash and issued  1,000,000  shares of Series A Preferred Stock.
The Preferred  Stock was valued for purposes of the transaction at $18.9 million
and was converted on March 12, 1997, into 2,631,578  shares of Common Stock. The
Company  expensed  the  in-process  research  and  development  acquired  in the
transaction, taking a pretax charge of $16.6 million against income in the first
quarter of 1995.  The Company  allocated  $4.4 million of the purchase  price to
intangible  assets (i.e.,  the customer base and goodwill  acquired),  which are
being amortized over five years.  Amortization  expense was $877,000,  $876,000,
and  $657,000  for  the  years  ended   December  31,  1997,   1996,  and  1995,
respectively.

     As a result of the acquisition,  the revenues of the business acquired from
TI are included  (beginning with the second quarter of 1995) in the net revenues
of the Company.  The Company  assumed and  subsequently  fulfilled TI's backlog,
which consisted  primarily of lower-margin ACT 1 and ACT 2 products with average
selling prices  generally lower than those charged by the Company for comparable
products.  These  product mix and average  selling price  influences  negatively
affected the Company's gross margin for 1995 and the absence of these influences
positively  affected the  Company's  gross  margin in  subsequent  quarters.  In
addition, the Company ceased receiving royalties (which had no associated costs)
from TI on sales  of FPGAs  following  the  acquisition.  See Note 3 of Notes to
Consolidated Financial Statements.

     Net Revenues

     Net  revenues for fiscal 1997 were $155.9  million,  an increase of 5% over
net revenues for fiscal 1996.  This compares with an increase in net revenues of
37% for fiscal 1996 over fiscal 1995. The Company's acquisition of TI's antifuse
FPGA business had a negative  influence on net revenues for the first quarter of
1995 and a positive effect on net revenues for subsequent quarters. Accordingly,
the year-over-year  growth rates in net revenues are not necessarily  indicative
of future results.

     The Company  derives its revenues  primarily from the sale of FPGAs,  which
accounted  for 98% of net revenues for 1997,  compared with 97% for 1996 and 95%
for 1995. The Company also derives revenues from the sale of development systems
and receipt of royalties.

     Net revenues from the sale of FPGAs for 1997 increased 6% over net revenues
from the sale of FPGAs for 1996.  This  compares  with an increase of 41% in net
revenues  from the sale of FPGAs for 1996 over 1995.  The growth in net revenues
from the sale of FPGAs for 1997 over 1996 was due  primarily to a 3% increase in
unit sales  coupled with a 2% increase in the overall  average  selling price of
FPGAs.  The growth in net revenues from the sale of FPGAs for 1996 over 1995 was
due  primarily to a 39% increase in unit sales coupled with a 7% increase in the
overall average selling prices of FPGAs. The increase in unit sales of FPGAs for
1996 was due  principally  to the  Company's  acquisition  of TI's antifuse FPGA
business.  The increases in the overall  average selling price of FPGAs for 1997
and  1996 was due  principally  to  proportionately  greater  unit  sales of the
Company's  newer (ACT 3, XL,  DX,  and RH)  product  families,  which  generally
command higher average selling prices than the Company's older (ACT 1 and ACT 2)
product families.

     Net  revenues  from the sale of FPGAs for the second half of 1997  declined
from the first half of 1997. This decline occurred in the Company's business for
both  commercial and  high-reliability  (or HiRel) FPGAs.  Commercial  FPGAs are
processed  using  the  Company's  standard  testing,  screening,  and  packaging
procedures.  In 1997,  the Company's  HiRel  business  consisted of military and
radiation-hardened  (or RH) FPGAs.  Military  FPGAs undergo  special or extended
testing,  screening,  and  packaging  procedures.  RH FPGAs are purchased by the
Company from Lockheed Martin Federal  Systems,  which has a proprietary  process
that makes RH products radiation-hardened without special testing, screening, or
packaging.  Orders for military and RH products tend to be large but  irregular,
and hence difficult to predict.  While the Company  believes that the demand for
HiRel FPGAs should rebound eventually, no assurance to that effect can be given.
The Company further believes that its commercial  business will resume a pattern
of growth as new products  are  introduced  and designed  into systems and those
systems come into  production.  The Company  introduced a new family of products
(MX) in the second half of 1997 and currently  expects to introduce  another new
family  (SX) in the first half of 1998.  Since  design wins take time and design
cycles are  lengthy,  the Company  views the  introduction  of new  products and
technologies as having an impact on revenues in the medium- to long-term.

     As is typical in the semiconductor  industry, the average selling prices of
the Company's  products  generally  decline over the lives of such products.  To
increase  revenues,  the  Company  seeks to  increase  unit  sales  of  existing
products,  principally  by  reducing  prices,  and to  introduce  and  sell  new
products. No assurance can be given that these efforts will be successful.

     Over  the  last  three  fiscal  years,  sales  to the  Company's  principal
distributors  have increased as a percentage of the Company's net revenues.  The
Company's principal  distributors are Wyle Electronics  Marketing Group ("Wyle")
and  Pioneer-Standard  Electronics,  Inc. ("Pioneer") in North America and Arrow
Electronics,  Inc. and Zeus Electronics  (collectively,  "Arrow") worldwide. The
following table sets forth,  for each of the last three years, the percentage of
revenues  derived from all customers  accounting for 10% or more of net revenues
in any of such years:
<TABLE>
<CAPTION>
                                                                                1997          1996          1995
                                                                            ------------  ------------  ------------
<S>                                                                              <C>           <C>           <C>
Wyle....................................................................         17%           14%           14%
Arrow...................................................................         17            14            12
Pioneer.................................................................         12            11            11
</TABLE>

The  Company  generally  does not  recognize  revenue on a product  shipped to a
distributor until the distributor resells the product to its customer.

     Sales to  customers  outside  the United  States for 1997,  1996,  and 1995
accounted for 31%, 33%, and 38% of net revenues,  respectively.  Of these export
sales,  the largest  portion was derived from European  customers.  Export sales
have declined as a percentage of net revenues  principally because the Company's
radiation-hardened  (RH) product  family,  which was introduced in 1996, is sold
almost exclusively to customers within the United States.

     Gross Margin

     Gross  margin for 1997 was 59% of net  revenues,  compared  with 57% of net
revenues  for 1996 and 52% of net revenues for 1995.  The  improvement  in gross
margin for 1997 over 1996 resulted primarily from improved manufacturing yields;
wafer  price  reductions;  the  generation  of an  increased  percentage  of net
revenues from sales of the company's  newer product  families,  which  generally
command  higher  margins;  and  appreciation  in the value of the United  States
dollar versus the Japanese yen, in which some of the Company's  wafer  purchases
are denominated.

     The improvement in gross margin for 1996 over 1995 resulted  primarily from
the Company's acquisition of TI's FPGA business, which positively influenced the
Company's net revenues and overall  average  selling price.  The Company's gross
margin for 1996 also  benefited  from many of the same factors  indicated  above
that contributed to gross margin improvement for 1997.

     As is  typical in the  semiconductor  industry,  margins  on the  Company's
products  generally  decline  as the  average  selling  prices of such  products
decline.  The  Company  seeks to  offset  margin  erosion  by  selling  a higher
percentage of new products,  which tend to have higher  margins than more mature
products,  and by reducing costs. The Company seeks to reduce costs by improving
wafer yields, negotiating price reductions with suppliers,  increasing the level
and efficiency of its testing and packaging  operations,  achieving economies of
scale by means of higher  production  levels,  and  increasing the number of die
produced per wafer by shrinking the die size of its  products.  No assurance can
be given that these efforts will be successful. The capability of the Company to
shrink  the die  size of its  FPGAs is  dependent  on the  availability  of more
advanced  manufacturing   processes.   Due  to  the  custom  steps  involved  in
manufacturing  antifuse  FPGAs,  the  Company  typically  obtains  access to new
manufacturing  processes later than its competitors using standard manufacturing
processes.

     Research and Development

     Research and development  expenditures for 1997 were $26.5 million,  or 17%
of net revenues,  compared with $23.9 million, or 16% of net revenues,  for 1996
and $20.6 million,  or 19% of net revenues,  for 1995.  Research and development
expenditures  for 1997  increased by 11% compared with 1996,  and increased as a
percentage of net revenues  principally because net revenues for the second half
of  1997  declined  from  the  first  half of  1997.  Research  and  development
expenditures  for 1996  increased by 16% compared  with 1995,  but declined as a
percentage of net revenues due to economies of scale resulting from the expanded
scope of the Company's  operations.  The Company  currently intends to boost the
level  of  its  research  and   development   expenditures   to  accelerate  the
introduction of new products. As a result, research and development expenditures
may again increase as a percentage of net revenues.

     The Company's research and development consists of circuit design, software
development,  and  process  technology  activities.  The Company  believes  that
continued  substantial  investment  in research and  development  is critical to
maintaining  a strong  technological  position in the industry  and,  therefore,
expects to continue increasing its research and development expenditures.  Since
the Company's  antifuse FPGAs are manufactured using a customized  process,  the
Company's  research and development  expenditures will probably always be higher
as a percentage of net revenues than that of its major competitors.

     Selling, General, and Administrative

     Selling,  general, and administrative expenses for 1997 were $41.2 million,
or 26% of net revenues, compared with $38.4 million, or 26% of net revenues, for
1996 and $27.4 million, or 25% of net revenues, for 1995. Selling,  general, and
administrative  expenses for 1997 increased by 7% compared with 1996,  while the
Company's  net revenues for 1997  increased by 5% compared  with 1996.  Selling,
general,  and administrative  expenses for 1997 increased as a percentage of net
revenues  principally  because net revenues for the second half of 1997 declined
from the first half of 1997. Selling,  general, and administrative  expenses for
1996  increased by 40% compared with 1995,  while the Company's net revenues for
1996 increased by 37% compared with 1995. Selling,  general,  and administrative
expenses for 1996 increased as a percentage of net revenues  principally because
of an  increased  level of sales and  marketing  activities  in  support  of new
products. The Company currently intends to again increase its level of sales and
marketing activity in support of new products. In addition, the Company believes
that  its  legal  expenses  will  increase  as a  percentage  of  net  revenues,
principally  because of the  Company's  continuing  litigation  with  QuickLogic
Corporation.  See Note 12 of Notes to Consolidated  Financial  Statements.  As a
result, selling, general, and administrative  expenditures may again increase as
a percentage of net revenues.

     In-Process Research and Development

     The $16.6 million pretax charge for in-process research and development for
1995 resulted from a write-off  taken in the first quarter of 1995 in connection
with the Company's acquisition of TI's antifuse FPGA business.  The value of the
in-process research and development was established by an independent  valuation
specialist.

     Tax Provision

     The  Company's  effective  tax rate for 1997 and 1996 was 35%.  Significant
components affecting the effective tax rate include benefits of federal research
and  development  credits,  and the  recognition of certain  deferred tax assets
subject to valuation allowances as of December 31, 1996, and December 31, 1995.

     The  Company  recorded  a  credit  for  income  taxes  for  1995 due to the
realization of deferred tax assets previously  subject to valuation  allowances.
The  Company  recorded  additional  deferred  tax assets of  approximately  $3.0
million  related  to the  1995  charge  for  acquired  in-process  research  and
development, the realization of which is dependent upon the generation of future
taxable income.

Financial Condition, Liquidity, and Capital Resources

     The Company's total assets were $160.0 million at the end of 1997, compared
with  $136.7  million  at the end of 1996.  The  increase  in total  assets  was
attributable  principally to increased  cash, cash  equivalents,  and short-term
investments.  The  following  table sets forth certain  financial  data from the
Consolidated  Balance Sheets expressed as the percentage  change from the end of
fiscal 1996 to the end of fiscal 1997:
<TABLE>
<CAPTION>
                                                                                              Percentage Change
                                                                                              From 1996 to 1997
                                                                                          --------------------------
<S>                                                                                                  <C>
Cash, cash equivalents, and short-term investments.....................................             102.4%
Accounts receivable, net...............................................................             (14.8)
Inventories............................................................................             (23.7)
Property and equipment, net............................................................              (5.6)
Total assets...........................................................................              17.0
Total current liabilities..............................................................               3.6
Shareholders' equity...................................................................              57.2
</TABLE>

     Cash, Cash Equivalents, and Short-Term Investments

     The Company's cash, cash equivalents, and short-term investments were $59.0
million at the end of 1997,  compared with $29.2 million at the end of 1996. The
amount of cash,  cash  equivalents,  and short-term  investments  increased as a
result of $34.0 million of cash provided by operations  and $4.0 million of cash
provided by financing  activities,  which were offset in part by $8.2 million of
cash used in investing activities.

     The Company presently has no material financial  obligations to its current
wafer  suppliers.   However,  wafer  manufacturers  are  increasingly  demanding
financial  support from customers in the form of equity  investments and advance
purchase price deposits, which in some cases are substantial. Should the Company
require   additional   capacity,   it  may  be  required  to  incur  significant
expenditures to secure such capacity.

     The Company believes that the availability of adequate financial  resources
is a substantial  competitive factor. To take advantage of opportunities as they
arise, or to withstand  adverse  business  conditions  should they occur, it may
become  prudent or necessary for the Company to raise  additional  capital.  The
Company  intends to  monitor  the  availability  and cost of  potential  capital
resources, including equity, debt, and off-balance sheet financing arrangements,
with a view toward  raising  additional  capital on terms that are acceptable to
the  Company.  No  assurance  can be given that  additional  capital will become
available on acceptable terms.

     Notwithstanding  the  foregoing,  the Company  believes that existing cash,
cash  equivalents,   and  short-term   investments,   together  with  cash  from
operations, will be sufficient to meet its cash requirements for 1998. A portion
of available cash may be used for investment in or acquisition of  complementary
businesses, products, or technologies.

     Accounts Receivable

     The  Company's  net accounts  receivable  were $25.1  million at the end of
1997, compared with $29.5 million at the end of 1996. This decline of 15% in net
accounts  receivable compares favorably with the 5% increase in net revenues for
1997 compared with 1996. The Company  believes that its net accounts  receivable
for  1997  declined  through  more  focused   collection   efforts  and  process
improvements.

     Inventories

     The Company's  inventories were $20.5 million at the end of 1997,  compared
with $26.8 million at the end of 1996.  With the decline of inventories in 1997,
the Company is approaching its inventory model of 120 days.  Since the Company's
FPGAs are  manufactured  using  customized  steps that are added to the standard
manufacturing  processes  of its  independent  wafer  suppliers,  the  Company's
manufacturing  cycle is longer and hence more difficult to adjust in response to
changing demands or delivery  schedules.  Accordingly,  the Company's  inventory
model will probably  always be higher than that of its major  competitors  using
standard  processes.  Excess  inventories  increase  the  risk of  obsolescence,
represent a non-productive  use of capital  resources,  increase handling costs,
and delay realization of the price and performance benefits associated with more
advanced manufacturing processes.

     Property and Equipment

     The  Company's  net property and  equipment was $15.1 million at the end of
1997,  compared with $16.0 million at the end of 1996. The Company invested $6.8
million in property and  equipment in 1997,  compared with $7.8 million in 1996.
Depreciation  and  amortization  of property and equipment were $7.5 million for
1997, compared with $5.9 million for 1996. Capital  expenditures during the past
two years have been primarily for leasehold  improvements  and for  engineering,
manufacturing,  and office  equipment.  The  Company  anticipates  that  capital
expenditures may increase in 1998.

     Current Liabilities

     The Company's  total current  liabilities  were $51.0 million at the end of
1997, compared with $49.2 million at the end of 1996.

     Shareholders' Equity

     Shareholders'  equity was $109.0 million at the end of 1997,  compared with
$69.4 million at the end of 1996.  The increase  included $18.1 million from the
conversion of the Series A Preferred  Stock into Common Stock,  $16.8 million of
net income,  and  proceeds of $4.0  million  from the sale of Common Stock under
employee stock plans.

Employees

     At the end of 1997, the Company had 380 full-time employees,  including 117
in marketing,  sales, and customer support; 137 in research and development;  94
in  operations;  and 32 in  administration  and finance.  This compares with 356
full-time  employees  at the end of 1996,  an increase of 7%. Net  revenues  per
employee  was  approximately  $410,000  for 1997,  compared  with  approximately
$418,000 for 1996.

Impact of Recently Issued Accounting Standards

     In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings per Share" ("SFAS 128"), which is applicable to all financial
statements  issued for periods ending after  December 15, 1997.  Under SFAS 128,
the Company is required to change the method it has used to compute earnings per
share  and to  restate  all  prior  periods.  The  new  requirements  include  a
calculation of basic earnings per share, from which the dilutive effect of stock
options,  warrants,  and  convertible  debt are excluded;  and a calculation  of
diluted earnings per share,  which does not differ from previously  reported net
income (loss) per share. Accordingly, the Company adopted the provisions of SFAS
128 for the year ended  December 31, 1997, and all share and per share data have
been adjusted retroactively to comply with the new requirement.

     In June 1997, the Financial  Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting  Comprehensive Income" ("SFAS
130"),  which establishes  standards for reporting and displaying  comprehensive
income and its  components in a full set of  general-purpose  statements  and is
expected to be first  reflected in the  Company's  first quarter of 1998 interim
financial  statements.  The  Company's  management is currently  evaluating  the
impact of SFAS 130 on operations.

     In  June  1997,  the  Financial  Accounting  Standards  Board  also  issued
Statement of Financial Accounting Standards No. 131, "Disclosures about Segments
of an  Enterprise  and Related  Information"  ("SFAS  131"),  which  established
standards for the way pubic enterprises  report information in annual statements
and  financial  reports  regarding  operating  segments,   products,   services,
geographic  areas, and major customers.  SFAS 131 will be first reflected in the
Company's 1998 Annual Report. The Company's  management is currently  evaluating
the impact of SFAS 131 on operations.

Quarterly Information

     The following table presents certain  unaudited  quarterly results for each
of the eight  quarters in the period ended  December 28, 1997. In the opinion of
management, this information has been presented on the same basis as the audited
consolidated  financial statements appearing elsewhere in this Annual Report and
all necessary  adjustments  (consisting only of normal recurring  accruals) have
been  included  in the  amounts  stated  below to present  fairly the  unaudited
quarterly  results  when  read in  conjunction  with  the  audited  consolidated
financial statements of the Company and notes thereto. These quarterly operating
results,  however, are not necessarily  indicative of the results for any future
period.

<PAGE>
<TABLE>
<CAPTION>
                                                                             Three Months Ended
                                         ------------------------------------------------------------------------------------------
                                          Dec. 28,   Sept. 28,   June 29,   Mar. 30,    Dec. 29,   Sept. 29,   June 30,   Mar. 31,
                                            1997       1997        1997       1997        1996       1996        1996       1996
                                         ---------   --------   ----------  ---------  ----------  ---------  ----------  ---------
                                                                  (in thousands, except per share amounts)
<S>                                      <C>         <C>        <C>         <C>        <C>         <C>        <C>         <C>
Statements of Operations Data:
Net revenues..........................   $  37,012   $ 38,220   $   40,823  $  39,803  $   39,027  $  38,014  $   36,694  $  35,043
Cost of revenues......................      15,287     15,788       16,731     16,439      16,381     16,164      16,105     15,769
                                         ---------   --------   ----------  ---------  ----------  ---------  ----------  ---------
Gross profit..........................      21,725     22,432       24,092     23,364      22,646     21,850      20,589     19,274
Research and development..............       6,816      6,641        6,461      6,547       5,855      6,417       5,650      6,011
Selling, general, and administrative..      10,313     10,355       10,394     10,131      10,651      9,854       9,582      8,308
                                         ---------   --------   ----------  ---------  ----------  ---------  ----------  ---------
Income from operations................       4,596      5,436        7,237      6,686       6,140      5,579       5,357      4,955
Net income............................   $   3,382   $  3,921   $    4,934  $   4,531  $    4,153  $   3,905   $   3,606  $   3,277
Net income per share:
  Basic (1)...........................   $    0.16   $   0.19   $     0.24  $    0.24  $     0.23  $    0.22   $    0.20  $    0.19
                                         =========   ========   ==========  =========  ==========  =========  ==========  =========
  Diluted (1).........................   $    0.16   $   0.18   $     0.23  $    0.21  $     0.19  $    0.18   $    0.17  $    0.16
                                         =========   ========   ==========  =========  ==========  =========  ==========  =========
Shares used in computing
  net income per share:
  Basic...............................      21,032     20,956       20,834     18,636     17,971      17,890      17,761     17,667
                                         =========   ========   ==========  =========  ==========  =========  ==========  =========
  Diluted.............................      21,623     22,172       21,890     22,082     21,893      21,475      21,467     21,068
                                         =========   ========   ==========  =========  ==========  =========  ==========  =========
</TABLE>
<TABLE>
<CAPTION>
                                                                             Three Months Ended
                                         ------------------------------------------------------------------------------------------
                                          Dec. 28,   Sept. 28,   June 29,   Mar. 30,    Dec. 29,   Sept. 29,   June 30,   Mar. 31,
                                            1997       1997        1997       1997        1996       1996        1996       1996
                                         ---------   --------   ----------  ---------  ----------  ---------  ----------  ---------
<S>                                        <C>         <C>        <C>         <C>        <C>         <C>        <C>         <C>
As a Percentage of Net Revenues:
Net revenues..........................     100.0%      100.0%     100.0%      100.0%     100.0%      100.0%     100.0%      100.0%
Cost of revenues......................      41.3        41.3       41.0        41.3       42.0        42.5       43.9        45.0
                                         ---------   --------   ----------  ---------  ----------  ---------  ----------  ---------
Gross margin..........................      58.7        58.7       59.0        58.7       58.0        57.5       56.1        55.0
Research and development..............      18.4        17.4       15.8        16.4       15.0        16.9       15.4        17.2
Selling, general, and administrative..      27.9        27.1       25.5        25.5       27.3        25.9       26.1        23.7
                                         ---------   --------   ----------  ---------  ----------  ---------  ----------  ---------
Income from operations................      12.4        14.2       17.7        16.8       15.7        14.7       14.6        14.1
Net income............................       9.1        10.3       12.1        11.4       10.6        10.3        9.8         9.4

------------------------------------------------
<FN>
   (1)     The 1996 and first three  quarters of 1997 earnings per share amounts
           have been restated to comply with  Statement of Financial  Accounting
           Standards No. 128, "Earnings Per Share."

</FN>
</TABLE>
<PAGE>

Year 2000 Compliance and Other Factors Affecting Future Operating Results

     Like most other  companies,  the year 2000 computer  issue creates risk for
the Company.  If internal  systems do not correctly  recognize date  information
when the year changes to 2000, there could be an adverse impact on the Company's
operations.  The Company has  initiated a  comprehensive  project to prepare its
computer systems for the year 2000 and plans to have changes to critical systems
completed by the first quarter of 1999 to allow time for testing. The Company is
also assessing the capability of its products sold to customers over a period of
years to handle the year 2000, but does not currently  believe there are product
issues. Management believes that the likelihood of a material adverse impact due
to problems  with  internal  systems or products sold to customers is remote and
expects that the cost of these  projects over the next two years will not have a
material effect on the Company's financial position or overall trends in results
of  operations.  The  Company  is also  developing  a plan to  contact  critical
suppliers of products and services to determine that the  suppliers'  operations
and the products  and services  they provide are year 2000 capable or to monitor
their  progress  toward year 2000  capability.  There can be no  assurance  that
another  company's  failure  to  ensure  year 2000  capability  will not have an
adverse effect on the Company.

     The Company's  operating results are subject to general economic conditions
and a variety of risks  characteristic of the semiconductor  industry (including
booking  and  shipment  uncertainties,  wafer  supply  fluctuations,  and  price
erosion)  or  specific to the  Company,  any of which could cause the  Company's
operating  results to differ  materially from past results.  For a discussion of
such risks,  see "Risk Factors" in Part I of the Company's Annual Report on Form
10-K for 1997, which is incorporated herein by this reference.





                                ACTEL CORPORATION

                           CONSOLIDATED BALANCE SHEETS
                      (in thousands, except share amounts)
<TABLE>
<CAPTION>
                                                                                                 December 31,
                                                                                           ------------------------
                                                                                              1997         1996
                                                                                           -----------  -----------
                                                       ASSETS
<S>                                                                                        <C>          <C>
Current assets:
   Cash and cash equivalents...........................................................    $     7,763  $     3,543
   Short-term investments..............................................................         51,272       25,626
   Accounts receivable, net............................................................         25,135       29,495
   Inventories, net....................................................................         20,472       26,848
   Deferred income taxes...............................................................         20,782       16,677
   Notes receivable from officers......................................................            364           --
   Other current assets................................................................          1,475        2,416
                                                                                           -----------  -----------
         Total current assets..........................................................        127,263      104,605
Property and equipment, net............................................................         15,081       15,973
Investment in Chartered Semiconductor..................................................         10,680       10,680
Other assets, net......................................................................          6,970        5,454
                                                                                           -----------  -----------
                                                                                           $   159,994  $   136,712
                                                                                           ===========  ===========

                                        LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Accounts payable....................................................................    $    12,440  $     9,933
   Accrued salaries and employee benefits..............................................          4,718        5,967
   Other accrued liabilities...........................................................          2,898        5,922
   Deferred income.....................................................................         30,928       27,386
                                                                                           -----------  -----------
         Total current liabilities.....................................................         50,984       49,208

Commitments and contingencies

Redeemable, convertible preferred stock (Series A), $.001 par value, $25.00 liquidation
   preference; 1,000,000 shares authorized; none and 1,000,000 shares issued and
   outstanding at December 31, 1997 and 1996, respectively.............................             --       18,147

Shareholders' equity:
   Preferred stock, $.001 par value; 4,000,000 shares authorized; none issued and
     outstanding.......................................................................             --           --
   Common stock, $.001 par value; 30,000,000 shares authorized; 21,046,894 and
     17,991,503 shares issued and outstanding at December 31, 1997 and 1996,
     respectively......................................................................             21           18
   Additional paid-in capital..........................................................         85,965       63,133
   Retained earnings ..................................................................         23,024        6,206
                                                                                           -----------  -----------
         Total shareholders' equity....................................................        109,010       69,357
                                                                                           -----------  -----------
                                                                                           $   159,994  $   136,712
                                                                                           ===========  ===========
</TABLE>

<PAGE>


                                ACTEL CORPORATION

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                    (in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                                    Year Ended December 31,
                                                                            ----------------------------------------
                                                                                1997          1996          1995
                                                                            ------------  ------------  ------------
<S>                                                                         <C>           <C>           <C>
Net revenues............................................................    $    155,858  $    148,779  $    108,516
Costs and expenses:
   Cost of revenues.....................................................          64,244        64,420        52,517
   Research and development.............................................          26,465        23,934        20,560
   Selling, general, and administrative.................................          41,194        38,395        27,364
   In-process research and development..................................              --            --        16,600
                                                                            ------------  ------------  ------------
         Total costs and expenses.......................................         131,903       126,749       117,041
                                                                            ------------  ------------  ------------
Income (loss) from operations...........................................          23,955        22,030        (8,525)
Interest expense........................................................              --           (13)          (93)
Interest income and other, net..........................................           1,842         1,068           846
                                                                            ------------  ------------  ------------
Income (loss) before taxes..............................................          25,797        23,085        (7,772)
Tax provision (benefit).................................................           9,029         8,147        (6,640)
                                                                            ------------  ------------  ------------
Net income (loss).......................................................    $     16,768  $     14,938  $     (1,132)
                                                                            ============  ============  ============
Net income (loss) per share:
   Basic................................................................    $       0.82  $       0.84  $     (0.07)
                                                                            ============  ============  ============
   Diluted..............................................................    $       0.76  $       0.70  $     (0.07)
                                                                            ============  ============  ============
Shares used in computing net income (loss) per share:
   Basic................................................................          20,370        17,826        17,367
                                                                            ============  ============  ============
   Diluted..............................................................          21,968        21,485        17,367
                                                                            ============  ============  ============
</TABLE>

<PAGE>


                                ACTEL CORPORATION

                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                      (in thousands, except share amounts)

<TABLE>
<CAPTION>

                                                                                      Retained
                                                                                      Earnings/           Total
                                                                    Additional      (Accumulated      Shareholders'
                                                 Common Stock     Paid-In Capital     Deficit)           Equity
                                                ---------------  ----------------  ---------------  -----------------
<S>                                             <C>              <C>               <C>              <C>
Balance at December 31, 1994................    $            17  $         57,306  $        (8,012) $          49,311
Issuance of 455,393 shares of common stock
   under employee stock plans...............                  1             1,894               --              1,895
Securities valuation adjustment.............                 --                --              408                408
Tax benefit from exercise of stock options..                 --               438               --                438
Net loss....................................                 --                --           (1,132)            (1,132)
                                                ---------------  ----------------  ---------------  -----------------
Balance at December 31, 1995................    $            18  $         59,638  $        (8,736) $          50,920
                                                ===============  ================  ===============  =================
Issuance of 429,745 shares of common stock
   under employee stock plans...............                 --             2,955               --              2,955
Securities valuation adjustment.............                 --                --                4                  4
Tax benefit from exercise of stock options..
                                                             --               540               --                540
Net income..................................                 --                --           14,938             14,938
                                                ---------------  ----------------  ---------------  -----------------
Balance at December 31, 1996................    $            18  $         63,133  $         6,206  $          69,357
                                                ===============  ================  ===============  =================
Conversion of 1,000,000 shares of redeemable,
   convertible preferred stock into 2,631,578
   shares of common stock...................                  3            18,144               --             18,147
Issuance of 423,813 shares of common stock
   under employee stock plans...............                 --             3,970               --              3,970
Securities valuation adjustment.............                 --               --                50                 50
Tax benefit from exercise of stock options..                 --               718               --                718
Net income..................................                 --                --           16,768             16,768
                                                ---------------  ----------------  ---------------  -----------------
Balance at December 31, 1997................    $            21  $        85,965   $        23,024  $         109,010
                                                ===============  ================  ===============  =================
</TABLE>

<PAGE>


                                ACTEL CORPORATION

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                                    Year Ended December 31,
                                                                            ----------------------------------------
                                                                                1997          1996          1995
                                                                            ------------  ------------  ------------
<S>                                                                         <C>           <C>           <C>
Operating activities:
   Net income (loss)....................................................    $     16,768  $     14,938  $     (1,132)
   Adjustments to reconcile  net income (loss) to net cash provided by
     operating activities:
     Depreciation and amortization......................................           8,358         6,755         4,412
     Loss on disposal of fixed assets...................................             175            --            --
     In-process research and development................................              --            --        16,600
     Changes in operating assets and liabilities:
       Accounts receivable..............................................           4,360       (11,690)       (4,973)
       Inventories......................................................           6,376           878        (9,095)
       Deferred income taxes............................................          (5,050)       (6,373)       (9,394)
       Other current assets.............................................             577          (319)        2,710
       Accounts payable, accrued salaries and employee benefits, and
         other accrued liabilities......................................          (1,048)        5,140         8,058
       Deferred income..................................................           3,542         8,238        10,802
                                                                            ------------  ------------  ------------
   Net cash provided by operating activities............................          34,058        17,567        17,988
Investing activities:
   Purchase of TI FPGA business.........................................              --            --       (10,000)
   Purchases of property and equipment..................................          (6,764)       (7,786)      (10,111)
   Purchases of short-term investments..................................        (157,753)      (49,429)           --
   Sales and maturities of short-term investments.......................         132,156        26,096        16,761
   Investment in Chartered Semiconductor................................              --        (3,611)       (3,033)
   Other assets.........................................................          (1,447)          126        (2,629)
                                                                            ------------  ------------  ------------
    Net cash used in investing activities................................        (33,808)      (34,604)       (9,012)
Financing activities:
   Sale of common stock.................................................           3,970         2,955         1,895
   Proceeds from line of credit.........................................              --            --         4,500
   Payments on line of credit...........................................              --            --        (4,500)
   Principal payments under notes payable and capital lease obligations.              --           (66)         (494)
                                                                            ------------  ------------  ------------
   Net cash provided by financing activities............................           3,970         2,889         1,401
Net increase (decrease) in cash and cash equivalents....................           4,220       (14,148)       10,377
Cash and cash equivalents, beginning of year............................           3,543        17,691         7,314
                                                                            ------------  ------------  ------------
Cash and cash equivalents, end of year..................................    $      7,763  $      3,543  $     17,691
                                                                            ============  ============  ============
Supplemental  disclosures of cash flows  information and non-cash
   investing and financing activities:
   Cash paid during the year for interest...............................    $         --  $          2  $         88
   Cash paid during the year for taxes..................................          15,398        12,370         4,593
Tax benefits from exercise of stock options.............................             718           540           438
Preferred stock issued to TI, net of estimated future issuance costs....              --            --        18,147
Conversion of preferred stock into common stock.........................         (18,147)           --            --
</TABLE>

                               ACTEL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.   Organization and Summary of Significant Accounting Policies

     Actel  Corporation  (the  "Company")  was  incorporated  under  the laws of
California on October 17, 1985. The Company designs, develops, and markets field
programmable  gate arrays ("FPGAs") and associated  development  system software
and programming hardware.  Net revenues from the sale of FPGAs accounted for 98%
of the Company's  net revenues for 1997,  compared with 97% for 1996 and 95% for
1995. FPGAs are logic integrated  circuits,  which adapt the microprocessing and
memory  capabilities  of  electronic  systems  to  specific  applications.   The
Company's  operating  results  are  therefore  subject  to a  variety  of  risks
characteristic  of the  semiconductor  industry,  including booking and shipment
uncertainties,  wafer yield fluctuations,  and price erosion, as well as general
economic  conditions.  FPGAs are used by designers of  communication,  computer,
industrial  control,   military/aerospace,   and  other  electronic  systems  to
differentiate  their products and get them to market faster.  Information on the
Company's sales by geographic area is included in Note 11.

     Advertising and Promotion Costs

     The Company's policy is to expense  advertising and promotion costs as they
are  incurred.   The   Company's   advertising   and  promotion   expenses  were
approximately $4,050,000,  $3,595,000,  and $2,736,000 for 1997, 1996, and 1995,
respectively.

     Basis of Presentation

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

     The Company's fiscal year ends on the Sunday closest to December 31. Fiscal
1997, 1996, and 1995 ended on December 28, 1997, December 29, 1996, and December
31, 1995, respectively. For ease of presentation,  December 31 has been utilized
as the fiscal year-end in the consolidated financial statements and accompanying
notes.

     Cash Equivalents and Short-Term Investments

     For financial statement  purposes,  the Company considers all highly liquid
debt  instruments with  insignificant  interest rate risk and with a maturity of
three months or less when  purchased to be cash  equivalents.  Cash  equivalents
consist  primarily of cash deposits in money market funds that are available for
withdrawal without  restriction.  Short-term  investments consist principally of
state and local municipal obligations.

     The Company  accounts for its investment in accordance  with the provisions
of Statement of Financial  Accounting Standards No. 115, "Accounting for Certain
Investments  in  Debt  and  Equity   Securities."   Management   determines  the
appropriate  classification  of debt  securities  at the  time of  purchase  and
re-evaluates  such  designation  as of each balance  sheet date. At December 31,
1997,   all   debt    securities    are   designated   as    available-for-sale.
Available-for-sale  securities  are carried at fair value,  with the  unrealized
gains and losses reported in  shareholders'  equity.  The amortized cost of debt
securities  in this  category  is adjusted  for  amortization  of  premiums  and
accretion of discounts to maturity.  Such  amortization  is included in interest
and other income.  Realized  gains and losses and declines in value judged to be
other than temporary on  available-for-sale  securities are included in interest
income  and  other.  The  cost of  securities  sold  is  based  on the  specific
identification  method.  Interest and  dividends  on  securities  classified  as
available-for-sale are included in interest income and other.

     Concentration of Credit Risk

     Financial   instruments   that   potentially   subject   the   Company   to
concentrations of credit risk consist  principally of cash investments and trade
receivables.  The  Company  invests  in  securities  of A, A1, or P1 grade.  The
Company  manufactures  and  sells  its  products  to  customers  in  diversified
industries.  The Company performs  ongoing credit  evaluations of its customers'
financial condition and generally requires no collateral. Three of the Company's
distributors -- Wyle,  Arrow,  and Pioneer -- accounted for  approximately  17%,
17%, and 12% of the  Company's  net revenues  for 1997,  respectively.  The same
three  distributors  accounted in the  aggregate  for  approximately  39% of the
Company's  net revenues for 1996 and 37% for 1995.  The loss of any one of these
distributors  could have a materially adverse effect on the Company's results of
operations and financial position.

     Fair Value of Financial Instruments

     The  following  methods  and  assumptions  were  used  by  the  Company  in
estimating its fair value disclosures for financial instruments:

          Cash and Cash Equivalents. The carrying amount reported in the balance
     sheets for cash and cash equivalents approximate fair value.

          Investment Securities.  The fair values for marketable debt securities
     are based on quoted market prices.

          Foreign Currency Exchange  Contracts.  The fair value of the Company's
     foreign currency  exchange forward  contracts are estimated based on quoted
     market prices of comparable contracts.

     Impact of Recently Issued Accounting Standards

     In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings per Share" ("SFAS 128"), which is applicable to all financial
statements  issued for periods ending after  December 15, 1997.  Under SFAS 128,
the Company is required to change the method it has used to compute earnings per
share  and to  restate  all  prior  periods.  The  new  requirements  include  a
calculation of basic earnings per share, from which the dilutive effect of stock
options,  warrants,  and  convertible  debt are excluded;  and a calculation  of
diluted earnings per share,  which does not differ from previously  reported net
income (loss) per share. Accordingly, the Company adopted the provisions of SFAS
128 for the year ended  December 31, 1997, and all share and per share data have
been adjusted retroactively to comply with the new requirement.

     In June 1997, the Financial  Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting  Comprehensive Income" ("SFAS
130"),  which establishes  standards for reporting and displaying  comprehensive
income and its  components in a full set of  general-purpose  statements  and is
expected to be first  reflected in the  Company's  first quarter of 1998 interim
financial  statements.  The  Company's  management is currently  evaluating  the
impact of SFAS 130 on operations.

     In  June  1997,  the  Financial  Accounting  Standards  Board  also  issued
Statement of Financial Accounting Standards No. 131, "Disclosures about Segments
of an  Enterprise  and Related  Information"  ("SFAS  131"),  which  established
standards for the way pubic enterprises  report information in annual statements
and  financial  reports  regarding  operating  segments,   products,   services,
geographic  areas, and major customers.  SFAS 131 will be first reflected in the
Company's 1998 Annual Report. The Company's  management is currently  evaluating
the impact of SFAS 131 on operations.

     Income Taxes

     The Company  accounts for income taxes in accordance with the provisions of
Statement of Financial  Accounting  Standards  No. 109,  "Accounting  for Income
Taxes" ("SFAS 109").  Under SFAS 109, the liability method is used in accounting
for income taxes.  Deferred tax assets and liabilities  are determined  based on
the  differences  between  financial  reporting  and the tax basis of assets and
liabilities,  and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse.

     Inventories

     Inventories are stated at the lower of cost (first-in, first-out) or market
(net  realizable  value).  Given the  volatility of the market for the Company's
products,  the Company makes  inventory  provisions for  potentially  excess and
obsolete inventory based on backlog and forecast demand.  However,  such backlog
demand is subject to revisions,  cancellations, and rescheduling.  Actual demand
will  inevitably  differ  from  such  backlog  and  forecast  demand,  and  such
differences  may be material to the  financial  statements.  Excess  inventories
increase the risk of  obsolescence,  represent a  non-productive  use of capital
resources,  increase  handling  costs,  and delay  realization  of the price and
performance benefits associated with more advanced manufacturing processes.

     Off-Balance-Sheet Risk

     The Company enters into foreign  exchange  contracts to hedge firm purchase
commitments denominated in foreign currencies. The Company's accounting policies
for these instruments are based on the Company's designation of such instruments
as hedging  transactions.  The  criteria  the Company  uses for  designating  an
instrument  as a hedge  includes its  effectiveness  in exposure  reduction  and
one-to-one  matching of the  derivative  financial  instrument to the underlying
transaction  being hedged.  Gains and losses on these  contracts are  recognized
upon  maturity  of the  contracts  and are  included  in the cost of  sales.  At
December  31,  1997,  the  Company had foreign  exchange  contracts  maturing in
January 1998 to purchase Japanese yen for  approximately  $830,000 at an average
rate of 124 yen per dollar.

     In addition,  the Company had  approximately  $775,000  outstanding under a
standby letter of credit at December 31, 1997.

     Property and Equipment

     Property and  equipment are carried at cost less  accumulated  depreciation
(see  Note  2).   Depreciation  and   amortization   have  been  provided  on  a
straight-line basis over the following estimated useful lives:

Equipment......................   2 to 5 years
Furniture and fixtures.........   3 to 5 years
Leasehold improvements.........   Estimated useful life or lease term,
                                  whichever is shorter

     Revenue Recognition

     Revenue from product shipped to customers is generally recorded at the time
of  shipment.   Revenue  related  to  products  shipped  subject  to  customers'
evaluation is recognized upon final  acceptance.  Shipments to distributors  are
made under agreements  allowing certain rights of return and price protection on
unsold merchandise.  For that reason, the Company defers recognition of revenues
and related  cost of revenues  on sales of products to  distributors  until such
products are sold by the distributor. Royalty income is recognized upon the sale
by others of products subject to royalties.

     Stock-Based Compensation

     The  Company  accounts  for  stock-based  awards  to  employees  using  the
intrinsic value method in accordance with  Accounting  Principles  Board Opinion
No. 25, "Accounting for Stock Issued to Employees" ("APB 25").  Accordingly,  no
compensation  cost has been  recognized for its fixed cost stock option plans or
its associated  stock purchase plan. The Company  provides  additional pro forma
disclosures as required under  Statement of Financial  Accounting  Standards No.
123, "Accounting for Stock Based Compensation" ("SFAS 123").

     Use of Estimates

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

2.   Balance Sheet Detail

<TABLE>
<CAPTION>
                                                                                                 December 31,
                                                                                          --------------------------
                                                                                              1997          1996
                                                                                          ------------  ------------
                                                                                                (in thousands)
<S>                                                                                       <C>           <C>
 Accounts receivable:
    Trade accounts receivable..........................................................   $     26,767  $     30,128
    Allowance for doubtful accounts....................................................         (1,632)         (633)
                                                                                          ------------  ------------
                                                                                          $     25,135  $     29,495
                                                                                          ============  ============
 Inventories:
    Purchased parts and raw materials..................................................   $      3,681  $      1,792
    Work-in-process....................................................................          8,438        17,080
    Finished goods.....................................................................          8,353         7,976
                                                                                          ------------  ------------
                                                                                          $     20,472  $     26,848
                                                                                          ============  ============
 Property and equipment:
    Equipment..........................................................................   $     33,664  $     27,539
    Furniture and fixtures.............................................................          2,171         2,088
    Leasehold improvements.............................................................          4,476         4,210
                                                                                          ------------  ------------
                                                                                                40,311        33,837
    Accumulated depreciation and amortization..........................................        (25,230)      (17,864)
                                                                                          ------------  ------------
                                                                                          $     15,081  $     15,973
                                                                                          ============  ============
</TABLE>

     Depreciation  and  amortization   expense  was  approximately   $7,481,000,
$5,879,000,   and   $3,755,000   for  1997,   1996,   and  1995,   respectively.

3.   Purchase of TI FPGA Business

     On February 12, 1995, the Company entered into an Asset Purchase  Agreement
with Texas  Instruments  Incorporated  ("TI") under which TI agreed to convey to
the Company all tangible and intangible assets and intellectual  property rights
necessary to operate TI's antifuse FPGA business (the "TI FPGA  Business").  The
acquisition was completed on March 31, 1995, in a transaction accounted for as a
purchase.  The Company acquired approximately  $9,100,000 of inventory,  prepaid
research  and  development,  and other  credits  receivable.  The  Company  also
acquired  certain fixed assets used in the TI FPGA Business.  Beginning with the
second quarter of 1995, the Company's net revenues  included the revenues of the
TI FPGA Business, but no longer included royalties from TI.

     As  consideration  for the TI FPGA Business,  the Company  assumed  certain
liabilities,  paid  $10,000,000 in cash, and issued 1,000,000 shares of Series A
Preferred  Stock  (valued  at  approximately  $18,947,000  for  purposes  of the
transaction),  which on March 12,  1997,  were  converted  by TI into  2,631,578
shares of Common  Stock.  The total  purchase  price  booked by the  Company was
approximately  $28,947,000,  of which  approximately  $16,600,000  of in-process
research and  development  was charged  against  income in the first  quarter of
1995. The amount was  established by an independent  valuation  specialist.  The
remaining  amount of  consideration,  approximately  $4,400,000,  represents the
valuation  of  the  customer  base  and  goodwill  acquired,  was  allocated  to
intangible assets, and is being amortized over a five-year period.  Amortization
expense was $877,000,  $876,000,  and $657,000 for the years ended  December 31,
1997, 1996, and 1995, respectively.

4.   Short-Term Investments

     The following is a summary of available-for-sale securities at December 31,
1997 and 1996:
<TABLE>
<CAPTION>
                                                                              Gross         Gross
                                                                            Unrealized    Unrealized    Estimated
                                                                 Cost         Gains         Losses     Fair Values
                                                             ------------  ------------  ------------  ------------
                                                                                 (in thousands)
<S>                                                          <C>           <C>           <C>           <C>
December 31, 1997
   Municipal obligations included in short-term investments
                                                             $     51,222  $         50  $         --  $     51,272
                                                             ============  ============  ============  ============
December 31, 1996
   Municipal obligations included in short-term investments
                                                             $     25,618  $          8  $         --  $     25,626
                                                             ============  ============  ============  ============
</TABLE>

     There  were no  realized  gains or losses in 1997 or 1996.  Gross  realized
gains and (losses) were  approximately  $4,000 and ($8,000),  respectively,  for
1995.

     The  adjustments  to net  unrealized  gains  and  (losses)  on  investments
included as a separate component of shareholders'  equity totaled  approximately
$50,000 and $4,000 for 1997 and 1996, respectively.

     The expected maturities of the Company's  investments at December 31, 1997,
are shown below.  Expected  maturities  may differ from  contractual  maturities
because the issuers of the securities  may have the right to prepay  obligations
without prepayment penalties.

 Available-for-sale (in thousands):
    Due in less than one year....................................   $     19,061
    Due in one year or more......................................         32,211
                                                                    ------------
                                                                    $     51,272
                                                                    ============

A significant  proportion of the Company's securities  represent  investments in
floating  rate  municipal  bonds with  contractual  maturities  greater than ten
years.  However,  the interest rates on these debt  securities  generally  reset
every ninety days, at which time the Company has the option to sell the security
or roll-over the investment at the new interest rate. As it is not the Company's
intention to hold these securities  until their  contractual  maturities,  these
amounts     have     been     classified     as     short-term      investments.

5.   Investment in Chartered Semiconductor

     In  February  1994,  the  Company  entered  into  an  agreement  to  invest
approximately   $10,000,000  in  Chartered   Semiconductor   Manufacturing   Ltd
("Chartered Semiconductor"), a semiconductor company located in Singapore. Under
the terms of the  agreement,  the  Company has  acquired  an equity  interest in
Chartered Semiconductor of less than 2%. The investment was payable in Singapore
dollars, with the initial installment of approximately  $2,000,000 paid in March
1994, the second installment of approximately $2,000,000 paid in September 1994,
the third  installment of  approximately  $3,000,000 paid in March 1995, and the
last installment of approximately  $2,900,000 paid in January 1996. In 1996, the
Company  purchased an  additional  equity  interest in Chartered  Semiconductor,
pursuant to a contractual right of first refusal,  for  approximately  $698,000.
The  investment  in  Chartered  Semiconductor  is  accounted  for under the cost
method;  therefore,  changes in the value of the  investment  are not recognized
unless an impairment  in the value of the  investment is deemed by management to
be "other than temporary."

6.   Line of Credit

     The Company has a line of credit with a bank that  provides for  borrowings
not to exceed  $10,000,000.  The agreement  contains  covenants that require the
Company to  maintain  certain  financial  ratios  and  levels of net  worth.  At
December 31, 1997, the Company was in compliance with the covenants for the line
of credit.  Borrowings  against the line of credit  bear  interest at the bank's
prime rate. There were no borrowings  against the line of credit at December 31,
1997. The line of credit, which expires in May 1998, may be terminated by either
party upon not less than thirty days' prior written notice.

7.   Commitments

     The   Company   leases  its   facilities   and  certain   equipment   under
non-cancellable  lease agreements.  The principal facility lease expires in June
1998, and provides for two consecutive  five-year renewal options. The equipment
leases are accounted for as operating leases.  The lease terms expire at various
dates through  September  2001.  All of these leases  require the Company to pay
property  taxes,  insurance,  and  maintenance and repair costs. At December 31,
1997, the Company had no capital lease obligations.

     Future  minimum  lease  payments  under all  non-cancellable  leases are as
follows:

                                                                     Operating
                                                                       Leases
                                                                    ------------
1998............................................................    $      1,530
1999............................................................             866
2000............................................................             805
2001............................................................             575
2002............................................................             101
                                                                    ------------
Total minimum lease payments....................................    $      3,877
                                                                    ============

     Rental  expense  under  operating  leases  was  approximately   $2,481,313,
$1,615,000,   and   $1,193,000   for  1997,   1996,   and  1995,   respectively.

8.   Retirement Plan

     Effective  December 10, 1987,  the Company  adopted a tax deferred  savings
plan for the  benefit of  qualified  employees.  The plan is designed to provide
employees with an  accumulation  of funds at retirement.  Employees may elect at
any time to have salary reduction contributions made to the plan.

     The Company may make  contributions  to the plan at the  discretion  of the
Board of Directors. The first contributions to the plan by the Company were made
in March 1998,  based on net  revenues  and net income for the 1997 fiscal year.
For 1997,  the plan provided for a maximum  contribution  of 2.5% of an eligible
employee's gross earnings or $1,500,  whichever is less, if the Company achieved
its net revenue and net income goals.  To be eligible for the  contribution,  an
employee  must have been hired on or before July 15,  1997,  and been an active,
regular employee on December 31, 1997. Since the Company did not achieve its net
revenue or net income goals in 1997 for purposes of the plan,  the amount of the
contribution was reduced to 1.7% of an eligible employee's gross earnings, up to
a maximum of $1,500.  The aggregate amount contributed to the plan was $340,750.
The contributions vest annually,  retroactively from an eligible employee's date
of hire,  at the rate of 25% per year. In addition,  contributions  become fully
vested upon  retirement  from the Company at age 65. There is no  guarantee  the
Company will make any contributions to the plan in the future, regardless of its
financial  performance.  If the Company,  at its  discretion,  chooses to make a
contribution again in the future, the amount could be higher or lower.

9.   Shareholders' Equity

     Stock Option Plans

     The Company has  adopted  stock  option  plans  under  which  officers  and
employees  may be granted  incentive  stock options or  nonqualified  options to
purchase shares of the Company's  common stock. At December 31, 1997,  7,364,533
shares of common stock were  reserved for issuance  under these plans,  of which
521,100  were  available  for grant.  In January  1998,  the Board of  Directors
authorized  the Company to exchange  stock options  granted under these plans to
all employees  (except officers with more than one year seniority) and having an
exercise  price greater than $11.75 for options with an exercise price of $11.75
(the fair market  value of the  Company's  stock on January 26,  1998,  when the
exchange  was  effected).  Under the terms of this stock  option  repricing,  no
portion of any repriced  option was  exercisable  until July 27,  1998.  Options
representing the right to purchase a maximum of 1,777,016 shares of common stock
were repriced.

     The Company has also  adopted a Directors'  Stock Option Plan,  under which
directors  who are not  employees  of the  Company  may be granted  nonqualified
options to purchase shares of the Company's  common stock. At December 31, 1997,
200,000  shares of common stock were  reserved for issuance  under such plan, of
which 70,000 were available for grant.

     The Company  grants stock  options  under its plans at a price equal to the
fair  value of the  Company's  common  stock on the date of  grant.  Subject  to
continued service, options generally vest over a period of four years and expire
ten years from the date of grant.

     The following  table  summarizes  the Company's  stock option  activity and
related information for the three years ended December 31, 1997:

<TABLE>
<CAPTION>
                                             1997                        1996                        1995
                                  --------------------------  --------------------------  --------------------------
                                                   Weighted                    Weighted                    Weighted
                                                    Average                     Average                     Average
                                    Number of      Exercise      Number of     Exercise      Number of     Exercise
                                     Shares          Price         Shares        Price         Shares        Price
                                  -------------  -----------  --------------  ----------  --------------  ----------
<S>                                  <C>         <C>              <C>        <C>              <C>        <C>
Outstanding at January 1......        3,542,836  $     12.38       2,506,331  $    10.17       1,588,565  $     6.42
Granted.......................        1,252,895        17.39       2,633,911       14.24       1,315,860       12.96
Exercised.....................         (214,821)        8.29        (204,344)       6.60        (270,365)       2.25
Cancelled.....................         (328,795)       13.40      (1,393,062)      12.79        (127,729)       8.99
                                  -------------               --------------              --------------
Outstanding at December 31....        4,252,115        13.98       3,542,836       12.38       2,506,331       10.17
                                  =============               ==============              ==============
</TABLE>

     The following table summarizes  information about stock options outstanding
at December 31, 1997:

 <TABLE>
<CAPTION>
                                                                         December 31, 1997
                                                --------------------------------------------------------------------
                                                          Options Outstanding                 Options Exercisable
                                                ----------------------------------------   -------------------------
                                                                 Weighted
                                                                 Average      Weighted                    Weighted
                                                                Remaining     Average                     Average
                                                  Number of      Contract     Exercise      Number of     Exercise
           Range of Exercise Prices                 Shares         Life        Price          Shares       Price
---------------------------------------------    -----------   ----------   ------------   -----------  ------------
<S>                                                <C>         <C>          <C>                <C>      <C>
$    1.80    -  $   8.00....................         588,679   5.69 years    $      6.77       406,441  $       6.38
     8.13    -     10.50....................         241,275   7.13                 9.35        82,619          9.40
                   10.63....................         842,625   8.01                10.63       375,099         10.63
    12.25    -     13.56....................         222,850   8.37                13.24        52,624         13.21
                   14.88....................         548,225   8.55                14.88        56,107         14.88
    15.00    -     16.25....................         121,625   8.54                15.30        31,416         15.16
                   16.38....................         737,116   9.51                16.38         8,065         16.38
    17.00    -     20.88....................         557,670   8.62                19.06        51,643         18.34
    21.00    -     22.50....................         327,400   9.14                21.78        35,045         22.34
                   22.69....................          64,650   9.69                22.69             0             0
                                                 -----------                               -----------
     1.80    -     22.69....................       4,252,115   8.19                13.98     1,099,059         10.21
                                                 ===========                               ===========
</TABLE>

691,944 and 564,195  outstanding  options were  exercisable at December 31, 1996
and 1995,  respectively.  The weighted-average  grant-date fair value of options
granted during 1997, 1996, and 1995 were $7.38, $4.92, and $6.11, respectively.

     Employee Stock Purchase Plan

     The Company has adopted an Employee Stock Purchase Plan (the "ESPP"), under
which  eligible  employees  may  designate  not  more  than  15% of  their  cash
compensation to be deducted each pay period for the purchase of common stock (up
to a maximum of $25,000  worth of common  stock in any year).  At  December  31,
1997,  1,150,000  shares of common stock were  reserved  for issuance  under the
ESPP. The ESPP is  administered  over offering  periods of up to 24 months each,
with each  offering  period  divided into four  consecutive  six-month  purchase
periods beginning August 1 and February 1 of each year. On the last business day
of each purchase  period,  shares of common stock are purchased with  employees'
payroll deductions  accumulated during the six months at a price per share equal
to 85%  of  the  market  price  of the  common  stock  on the  first  day of the
applicable offering period or the last day of the purchase period,  whichever is
lower.  There were 208,992 and 225,401  shares issued under the ESPP in 1997 and
1996, respectively,  and 387,292 remained available for issuance at December 31,
1997.

     Pro Forma Disclosures

     Pro forma information regarding net income/(loss) and net income/(loss) per
share is required  by SFAS 123,  which also  requires  that the  information  be
determined  as if the Company  had  accounted  for its  employee  stock  options
granted  subsequent to December 31, 1994 under the fair value  method.  The fair
value  for  these  options  was  estimated  at  the  date  of  grant  using  the
Black-Scholes pricing model with the following weighted-average  assumptions for
1997,  1996,  and 1995:  risk-free  interest rates of 5.95%,  5.84%,  and 6.55%,
respectively;  no dividend yield; volatility factor of the expected market price
of the Company's common stock of 48%, 50%, and 50%, respectively; and a weighted
average expected life of the options of four years.

     The  Black-Scholes   option  valuation  model  was  developed  for  use  in
estimating the fair value of traded options,  which have no vesting restrictions
and are fully  transferable.  In addition,  option  valuation models require the
input of highly  subjective  assumptions,  including  the  expected  stock price
volatility.  Because the Company's  employee stock options have  characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially  affect the fair value estimate,  in
management's  opinion the existing models do not necessarily  provide a reliable
single measure of the fair value of its employee stock options.

     For  purposes of pro forma  disclosures,  the  estimated  fair value of the
options is amortized to expense over the options' vesting period.  The Company's
pro forma information is as follows:
<TABLE>
<CAPTION>

                                                                                   Year Ended December 31,
                                                                            ----------------------------------------
                                                                                1997          1996          1995
                                                                            ------------  ------------  ------------
                                                                            (in thousands, except per share amounts)
<S>                                                                         <C>           <C>           <C>
Pro forma net income (loss).............................................    $     11,405  $     10,452  $     (2,780)
Pro forma earnings (loss) per share:
   Basic................................................................            0.56          0.59        (0.16)
   Diluted..............................................................            0.54          0.50        (0.16)
</TABLE>

Since SFAS 123 is applicable only to options granted  subsequent to December 31,
1994, its pro forma effect will not be fully reflected until  subsequent  years.
The effects on pro forma  disclosures  of applying SFAS 123 are not likely to be
representative of the effects on pro forma disclosures in future years.

10.      Tax Provision (Benefit)

     The tax provision (benefit) consists of:
<TABLE>
<CAPTION>

                                                                                          December 31,
                                                                            ----------------------------------------
                                                                                1997          1996          1995
                                                                            ------------  ------------  ------------
                                                                                         (in thousands)
<S>                                                                         <C>           <C>           <C>
Federal - current.......................................................    $     11,585  $     12,150  $      4,113
Federal - deferred......................................................          (4,544)       (5,571)       (8,977)
State - current.........................................................           2,304         2,460         1,149
State - deferred........................................................            (506)       (1,089)       (3,044)
Foreign - current.......................................................             190           197           119
                                                                            ------------  ------------  ------------
                                                                            $      9,029  $      8,147  $     (6,640)
                                                                            ============  ============  ============
</TABLE>

     The  tax  provision   (benefit)   reconciles  to  the  amount  computed  by
multiplying  income  (loss)  before tax by the U.S.  statutory  rate as follows:
<TABLE>
<CAPTION>
                                                                                          December 31,
                                                                            ----------------------------------------
                                                                                1997          1996          1995
                                                                            ------------  ------------  ------------
                                                                                         (in thousands)
<S>                                                                         <C>           <C>           <C>
Provision (benefit) at statutory rate...................................    $      9,029  $      8,079  $     (2,719)
Change in valuation allowance...........................................            (440)         (432)       (2,396)
Federal research credits................................................            (772)         (425)         (937)
State taxes, net of federal benefit.....................................           1,169           891          (813)
Other...................................................................              43            34           225
                                                                            ------------  ------------  ------------
Tax provision (benefit).................................................    $      9,029  $      8,147  $     (6,640)
                                                                            ============  ============  ============
</TABLE>

     Significant components of the Company's deferred tax assets and liabilities
for     federal     and    state     income     taxes     are    as     follows:

<TABLE>
<CAPTION>
                                                                                                 December 31,
                                                                                          --------------------------
                                                                                              1997          1996
                                                                                          ------------  ------------
                                                                                                (in thousands)
<S>                                                                                       <C>           <C>
Deferred tax assets:
        Depreciation...................................................................   $        219  $         --
        Distributor reserve............................................................         12,350        11,033
        Charge for in-process research expenses........................................          5,450         5,962
        Inventories....................................................................          5,323         3,293
        Other, net.....................................................................          3,905         2,453
                                                                                          ------------  ------------
                                                                                                27,247        22,741
        Valuation allowance............................................................         (2,606)       (3,046)
                                                                                          ------------  ------------
                                                                                                24,641        19,695
                                                                                          ============  ============
Deferred tax liabilities:
        Depreciation...................................................................             --          (104)
                                                                                          ------------  ------------
                                                                                                    --          (104)
                                                                                          ------------  ------------
                Net deferred tax assets................................................   $     24,641  $     19,591
                                                                                          ============  ============
</TABLE>

The valuation allowance declined by approximately $432,000 during 1996.

11.  Industry and Geographic Information

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

<TABLE>
<CAPTION>
                                                               Year Ended December 31,
                                  ----------------------------------------------------------------------------------
                                             1997                        1996                        1995
                                  --------------------------  --------------------------  --------------------------
                                                          (in thousands, except percentages)

<S>                               <C>               <C>       <C>               <C>       <C>               <C>
United States.................    $    107,308       69%      $     99,131       67%      $     67,156       62%
Export:
     Europe...................          26,239       17             26,105       18             18,706       17
     Japan....................          13,328        8             15,340       10             13,238       12
     Other international......           8,983        6              8,203        5              9,416        9
                                  ------------  ------------  ------------  ------------  ------------  ------------
                                  $    155,858      100%      $    148,779      100%      $    108,516      100%
                                  ============  ============  ============  ============  ============  ============
</TABLE>

12.  Patent Infringement

     In January 1994, the Company brought a patent infringement  lawsuit against
QuickLogic   Corporation   ("QuickLogic"),   which  in  turn  brought  a  patent
infringement  counterclaim  against  the  Company in May 1995.  The  parties are
currently  engaged in  discovery  and motion  proceedings.  Although the Company
believes that it has  meritorious  claims and defenses in this matter,  and that
its  resolution  will not have a  materially  adverse  effect  on the  Company's
business,  financial  position,  or results of  operations,  no assurance can be
given to that effect.

     As is typical  in the  semiconductor  industry,  the  Company  has been and
expects to be from time to time  notified  of claims  that it may be  infringing
patents owned by others.  As it has in the past, the Company may obtain licenses
under patents that it is alleged to infringe.  Although the Company is unable to
estimate with any degree of confidence the cost of such  licenses,  no assurance
can be given that they  would  not,  individually  or in the  aggregate,  have a
materially adverse effect on the Company's financial  condition,  and/or results
of operations.  In addition,  no assurance can be given that such claims against
the  Company  will not  result in  litigation.  All  litigation,  whether or not
determined  in favor of the Company,  can result in  significant  expense to the
Company and can divert the efforts of the  Company's  technical  and  management
personnel from productive tasks.

     Although the Company has obtained patents covering  elements of its circuit
architecture and certain techniques for manufacturing its antifuse, no assurance
can be given that the  Company's  patents will be determined to be valid or that
the claims of QuickLogic or any assertions of  infringement by other parties (or
claims for indemnity from customers resulting from any infringement claims) will
not succeed.  In the event of an adverse  ruling in the  QuickLogic  case or any
other  litigation  involving  intellectual  property,  the Company  could suffer
significant  (and possibly  treble)  monetary  damages.  The Company may also be
required to discontinue  the use of certain  processes;  cease the  manufacture,
use, and sale of infringing  products;  expend significant  resources to develop
non-infringing   technology;  or  obtain  licenses  under  patents  that  it  is
infringing.  Any of these outcomes could have a materially adverse effect on the
Company's business, financial condition, and/or results of operations.

13.  Earnings Per Share

     Under SFAS 128, the Company is required to change the method it has used to
compute  earnings  per  share  and  to  restate  all  prior  periods.   The  new
requirements  include a calculation  of basic earning per share,  from which the
dilutive effect of stock options,  warrants,  and convertible debt are excluded;
and a  calculation  of diluted  earnings  per  share,  which will not change the
primary  earnings  per share  previously  reported.  For the  fiscal  year ended
December  31,  1995,  the  dilutive  effect  of  stock  options,  warrants,  and
convertible  preferred  stock was excluded from the calculation of common shares
used  in  the  denominator  for  diluted   earnings  per  share  because  it  is
anti-dilutive.

     The  following  table  sets  forth the  computation  of basic  and  diluted
earnings per share:
<TABLE>
<CAPTION>
                                                                                   Year Ended December 31,
                                                                            ----------------------------------------
                                                                                1997          1996          1995
                                                                            ------------  ------------  ------------
<S>                                                                         <C>           <C>           <C>
                                                                            (in thousands, except per share amounts)
Basic:
Average common shares outstanding.......................................          20,370        17,826        17,367
                                                                            ------------  ------------  ------------
Shares used in computing net income (loss) per share....................          20,370        17,836        17,367
                                                                            ============  ============  ============
Net income (loss).......................................................    $     16,768  $     14,938  $     (1,132)
                                                                            ============  ============  ============
Net income (loss) per share.............................................    $       0.82  $       0.84  $     (0.07)
                                                                            ============  ============  ============

Diluted:
Average common shares outstanding.......................................          20,370        17,826        17,367
Net effect of dilutive stock options,  warrants, and convertible preferred
   stock - based on the treasury stock method...........................           1,598         3,659            --
                                                                            ------------  ------------  ------------
Shares used in computing net income (loss) per share....................          21,968        21,485        17,367
                                                                            ============  ============  ============
Net income (loss).......................................................    $     16,768  $     14,938  $     (1,132)
                                                                            ============  ============  ============
Net income (loss) per share.............................................    $       0.76  $       0.70  $     (0.07)
                                                                            ============  ============  ============
</TABLE>


<PAGE>


                REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS



THE BOARD OF DIRECTORS AND SHAREHOLDERS

ACTEL CORPORATION



     We have  audited  the  accompanying  consolidated  balance  sheets of Actel
Corporation  as of  December  31, 1997 and 1996,  and the  related  consolidated
statements of operations,  cash flows, and shareholders'  equity for each of the
three years in the period ended December 31, 1997.  These  financial  statements
are the  responsibility of the Company's  management.  Our  responsibility is to
express an opinion on these financial statements based on our audits.

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

     In our opinion,  the financial statements referred to above present fairly,
in  all  material  respects,   the  consolidated  financial  position  of  Actel
Corporation  at December 31, 1997 and 1996 and the  consolidated  results of its
operations  and its cash flows for each of the three  years in the period  ended
December 31, 1997, in conformity with generally accepted accounting principles.



/s/ ERNST & YOUNG LLP

San Jose, California
January 21, 1998


                                  STOCK LISTING

     Actel's common stock has been traded on the  over-the-counter  market since
the Company's  initial public offering (IPO) on August 2, 1993, and is quoted on
the NASDAQ National Market System under the symbol "ACTL." The Company has never
paid cash dividends on its common stock and has no present plans to do so.

     On March 25,  1998,  there  were 304  shareholders  of  record.  Since many
shareholders  have their  shares  held of record in the name of their  brokerage
firm, the actual number of  shareholders is estimated by the Company to be about
5,000.

     During the last two years,  the quarterly  high and low sale prices for the
common stock were:

                       1997                                High          Low
---------------------------------------------------   ------------  ------------
First Quarter......................................   $     29.125  $     17.875
Second Quarter.....................................         22.125        15.375
Third Quarter......................................         24.125        15.75
Fourth Quarter.....................................         19.25         11.25

                       1996                                High          Low
---------------------------------------------------   ------------  ------------
First Quarter......................................   $     17.125  $      9.00
Second Quarter.....................................         21.875        14.50
Third Quarter......................................         20.25         12.375
Fourth Quarter.....................................         24.625        16.25