UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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

                                    FORM 10-K

(Mark One)

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

For the fiscal year ended December 28, 1997

                                       OR

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

Commission file number 0-21970

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

                                ACTEL CORPORATION
             (Exact name of Registrant as specified in its charter)

               California                               77-0097724
    (State or other jurisdiction of                  (I.R.S. Employer
     incorporation or organization)                Identification No.)

         955 East Arques Avenue
         Sunnyvale, California                          94086-4533
(Address of principal executive offices)                (Zip Code)

                                 (408) 739-1010
              (Registrant's telephone number, including area code)

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

               Securities registered pursuant to Section 12 (b) of
                                    the Act:
                                      None

           Securities registered pursuant to Section 12(g) of the Act:
                          Common Stock, $.001 par value
                                (Title of class)

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

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

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

     The aggregate  market value of the voting stock held by  non-affiliates  of
the  Registrant,  based upon the  closing  price for shares of the  Registrant's
Common Stock on March 27, 1998, as reported by the National Market System of the
National  Association of Securities  Dealers  Automated  Quotation  System,  was
approximately  $203,525,747.  In calculating such aggregate market value, shares
of Common Stock owned of record or beneficially by all officers,  directors, and
persons  known to the  Registrant  to own more than five percent of any class of
the  Registrant's  voting  securities were excluded  because such persons may be
deemed to be affiliates.  The  Registrant  disclaims the existence of control or
any admission thereof for any other purpose.

     Number  of  shares  of  Common  Stock  outstanding  as of March  27,  1998:
21,246,215.


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

                       DOCUMENTS INCORPORATED BY REFERENCE

         The following documents are incorporated by reference in Parts II, III,
and IV of this Annual Report on Form 10-K: (i) portions of  Registrant's  annual
report to security holders for the fiscal year ended December 28, 1997 (Parts II
and IV),  and (ii)  portions  of  Registrant's  proxy  statement  for its annual
meeting of shareholders to be held on May 22, 1998 (Part III).

<PAGE>


                                     PART I

ITEM 1.  BUSINESS

Overview

     Actel  designs,  develops,  and  markets  field  programmable  gate  arrays
("FPGAs") and associated  development system software and programming  hardware.
FPGAs  are  used  by  designers   of   communications,   computer,   industrial,
military/aerospace, and other electronic systems to differentiate their products
and get them to market  faster.  The  Company is the  leading  supplier of FPGAs
based on  antifuse  switching  elements,  which  are  smaller  than  alternative
switching  elements (such as static random access memories ("SRAMs") or erasable
programmable read only memories ("EPROMs")), permitting reduced circuit size and
cost and increased design efficiencies. Actel shipped its first products in 1988
and  thousands  of  its  development  systems  are in the  hands  of  customers,
including  Allen   Bradley/Rockwell,   AST  Computer,   Alcatel,  Bay  Networks,
Cabletron,  DSC  Communications,   Hughes  Aircraft,   Lockheed-Martin,   Lucent
Technologies,  and Siemens. The Company has foundry relationships with Chartered
Semiconductor  Manufacturing Pte Ltd ("Chartered  Semiconductor")  in Singapore,
Lockheed-Martin  Federal Systems Company  ("Lockheed-Martin  FSC") in the United
States,  Matsushita  Electronics  Company  and  Matsushita  Electrical  Industry
Company Ltd.  (collectively,  "Matsushita")  in Japan,  and Winbond  Electronics
Corp. ("Winbond") in Taiwan, permitting Actel to focus its resources on its core
strengths of designing, developing, and marketing FPGAs.

     The Company's FPGAs  currently are based on two  proprietary  technologies:
the Actel  antifuse  and a circuit  architecture  that  takes  advantage  of the
Company's  antifuse.  The principal  advantages of the antifuse over alternative
switching elements are smaller size and lower electrical resistance. The smaller
size of the antifuse generally permits Actel to make programmable  circuits that
are smaller, and hence less costly, than circuits of comparable  performance and
capacity  made  under   comparable   design  rules  using   alternative   switch
technologies.   Similarly,   for  circuits  of  comparable   size  and  capacity
manufactured under comparable design rules, the antifuse  facilitates the design
of circuits with a greater number of switches,  which,  in combination  with the
lower electrical resistance of the antifuse, tends to enhance flexibility and/or
performance.   In  addition,   the  Company  believes  that  its  antifuse-based
architecture is better suited for the high-level  logic synthesis tools that are
increasingly   employed  to  design  higher   capacity   devices  than  existing
architectures using other types of switching elements.

     Actel  believes that the demand for higher  capacity  devices will increase
faster than that for programmable devices as a whole.  Accordingly,  the Company
is focusing its attention on the transition to higher  capacity  devices and the
associated high-level design  methodologies.  Actel's strategy is to provide the
best FPGA  solutions by giving logic  designers the capability and confidence to
successfully  move up to higher level designs.  The Company is implementing this
strategy  by  enhancing  the  functionality,  usability,  and  accessibility  of
high-level design tools for its antifuse-based  architecture;  by increasing its
support for high-level design methodologies; and by developing a new, SRAM-based
architecture  that Actel believes will be better suited for use with  high-level
design tools than existing non-antifuse architectures.

     The Company's  product line currently  consists of seven families of FPGAs,
Designer  Series  Development  System and  CoreHDL  software,  Silicon  Explorer
debugging and diagnostic  tools, and Activator device  programmers.  To meet the
diverse customer requirements in the broad FPGA market, each member of a product
family  generally  is  offered  in a variety  of speed  grades,  package  types,
reliability screenings, and ambient temperature tolerances.  Designers typically
use popular  third-party  software  for circuit  design and then  translate  the
design  into a  programmed  FPGA using  Actel's  proprietary,  highly  automated
software   (Designer   Series   Development   System)  and  device   programmers
(Activator).  CoreHDL  blocks or "cores" that can be used to reduce  development
time by being "dropped into" designs, and Silicon Explorer can be used to reduce
design-verification  time by enabling the user to monitor the functionality of a
programmed FPGA in "real time."

     During 1997, Actel introduced a number of new silicon products.  In January
1997, the Company  announced the immediate  availability  of the world's highest
capacity  antifuse-based  FPGA, the 30,000-gate  A32300DX.  In April 1997, Actel
expanded its 3.3-volt product line to include  additional  members of its 1200XL
and 3200DX FPGA  families.  Most  significantly,  in October  1997,  the Company
introduced its new MX family of antifuse FPGAs, which is expected to feature six
devices ranging from 2,000 to 36,000 logic gates. At introduction, the MX family
was  believed  to be the world's  fastest  FPGA  family.  The MX family is being
marketed as a  single-chip  alternative  to ASICs and offered at pricing  levels
that are intended to be attractive to high-volume users of FPGAs.

     In  April  1997,  the  Company  introduced  its  Silicon  Explorer  desktop
debugging and diagnostic tool. Silicon Explorer permits designers to monitor and
hence debug the internal  operation of an Actel FPGA while running within a real
system at system speeds, a capability that is unique to Actel.

     During the course of 1997, the Company's  Designer Series software products
were  significantly  enhanced in terms of both functionality and support for the
various new silicon products. In addition, notable improvements were made in the
packaging of the software to enhance both its usability and  accessibility.  For
example,  the  requirement  for a licensing  security  block in order to run the
software was removed in June 1997. More significantly, certain software packages
were offered free of charge and made available for downloading  from Actel's web
site.

     Actel  markets its  products  through a worldwide,  multi-tiered  sales and
distribution  network.  The North American network includes six sales management
offices, seven technical sales offices, 21 manufacturers'  representative firms,
and three major  industrial  distributors.  The European  network includes sales
management  offices in  England,  France,  Italy,  and  Germany,  as well as two
Pan-European distributors and five regional distributors.  In Japan, the Company
has a sales  management  and technical  office and markets its products  through
three  distributors.  In Korea, the Company has a sales management and technical
office  and  markets  its  products  through  one  distributor.  Six  additional
distributors serve the remaining international markets in which Actel offers its
products.

     The Company was  incorporated  in  California  in 1985.  Actel's  principal
facilities  and  executive  offices  are  located  at 955  East  Arques  Avenue,
Sunnyvale,  California  94086-4533,  and its telephone number at that address is
(408) 739-1010. The Company's World Wide Web address is http://www.actel.com. As
used in this Annual Report on Form 10-K,  "Actel" and the  "Company"  mean Actel
Corporation and its  consolidated  subsidiaries.  "Actel" and the Actel logo are
registered  trademarks  of the  Company.  This  Annual  Report on Form 10-K also
includes  unregistered  trademarks  of the Company and  trademarks  of companies
other than Actel.

Industry Background

     The three  principal  types of  integrated  circuits  used in most  digital
electronic   systems   are   microprocessor,   memory,   and   logic   circuits.
Microprocessors  are used for control and computing  tasks;  memory  devices are
used to store program instructions and data; and logic devices are used to adapt
these  processing  and storage  capabilities  to a specific  application.  Logic
circuits are found in virtually every electronic system.

     The logic design of competing  electronic systems is often a principal area
of  differentiation.  Unlike the  microprocessor  and memory markets,  which are
dominated  by a  relatively  few  standard  designs,  the logic market is highly
fragmented  and  includes,  among  many  other  segments,  low-density  standard
transistor-transistor  logic circuits ("TTLs") and  custom-designed  ASICs. TTLs
are  standard  logic  circuits  that  can  be  purchased  "off  the  shelf"  and
interconnected  on a  printed  circuit  board,  but they  tend to  limit  system
performance  and increase  system size and cost  compared  with logic  functions
integrated at the circuit  (rather than the board) level.  ASICs are  customized
circuits  that offer  electronic  system  manufacturers  the  benefits of higher
levels of circuit integration: improved system performance, reduced system size,
and lower system cost.

     ASICs include  conventional  gate arrays and  programmable  logic circuits.
Conventional  gate arrays are customized to perform desired logical functions at
the time the device is  manufactured.  Since they are "hard  wired" at the wafer
foundry,  conventional  gate arrays are  subject to the time and  expense  risks
associated   with  any  development   cycle  involving  a  foundry.   Typically,
conventional gate arrays are first delivered in production  volumes months after
the successful production of acceptable  prototypes.  In addition,  conventional
gate arrays cannot be modified after they are manufactured,  which subjects them
to the risk of inventory  obsolescence and constrains the system  manufacturer's
ability to change the logic design.  Programmable  logic circuits,  on the other
hand,  are  manufactured  as standard  devices and  customized "in the field" by
electronic system manufacturers using computer-aided  engineering ("CAE") design
and programming systems. Programmable logic circuits are being used by a growing
number of  electronic  system  manufacturers  as a solution to their  increasing
demands  for   differentiation,   rapid  time  to  market,   and   manufacturing
flexibility.  While  conventional  gate array designs are generally more complex
than  programmable  logic circuit designs,  the average capacity (or "gates" per
circuit) of both  conventional  gate arrays and programmable  logic circuits has
increased over time.  This indicates that long-term  growth in sales within each
market segment has increased faster for circuits with higher capacities.

     Programmable logic circuits include programmable logic devices ("PLDs") and
FPGAs. The market for complex PLDs ("CPLDs") and FPGAs has grown rapidly because
they generally offer greater  capacity,  lower total cost per usable logic gate,
and lower power consumption than TTLs and simple PLDs, and faster time to market
and lower development  costs than conventional gate arrays.  For many electronic
system manufacturers, the time-to-market and manufacturing-flexibility  benefits
of CPLDs and FPGAs outweigh their price premium over conventional gate arrays of
comparable  capacity.  This is particularly  true with respect to communications
applications.

     Electronic system  manufacturers  customize  programmable logic circuits to
perform the desired logical  functions by using CAE systems to define a device's
function  and then a device  programmer  to  change  the  state of the  device's
programming elements (such as antifuses or memory cells) through the application
of an electrical signal. Most CPLDs currently are programmed with EPROM or other
"floating  gate"  technologies.  Many FPGAs  currently are programmed  with SRAM
technology.   FPGAs  based  on  antifuse   programming   elements  are  one-time
programmable, meaning they will retain their circuit configurations permanently,
even in the  absence of  electrical  power.  FPGAs and CPLDs  based on EPROM- or
SRAM-controlled programming elements are reprogrammable.

     The  principal  limitation on the wider use of CPLDs and FPGAs has been the
difficulty in developing devices with price and performance  factors approaching
those of  conventional  gate  arrays.  Programming  elements  based on  existing
reprogrammable  architectures  occupy  relatively large amounts of area within a
circuit, which tends to increase the overall size and, in turn, the cost of each
circuit.  In  addition,  the size of  programming  elements  based  on  existing
reprogrammable architectures tends to limit the number of interconnect points in
a circuit,  which, in combination with the relatively high electrical resistance
of such programming elements,  tends to limit to limit design flexibility and/or
circuit performance.

     Before an FPGA can be  programmed  there  are  various  steps  that must be
accomplished  by a  designer  using CAE design  software.  These  steps  include
defining  the  function of the FPGA,  verifying  the design,  and laying out the
circuit.  Traditionally,  logic  functions  have been  defined  using  schematic
capture  tools,  which  essentially  permit the  designer to construct a circuit
diagram on the computer.  As FPGA designers have begun to design higher capacity
circuits, the time required to create schematic diagrams using schematic capture
tools  has  become   prohibitive.   To  address  this  problem,   designers  are
increasingly turning to hardware description  languages ("HDLs"),  also known as
high-level description ("HLD"). VHDL and Verilog are the most common HDLs, which
permit the designer to describe the circuit  functions at an abstract  level and
to verify the performance of logic functions at that level.  The HDL can then be
fed into logic synthesis  software that  automatically  converts the abstract or
high-level  description  to  a  gate-level  representation  equivalent  to  that
produced by schematic  capture tools.  After a gate-level  representation of the
logic  function has been created and  verified,  it must be  translated or "laid
out" onto the generic logic modules of the FPGA. This is achieved by placing the
logic gates and routing their interconnections,  a process referred to as "place
and route." As designers have begun to design higher capacity circuits, the need
for  automatic  (instead  of  manual)  place and  route  capability  has  become
increasingly important.  This transition to the use of HDLs presents a challenge
to the  designer  to learn new design  methods and to use new design  tools.  In
addition,  not all  programmable  logic circuit  architectures  are equally well
suited for use with logic synthesis and place and route tools.

Actel Strategy

     Actel  believes that the demand for higher  capacity  devices will increase
faster than that for programmable devices as a whole.  Accordingly,  the Company
is focusing its attention on the transition to higher  capacity  devices and the
associated high-level design  methodologies.  Actel's strategy is to provide the
best FPGA  solutions by giving logic  designers the capability and confidence to
successfully  move up to higher level designs.  The Company is implementing this
strategy  by  enhancing  the  functionality,  usability,  and  accessibility  of
high-level design tools for its antifuse-based  architecture;  by increasing its
support for high-level design methodologies; and by developing a new, SRAM-based
architecture  that Actel believes will be better suited for use with  high-level
design tools than existing reprogrammable architectures.

Technology

     Actel's FPGAs  currently  are based on two  proprietary  technologies:  the
Actel antifuse and a circuit  architecture that takes advantage of the Company's
antifuse.  The  antifuse is a  two-terminal  switch  that is open  before  being
programmed.  In contrast to a conventional  fuse, the  application of sufficient
voltage to an antifuse causes the switch to close permanently,  allowing current
to pass. Actel is the leading supplier of FPGAs based on antifuses.

     Antifuse

     Actel  believes  that  it  was  first  to  achieve  volume   production  of
antifuse-based  FPGAs.  The  patented  antifuse  structure  used by Actel in its
current  product  families  consists of a "sandwich" of silicon  oxide,  silicon
nitride,  and silicon oxide  ("ONO").  This  structure is similar to that of ONO
capacitors  employed in the volume  manufacture  of many dynamic  random  access
memory (DRAM) circuits.  Actel has continued to develop antifuse  technology and
plans to introduce a family of FPGAs during 1998 based on a new "metal-to-metal"
fuse  structure  that further  enhances the benefits of the antifuse,  which the
Company believes include the following:

          Small Size

          Antifuses are smaller than  alternative  switching  elements  (such as
     those utilizing SRAM and EPROM elements),  so antifuse-based  circuits tend
     to  be  smaller,  and  hence  less  costly,  than  circuits  of  comparable
     performance and capacity  manufactured  under comparable  design rules with
     alternative switching elements.  Similarly, for circuits of comparable size
     and capacity  manufactured  under  comparable  design  rules,  the antifuse
     facilitates the design of circuits with a greater number of switches, which
     tends to enhance flexibility and/or performance.

          Low Resistance

          Antifuses   typically   exhibit  lower   electrical   resistance  than
     alternative  switching elements.  Lower electrical resistance also tends to
     enhance circuit performance.

          High Reliability

          The  Company  has  performed  extensive  reliability  testing  on  its
     antifuses over many years with excellent  results.  The negligible  rate of
     individual  antifuse  failure  permits  antifuses to be used in substantial
     numbers  without  degrading  overall  circuit  reliability,  which  in turn
     permits the small size and low resistance  attributes of the antifuse to be
     fully exploited.

          Nonvolatility

          After an  antifuse-based  FPGA is  programmed,  it retains its circuit
     configuration permanently, even in the absence of electrical power. This is
     not true of SRAM-based FPGAs.  Although the  reprogrammability  of SRAM and
     EPROM  switches  is  desirable  in  some  applications,   nonvolatility  is
     necessary in certain military, aerospace, and communications applications.

     Circuit Architecture

     The Company  believes  that the  principal  advantages  of its  proprietary
circuit architecture include the following:

          Synthesisizability

          All of Actel's FPGAs are  "synthesis  friendly" by virtue of their use
     of many,  relatively  simple logic  building  blocks  (referred to as "fine
     granularity") made possible by the antifuse. The Company believes that this
     characteristic will become  increasingly  important to designers as circuit
     capacity increases.

          Few Programming Elements in Interconnect Path

          Actel's circuit  architecture  usually provides for the minimum number
     of antifuses in an  interconnect  path (two),  and never  permits more than
     four antifuses in any interconnect  path. In general,  the fewer the number
     of  switches  in an  interconnect  path,  the faster the  connection.  Many
     competing FPGAs include interconnect paths with considerably more than four
     programming  elements,  which  increase  resistance  and  therefore  impede
     circuit performance.

          Routability

          The plentiful number of antifuses and the patented  segmented  routing
     tracks of different  lengths in Actel's  products  provide numerous routing
     alternatives,  which generally facilitates efficient results with automatic
     place  and  route  software  even  when a  high  percentage  of the  FPGA's
     potential  gate capacity is used.  Actel  believes that these features make
     its circuits easier to design with than most competing FPGAs.

          Flexibility and Utilization

          A  key  competitive   factor  in  the  programmable  logic  market  is
     utilization,  or the  extent  to  which  a  particular  design  can use the
     potential  number of logic resources within a particular chip. A measure of
     logic  resources  frequently  used in the  programmable  logic  industry is
     ASIC-gate  equivalents.  Since this gate  counting  measure is  interpreted
     differently by the various  suppliers and end-users of programmable  logic,
     however,  it is not a  reliable  measure.  A more  accurate  assessment  of
     utilization  is the  number  of logic  modules  within  the  chip  that are
     actually  accessible to the customer's real design. In the case of existing
     SRAM-based FPGAs and EPROM-based  CPLDs,  logic module utilization can vary
     substantially  from design to design, so that a "400 logic module" chip may
     in  practice  yield only a fraction  of that  number as true  usable  logic
     resources.  By contrast,  Actel's circuit architecture permits its products
     to have a more  predictable  capacity  over a broad range of  applications.
     This enables  Actel's  customers to select with a relatively high degree of
     confidence the product that is most  economical for a desired  application.
     It is not  uncommon  for a design  implemented  within an Actel chip to use
     100% of the  potentially  available  logic  modules  and still be fully and
     automatically placed and routed. Users of existing SRAM-based FPGAs, on the
     other  hand,  often  restrict  their  designs to 60% or less of the claimed
     logic resources in order to give their "automatic" place and route tools an
     improved chance of successful completion.

Products

     Actel's  product  line  currently  consists  of seven  families  of  FPGAs,
Designer  Series  Development  System and Core HDL  software,  Silicon  Explorer
debugging and diagnostic tools, and Activator device  programmers.  In 1997, the
first members of the MX family of FPGAs were shipped for revenue and the Company
adopted  a  number  of  new  software  strategies  intended  to  broaden  market
acceptance of high-level design methodologies by mainstream FPGA designers.

     FPGAs

     Currently,  all seven of the Company's FPGA families are in production.  To
meet the diverse customer  requirements in the broad high-capacity  programmable
logic market,  each member of a family (except  RadHard) is offered in a variety
of speed grades, package types, reliability screenings,  and ambient temperature
tolerances.  The five members of the ACT 1 and ACT 2 families,  for example, can
be  ordered  in  more  than  100  speed,  packaging,  screening,  and  tolerance
variations.

          ACT 1

          The ACT 1 family consists of two products: the 1,200-gate A1010, which
     was first shipped for revenue in 1988; and the 2,000-gate A1020,  which was
     first shipped for revenue in 1989. The A1020 is capable of integrating  the
     equivalent  of 60 TTLs into a single  package.  This family of circuits was
     introduced  at 2.0 micron and currently is  manufactured  under 1.0 and 0.9
     micron  design rules.  The Company  offers  3.3-volt  versions of its ACT 1
     products.

          ACT 2

          The ACT 2 family consists of three products:  the 4,000-gate A1240 and
     the 8,000-gate A1280, which were first shipped for revenue in 1991; and the
     2,500-gate A1225, which was first shipped for revenue in 1992. The A1280 is
     capable of integrating  the  equivalent of 240 TTLs into a single  package.
     This family of  circuits  was  introduced  at 1.2 micron and  currently  is
     manufactured under 1.0 micron design rules.

          ACT 3

          The ACT 3 family consists of five products:  the 2,500-gate  A1425 and
     the 6,000-gate A1460, which were first shipped for revenue in 1993; and the
     1,500-gate A1415, the 4,000-gate A1440, and the 10,000-gate  A14100,  which
     were first  shipped for revenue in 1994.  The ACT 3 family was designed for
     applications  requiring  high speed and a high number of inputs and outputs
     ("I/Os").  The five members of the ACT 3 family can be ordered in more than
     70 speed,  packaging,  screening,  and  tolerance  variations.  The Company
     offers 3.3-volt and PCI-compliant versions of its ACT 3 products. The ACT 3
     family was introduced at 0.8 micron and currently is manufactured under 0.6
     micron design rules.

          1200XL

          The  1200XL  family,  which was first  shipped  for  revenue  in 1995,
     consists  of three  members  ranging  from 2,500 to 8,000 gates that can be
     ordered  in  more  than  50  speed,  packaging,  screening,  and  tolerance
     variations.  Taking advantage of 0.6 micron design rules and redesigned I/O
     modules and clock  distribution  networks,  1200XL  products  offer  system
     performance significantly in excess of that offered by pin-compatible ACT 2
     devices.  In 1997,  Actel began  offering  all three  members of its 1200XL
     family in 84-pin Plastic Leaded Chip Carriers ("PL84"). Designers using the
     new  packages  will be able to migrate to higher  density  devices  without
     changing packages. In 1997, the Company also expanded its 3.3-volt offering
     to include all members of the 1200XL family.

          3200DX

          The 3200DX family consists of the 6,500-gate A3265DX,  which was first
     shipped for revenue in 1995; the  14,000-gate  A32140DX and the 20,000-gate
     A32200DX, which were first shipped for revenue in 1996; and the 10,000-gate
     A32100 and the 30,000-gate A32300,  which were first shipped for revenue in
     1997.   The   3200DX   family   permits    designers   to   integrate   the
     register-intensive  datapath  functions  of FPGAs,  the  control and decode
     modules  commonly  implemented  in  CPLDs,  and  the  fast  dual-port  SRAM
     typically  used  for  high-speed  buffering.  Supported  by  the  Company's
     extensive  selection  of  automated  design  tools,  the  3200DX  family is
     optimized  for  synthesis  design   methodologies   to  yield   predictable
     performance for system logic integration. To further assist designers, most
     members of the family offer JTAG boundary scan logic, which permits testing
     of the design during  manufacture.  In 1997, Actel began offering  A3265DX,
     A32100DX,  and A32140DX in PL84  packages,  which will enable  designers to
     migrate  easily from  smaller  PL84  devices.  In 1997,  the  Company  also
     expanded its 3.3-volt offering to include all members of the 3200DX family.
     The 3200DX family is based on 0.6 micron design rules.

          MX

          In 1997, the Company  shipped for revenue the first two devices in its
     new MX family of FPGAs: the 4,000-gate A40MX04 and the 16,000-gate A42MX16.
     The third member of the family,  the 9,000-gate  A40MX09,  was announced as
     immediately available during first week of 1998. The MX family includes the
     best features from Actel's earlier ACT 1, ACT2, 1200XL, and 3200DX families
     and is based on 0.45 micron design  rules,  which will permit the MX family
     to work in pure 5-volt,  pure 3.3-volt,  and mixed 5- and 3.3-volt systems.
     It is anticipated that the larger MX devices will be PCI compliant.  At the
     time of  introduction,  the MX  devices  were  believed  to be the  world's
     fastest  FPGAs.  Like ASICs and all previous  Actel  FPGAs,  MX devices are
     nonvolatile  and do not  require  any  external  configuration  devices  or
     circuitry. The MX family was introduced with volume production pricing that
     the  Company   believes,   in   combination   with  its   performance   and
     functionality, should make it attractive as a single-chip ASIC alternative.
     Over  time,  the MX family  should  replace  all of  Actel's  earlier  FPGA
     families in new commercial designs.

          RH

          The RadHard family currently consists of the 8,000-gate RH1280,  which
     was first shipped for revenue in 1996, and the 2,000-gate RH1020, which was
     first shipped in 1997. Actel and Lockheed-Martin FSC are jointly developing
     the RadHard family to meet the demands of applications requiring guaranteed
     levels  of  performance  and  radiation  immunity,  including  the  growing
     commercial   satellite   market.   The   RadHard   family  is  based  on  a
     high-reliability, radiation-hardened 0.8 micron process.

     Software

     A key element of the  Company's  strategy is to support  users'  electronic
design  automation  ("EDA")  tools of choice  by  establishing  and  maintaining
relationships  with  leading  synthesis  software  vendors  for the  purpose  of
permitting  such  tools  to be used as a  "front  end"  to  Actel's  proprietary
Designer  Series  Development  System.  Rather than  developing  this capability
alone, the Company has established the Actel Industry Alliance, which Actel uses
to  establish  relationships  with EDA  vendors  for the  purpose of  developing
interfaces  between such  vendors' EDA tools and Actel's  proprietary  software.
Under the Alliance  program,  Actel provides  members with,  among other things,
access to its  proprietary  software  specifications,  early  access to software
revisions,  verification services, and participation in joint marketing efforts.
The Alliance currently has more than 20 members, including all major EDA vendors
supporting  high-level  design for both VHDL and Verilog.  The Company  provides
comprehensive  HDL solutions for the EDA environments of Cadence Design Systems,
Exemplar Logic, Mentor Graphics, Synopsys, Synplicity, and Viewlogic.

          Designer Series Development System

          In  1997,  the  Company  introduced  two  significant  updates  to its
     Designer Series  software.  The first of these releases,  known as Designer
     Series  3.1.1,  provided  support  for  many of the new  silicon  products,
     including various new 3200DX family members and the RH1280. Designer Series
     3.1.1 runs on both PC and UNIX  platforms.  On PCs,  Designer  Series 3.1.1
     runs on Windows 3.1,  Windows for Workgroups,  Windows NT 4.01, and Windows
     95 operating systems. On UNIX platforms,  Designer Series 3.1.1 runs on Sun
     SparcStation  workstations  running SunOS or Solaris  operating systems and
     Hewlett Packard HP 9000 workstations running HP-UX operating systems.

          In July 1997,  Actel  announced a new approach to its Designer  Series
     software products, offering a series of integrated,  high-level design FPGA
     development  tools suites and cutting  prices in all packages.  The Company
     believes the aggressive pricing strategy will prove attractive to schematic
     designers  moving  up to  high  level  design  methodologies  as well as to
     experienced synthesis designers.  In total, the new Designer Series product
     line  consists  of  eight  separate  packages.  The  new  suites  integrate
     high-level  design  tools  from  Viewlogic,  including  ViewSynthesis  FPGA
     Synthesis, SpeedWave VHDL Simulator, and WorkView Office, and Synopsys with
     Actel Designer Series 3.1.1. The product line also includes  Designer Lite,
     the first no-cost FPGA development software downloadable from the worldwide
     web.  Designer  Lite is a complete  package of design tools for the PC with
     device libraries  initially up to 8,000 gates. In October 1997, an enhanced
     version of  Designer  Series  3.1.1 was  released  to support  the  initial
     members of the new MX family of FPGAs. The first family member was rated as
     a 16,000-gate device and Designer Lite was extended to include this and the
     smaller  devices  in the MX  family.  Between  July 1997 and the end of the
     year,  more than 10,000  copies of Designer Lite were  downloaded,  thereby
     greatly  expanding the number of potential  designers  for Actel's  silicon
     products.

          CoreHDL Intellectual Property

          As  integrated  circuits  move to ever higher  levels of capacity  and
     integration, the use of intellectual property ("IP"), in the form of cores,
     becomes more  important.  In offering  CoreHDL IP, the Company is targeting
     high-density  FPGA  designers who are  interested  in combining  customized
     logic   with   predefined   functions   optimized   for  high   performance
     applications.   By  using  predefined  cores,  designers  save  engineering
     resources for the  value-added  portions of their designs while  shortening
     the design cycle. In addition,  the portable nature of cores enables design
     reuse across multiple product versions.

          Actel's  CoreHDL IP  portfolio  includes  CorePCI,  telecommunications
     cores,  and industrial  cores.  In 1997,  the Company  enhanced its CorePCI
     models,  which are Peripheral Component Interface (PCI) compliant blocks or
     "cores" that can be used to save  development  time by being "dropped into"
     designs for ACT 3 PCI devices.  Actel  offers  CorePCI  models,  which were
     developed  internally,  in both VHDL and  Verilog-HDL.  The remaining cores
     were developed by Inicore AG, a Swiss IP provider.  The  telecommunications
     cores include an ISDN G704-EI Framer,  an Asynchronous  Transfer Mode (ATM)
     UTOPIA receiver  interface,  and an ATM UTOPIA transmitter  interface.  The
     cores  targeted  to  industrial  control  applications  include a Universal
     Asynchronous  Receiver/Transmitter  (UART), a Controller Area Network (CAN)
     Interface,  and a Serial Control Bus Interface.  The Company has terminated
     its agreement with Inicore and currently does not have a contractual  right
     of access to cores developed by any third party.

     Silicon Explorer

     In April 1997,  Actel  introduced a powerful  debugging and diagnostic tool
known as the  Silicon  Explorer.  This tool can  significantly  reduce  the FPGA
design  verification time by enabling the user to monitor the internal operation
of a programmed FPGA as it performs its functions at speed within a real system.
The  Silicon  Explorer  tool suite  includes  ProbePilot,  a  high-speed  signal
acquisition  hardware  interface  between the Actel FPGA, the board on which the
FPGA resides,  and the  designer's  desktop  computer;  Explore,  an easy-to-use
point-and-click  software  tool that is integrated  with the Company's  Designer
Series  development  software;  and Analyze,  a PC-hosted  logic  analyzer  that
graphically  displays the waveforms accessed through ProbePilot.  The ProbePilot
signal  acquisition  control  takes  advantage  of  the  Company's   ActionProbe
circuitry,  a patented  architectural feature included in all Actel devices that
provides  100%  observability  of internal  nodes from selected  external  pins.
ProbePilot supports 18 separate probing channels and features high-speed 100 MHz
asynchronous or 66 MHz synchronous sampling rates.  ProbePilot connects directly
to any  desktop or laptop  computer or  workstation  through the series port and
operates  off the test  board's 5.0 volt or 3.3 volt power  supply.  The Explore
windows-based  software  drives  the entire  diagnostic  and debug  process  and
resides on the designer's PC or workstation as part of Actel's  Designer  Series
FPGA  development  tools.  The  Analyze  software  tool  essentially  turns  the
designer's PC or workstation  into a  full-featured  18 channel logic  analyzer,
eliminating the need for a costly stand-alone logic analyzer.

     Activator

     The Company's  Activator  device  programmers  are used to program  Actel's
FPGAs.  The  Activator  accepts data from  Designer  Series  Development  System
software,  converts the data to the proper protocol, and applies the appropriate
electrical  signals to the device so as to imprint the user's  circuit design on
the device  permanently.  There are currently two Activator device  programmers,
Activator  2  and  Activator   2S,  both  of  which  execute  all   programming,
verification, and debugging functions.  Customized programming adapters for each
device type permit  different  packages to be programmed by switching  adapters.
Activator 2 programs up to four FPGAs at a time;  Activator 2S programs one FPGA
at a time.

     Actel also supports  programmers  that are  manufactured  by third parties,
including Data I/O and BP Microsystems Inc.

Market and Applications

     FPGAs  can be used in a broad  range  of  applications  across  nearly  all
electronic  system market  segments.  Most customers use the Company's  FPGAs in
low- to  medium-volumes  in the final  production form of their  products.  Some
high-volume  electronic system  manufacturers use Actel's FPGAs as a prototyping
vehicle and convert  production to lower-cost  conventional  gate arrays,  while
others with  time-to-market  constraints  use the Company's FPGAs in the initial
production and then convert to conventional  gate arrays. As product life cycles
continue  to shorten and  manufacturing  efficiencies  increase  in FPGAs,  some
high-volume  electronic  system  manufacturers  are  electing to retain FPGAs in
volume production  because  conversion to conventional gate arrays may not yield
sufficiently  attractive savings before the electronic system reaches the end of
its life. With the introduction of the MX family,  Actel believes that its FPGAs
will increasingly be used in high-volume production.

     Communications

     The high capacity,  high  performance,  and low power  consumption of FPGAs
make them well suited for use in communications equipment.  Increasingly complex
equipment  must  frequently be designed to fit in the space occupied by previous
product  generations.  The rapidly changing  communications  environment rewards
short development times and early market entry.

     Representative Actel customers in the communications market include:  3Com,
ADC Kentrox, Advanced Fibre Communications,  Alcatel, Ascend Communications, Bay
Networks, Cabletron, Cascade, Cisco Systems, Chipcom, DSC Communications, Hughes
Network Systems, Lucent Technologies, Motorola, and Nortel.

     Computer Systems and Peripherals

     The computer systems markets are intensely  competitive,  placing a premium
on early market entry for new  products.  FPGAs  decrease the time to market and
facilitate early completion of production models so that development of hardware
and software can occur in parallel.

     Representative   Actel  customers  in  the  computer  market  include:  AST
Computer, Hewlett-Packard, IBM, Olivetti, Sky Computer, and Tandem Computer.

     Industrial Control Equipment

     Industrial control and  instrumentation  applications often require complex
electronic functions tailored to specific needs. FPGAs offer programmability and
high  capacity,  making  them  attractive  to  this  segment  of the  electronic
equipment market.

     Representative  Actel  customers in the industrial  market  include:  Allen
Bradley/Rockwell,  Eastman Kodak, General Electric, Hewlett-Packard,  Marquette,
and Siemens.

     Military and Aerospace

     Rigorous quality and reliability standards,  stringent volume requirements,
and the need  for  design  security  are  characteristics  of the  military  and
aerospace  market.  The  Company's  FPGAs have high  quality,  reliability,  and
capacity, and are virtually impossible to reverse engineer, making them suitable
for many military and aerospace applications.  Actel's FPGAs are especially well
suited  for  space  applications,  due to the high  radiation  tolerance  of the
Company's antifuse,  and for many aircraft and missile flight applications,  due
to the high density and performance of Actel's FPGAs.

     Representative  Actel  customers in the military  market  include:  Alliant
Technology,   Boeing,  E-Systems,   Harris,  Honeywell,   Hughes  Aircraft,  Jet
Propulsion  Labs  (JPL),  Lockheed-Martin,  Loral,  National  Aeronautics  Space
Administration (NASA), Northrup, Olin Corporation,  Raytheon, SCI Systems, Texas
Instruments Incorporated ("TI"), and TRW.

Sales and Distribution

     The Company maintains a worldwide,  multi-tiered  selling organization that
includes a direct sales force, independent manufacturers'  representatives,  and
electronics distributors.

     Actel's   domestic  sales  force   currently   consists  of  77  sales  and
administrative personnel and field application engineers ("FAEs") operating from
15 sales offices  located in major  metropolitan  areas.  Direct sales personnel
call on target  accounts and support  direct  original  equipment  manufacturers
("OEMs").  Besides  overseeing  the  activities of direct sales  personnel,  the
Company's  sales  managers  also  oversee the  activities  of 21  manufacturers'
representative  firms that operate from  approximately 43 office locations.  The
manufacturers'  representatives  concentrate  on  selling  to  major  industrial
companies  in  North  America.  To  service  smaller,  geographically  dispersed
accounts   in   North   America,   Actel   has   distributor   agreements   with
Pioneer-Standard Electronics, Inc. ("Pioneer"), Arrow Electronics, Inc. and Zeus
Electronics  (collectively,  "Arrow"), and Wyle Electronics ("Wyle").  Arrow has
approximately 50 branch offices in North America;  Pioneer and Wyle have a total
of approximately 60 branch locations in North America.

     The  Company   generates  a  significant   portion  of  its  revenues  from
international  sales.  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.  Actel's
European sales  organization  currently  consists of 23 distributors  (including
Arrow  and  Memec,  which  have  16  subsidiary   companies  in  Europe)  having
approximately  45 branch  offices.  The  activities  of these  distributors  are
supervised  from  sales  management  offices  in  Basingstoke  (England),  Paris
(France),  Milano (Italy), and Munich (Germany),  where a total of 17 people are
employed.

     Matsushita,  which is a  foundry  and  strategic  partner  of the  Company,
markets  Actel's  products in Japan under the Company's  brand name. The Company
has two additional  distributors in Japan:  Innotech Corporation and Teksel Ltd.
Actel also has distributors in Australia, China, Egypt, Hong Kong, India, Korea,
Malaysia,  Singapore,  South Africa,  and Taiwan. In 1997, the Company appointed
I&C  Microsystems,  Co.,  Ltd. as its new  distribution  partner for Korea.  The
activities of these distributors are supervised from sales management offices in
Japan and  Korea.  Actel  officially  opened  its  Korean  office  in 1997,  and
currently plans to open an office in Hong Kong in 1998.

     After the  Company's  sales  representatives  and  distributors  evaluate a
customer's  logic design  requirements  and determine if there is an application
suitable for Actel's FPGAs,  the next step typically is a visit to the qualified
customer  by a  regional  sales  manager  or the FAE  from  the  Company  or its
distributor.  The  sales  manager  or FAE may  then  determine  that  additional
analysis is required by engineers based at Actel's  headquarters.  The Company's
sales cycle for the initial  sale of a design  system is  generally  lengthy and
requires the continued  participation  of  salespersons,  FAEs,  engineers,  and
management.

     In 1997, more than half of Actel's sales in the United States and virtually
all of  the  Company's  sales  outside  the  United  States  were  made  through
distributors. As is common in the semiconductor industry, Actel generally grants
price protection to distributors.  Under this policy, distributors are granted a
credit upon a price reduction for the difference between their original purchase
price for  products  in  inventory  and the  reduced  price.  From time to time,
distributors are also granted credit on an individual basis for Company-approved
price reductions on specific transactions to meet competition.  The Company also
generally  grants  distributors  limited  rights  to return  products.  To date,
product  returns  under this  policy  have not been  material.  Actel  maintains
reserves  against  which these  credits and returns are charged.  Because of its
price protection and return policies,  the Company  generally does not recognize
revenue on products  sold to  distributors  until the products are resold to end
customers.

Backlog

     At December 31, 1997,  Actel's  backlog was  approximately  $28.0  million,
compared  with  approximately  $27.0  million at December 31, 1996.  The Company
includes in its backlog all OEM orders scheduled for delivery over the next nine
months and all  distributor  orders  scheduled  for  delivery  over the next six
months.  Actel  produces  standard  products that may be shipped from  inventory
within a short time after receipt of an order. The Company's business,  and to a
large extent that of the entire  semiconductor  industry,  is  characterized  by
short-term order and shipment schedules,  rather than volume purchase contracts.
In  accordance  with  industry  practice,  Actel's  backlog may be  cancelled or
rescheduled by the customer on short notice without  significant  penalty.  As a
result,  the  Company's  backlog  may not be  indicative  of  actual  sales  and
therefore should not be used as a measure of future revenue.

Customer Service and Support

     Actel  believes that superior  customer  service and technical  support are
essential for success in the FPGA market.  The Company  facilitates  service and
support  through  service team meetings that address  particular  aspects of the
overall service  strategy and support.  The most  significant  areas of customer
service and technical support are regularly  measured.  Actel's customer service
organization  emphasizes  prompt,  accurate responses to questions about product
delivery and order status.

     The  Company's  FAEs provide  technical  support to customers in the United
States,  Japan,  Korea and Europe.  This network of experts is augmented by FAEs
working for Actel's sales representatives and distributors throughout the world.
Customers in any stage of design can also obtain  assistance  from the Company's
technical support hotline.  In addition,  Actel offers technical seminars on its
products and comprehensive training classes on its software.

     In 1997, Actel moved to better address the design concerns of its customers
by  establishing  Actel  Design  Services,  an  international  network of design
centers. With offices now in Basingstoke,  Boston, Chicago, and Sunnyvale, Actel
has an  enhanced  capability  to  support  the  increasing  technical  needs  of
customers developing with synthesis tools.

     In November 1997,  Actel further enhanced its worldwide  technical  support
capabilities  with the  introduction of a web-based  technical  support database
called  "Guru."  Actel  users can access  Guru from their  familiar  web browser
through a series of "push  button"  forms and key words.  The Guru  system  will
return relevant information to the questioner in a matter of seconds.

     The Company generally warrants its products against defects in material and
workmanship for one year. Actel also warrants that its automatic place and route
software will achieve gate  utilization  at not less than the rates  advertised.
The Company has not experienced significant warranty returns to date.

Manufacturing and Strategic Relationships

     Actel's current strategy is to utilize  third-party  manufacturers  for its
wafer  requirements,  which  permits the Company to allocate  its  resources  to
product  design,  development,  and marketing.  Wafers used in Actel's FPGAs are
manufactured by Chartered  Semiconductor in Singapore, by Lockheed-Martin FSC in
the United States, by Matsushita in Japan, and by Winbond in Taiwan. The Company
historically  purchased wafers from Matsushita and TI. Chartered  Semiconductor,
Lockheed-Martin  FSC, and Winbond were added in 1994.  During 1997, Actel phased
out wafer purchases from TI in favor of its other suppliers.  The active foundry
relationships  for  Actel's  production  FPGAs  are  currently  manufactured  by
Chartered  Semiconductor  using 0.6 0.45 micron design rules; by Lockheed-Martin
FSC using 0.8 micron design rules; by Matsushita  using 0.8, 0.9, and 1.0 micron
design   rules;   and  by  Winbond  using  0.6  and  0.8  micron  design  rules.
Pre-production  wafers  have been  received  from  Chartered  Semiconductor  for
products designed using 0.35 micron design rules.

     Wafers  purchased by the Company from its suppliers are assembled,  tested,
marked,  and  inspected by Actel and/or a  subcontractor  of the Company  before
shipment to customers.  Actel assembles most of its plastic commercial  products
in Hong Kong and Korea.  Ceramic package assembly,  which is generally  required
for military  applications,  currently is performed at one or more subcontractor
manufacturing facilities, some of which are in the United States.

     In 1997,  the Company and  Lockheed-Martin  FSC entered into an Amended and
Restated M2M Joint Development and Marketing Agreement.  The Agreement calls for
the parties to establish production  capability at Lockheed-Martin FSC for space
quality,  radiation-hardened  versions of Actel's first metal-to-metal  antifuse
FPGAs (see  "Research  and  Development  -- SX  Family").  After the  production
capability is established,  Lockheed-Martin FSC will manufacture,  assemble, and
test the radiation-hardened FPGAs, and the Company will market and sell them.

     In  1997,  Actel  announced  the  availability  of two new  sockets  tooled
specifically  for the  Company  by  Yamaichi  Electronics  of Japan,  one of the
leading suppliers of prototype and production sockets.  Sockets permit designers
to replace a chip  without  damaging the board,  which  reduces some of the risk
commonly  associated with using an antifuse FPGA in prototype board design.  The
two new sockets  increase the total number of Actel sockets  offered by Yamaichi
to nine.  The  complete  line of sockets  accommodates  all Actel FPGAs in TQFP,
PQFP, RQFP, and VQFP packages.

Research and Development

     In 1997,  1996, and 1995,  the Company spent $26.5 million,  $23.9 million,
and $20.6 million,  respectively, on research and development, which represented
approximately 17%, 16%, and 19% of net revenues, respectively, for such periods.
Actel's  research and  development  expenditures  are  currently  divided  among
circuit design, software development,  and process technology activities. In the
areas of circuit  design and process  technology,  the  Company's  research  and
development activities include continuing efforts to reduce the cost and improve
the  performance of current  products,  principally by reducing the design rules
under which such products are manufactured,  and to develop new families of FPGA
products based on existing or emerging  technologies.  Actel's software research
and development activities are dedicated to providing customers with access to a
wide  variety of CAE tools and HDL cores in a  complete  and  automated  desktop
design environment on popular personal computer and workstation platforms,  with
the  objective  of giving logic  designers  the  capability  and  confidence  to
successfully move up to higher level designs.

     The research and development  projects that the Company publicly  discussed
in 1997 included the following:

     SX Family

     In the fourth calendar  quarter of 1997,  Actel won a number of significant
design wins with  pre-production  silicon  and  software of its new SX family of
FPGAs.  It is  currently  anticipated  that  the  SX  family  will  be  formally
introduced in April 1998.  The SX family will be  significantly  faster than the
recently-launched  MX family,  which was believed to be the world's fastest FPGA
family at its  introduction.  This high level of performance in the SX family is
achieved  through a combination  of  architectural  features and a new, very low
impedance  "metal  to  metal"  antifuse  structure.  This  new  antifuse  is the
culmination  of more than six years of research and  development  activities  to
produce a reliable, manufacturable, high-performance metal to metal antifuse.

     ES Architecture and ES Reprogrammable Products

     In 1996,  Actel  announced its intention to enter the  reprogrammable  FPGA
market. The Company's first  reprogrammable  FPGA offering will be an SRAM-based
"ES" product family utilizing Actel's new ES reprogrammable architecture.

     The ES  architecture  combines a new,  fine-grained  cell  structure with a
routing-centric  architecture.  The expected result is logic cells that are more
readily synthesized and more efficient than current programmable  architectures.
The key to the  architectural  efficiencies  is a technology  in which  separate
transistors  are used to  implement  logic  and to drive the  interconnects.  By
separating these  functions,  Actel believes that more efficient die utilization
is achievable,  resulting in lower-cost designs.  In addition,  the interconnect
drivers are tailored to routing  length,  which should provide high  performance
even for  cross-chip  routing.  The ES  architecture  also makes  greater use of
hierarchy than current programmable  architectures.  A constant, maximum routing
delay is  associated  with each level of  hierarchy,  which  should  provide the
device with fanout independent delays. This means that, regardless of the number
of logic elements being driven, the delay should always be constant,  making the
chip's  performance  predictable.  Many  aspects  of  the  ES  architecture  are
switch-technology independent, making it possible that future variants of the ES
architecture will employ antifuse, flash, or other basic programming elements.

     The Company has experienced significant delays in matching the capabilities
of its software and the  resources of its silicon.  Actel  currently is making a
set of changes to both the silicon and the software.  While the result should be
a product as good as or better than the one originally planned, the Company does
not  believe  the product  will be  available  until at least the second half of
1998.  With the  additional  time required for ES  development,  the Company now
anticipates  that the  initial  production  ES devices  will use a 0.25  micron,
five-layer metal process.

Competition

     The FPGA  market  is  highly  competitive,  and the  Company  expects  that
competition will continue to increase as the market grows.  Actel's  competitors
include suppliers of TTLs and ASICs,  including  conventional gate arrays, PLDs,
and  FPGAs.  Of these,  the  Company  competes  principally  with  suppliers  of
conventional gate arrays, CPLDs, and FPGAs.

     The primary advantages of conventional gate arrays are high capacity,  high
speed, and low production cost in high volume.  Actel competes with conventional
gate array suppliers by offering lower design costs,  shorter design cycles, and
reduced inventory risks.  However,  some customers elect to design and prototype
with the  Company's  products  and then convert to  conventional  gate arrays to
achieve  lower  costs  for  volume  production.  For this  reason,  Actel  faces
competition  from  companies  that  specialize  in  converting  CPLDs and FPGAs,
including the Company's products, into conventional gate arrays.

     The Company  also  competes  with  suppliers  of CPLDs.  Suppliers of these
devices include Altera  Corporation  ("Altera"),  Advanced Micro Devices' Vantis
subsidiary,  and Lattice Semiconductor.  The circuit architecture of CPLDs gives
them a performance advantage in certain lower capacity  applications,  but Actel
believes  that its  products  are better  suited for  higher  capacity  designs.
Altera,  however,  has a larger  installed base of development  systems than the
Company.  In  addition,  many  newer  CPLDs are  reprogrammable,  which  permits
customers to reuse a circuit  multiple times during the design  process  (unlike
antifuse-based FPGAs, which permanently retain the programmed configuration). No
assurance  can be given that Actel will be able to  overcome  these  competitive
disadvantages.

     The Company competes most directly with established FPGA suppliers, such as
Xilinx,  Inc.  ("Xilinx") and Lucent  Technologies  (which is a licensed  second
source  of  some  Xilinx  products).  While  Actel  believes  its  products  and
technology  are  superior  to those of  Xilinx  in many  applications  requiring
greater  speed,  lower cost,  or  nonvolatility,  Xilinx came to market with its
FPGAs approximately three years before the Company,  has a larger installed base
of development  systems,  and its  SRAM-based  products are  reprogrammable.  No
assurance  can be given that Actel will be able to  overcome  these  competitive
disadvantages.

     Several  companies  have  either  already  marketed  antifuse-based  FPGAs,
including QuickLogic Corporation ("QuickLogic"), or announced their intention to
do so. See "Legal." On March 31, 1995, the Company  completed its acquisition of
the antifuse FPGA business of TI, which was the only  second-source  supplier of
the Company's products.  Xilinx, which is a licensee of certain of the Company's
patents,  introduced  antifuse-based  FPGAs in 1995 and  terminated its antifuse
FPGA business in 1996. Cypress Semiconductor  Corporation,  which was a licensed
second  source of  QuickLogic,  sold its antifuse FPGA business to QuickLogic in
the first quarter of 1997.

     Actel expects  significant  additional  competition from major domestic and
international semiconductor suppliers, such as Motorola, which has declared that
it is a participant  in the FPGA market.  All such  companies are larger,  offer
broader  product  lines,  and have  substantially  greater  financial  and other
resources than the Company,  including the  capability to manufacture  their own
wafers.   Additional   competition  could  adversely  affect  Actel's  business,
financial condition, or results of operations.

     The Company may also face  competition  from  suppliers  of logic  products
based on new or  emerging  technologies.  For  example,  there are  other  known
techniques  for  manufacturing  programmable  switch  elements  that might offer
certain  advantages  over Actel's  antifuse  technologies.  The Company seeks to
monitor developments in existing and emerging technologies.  No assurance can be
given that Actel will be able to compete  successfully  with suppliers  offering
products based on new or emerging technologies.

Patents and Licenses

     As of December  31,  1997,  the Company had 117 United  States  patents and
applications  pending for an additional 35 United States patents.  Actel has ten
European  patent  and has  applications  pending  for an  additional  42 patents
outside the United  States.  The Company's  patents  cover,  among other things,
Actel's basic circuit architecture,  antifuse structure, and programming method.
The Company expects to continue filing patent  applications  when appropriate to
protect its proprietary  technologies.  Actel believes that patents,  along with
such factors as innovation,  technological expertise, and experienced personnel,
will become increasingly important.

     The  Company  attempts  to protect its  circuit  designs,  software,  trade
secrets,  and  other  proprietary   information  through  patent  and  copyright
protection,  agreements  with customers and suppliers,  proprietary  information
agreements  with  employees,  and other security  measures.  No assurance can be
given that the steps taken by Actel will be adequate to protect its  proprietary
rights.

     In 1995, Actel and BTR, Inc. entered into a License  Agreement  pursuant to
which BTR licensed its proprietary technology to the Company for development and
use in FPGAs and certain  multichip  modules.  As partial  consideration for the
grant of the  license,  the  Company  is  paying to BTR  non-refundable  advance
royalties.  Actel has also employed the  principals of BTR to assist the Company
in its development and implementation of the licensed technology.

     As is typical in the semiconductor  industry, the Company has been notified
of claims that it may be infringing  patents owned by others. If it is necessary
or  appropriate,  Actel may seek to 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
Actel's financial condition or results of operations.  In addition, there can be
no assurance  that  licenses  will be available or that the terms of any offered
license  will be  acceptable  to the  Company.  Failure to obtain a license  for
technology used by Actel could result in litigation.  In the event of an adverse
result  in any  litigation,  the  Company  may be  required  to pay  substantial
damages;  discontinue the use of infringing  processes;  cease the  manufacture,
use, and sale of infringing  products;  and/or expend  significant  resources to
develop non-infringing technology. All litigation,  whether or not determined in
favor of Actel,  can result in  significant  expense  and divert the  efforts of
technical and management personnel from the Company's  operations.  In addition,
the Company has agreed to defend its customers  from and against any claims that
Actel  products  infringe the patent or other  intellectual  rights of any third
party, and to indemnify its customers up to the dollar amount of their purchases
of any Actel  products  found to  infringe.  Any  successful  third  party claim
against the Company or its customers for patent or other  intellectual  property
infringement may have a materially adverse effect on Actel's business, financial
condition, or results of operations.

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.  None of the  Company's
employees  is  represented  by a labor  union  nor does  Actel  have  employment
agreements  with any of its employees.  The Company has not experienced any work
stoppages, and believes that its employee relations are satisfactory.

Risk Factors

     Shareholders  and  prospective   shareholders  of  Actel  should  carefully
consider,  along with the other  information in this Annual Report on Form 10-K,
the following risk factors:

     Acts of God

     The  performance  of  Actel  and  each  of  its  suppliers,   distributors,
subcontractors,  and  agents is  subject  to events or  conditions  beyond  such
party's control, including labor disputes, acts of public enemies or terrorists,
war or other military conflicts,  blockades,  insurrections,  riots,  epidemics,
quarantine  restrictions,  landslides,  lightning,  earthquake,  fires,  storms,
floods,  washouts,  arrests,  civil  disturbances,  restraints  by or actions of
governmental bodies acting in a sovereign capacity (including export or security
restrictions  on information,  material,  personnel,  equipment,  or otherwise),
breakdowns of plant or machinery, inability to obtain transport or supplies, and
the  like.  The  occurrence  of any of these  circumstances  could  disrupt  the
Company's  operations and may have a materially  adverse effect on the Company's
business, financial condition, or results of operations.

     "Blank Check" Preferred Stock; Change in Control Arrangements

     Actel's Articles of Incorporation authorize the issuance of up to 5,000,000
shares of "blank  check"  Preferred  Stock (of  which  4,000,000  shares  remain
available for issuance), with such designations,  rights, and preferences as may
be  determined  from time to time by the Board of  Directors.  Accordingly,  the
Board is empowered,  without  approval by holders of the Company's Common Stock,
to issue Preferred  Stock with dividend,  liquidation,  redemption,  conversion,
voting,  or other rights that could  adversely  affect the voting power or other
rights of the holders of the Common Stock. Issuance of the Preferred Stock could
be used as a method of discouraging, delaying, or preventing a change in control
of Actel. In addition,  such issuance could adversely affect the market price of
the Common Stock.  Although the Company does not  currently  intend to issue any
additional  shares of its Preferred Stock,  there can be no assurance that Actel
will not do so in the future.

     The  Company  has  adopted an Employee  Retention  Plan that  provides  for
payment of stock to Actel's  employees  who hold  unvested  stock options in the
event of a change of control of the  Company.  Payment  is  contingent  upon the
employee  remaining  with Actel for six months after the change of control.  The
Company has also entered into Management  Continuity Agreements with each of its
executive officers, which provide for the acceleration of unvested stock options
in the event an executive  officer's  employment  is actually or  constructively
terminated other than for cause following a change of control.

     Competition

     The semiconductor industry is intensely competitive and is characterized by
rapid rates of technological change,  product  obsolescence,  and price erosion.
Actel's  existing  competitors  include  suppliers of conventional  gate arrays,
CPLDs, and FPGAs. The Company's two principle competitors are Xilinx, a supplier
of FPGAs based on SRAM technology,  and Altera, a supplier principally of CPLDs.
In connection  with the settlement of patent  litigation in 1993,  Actel granted
Xilinx a license  under  certain  of  Actel's  patents  that  permits  Xilinx to
manufacture and market antifuse-based products. Xilinx announced in 1996 that it
had  discontinued its  antifuse-based  FPGA product line. The Company also faces
competition  from  companies  that  specialize  in converting  FPGAs,  including
Actel's  products,  into  conventional  gate arrays.  In  addition,  the Company
expects   significant   competition  in  the  future  from  major  domestic  and
international   semiconductor   suppliers,  and  Actel's  patents  may  not  bar
competitors  to which it has not  granted a  license  from  manufacturing  other
antifuse-based products. The Company may also face competition from suppliers of
logic products based on new or emerging technologies. Given the intensity of the
competition  and the research and  development  being done,  no assurance can be
given that Actel's antifuse and architecture technology will remain competitive.

     The Company believes that important  competitive  factors in its market are
price,  performance,  number of usable gates,  ease of use and  functionality of
development system software, installed base of development systems, adaptability
of products to specific  applications,  length of development  cycle  (including
reductions to finer micron design rules), number of I/Os, reliability,  adequate
wafer fabrication capacity and sources of raw materials,  protection of products
by effective  utilization of intellectual  property laws, and technical  service
and support.  Failure of Actel to compete  successfully in any of these or other
areas  could  have  a  materially  adverse  effect  on its  business,  financial
condition,  or results of operations.  In addition, all existing FPGAs not based
on antifuse  technology  and certain  CPLDs are  reprogrammable,  a feature that
makes them more  attractive  to designers.  The Company also  believes  that, if
there were a downturn  in the  market for CPLDs and FPGAs,  companies  that have
broader product lines and longer  standing  customer  relationships  may be in a
stronger  competitive  position than Actel.  Many of the  Company's  current and
potential competitors offer broader product lines and have significantly greater
financial, technical, manufacturing, and marketing resources than Actel.

     Dependence on Customized Manufacturing Process

     Actel's antifuse based FPGAs are  manufactured  using customized steps that
are added to otherwise standard manufacturing processes of its independent wafer
suppliers.  There is  considerably  less  operating  history  for the  Company's
customized  process  steps  than  for  the  foundries'  standard   manufacturing
processes. The dependence of Actel on customized processing steps means that, in
contrast with competitors using standard  manufacturing  processes,  the Company
has  more  difficulty   establishing   relationships   with  independent   wafer
manufacturers, takes longer to qualify a new wafer manufacturer, takes longer to
achieve satisfactory,  sustainable wafer yields on new processes, may experience
a higher incidence of production yield problems,  must pay more for wafers,  and
generally  will not obtain early access to the most  advanced  processes.  These
risks are  particularly  pronounced  with respect to wafers  intended for use in
military  and  aerospace  applications.  Any of the  above  factors  could  be a
material  disadvantage  against the competing  non-antifuse  products of Actel's
competitors,  which use standard manufacturing  processes.  As a result of these
factors,  the Company's  products typically have been fabricated using processes
one or two  generations  behind the processes used on competing  products.  As a
consequence,  Actel to date has not fully  realized  the  price and  performance
benefits of its antifuse technology. The Company is attempting to accelerate the
rate at which its products are reduced to finer  geometries  and is working with
its wafer  suppliers  to obtain  earlier  access to advanced  processes,  but no
assurance can be given that such efforts will be successful.

     Dependence on Design Wins

     In order for the Company to sell an FPGA to a customer,  the customer  must
incorporate  the FPGA into the  customer's  product in the design  phase.  Actel
therefore  devotes  substantial  resources,  which  it may not  recover  through
product sales, in support of potential customer design efforts (including, among
other things,  providing  development system software) and to persuade potential
customers to incorporate the Company's FPGAs into new or updated products. These
efforts  usually  precede  by many  months  (and  sometimes  a year or more) the
generation of volume FPGA sales, if any, by Actel.  The value of any design win,
moreover,  will depend in large part upon the ultimate success of the customer's
product.  No assurance can be given that the Company will win sufficient designs
or that any design win will result in significant revenues.

     Dependence on Independent Assembly Subcontractors

     Actel  relies  primarily  on foreign  subcontractors  for the  assembly and
packaging  of its  products  and,  to a lesser  extent,  for the  testing of its
finished products.  The Company generally relies on one or two subcontractors to
provide particular  services and has from time to time experienced  difficulties
with the  timeliness and quality of product  deliveries.  Actel has no long-term
contracts  with its  subcontractors  and  certain  of those  subcontractors  are
currently  operating at or near full  capacity.  There can be no assurance  that
these  subcontractors will continue to be able and willing to meet the Company's
requirements  for such  components or services.  Any  significant  disruption in
supplies from, or degradation in the quality of components or services  supplied
by,  these  subcontractors  could  delay  shipments  and  result  in the loss of
customers or revenues or otherwise  have a materially  adverse effect on Actel's
business, financial condition, or results of operations.

     Dependence on Independent Software Developers

     Actel  is  dependent   upon   independent   software   developers  for  the
development, maintenance, and support of certain elements of its Designer Series
Development  Systems software.  The Company's  reliance on independent  software
developers  involves  certain risks,  including lack of control over development
and delivery  schedules and the availability of customer  support.  No assurance
can be given that the Company's independent  developers will be able to complete
software currently under development, or provide updates, or customer support in
a timely manner,  which could delay future  releases and disrupt Actel's ability
to provide customer support services. Any significant delays in the availability
of  the  Company's  software  would  be  detrimental  to the  capability  of the
Company's new families of products to win designs, which could have a materially
adverse  effect  on  Actel's  business,   financial  condition,  or  results  of
operations.

     Dependence on Independent Wafer Manufacturers

     Actel does not  manufacture any of the wafers used in the production of its
FPGAs.  Currently,  such wafers are  manufactured by Chartered  Semiconductor in
Singapore,  Lockheed-Martin  FSC in the United States,  Matsushita in Japan, and
Winbond in Taiwan. The Company's reliance on independent wafer  manufacturers to
fabricate its wafers involves  significant  risks,  including the risk of events
limiting  production  and reducing  yields,  such as technical  difficulties  or
damage to production  facilities,  lack of control over capacity  allocation and
delivery  schedules,  and potential lack of adequate  capacity.  These risks are
particularly  pronounced with respect to wafers intended for use in military and
aerospace applications.

     Actel has from time to time experienced delays in obtaining wafers from its
foundries,  and there can be no assurance  that the Company will not  experience
similar or more severe  delays in the future.  In addition,  although  Actel has
supply  agreements  with  most of its wafer  manufacturers,  a  shortage  of raw
materials or production capacity could lead any of the Company's wafer suppliers
to allocate  available  capacity to customers  other than Actel,  or to internal
uses,  which  could  interrupt  the  Company's  capability  to meet its  product
delivery  obligations.  These risks are particularly  pronounced with respect to
wafers intended for use in military and aerospace applications. Any inability or
unwillingness  of Actel's  wafer  suppliers to provide  adequate  quantities  of
finished  wafers to satisfy the  Company's  needs in a timely manner would delay
production and product  shipments and could have a materially  adverse effect on
Actel's business, financial condition, or results of operations.

     If the Company's  current  independent wafer  manufacturers  were unable or
unwilling to manufacture Actel's products as required, the Company would have to
identify and qualify additional  foundries.  The qualification process typically
takes one year or longer.  No assurance can be given that any  additional  wafer
foundries would become available or be able to satisfy Actel's requirements on a
timely  basis  or that  qualification  would be  successful.  In  addition,  the
semiconductor   industry  has  from  time  to  time  experienced   shortages  of
manufacturing  capacity. To secure an adequate supply of wafers, the Company has
considered, and continues to consider, various possible transactions,  including
the  use of  substantial  nonrefundable  deposits  to  secure  commitments  from
foundries for specified levels of manufacturing  capacity over extended periods,
equity  investments (such as Actel's  investment in Chartered  Semiconductor) in
exchange for guaranteed  production,  and the formation of joint ventures to own
foundries. No assurance can be given as to the effect of any such transaction on
the Company's business, financial condition, or results of operations.

     Dependence on International Operations

     Actel buys a majority of its wafers from foreign  foundries and has most of
its  commercial  products  assembled,  packaged,  and  tested by  subcontractors
located  outside  the  United  States.  These  activities  are  subject  to  the
uncertainties associated with international business operations, including trade
barriers and other restrictions, changes in trade policies, foreign governmental
regulations, currency exchange fluctuations, reduced protection for intellectual
property, war and other military activities,  terrorism, changes in political or
economic conditions, and other disruptions or delays in production or shipments,
any of which could have a materially  adverse effect on the Company's  business,
financial condition, or results of operations.

     In order to expand  international sales and service,  the Company will need
to maintain and expand  existing  foreign  operations  or establish  new foreign
operations.   This  entails  hiring  additional  personnel  and  maintaining  or
expanding  existing  relationships  with  international  distributors  and sales
representatives.   This  will  require  significant   management  attention  and
financial  resources and could adversely affect Actel's financial  condition and
operating results. No assurance can be given that the Company will be successful
in  its  maintenance  or  expansion  of  existing  foreign  operations,  in  its
establishment of new foreign operations, or in its efforts to maintain or expand
its relationships with international distributors or sales representatives.

     Dependence on Key Personnel

     The  success of the  Company is  dependent  in large part on the  continued
service  of its key  management,  engineering,  marketing,  sales,  and  support
employees.  Competition for qualified  personnel is intense in the semiconductor
industry, and the loss of Actel's current key employees, or the inability of the
Company to attract other qualified  personnel,  could have a materially  adverse
effect on Actel. The Company does not have employment agreements with any of its
key employees.

     Dependence on Military and Aerospace Customers

     Although  Actel is unable to determine  with certainty the ultimate uses of
its products,  the Company  estimates that sales of its products to customers in
the military and  aerospace  industries,  which  sometimes  carry higher  profit
margins  than  sales  of  products  to  commercial   customers,   accounted  for
approximately  one-quarter  of revenues in 1997.  The Company  believes that the
military  and  aerospace  industries  accounted  for  a  significantly   greater
percentage of the Company's net revenues following the introduction of RH1280 in
1996.  No assurance  can be given that future sales to customers in the military
and  aerospace  industries  will  continue at current  volume or margin  levels.
Orders from the military and aerospace customers tend to be large and irregular,
which creates operational  challenges and contributes to fluctuations in Actel's
net revenues and gross  margins.  These sales are also subject to more extensive
governmental regulations,  including greater import and export restrictions.  In
addition,  products for military and aerospace  applications  require processing
and testing that is more lengthy and stringent than for commercial applications,
increasing the risk of failure. It is often not possible to determine before the
end of  processing  and  testing  whether  products  intended  for  military  or
aerospace  applications will fail and, if they do fail, a significant  period of
time is often required to process and test replacements,  each of which makes it
difficult to accurately  estimate quarterly revenues and could have a materially
adverse  effect  on  Actel's  business,   financial  condition,  or  results  of
operations.

     Dividend Policy

     Actel has never  declared or paid any cash  dividends on its capital stock.
The Company currently intends to retain any earnings for use in its business and
does not anticipate paying any cash dividends in the future.

     Fluctuations in Operating Results

     The  Company's  quarterly  and  annual  operating  results  are  subject to
fluctuations  resulting from general economic  conditions and a variety of risks
specific to Actel or  characteristic of the  semiconductor  industry,  including
booking and shipment uncertainties, supply problems, and price erosion.

          Booking and Shipment Uncertainties

          Actel typically generates a large percentage of its quarterly revenues
     from orders  received  during the quarter and shipped in the final weeks of
     the quarter, making it difficult to accurately estimate quarterly revenues.
     The Company's  backlog  (which may be cancelled or deferred by customers on
     short notice  without  significant  penalty) at the  beginning of a quarter
     accounts for only a fraction of Actel's  revenues during the quarter.  This
     means that the Company  generates the rest of its  quarterly  revenues from
     orders  received  during the quarter and "turned"  for shipment  within the
     quarter,  and that any  shortfall in "turns"  orders will have an immediate
     and adverse impact on quarterly revenues. There are many factors that could
     cause a shortfall in "turns" orders, including but not limited to a decline
     in general  economic  conditions  or the  businesses  of end users,  excess
     inventory in the channel,  conversion to conventional (or non-programmable)
     gate  arrays,  or the loss of  business to other  competitors  for price or
     other reasons.

          Historically,  Actel has shipped a disproportionately large percentage
     of its quarterly revenues in the final weeks of the quarter. Any failure by
     the  Company  to  effect  scheduled  shipments  by the end of the  quarter,
     therefore,  could have a  materially  adverse  effect on revenues  for such
     quarter.  Since Actel generally does not recognize revenue on the sale of a
     product to a distributor  until the  distributor  resells the product,  the
     Company's  quarterly  revenues  are  also  dependent  on,  and  subject  to
     fluctuations  in,  shipments  by  Actel's  distributors.  When  there  is a
     shortfall  in  revenues,  operating  results  are  likely  to be  adversely
     affected because most of the Company's expenses do not vary with revenues.

          Supply Problems

          In a  typical  semiconductor  manufacturing  process,  silicon  wafers
     produced by a foundry  are sorted and cut into  individual  die,  which are
     then assembled into  individual  packages and tested for  performance.  The
     manufacture,  assembly,  and  testing of  semiconductor  products is highly
     complex and subject to a wide variety of risks, including defects in masks,
     impurities in the materials  used,  contaminants  in the  environment,  and
     performance  failures by personnel and  equipment.  Semiconductor  products
     intended  for  military  and  aerospace   applications   are   particularly
     susceptible  to these  conditions,  any of which  could  have a  materially
     adverse  effect on Actel's  business,  financial  condition,  or results of
     operations.

          As is common in the semiconductor industry,  Actel's independent wafer
     suppliers from time to time  experience  lower than  anticipated  yields of
     usable die. For example,  the Company experienced a yield problem at one of
     its foundries in the fourth  quarter of 1993 that was severe enough to have
     a materially  adverse effect on Actel's  operating  results.  To the extent
     yields of usable die  decrease,  the  average  cost to the  Company of each
     usable die increases,  which reduces gross margin. Wafer yields can decline
     without  warning  and may take  substantial  time to analyze  and  correct,
     particularly  for a company  such as Actel  that does not  operate  its own
     manufacturing facility, but instead utilizes independent  facilities,  most
     of which are offshore.  Yield problems may also increase the time to market
     for the Company's products and create inventory  shortages and dissatisfied
     customers. In addition, Actel typically experiences difficulties and delays
     in achieving  satisfactory,  sustainable  yields on new processes or at new
     foundries.  Although the Company eventually has been able to overcome these
     difficulties in the past, no assurance can be given that it will be able to
     do so with  respect  to its  current  or future  new  processes  and/or new
     foundries.  Nor can any  assurance  be  given  that  the  Company  will not
     experience  wafer supply  problems in the future,  or that any such problem
     would not have a materially  adverse effect on Actel's business,  financial
     condition, or results of operations.

          Price Erosion

          The  semiconductor  industry is characterized by intense  competition.
     Historically,   average  selling  prices  in  the  semiconductor   industry
     generally,  and for the  Company's  products in  particular,  have declined
     significantly over the life of each product.  While Actel expects to reduce
     the  average  selling  prices  of its  products  over  time as the  Company
     achieves  manufacturing  cost  reductions,  Actel is sometimes  required by
     competitive  pressures  to reduce the prices of its  products  more quickly
     than such  cost  reductions  can be  achieved.  In  addition,  the  Company
     sometimes  approves price reductions on specific sales to meet competition.
     If not offset by reductions in manufacturing costs or by a shift in the mix
     of products  sold toward  higher-margin  products,  declines in the average
     selling prices of Actel's products will reduce gross margins and could have
     a materially adverse effect on the Company's business, financial condition,
     or results of operations.

     Forward-Looking Statements

     All  forward-looking  statements  contained  in this Annual  Report on Form
10-K,  including  all  forward-looking  statements  contained  in  any  document
incorporated  herein  by  reference,  are  made  pursuant  to  the  safe  harbor
provisions of the Public Securities Litigation Reform Act of 1995. Words such as
"anticipates,"  "believes,"  "estimates," "expects," intends," "plans," "seeks,"
and  variations of such words and similar  expressions  are intended to identify
the  forward-looking   statements.   The   forward-looking   statements  include
projections  relating to trends in markets,  revenues,  average  selling prices,
gross margin,  wafer yields,  research and  development  expenditures,  selling,
general,  and administrative  expenditures,  and the Year 2000 compliance issue.
All forward-looking statements are based on current expectations and projections
about the semiconductor  industry and programmable logic market, and assumptions
made by the Company's  management  that reflect its best judgment based on other
factors  currently  known by  management,  but they are not guarantees of future
performance.  Accordingly,  actual events and results may differ materially from
those  expressed or forecast in the  forward-looking  statements due to the risk
factors  identified herein or for other reasons.  Actel undertakes no obligation
to update any  forward-looking  statement contained or incorporated by reference
in this Annual Report on Form 10-K.

     Future Capital Needs

     The Company must continue to make  significant  investments in research and
development as well as capital  equipment and expansion of  facilities.  Actel's
future  capital  requirements  will  depend on many  factors,  including,  among
others, product development, investments in working capital, and acquisitions of
complementary businesses, products, or technologies. To the extent that existing
resources and future earnings are insufficient to fund the Company's operations,
Actel may need to raise  additional  funds  through  public or  private  debt or
equity financings. If additional funds are raised through the issuance of equity
securities, the percentage ownership of current shareholders will be reduced and
such equity  securities may have rights,  preferences,  or privileges  senior to
those of the holders of the Company's  Common  Stock.  No assurance can be given
that  additional  financing  will be available or that, if available,  it can be
obtained on terms favorable to Actel and its shareholders. If adequate funds are
not available, the Company may be required to delay, limit, or eliminate some or
all of its proposed operations.

     Gross Margin

     The  Company's  gross  margin is the  difference  between  the  revenues it
receives from the sale of its products and the cost of those products. The price
Actel can charge for a product is constrained  principally  by its  competitors.
While   competition  has  always  been  intense,   the  Company  believes  price
competition  is becoming more acute.  This may be due in part to the  transition
toward  high-level  design  methodologies,  which permit designers to wait until
later in the design  process before  selecting a  programmable  logic device and
make it easier to convert from one programmable  logic device to another.  These
competitive  pressures may cause Actel to reduce the prices of its products more
quickly than it can achieve cost  reductions,  which would reduce the  Company's
gross margin and may have a materially adverse effect on its operating results.

     One of the most  important  variables  affecting  the cost of the Company's
products is manufacturing  yields.  With its customized  antifuse  manufacturing
process  requirements,  Actel almost  invariably  experiences  difficulties  and
delays in achieving satisfactory,  sustainable yields on new processes or at new
foundries.  The  Company  introduced  the first  members of the MX family in the
fourth  quarter of 1997 and is currently  scheduled to introduce  new members of
the MX family and the first members of the SX family in 1998. Until satisfactory
yields are achieved on these new product  families,  they generally will be sold
at lower gross margins than Actel's mature product families.  Depending upon the
rate at which sales of these new products ramp (and the MX family is directed at
high-volume  users) and the extent to which they displace mature  products,  the
lower gross  margins  could have a materially  adverse  effect on the  Company's
operating results.

     Management of Growth

     Actel has recently experienced and expects to continue to experience growth
in the number of its  employees  and the scope of its  operations,  resulting in
increased  responsibilities  for  management  personnel.  To manage  recent  and
potential future growth effectively,  the Company will need to continue to hire,
train, motivate, and manage a growing number of employees. The future success of
Actel will also depend on its ability to attract and retain qualified technical,
marketing, and management personnel. In particular,  the current availability of
qualified  silicon  design,  software  design,  process,  and test  engineers is
limited, and competition among companies for skilled and experienced engineering
personnel is very strong.  The Company has been  attempting  to hire a number of
engineering  personnel  and has  experienced  delays in filling such  positions.
During strong business cycles,  Actel expects to experience continued difficulty
in filling its needs for qualified  engineers and other personnel.  No assurance
can be given that the Company will be able to achieve or manage  effectively any
such  growth,  and  failure  to  do  so  could  delay  product  development  and
introductions or otherwise have a materially adverse effect on Actel's business,
financial condition, or results of operations.

     Manufacturing Yields

     Actel depends upon its  independent  wafer suppliers to produce wafers with
acceptable  yields  and to  deliver  them to the  Company  in a  timely  manner.
Currently, substantially all of the Company's revenues are derived from products
based  on  Actel's  proprietary   antifuse  process   technologies.   Successful
implementation  of  antifuse  process  technology  requires  a  high  degree  of
coordination  between the Company and its foundry.  Therefore,  significant lead
time is required to reach volume  production on new processes and at a new wafer
supply locations.  Accordingly, no assurance can be given that volume production
on Actel's new MX and SX families will be achieved in the near term or at all.

     The  manufacture of  high-performance  antifuse wafers is a complex process
that requires a high degree of technical skill,  state-of-the-art equipment, and
effective  cooperation  between the wafer  supplier and the circuit  designer to
produce  acceptable  yields.  Minute  impurities,  errors  in  any  step  of the
fabrication process, defects in the masks used to print circuits on a wafer, and
other  factors can cause a  substantial  percentage  of wafers to be rejected or
numerous  die  on  each  wafer  to  be  non-functional.  As  is  common  in  the
semiconductor  industry,  the Company has from time to time  experienced  in the
past,  and  expects  that it will  experience  in the future,  production  yield
problems and delivery delays. Any prolonged  inability to obtain adequate yields
or deliveries could adversely affect the Actel's business and operating results.

     One-Time Programmability

     While the nonvolatility of Actel's antifuse FPGAs is necessary or desirable
in some applications, logic designers generally would prefer to prototype with a
reprogrammable  logic device,  all other things being equal. This is because the
designer  can reuse the  device  if he or she  makes an  error.  The  visibility
associated with discarding a one-time programmable device often causes designers
to  select  a   reprogrammable   device  even  when  the  alternative   one-time
programmable  device  offers  significant  advantages.  This  bias in  favor  of
designing with  reprogrammable  logic devices appears to increase as the size of
the design increases, and is a major reason the Company has decided to enter the
reprogrammable FPGA market.

     Patent Infringement

     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.  No  assurance  can be given that such claims  against
Actel will not result in  litigation.  In January  1994,  the Company  brought a
patent infringement  lawsuit against QuickLogic,  which in turn brought a patent
infringement  counterclaim  against  Actel in May 1995.  In  January  1998,  the
Company  brought  a  second  patent  infringement  lawsuit  against  QuickLogic.
Management  of the  Company  believes  that  Actel has  meritorious  claims  and
defenses in these matters,  and that their resolution will not have a materially
adverse effect on the Company's  business,  financial  condition,  or results of
operations,  but no  assurance  can be given  to that  effect.  All  litigation,
whether or not determined in favor of Actel,  can result in significant  expense
to the Company and can divert the efforts of Actel's  technical  and  management
personnel from productive tasks.

     Although  the Company has  obtained  patents  covering  aspects of its FPGA
architecture,  logic  modules,  and certain  techniques  for  manufacturing  its
antifuse,  no assurance can be given that Actel's  patents will be determined to
be valid or that the claims of QuickLogic or any assertions of  infringement  or
invalidity by other parties (or claims for indemnity  from  customers  resulting
from any infringement claims) will not be successful. In the event of an adverse
ruling in the QuickLogic  cases or any other litigation  involving  intellectual
property,  the Company could suffer  significant  (and possibly treble) monetary
damages,  which  might have a  materially  adverse  effect on Actel's  business,
financial condition, or results of operations.  The Company may also be required
to discontinue the use of infringing 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.   Although  patent  holders   commonly  offer  licenses  to  alleged
infringers,  no assurance can be given that licenses will be offered or that the
terms of any offered  licenses will be  acceptable  to Actel.  In the event of a
successful  claim against the Company,  Actel's  failure to develop or license a
substitute  technology on commercially  reasonable terms would have a materially
adverse effect on the Company's business,  financial  condition,  and results of
operations.

     Potential Acquisitions

     In  pursuing   its   business   strategy,   Actel  may  acquire   products,
technologies,  or businesses  from third parties.  Identifying  and  negotiating
these  acquisitions  may  divert  substantial  management  time  away  from  the
Company's  operations.  An acquisition could absorb  substantial cash resources,
require Actel to incur or assume debt  obligations,  and/or involve the issuance
of  additional  equity  securities  of the Company.  The issuance of  additional
equity  securities  may dilute,  and could  represent an interest  senior to the
rights of, the holders of Actel's Common Stock. An acquisition  accounted for as
a purchase,  such as the Company's acquisition of TI's antifuse FPGA business in
1995, could involve significant one-time write-offs,  possibility resulting in a
loss  for  the  fiscal  year  in  which  it is  taken,  and  would  require  the
amortization  of any  goodwill  over a number of years,  which  would  adversely
affect earnings in those years. Any acquisition would require attention from the
Company's  management to integrate the acquired entity into Actel's  operations,
may require the Company to develop expertise outside its existing business,  and
could  result in  departures  of  management  from either  Actel or the acquired
entity.  An acquired entity may have unknown  liabilities,  and its business may
not achieve the results anticipated at the time it is acquired by the Company.

     Protection of Intellectual Property

     Actel has  historically  devoted  significant  resources  to  research  and
development  and  believes  that the  intellectual  property  derived  from such
research and  development is a valuable asset that has been and will continue to
be important to the success of the Company's business. Actel relies primarily on
a combination of nondisclosure  agreements,  other contractual  provisions,  and
patent and copyright laws to protect its proprietary rights. No assurance can be
given that the steps  taken by the  Company  will be  adequate  to  protect  its
proprietary  rights.  In  addition,  the laws of  certain  territories  in which
Actel's products are or may be developed,  manufactured, or sold, including Asia
and Europe,  may not protect the Company's  products and  intellectual  property
rights to the same extent as the laws of the United States.  Failure of Actel to
enforce its patents or  copyrights  or to protect its trade secrets could have a
materially adverse effect on the Company's  business,  financial  condition,  or
results of operations.

     Reliance on Distributors

     In 1997, more than half of Actel's sales in the United States and virtually
all of  the  Company's  sales  outside  the  United  States  were  made  through
distributors. Three of Actel's distributors, Wyle, Arrow, and Pioneer, accounted
for approximately 17%, 17%, and 12%, respectively, of the Company's net revenues
in  1997.  No  assurance  can be  given  that  future  sales  by  these or other
distributors will continue at current levels or that the Company will be able to
retain its current distributors on terms that are acceptable to Actel.

     The Company's  distributors  generally offer products of several  different
companies,  including  products  that are  competitive  with  Actel's  products.
Accordingly, there is a risk that these distributors may give higher priority to
products of other  suppliers,  thus reducing their efforts to sell the Company's
products.  In addition,  Actel's  agreements with its distributors are generally
terminable at the  distributor's  option. A reduction in sales efforts by one or
more of the Company's current distributors or a termination of any distributor's
relationship with Actel could have a materially  adverse effect on the Company's
business, financial condition, or results of operations.

     Actel generally defers  recognition of revenue on shipments to distributors
until the product is resold by the  distributor  to the end user.  The Company's
distributors  have on occasion built  inventories in anticipation of substantial
growth in sales and,  when such growth did not occur as rapidly as  anticipated,
substantially  decreased the amount of product  ordered from Actel in subsequent
quarters.  Such a slowdown in orders would generally reduce the Company's profit
margins on future sales of higher cost products because Actel would be unable to
take  advantage  of any  manufacturing  cost  reductions  while the  distributor
depleted its inventory at lower average selling prices.  In addition,  while the
Company  believes  that  its  major   distributors   are  currently   adequately
capitalized,  no assurance can be given that one or more of Actel's distributors
will not experience  financial  difficulties.  The failure of one or more of the
Company's  distributors  to pay for  products  ordered from Actel or to continue
operations  because of financial  difficulties or for other reasons could have a
materially adverse effect on the Company's  business,  financial  condition,  or
results of operations.

     Reliance on International Sales

     Sales  to  customers  located  outside  the  United  States  accounted  for
approximately  31%,  33%,  and 38% of net  revenues  for 1997,  1996,  and 1995,
respectively.  Actel expects that revenues derived from international sales will
continue to represent a significant portion of its total revenues. International
sales are  subject  to a variety  of risks,  including  longer  payment  cycles,
greater difficulty in accounts  receivable  collection,  currency  restrictions,
tariffs, trade barriers,  taxes, export license requirements,  and the impact of
recessionary  environments  in economies  outside the United States.  All of the
Company's  foreign sales are denominated in U.S.  dollars,  so Actel's  products
become less price competitive in countries with currencies that are declining in
value  against the dollar.  In addition,  since  virtually  all of the Company's
foreign sales are made through distributors, such sales are subject to the risks
described above in "Reliance on Distributors."

     Semiconductor Industry Risks

     The semiconductor  industry has historically been cyclical and periodically
subject to significant economic downturns, which are characterized by diminished
product demand, accelerated price erosion, and overcapacity.  The Company may in
the future experience substantial period-to-period  fluctuations in business and
results of operations due to general semiconductor industry conditions,  overall
economic  conditions,  or other factors,  including  legislation and regulations
governing the import or export of semiconductor products.

     Software Development Challenges

     The computational complexities are not yet well understood for the software
tools required to support the largest  members of the ES family of products.  It
is anticipated that both the  computational  memory capacities and tool runtimes
will be several times greater than those presently  required for Actel's current
antifuse  products,  which are  significantly  smaller.  It is expected that the
Company will need to develop and deploy tools  incorporating  significantly more
compact, memory-resident data structures, which must be combined with algorithms
capable of dealing very efficiently with the large circuit sizes.

     Technological Change and Dependence on New Product Development

     The  market for  Actel's  products  is  characterized  by rapidly  changing
technology,  frequent new product  introductions,  and declining average selling
prices over product life cycles,  each of which makes the timely introduction of
new  products a critical  objective of the Company.  Actel's  future  success is
highly dependent upon the timely  completion and introduction of new products at
competitive price and performance  levels. In evaluating new product  decisions,
Actel must  anticipate well in advance both the future demand and the technology
that will be  available to supply such demand.  Failure to  anticipate  customer
demand,  delays  in  developing  new  products  with  anticipated  technological
advances,  and failure to coordinate  the design and  development of silicon and
associated  software  products  each could have a materially  adverse  effect on
Actel's business, financial condition, or results of operation.

     In  addition,   there  are  greater  technological  and  operational  risks
associated with new products.  The inability of the Company's wafer suppliers to
produce advanced products;  delays in commencing or maintaining volume shipments
of new products;  the discovery of product,  process,  software,  or programming
failures;  and any related product returns could each have a materially  adverse
effect on Actel's business, financial condition, or results of operation.

     Actel is currently scheduled to introduce new members of the MX, SX, and ES
families  in 1998.  No  assurance  can be given  that the  Company's  design and
introduction  schedules for such products or the supporting software will be met
or that such products will be  well-received  by customers.  No assurance can be
given  that any  other new  products  will gain  market  acceptance  or that the
Company will respond  effectively  to new  technological  changes or new product
announcements by others. Any failure of Actel to successfully  define,  develop,
market,  manufacture,  assemble,  or test  competitive new products could have a
materially adverse effect on its business,  financial  condition,  or results of
operations.

     The Company must also continue to make significant  investments in research
and  development to develop new products and achieve market  acceptance for such
products.  Actel  currently  conducts  most  of  its  research  and  development
activities   at   facilities   operated  by   Matsushita   in  Japan  and  Extel
Semiconductor,  Inc. in the United States.  Although the Company has not to date
experienced  any  significant  difficulty  in  obtaining  access to its  current
facilities,  no  assurance  can be given that access will not be limited or that
such facilities will be adequate to meet Actel's needs in the future.

     Volatility of Stock

     The price of the Company's Common Stock can fluctuate  substantially on the
basis  of  factors  such  as  announcements  of new  products  by  Actel  or its
competitors,  quarterly  fluctuations in the Company's  financial results or the
financial results of other semiconductor companies, or general conditions in the
semiconductor  industry or in the financial markets. In addition,  stock markets
have recently  experienced extreme price and volume volatility.  This volatility
has had a substantial  effect on the market prices of the  securities  issued by
high  technology  companies,  at times for reasons  unrelated  to the  operating
performance of the specific companies.

     Year 2000 Compliance

     The Year 2000 issue arises because most computer hardware and software were
developed without  considering the impact of the upcoming change in the century.
The hardware and software were originally  designed to accept two-digit  entries
rather  than  four-digit  entries in the date code field.  As a result,  certain
computer  systems and  software  packages  will not be able to  interpret  dates
beyond December 31, 1999; they will, for example,  interpret January 1, 2000, as
January  1,  1900.  This  could  potentially   result  in  computer  failure  or
miscalculations,  causing operating disruptions, including among other things an
inability to process  transactions,  send invoices,  or engage in other ordinary
activities.

     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 permit time for testing.  A task force
is identifying all areas of application  software,  operating  system  software,
hardware,  and external interfaces that require Year 2000 compliance.  While the
Company currently expects that the Year 2000 will not pose significant  internal
operational  problems,  delays in the implementation of new information systems,
or a failure  to fully  identify  all Year 2000  dependencies  in the  Company's
systems,  could have a  materially  adverse  effect on the  Company's  operating
results.

     The  Company is also  assessing  the  capability  of its  products  sold to
customers over a period of years to handle the Year 2000. The ongoing assessment
has not revealed any significant  compliance issues.  However,  the inability of
these  products to properly  manage and  manipulate  data in the Year 2000 could
result in a material adverse impact on the Company, including increased warranty
costs, customer satisfaction issues, and potential lawsuits.

     Based  on  its  current  understanding,   the  Company  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 its Year 2000
compliance  program  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
cost of the program  and the date on which the  Company  believes it will become
Year 2000 compliant are based on management's best estimates, which were derived
utilizing  numerous  assumptions  of  future  events,  including  the  continued
availability of certain  resources,  cooperation of vendors,  and other factors.
However,  there can be no guarantee  that these  estimates  will be achieved and
actual  results could differ  materially  from those  anticipated.  If Year 2000
modifications  and  conversions  are not properly  made, or are not completed in
timely manner, the Year 2000 issue could have a materially adverse impact on the
Company's future business operations and, in turn, on its financial position and
results  of  operations.   Specific  factors  that  might  cause  such  material
differences  include,  but are not  limited  to,  the  availability  and cost of
personnel  trained in the area,  the ability to locate and correct all  relevant
computer codes, and similar uncertainties.

     Ultimately,  the  potential  impact of the Year 2000 issue will  depend not
only on the corrective measures the Company  undertakes,  but also on the way in
which the Year 2000 issue is  addressed  by  businesses  and other  entities who
provide data to, or receive data from the Company,  or whose financial condition
or operational capability is important to the Company as suppliers or customers.
Therefore,  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.  The Company's suppliers and customers are
generally  much larger  organizations  than the Company with a greater number of
suppliers  and  customers  of their own. The Company  believes  that many of its
suppliers and customers have not completed their own systems  modification to be
Year 2000  compliant.  The failure of significant  suppliers or customers of the
Company to become Year 2000 compliant could have materially adverse consequences
to the  Company.  Those  consequences  could  include the  inability  to receive
product in a timely  manner or lost sales  opportunities,  either of which could
result in a material decline in the Company's revenues and profits. In addition,
there can be no guarantee  that a conversion by a third party's  system on which
the Company's systems rely would be compatible with the Company's systems. It is
not possible at this time to quantify the potential  impact of such  situations,
but no assurance can be given that another company's failure to ensure Year 2000
capability will not have an adverse effect on the Company.

Executive Officers of the Registrant

     The following table identifies each executive  officer of Actel as of March
27, 1998:
<TABLE>
<CAPTION>
                 Name                      Age                                 Position
---------------------------------------- ------- ---------------------------------------------------------
<S>                                        <C>   <C>
John C. East.........................      53    President and Chief Executive Officer

Henry L. Perret......................      52    Vice President of Finance and Chief Financial Officer

Esmat Z. Hamdy.......................      48    Senior Vice President of Technology & Operations

Jeffrey M. Schlageter................      54    Senior Vice President of Engineering & Corporate Programs

Michelle A. Begun....................      41    Vice President of Human Resources

Carl N. Burrow.......................      37    Vice President of Marketing

Douglas D. Goodyear..................      43    Vice President of Worldwide Sales

Fares N. Mubarak.....................      36    Vice President of Engineering

Dennis F. Nye........................      45    Vice President of Strategic Accounts

Robert J. Smith, II..................      53    Vice President of Software

David L. Van De Hey..................      42    Vice President & General Counsel and Secretary
</TABLE>

     Mr. East has served as President and Chief Executive Officer of the Company
since  December 1988.  From April 1979 until joining  Actel,  Mr. East served in
various  positions with Advanced Micro Devices,  a  semiconductor  manufacturer,
including Senior Vice President of Logic Products from November 1986 to November
1988.  From December  1976 to March 1979,  he served as  Operations  Manager for
Raytheon  Semiconductor.  From  September  1968 to December  1976,  he served in
various marketing, manufacturing, and engineering positions for Fairchild Camera
and Instrument Corporation, a semiconductor manufacturer.

     Mr.  Perret  joined Actel in January 1996 as  Controller  and has been Vice
President of Finance and Chief  Financial  Officer  since June 1997.  From April
1992 until joining the Company, he was the Site Controller for the manufacturing
division of Applied Materials, a maker of semiconductor manufacturing equipment,
in  Austin,  Texas.  From  1978 to  1991,  Mr.  Perret  held  various  financial
positions,  including divisional controllerships with National Semiconductor,  a
semiconductor manufacturer.

     Dr. Hamdy is a founder of the  Company,  was Vice  President of  Technology
from August  1991 to March 1996 and Senior Vice  President  of  Technology  from
March 1996 to September  1996,  and has been Senior Vice President of Technology
and Operations  since September 1996. From November 1985 to July 1991, he held a
number of management  positions with the Company's  technology  and  development
group.  From January 1981 to November 1985, Dr. Hamdy held various  positions at
Intel Corporation, a semiconductor manufacturer, lastly as project manager.

     Mr.  Schlageter  joined the Company in February  1989 as Vice  President of
Engineering,  was Senior Vice  President of  Engineering  from  November 1992 to
October 1997, and has been Senior Vice  President of  Engineering  and Corporate
Programs  since  October  1997.  From July 1985 to January 1989, he held various
positions at Advanced Micro Devices, a semiconductor manufacturer, where he last
served as Managing Director of Peripheral  Products.  From February 1981 to July
1985,  Mr.  Schlageter  was Vice  President  of  Semicustom  Products  at Mostek
Corporation, a semiconductor manufacturer.

     Ms. Begun joined Actel in May 1989 as Director of Human Resources,  and has
been Vice President of Human  Resources  since August 1991. From May 1984 to May
1989,  she  held  various  human   resources   management   positions  at  Intel
Corporation,  a  semiconductor  manufacturer,  her  last  position  being  Human
Resources  Manager.  From  October  1977 to May  1984,  she held  various  human
resources management positions at Synertek,  Inc., a subsidiary of Honeywell,  a
semiconductor manufacturer.

     Mr. Burrow joined the Company in January 1992 as Southwest  Regional  Sales
Manager,  was Director of Western Area Sales from February 1996 to October 1997,
and has been Vice  President of Marketing  since  October  1997.  From June 1983
until  January  1992,  he held various  sales and  marketing  positions at Texas
Instruments, a semiconductor manufacturer.

     Mr.  Goodyear  joined the Company in  February  1996 as Vice  President  of
Worldwide Sales. From November 1991 until joining the Company, he served as Vice
President of Sales for the components division of Sharp Electronics Corporation,
a semiconductor  manufacturer.  From January 1987 to November 1991, Mr. Goodyear
held various sales  management  positions at Hitachi  America,  a  semiconductor
manufacturer,  lastly as Western Area Sales  Manager.  From June 1983 to January
1987, he held various sales and sales  management.  positions at Advanced  Micro
Devices, a semiconductor manufacturer.

     Mr.  Mubarak  joined the Company in November  1992, was Director of Product
and Test  Engineering  until  October  1997,  and has  been  Vice  President  of
Engineering  since October 1997.  From 1989 until joining Actel, he held various
engineering  and  engineering  management  positions with Samsung  Semiconductor
Inc., a semiconductor manufacturer,  and its spin-off, Integrated Circuit Works,
Inc. From 1984 to 1989, Mr. Mubarak held various engineering,  product planning,
and   engineering   management   positions  with  Advanced   Micro  Devices,   a
semiconductor manufacturer.

     Mr. Nye joined  Actel in October  1990 as European  Business  Manager  with
Actel Europe Ltd., the Company's United Kingdom  subsidiary,  was Vice President
of Marketing  from January 1994 until October 1997,  and has been Vice President
of Strategic Accounts since October 1997. From January 1990 to October 1990, Mr.
Nye served as Director of Sales of Genrad Corporation,  a software company. From
November 1986 to January 1990, he served as European  Sales Manager of Viewlogic
Corporation, a software company.

     Dr. Smith joined Actel in March 1997 as Vice  President of Software.  Prior
to joining the Company, he was an independent consultant specializing in product
development  and  positioning,   software  team  building,   pragmatic  software
engineering practices,  and small company trouble shooting.  From September 1985
to March  1995,  Dr Smith  held  various  positions  with  Microelectronics  and
Computer  Technology  Corporation  (MCC), a consortial  systems and software R&D
company,  where  he last  served  as Vice  President  of  Advanced  Systems  and
Networks.

     Mr.  Van De Hey  joined  Actel in July 1993 as  Corporate  Counsel,  became
Secretary  in May 1994,  and has been Vice  President  & General  Counsel  since
August 1995.  From  November 1988 to September  1993,  he was an associate  with
Wilson, Sonsini, Goodrich & Rosati, Professional Corporation, a law firm in Palo
Alto,  California,  and the Company's  outside legal  counsel.  From August 1985
until October 1988, he was an associate with the Cleveland office of Jones, Day,
Reavis & Pogue, a law firm.

     Executive officers serve at the discretion of the Board of Directors.

ITEM 2.   PROPERTIES

     Actel's  principal  administrative,  marketing,  sales,  customer  support,
design,  research  and  development,  and  testing  facilities  are  located  in
Sunnyvale,  California,  in three buildings that comprise  approximately 138,000
square feet. These buildings are leased through June 2003, and the Company has a
renewal option for an additional five-year term. Actel also leases sales offices
in the metropolitan areas of Atlanta, Baltimore,  Basingstoke (England), Boston,
Chicago,   Dallas,  Denver,  Destin  (Florida),  Los  Angeles,  Milano  (Italy),
Minneapolis,   Munich   (Germany),   Ottawa   (Canada),   and  Paris   (France),
Philadelphia,  Raleigh,  Seoul (Korea),  and Tokyo (Japan). The Company believes
its  facilities  will be adequate  for its needs in 1998,  but is  investigating
options for continued expansion beyond that time.

ITEM 3.   LEGAL

     Except as described  below,  there are no pending  legal  proceedings  of a
material nature to which Actel is a party or of which any of its property is the
subject.  There  are no  such  legal  proceedings  known  by the  Company  to be
contemplated by any governmental authority.

     Actel v. QuickLogic (CV C-94 20050 JW (PVT))

          Claims Asserted

          Actel commenced the above-referenced  action against QuickLogic in the
     United States  District Court for the Northern  District of California (the
     "Court")  on  January  20,  1994.   The  Complaint   asserted   claims  for
     infringement of U. S. Patents Nos.  4,758,745,  4,873,459,  5,055,718,  and
     5,198,705,  respectively,  each relating to field  programmable  gate array
     technology.  The Complaint sought injunctive  relief,  treble damages in an
     unspecified amount, and attorneys' fees.

          On February 10,  1994,  QuickLogic  filed an Answer and  Counterclaim,
     denying   infringement,   asserting   invalidity   defenses,   and  seeking
     declaratory relief.

          On March 15, 1995, Actel filed an Amended and  Supplemental  Complaint
     against QuickLogic asserting,  in addition to claims previously asserted, a
     claim for infringement of U.S. Patent No. 5,367,208.  Actel's  Supplemental
     Complaint  sought  injunctive  relief,  treble  damages  in an  unspecified
     amount, and attorneys' fees.

          On April 14, 1995, QuickLogic filed an Answer and Counterclaim denying
     infringement,  asserting  invalidity  defenses,  and  asserting  two claims
     against Actel for alleged  infringement of U.S. Patents Nos.  5,220,213 and
     5,396,127  relating  to logic  modules.  QuickLogic's  Counterclaim  sought
     declaratory  and  injunctive  relief,  and treble damages in an unspecified
     amount.   On  May  25,  1995,   QuickLogic  filed  an  Amended  Answer  and
     Counterclaim, adding allegations of inequitable conduct.

          In response to  QuickLogic's  counterclaims,  on June 11, 1995,  Actel
     filed a Reply and Counterclaim, denying infringement,  asserting invalidity
     defenses,  naming John Birkner as an  individual  defendant,  and asserting
     causes of action for trade  secret  misappropriation,  breach of  contract,
     breach of  confidential  business  relationship,  and  unfair  competition.
     Actel's  Counterclaim sought declaratory and injunctive relief,  damages in
     an  unspecified  amount,  and an  assignment to Actel of  QuickLogic's  two
     patents-in-suit.  In response,  both  QuickLogic and Mr. Birkner denied all
     allegations.

          On March 7, 1996, Actel filed a Second Supplemental Complaint,  adding
     a claim against QuickLogic for infringement of U.S. Patent No. 5,479,113.

          As of June 13, 1997,  QuickLogic  amended its complaint to assert that
     Actel's ACT 3 products infringe U.S. Patent No. 5,594,364.

          On August 1,  1997,  Actel  answered  QuickLogic's  amended  complaint
     denying   liability  and   restating   Actel's  trade  secret  and  related
     counterclaims.

          On August 15, 1997, Actel filed an amended and supplemental complaint.
     This  complaint  reasserted the patent claims  described  above and added a
     claim under U.S. Patent No. 5,610,534, issued March 11, 1997.

          On  September  3,  1997,  QuickLogic  and  Birkner  filed an answer to
     Actel's  Second Amended and  Supplemental  Complaint,  and alleged  amended
     counterclaims asserting invalidity and other customary affirmative defenses
     in patent cases and demanding  jury. On September 9, 1997,  QuickLogic  and
     Birkner filed an answer to Actel's Amended Counterclaims.

          On March 3, 1998,  QuickLogic advised that it will seek leave to amend
     its   answer   to   assert   additional    defenses   of   invalidity   and
     unenforceability.

          In  summary,  Actel has  asserted  claims of  patent  infringement  as
     against  all  QuickLogic   products  under  U.S.  Patents  Nos.  4,758,745,
     4,873,459,  5,055,718, 5,198,705, 5,357,208, 5,479,113 and 5,610,534. Actel
     has also asserted various  counterclaims against QuickLogic and Mr. Birkner
     based  on  misappropriation  of  Actel  trade  secrets.  QuickLogic  denies
     infringement  and  asserts  invalidity  and  unenforceability  of all Actel
     patents-in-suit.  As  explained  below,  the  Court  has  granted a summary
     judgment finding that QuickLogic's products infringe the `705 patent.

          QuickLogic has asserted claims of patent infringement  against Actel's
     ACT 2 and ACT 3  product  lines  under  U.S.  Patents  Nos.  5,220,213  and
     5,396,127 and against ACT 3 products under U.S. Patent No. 5,594,364. Actel
     denies  infringement  and asserts  invalidity and  unenforceability  of the
     QuickLogic  patents.  Actel further asserts that it is entitled to impose a
     constructive  trust on the  QuickLogic  patents  because those patents were
     obtained using Actel trade secrets.

          Motions

          On November 15, 1994 Actel moved for summary  judgment of infringement
     of its `705  patent.  On October 4, 1996,  after  extensive  discovery  and
     briefing,  the  Special  Master,  to whom all  pretrial  matters  have been
     referred,  filed a  recommendation  with the Court that  Actel's  motion be
     granted.  After further hearings,  on August 8, 1997, the Court adopted the
     Special Master's recommendation.

          On January 18, 1996,  Actel filed a motion seeking summary judgment of
     invalidity  of the two  QuickLogic  patents-in-suit  based  on the  sale of
     Actel's  ACT 2 product  line more than one year  prior to the filing of the
     application  which is the parent of the applications  from which QuickLogic
     obtained  Patents Nos.  5,220,213 and 5,396,127.  This motion was argued to
     the Special Master on December 12, 1997, and is awaiting his action.

          On February 5, 1996, QuickLogic filed a motion for summary judgment of
     infringement  of  QuickLogic  patent no.  5,520,213.  This  motion has been
     withdrawn without prejudice to refiling of a similar motion.

          On February 26, 1996,  QuickLogic  filed a motion to disqualify  Actel
     counsel,  the law  firm of Lyon & Lyon,  on the  ground  that a Lyon & Lyon
     attorney,  in  previous  employment  with  QuickLogic  counsel,   Skjerven,
     Morrill,   MacPherson,   Franklin  &  Friel,  had  access  to  confidential
     QuickLogic information and attorney work product. The Special Master issued
     a recommendation in favor of QuickLogic's  motion and, on May 29, 1996, the
     Court  entered  an  Order  disqualifying  Lyon & Lyon.  On June  19,  1996,
     O'Melveny & Myers was substituted as counsel of record on behalf of Actel.

          On  November  25,  1996,  QuickLogic  moved for  Summary  Judgment  of
     invalidity  with  respect to Claim 1 of Actel  patent no.  5,198,705.  This
     motion is being held in abeyance pending further pretrial planning.

          On June 27, 1997, Actel moved for a summary judgment that QuickLogic's
     products  infringe Claim 11 of U.S.  Patent No.  4,873,459.  This motion is
     being held in abeyance pending further pretrial planning.

          On July 3, 1997, QuickLogic and Mr. Birkner moved for summary judgment
     that all of the  Actel  counterclaims  based on  misappropriation  of trade
     secrets are barred by applicable  statutes of  limitation.  This motion was
     argued to the Special Master on December 12, 1997. In Recommendations dated
     February 13, 1998 and March 3, 1998,  the Special Master  recommended  that
     this motion be granted in its entirety.  Actel has filed  objections to the
     Special Master's  recommendations.  This matter awaits further briefing and
     argument before the district judge.

          On  September  9, 1997,  Actel  moved for leave to file an amended and
     supplemental  complaint joining two individuals as additional defendants on
     Actel's  counterclaims.  One objective of this motion was to establish that
     Actel's trade secret  counterclaims  against  QuickLogic relate back to the
     date of Actel's original complaint.  If the relation-back doctrine applies,
     this would obviate  QuickLogic's  summary judgment defense.  On December 5,
     1997,  pursuant to recommendation of the Special Master, the district court
     denied Actel's motion to join the two additional  defendants.  On March 13,
     1998,  the Special  Master  recommended  that the district  judge hold that
     Actel's  counterclaims  do not relate back.  Actel has filed  objections to
     this  recommendation,  and the matter awaits further proceedings before the
     district judge.

          Each side has advised the Special Master that  additional  motions for
     summary judgment will be made after completion of discovery.

          Trial Schedule

          By order of the Court entered March 19, 1997, the Court  established a
     deadline  for  completion  of fact  discovery  of January  31,  1998.  This
     deadline has passed,  but limited specific fact discovery that could not be
     completed by the deadline remains to be conducted.  Expert disclosures will
     be required in advance of trial,  but no specific date for such disclosures
     is currently in effect.

          The parties are discussing a process for  simplification of the issues
     to be tried and  expect to enter into a  stipulation  to  bifurcate  damage
     issues from liability and  infringement  issues and to try a limited subset
     of issues in phases. A process for selecting  claims has commenced,  but it
     is too early to predict what claims will be selected for trial.

          No trial date has been set.  The parties have  stipulated  that purely
     equitable  will be  tried to the  judge  prior  to jury  trial of  selected
     claims.  Trial of the equitable issues is currently  expected to take place
     in the fourth quarter of 1998.

     Actel v. QuickLogic (CV C-97 21107 JW (EAI))

          Claims Asserted

          On December 15, 1997,  Actel  commenced  the  above-referenced  action
     against   QuickLogic  in  the  Court.  The  Complaint  asserts  claims  for
     infringement of U. S. Patents Nos.  5,132,571 and 5,191,214,  respectively,
     each relating to field  programmable gate array  technology.  The Complaint
     seeks  injunctive  relief,  treble  damages in an unspecified  amount,  and
     attorneys' fees.

          On January  13,  1998,  QuickLogic  filed an Answer and  Counterclaim,
     denying infringement, asserting invalidity defenses and seeking declaratory
     relief.

          Motions

          No motions have been filed in this action.

          Trial

          The parties have begun to disclose  relevant  information  as required
     under the Local Rules of the United States  District Court for the Northern
     District of California.  There have been no  communications  from the Court
     concerning a trial date.

     After  considering the facts currently  known,  management does not believe
that the  ultimate  outcome of the either  case will have a  materially  adverse
effect on the Company's  business,  financial  condition,  or operating results,
although no assurance can be given to that effect.

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

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

                                     PART II

ITEM 5.   MARKET  FOR THE  REGISTRANT'S  COMMON  STOCK AND  RELATED  SHAREHOLDER
          MATTERS

     The  information  appearing  under  the  caption  "Stock  Listing"  in  the
Registrant's  annual  report to  security  holders  for the  fiscal  year  ended
December 28, 1997 (the "1997 Annual  Report"),  is  incorporated  herein by this
reference.

ITEM 6.   SELECTED FINANCIAL DATA

     The  information   appearing  under  the  caption  "Selected   Consolidated
Financial  Data"  in the 1997  Annual  Report  is  incorporated  herein  by this
reference.

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

     The information  appearing under the caption  "Management's  Discussion and
Analysis of Financial  Conditions  and Results of Operations" of the 1997 Annual
Report is incorporated herein by this reference.

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The information appearing under the captions "Consolidated Balance Sheets,"
"Consolidated   Statements   of   Operations,"   "Consolidated   Statements   of
Shareholders'  Equity,"  "Consolidated  Statements  of Cash  Flows,"  "Notes  to
Consolidated   Financial   Statements,"  and  "Report  of  Ernst  &  Young  LLP,
Independent  Auditors" in the 1997 Annual Report is incorporated  herein by this
reference.

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

     None.

                                    PART III

     Except for the  information  specifically  incorporated  by reference  from
Actel's  definitive Proxy Statement for the Annual Meeting of Shareholders to be
held on May 22, 1998,  as filed on or about April 7, 1998,  with the  Securities
and Exchange  Commission (the "1997 Proxy Statement") in Part III of this Annual
Report on Form 10-K, the 1997 Proxy Statement shall not be deemed to be filed as
part of this Report.  Without limiting the foregoing,  the information under the
captions  "Compensation  Committee Report" and "Company Stock Performance" under
the main  caption  "OTHER  INFORMATION"  in the  1997  Proxy  Statement  are not
incorporated by reference in this Annual Report on Form 10-K.

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The information  regarding the  identification  and business  experience of
Actel's directors under the caption  "Nominees" under the main caption "PROPOSAL
NO. 1 -- ELECTION OF DIRECTORS" in the 1997 Proxy  Statement and the information
under the main caption "COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE
ACT OF  1934"  in the 1997  Proxy  Statement  are  incorporated  herein  by this
reference.  For information regarding the identification and business experience
of Actel's executive officers, see "Executive Officers of the Registrant" at the
end of Item 1 in Part I of this Annual Report on Form 10-K.

ITEM 11.  EXECUTIVE COMPENSATION

     The information  under the caption "Director  Compensation"  under the main
caption  "PROPOSAL NO. 1 -- ELECTION OF  DIRECTORS" in the 1997 Proxy  Statement
and the information under the caption  "Executive  Compensation"  under the main
caption "OTHER  INFORMATION" in the 1997 Proxy Statement are incorporated herein
by this reference.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information  under the caption "Share Ownership" under the main caption
"INFORMATION CONCERNING SOLICITATION AND VOTING" in the 1997 Proxy Statement and
the information under the caption  "Security  Ownership of Management" under the
main caption "OTHER  INFORMATION" in the 1997 Proxy  Statement are  incorporated
herein by this reference.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information  under the caption  "Certain  Transactions"  under the main
caption "OTHER  INFORMATION" in the 1997 Proxy Statement is incorporated  herein
by this reference.

                                     PART IV

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

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

          (1)  Financial  Statements.   The  following   consolidated  financial
     statements  of Actel  Corporation  included in the 1997  Annual  Report are
     incorporated by reference in Item 8 of this Annual Report on Form 10-K:

          Consolidated balance sheets at December 31, 1997 and 1996

          Consolidated  statements of operations  for each of the three years in
          the period ended December 31, 1997

          Consolidated  statements of shareholders' equity for each of the three
          years in the period ended December 31, 1997

          Consolidated  statements  of cash flows for each of the three years in
          the period ended December 31, 1997

          Notes to consolidated financial statements

          (2) Financial  Statement  Schedule.  The financial  statement schedule
     listed under 14(d) hereof is filed with this Annual Report on Form 10-K.

          (3)  Exhibits.  The exhibits  listed under Item 14(c) hereof are filed
     with, or incorporated by reference into, this Annual Report on Form 10-K.

     (b) Reports on Form 8-K. No reports on Form 8-K were filed by Actel  during
the quarter ended December 28, 1997.

     (c) Exhibits.  The following exhibits are filed as part of, or incorporated
by reference into, this Report on Form 10-K:

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

        2.1 (1)          Asset Purchase Agreement dated as of February 12, 1995,
                         between   the   Registrant   and   Texas    Instruments
                         Incorporated  (filed as Exhibit 2.1 to the Registrant's
                         Current  Report on Form 8-K (File  No.  0-21970)  filed
                         with the  Securities  and Exchange  Commission on April
                         17, 1995).


        2.2              Amendment No. 1 to the Asset Purchase  Agreement  dated
                         as of March 31, 1995,  between the Registrant and Texas
                         Instruments  Incorporated  (filed as Exhibit 2.2 to the
                         Registrant's  Current  Report  on Form  8-K  (File  No.
                         0-21970)   filed  with  the   Securities  and  Exchange
                         Commission on April 17, 1995).

        3.1              Restated  Articles of  Incorporation  (filed as Exhibit
                         3.2 to the Registrant's  Registration Statement on Form
                         S-1 (File No. 33-64704),  declared  effective on August
                         2, 1993).

        3.2              Restated Bylaws of the Registrant (filed as Exhibit 3.3
                         to the Registrant's  Registration Statement on Form S-1
                         (File No.  33-64704),  declared  effective on August 2,
                         1993).

        3.3              Certificate of Determination of Rights, Preferences and
                         Privileges   of  Series  A   Preferred   Stock  of  the
                         Registrant  (filed as Exhibit  3.3 to the  Registrant's
                         Current  Report on Form 8-K (File  No.  0-21970)  filed
                         with the  Securities  and Exchange  Commission on April
                         17,  1995).

       10.1 (2)          Form of  Indemnification  Agreement  for  directors and
                         officers  (filed as  Exhibit  10.1 to the  Registrant's
                         Registration Statement on Form S-1 (File No. 33-64704),
                         declared     effective     on    August    2,    1993).

       10.2 (2)          1986 Incentive Stock Option Plan (filed as Exhibit 10.2
                         to the  Registrant's  Annual  Report on Form 10-K (File
                         No.  0-21970)  for the fiscal year ended  December  28,
                         1997).

       10.3 (2)          1993  Directors'  Stock  Option  Plan,  as amended  and
                         restated.

       10.4 (2)          1993  Employee  Stock  Purchase  Plan,  as amended  and
                         restated.

       10.5 (2)          1995 Employee and Consultant Stock Plan, as amended and
                         restated  (filed as  Exhibit  10.5 to the  Registrant's
                         Annual  Report on Form 10-K (File No.  0-21970) for the
                         fiscal    year    ended     December     28,     1997).

       10.6              Form of Distribution  Agreement (filed as Exhibit 10.13
                         to the Registrant's  Registration Statement on Form S-1
                         (File No.  33-64704),  declared  effective on August 2,
                         1993).

       10.7 (1)          Patent  Cross  License  Agreement  dated April 22, 1993
                         between  the  Registrant  and  Xilinx,  Inc.  (filed as
                         Exhibit   10.14   to  the   Registrant's   Registration
                         Statement  on Form S-1  (File No.  33-64704),  declared
                         effective on August 2, 1993).

       10.8              Subscription and Participation Agreement dated February
                         3, 1994 between the Registrant,  Singapore Technologies
                         Ventures   Pte   Ltd   and   Chartered    Semiconductor
                         Manufacturing  Pte Ltd (filed as  Exhibit  10.16 to the
                         Registrant's  Annual  Report  on Form  10-K  (File  No.
                         0-21970)  for the fiscal  year ended  January 2, 1994).

       10.9              Manufacturing  Agreement dated February 3, 1994 between
                         the    Registrant    and    Chartered     Semiconductor
                         Manufacturing  Pte Ltd (filed as  Exhibit  10.17 to the
                         Registrant's  Annual  Report  on Form  10-K  (File  No.
                         0-21970)  for the fiscal  year ended  January 2, 1994).

       10.10             Distribution  Agreement dated June 1, 1994, between the
                         Registrant  and  Arrow  Electronics,   Inc.  (filed  as
                         Exhibit 10.18 to the  Registrant's  Quarterly Report on
                         Form 10-Q (File No.  0-21970) for the quarterly  period
                         ended July 3, 1994).

       10.11 (1)         Product   Development  and  Marketing  Agreement  dated
                         August  1,  1994,  between  the  Registrant  and  Loral
                         Federal  Systems Company (filed as Exhibit 10.19 to the
                         Registrant's  Quarterly  Report on Form 10-Q  (File No.
                         0-21970)  for the  quarterly  period  ended  October 2,
                         1994).

       10.12 (1)         M2M Joint  Development  and Marketing  Agreement  dated
                         August  1,  1994,  between  the  Registrant  and  Loral
                         Federal  Systems Company (filed as Exhibit 10.20 to the
                         Registrant's  Quarterly  Report on Form 10-Q  (File No.
                         0-21970)  for the  quarterly  period  ended  October 2,
                         1994).

       10.13 (1)         License  Agreement  dated as of April 1, 1995,  between
                         the  Registrant  and  Texas  Instruments   Incorporated
                         (filed as  Exhibit  10.22 to the  Registrant's  Current
                         Report on Form 8-K (File No.  0-21970)  filed  with the
                         Securities and Exchange  Commission on April 17, 1995).

       10.14 (1)         Foundry  Agreement  dated as of June 29, 1995,  between
                         the Registrant and Matsushita  Electric Industrial Co.,
                         Ltd and Matsushita  Electronics  Corporation  (filed as
                         Exhibit 10.25 to the  Registrant's  Quarterly Report on
                         Form 10-Q (File No.  0-21970) for the quarterly  period
                         ended July 2, 1995).

       10.15 (1)         Distribution  Agreement  dated  as of  June  29,  1995,
                         between  the   Registrant   and   Matsushita   Electric
                         Industrial   Co.,   Ltd  and   Matsushita   Electronics
                         Corporation (filed as Exhibit 10.26 to the Registrant's
                         Quarterly  Report on Form 10-Q (File No.  0-21970)  for
                         the    quarterly    period   ended   July   2,   1995).

       10.16             Lease  Agreement  for  the   Registrant's   offices  in
                         Sunnyvale,  California,  dated May 10,  1995  (filed as
                         Exhibit 10.19 to the Registrant's Annual Report on Form
                         10-K  (File No.  0-21970)  for the  fiscal  year  ended
                         December 31, 1995).

       10.17 (1)         License  Agreement  dated as of March 6, 1995,  between
                         the Registrant and BTR, Inc. (filed as Exhibit 10.20 to
                         the  Registrant's  Annual Report on Form 10-K (File No.
                         0-21970) for the fiscal year ended  December 28, 1997).

       13                Portions of Registrant's  Annual Report to Shareholders
                         for  the  fiscal   year  ended   December   28,   1997,
                         incorporated  by  reference  into  this  Report on Form
                         10-K.

       21                Subsidiaries    of    Registrant    (see    page   47).

       23                Consent of Ernst & Young LLP, Independent Auditors (see
                         page 45).

       24                Power     of      Attorney      (see      page     44).

       27.1              Financial Data Schedule - 1997.

       27.2              Financial Data Schedule - 1996.

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

     (1)  Confidential treatment requested as to a portion of this Exhibit.

     (2)  This  Exhibit  is  a  management  contract  or  compensatory  plan  or
          arrangement.

     Pursuant to Item 601(b)(2) of Regulation  S-K, the schedules to Exhibit 2.1
have been omitted. The Registrant hereby agrees to furnish supplementally a copy
of any omitted schedule to the Securities and Exchange  Commission upon request.
The omitted schedules are listed below:

     Schedule 1.1(a)      Capital Equipment
     Schedule 1.1(b)      Expensed Assets
     Schedule 1.1(d)      Contracts
     Schedule 1.1(f)      Software
     Schedule 1.1(h)      Testing Hardware and Software
     Schedule 1.1(i)      Research and Development Projects
     Schedule 2.2         Calculation of Net Revenues of the Business
     Schedule 2.5         Inventory  Transfer Pricing
     Schedule 5.2(a)      Seller Consents
     Schedule 5.16        Seller's Knowledge
     Schedule 6.2(a)      Buyer Consents
     Schedule 6.2(b)      Buyer Violations
     Schedule 6.4         Capitalization of Buyer
     Schedule 6.7         Registration Rights
     Schedule 12.3(d)     Buyer's Knowledge

     (d)  Financial  Statement  Schedule.   The  following  financial  statement
schedule of Actel  Corporation  is filed as part of this Report on Form 10-K and
should be read in  conjunction  with the  Consolidated  Financial  Statements of
Actel  Corporation,  including the notes thereto,  and the Report of Independent
Auditors with respect thereto:

    Schedule                          Description                        Page
---------------  ----------------------------------------------------- ---------
       II                   Valuation and qualifying accounts             46

     All  other  schedules  for  which  provision  is  made  in  the  applicable
accounting  regulations  of the  Securities  and  Exchange  Commission  are  not
required under the related  instructions or are  inapplicable and therefore have
been omitted.


                                   SIGNATURES

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

                                  ACTEL CORPORATION




March 27, 1998                    By:              /s/ John C. East
                                     -------------------------------------------
                                                      John C. East
                                         President and Chief Executive Officer

<PAGE>

                                                                     SCHEDULE II

                                ACTEL CORPORATION

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

                        Valuation and Qualifying Accounts
                                 (in thousands)


<TABLE>
<CAPTION>
                                                               Balance at                                Balance at
                                                               beginning                                   end of
                                                               of period     Provisions    Write-Offs      period
                                                              ------------  ------------  ------------  ------------
<S>                                                           <C>           <C>           <C>           <C>
Allowance for doubtful accounts:
   Year ended December 31, 1995...........................    $        597  $         --  $         30  $        567
   Year ended December 31, 1996...........................             567            81            15           633
   Year ended December 31, 1997...........................             633         1,611           612         1,632
</TABLE>