LATTICE SEMICONDUCTOR CORP, 424B1, 1995-11-09

LATTICE SEMICONDUCTOR CORP
424B1, 1995-11-09
SEMICONDUCTORS & RELATED DEVICES

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<PAGE>
EXPLANATORY NOTE

This Registration Statement contains two forms of prospectuses: one to be
used in connection with an offering in the United States and the other to be
used in connection with a concurrent international offering (the "International
Prospectus"). The two prospectuses are identical except for the outside front
cover page. The alternate page for the International Prospectus is included
herein and labeled "Alternate Page For International Prospectus."
<PAGE>

PROSPECTUS

2,500,000 SHARES

[LOGO]

COMMON STOCK
-----------------

OF THE 2,500,000 SHARES OF COMMON STOCK BEING OFFERED, 2,000,000 SHARES ARE
BEING OFFERED INITIALLY IN THE UNITED STATES AND CANADA BY THE U.S.
UNDERWRITERS AND 500,000 SHARES ARE BEING OFFERED INITIALLY OUTSIDE OF
THE UNITED STATES AND CANADA BY THE INTERNATIONAL UNDERWRITERS. ALL OF
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE BEING SOLD BY THE
COMPANY. THE COMPANY'S COMMON STOCK IS TRADED IN THE
OVER-THE-COUNTER MARKET UNDER THE NASDAQ NATIONAL MARKET SYMBOL
"LSCC." THE LAST SALE PRICE FOR THE COMMON STOCK ON NOVEMBER
8, 1995, AS REPORTED ON THE NASDAQ NATIONAL MARKET, WAS
$36 5/8 PER SHARE. SEE "PRICE RANGE OF COMMON STOCK."

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

THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
COMMENCING ON PAGE 6 HEREOF.
-------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-------------------

PRICE $36 5/8 A SHARE

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

<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSSIONS(1) COMPANY(2)
------------------- ------------------- -------------------
<S> <C> <C> <C>
PER SHARE........................................ $36.625 $1.78 $34.845
TOTAL(3)......................................... $91,562,500 $4,450,000 $87,112,500
</TABLE>

- ---------
(1) THE COMPANY HAS AGREED TO INDEMNIFY THE UNDERWRITERS AGAINST CERTAIN
LIABILITIES, INCLUDING LIABILITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. SEE "UNDERWRITERS."

(2) BEFORE DEDUCTING EXPENSES PAYABLE BY THE COMPANY ESTIMATED AT $350,000.

(3) THE COMPANY HAS GRANTED TO THE U.S. UNDERWRITERS AN OPTION, EXERCISABLE
WITHIN 30 DAYS OF THE DATE HEREOF, TO PURCHASE UP TO AN AGGREGATE OF
375,000 ADDITIONAL SHARES AT THE PRICE TO PUBLIC LESS UNDERWRITING
DISCOUNTS AND COMMISSIONS FOR THE PURPOSE OF COVERING OVER-ALLOTMENTS, IF
ANY. IF THE U.S. UNDERWRITERS EXERCISE SUCH OPTION IN FULL, THE TOTAL
PRICE TO PUBLIC, UNDERWRITING DISCOUNTS AND COMMISSIONS AND PROCEEDS TO
COMPANY WILL BE $105,296,875, $5,117,500 AND $100,179,375, RESPECTIVELY.
SEE "UNDERWRITERS."

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

THE SHARES ARE OFFERED SUBJECT TO PRIOR SALE, WHEN, AS AND IF ACCEPTED BY
THE UNDERWRITERS NAMED HEREIN AND SUBJECT TO APPROVAL OF CERTAIN LEGAL MATTERS
BY MORRISON & FOERSTER, COUNSEL FOR THE UNDERWRITERS. IT IS EXPECTED THAT
DELIVERY OF THE SHARES WILL BE MADE ON OR ABOUT NOVEMBER 14, 1995 AT THE OFFICE
OF MORGAN STANLEY & CO. INCORPORATED, NEW YORK, N.Y., AGAINST PAYMENT THEREFOR
IN NEW YORK FUNDS.

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

MORGAN STANLEY & CO.
INCORPORATED

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

PAINEWEBBER INCORPORATED

NEEDHAM & COMPANY, INC.

NOVEMBER 8, 1995

<PAGE>

[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]

PROSPECTUS

2,500,000 SHARES

[LOGO]

COMMON STOCK
-----------------

OF THE 2,500,000 SHARES OF COMMON STOCK BEING OFFERED, 500,000 SHARES ARE
BEING OFFERED INITIALLY OUTSIDE OF THE UNITED STATES AND CANADA BY THE
INTERNATIONAL UNDERWRITERS AND 2,000,000 SHARES ARE BEING OFFERED
INITIALLY IN THE UNITED STATES AND CANADA BY THE U.S. UNDERWRITERS.
ALL OF THE SHARES OF COMMON STOCK OFFERED HEREBY ARE BEING SOLD
BY THE COMPANY. THE COMPANY'S COMMON STOCK IS TRADED IN THE
OVER-THE-COUNTER MARKET UNDER THE NASDAQ NATIONAL MARKET
SYMBOL "LSCC." THE LAST SALE PRICE FOR THE COMMON
STOCK ON NOVEMBER 8, 1995, AS REPORTED ON THE
NASDAQ NATIONAL MARKET, WAS $36 5/8 PER
SHARE. SEE "PRICE RANGE OF
COMMON STOCK."

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

THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" COMMENCING ON
PAGE 6 HEREOF.
-------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-------------------

PRICE $36 5/8 A SHARE

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

<TABLE>
<CAPTION>
UNDERWRITING
DISCOUNTS AND PROCEEDS TO
PRICE TO PUBLIC COMMISSSIONS (1) COMPANY (2)
------------------- ------------------- -------------------
<S> <C> <C> <C>
PER SHARE........................................ $36.625 $1.78 $34.845
TOTAL (3)........................................ $91,562,500 $4,450,000 $87,112,500
</TABLE>

- ---------

(1) THE COMPANY HAS AGREED TO INDEMNIFY THE UNDERWRITERS AGAINST CERTAIN
LIABILITIES, INCLUDING LIABILITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. SEE "UNDERWRITERS."

(2) BEFORE DEDUCTING EXPENSES PAYABLE BY THE COMPANY ESTIMATED AT $350,000.

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

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

MORGAN STANLEY & CO.
INTERNATIONAL

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

PAINEWEBBER INTERNATIONAL

NEEDHAM & COMPANY, INC.

NOVEMBER 8, 1995

<PAGE>
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS, AND ANY INFORMATION OR REPRESENTATION NOT
CONTAINED OR INCORPORATED HEREIN MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY BY ANY PERSON
IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO MAKE SUCH AN
OFFERING OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS AT ANY TIME
NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCE IMPLY THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
---------------------

NO ACTION HAS BEEN OR WILL BE TAKEN IN ANY JURISDICTION BY THE COMPANY OR BY
AN UNDERWRITER THAT WOULD PERMIT A PUBLIC OFFERING OF THE COMMON STOCK OR
POSSESSION OR DISTRIBUTION OF THIS PROSPECTUS IN ANY JURISDICTION WHERE ACTION
FOR THAT PURPOSE IS REQUIRED, OTHER THAN IN THE UNITED STATES. PERSONS INTO
WHOSE POSSESSION THIS PROSPECTUS COMES ARE REQUIRED BY THE COMPANY AND THE
UNDERWRITERS TO INFORM THEMSELVES ABOUT, AND TO OBSERVE ANY RESTRICTIONS AS TO,
THE OFFERING OF THE COMMON STOCK AND THE DISTRIBUTION OF THIS PROSPECTUS.
---------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Incorporation of Certain Documents by Reference............................................................ 2
Prospectus Summary......................................................................................... 3
The Company................................................................................................ 4
Risk Factors............................................................................................... 6
Use of Proceeds............................................................................................ 11
Price Range of Common Stock................................................................................ 11
Dividend Policy............................................................................................ 11
Capitalization............................................................................................. 12
Selected Consolidated Financial Data....................................................................... 13
Business................................................................................................... 15
Description of Capital Stock............................................................................... 23
Certain United States Federal Tax Considerations for Non-U.S. Holders of Common Stock...................... 25
Underwriters............................................................................................... 27
Legal Matters.............................................................................................. 30
Experts.................................................................................................... 30
Available Information...................................................................................... 30
</TABLE>

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

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents heretofore filed by the Company with the Securities
and Exchange Commission (the "Commission") pursuant to the Securities Exchange
Act of 1934, as amended (the "Exchange Act") are incorporated herein by
reference: (1) the Company's Annual Report on Form 10-K for the fiscal year
ended April 1, 1995; (2) the Company's Quarterly Report on Form 10-Q for the
quarter ended July 1, 1995; (3) the Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1995, as amended by the Company's Report on Form
10-Q/A filed on November 6, 1995; (4) the Company's Current Report on Form 8-K
dated October 2, 1995; (5) the description of the Common Stock contained in the
Company's Registration Statement on Form 8-A filed with the Commission on
September 27, 1989; and (6) the description of the preferred stock purchase
rights of the Company contained in the Company's Registration Statement on Form
8-A filed with the Commission on September 13, 1991.

All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Common Stock hereunder shall be deemed to
be incorporated by reference herein and to be a part hereof from the date of the
filing of such reports and documents. The Company will provide without charge,
to each person to whom this Prospectus is delivered, a copy of any or all of
such documents (exclusive of exhibits unless such exhibits are specifically
incorporated by reference herein), upon written or oral request to Rodney F.
Sloss, Vice President, Finance, Lattice Semiconductor Corporation, 5555 NE Moore
Court, Hillsboro, Oregon 97124, telephone (503) 681-0118.

Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document that also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
---------------------

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.

IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS (IF ANY) OR THEIR RESPECTIVE AFFILIATES HAVE ENGAGED IN PASSIVE MARKET
MAKING TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET IN
ACCORDANCE WITH RULE 10B-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE
"UNDERWRITERS."

2
<PAGE>
PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS APPEARING ELSEWHERE OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS.

THE COMPANY

Lattice Semiconductor Corporation (the "Company") is the world's leading
supplier of in-system programmable ("ISP-TM-") logic devices and pioneered the
application of electrically erasable CMOS ("E(2)CMOS-Registered Trademark-")
technology to programmable logic. The Company designs, develops and markets both
high-and low-density, high performance E(2)CMOS programmable logic devices
("PLDs") and related development system software. PLDs are standard
semiconductor components that can be configured by the end customer as specific
logic circuits. PLDs enable the end customer to shorten design cycle times and
reduce development costs.

The Company's strategy has been to penetrate the rapidly growing
high-density complex programmable logic device ("CPLD") market with
differentiated products and technology while maintaining its leadership position
in the low-density market. The Company has pioneered the development of ISP, a
proprietary technology, which affords it a competitive advantage in the
high-density CPLD market. ISP can allow customers to reduce design cycle times,
accelerate time to market, reduce prototyping costs, reduce manufacturing costs,
lower inventory requirements and perform simplified and cost-effective field
upgrades. The Company seeks to maintain a relatively high margin low-density
product mix by differentiating its products through performance, proprietary
architectures and lower operating voltages. The Company's end customers are
primarily original equipment manufacturers ("OEMs") in the fields of
communications, computing, peripherals, instrumentation, industrial controls and
military systems.

THE OFFERING

<TABLE>
<S> <C>
U.S. Offering.......................... 2,000,000 Shares
International Offering................. 500,000 Shares
Total (1).............................. 2,500,000 Shares
Common Stock to be outstanding
after the offering.................... 22,002,914 Shares (1)(2)
Use of proceeds........................ For expansion and maintenance of the Company's
wafer supply and assembly capacity, including
funding a planned equity investment in an
advanced semiconductor manufacturing facility in
Taiwan, and other general corporate purposes,
including procurement of additional capital
equipment and facilities, development of new
products and possible acquisitions. See "Use of
Proceeds" and "Business -- Operations -- Wafer
Fabrication."
The Nasdaq National Market symbol...... LSCC
</TABLE>

SUMMARY CONSOLIDATED FINANCIAL DATA (3)
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
SIX MONTHS
FISCAL YEAR ENDED ENDED
--------------------------------------------------------- ----------------------
MARCH 30, MARCH 28, APRIL 3, APRIL 2, APRIL 1, OCT. 1, SEPT. 30,
1991 1992 1993 1994 1995 1994 1995
----------- ----------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenue......................................... $ 64,539 $ 71,009 $ 103,391 $ 126,241 $ 144,083 $ 67,477 $ 93,621
Income from operations.......................... 12,115 13,315 22,746 30,040 37,268 17,339 26,502
Net income...................................... 10,297 10,855 17,399 22,490 26,966 12,418 18,624
Net income per share............................ $ 0.61 $ 0.61 $ 0.94 $ 1.19 $ 1.41 $ 0.65 $ 0.93
Weighted average common and common equivalent
shares outstanding............................ 16,770 17,834 18,458 18,946 19,164 19,073 20,117
</TABLE>

<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1995
------------------------
ACTUAL AS ADJUSTED(4)
-------- --------------
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital........................................ $138,050 $224,813
Total assets........................................... 225,768 312,531
Stockholders' equity................................... 186,006 272,769
<FN>
- ------------
(1) Assumes the U.S. Underwriters' over-allotment option to purchase 375,000
shares is not exercised. See "Underwriters."
(2) Excludes (i) 2,063,126 shares of Common Stock subject to outstanding
options under the Company's 1988 Stock Incentive Plan with an average
exercise price of $19.75 per share and 693,560 shares available for future
grants of options thereunder as of September 30, 1995; (ii) 133,593 shares
of Common Stock reserved but unissued under the Company's Employee Stock
Purchase Plan; (iii) 94,125 shares of Common Stock subject to outstanding
options under the Company's 1993 Outside Directors Stock Option Plan with
an average exercise price of $20.49 per share and 148,500 shares available
for future grants of options thereunder as of September 30, 1995; and (iv)
123,625 shares of Common Stock subject to outstanding warrants owned by
Bain & Company with an average exercise price of $18.76 per share.
(3) All share and per share amounts have been adjusted to reflect the
three-for-two stock split effected in the form of a stock dividend which
was paid on July 6, 1993.
(4) Gives effect to the issuance and sale of 2,500,000 shares offered hereby by
the Company.
</TABLE>

3
<PAGE>
THE COMPANY

Lattice Semiconductor Corporation (the "Company") is the world's leading
supplier of in-system programmable ("ISP-TM-") logic devices and pioneered the
application of electrically erasable CMOS ("E(2)CMOS-Registered Trademark-")
technology to programmable logic. The Company designs, develops and markets both
high-and low-density, high performance E(2)CMOS programmable logic devices
("PLDs") and related development system software. PLDs are standard
semiconductor components that can be configured by the end customer as specific
logic circuits, and enable the end customer to shorten design cycle times and
reduce development costs.

Manufacturers of electronic systems are increasingly challenged to bring
differentiated products to market quickly. These competitive pressures often
preclude the use of custom-designed application specific integrated circuits
("ASICs"), which generally entail significant design risks and time delay.
Standard logic products, an alternative to custom-designed ASICs, limit a
manufacturer's flexibility to adequately customize an end system. PLDs are
standard products that can be configured into a virtually unlimited number of
specific logic circuits by programming the device with electrical signals. PLDs
give system designers the ability to quickly create their own custom logic
circuits and to provide product differentiation and rapid time to market.

The Company offers a full product line in both the high-density complex
programmable logic device ("CPLD") market and the low-density CMOS PLD market.
The Company's strategy has been to penetrate the rapidly growing high-density
CPLD market with differentiated products and technology while maintaining its
leadership position in the low-density market. Since the Company introduced its
first high-density products in fiscal 1993, its percentage of total revenue
generated by sales of high-density products has grown to 21% for the fiscal year
ended April 1, 1995 and 33% for the six-month period ended September 30, 1995.

The Company has pioneered the development of ISP, a proprietary technology,
which affords it a competitive advantage in the high-density CPLD market. In
contrast to standard PLD programming technologies, ISP allows the system
designer to configure and reconfigure the PLD without removing the device from
the system board. ISP enhances the flexibility of PLD devices, providing a
number of important benefits to a system manufacturer across the full spectrum
of an electronic system product cycle. ISP can allow customers to reduce design
cycle times, accelerate time to market, reduce prototyping costs, reduce
manufacturing costs, lower inventory requirements and perform simplified and
cost-effective field upgrades.

Since the Company entered the high-density CPLD market in fiscal 1993, it
has introduced three high-density CPLD product families, the
ispLSI-Registered Trademark- 1000, ispLSI 2000 and ispLSI 3000. The ispLSI 1000,
the Company's first high-density CPLD product family, was the industry's first
PLD product family based on ISP technology. The ispLSI 1000 offers performance
of up to 110 MHz, with propagation delays (the time it takes an input signal to
propagate through the device to a designated output) as low as 10 nanoseconds
and densities of 2,000 to 8,000 gates. The ispLSI 2000 product family, first
introduced in fiscal 1994, offers CPLD performance leadership with performance
of up to 154 MHz, with propagation delays as low as 5.5 nanoseconds, and is
capable of supporting high speed communications and computing applications based
on advanced microprocessors, such as Pentium, PowerPC and other RISC-based
systems. The ispLSI 3000 product family, also introduced in fiscal 1994,
incorporates an enhanced logic architecture to target CPLD density leadership at
densities of 8,000 to 14,000 gates and performance of up to 100 MHz, with
propagation delays as low as 10 nanoseconds. The ispLSI 3000 family offers
additional architectural enhancements and boundary scan test to satisfy
sophisticated and complex customer applications.

The Company's high-density CPLD products with ISP technology can be quickly
and easily configured and reconfigured on the system board using the Company's
proprietary software development tools. These tools may be used on a stand-alone
basis or integrated with computer aided engineering ("CAE") design tools and
automatic test equipment provided by selected third party vendors. During the
twelve months ended September 30, 1995, the number of installed seats of the
Company's software development tools, as measured by the Company, has grown from
over 3,000 to over 7,000.

The high-density CPLD market, according to Dataquest Incorporated, a
semiconductor market research firm, amounted to $306 million in calendar year
1994 and is estimated to grow to over $1 billion by the end of calendar year
1998. The Company's high-density CPLD revenue mix by end-market for the first
six

4
<PAGE>
months of fiscal 1996 was: 49% communications, 11% computing, 23% peripherals
and 17% industrial and other markets. The Company expects that in the future the
communications market will continue to account for a substantial portion of the
Company's high-density revenue and revenue growth.

The Company holds a leading position in the low-density CMOS PLD market. The
Company seeks to maintain a relatively high margin, low-density product mix by
differentiating its products through performance, proprietary architectures and
by offering lower operating voltages. In addition, the Company maintains
industry leading performance across its entire low-density CMOS PLD product
line.

The Company offers the industry's broadest line of low-density CMOS PLDs
based on its 16 families of GAL-Registered Trademark- ("Generic Array Logic")
products offered in over 150 speed, power, package and temperature range
combinations. GAL devices range in complexity from approximately 200 to 1,000
logic gates and are typically assembled in 20-, 24- and 28-pin standard dual
in-line packages ("DIPs") and in 20- and 28-pin standard plastic leaded chip
carrier ("PLCC") packages. The Company's low-density PLDs are offered in both
5-volt and 3.3-volt technologies with propagation delays as low as 3.5
nanoseconds, the highest performance in the industry. The Company is currently
selling the GAL16LV8D-3.5, the world's fastest PLD available in any technology
or operating voltage.

The Company sells its products directly to end customers through a network
of independent sales representatives and indirectly through a network of
distributors. The Company utilizes a direct sales management and field
applications engineering organization in combination with manufacturer's
representatives and distributors to reach a broad base of potential end
customers. The Company's end customers are primarily original equipment
manufacturers ("OEMs") in the fields of communications, computing, peripherals,
instrumentation, industrial controls and military systems. The Company believes
its distribution channels provide a cost-effective means for reaching end
customers.

The Company's current high- and low-density PLD offerings are based on the
Company's proprietary E(2)CMOS process technologies, termed
UltraMOS-Registered Trademark-. The Company's current production processes,
UltraMOS IV and UltraMOS V, are sub-micron CMOS technologies. The Company has
recently released to production UltraMOS VI, an advanced sub-micron process
technology designed to enhance product performance and densities.

The Company's manufacturing strategy has been to procure wafers for its
products from a leading manufacturer under current purchase orders and long-term
agreements, which has allowed the Company to avoid the cost of establishing its
own wafer fabrication facility. The Company currently obtains all of its wafer
supply from Seiko Epson Corporation ("Seiko Epson") through Seiko Epson's
affiliated United States distributor, S MOS Systems Inc. ("S MOS"). See
"Business -- Licenses and Agreements -- Seiko Epson/ S MOS." The Company intends
to expand existing sources and establish additional sources of wafer supply for
its products at such time as these arrangements are required to meet customer
demand. The Company entered into a series of agreements with United
Microelectronics Corporation ("UMC") in September 1995 pursuant to which the
Company has agreed to join UMC and several other companies to form a separate
Taiwanese company for the purpose of building and operating an advanced
semiconductor manufacturing facility in Taiwan, Republic of China. Under the
terms of the agreement, the Company will invest $60 million, payable in three
installments over the next two and a half years, for a 10% equity interest in
the venture and the right to receive a percentage of the facility's wafer
production at market prices. In a related agreement, UMC has committed to supply
the Company with sub-micron wafers beginning in the first calendar quarter of
1996 and continuing with phased increases for several years, until such capacity
is available from the new facility. See "Business -- Licenses and Agreements --
UMC."

The Company was incorporated in Oregon in 1983 and reincorporated in
Delaware in 1985. The Company's principal offices are located at 5555 NE Moore
Court, Hillsboro, Oregon 97124, and its telephone number is (503) 681-0118.
References to the Company shall mean Lattice Semiconductor Corporation and its
subsidiaries, unless the context requires otherwise.

"GAL", "ispLSI", "ispGAL", "E(2)CMOS", "UltraMOS", "pDS", "pDS+", "pLSI",
"ISP", "ISP", "In-System Programmable", "In-System Programmability", "LATTICE
SEMICONDUCTOR CORPORATION", "Silicon Forest" and "L LATTICE SEMICONDUCTOR
CORPORATION", including the design and the symbol "L" in the form appearing on
the cover page of this Prospectus, are trademarks of the Company. This
Prospectus also includes product names, trade names and trademarks of other
companies.

5
<PAGE>
RISK FACTORS

IN ADDITION TO THE OTHER INFORMATION PROVIDED IN THIS PROSPECTUS AND IN THE
DOCUMENTS INCORPORATED BY REFERENCE HEREIN, THE FOLLOWING RISK FACTORS SHOULD BE
CAREFULLY CONSIDERED IN EVALUATING THE COMPANY AND ITS BUSINESS BEFORE
PURCHASING THE COMMON STOCK OFFERED BY THIS PROSPECTUS.

DEPENDENCE ON WAFER SUPPLIERS. The Company does not manufacture finished
silicon wafers. Its products, however, require wafers manufactured with
state-of-the-art fabrication equipment and techniques. Accordingly, the
Company's strategy has been to maintain relationships with large semiconductor
manufacturers for the production of its wafers. All of its silicon wafers are
currently manufactured by Seiko Epson in Japan and sold to the Company, through
Seiko Epson's affiliated U.S. distributor, S MOS. See "Business -- Licenses and
Agreements -- Seiko Epson/S MOS." In connection with a series of agreements
recently entered into with UMC providing for the formation of a separate
Taiwanese company for the purpose of building and operating an advanced
semiconductor manufacturing facility in Taiwan, Republic of China, UMC committed
to supply the Company with sub-micron wafers beginning in the first calendar
quarter of 1996 and continuing with phased increases for several years. See
"Business -- Licenses and Agreements -- UMC." A significant interruption in
supply from Seiko Epson through S MOS or from UMC would have a material adverse
effect on the Company's business.

Worldwide manufacturing capacity for silicon wafers is limited and
inelastic. Therefore, significant increases in demand or interruptions in supply
could adversely affect the Company. Through fiscal 1995, the Company has been
successful in obtaining adequate wafer capacity commitments and has not
experienced any material difficulties or delays in the supply of wafers.
Presently, demand on wafer suppliers for silicon wafers is growing and existing
capacity commitments may not be sufficient to permit the Company to satisfy all
of its customers' demand in future periods. The Company negotiates wafer prices
and certain wafer supply commitments with Seiko Epson and S MOS on an annual
basis, and, in some cases, as frequently as semiannually. Moreover, wafer prices
and commitments are subject to continuing review and revision by the parties.
Although current commitments are anticipated to be adequate through fiscal 1996,
Seiko Epson and S MOS advised the Company in July 1995 that, due to high levels
of demand and limited manufacturing capacity, there were significant
uncertainties as to whether they would be able to supply wafers to the Company
for the Company's fiscal 1997 at increased levels relative to fiscal 1996 or
even at historical levels. More recently, however, the Company received
indications from Seiko Epson and S MOS that they believe they will be able to
supply wafers to the Company in fiscal 1997 at levels moderately higher than in
fiscal 1996. In addition, the Company recently obtained a commitment from UMC to
supply the Company with sub-micron wafers beginning in the first calendar
quarter of 1996 and continuing with phased increases for several years. Wafer
prices and other purchase terms are expected to be negotiated prior to
initiating wafer production and will be subject to periodic adjustment. The
availability of wafers from UMC will depend on, among other things, UMC
successfully achieving volume production. There can be no assurance that UMC
will successfully achieve volume production of Company wafers or that Seiko
Epson, S MOS or UMC will not reduce their allocations of wafers or increase
prices to the Company in future periods or that any such reduction in supply
could be offset pursuant to arrangements with alternate sources of supply. If
any substantial reduction of supply or substantial price increase were to occur,
the Company's operating results would be materially adversely affected. The
Company's future revenue growth will depend in part on improving yields of die
per wafer through reductions in the die size of its products, shifting capacity
to a higher revenue per wafer product mix, successfully achieving production
volumes at UMC, increasing its wafer allocations from its suppliers or obtaining
additional wafer allocations from other suppliers. There can be no assurance
that the Company will be successful in improving yields, enhancing product mix,
achieving volume production at UMC or otherwise increasing wafer supply.

The Company's wafer purchases from Seiko Epson are denominated in Japanese
yen. During the first two calendar quarters of 1995, the dollar lost substantial
value with respect to the yen. Such loss was regained in the third calendar
quarter of 1995. There is no assurance that the value of the dollar with respect
to the yen will not again experience substantial deterioration or that any such
deterioration will not continue in the future. Any substantial continued
deterioration of dollar-yen exchange rates could have a material adverse effect
on the Company's results of operations.

6
<PAGE>
The Company depends upon wafer suppliers to produce wafers with acceptable
yields and to deliver them to the Company in a timely manner. Substantially all
of the Company's revenues are derived from products based on E(2)CMOS process
technology. Successful implementation of the Company's proprietary E(2)CMOS
process technology, UltraMOS, requires a high degree of coordination between the
Company and its wafer supplier. Therefore, significant lead time is required to
reach volume production at a new wafer supply location such as UMC. Accordingly,
there can be no assurance that volume production at UMC will be achieved in the
near term or at all. The manufacture of high performance E(2)CMOS semiconductor
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 Company's operating
results.

The Company expects that, as is customary in the semiconductor business, it
will in the future seek to convert its fabrication process technology to larger
wafer sizes, to smaller device geometries or to new or additional suppliers in
order to maintain or enhance its competitive position. Such conversions entail
inherent technological risks that could adversely affect yields and delivery
times and could have a material adverse impact on the Company's operating
results. To a considerable extent, the Company's ability to execute its
strategies will depend upon its ability to maintain and enhance its advanced
process technologies. As the Company does not presently operate its own wafer
fabrication or process development facility, the Company depends upon silicon
wafer manufacturers to provide the facilities and support for its process
development. In light of this dependency and the intensely competitive nature of
the semiconductor industry, there is no assurance that either process technology
development or timely product introduction can be sustained in the future.

In addition, other unanticipated changes in or disruptions of the Company's
wafer supply arrangements could reduce product availability, increase cost or
impair product quality and reliability. Many of the factors that could result in
such changes are beyond the Company's control. For example, a disruption of
operations at Seiko Epson's or UMC's manufacturing facilities as a result of a
work stoppage, fire, earthquake or other natural disaster, would cause delays in
shipments of the Company's products and could have a material adverse effect on
the Company's operating results.

DEPENDENCE ON ASSEMBLY CONTRACTORS. The Company's finished silicon wafers
are assembled and packaged by independent subcontractors located in the
Philippines and South Korea. Although the Company has not yet experienced
significant problems or interruptions in supply from its assembly contractors,
any prolonged work stoppages or other failure of these contractors to supply
finished products would have a material adverse effect on the Company's
operating results.

FLUCTUATIONS IN OPERATING RESULTS. The Company believes that its future
operating results will be subject to quarterly variations based upon a wide
variety of factors, including the cyclical nature of both the semiconductor
industry and the markets addressed by the Company's products, the timing of new
product introductions, price erosion, product obsolescence, substantial adverse
currency exchange rate movements, variations in product mix, scheduling,
rescheduling and cancellation of large orders, competitive factors, the
availability of manufacturing capacity and wafer supply, the ability to achieve
volume production at UMC, the ability to develop and implement new process
technologies, fluctuations in manufacturing yields, changes in effective tax
rates and litigation expenses. Due to these and other factors, the Company's
past results are a less useful predictor of future results than is the case in
more mature and less dynamic industries. The Company has increased its level of
operating expenses and investment in manufacturing capacity in anticipation of
future growth in revenues, primarily from increased sales of its high-density
products. To the extent that this revenue growth does not materialize, the
Company's operating results would be adversely affected.

7
<PAGE>
PRODUCT ENHANCEMENTS AND NEW PRODUCTS. Because of the rapid rate of
technological change in the semiconductor industry, the Company's success will
ultimately depend in large part on its ability to introduce new products on a
timely basis that meet a market need at a competitive price and with acceptable
margins as well as enhancing the performance of its existing products. The
success of new products, including the Company's high-density product families,
depends on a variety of factors, including product selection, timely and
efficient completion of product design, timely and efficient implementation of
manufacturing and assembly processes, product performance, quality and
reliability in the field and effective sales and marketing. Because new product
development commitments must be made well in advance of sales, new product
decisions must anticipate both future demand and the technology that will be
available to supply that demand. New and enhanced products are continually being
introduced into the Company's markets by others, and these products can be
expected to affect the competitive environment in the markets in which they are
introduced. There is no assurance that the Company will be successful in
enhancing its existing products or in selecting, developing, manufacturing,
marketing and selling new products.

The majority of the Company's revenue and gross margin percentage over the
past three fiscal years was due to revenues from low-density GAL products, many
of which are second sourced by other suppliers. Future revenue growth will be
largely dependent on market acceptance of the Company's new and proprietary
products, including its high-density product families, and market acceptance of
the Company's proprietary software development tools. There can be no assurance
that the Company's product and process development efforts will be successful or
that new products, including the Company's high-density products, will continue
to achieve market acceptance. If the Company were unable to successfully define,
develop and introduce competitive new products in a timely manner, its future
operating results would be adversely affected.

COMPETITION AND RAPID TECHNOLOGICAL CHANGE. The semiconductor industry is
intensely competitive and is characterized by rapid technological change, sudden
price fluctuations, general price erosion, rapid rates of product obsolescence,
periodic shortages of materials and manufacturing capacity and variations in
manufacturing costs and yields. The Company's competitive position is affected
by all of these factors and by industry competition for effective sales and
distribution channels. The Company's existing and potential competitors range
from established major domestic and international semiconductor companies to
emerging companies. Many of the Company's competitors have substantially greater
financial, technological, manufacturing, marketing and sales resources than the
Company. The Company faces direct competition from companies that have developed
or licensed similar technology and from licensees of the Company's products and
technology. The Company also faces indirect competition from a wide variety of
semiconductor companies offering products and solutions based on alternative
technologies. Although to date the Company has not experienced significant
competition from companies located outside the United States, such companies may
become a more significant competitive factor in the future. As the Company and
its current competitors seek to expand their markets, competition may increase,
which could have an adverse effect on the Company's operating results.
Development of new technologies that have price/performance characteristics
superior to the Company's technologies could adversely affect the Company's
results of operations. There can be no assurance that the Company will be able
to develop and market new products successfully or that the products introduced
by others will not render the Company's products or technologies non-competitive
or obsolete. See "-- Product Enhancements and New Products." The Company expects
that its markets will become more competitive in the future. See "Business --
Competition."

CYCLICAL NATURE OF THE SEMICONDUCTOR INDUSTRY. The semiconductor industry
is highly cyclical and has been subject to significant downturns at various
times that have been characterized by diminished product demand, production
overcapacity and accelerated erosion of average selling prices. The Company's
rate of growth in recent periods has been positively impacted by recent trends
in the semiconductor industry. Any material imbalance in industry-wide
production capacity relative to demand, shift in industry capacity toward
products competitive with the Company's products, reduced demand or reduced
growth in demand or other factors could result in a rapid decline in product
pricing and have a material adverse effect on the Company's operating results.

8
<PAGE>
FUTURE CAPITAL NEEDS. In an effort to secure additional wafer supply, the
Company may from time to time consider various arrangements, including joint
ventures with, minority investments in, advanced purchase payments to, loans to
or similar arrangements with independent wafer manufacturers in exchange for
committed production capacity. Such arrangements are becoming common within the
industry as independent wafer manufacturers increasingly seek to require their
customers to share a portion of the cost of capital intensive wafer fabrication
facilities. The Company entered into an advanced production payment arrangement
with Seiko Epson in 1994 pursuant to which it advanced a total of $42 million to
Seiko Epson. See "Business -- Licenses and Agreements -- Seiko Epson/S MOS." In
September 1995, the Company entered into an agreement with UMC to invest $60
million for a 10% equity interest in a separate Taiwanese company providing for
the formation of a joint venture with UMC and several other companies for the
purpose of building and operating an advanced semiconductor manufacturing
facility. See "Business -- Licenses and Agreements -- UMC." To the extent the
Company pursues any other such transactions with Seiko Epson, UMC or any other
wafer manufacturers, such transactions could entail even greater levels of
investment requiring the Company to seek additional equity or debt financing to
fund such activities. See "Use of Proceeds." There can be no assurance that any
such additional funding could be obtained when needed or, if available, on terms
acceptable to the Company.

LIMITED PROTECTION OF INTELLECTUAL PROPERTY. The Company's success depends
in part on its proprietary technology. While the Company attempts to protect its
proprietary technology through patents, copyrights and trade secrets, it
believes that its success will depend more upon technological expertise,
continued development of new products, and successful market penetration of its
silicon and software products. There can be no assurance that the Company will
be able to protect its technology or that competitors will not be able to
develop similar technology independently. The Company currently has a number of
United States and foreign patents and patent applications. See "Business --
Patents." There can be no assurance that the claims allowed on any patents held
by the Company will be sufficiently broad to protect the Company's technology,
or that any patents will issue from any application pending or filed by the
Company. In addition, there can be no assurance that any patents issued to the
Company will not be challenged, invalidated or circumvented or that the rights
granted thereunder will provide competitive advantages to the Company.

The semiconductor industry is generally characterized by vigorous protection
and pursuit of intellectual property rights and positions, which have on
occasion resulted in protracted litigation that utilizes cash and management
resources, which can have a significant adverse effect on operating results. The
Company has received a letter from a semiconductor manufacturer stating that it
believes a number of its patents, related to product packaging, cover certain
products sold by the Company. While the manufacturer has offered to license
certain of such patents to the Company, there can be no assurance, on this or
any other claim which may be made against the Company, that the Company could
obtain a license on terms or under conditions that would be favorable to the
Company. In addition, there can be no assurance that other intellectual property
claims will not be made against the Company in the future or that the Company
will not be prohibited from using the technologies subject to such claims or be
required to obtain licenses and make corresponding royalty payments for past or
future use. See "Business -- Patents."

IMPORTANCE OF INTERNATIONAL REVENUES. International revenues accounted for
45%, 43%, 47% and 49% of the Company's revenues for fiscal years 1993, 1994,
1995 and the first six months of fiscal 1996, respectively. The Company believes
that international revenues will continue to represent a significant percentage
of revenues. International revenues and operations may be adversely affected by
the imposition of governmental controls, export license requirements,
restrictions on the export of technology, political instability, substantial
currency exchange rate movements, trade restrictions, changes in tariffs and
difficulties in staffing and managing international operations. See "Business --
Marketing, Sales and Customers."

DEPENDENCE ON KEY PERSONNEL. The future success of the Company is
dependent, in part, on its ability to attract and retain highly qualified
technical and management personnel, particularly highly skilled engineers
involved in new product, both silicon and software, and process technology
development. Competition for such personnel is intense. There can be no
assurance that the Company will be able to retain its existing key

9
<PAGE>
technical and management personnel or attract additional qualified employees in
the future. The loss of key technical or management personnel could delay
product development cycles or otherwise have a material adverse effect on the
Company's business.

FOREIGN MANUFACTURING AND ASSEMBLY. The Company currently depends on Seiko
Epson, a Japanese company, for the manufacture of all of its finished silicon
wafers, and anticipates depending on UMC, a Taiwanese company, and a joint
venture formed with UMC and other semiconductor companies for the manufacture of
a portion of its finished silicon wafers. In addition, after wafer manufacturing
is completed and each wafer is tested, products are assembled by subcontractors
in South Korea and the Philippines. Although the Company's subcontractors have
not recently experienced any serious work stoppages, the social and political
situations in these countries can be volatile, and any prolonged work stoppages
or other disruptions in the Company's ability to manufacture and assemble its
products would have a material adverse effect on the Company's results of
operations. Furthermore, economic risks, such as changes in currency exchange
rates, tax laws, tariffs, or freight rates, or interruptions in air
transportation, could have a material adverse effect on the Company's results of
operations. See "Business -- Operations."

VOLATILITY OF COMMON STOCK PRICE. The market price of the Company's Common
Stock could be subject to significant fluctuations in response to variations in
quarterly operating results, shortfalls in revenues or earnings from levels
expected by securities analysts and other factors such as announcements of
technological innovations or new products by the Company or by the Company's
competitors, government regulations, developments in patent or other proprietary
rights, and developments in the Company's relationships with parties to
collaborative agreements. In addition, the stock market has recently experienced
significant price fluctuations. These fluctuations often have been unrelated to
the operating performance of the specific companies whose stocks are traded.
Broad market fluctuations, as well as economic conditions generally and in the
semiconductor industry specifically, may adversely affect the market price of
the Company's Common Stock. See "Price Range of Common Stock."

POTENTIAL ANTI-TAKEOVER EFFECTS. Certain provisions of the Company's
stockholder rights plan, its Restated Certificate of Incorporation, as amended,
Bylaws, as amended, and Delaware law could discourage potential acquisition
proposals and could delay or prevent a change in control of the Company. Such
provisions could diminish the opportunities for a stockholder to participate in
tender offers, including tender offers at a price above the then current market
value of the Common Stock. Such provisions may also inhibit increases in the
market price of the Common Stock that could result from takeover attempts. In
addition, the Company's Board of Directors has the authority to issue Preferred
Stock without any further vote or action by the stockholders. The issuance of
Preferred Stock may have the effect of delaying, deferring or preventing a
change in control of the Company without further action by the stockholders and
could adversely affect the rights and powers, including voting rights, of the
holders of Common Stock. Such effects could result in a decrease in the market
price of the Company's Common Stock. See "Description of Capital Stock."

10
<PAGE>
USE OF PROCEEDS

The net proceeds to be received by the Company from the sale of the
2,500,000 shares of Common Stock offered by the Company hereby are estimated to
be $86,762,500 ($99,829,375 if the U.S. Underwriters' over-allotment option is
exercised in full). The Company intends to use the proceeds of this offering
primarily for expansion and maintenance of its wafer supply and assembly
capacity, including funding a planned equity investment in an advanced
semiconductor manufacturing facility in Taiwan, and other general corporate
purposes, including procurement of additional capital equipment and facilities
to expand the Company's internal manufacturing capacity, development of new
products, and potential acquisitions of businesses, products, or technologies
that would complement the Company's businesses. See "Business -- Licenses and
Agreements -- UMC." In addition, the Company from time to time has discussions
with third parties regarding possible arrangements with respect to wafer supply
and assembly capacity, such as purchasing options for such capacity or making
investments in new or existing manufacturing facilities. Except as discussed
elsewhere in this Prospectus, there are no current understandings or agreements
involving purchasing options or making investments with respect to any material
wafer supply and assembly arrangements or with respect to business, product, or
technology acquisition transactions. Pending such applications, the net proceeds
from this offering will be invested in bank deposits and investment grade,
interest bearing securities.

PRICE RANGE OF COMMON STOCK

The following table sets forth the range of high and low sales prices of the
Company's Common Stock for the indicated periods, as reported by The Nasdaq
National Market. On November 8, 1995, the last reported sale price for the
Common Stock on The Nasdaq National Market was $36 5/8 per share. As of October
16, 1995, the Company had approximately 294 holders of record of the Common
Stock. All prices have been restated to reflect a three-for-two stock split
effected in the form of a stock dividend which was paid on July 6, 1993.

<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
Fiscal year ended April 2, 1994:
First Quarter................................................ $20 13/16 $14 11/16
Second Quarter............................................... 26 3/4 14 3/4
Third Quarter................................................ 24 3/4 12 1/4
Fourth Quarter............................................... 19 3/8 14
Fiscal year ended April 1, 1995:
First Quarter................................................ 19 5/8 14 3/4
Second Quarter............................................... 20 1/8 16 1/4
Third Quarter................................................ 19 3/8 15 1/2
Fourth Quarter............................................... 27 1/8 16 3/8
Fiscal year ending March 30, 1996:
First Quarter................................................ 37 1/8 23
Second Quarter............................................... 43 28 7/8
Third Quarter (through November 8, 1995)..................... 42 1/8 33
</TABLE>

DIVIDEND POLICY

To date the Company has not declared or paid cash dividends on its Common
Stock. The Board of Directors of the Company presently intends to retain all
earnings for use in the Company's business and therefore does not anticipate
declaring or paying any cash dividends on its Common Stock in the foreseeable
future.

11
<PAGE>
CAPITALIZATION

The following table sets forth, on an unaudited basis, the short-term debt
and capitalization of the Company at September 30, 1995, and as adjusted to
reflect the sale by the Company of the 2,500,000 shares of Common Stock offered
hereby (after deducting underwriting discounts and commissions and estimated
offering expenses).

<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1995
--------------------------
ACTUAL AS ADJUSTED(1)
---------- --------------
(IN THOUSANDS, EXCEPT
SHARE DATA)
<S> <C> <C>
Short-term debt.............................................................. $ -- $ --
Long-term debt............................................................... -- --
Stockholders' equity:
Preferred Stock, $.01 par value, 10,000,000 shares authorized; none issued
and outstanding........................................................... -- --
Common Stock, $.01 par value, 100,000,000 shares authorized; 19,502,914
shares issued and outstanding; 22,002,914 shares issued and outstanding as
adjusted(2)............................................................... 195 220
Paid-in capital............................................................ 92,381 179,119
Retained earnings.......................................................... 93,430 93,430
---------- --------------
Total stockholders' equity............................................. 186,006 272,769
---------- --------------
Total capitalization................................................. $ 186,006 $ 272,769
---------- --------------
---------- --------------
<FN>
- ---------
(1) Assumes the U.S. Underwriters' over-allotment option to purchase 375,000
shares from the Company is not exercised. See "Underwriters."

(2) Excludes (i) 2,063,126 shares of Common Stock subject to outstanding
options under the Company's 1988 Stock Incentive Plan with an average
exercise price of $19.75 per share and 693,560 shares available for future
grants of options thereunder as of September 30, 1995; (ii) 133,593 shares
of Common Stock reserved but unissued under the Company's Employee Stock
Purchase Plan; (iii) 94,125 shares of Common Stock subject to outstanding
options under the Company's 1993 Outside Directors Stock Option Plan with
an average exercise price of $20.49 per share and 148,500 shares available
for future grants of options thereunder as of September 30, 1995; and (iv)
123,625 shares of Common Stock subject to outstanding warrants owned by
Bain & Company with an average exercise price of $18.76 per share.
</TABLE>

12
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data presented below as of April 2, 1994
and April 1, 1995, and for each of the years in the three-year period ended
April 1, 1995 have been derived from the consolidated financial statements of
the Company, which have been audited by Price Waterhouse LLP, independent
accountants, which financial statements are incorporated by reference herein.
The selected consolidated financial data presented below as of March 30, 1991,
March 28, 1992 and April 3, 1993, and for each of the years in the two-year
period ended March 28, 1992 have also been derived from audited consolidated
financial statements of the Company which are not incorporated by reference
herein. The selected consolidated financial data presented below as of October
1, 1994 and September 30, 1995, for the six months then ended, for the fiscal
quarters ended July 1, 1995 and September 30, 1995, and for each of the four
quarters of fiscal 1994 and fiscal 1995 have been derived from unaudited
consolidated financial statements of the Company. In the opinion of the
Company's management, such unaudited consolidated financial statements include
all adjustments, consisting of only normal recurring adjustments, necessary to
fairly state the information set forth therein. The following consolidated
financial data should be read in conjunction with the consolidated financial
statements, related notes and other financial information incorporated by
reference herein. See "Incorporation of Certain Documents by Reference." All
share and per share amounts have been adjusted to reflect the three-for-two
stock split effected in the form of a stock dividend which was paid on July 6,
1993.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SIX MONTHS ENDED
--------------------------------------------------------- ----------------------
MARCH 30, MARCH 28, APRIL 3, APRIL 2, APRIL 1, OCT. 1, SEPT. 30,
1991 1992 1993 1994 1995 1994 1995
----------- ----------- --------- --------- --------- --------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenue..................................... $ 64,539 $ 71,009 $ 103,391 $ 126,241 $ 144,083 $ 67,477 $ 93,621
Costs and expenses:
Cost of products sold................... 29,919 31,015 43,650 53,266 58,936 27,416 38,959
Research and development................ 10,363 12,535 16,530 20,636 22,859 10,884 13,073
Selling, general and administrative..... 12,142 14,144 20,465 22,299 25,020 11,838 15,087
----------- ----------- --------- --------- --------- --------- -----------
Total costs and expenses............ 52,424 57,694 80,645 96,201 106,815 50,138 67,119
----------- ----------- --------- --------- --------- --------- -----------
Income from operations...................... 12,115 13,315 22,746 30,040 37,268 17,339 26,502
Interest and other income, net.............. 2,439 2,420 2,470 2,566 3,349 1,402 1,932
----------- ----------- --------- --------- --------- --------- -----------
Income before provision for income taxes.... 14,554 15,735 25,216 32,606 40,617 18,741 28,434
Provision for income taxes.................. 4,257 4,880 7,817 10,116 13,651 6,323 9,810
----------- ----------- --------- --------- --------- --------- -----------
Net income.................................. $ 10,297 $ 10,855 $ 17,399 $ 22,490 $ 26,966 $ 12,418 $ 18,624
----------- ----------- --------- --------- --------- --------- -----------
----------- ----------- --------- --------- --------- --------- -----------
Net income per share........................ $ 0.61 $ 0.61 $ 0.94 $ 1.19 $ 1.41 $ 0.65 $ 0.93
----------- ----------- --------- --------- --------- --------- -----------
----------- ----------- --------- --------- --------- --------- -----------
Weighted average common and common
equivalent shares outstanding............. 16,770 17,834 18,458 18,946 19,164 19,073 20,117

AS OF AS OF
--------------------------------------------------------- ----------------------
MARCH 30, MARCH 28, APRIL 3, APRIL 2, APRIL 1, OCT. 1, SEPT. 30,
1991 1992 1993 1994 1995 1994 1995
----------- ----------- --------- --------- --------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>

CONSOLIDATED BALANCE SHEET DATA:
Working capital............................. $ 51,770 $ 64,297 $ 79,878 $ 105,007 $ 106,021 $ 102,317 $ 138,050
Total assets................................ 79,081 91,653 128,876 146,093 192,917 169,884 225,768
Long-term lease obligations, excluding
current portion........................... 566 205 -- -- -- -- --
Stockholders' equity........................ 63,230 75,643 98,481 125,068 157,797 140,013 186,006
</TABLE>

13
<PAGE>
The following table presents unaudited quarterly results in dollar amounts
and as a percentage of revenue for the Company's last ten fiscal quarters.
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------------------------------------------
FISCAL FISCAL
1994 1995
--------------------------------------------- ---------------------------------------------
JULY 3, OCT. 2, JAN. 1, APR. 2, JULY 2, OCT. 1, DEC. 31, APR. 1,
1993 1993 1994 1994 1994 1994 1994 1995
--------- --------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenue......................... $33,345 $34,136 $28,573 $30,187 $32,913 $34,564 $36,288 $40,318
Costs and expenses:
Cost of products sold....... 14,241 14,509 12,070 12,446 13,418 13,998 14,810 16,710
Research and development.... 5,425 5,428 4,797 4,986 5,306 5,578 5,790 6,185
Selling, general and
administrative............. 5,949 5,897 5,113 5,340 5,769 6,069 6,283 6,899
--------- --------- --------- --------- --------- --------- --------- ---------
Total costs and
expenses............... 25,615 25,834 21,980 22,772 24,493 25,645 26,883 29,794
--------- --------- --------- --------- --------- --------- --------- ---------
Income from operations.......... 7,730 8,302 6,593 7,415 8,420 8,919 9,405 10,524
Interest and other income, net.. 608 663 668 627 669 733 895 1,052
--------- --------- --------- --------- --------- --------- --------- ---------
Income before provision for
income taxes.................. 8,338 8,965 7,261 8,042 9,089 9,652 10,300 11,576
Provision for income taxes...... 2,668 2,868 2,178 2,402 3,090 3,233 3,450 3,878
--------- --------- --------- --------- --------- --------- --------- ---------
Net income...................... $ 5,670 $ 6,097 $ 5,083 $ 5,640 $ 5,999 $ 6,419 $ 6,850 $ 7,698
--------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- ---------
Net income per share............ $ 0.30 $ 0.32 $ 0.27 $ 0.30 $ 0.32 $ 0.34 $ 0.36 $ 0.40
--------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- ---------
Weighted average common and
common equivalent shares
outstanding................... 18,896 19,051 18,918 18,925 19,002 19,145 19,134 19,467

FISCAL
1996
---------------------
JULY 1, SEPT. 30,
1995 1995
--------- ---------

<S> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenue......................... $45,013 $48,608
Costs and expenses:
Cost of products sold....... 18,769 20,190
Research and development.... 6,383 6,690
Selling, general and
administrative............. 7,371 7,716
--------- ---------
Total costs and
expenses............... 32,523 34,596
--------- ---------
Income from operations.......... 12,490 14,012
Interest and other income, net.. 1,015 917
--------- ---------
Income before provision for
income taxes.................. 13,505 14,929
Provision for income taxes...... 4,659 5,151
--------- ---------
Net income...................... $ 8,846 $ 9,778
--------- ---------
--------- ---------
Net income per share............ $ 0.45 $ 0.49
--------- ---------
--------- ---------
Weighted average common and
common equivalent shares
outstanding................... 19,811 20,119
</TABLE>

<TABLE>
<CAPTION>
AS A PERCENTAGE OF REVENUE
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenue......................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Cost of products sold....... 42.7% 42.5% 42.2% 41.2% 40.8% 40.5% 40.8% 41.5% 41.7% 41.5%
Research and development.... 16.3% 15.9% 16.8% 16.5% 16.1% 16.1% 16.0% 15.3% 14.2% 13.8%
Selling, general and
administrative............. 17.8% 17.3% 17.9% 17.7% 17.5% 17.6% 17.3% 17.1% 16.4% 15.9%
------- ------- ------- ------- ------- ------- -------- ------- ------- ---------
Total costs and
expenses............... 76.8% 75.7% 76.9% 75.4% 74.4% 74.2% 74.1% 73.9% 72.3% 71.2%
------- ------- ------- ------- ------- ------- -------- ------- ------- ---------
Income from operations.......... 23.2% 24.3% 23.1% 24.6% 25.6% 25.8% 25.9% 26.1% 27.7% 28.8%
Interest and other income, net.. 1.8% 2.0% 2.3% 2.1% 2.0% 2.1% 2.5% 2.6% 2.3% 1.9%
------- ------- ------- ------- ------- ------- -------- ------- ------- ---------
Income before provision for
income taxes.................. 25.0% 26.3% 25.4% 26.7% 27.6% 27.9% 28.4% 28.7% 30.0% 30.7%
Provision for income taxes...... 8.0% 8.4% 7.6% 8.0% 9.4% 9.3% 9.5% 9.6% 10.3% 10.6%
------- ------- ------- ------- ------- ------- -------- ------- ------- ---------
Net income...................... 17.0% 17.9% 17.8% 18.7% 18.2% 18.6% 18.9% 19.1% 19.7% 20.1%
------- ------- ------- ------- ------- ------- -------- ------- ------- ---------
------- ------- ------- ------- ------- ------- -------- ------- ------- ---------
</TABLE>

14
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BUSINESS

GENERAL
Lattice Semiconductor Corporation (the "Company") is the world's leading
supplier of in-system programmable ("ISP") logic devices and pioneered the
application of electrically erasable CMOS ("E(2)CMOS") technology to
programmable logic. The Company designs, develops and markets both high-and
low-density, high performance E(2)CMOS programmable logic devices ("PLDs") and
related development system software. PLDs are standard semiconductor components
that can be configured by the end customer as specific logic circuits. PLDs
enable the end customer to shorten design cycle times and reduce development
costs.

PLD MARKET BACKGROUND
Three principal types of digital integrated circuits are used in most
electronic systems: microprocessors, memory and logic. Microprocessors are used
for control and computing tasks, memory is used to store programming
instructions and data, and logic is employed to manage the interchange and
manipulation of digital signals within a system. Logic circuits contain
interconnected groupings of simple logical "AND" and logical "OR" functions,
commonly described as "gates". Typically, complex combinations of individual
gates are required to implement the specialized logic circuits required for
systems applications. While system designers use a relatively small number of
standard architectures to meet their microprocessor and memory needs, they
require a wide variety of logic circuits in order to achieve end product
differentiation.

Logic circuits are found in a wide range of today's electronic systems
including communications equipment, computers, peripherals, instrumentation,
industrial control and military systems. According to Dataquest Incorporated, a
semiconductor market research firm, logic accounted for approximately 32% of the
estimated $79 billion worldwide digital integrated circuit market in 1994. The
logic market encompasses, among other segments, standard transistor-transistor
logic ("TTL"), custom-designed application specific integrated circuits
("ASICs", which include conventional gate-arrays, standard cells and full custom
logic circuits), and PLDs. Logic circuits are often classified by the number of
gates per circuit, with TTL circuits typically containing up to 100 gates, PLDs
offering up to 20,000 gates, and conventional gate arrays and custom logic
circuits reaching up to to several hundred thousand gates.

Manufacturers of electronic systems are increasingly challenged to bring
differentiated products to market quickly. These competitive pressures often
preclude the use of custom-designed ASICs, which generally entail significant
design risks and time delay. Standard logic products, an alternative to custom-
designed ASICs, limit a manufacturer's flexibility to adequately customize an
end system. Programmable logic addresses this inherent dilemma. PLDs are
standard products, purchased by systems manufacturers in a "blank" state, that
can be custom configured into a virtually unlimited number of specific logic
circuits by programming the device with electrical signals. PLDs give system
designers the ability to quickly create their own custom logic circuits to
provide product differentiation and rapid time to market. Certain PLD products,
including the Company's, are reprogrammable, which means that the logic
configuration can be modified, if needed, after the initial logic programming. A
recent technology development, in-system programmability, extends the
flexibility of standard reprogrammable PLDs by allowing the system designer to
configure and reconfigure the logic functions of the PLD with a standard 5-volt
power supply without removing the PLD from the system board.

Several common types of PLDs currently coexist in the marketplace, each
offering customers a particular set of benefits. These include low-density PLDs
(less than 1,000 gates) and high-density PLDs (greater than 1,000 gates).
High-density PLDs include both complex PLDs ("CPLDs," up to 14,000 gates) and
field programmable gate arrays ("FPGAs," up to 20,000 gates).

Low-density devices are typically based on industry standard architectures
and include the GAL ("Generic Array Logic") product family developed by the
Company. These architectures are familiar to most system designers and are
supported by standard widely available development tools. Offering the highest
absolute performance and lowest cost per device, these products are the most
effective PLD solution to support simple logic functions in all systems and
complex logic functions in systems with fast clock rates, such as those
supporting state-of-the-art microprocessors.

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<PAGE>
High-density devices are typically based on proprietary architectures and
require support from sophisticated computer aided engineering ("CAE")
development tools. Due to their higher levels of logic integration, absolute
performance levels typically lag those of state-of-the-art low-density PLDs by
one or more technology generations. However, in situations requiring complex
logic functions, high-density PLDs can provide important advantages over the use
of a large cluster of low-density devices. These advantages include system
performance enhancement and power and cost savings.

CPLDs and FPGAs are the two primary types of high-density PLD architectures.
CPLD and FPGA architectures are generally optimal for different types of logic
functions, although many logic functions can be implemented with either
architecture. CPLDs are characterized by a regular building block structure of
wide-input logic cells, termed macrocells, and use of a centralized logic
interconnect scheme. CPLDs are optimal for control logic applications, such as
state machines, bus arbitration, encoders and decoders and sequencers. FPGAs are
characterized by a narrow-input logic cell and use a distributed interconnect
scheme. FPGAs are optimal for register intensive and data path logic
applications such as interface logic and arithmetic functions. The Company
believes that a substantial portion of high-density PLD customers utilize both
CPLD and FPGA architectures within a single system design, partitioning logic
functions across multiple devices to optimize overall system performance and
cost.

TECHNOLOGY
The Company believes that E(2)CMOS is the preferred process technology for
both high-density CPLDs and low-density PLDs due to its inherent performance,
reprogrammability and testability benefits. E(2)CMOS, through its fundamental
ability to be programmed and erased electronically, serves as the foundation for
the Company's ISP technology.

IN-SYSTEM PROGRAMMABLE (ISP) TECHNOLOGY
The Company has pioneered the development of ISP, a proprietary technology,
which affords it a competitive advantage in the high-density CPLD market. In
contrast to standard PLD programming technologies, ISP allows the system
designer to configure and reconfigure the PLD without removing the device from
the system board. Standard E(2)CMOS programmable logic devices require 12-volt
electrical signals and therefore must be removed from the printed circuit board
and programmed using stand alone, specialized hardware, while ISP devices can be
programmed with standard 5-volt electrical signals. ISP enhances the flexibility
of PLDs, providing a number of important benefits to a system manufacturer
across the full spectrum of an electronic system product cycle. ISP can allow
customers to reduce design cycle times, accelerate time to market, reduce
prototyping costs, reduce manufacturing costs and lower inventory requirements.
ISP can also provide customers the opportunity to perform simplified and
cost-effective field reconfiguration through a data file transferred by computer
disk or telephone line. All of the Company's high-density CPLDs are available
with ISP technology. The Company also offers its most popular low-density
architecture, the GAL22V10, with ISP technology.

E(2)CMOS PROCESS TECHNOLOGY
The Company's current high- and low-density PLD offerings are based on the
Company's proprietary E(2)CMOS manufacturing process technology, termed
UltraMOS-Registered Trademark-. The Company's current production processes,
UltraMOS IV and UltraMOS V, are sub-micron CMOS technologies. The Company has
recently released to production UltraMOS VI, an advanced sub-micron process
technology designed to enhance product performance and densities.

In comparison to bipolar technology, at one time the dominant technology for
low-density PLDs, E(2)CMOS technology consumes less power and generates less
heat while operating at comparable speed. Additionally, in contrast to
one-time-programmable bipolar PLDs, E(2)CMOS PLDs are fully erasable and
reprogrammable, providing greater end customer design flexibility and allowing
the PLD manufacturer to fully test all programmable elements in a device prior
to shipment. An alternative CMOS technology, Erasable Programmable Read Only
Memory ("EPROM"), provides the same low power consumption benefits as E(2)CMOS,
but requires ultraviolet light exposure for erasure, necessitating expensive
quartz windowed packages and limiting testability. Antifuse and Static Random
Access Memory ("SRAM") technologies, used primarily in the manufacture of
high-density FPGAs, offer certain advantages for very dense

16
<PAGE>
logic devices, but also have significant drawbacks when compared with E(2)CMOS.
Antifuse technology is non-erasable, non-reprogrammable and subject to lengthy
initial programming times that can hinder usage in volume production
applications. SRAM technology is volatile (erases when electrical power is
removed), and as such programmable SRAM FPGAs require additional non-volatile
memory, typically on a separate device, to store programming code. This adds
cost and printed circuit board area to a design, and results in the devices not
being completely functional at initial system power-up.

PRODUCTS

HIGH-DENSITY CPLDS

SILICON. In fiscal 1993, the Company entered the high-density PLD market by
releasing to production its ispLSI 1000 product family, consisting of eight
devices. The ispLSI 1000 product family, based on an innovative proprietary CPLD
architecture incorporating familiar GAL-like logic building blocks, offers
performance of up to 110 MHz, with propagation delays as low as 10 nanoseconds,
densities of 2,000 to 8,000 gates, and is available in surface mount packages
ranging from 44- to 128-pins. The Company is currently shipping over 60 speed,
package and temperature range combinations of the ispLSI 1000 family.

In fiscal 1994, the Company announced two new ispLSI families, the 2000 and
3000 series. The ispLSI 2000 family, containing eight devices, targets CPLD
performance leadership, providing performance of up to 154 MHz, with propagation
delays as low as 5.5 nanoseconds, densities of 1,000 to 4,000 gates, and 44- to
128-pin standard surface mount packages. It is the first high-density PLD
architecture capable of supporting advanced microprocessors operating at clock
speeds over 75 MHz, such as Pentium, PowerPC and other RISC-based systems. The
ispLSI 3000 family, initially containing six devices, incorporates an enhanced
logic architecture to target CPLD density leadership while retaining high
performance. It offers densities of 8,000 to 14,000 gates, and performance of up
to 100 MHz, with propagation delays as low as 10 nanoseconds. Available in 128-
to 208-pin surface mount packages, the 3000 family also incorporates boundary
scan test, an attractive feature that provides enhanced testing capabilities
important for complex systems. The Company is currently shipping over 30 speed,
package and temperature range combinations of the ispLSI 2000 and 3000 families.
The Company plans to continue to introduce new families of high-density
products, as well as improving the performance of existing product families, to
meet market needs.

SOFTWARE DEVELOPMENT TOOLS. All of the Company's high-density products are
supported by the Company's pDS-Registered Trademark- software development tools
and pDS+-TM- software development tools (referred to as "fitters"). First
introduced in fiscal 1992, pDS software allows a customer to enter and verify a
logic design, perform logic minimization, assign input/output ("I/O") pins and
critical speed paths, and execute automatic place and route tasks. Designed to
be a low cost, fully integrated development tool, pDS runs under the Microsoft
Windows operating system on a personal computer. First introduced in fiscal year
1994, pDS+ software supports most popular third party CAE development tool
environments running on IBM compatible personal computers as well as
workstations from Sun Microsystems and Hewlett-Packard. Designed to provide a
low cost method to incorporate the Company's high-density CPLD products into
standard development environments, pDS+ software leverages customers' existing
investment in third-party CAE tools. The Company also provides ispCODE-TM-
software, a product that supports in-system programming of the Company's ISP
devices.

During fiscal 1995, the Company released new versions of all its existing
pDS and pDS+ software development tools to enhance performance, functionality
and ease of use. The Company offers pDS+ products supporting common third party
CAE design tool environments, including Cadence, CUPL,
Data I/O ABEL, Data I/O Synario, Isdata, Mentor Graphics, OrCAD, Synopsys and
ViewLogic. The Company also enhanced its ISP programming support by releasing
ispTEST-TM- software, a product that enables ISP to be integrated into automatic
test equipment ("ATE") on the manufacturing floor. Currently ispTEST supports
ATE equipment from Genrad, Hewlett-Packard and Teradyne.

During the twelve months ended September 30, 1995, the number of installed
seats of the Company's software development tools, as measured by the Company,
has grown from over 3,000 to over 7,000. The Company plans to continue to
enhance and expand its development tool offerings during fiscal 1996.

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<PAGE>
LOW-DENSITY PLDS
The Company offers the industry's broadest line of low-density CMOS PLDs
based on its 16 families of GAL products offered in over 150 speed, power,
package and temperature range combinations. GAL devices range in complexity from
approximately 200 to 1,000 logic gates and are typically assembled in 20-, 24-
and 28-pin standard dual in-line packages and in 20- and 28-pin standard plastic
leaded chip carrier packages. The Company offers the industry standard GAL16V8,
GAL20V8, GAL22V10, GAL20RA10 and GAL20XV10 architectures in a variety of speed
grades, with propagation delays as low as 5 nanoseconds, the highest performance
in the industry. The Company also offers several innovative proprietary
extension architectures, the ispGAL22V10, GAL26CV12, GAL18V10, GAL16VP8,
GAL20VP8, GAL6001/2, GAL16V8Z and GAL20V8Z, each of which is optimized for
specific applications. These product families offer industry leading performance
levels, typically with propagation delays as low as 7.5 nanoseconds.

Beginning in fiscal 1995, the Company extended its GAL line by introducing a
family of 3.3-volt industry standard architectures, the GAL16LV8, GAL20LV8 and
the GAL22LV10 in a variety of speed grades, with propagation delays as low as
3.5 nanoseconds, the highest performance in the industry. Offered with a range
of power consumption specifications, these devices are targeted towards emerging
high-growth, low-voltage system applications in the computing and communication
markets. The Company is currently selling the GAL16LV8D-3.5, the world's fastest
PLD available in any technology or operating voltage. The Company plans to
continue to maintain a broad offering of performance leadership, standard and
proprietary architecture low-density CMOS PLDs.

The Company's GAL products are supported by industry standard software and
hardware development tools marketed by independent manufacturers specifically
for PLD applications.

PRODUCT DEVELOPMENT
The Company places great emphasis on product development and believes that
continued investment in the development of new products that exploit market
trends is required to maintain its competitive position. The Company's product
development activities emphasize new high-density PLDs, improvements of its
proprietary E(2)CMOS processes and ISP technologies, performance enhancement and
cost reduction of existing products, and extension and enhancement of its
software development tools. Product development activities occur in the
Company's Hillsboro, Oregon headquarters, its Milpitas, California product
development center, and its Shanghai, China design center.

Research and development expenses were $16.5 million, $20.6 million, $22.9
million and $13.1 million in fiscal years 1993, 1994, 1995 and the first six
months of fiscal 1996, respectively. The Company expects to continue to make
significant investments in research and development in the future.

OPERATIONS
The Company does not manufacture its silicon wafers. The Company has
historically maintained strategic relationships with large semiconductor
manufacturers in order to source its finished silicon wafers, allowing the
Company to focus its internal resources on product, process and market
development. In addition, assembly is performed for the Company by outside
suppliers. The Company performs most test operations and all reliability and
quality assurance processes internally, as the Company believes it can add
significant customer value in these areas. In fiscal 1994, the Company became
the first domestic PLD company to achieve ISO 9001 quality registration, an
indication of the Company's high internal operational standards.

WAFER FABRICATION
All of the Company's silicon wafer requirements are currently supplied by
Seiko Epson in Japan pursuant to an agreement with S MOS, an affiliated U.S.
distributor of Seiko Epson. See "-- Licenses and Agreements -- Seiko Epson/S
MOS." The Company negotiates wafer volumes, prices and terms with Seiko Epson
and S MOS on a periodic basis. In addition, the Company entered into a series of
agreements with UMC in September 1995 pursuant to which the Company has agreed
to join UMC and several other companies to form a separate Taiwanese company for
the purpose of building and operating an advanced semiconductor manufacturing
facility in Taiwan, Republic of China. As a result of its equity ownership, the
Company will receive rights to purchase at market prices a percentage of the
facility's wafer production. In a

18
<PAGE>
related agreement, UMC has committed to supply the Company with sub-micron
wafers beginning in the first calendar quarter of 1996 and continuing with
phased increases for several years, until such capacity is available from the
new facility. Wafer prices and other terms are expected to be negotiated prior
to initiating wafer production and will be subject to periodic adjustment. See "
- -- Licenses and Agreements -- UMC." A significant interruption in supply from
Seiko Epson through S MOS or from UMC would have a material adverse effect on
the Company's business. See "Risk Factors -- Dependence on Wafer Suppliers."

ASSEMBLY

After wafer fabrication and initial testing, the Company ships wafers to
independent subcontractors for assembly. During assembly, wafers are separated
into individual die and encapsulated in plastic or ceramic packages. Presently,
the Company has qualified long-term assembly partners in Hong Kong, the
Philippines, South Korea and the United States.

TESTING
The Company electrically tests the die on each wafer prior to shipment for
assembly. Following assembly, prior to customer shipment, each product undergoes
final testing using sophisticated test equipment, techniques and quality
assurance procedures developed by the Company. Final testing on certain products
is performed at independent contractors in the Philippines, South Korea and the
United States.

MARKETING, SALES AND CUSTOMERS
The Company sells its products directly to end customers through a network
of independent sales representatives and indirectly through a network of
distributors. The Company utilizes a direct sales management and field
applications engineering organization in combination with manufacturer's
representatives and distributors to reach a broad base of potential end
customers. The Company's end customers are primarily original equipment
manufacturers in the fields of communications, computing, peripherals,
instrumentation, industrial controls and military systems. The Company believes
its distribution channel is a cost-effective means of reaching end customers.

On September 30, 1995, the Company had 19 sales representatives and five
distributors in the United States and Canada. In North America, Arrow
Electronics, Inc., Hamilton Hallmark, Insight Electronics, Inc. and Marshall
Industries provide nationwide distribution, while Future Electronics provides
regional distribution coverage in Canada. The Company has established sales
channels in over 25 foreign countries through a network of over 30 sales
representatives and distributors. Approximately one-half of the Company's North
American sales and most of its foreign sales are made through distributors.

The Company protects each of its North American distributors and some of its
foreign distributors against reductions in published prices, and expects to
continue this policy in the foreseeable future. The Company also allows returns
from these distributors of unsold products under certain conditions. For these
reasons, the Company does not recognize revenue until products are resold by
these distributors.

The Company provides technical and marketing assistance to its end customers
and sales force with engineering staff based in the Company's offices in Oregon,
California and selected field sales offices. The Company maintains 17 domestic
and international sales offices where the Company's field sales managers and
applications engineers are based. These offices are located in the metropolitan
areas of Atlanta, Austin, Boston, Chicago, Dallas, Los Angeles, Minneapolis, New
York, Orlando, Portland, San Jose, Hong Kong, London, Munich, Paris, Seoul and
Tokyo.

International revenues, including those from Canada, accounted for 45%, 43%,
47% and 49% of the Company's revenues in fiscal 1993, 1994, 1995 and the first
six months of fiscal 1996, respectively. Revenues from Europe were $13.1
million, $16.1 million, $24.5 million and $17.8 million, and from Asia were
$32.7 million, $34.3 million, $40.6 million and $26.4 million, in fiscal 1993,
1994, 1995 and the first six months of fiscal 1996, respectively. Both
international and domestic revenues are generally invoiced in U.S. dollars with
the exception of sales in Japan which are invoiced in yen.

19
<PAGE>
The Company's products are sold to a large and diverse group of customers.
Two distributors accounted for approximately 11% each of revenue in fiscal 1993,
approximately 12% and 10% in fiscal 1994 and approximately 12% and 11% in fiscal
1995. No individual customer accounted for more than 5% of revenue in fiscal
1995.

The Company's sales are primarily executed against purchase orders for
standard products. Customers frequently revise quantities and delivery
schedules, without penalty. The Company therefore does not believe that backlog
as of any given date is indicative of future revenue.

COMPETITION
The semiconductor industry overall is intensely competitive and is
characterized by rapid technological change, rapid rates of product obsolescence
and price erosion. The Company's current and potential competitors include a
broad range of semiconductor companies, ranging from very large, established
companies to emerging companies, many of which have greater financial,
technical, manufacturing, marketing and sales resources than the Company.

The principal competitive factors in the CMOS PLD market include product
features, price, customer support, and sales, marketing and distribution
strength. In the high-density segment, the availability of competitive software
development tools is also critical. In addition to product features such as
speed, power consumption, reprogrammability, design flexibility and reliability,
competition in the PLD market occurs on the basis of price and market acceptance
of specific products and technology. The Company believes that it competes
favorably with respect to each of these factors. The Company intends to continue
to address these competitive factors by working to continually introduce product
enhancements and new products, by seeking to establish its products as industry
standards in their respective markets, and by working to reduce the
manufacturing cost of its products over their life cycle.

In the high-density PLD market, the Company competes directly primarily with
Advanced Micro Devices ("AMD") and Altera, both of which offer competing CPLD
products. The Company also competes indirectly with manufacturers of FPGA
devices such as Actel, AT&T, and Xilinx as well as other semiconductor companies
providing non-PLD based logic solutions. As the Company and these other
companies seek to expand their markets, competition may increase.

In the low-density PLD market, the Company competes primarily with AMD, a
licensee of the Company's GAL patents, which offers a full line of E(2)CMOS
GAL-compatible PLDs. Altera, Atmel and Cypress Semiconductor offer products
based on similar and competing CMOS technologies and architectures, however,
these companies do not offer full product lines.

Although to date the Company has not experienced significant competition
from companies located outside the United States, such companies may become a
more significant competitive factor in the future. As the Company and its
current competitors seek to expand their markets, competition may increase. Any
such increases in competition could have a material adverse effect on the
Company's operating results.

PATENTS
The Company seeks to protect its products and wafer fabrication process
technology primarily through patents, trade secrecy measures, copyrights, mask
work protection, trademark registrations, licensing restrictions,
confidentiality agreements and other approaches designed to protect proprietary
information. There can be no assurance that others may not independently develop
competitive technology not covered by the Company's patents or that measures
taken by the Company to protect its technology will be effective.

The Company holds 32 domestic and European patents on its PLD products and
has a number of patent applications pending in the United States, Japan and
under the European Patent Convention. There can be no assurance that pending
patent applications or other applications that may be filed will result in
issued patents, or that any issued patents will survive challenges to their
validity. Although the Company believes that its patents have value, there can
be no assurance that the Company's patents, or any additional patents that may
be issued in the future, will provide meaningful protection from competition.
The Company believes its success will depend primarily upon the technical
expertise, experience, creativity and the sales and marketing abilities of its
personnel.

20
<PAGE>
Patent and other proprietary rights infringement claims are common in the
semiconductor industry. The Company has received a letter from a semiconductor
manufacturer stating that it believes a number of its patents, related to
product packaging, cover certain products sold by the Company. While the
manufacturer has offered to license certain of such patents to the Company,
there can be no assurance, on this or any other claim which may be made against
the Company, that the Company could obtain a license on terms or under
conditions that would be favorable to the Company.

LICENSES AND AGREEMENTS

SEIKO EPSON/S MOS
S MOS, an affiliated U.S. distributor of Seiko Epson, has agreed to provide
manufactured wafers to the Company in quantities based on six-month rolling
forecasts provided by the Company. The Company has committed to buy certain
minimum quantities of wafers per month. The Company's products are manufactured
in Japan at Seiko Epson's wafer fabrication facilities and delivered to the
Company by S MOS. Prices for the wafers obtained from S MOS are reviewed and
adjusted periodically and may be adjusted to reflect prevailing currency
exchange rates. See "Risk Factors -- Dependence on Wafer Suppliers." Daniel S.
Hauer, a member of the Company's Board of Directors, is Chairman of the Board of
Directors of S MOS.

In July 1994, the Company entered into an advance production payment
agreement with Seiko Epson and S MOS, under which it advanced to Seiko Epson $42
million during fiscal 1995 to be used by Seiko Epson to finance additional
sub-micron semiconductor wafer manufacturing capacity. Under the terms of the
agreement, the advances are to be repaid in the form of advanced technology
sub-micron semiconductor wafers. Subject to certain conditions set forth in the
agreement, Seiko Epson has agreed to supply, and the Company has agreed to
receive, such wafers at a price (in Japanese yen) and volume expected to achieve
full repayment of the advance over a three- to four-year period. In conjunction
with the advance production payment agreement, the Company also paid $2 million
during fiscal 1995 for the development of sub-micron process technology and the
fabrication of engineering wafers to be delivered over the same period. The
agreement calls for wafers to be supplied by Seiko Epson through S MOS pursuant
to a purchase agreement concluded with S MOS.

UMC
The Company entered into a series of agreements with UMC in September 1995
pursuant to which the Company has agreed to join UMC and several other companies
to form a separate Taiwanese company for the purpose of building and operating
an advanced semiconductor manufacturing facility in Taiwan, Republic of China.
Under the terms of the agreement, the Company will invest $60 million, payable
in three installments over the next two and a half years, for a 10% equity
interest in the venture. As a result of its equity ownership, the Company will
receive rights to purchase at market prices a percentage of the facility's wafer
production. The proposed facility is expected to commence production of
eight-inch sub-micron wafers during the second half of 1997. Formation of the
venture is subject to a number of conditions, including receipt of requisite
governmental approvals.

In a related agreement, UMC has committed to supply the Company with
sub-micron wafers beginning in the first calendar quarter of 1996 and continuing
with phased increases for several years, until such capacity is available from
the new facility. The Company is currently engaged in qualifying its process
technology with UMC in anticipation of starting volume wafer production. Wafer
prices, and other terms, are expected to be negotiated prior to initiating wafer
production and will be subject to periodic adjustment.

AMD
In November 1987, as part of the settlement of a patent infringement suit
against the Company, the Company and Monolithic Memories Inc. ("MMI",
subsequently merged with AMD) entered into an agreement cross-licensing each
other's patents covering programmable and reprogrammable logic devices based on
patent applications having a first filing date prior to November 1989. The
agreement was subsequently amended in May 1989 by the Company and AMD, the
successor to the rights and obligations of MMI in the original agreement. The
amendment covers those patents relating to PLD products which are based on
patent applications originally filed by the Company, MMI and AMD prior to
December 31, 1991. The license terminates, with respect to certain patents
asserted by AMD, to cover the Company's current

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principal products if the Company is acquired by a semiconductor manufacturer
with sales in excess of a stated amount or by certain types of companies
headquartered in designated Asian countries. No license has been granted to
either party for any copyright work, trademark or process technology and,
therefore, AMD has not been licensed to use the GAL trademark on its products.

EMPLOYEES
As of September 30, 1995, the Company had 452 full-time employees. The
Company believes that its future success will depend, in part, on its ability to
continue to attract and retain highly skilled technical, marketing and
management personnel.

None of the Company's employees is subject to a collective bargaining
agreement. The Company has never experienced a work stoppage and considers its
employee relations good.

PROPERTIES
The Company's corporate offices and testing and principal research and
design facilities are located in two adjacent buildings owned by the Company in
Hillsboro, Oregon comprising a total of 90,000 square feet. The Company's
executive, administrative, marketing and production activities are also located
at these facilities. The Company also leases a 41,000 square foot research and
design facility in Milpitas, California under a five-year lease which expires in
August 1998.

The Company leases space in various locations in the United States for its
domestic sales offices, and also leases space in Hong Kong, London, Munich,
Paris, Seoul and Tokyo for its foreign sales offices. The Company also owns a
13,000 square foot research and development facility and approximately 6,000
square feet of dormitory facilities in Shanghai.

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DESCRIPTION OF CAPITAL STOCK

The Company's authorized capital stock consists of 100,000,000 shares of
common stock, $.01 par value (the "Common Stock"), and 10,000,000 shares of
preferred stock, $.01 par value (the "Preferred Stock"). As of September 30,
1995, there were 19,502,914 shares of Common Stock and no shares of Preferred
Stock outstanding.

COMMON STOCK
The holders of Common Stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. Subject to preferences applicable
to any outstanding Preferred Stock, the holders of Common Stock are entitled to
receive ratably such dividends as may be declared from time to time by the Board
of Directors out of funds legally available therefor and in the event of
liquidation, dissolution, or winding up of the Company, the holders of Common
Stock are entitled to share in all assets remaining after payment of
liabilities. The Common Stock has no preemptive or conversion rights and is not
subject to further calls or assessments by the Company. There are no redemption
or sinking fund provisions applicable to the Common Stock. The Common Stock
currently outstanding is, and the Common Stock offered hereby will be, validly
issued, fully paid and non-assessable.

CERTAIN CHARTER PROVISIONS
The Company's Restated Certificate of Incorporation, as amended, and Bylaws,
as amended, contain certain procedural provisions that could have the effect of
delaying, deferring or preventing a change in control of the Company. These
include the following: (i) a provision classifying the Board of Directors into
three classes; and (ii) a provision requiring that the affirmative vote of
two-thirds (2/3) of the outstanding voting shares of capital stock of the
Company is required to approve certain business combinations.

PREFERRED STOCK
The Board of Directors of the Company has the authority to issue the
Preferred Stock in one or more series and to fix the rights, preferences and
privileges, including dividend rights, conversion rights, liquidation rights,
voting rights, and the number of shares constituting any series or the
designation of such series of Preferred Stock, without any further vote or
action by the stockholders. As of the date of this Prospectus, there are no
outstanding shares of Preferred Stock or options to purchase Preferred Stock
other than the Rights Agreement described below. Although it has no present
intention to do so, the Board of Directors of the Company may, without
stockholder approval, issue Preferred Stock with voting and conversion rights
which could adversely affect the voting power of the holders of Common Stock.
The issuance of Preferred Stock may have the effect of delaying, deferring, or
preventing a change of control of the Company.

RIGHTS AGREEMENT
Effective September 1991, the Board of Directors of the Company approved a
Preferred Shares Right Agreement and declared a dividend distribution payable
November 14, 1991 of one Preferred Share Purchase Right (the "Rights") for each
share of its Common Stock outstanding on November 14, 1991 and each share of its
Common Stock issued thereafter (subject to certain limitations).

Currently, the Rights trade with the shares of Common Stock. When the Rights
become exercisable, each Right will entitle the holder to buy one one-thousandth
of a share of Series A Participating Preferred Stock, $.01 par value, at an
exercise price of $60 per one one-thousandth of a share. The Rights will become
exercisable and will trade separately from the Common Stock (unless postponed by
action of the disinterested directors of the Company) on the earlier of (i) 10
days following a public announcement that a person or group has acquired, or
obtained the right to acquire, beneficial ownership of 20% or more of the
Company's outstanding Common Stock or (ii) 10 days following the commencement or
announcement of a tender offer or exchange offer which, if consummated, would
result in the beneficial ownership by a person or group of 20% or more of the
Company's outstanding Common Stock.

In general, if any person or group acquires 20% or more of the Company's
Common Stock without approval of the Company's Board of Directors, each Right
not held by the acquiring person will entitle its holder to purchase $120 worth
of the Company's Common Stock for an effective purchase price of $60. If, after
any person or group acquires 20% or more of the Company's Common Stock without
the approval of

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<PAGE>
the Board of Directors, the Company is acquired in a merger or other business
combination transaction, each Right not held by the acquiring person would
entitle its holder to purchase $120 worth of the Common Stock of the acquiring
company for $60. Under certain conditions, the Company may elect to redeem the
Rights for $.01 per Right or cause the exchange of each Right not held by the
acquiring person for one share of the Company's Common Stock. Additionally, the
exercise price, number of Rights, and number of shares of Series A Participating
Preferred or Common Stock that may be acquired for the exercise price are
subject to adjustment from time to time to prevent dilution. The Rights expire
on September 11, 2001, unless previously exchanged or redeemed as described
above, or terminated in connection with the acquisition of the Company by
consolidation or merger approved by the Board of Directors and satisfying
certain conditions.

The Rights are designed to protect and maximize the value of the outstanding
equity interests in the Company in the event of an unsolicited attempt by an
acquiror to take over the Company in a manner or on terms not approved by the
Board of Directors. Takeover attempts frequently include coercive tactics to
deprive a corporation's Board of Directors and its stockholders of any real
opportunity to determine the destiny of the corporation. The Rights have been
declared by the Board of Directors in order to deter such tactics, including a
gradual accumulation of shares in the open market of a 20% or greater position
to be followed by a merger or a partial or two-tier tender offer that does not
treat all stockholders equally.

The Rights are not intended to prevent a takeover of the Company and will
not do so. Nevertheless, the Rights may have the effect of rendering more
difficult or discouraging an acquisition of the Company deemed undesirable by
the Board of Directors. The Rights may cause substantial dilution to a person or
group that attempts to acquire the Company on terms or in a manner not approved
by the Company's Board of Directors, except pursuant to an offer conditioned
upon the negation, purchase or redemption of the Rights.

The description above is qualified in its entirety by reference to the
Preferred Shares Right Agreement dated as of September 11, 1991.

DELAWARE TAKEOVER STATUTE
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law, which prohibits a publicly-held Delaware corporation
from engaging in any "business combination" with an "interested stockholder" for
three years following the date that such stockholder became an interested
stockholder, unless (i) prior to such date, the board of directors of the
corporation approved either the business combination or the transaction that
resulted in the stockholder becoming an interested stockholder; (ii) upon
consummation of the transaction that resulted in the stockholder becoming an
interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced, excluding for purposes of determining the number of shares
outstanding, those shares owned (a) by persons who are directors and also
officers and (b) by employee stock plans in which employee participants do not
have the right to determine confidentially whether shares held subject to the
plan will be tendered in a tender or exchange offer; or (iii) on or subsequent
to such date, the business combination is approved by the board of directors and
authorized at an annual or special meeting of stockholders, and not by written
consent, by the affirmative vote of at least 66 2/3% of the outstanding voting
stock not owned by the interested stockholder.

Generally, a "business combination" includes a merger, asset or stock sale,
or other transaction resulting in a financial benefit to the stockholders. An
"interested stockholder" is a person who, together with affiliates and
associates, owns (or within three years prior did own) 15% or more of the
corporation's voting stock.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the Common Stock is First Interstate
Bank of Oregon, N.A.

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<PAGE>
CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS
FOR NON-U.S. HOLDERS OF COMMON STOCK

The following discussion concerns the material United States federal income,
gift and estate tax consequences of the ownership and disposition of shares of
Common Stock applicable to Non-U.S. Holders, as defined, of such shares of
Common Stock. In general, a "Non-U.S. Holder" is any holder other than (i) a
citizen or resident of the United States, (ii) a corporation or partnership
created or organized in the United States or under the laws of the United States
or any State or (iii) an estate or trust whose income is includible in gross
income for United States federal income tax purposes regardless of its source.
The discussion is based on current law, which is subject to change retroactively
or prospectively, and is for general information only. The discussion does not
address all aspects of federal income and estate taxation and does not address
any aspects of state, local or foreign tax laws. The discussion does not
consider any specific facts or circumstances that may apply to a particular
Non-U.S. Holder (including the fact that in the case of a Non-U.S. Holder that
is a partnership, the United States tax consequences of holding and disposing of
shares of Common Stock may be affected by certain determinations made at the
partner level). Accordingly, prospective investors are urged to consult their
tax advisors regarding the United States federal, state, local and non-U.S.
income and other tax consequences of holding and disposing of shares of Common
Stock.

DIVIDENDS
Dividends, if any (see "Dividend Policy"), paid to a Non-U.S. Holder
generally will be subject to United States withholding tax at a 30% rate (or a
lower rate as may be prescribed by an applicable tax treaty) unless the
dividends are effectively connected with a trade or business of the Non-U.S.
Holder within the United States. Dividends effectively connected with such a
trade or business will generally not be subject to withholding (if the Non-U.S.
Holder properly files an executed IRS Form 4224 with the payor of the dividend)
and generally will be subject to United States federal income tax on a net
income basis at regular graduated rates. In the case of a Non-U.S. Holder which
is a corporation, such effectively connected income also may be subject to the
branch profits tax (which is generally imposed on a foreign corporation on the
repatriation from the United States of effectively connected earnings and
profits). The branch profits tax may not apply if the recipient is a qualified
resident of certain countries with which the United States has an income tax
treaty. To determine the applicability of a tax treaty providing for a lower
rate of withholding, dividends paid to an address in a foreign country are
presumed, under the current Internal Revenue Service position, to be paid to a
resident of that country, unless the payor had definite knowledge that such
presumption is not warranted or an applicable tax treaty (or United States
Treasury Regulations thereunder) requires some other method for determining a
Non-U.S. Holder's resident. The Company must report annually to the Internal
Revenue Service and to each Non-U.S. Holder the amount of dividends paid to, and
the tax withheld with respect to, each Non-U.S. Holder. These reporting
requirements apply regardless of whether withholding was reduced or eliminated
by an applicable tax treaty. Copies of these information returns also may be
made available under the provisions of a specific treaty or agreement to the tax
authorities in the country in which the Non-U.S. Holder resides.

SALE OF COMMON STOCK
Generally, a Non-U.S. Holder will not be subject to United States federal
income tax on any gain realized upon the disposition of such holder's shares of
Common Stock unless (i) the gain is effectively connected with a trade or
business carried on by the Non-U.S. Holder within the United States (in which
case the branch profits tax may apply); (ii) the Non-U.S. Holder is an
individual who holds the shares of Common Stock as a capital asset and is
present in the United States for 183 days or more in the taxable year of the
disposition and to whom such gain is United States source; (iii) the Non-U.S.
Holder is subject to tax pursuant to the provisions of U.S. tax law applicable
to certain former United States citizens or residents; or (iv) the Company is or
has been a "U.S. real property holding corporation" for federal income tax
purposes (which the Company does not believe that it is or is likely to become)
at any time during the five year period ending on the date of disposition (or
such shorter period that such shares were held) and, subject to certain
exceptions, the Non-U.S. Holder held, directly or indirectly, more than 5% of
the Common Stock.

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<PAGE>
GIFT TAX
Generally, an individual who is not a citizen or resident (as specially
defined for United States federal estate and gift tax purposes) of the United
States at the time of a gift will not be subject to United States federal gift
tax on the lifetime transfer of shares of Common Stock by gift unless the
individual is subject to tax pursuant to the provisions of U.S. tax law
applicable to certain former United States citizens.

ESTATE TAX
Shares of Common Stock owned or treated as owned by an individual who is not
a citizen or resident (as specially defined for United States federal estate and
gift tax purposes) of the United States at the time of death will be includible
in the individual's gross estate for United States federal estate tax purposes,
unless an applicable tax treaty provides otherwise, and may be subject to United
States federal estate tax.

BACKUP WITHHOLDING AND INFORMATION REPORTING
Under current United States federal income tax law, backup withholding tax
(which generally is a withholding tax imposed at the rate of 31 percent on
certain payments to persons that fail to furnish certain required information)
and information reporting apply to payments of dividends (actual and
constructive) made to certain non-corporate United States persons. The United
States backup withholding tax requirements will generally not apply to dividends
paid on Common Stock to a Non-U.S. Holder at an address outside the United
States.

The payment of the proceeds from the disposition of shares of Common Stock
through the United States office of a broker will be subject to information
reporting and backup withholding unless the holder, under penalties of perjury,
certifies, among other things, its status as a Non-U.S. Holder, or otherwise,
establishes an exemption. Generally, the payment of the proceeds from the
disposition of shares of Common Stock to or through a non-U.S. office of a
broker will not be subject to backup withholding and will not be subject to
information reporting. In the case of the payment of proceeds from the
disposition of shares of Common Stock through a non-U.S. office of a broker that
is a U.S. person or a "U.S.-related person", as defined below, existing
regulations require information reporting (but not backup withholding) on the
payment unless the broker receives a statement from the owner, signed under
penalties of perjury, certifying, among other things, its status as a Non-U.S.
Holder, or the broker has documentary evidence in its files that the owner is a
Non-U.S. Holder and the broker has no actual knowledge to the contrary. For this
purpose, a "U.S.-related person" is (i) a "controlled foreign corporation" for
the United States federal income tax purposes or (ii) a foreign person 50% or
more of whose gross income from all sources for the three year period ending
with the close of its taxable year preceding the payment (or for such part of
the period that the broker has been in existence) is derived from activities
that are effectively connected with the conduct of a United States trade or
business.

Any amounts withheld from a payment to a Non-U.S. Holder under the backup
withholding rules will be allowed as a credit against such holder's United
States federal income tax liability and may entitle such holder to a refund,
provided that the required information is furnished to the United States
Internal Revenue Service. Non-U.S. Holders should consult their tax advisors
regarding the application of these rules to their particular situations, the
availability of an exemption therefrom and the procedure for obtaining such an
exemption, if available.

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<PAGE>
UNDERWRITERS

Under the terms and subject to conditions contained in an Underwriting
Agreement dated the date hereof, the U.S. Underwriters named below, for whom
Morgan Stanley & Co. Incorporated, Donaldson, Lufkin & Jenrette Securities
Corporation, PaineWebber Incorporated and Needham & Company, Inc. are serving as
U.S. Representatives, have severally agreed to purchase, and the Company has
agreed to sell, 2,000,000 shares of the Company's Common Stock, and the
International Underwriters named below (collectively with the U.S.
Representatives, the "Representatives"), have severally agreed to purchase, and
the Company has agreed to sell, 500,000 shares of the Company's Common Stock,
which in the aggregate equals the number of shares set forth opposite the name
of such Underwriters below.

<TABLE>
<CAPTION>
NUMBER
NAME OF SHARES
- ------------------------------------------------------------------ ----------
<S> <C>
U.S. Underwriters:
Morgan Stanley & Co. Incorporated............................... 387,500
Donaldson, Lufkin & Jenrette Securities Corporation............. 387,500
PaineWebber Incorporated........................................ 387,500
Needham & Company, Inc.......................................... 387,500
Hambrecht & Quist LLC........................................... 60,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated.............. 60,000
Smith Barney Inc................................................ 60,000
UBS Securities Inc.............................................. 60,000
Wasserstein Perella Securities, Inc............................. 60,000
Cowen & Company................................................. 30,000
Fahnestock & Co. Inc............................................ 30,000
Gruntal & Co., Incorporated..................................... 30,000
Josephthal Lyon & Ross Incorporated............................. 30,000
Pacific Crest Securities, Inc................................... 30,000
----------
Subtotal.................................................. 2,000,000

International Underwriters:
Morgan Stanley & Co. International Limited...................... 125,000
Donaldson, Lufkin & Jenrette Securities Corporation............. 125,000
PaineWebber International (U.K.) Ltd............................ 125,000
Needham & Company, Inc.......................................... 125,000
----------
Subtotal.................................................. 500,000
----------
Total..................................................... 2,500,000
----------
----------
</TABLE>

The U.S. Underwriters and the International Underwriters are collectively
referred to as the "Underwriters." The Underwriting Agreement provides that the
obligations of the several Underwriters to pay for and accept delivery of the
shares of Common Stock offered hereby are subject to the approval of certain
legal matters by counsel and to certain other conditions. The Underwriters are
obligated to take and pay for all of the shares of Common Stock offered hereby
(other than those covered by the over-allotment option described below) if any
are taken.

Pursuant to the Agreement Between U.S. and International Underwriters, each
U.S. Underwriter has represented and agreed that, with certain exceptions set
forth below, (a) it is not purchasing any U.S. Shares (as defined below) for the
account of anyone other than a United States or Canadian Person (as defined
below) and (b) it has not offered or sold, and will not offer or sell, directly
or indirectly, any U.S. Shares or distribute this Prospectus outside the United
States or Canada or to anyone other than a United States or Canadian Person.
Pursuant to the Agreement between U.S. and International Underwriters, each
International Underwriter has represented and agreed that, with certain
exceptions set forth below, (a) it is not purchasing any International Shares
(as defined below) for the account of any United States or Canadian Person and
(b) it has not offered or sold, and will not offer or sell, directly or
indirectly, any International

27
<PAGE>
Shares or distribute this Prospectus within the United States or Canada or to
any United States or Canadian Person. The foregoing limitations do not apply to
stabilization transactions or to certain other transactions specified in the
Agreement Between U.S. and International Underwriters. With respect to each of
Donaldson, Lufkin & Jenrette Securities Corporation and Needham & Company, Inc.,
the foregoing representations or agreements (i) made by it in its capacity as a
U.S. Underwriter shall apply only to shares of Common Stock purchased by it in
its capacity as a U.S. Underwriter, (ii) made by it in its capacity as an
International Underwriter shall apply only to shares of Common Stock purchased
by it in its capacity as an International Underwriter and (iii) shall not
restrict its ability to distribute this Prospectus to any person. As used
herein, "United States or Canadian Person" means any national or resident of the
United States or Canada or any corporation, pension, profit-sharing or other
trust or other entity organized under the laws of the United States or Canada or
of any political subdivision thereof (other than a branch located outside of the
United States and Canada of any United States or Canadian Person) and includes
any United States or Canadian branch of a person who is not otherwise a United
States or Canadian Person, and "United States" means the United States of
America, its territories, its possessions and all areas subject to this
jurisdiction. All shares of Common Stock to be offered by the U.S. Underwriters
and International Underwriters under the Underwriting Agreement are referred to
herein as the "U.S. Shares" and the "International Shares," respectively.

Pursuant to the Agreement Between U.S. and International Underwriters, sales
may be made between the U.S. Underwriters and the International Underwriters of
any number of shares of Common Stock to be purchased pursuant to the
Underwriting Agreement as may be mutually agreed. The per share price and
currency settlement of any shares of Common Stock so sold shall be the public
offering price set forth on the cover page hereof, in United States dollars,
less an amount not greater than the per share amount of the concession to
dealers set forth below.

Pursuant to the Agreement Between U.S. and International Underwriters, each
U.S. Underwriter has represented that it has not offered or sold, and has agreed
not to offer or sell, any shares of Common Stock, directly or indirectly, in
Canada in contravention of the securities laws of Canada or any province or
territory thereof and has represented that any offer of such shares in Canada
will be made only pursuant to an exemption from the requirement to file a
prospectus in the province or territory of Canada in which such offer is made.
Each U.S. Underwriter has further agreed to send to any dealer who purchases
from it any shares of Common Stock a notice stating in substance that, by
purchasing such shares, such dealer represents and agrees that it has not
offered or sold, and will not offer or sell, directly or indirectly, any of such
shares in Canada in contravention of the securities laws of Canada or any
province or territory thereof and that any offer of shares of Common Stock in
Canada will be made only pursuant to an exemption from the requirement to file a
prospectus in the province or territory of Canada in which such offer is made,
and that such dealer will deliver to any other dealer to whom it sells any of
such shares a notice to the foregoing effect.

Pursuant to the Agreement Between U.S. and International Underwriters, each
International Underwriter has represented that (i) it has not offered or sold
and will not offer or sell any shares of Common Stock to persons in the United
Kingdom except to persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as principal or agent) for the
purposes of their businesses or otherwise in circumstances which are not
resulted and will not result in an offer to the public in the United Kingdom
within the meaning of the Public Offers of Securities Regulations 1995 (the
"Regulations"); (ii) it has complied and will comply with all applicable
provisions of the Financial Services Act of 1986 and the Regulations with
respect to anything done by it in relation to such shares in, from or otherwise
involving the United Kingdom; and (iii) it has only issued or passed on and will
only issue or pass on to any person in the United Kingdom any document received
by it in connection with the issue of such shares, if that person is of a kind
described in Article 11(3) of the Financial Services Act of 1986 (Investment
Advertisements) (Exemptions) Order 1995, or is a person to whom such document
may otherwise lawfully be issued or passed on.

Pursuant to the Agreement Between U.S. and International Underwriters, each
International Underwriter has represented and agreed that it has not offered or
sold, and will not offer or sell, directly or indirectly, in Japan or to or for
the account of any resident thereof, any shares of Common Stock acquired in
connection with this offering, except for offers or sales to Japanese
International Underwriters or dealers

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<PAGE>
and except pursuant to any exemption from the registration requirements of the
Securities and Exchange Law of Japan. Each International Underwriter has further
agreed to send to any dealer who purchases from it any of such shares of Common
Stock a notice stating in substance that such dealer may not offer or sell any
of such shares, directly or indirectly, in Japan or to or for the account of any
resident thereof, except pursuant to any exemption from the registration
requirements of the Securities and Exchange Law of Japan, and that such dealer
will send to any other dealer to whom it sells any of such shares a notice to
the foregoing effect.

The Underwriters propose to offer part of the shares of Common Stock offered
hereby directly to the public at the public offering price set forth on the
cover page hereof and part to certain dealers at a price which represents a
concession not in excess of $1.06 per share under the public offering price. The
Underwriters may allow, and such dealers may re-allow, a concession not in
excess of $.10 per share to other Underwriters or to certain other dealers.
After the initial offering of the Common Stock, the offering price and other
selling terms may from time to time be varied by the Representatives.

Pursuant to the Underwriting Agreement, the Company has granted to the U.S.
Underwriters an option, exercisable for 30 days from the date of this
Prospectus, to purchase up to an additional 375,000 shares of Common Stock at
the public offering price set forth on the cover page hereof, less underwriting
discounts and commissions. The U.S. Underwriters may exercise such option to
purchase solely for the purpose of covering over-allotments, if any, incurred in
the sale of the shares of Common Stock offered hereby. To the extent such option
is exercised, each U.S. Underwriter will become obligated, subject to certain
conditions, to purchase approximately the same percentage of such additional
shares as the number set forth next to such U.S. Underwriters' name in the
preceding table bears to the total number of shares of Common Stock offered
hereby to the U.S. Underwriters.

The Company and the Underwriters have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Securities Act").

Each of the executive officers and directors of the Company has agreed not
to offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase, or otherwise transfer or dispose of, directly or
indirectly, any shares of Common Stock, or any securities convertible into or
exercisable or exchangeable for Common Stock, or enter into any swap or similar
agreement that transfers, in whole or in part, the economic risk of ownership of
the Common Stock, for a period of 90 days from the date of this Prospectus,
without the prior written consent of Morgan Stanley & Co. Incorporated, other
than an aggregate of 100,000 shares by all such executive officers and
directors, which shall include no more than 50,000 shares by any such
individual. The Company has agreed in the Underwriting Agreement that it will
not, directly or indirectly, without the prior written consent of Morgan Stanley
& Co. Incorporated, offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, or otherwise transfer or dispose of any shares of
Common Stock or any securities convertible into or exercisable or exchangeable
for Common Stock, for a period of 90 days after the date of this Prospectus,
subject to certain limited exceptions.

In connection with this offering, certain Underwriters and selling group
members (if any) or their respective affiliates who are qualified registered
market makers on The Nasdaq National Market, may engage in passive market making
transactions in the Common Stock on The Nasdaq National Market in accordance
with Rule 10b-6A under the Exchange Act during the two-business-day period
before commencement of offers or sales of the Common Stock. The passive market
making transactions must comply with applicable volume and price limits and be
identified as such. In general, a passive market maker may display its bid at a
price not in excess of the highest independent bid for the security; if all
independent bids are lowered below the passive market maker's bid, however, such
bid must then be lowered when certain purchase limits are exceeded. Passive
market making may stabilize the market price of the Common Stock at a level
above that which might otherwise prevail and, if commenced, may be discontinued
at any time.

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<PAGE>
LEGAL MATTERS

The validity of the issuance of the shares of Common Stock offered hereby
will be passed upon for the Company by Wilson Sonsini Goodrich & Rosati,
Professional Corporation, Palo Alto, California. Larry W. Sonsini, a member of
such firm, is a director of the Company and holds options to purchase 26,625
shares of Common Stock. Certain legal matters in connection with the offering,
will be passed upon for the Underwriters by Morrison & Foerster, Palo Alto,
California.

EXPERTS

The consolidated financial statements incorporated by reference in the
Company's Annual Report on Form 10-K for the year ended April 1, 1995, which
Form 10-K has been incorporated by reference in this Prospectus, have been
incorporated by reference in this Prospectus in reliance on the report of Price
Waterhouse LLP, independent accountants, given on the authority of said firm as
experts in accounting and auditing.

AVAILABLE INFORMATION

The Company has filed with the Commission a Registration Statement on Form
S-3 (referred to herein, together with all amendments and exhibits, as the
"Registration Statement") under the Securities Act, with respect to the
securities offered by this Prospectus. This Prospectus does not contain all of
the information set forth in the Registration Statement, certain parts of which
have been omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company and the
securities offered hereby, reference is made to the Registration Statement.
Statements made in this Prospectus as to the contents of any contract or other
document referred to herein are not necessarily complete and, in each instance
in which a copy of such contract is filed as an exhibit to the Registration
Statement, reference is made to such copy and each such statement shall be
deemed qualified in all respects by such reference. Copies of the Registration
Statement may be inspected, without charge, at the offices of the Commission, or
obtained at prescribed rates from the Public Reference Section of the Commission
at the address set forth below.

The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information filed by the Company can be inspected and copied at the public
reference facilities of the Commission located at Room 1024, 450 Fifth Street,
N.W., Judiciary Plaza, Washington, D.C. 20549 and at the Commission's regional
offices at Seven World Trade Center, 13th Floor, New York, New York 10048 and at
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material also can be obtained from the Public
Reference Section of the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Company's Common Stock is
quoted for trading on The Nasdaq National Market and reports, proxy statements
and other information concerning the Company may be inspected at the offices of
the National Association of Securities Dealers, Inc., 9513 Key West Avenue,
Rockville, Maryland 20850.

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