LATTICE SEMICONDUCTOR CORP
DEF 14A, 1998-07-01
SEMICONDUCTORS & RELATED DEVICES
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<PAGE>
                            SCHEDULE 14A INFORMATION
 
                  Proxy Statement Pursuant to Section 14(a) of
            the Securities Exchange Act of 1934 (Amendment No.    )
 
    Filed by the Registrant /X/
    Filed by a Party other than the Registrant / /
 
    Check the appropriate box:
    / /  Preliminary Proxy Statement
    / /  Confidential, for Use of the Commission Only (as permitted by Rule
         14a-6(e)(2))
    /X/  Definitive Proxy Statement
    / /  Definitive Additional Materials
    / /  Soliciting Material Pursuant to Section240.14a-11(c) or
         Section240.14a-12
 
                             LATTICE SEMICONDUCTOR CORPORATION
- --------------------------------------------------------------------------------
                (Name of Registrant as Specified In Its Charter)
 
- --------------------------------------------------------------------------------
    (Name of Person(s) Filing Proxy Statement, if other than the Registrant)
 
Payment of Filing Fee (Check the appropriate box):
 
/X/  No fee required.
/ /  Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
     and 0-11.
     (1) Title of each class of securities to which transaction applies:
         -----------------------------------------------------------------------
     (2) Aggregate number of securities to which transaction applies:
         -----------------------------------------------------------------------
     (3) Per unit price or other underlying value of transaction computed
         pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
         filing fee is calculated and state how it was determined):
         -----------------------------------------------------------------------
     (4) Proposed maximum aggregate value of transaction:
         -----------------------------------------------------------------------
     (5) Total fee paid:
         -----------------------------------------------------------------------
/ /  Fee paid previously with preliminary materials.
/ /  Check box if any part of the fee is offset as provided by Exchange Act Rule
     0-11(a)(2) and identify the filing for which the offsetting fee was paid
     previously. Identify the previous filing by registration statement number,
     or the Form or Schedule and the date of its filing.
     (1) Amount Previously Paid:
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     (2) Form, Schedule or Registration Statement No.:
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     (4) Date Filed:
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<PAGE>
                                     [LOGO]
 
                       LATTICE SEMICONDUCTOR CORPORATION
 
                              5555 NE MOORE COURT
                          HILLSBORO, OREGON 97124-6421
 
                             ---------------------
 
                    NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
                                AUGUST 10, 1998
 
                            ------------------------
 
TO THE STOCKHOLDERS:
 
    NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Lattice
Semiconductor Corporation (the "Company") will be held at The Greenwood Inn,
10700 SW Allen Blvd., Beaverton, OR 97005, on Monday, August 10, 1998, at 1:00
p.m., Pacific Time, for the following purposes:
 
    1.  To elect two Class III directors to serve a term of three years or until
       their successors are elected;
 
    2.  To approve an amendment to the Company's 1996 Stock Incentive Plan
       increasing the number of shares reserved for issuance thereunder by
       2,300,000 shares;
 
    3.  To ratify the appointment of Price Waterhouse LLP as independent
       accountants of the Company for the fiscal year ending April 3, 1999; and
 
    4.  To transact such other business as may properly come before the meeting
       or any adjournment of the meeting.
 
    The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
 
    Only stockholders of record at the close of business on June 23, 1998 are
entitled to notice of and to vote at the meeting. The meeting is subject to
adjournment from time to time as the stockholders present in person or by proxy
may determine.
 
    All stockholders are invited to attend the meeting in person. WHETHER OR NOT
YOU PLAN TO ATTEND THE MEETING, TO ASSURE YOUR REPRESENTATION AT THE MEETING,
PLEASE PROMPTLY SIGN AND RETURN THE ACCOMPANYING FORM OF PROXY IN THE ENCLOSED
RETURN ENVELOPE. Any stockholder of record attending the meeting may vote in
person even if he or she has returned a proxy.
 
                                          BY ORDER OF THE BOARD OF DIRECTORS
 
                                          Stephen A. Skaggs
                                          SECRETARY
 
Hillsboro, Oregon
July 7, 1998
<PAGE>
                                     [LOGO]
 
                       LATTICE SEMICONDUCTOR CORPORATION
 
                              5555 NE MOORE COURT
                          HILLSBORO, OREGON 97124-6421
 
                             ---------------------
 
               PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
 
                             ---------------------
 
                 INFORMATION CONCERNING SOLICITATION AND VOTING
 
GENERAL
 
    A proxy in the accompanying form is solicited by the Board of Directors of
Lattice Semiconductor Corporation (the "Company") for use at the 1998 Annual
Meeting of Stockholders (the "Annual Meeting") to be held at The Greenwood Inn,
10700 SW Allen Blvd., Beaverton, OR 97005, on Monday, August 10, 1998 at 1:00
p.m., Pacific Time, or at any adjournment thereof. The proxy is solicited for
the purposes set forth herein and in the accompanying Notice of Annual Meeting
of Stockholders. The mailing address of the Company's principal executive office
is 5555 NE Moore Court, Hillsboro, Oregon 97124-6421, and the telephone number
at that address is (503) 681-0118.
 
    These proxy solicitation materials were mailed on or about July 7, 1998,
together with the Company's 1998 Annual Report to Stockholders, to all
stockholders entitled to vote at the meeting.
 
    The power of the proxy holders will be suspended if the stockholder of
record executing the proxy is present at the meeting and elects to vote in
person. Any proxy may be revoked prior to its exercise upon written notice to
the Secretary of the Company or upon delivery to the Secretary of the Company of
a duly executed proxy bearing a later date. The shares represented by each
valid, unrevoked proxy will be voted in accordance with the instructions
specified in the proxy, if given. If a signed proxy is returned without
instructions, it will be voted for the nominees for director, for the approval
of the proposals presented, and in accordance with the recommendations of the
Board of Directors on any other business which may properly come before the
meeting or matters incident to the conduct of the meeting.
 
    The Company's outstanding voting securities at the close of business on June
23, 1998 consisted of 23,558,291 shares of Common Stock, $.01 par value per
share (the "Common Stock"), each of which is entitled to one vote on all matters
to be presented at the meeting. Only stockholders of record at the close of
business on June 23, 1998 (the "Record Date") are entitled to notice of and to
vote at the meeting or any adjournment thereof. The Common Stock does not have
cumulative voting rights.
 
    The required quorum for the transaction of business at the Annual Meeting is
a majority of shares of Common Stock outstanding on the Record Date. Shares that
are voted "FOR", "AGAINST", "ABSTAIN" or "WITHHELD" from a matter are treated as
being present at the meeting for purposes of establishing a quorum and are also
treated as votes eligible to be cast by the Common Stock present in person or
represented by proxy at the Annual Meeting and "entitled to vote on the subject
matter" (the "Votes Cast") with respect to such matter.
 
    Abstentions and votes "withheld" will be counted for purposes of determining
both the presence or absence of a quorum for the transaction of business and the
total number of Votes Cast with respect to a particular matter. Broker non-votes
with respect to proposals set forth in this Proxy Statement will be counted only
for purposes of determining the presence or absence of a quorum and will not be
considered "Votes Cast", and will not affect the determination as to whether the
requisite majority of Votes Cast has been obtained with respect to a particular
matter.
 
                                       1
<PAGE>
                       PROPOSAL 1: ELECTION OF DIRECTORS
 
DIRECTORS
 
    Pursuant to the Company's Certificate of Incorporation as amended and
restated (the "Certificate"), the Board of Directors is divided into three
classes. The directors are elected to serve staggered three-year terms, such
that the term of one class of directors expires each year. Each class consists
of two directors. Two Class III directors are to be elected at the Annual
Meeting for a three-year term ending in 2001. The proxy holders intend to vote
the proxies received by them for Mr. Hatfield and Mr. Tsui, who have been
nominated to the Board of Directors. If the nominees for director become
unavailable for election for any reason, pursuant to the proxy the proxy holders
will have discretionary authority to vote for suitable substitutes. The Company
is not aware of any reason that Mr. Hatfield or Mr. Tsui will be unable or will
decline to serve as a director. The terms of office of the persons elected as
director will continue until their terms expire in 2001 or until successors have
been elected and qualified.
 
    The following table briefly describes the Company's nominees for director
and the directors whose terms will continue. Except as otherwise noted, each has
held his principal occupation for at least five years. There are no family
relationships among any directors or officers of the Company.
<TABLE>
<CAPTION>
                                                                                                DIRECTOR       TERM
NOMINEES                      AGE           PRINCIPAL OCCUPATION AND OTHER DIRECTORSHIPS          SINCE       EXPIRES       CLASS
- ------------------------      ---      ------------------------------------------------------  -----------  -----------     -----
<S>                       <C>          <C>                                                     <C>          <C>          <C>
Mark O. Hatfield                  75   United States Senator from Oregon (until January              1997         1998          III
                                         1997).
 
Cyrus Y. Tsui                     52   Chairman of the Board of the Company (effective March         1988         1998          III
                                         31, 1991); President and Chief Executive Officer of
                                         the Company (since 1988); Director of Asante
                                         Technologies.
 
<CAPTION>
 
DIRECTORS WHOSE TERMS CONTINUE
- ---------------------------------------------------------------------------------------------
<S>                       <C>          <C>                                                     <C>          <C>          <C>
 
Harry A. Merlo                    73   President of Merlo Corporation, a holding company             1983         1999            I
                                         (since July 1995); President and Chairman of the
                                         Board of Louisiana-Pacific Corporation, a building
                                         materials company (until June 1995).
 
Larry W. Sonsini                  57   Chairman of the Executive Committee of Wilson Sonsini         1991         1999            I
                                         Goodrich & Rosati, Professional Corporation;
                                         Director of Novell, Inc. and Pixar.
 
Daniel S. Hauer                   61   Chairman of the Board of S-MOS Systems, Inc., a               1987         2000           II
                                         supplier of CMOS integrated circuits and silicon
                                         wafers (since August 1994); President and Chief
                                         Executive Officer of S-MOS Systems, Inc. (until
                                         October 1994).
 
Douglas C. Strain                 78   Vice Chairman and Founder of Electro Scientific               1986         2000           II
                                         Industries, Inc., a manufacturer of industrial
                                         lasers and electro-optical equipment.
</TABLE>
 
                                       2
<PAGE>
REQUIRED VOTE
 
    The two nominees receiving the highest number of affirmative votes of the
Votes Cast at the Annual Meeting on this matter shall be elected as the Class
III directors. See "Information Concerning Solicitation and Voting - General".
 
    THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" MARK O.
HATFIELD AND CYRUS Y. TSUI AS THE CLASS III DIRECTORS OF THE COMPANY.
 
BOARD MEETINGS AND COMMITTEES
 
    In fiscal 1998, the Company's Board of Directors held four regularly
scheduled meetings. No member of the Board of Directors attended fewer than 75%
of the total number of board and committee meetings of the Board of Directors
held during fiscal 1998.
 
    The Board of Directors currently has three standing committees: the
Compensation Committee, the Audit Committee and the Nominating Committee. The
Compensation Committee makes recommendations to the Board of Directors
concerning the salaries and other compensation paid to the executive officers,
the granting of employee stock options and other compensation-related issues.
During fiscal 1998, the Compensation Committee was composed of Mr. Strain and
Mr. Merlo and met twice.
 
    The Audit Committee recommends engagement of the Company's independent
accountants and is primarily responsible for reviewing and approving the scope
of the audit and other services performed by the Company's independent
accountants and for reviewing and evaluating the Company's accounting principles
and its systems of internal accounting controls. The Audit Committee meets with
management and the Company's independent accountants, who have access to the
Audit Committee with and without the presence of management representatives.
During fiscal 1998, the Audit Committee was composed of Mr. Merlo and Mr. Hauer
and met twice.
 
    A Nominating Committee comprising Mr. Sonsini and Mr. Tsui exists to
identify persons for future nomination for election to the Board of Directors.
The Nominating Committee held no meetings in fiscal 1998. Stockholders who wish
to submit names to the Nominating Committee for consideration should do so in
writing addressed to the Nominating Committee, c/o Corporate Secretary, Lattice
Semiconductor Corporation, 5555 NE Moore Court, Hillsboro, Oregon 97124-6421.
 
DIRECTORS' COMPENSATION
 
    Directors who are employees of the Company (currently only Mr. Tsui) receive
no additional or special remuneration for serving as directors. Each
non-employee director receives an annual retainer of $12,000 plus $1,500 for
each board meeting attended and $750 for each committee meeting attended.
 
    Non-employee directors also receive options to purchase shares of the
Company's Common Stock. Prior to May 1993, these options were issued under the
Company's Outside Directors Stock Option Plan (the "1990 Directors Plan"). In
August 1993, the stockholders approved the 1993 Outside Directors Stock Option
Plan (the "1993 Directors Plan") which replaced the 1990 Directors Plan. The
1993 Directors Plan provides for automatic grants of stock options to
non-employee directors. Under this plan, each outside director received a grant
of 18,000 shares in August 1993. A new director receives a grant for 18,000
shares on the date he is appointed by the Board of Directors. In addition, each
outside director will receive a grant of 18,000 shares on the date any
previously granted option becomes fully vested. In August 1997, replenishment
grants were granted to the four directors whose August 1993 grants had fully
vested. These shares generally vest quarterly over a four-year period and expire
five years from the grant date.
 
TRANSACTIONS WITH MANAGEMENT
 
    Mr. Hauer, a director of the Company, is the Chairman of S-MOS Systems, Inc.
("S-MOS"). The Company has a manufacturing agreement with S-MOS for the
production and delivery of silicon wafers. In July 1994, the Company entered
into advance payment and research and development agreements with
 
                                       3
<PAGE>
Seiko Epson Corporation and its affiliate S-MOS. Pursuant to the terms of these
agreements, the Company made payments of $44 million to Seiko Epson, in
approximately even quarterly amounts from July 1994 to March 1995. A second
advance payment agreement between the Company and Seiko Epson Corporation and
its affiliate S-MOS was entered into in March 1997. During fiscal 1998, the
Company made payments of $34.2 million to Seiko Epson on this second agreement.
Total payments of approximately $90 million (with an option for an additional
$60 million) will be made by the end of fiscal 1999. Repayment for the advance
payment portions of these agreements will be made in the form of semiconductor
wafers over a multi-year period. Approximately $13.6 million of wafers were
delivered to the Company in fiscal 1998 in connection with these advance payment
agreements. Additionally, in fiscal 1998, cash wafer purchases by the Company
from S-MOS totaled approximately $20.9 million.
 
    Mr. Sonsini, a director of the Company, is Chairman of the Executive
Committee of Wilson Sonsini Goodrich & Rosati, Professional Corporation, a law
firm based in Palo Alto, California. This firm serves as the Company's primary
outside legal counsel.
 
EMPLOYMENT AGREEMENTS
 
    In September 1988, the Company entered into an employment letter with Mr.
Tsui pursuant to which Mr. Tsui serves as President and Chief Executive Officer
of the Company. In addition to providing for an annual base salary and bonus
arrangements, the letter provides that in the event of a change in control of
the Company as described in the letter, then any unvested options to purchase
common stock of the Company held by Mr. Tsui shall become fully vested.
Additionally, in the event Mr. Tsui is involuntarily terminated other than for
cause, the Company will continue to pay his salary for up to six months, or
until Mr. Tsui begins employment elsewhere, whichever occurs sooner, and options
vesting during that period are exercisable.
 
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
 
    The members of the Compensation Committee during fiscal 1998 were Mr. Strain
and Mr. Merlo. Neither Mr. Strain nor Mr. Merlo was or is an officer or employee
of the Company. No executive officer of the Company serves as a member of the
board of directors or compensation committee of any entity which has one or more
executive officers serving as a member of the Company's Board of Directors or
Compensation Committee.
 
REPORT OF THE COMPENSATION COMMITTEE
 
    The Compensation Committee, comprised of non-employee Directors, sets,
reviews and administers the executive compensation program of the Company. The
role of the Compensation Committee is to establish and approve salaries and
other compensation paid to the executive officers of the Company and to
administer the Company's stock option plan, in which capacity the Compensation
Committee reviews and approves stock option grants to all employees.
 
    COMPENSATION PHILOSOPHY.  Lattice's compensation philosophy is that cash
compensation should be directly linked to the short-term performance of the
Company and that longer-term incentives, such as stock options, should be
aligned with the objective of enhancing stockholder value over the long term.
The use of stock options clearly links the interests of the officers and
employees of the Company to the interests of the stockholders. In addition, the
Compensation Committee believes that total compensation packages must be
competitive with other companies in the industry to ensure that the Company can
continue to attract, retain and motivate key employees who are critical to the
long-term success of the Company.
 
    COMPONENTS OF EXECUTIVE COMPENSATION.  The principal components of executive
compensation are base salary, bonuses paid under the Executive Incentive Plan
and stock options.
 
                                       4
<PAGE>
    Base salary is set based on competitive factors and the historic salary
structure for various levels of responsibility within the Company. The
Compensation Committee periodically conducts surveys of companies in the
industry in order to determine whether the Company's executive base salaries are
in a competitive range. Generally, salaries are set at the middle to high end of
the range. In addition, the Company relies on variable compensation in order to
emphasize the importance of performance. As a result, in the fiscal year ended
March 28, 1998, a year of record profit for the Company, the salaries of the
named executive officers (as subsequently defined) comprised only 25% to 38% of
their total cash compensation.
 
    The Executive Incentive Plan ("EIP") is a bonus plan linked directly to the
profitability of the Company. This plan in particular emphasizes the
Compensation Committee's belief that, when the Company is successful, the
executives should be highly compensated, but that, conversely, if the Company is
not successful and is not profitable, no bonuses should be paid absent
extraordinary circumstances. The total bonus pool available under the EIP is
based directly on the operating profit of the Company. With respect to the Chief
Executive Officer, an individual bonus is determined by formula based on the
total bonus pool and his base salary. The bonus derived from such formula is
paid to the Chief Executive Officer in a combination of Company stock and cash,
pursuant to the 1996 Stock Incentive Plan. With respect to other executives,
individual cash bonuses are determined by formula based on the total bonus pool,
the executive's base salary and his or her individual performance relative to
key objectives as determined by the Chief Executive Officer.
 
    The 1996 Stock Incentive Plan was approved by the stockholders at the 1996
Annual Meeting. This Plan allows the Company to grant certain stock-related
benefits and to utilize additional tax deductions which may be available under
Section 162(m) of the Internal Revenue Code of 1986. Section 162(m) limits to $1
million the deductibility of annual compensation paid by a public corporation to
the chief executive officer and the next four most highly compensated executive
officers unless such compensation is performance-based within the meaning of
Section 162(m) and the regulations thereunder.
 
    The principal equity component of executive compensation is the stock option
program. Stock options are generally granted when an executive joins the Company
and on an annual basis thereafter under a replenishment program. Stock options
are also occasionally granted for promotions or other special achievements.
Initial stock option grants vest over a period of four years. The purpose of the
annual replenishment program is to ensure that an executive always has options
that vest in increments over the subsequent four-year period. Stock options
provide a means of retention and motivation for senior level executives of the
Company and also align the executive's interests with long-term stock price
appreciation. In addition, executives are eligible to participate in a payroll
deduction employee stock purchase plan pursuant to which Company stock may be
purchased at 85% of the fair market value at the beginning or end of each
offering period, whichever is less (up to a maximum of $25,000 worth of stock
per calendar year or 10% of salary, whichever is less).
 
    Executives also participate in the Company's Profit Sharing Plan under which
a specified percentage of operating profit is set aside and distributed among
all domestic employees based on Company tenure. Other elements of executive
compensation include the ability to participate in a Company-wide life insurance
program, supplemental life insurance, long-term disability insurance,
Company-wide medical benefits and the ability to defer compensation pursuant to
both a Company-wide 401(k) plan and a supplemental deferred compensation plan.
Discretionary Company contributions to the Company-wide 401(k) plan of up to 5%
of eligible base pay were made in fiscal 1998.
 
                                          Compensation Committee of the
                                          Board of Directors
                                          Douglas C. Strain, Chairman
                                          Harry A. Merlo
 
                                       5
<PAGE>
                             EXECUTIVE COMPENSATION
 
SUMMARY OF COMPENSATION
 
    The following table provides certain summary information concerning
compensation paid to or accrued for the Company's Chief Executive Officer and
each of the four other most highly compensated executive officers of the Company
(hereafter referred to as the "named executive officers") for the fiscal years
ended March 28, 1998, March 29, 1997, and March 30, 1996:
 
                           SUMMARY COMPENSATION TABLE
 
<TABLE>
<CAPTION>
                                                                                                         LONG-TERM
                                                                                                        COMPENSATION
                                                                        ANNUAL COMPENSATION             ------------
                                                               --------------------------------------   STOCK OPTION
                                                                                         OTHER ANNUAL      GRANTS
                                                      FISCAL    SALARY       BONUS       COMPENSATION      (# OF        ALL OTHER
            NAME AND PRINCIPAL POSITION                YEAR      (1)          (2)            (3)          SHARES)      COMPENSATION
- ----------------------------------------------------  ------   --------  -------------   ------------   ------------   ------------
<S>                                                   <C>      <C>       <C>             <C>            <C>            <C>
Tsui, Cyrus Y.                                         1998    $509,172  $ 1,531,705(4)     $6,365        131,250        $38,651(5)
  President & CEO                                      1997     462,876    1,266,199(4)      4,403        131,250         34,834(6)
                                                       1996     402,505    1,082,983         6,175        131,250         21,669(7)
 
Laub, Steven A.                                        1998    $222,779  $   516,000        $6,365         45,000        $14,941(5)
  Senior V.P. & COO                                    1997     207,730      435,000         4,403         80,000         14,684(6)
                                                       1996     186,678      380,000         6,175         37,500          5,069(7)
 
Skaggs, Stephen A.                                     1998    $177,231  $   373,000        $6,365         35,000        $13,543(5)
  Senior V.P. & CFO                                    1997     162,304      295,000         4,403         60,000          6,300(6)
 
Yu, Kenneth K.                                         1998    $172,401  $   293,000        $6,365         20,000        $ 7,422(5)
  V.P. & Managing                                      1997     166,399      262,000         4,403         15,000          3,624(6)
    Director, Lattice Asia                             1996     158,099      244,000         6,175         18,750            821(7)
 
Yu, Jonathan K.                                        1998    $163,452  $   260,000        $6,365         15,000        $20,735(5)
  Corporate V.P. -                                     1997     158,645      228,000         4,403         15,000         19,496(6)
    Business Development                               1996     151,474      221,000         6,175         18,750         10,448(7)
</TABLE>
 
- ------------------------------
 
(1) Salary includes amounts deferred pursuant to the Company's 401(k) savings
    plan.
 
(2) Bonuses for each year include amounts earned for such year, even if paid in
    the subsequent year, and exclude bonuses paid during such year that were
    earned for a prior year.
 
(3) Represents participation in the Company's profit sharing plan.
 
(4) Bonus was paid in Company stock and cash, pursuant to the 1996 Stock
    Incentive Plan and based on attainment of performance goals established by
    the Board. For fiscal 1998, Mr. Tsui received $466,346 in cash, and shares
    as follows: 3,068 shares worth $197,886 for the quarter ended September 27,
    1997, 2,731 shares worth $141,671 for the quarter ended December 27, 1997,
    and 2,987 shares worth $143,003 for the quarter ended March 28, 1998. For
    fiscal 1997, Mr. Tsui received 5,842 shares worth $140,938 for the quarter
    ended June 26, 1996, 4,716 shares worth $139,712 for the quarter ended
    September 28, 1996, 3,346 shares worth $150,988 for the quarter ended
    December 28, 1996, and 3,908 shares worth $175,860 for the quarter ended
    March 29, 1997. The remainder of the bonus in each year was paid in cash to
    provide reimbursement for taxes.
 
(5) Includes payments made by the Company during fiscal 1998 for life and
    disability insurance in the amounts of $27,796, $5,790, $3,735, $7,422 and
    $12,421 for Mr. Tsui, Mr. Laub, Mr. Skaggs, Mr. Kenneth Yu, and Mr. Jonathan
    Yu, respectively. Also includes contributions made to the 401(k) plan by the
    Company in the amounts of $9,455 for Mr. Tsui, $9,151 for Mr. Laub, $8,808
    for Mr. Skaggs, and $8,314 for Mr. Jonathan Yu. Also includes a patent award
    payment by the Company for Mr. Tsui of $1,400 and an anniversary bonus of
    $1,000 for Mr. Skaggs.
 
(6) Includes payments made by the Company during fiscal 1997 for life and
    disability insurance in the amounts of $25,344, $5,112, $1,298, $3,624 and
    $11,678 for Mr. Tsui, Mr. Laub, Mr. Skaggs, Mr. Kenneth Yu, and Mr. Jonathan
    Yu, respectively. Also includes contributions made to the 401(k) plan by the
    Company in the amounts of $9,490 for Mr. Tsui, $9,572 for Mr. Laub, $5,002
    for Mr. Skaggs, and $7,818 for Mr. Jonathan Yu.
 
(7) Includes payments made by the Company during fiscal 1996 for life and
    disability insurance in the amounts of $20,269, $4,069, $821 and $10,488 for
    Mr. Tsui, Mr. Laub, Mr. Kenneth Yu, and Mr. Jonathan Yu, respectively. Also
    includes a patent award payment by the Company for Mr. Tsui of $1,400 and an
    anniversary bonus of $1,000 for Mr. Laub.
 
                                       6
<PAGE>
OPTIONS GRANTED AND OPTIONS EXERCISED IN THE LAST FISCAL YEAR
 
    The following tables set forth information regarding stock options granted
to and exercised by the named executive officers during the last fiscal year, as
well as options held by the named executive officers as of March 28, 1998:
 
                       OPTION GRANTS IN LAST FISCAL YEAR
 
<TABLE>
<CAPTION>
                                                                                         POTENTIAL REALIZABLE VALUE
                                                     INDIVIDUAL GRANTS                     AT ASSUMED ANNUAL RATES
                                     --------------------------------------------------  OF STOCK PRICE APPRECIATION
                                       OPTIONS                                            (THROUGH EXPIRATION DATE)
                                       GRANTS     % OF TOTAL    EXERCISE                 ---------------------------
                                     (# OF SHS)     OPTIONS       PRICE     EXPIRATION        5%            10%
    NAME AND PRINCIPAL POSITION          (1)        GRANTED    ($/SH) (1)      DATE      PER YEAR (2)  PER YEAR (2)
- -----------------------------------  -----------  -----------  -----------  -----------  ------------  -------------
<S>                                  <C>          <C>          <C>          <C>          <C>           <C>
Tsui, Cyrus Y.                          131,250(3)      14.5%   $   66.25      8/11/07   $  5,468,435  $  13,858,089
  President & CEO
 
Laub, Steven A.                          45,000         5.0%    $   66.25      8/11/07   $  1,874,892  $   4,751,345
  Senior V.P. & COO
 
Skaggs, Stephen A.                       35,000         3.9%    $   66.25      8/11/07   $  1,458,249  $   3,695,490
  Senior V.P. & CFO
 
Yu, Kenneth K.                           20,000         2.2%    $   66.25      8/11/07   $    833,285  $   2,111,709
  V.P. & Managing
    Director, Lattice Asia
 
Yu, Jonathan K.                          15,000         1.7%    $   66.25      8/11/07   $    624,964  $   1,583,782
  Corporate V.P. -
    Business Development
</TABLE>
 
- ------------------------------
 
(1) Unless otherwise noted, these options were granted under the Company's 1996
    Stock Incentive Plan in August 1997, and have an exercise price equal to the
    fair market value of the Company's Common Stock as of the date of the grant.
    These grants vest quarterly over a four-year period ending in August 2001.
 
(2) The 5% and 10% assumed rates of appreciation are mandated by the rules of
    the Securities and Exchange Commission and do not represent the Company's
    estimate or projection of future prices for its Common Stock.
 
(3) This option was granted under the Company's 1988 Stock Incentive Plan in
    August 1997, and has an exercise price equal to the fair market value of the
    Company's Common Stock as of the date of the grant. This grant vests
    quarterly over a four-year period ending in August 2001.
 
                                       7
<PAGE>
                      OPTION EXERCISES IN LAST FISCAL YEAR
                       AND FISCAL YEAR-END OPTION VALUES
 
<TABLE>
<CAPTION>
                                                                      NUMBER OF
                                                                 UNEXERCISED OPTIONS            VALUE OF
                                                                 AT FISCAL YEAR END     UNEXERCISED IN THE MONEY
                                                                ---------------------           OPTIONS
                                       SHARES                     VESTED    UNVESTED       AT FISCAL YEAR END
             NAME AND                ACQUIRED ON     VALUE        (# OF       (# OF    --------------------------
        PRINCIPAL POSITION            EXERCISE      REALIZED      SHRS)       SHRS)     VESTED (1)   UNVESTED (1)
- -----------------------------------  -----------  ------------  ----------  ---------  ------------  ------------
Tsui, Cyrus Y.
<S>                                  <C>          <C>           <C>         <C>        <C>           <C>
  President & CEO                       100,000   $  3,968,224     208,984    259,766  $  4,874,535  $  3,367,554
 
Laub, Steven A.
  Senior V.P. & COO                      20,000   $    882,682      71,656    107,344  $  1,616,164  $  1,611,279
 
Skaggs, Stephen A.
  Senior V.P. & CFO                           0   $          0      40,688     73,812  $    911,746  $  1,038,910
 
Yu, Kenneth K.
  V.P. & Managing                         3,250   $    132,496      38,203     35,547  $    940,396  $    413,276
    Director, Lattice Asia
 
Yu, Jonathan K.
  Corporate V.P. -                            0   $          0      44,766     31,484  $  1,158,150  $    423,803
    Business Development
</TABLE>
 
- ------------------------------
 
(1) Represents the difference between the exercise prices of the options and the
    closing price of the Company's Common Stock on March 27, 1998.
 
                                       8
<PAGE>
               COMPARISON OF TOTAL CUMULATIVE STOCKHOLDER RETURN
 
    The following two graphs show five-year and seven-year comparisons of
cumulative stockholder return on Common Stock for the Company, the S&P 500
Index, and the S&P Technology Sector (previously named the S&P High Technology
Index) from March 31, 1993 through March 31, 1998 and from March 31, 1991
through March 31, 1998. The total stockholder return assumes $100 invested at
the beginning of the period in Common Stock of the Company, the S&P 500, and the
S&P Technology. Historic stock price performance is not necessarily indicative
of future stock price performance. (All data points are at March 31st.)
 
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
 
<TABLE>
<CAPTION>
  LATTICE CUMULATIVE RETURN OVER 5
               YEARS
 
<S>                                   <C>                            <C>                     <C>
                                              LATTICE SEMICONDUCTOR   S&P Technology Sector    S&P 500
1993                                                          $ 100                   $ 100      $ 100
1994                                                           $ 87                   $ 118      $ 101
1995                                                          $ 134                   $ 149      $ 117
1996                                                          $ 155                   $ 201      $ 155
1997                                                          $ 250                   $ 272      $ 186
1998                                                          $ 281                   $ 411      $ 275
</TABLE>
 
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
 
<TABLE>
<CAPTION>
  LATTICE CUMULATIVE RETURN OVER 7
               YEARS
 
<S>                                   <C>                            <C>                     <C>
                                              LATTICE SEMICONDUCTOR   S&P Technology Sector    S&P 500
1991                                                          $ 100                   $ 100      $ 100
1992                                                          $ 158                   $ 102      $ 111
1993                                                          $ 282                   $ 112      $ 128
1994                                                          $ 246                   $ 132      $ 130
1995                                                          $ 378                   $ 167      $ 150
1996                                                          $ 437                   $ 226      $ 198
1997                                                          $ 704                   $ 306      $ 237
1998                                                          $ 791                   $ 462      $ 350
</TABLE>
 
                                       9
<PAGE>
                    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
                             OWNERS AND MANAGEMENT
 
    The following table sets forth, as of June 23, 1998, information about (i)
persons known to the Company to be the beneficial owners of more than five
percent of the Company's outstanding Common Stock, (ii) each director and named
executive officer and (iii) all directors and executive officers as a group:
 
<TABLE>
<CAPTION>
BENEFICIAL OWNER                                                              NUMBER OF SHARES(1)  PERCENT OF CLASS
- ----------------------------------------------------------------------------  -------------------  -----------------
<S>                                                                           <C>                  <C>
J. & W. Seligman & Co., Inc., 100 Park Avenue, NY, NY 10017                         2,976,448(2)            12.6%
 
Fidelity Investments, 82 Devonshire Street, Boston, MA 02109                        2,519,500(2)            10.7%
 
Merrill Lynch, PO Box 9011, Princeton, NJ 08543                                     1,850,000(2)             7.9%
 
State Farm Mutual Automobile Insurance Company                                      1,625,000(2)             6.9%
 One State Farm Plaza, Bloomington, IL 61710
 
Firstar Corporation, 777 East Wisconsin Avenue,                                     1,556,400(2)             6.6%
 Milwaukee, WI 53202
 
Cyrus Y. Tsui, Chairman of the Board,                                                 568,817(3)             2.4%
 President and Chief Executive Officer
 
Steven A. Laub, Senior Vice President and COO                                          75,651(4)           *
 
Stephen A. Skaggs, Senior Vice President and CFO                                       59,030(5)           *
 
Kenneth K. Yu, Vice President and Managing Director, Lattice Asia                      69,421(6)           *
 
Jonathan K. Yu, Corporate Vice President - Business Development                        40,418(7)           *
 
Mark O. Hatfield, Director                                                              6,750(8)           *
 
Daniel S. Hauer, Director                                                              31,590(9)           *
 
Harry A. Merlo, Director                                                               30,175(10)          *
 
Larry W. Sonsini, Director                                                             23,777(11)          *
 
Douglas C. Strain, Director                                                            15,625(12)          *
 
All directors and executive officers as a group (17 persons)                        1,217,112(13)            5.0%
</TABLE>
 
- ------------------------------
 
*   Less than one percent.
 
(1) Unless otherwise indicated, the named beneficial owner has sole voting and
    investment power with respect to the shares, subject to community property
    laws where applicable.
 
(2) Based upon information received on Schedule 13G filings under the Securities
    Exchange Act of 1934, as amended.
 
(3) Includes 269,140 shares exercisable under options within 60 days of the
    Record Date.
 
(4) Includes 70,093 shares exercisable under options within 60 days of the
    Record Date.
 
(5) Includes 55,000 shares exercisable under options within 60 days of the
    Record Date. Also includes 2,900 shares held for the benefit of Mr. Skaggs
    by the Company's deferred compensation plan.
 
(6) Includes 46,171 shares exercisable under options within 60 days of the
    Record Date.
 
(7) Includes 37,421 shares exercisable under options within 60 days of the
    Record Date.
 
(8) Includes 6,750 shares exercisable under options within 60 days of the Record
    Date.
 
(9) Includes 9,750 shares exercisable under options within 60 days of the Record
    Date.
 
(10) Excludes an aggregate of 15,815 shares held by the Harry A. Merlo
    Charitable Remainder Trusts and the Domenic W. Merlo Educational Trust;
    includes 4,500 shares exercisable under options within 60 days of the Record
    Date.
 
(11) Includes 23,250 shares exercisable under options within 60 days of the
    Record Date.
 
(12) Includes 13,125 shares exercisable under options within 60 days of the
    Record Date.
 
(13) Includes 802,337 shares exercisable under options within 60 days of the
    Record Date. Also includes 3,106 shares held for the benefit of executive
    officers by the Company's deferred compensation plan.
 
                                       10
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
 
    Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors, and persons who own more than 10% of a
registered class of the Company's equity securities, to file reports of
ownership on Form 3 and changes in ownership on Form 4 or Form 5 with the
Securities and Exchange Commission ("SEC"). Such officers, directors and 10%
stockholders are also required by SEC rules to furnish the Company with copies
of all Section 16(a) forms they file. Based solely on its review of the copies
of such forms received by it, or written representations from certain reporting
persons, the Company believes that, during the fiscal year ended March 28, 1998,
all Section 16(a) filing requirements applicable to its officers, directors and
10% stockholders were complied with.
 
         PROPOSAL 2: APPROVAL OF AMENDMENT TO 1996 STOCK INCENTIVE PLAN
 
    The 1996 Stock Incentive Plan (the "Incentive Plan") was adopted by the
Board of Directors and approved by stockholders in 1996 and a total of 2,000,000
shares of Common Stock was initially reserved for issuance under the Incentive
Plan. In May 1998, the Board of Directors adopted an amendment to the Incentive
Plan, subject to stockholder approval, to reserve an additional 2,300,000 shares
for issuance under the Incentive Plan, for a total of 4,300,000 shares reserved
for issuance thereunder.
 
    As of the Record Date, options to purchase an aggregate of 1,037,630 shares
were outstanding and 912,212 shares (exclusive of the 2,300,000 shares subject
to stockholder approval at this Annual Meeting) were available for future grant.
The Board of Directors believes that the availability of stock options is an
important factor in the Company's ability to attract and retain experienced key
employees and to provide incentives for such employees to exert their best
efforts for the Company. The Board of Directors believes that the remaining
shares available for grant under the Incentive Plan are insufficient to
accomplish these purposes.
 
DESCRIPTION OF INCENTIVE PLAN
 
    ELIGIBILITY.  All permanent employees of the Company and its subsidiaries,
including employees who are officers or directors, are eligible to participate
in the Incentive Plan.
 
    ADMINISTRATION.  The Incentive Plan is administered by the Board of
Directors. The Board of Directors may delegate authority to administer the
Incentive Plan to a committee of the Board of Directors consisting of two or
more directors. The Board of Directors, or such committee of the Board of
Directors with authority to administer the Incentive Plan, shall hereinafter be
referred to as the "Administrator".
 
    TERM OF PLAN.  The Incentive Plan became effective in May 1996 and will
continue until options have been exercised and shares have been awarded or sold
and are free of restrictions with respect to all shares reserved. However, no
incentive stock option may be granted under the Incentive Plan on or after the
tenth anniversary of the Incentive Plan's adoption by the Board of Directors.
The Administrator has the power to terminate the Incentive Plan at any time,
except with respect to options or stock subject to restrictions already
outstanding.
 
    AMENDMENT.  The Board of Directors may amend or modify the Incentive Plan at
any time without approval of the stockholders; provided, however, that
stockholder approval is required for any amendment which increases the total
number of shares that may be awarded or purchased under the Incentive Plan or
otherwise changes the Plan so as to require stockholder approval under
applicable law. No amendment or modification may change or modify any option or
award already granted without the consent of the holder of such option or award.
 
    CHANGE OF CONTROL.  If the outstanding shares of Common Stock of the Company
are increased or decreased or changed into or exchanged for a different number
or kind of shares or other securities of the Company by reason of any
reorganization, merger, consolidation, stock split, stock dividend or otherwise,
the Administrator may make appropriate adjustment in the number and kind of
shares for which grants,
 
                                       11
<PAGE>
sales and awards may be made under the Plan and in the number and kind of shares
as to which outstanding grants, sales and awards shall be exercisable. In the
event of a dissolution of the Company or a merger, consolidation or plan of
exchange affecting the Company, the Administrator may in its discretion provide
that prior to such event, optionees will have the right to exercise options
without any limitation on exercisability.
 
    STOCK OPTIONS.  The Administrator determines the persons to whom options are
granted, the option price, the number of shares to be covered by each option,
the period of each option, the times at which options may be exercised, whether
the option is an incentive stock option or a nonstatutory option and the other
terms applicable to each option. If the option is an incentive stock option, the
option price cannot be less than the fair market value of the Common Stock on
the date of grant and the option may not be exercised after the expiration of
ten years from the date of grant. If an optionee receiving an incentive stock
option at the time of grant owns stock representing more than 10 percent of the
combined voting power of the Company, (i) the option price may not be less than
110 percent of the fair market value of the Common Stock on the date of grant
and (ii) such option may not be exercisable after the expiration of five years
from the date of grant. To the extent that the aggregate fair market value
(determined as of the date of grant) of the stock with respect to which
incentive stock options become exercisable for the first time by an employee in
any calendar year exceeds $100,000, such excess shall be treated as a
nonstatutory stock option. If the option is a nonstatutory stock option, the
option price may not be less than 50 percent of the fair market value of the
Common Stock on the date of the grant. Nonstatutory stock options may not be
exercised after 10 years and seven days from the date of grant. No monetary
consideration is paid to the Company upon the granting of options.
 
    Options are nontransferable except on death of the holder, and are
exercisable in accordance with the terms of an option agreement entered into at
the time of the grant between the Company and the optionee. Options may be
exercised only while an optionee is employed by the Company or a subsidiary or
(i) within 12 months following termination of employment by reason of death or
disability or (ii) within the time specified in the optionee's option agreement
following termination for any other reason. The purchase price for shares
purchased pursuant to exercise of options must be paid in cash, a promissory
note, cashless exercise, in shares of Common Stock, which shares if acquired
directly from the Company have been held by the optionee for at least six
months, or, with the consent of the Administrator, held for a lesser period, or
in a combination of cash and Common Stock, as determined by the Administrator.
With the consent of the Administrator, an optionee may request the Company to
automatically apply the shares received upon the exercise of a portion of an
option (even though stock certificates have not yet been issued) to satisfy the
exercise price for additional portions of the option.
 
    Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code")
limits the deductibility of compensation paid to certain executive officers of
the Company. To maximize the Company's ability to deduct compensation
attributable to options or SARs (as described and defined below) granted to such
persons, the Incentive Plan provides that no employee may be granted, in any
fiscal year of the Company, options or SARs to purchase more than 500,000 shares
of Common Stock, provided, however, that in connection with an employee's
initial employment, he or she may be granted options or SARs to purchase up to
an additional 500,000 shares of Common Stock.
 
    STOCK APPRECIATION RIGHTS.  Stock appreciation rights ("SARs") may be
granted under the Incentive Plan, subject to the terms prescribed by the
Administrator. SARs may, but need not, be granted in connection with an option
grant or an outstanding option previously granted under the Incentive Plan. A
SAR gives the holder the right to payment from the Company of an amount equal in
value to the excess of the fair market value of a share of Common Stock of the
Company on the date of exercise over its fair market value on the date of grant,
or if granted in connection with an option, the option price per share under the
option to which the SAR is related. A SAR is exercisable only at the times
established by the Administrator. If a SAR is granted in connection with an
option, it is exercisable only to the extent and on the same conditions that the
related option is exercisable. If a SAR is granted independent of an option, it
is not exercisable later than ten years and seven days from the date of grant.
Payment by the Company upon exercise of a SAR may be made in shares of Common
Stock, in cash, or partly in shares of Common
 
                                       12
<PAGE>
Stock and partly in cash, as determined by the Administrator. The Administrator
may withdraw any SAR granted under the Incentive Plan at any time and may impose
any conditions upon the exercise of a SAR or adopt rules affecting the rights of
holders of SARs. The existence of SARs, as well as certain bonus rights
described below, may require charges to income for accounting purposes
(typically recognized, over the life of the right) based upon the amount of
appreciation, if any, in the market value of the Common Stock over the exercise
price of shares subject to SARs or bonus rights.
 
    STOCK BONUS AWARDS.  The Administrator may award Common Stock to employees
as a stock bonus under the Incentive Plan. The Administrator will determine the
employees to receive awards, the number of shares to be awarded and the time of
the award. Stock received as a stock bonus is subject to the terms, conditions
and restrictions determined by the Administrator at the time the stock is
awarded.
 
    RESTRICTED STOCK.  The Incentive Plan provides that the Company may issue
restricted stock to employees in such amounts, for such consideration, subject
to such restrictions and on such terms as the Administrator may determine. No
restricted stock may be issued for consideration less than 50 percent of the
fair market value of the Common Stock at the time of issuance, nor may any of
the issued restricted shares become freely transferable or free from restriction
within six months of the date the restricted stock is issued. All shares of
restricted stock issued under the Incentive Plan will be subject to a purchase
agreement between the Company and the recipient of the restricted stock.
 
    CASH BONUS RIGHTS.  The Administrator may grant cash bonus rights in
connection with option grants, bonus stock awards and restricted stock sales
under the Incentive Plan. Bonus rights may be used to provide cash to employees
for the payment of taxes in connection with awards under the Incentive Plan.
Bonus rights granted in connection with options entitle the optionee to a cash
bonus if and when the related option is exercised or terminates in connection
with the exercise of a SAR related to the option. If the shares are purchased on
the exercise of an option, the amount of the bonus is equal to the difference
between the aggregate exercise price of the surrendered option and the fair
market value of shares subject to the option on the exercise date, multiplied by
a bonus percentage determined by the Administrator, not to exceed 40 percent. If
an optionee exercises a related SAR in connection with the termination of an
option, the bonus amount is determined by multiplying the total fair market
value of the shares and cash received upon exercise of the SAR by the applicable
bonus percentage, not to exceed 40 percent. Bonus rights granted in connection
with stock bonuses entitle the recipient to a cash bonus, in an amount
determined by the Administrator, at the time the stock is awarded or at such
time as any restrictions to which the stock is subject lapse. Bonus rights
granted in connection with restricted stock purchases entitle the recipient to a
cash bonus in an amount determined by the Administrator. Bonus rights granted in
connection with restricted stock purchases or stock bonuses terminate in the
event that restricted stock is repurchased by the Company or forfeited by the
holder pursuant to the restrictions.
 
    As mentioned above, Section 162(m) of the Code limits the deductibility of
compensation paid to certain executive officers of the Company. To preserve the
deductibility of compensation attributable to stock bonus awards, restricted
stock sales and cash bonus rights, the Administrator has the discretion to set
performance goals which, depending on the extent to which they are met during
the applicable period, shall determine the number or value of the SARs, stock
bonus awards, sales of restricted stock or cash bonus rights that may be granted
to the participants. The performance goals applicable to a grant, sale or award
shall provide for a targeted level or levels of achievement by the Company based
on any or all of the following for the performance period: corporate
profitability; growth in sales; growth in income; share price appreciation; and
return on investment. Further, the maximum value of all stock bonus awards,
restricted stock sales or cash bonus rights that an individual may receive for a
fiscal year is 2.5% of operating profit for such fiscal year.
 
PLAN BENEFITS
 
    The following table shows the number of options granted and the average
price at which the options were granted in fiscal 1998 to the five named
executive officers, all current executive officers as a group,
 
                                       13
<PAGE>
and all employees, including all current officers who are not executive
officers, as a group. (Directors who are not employees are not eligible to
receive shares from this plan.)
 
<TABLE>
<CAPTION>
                                                                                      OPTION GRANTS  AVERAGE PRICE
NAME AND POSITION                                                                     (# OF SHARES)   (PER SHARE)
- ------------------------------------------------------------------------------------  -------------  -------------
<S>                                                                                   <C>            <C>
Cyrus Y. Tsui, Chairman of the Board,                                                     140,036(1)   $   65.54
 President and Chief Executive Officer
 
Steven A. Laub, Senior Vice President and COO                                              45,000      $   66.25
 
Stephen A. Skaggs, Senior Vice President and CFO                                           35,000      $   66.25
 
Kenneth K. Yu, Vice President and                                                          20,000      $   66.25
 Managing Director, Lattice Asia
 
Jonathan K. Yu, Corporate Vice                                                             15,000      $   66.25
 President - Business Development
 
All current executive officers as a group (12 persons)                                    363,036(2)   $   65.18
 
All employees, including all current officers
 who are not executive officers, as a group (430 persons)                                 552,005      $   61.25
</TABLE>
 
- ------------------------------
 
(1) 8,786 shares were issued pursuant to a stock bonus as detailed previously
    under the Summary Compensation Table. 131,250 options were granted from the
    prior stock incentive plan (the 1988 Stock Incentive Plan) in fiscal 1998.
    The 1988 Stock Incentive Plan has now expired and future grants will be made
    from the 1996 Stock Incentive Plan.
 
(2) Includes those shares and options described in footnote (1).
 
TAX CONSEQUENCES
 
    Certain options authorized to be granted under the Incentive Plan are
intended to qualify as "incentive stock options" for federal income tax
purposes. Under federal income tax law currently in effect, the optionee will
recognize no income upon grant or exercise of the incentive stock option;
however, the amount by which the fair market value of shares issued upon
exercise of an incentive stock option exceeds the option price is an item of tax
preference to the optionee for purposes of the alternative minimum tax. If an
optionee exercises an incentive stock option and does not dispose of any of the
option shares within two years following the date of grant and within one year
following the date of exercise, then any gain realized upon subsequent
disposition will be treated as long-term capital gain for federal income tax
purposes. If an optionee disposes of shares acquired upon exercise of an
incentive stock option before the expiration of either the one-year holding
period or the two-year waiting period, any amount realized will be taxable for
federal income tax purposes as ordinary income in the year of such disqualifying
disposition to the extent that the lesser of the fair market value of the shares
on the exercise date or the fair market value of the shares on the date of
disposition exceeds the exercise price. The Company will not be allowed any
deduction for federal income tax purposes at either the time of the grant or
exercise of an incentive stock option. Upon any disqualifying disposition by an
optionee, the Company will be entitled to a deduction to the extent the optionee
realizes income.
 
    Certain options authorized to be granted under the Incentive Plan will be
treated as non-statutory stock options for federal income tax purposes. Under
federal income tax law currently in effect, no income is realized by the grantee
of a nonstatutory stock option pursuant to the Incentive Plan until the option
is exercised. At the time of exercise of a nonstatutory stock option, the
optionee will realize ordinary income, and the Company will be entitled to a
deduction, in the amount by which the fair market value of the shares subject to
the option at the time of exercise exceeds the exercise price. Upon the sale of
shares acquired upon exercise of a nonstatutory stock option, the excess of the
amount realized from the sale over the market value for the shares on the date
of exercise will be taxable as long or short term capital gain, depending on the
holding period.
 
    An employee who receives stock in connection with the performance of
services will generally realize taxable income at the time of receipt unless the
shares are substantially nonvested for purposes of Section
 
                                       14
<PAGE>
83 of the Code. Absent an election under Section 83(b), an employee who receives
substantially nonvested shares under the Incentive Plan will realize taxable
income as and when the shares substantially vest. The Company will be entitled
to a tax deduction in the amount includible as income by the employee at the
time or times the employee recognizes income with respect to the shares. A
participant who receives a cash payment under the Incentive Plan will generally
recognize income equal to the amount of the payment when such payment is
received, and the Company will generally be entitled to a deduction equal to the
income recognized by the participant.
 
REQUIRED VOTE
 
    The approval of the amendment to the 1996 Stock Incentive Plan requires the
affirmative vote of a majority of the Votes Cast on this matter at the Annual
Meeting. See "Information Concerning Solicitation and Voting - General".
 
    THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" APPROVAL
OF THE AMENDMENT TO THE 1996 STOCK INCENTIVE PLAN.
 
       PROPOSAL 3: RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
 
    In May 1998, the Board of Directors appointed Price Waterhouse LLP to act as
the independent accountants of the Company for the fiscal year ending April 3,
1999, subject to ratification of the appointment by the stockholders. Price
Waterhouse LLP has served as the Company's independent accountants for the last
eleven fiscal years. Representatives of Price Waterhouse LLP have been invited
and are expected to attend the Annual Meeting, will be given the opportunity to
make a statement if they wish to do so and are expected to be available to
respond to appropriate questions.
 
REQUIRED VOTE
 
    The proposal to ratify the appointment of Price Waterhouse LLP requires the
affirmative vote of a majority of the Votes Cast at the Annual Meeting. See
"Information Concerning Solicitation and Voting - General". In the event of a
negative vote on such ratification, the Board will reconsider its selection.
 
    THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
RATIFICATION OF PRICE WATERHOUSE LLP AS THE COMPANY'S INDEPENDENT ACCOUNTANTS
FOR THE FISCAL YEAR ENDING APRIL 3, 1999.
 
                                 ANNUAL REPORT
 
    The Company's Annual Report to Stockholders for the fiscal year ended March
28, 1998 is transmitted herewith. The Company will furnish without charge, upon
the written request of any person who was a stockholder or a beneficial owner of
Common Stock of the Company at the close of business on June 23, 1998, a copy of
the Company's Annual Report on Form 10-K filed with the Securities and Exchange
Commission for its most recent fiscal year, including financial statement
schedules but not including exhibits. Requests should be directed to the
attention of the Secretary of the Company at the address set forth in the Notice
of Annual Meeting immediately preceding this Proxy Statement.
 
                                 OTHER BUSINESS
 
    The Board of Directors does not intend to present any business for action at
the meeting other than the election of directors and the proposals set forth
herein, nor does it have knowledge of any matters which may be presented by
others. If any other matter properly comes before the meeting, the persons named
in the accompanying form of proxy intend to vote the shares they represent as
the Board of Directors may recommend.
 
                        METHOD AND COST OF SOLICITATION
 
    The cost of solicitation of proxies will be paid by the Company. In addition
to solicitation by mail, employees of the Company, for no additional
compensation, may request the return of proxies personally
 
                                       15
<PAGE>
or by telephone, telecopy or telegram. The Company will, on request, reimburse
brokers and other persons holding shares for the benefit of others for their
expenses in forwarding proxies and accompanying material and in obtaining
authorization from beneficial owners of the Company's stock to execute proxies.
 
                             STOCKHOLDER PROPOSALS
 
    A stockholder proposal to be considered for inclusion in proxy material for
the Company's August 1999 Annual Meeting of Stockholders must be received by the
Company not later than February 25, 1999 in order that it may be included in the
Proxy Statement and form of proxy relating to that meeting.
 
    It is important that your shares be represented at the meeting, regardless
of the number of shares that you hold. Therefore, whether or not you expect to
be present at the meeting, please sign the accompanying form of proxy and return
it in the enclosed stamped return envelope.
 
                                          BY ORDER OF THE BOARD OF DIRECTORS
 
                                          Stephen A. Skaggs
                                          SECRETARY
 
Hillsboro, Oregon
July 7, 1998
 
                                       16
<PAGE>
                                   APPENDIX A
                       LATTICE SEMICONDUCTOR CORPORATION
                           1996 STOCK INCENTIVE PLAN
                            (as amended May 5, 1998) 

    1.   PURPOSE.  The purpose of this 1996 Stock Incentive Plan (the "Plan") is
to enable  Lattice  Semiconductor Corporation  (the  "Company") to  attract  and
retain  experienced and  able employees and  to provide  additional incentive to
these  employees  to  exert  their  best   efforts  for  the  Company  and   its
stockholders.
 
    2.  SHARES SUBJECT TO THE PLAN.  Subject to adjustment as provided below and
in  paragraph 12, the stock to be offered under the Plan shall consist of shares
of the Company's Common Stock ("Stock"), and the number of shares of Stock  that
may  be  issued  pursuant to  this  Plan  shall not  exceed,  in  the aggregate,
4,300,000 shares. Such shares  may be authorized and  unissued shares or may  be
treasury  shares. If an option granted under  the Plan expires or terminates for
any reason without having been exercised in full, the unpurchased shares subject
to such option shall again be available under the Plan. If Stock sold or awarded
as a bonus  under the Plan  is forfeited to  the Company or  repurchased by  the
Company  at its original purchase price pursuant to applicable restrictions, the
number of shares  forfeited or repurchased  shall again be  available under  the
Plan;  PROVIDED, however, that,  Stock which has actually  been issued under the
Plan and is not  subject to a  repurchase right at  its original purchase  price
shall  not in any event  be returned to the Plan  and shall not become available
for future  distribution under  the Plan.  Stock issued  under the  Plan may  be
subject   to  such  restrictions   on  transfer,  repurchase   rights  or  other
restrictions as determined by the Board of Directors of the Company (the  "Board
of Directors").
 
    3.  EFFECTIVE DATE AND DURATION OF PLAN.
 
        (a)   EFFECTIVE DATE.   The Plan shall become  effective when adopted by
    the Board of Directors. Options may be  granted and Stock may be awarded  as
    bonuses  or sold  under the Plan  at any  time after the  effective date and
    before termination of the Plan.
 
        (b)   DURATION.    The Plan  shall  continue  in effect  until,  in  the
    aggregate,  options  and stock  appreciation  rights have  been  granted and
    exercised and Stock has been awarded as bonuses or sold and the restrictions
    on any such Stock  have lapsed on  all shares available  for the Plan  under
    paragraph  2  (subject to  any  adjustments under  paragraph  12); provided,
    however, that  unless  sooner  terminated  by the  Board  of  Directors,  no
    incentive  stock options shall be granted  on or after the tenth anniversary
    of the effective date. The Board  of Directors may suspend or terminate  the
    Plan  at any  time except with  respect to  options and to  Stock subject to
    restrictions then outstanding under the  Plan. Termination shall not  affect
    any  right  of the  Company to  repurchase shares  or the  forfeitability of
    shares issued under the Plan.
 
    4.  ADMINISTRATION.
 
        (a)  COMPOSITION OF ADMINISTRATOR.
 
           (i)   MULTIPLE ADMINISTRATIVE  BODIES.   If permitted  by Rule  16b-3
       promulgated  under the Securities  Exchange Act of  1934, as amended (the
       "Exchange Act") ("Rule 16b-3") and the legal requirements relating to the
       administration of stock  option plans under  applicable securities  laws,
       Delaware  corporate law and the Internal Revenue Code of 1986, as amended
       (the "Code")  ("Applicable  Laws"),  the  Plan  may  (but  need  not)  be
       administered  by  different  administrative bodies  with  respect  to (A)
       members of the Board  of Directors ("Directors")  who are employees,  (B)
       officers  who  are  not  Directors  and  (C)  employees  who  are neither
       Directors nor officers.
 
           (ii)  ADMINISTRATION WITH  RESPECT TO DIRECTORS  AND OFFICERS.   With
       respect  to grants,  awards and  sales to  eligible participants  who are
       officers or Directors of the Company,  the Plan shall be administered  by
       (A)   the   Board  of   Directors,  if   the   Board  of   Directors  may
 
                                      A-1
<PAGE>
       administer the Plan in compliance with Rule 16b-3 as it applies to a plan
       intended to qualify thereunder as a discretionary grant or award plan, or
       (B) a committee designated  by the Board of  Directors to administer  the
       Plan,  which committee shall  be constituted (1)  in such a  manner as to
       permit the  Plan to  comply  with Rule  16b-3 as  it  applies to  a  plan
       intended to qualify thereunder as a discretionary grant or award plan and
       (2) in such a manner as to satisfy the Applicable Laws.
 
           (iii)    ADMINISTRATION  WITH  RESPECT TO  GRANTS,  AWARDS  AND SALES
       INTENDED TO QUALIFY AS PERFORMANCE-BASED  COMPENSATION.  With respect  to
       grants,  awards and sales  to eligible participants  that are intended to
       qualify as "performance-based compensation" within the meaning of Section
       162(m) of  the  Code, the  Plan  shall  be administered  by  a  committee
       designated  by the Board  of Directors, which  committee shall consist of
       two or more members of the Board who are not employees of the Company and
       who otherwise  qualify  as  "outside directors"  within  the  meaning  of
       Section 162(m) of the Code.
 
           (iv)   ADMINISTRATION WITH RESPECT TO OTHER PERSONS.  With respect to
       grants, awards  and  sales  to  eligible  participants  who  are  neither
       Directors  nor officers of the Company, the Plan shall be administered by
       (A) the Board of Directors or (B) a committee designated by the Board  of
       Directors,  which committee shall  be constituted in such  a manner as to
       satisfy the Applicable Laws.
 
           (v)   GENERAL.   Once  a committee  has  been appointed  pursuant  to
       subsection  (ii)  or (iii)  of this  Section  4(a), such  Committee shall
       continue to serve in its designated capacity until otherwise directed  by
       the  Board of  Directors. From  time to time  the Board  of Directors may
       increase the  size  of  any  committee  and  appoint  additional  members
       thereof,  remove members (with or without  cause) and appoint new members
       in substitution therefor, fill vacancies (however caused) and remove  all
       members  of a committee and thereafter  directly administer the Plan, all
       to the extent  permitted by the  Applicable Laws  and, in the  case of  a
       committee  appointed under  subsection (ii),  to the  extent permitted by
       Rule 16b-3 as it applies  to a plan intended  to qualify thereunder as  a
       discretionary grant or award plan.
 
        (b)     POWERS  OF  THE  BOARD   OF  DIRECTORS  OR  ITS  COMMITTEE  (THE
    "ADMINISTRATOR").  Subject to the provisions of the Plan, and in the case of
    a committee,  subject to  the  specific duties  delegated  by the  Board  of
    Directors  to such committee, the Administrator shall have the authority, in
    its discretion:
 
           (i) to determine the fair market value of the Stock;
 
           (ii) to select the  employees and consultants  to whom grants,  sales
       and awards may be made hereunder;
 
          (iii)  to  determine  whether and  to  what extent  grants,  sales and
       awards, or any combination thereof, are made hereunder;
 
          (iv) to  determine the  number of  shares of  Stock to  be covered  by
       grants, sales and awards hereunder;
 
           (v) to approve forms of agreement for use under the Plan;
 
          (vi)  to determine the terms and conditions, not inconsistent with the
       terms of the Plan, of any grants, sales and awards hereunder. Such  terms
       and  conditions include, but are not  limited to, the exercise price, the
       time or times when grants, sales  and awards may be exercised (which  may
       be  based on performance criteria), any vesting acceleration or waiver of
       forfeiture restrictions, and any restriction or limitation regarding  any
       grant,  sale or award, or the shares  of Stock relating thereto, based in
       each case on such factors as  the Administrator, in its sole  discretion,
       shall determine;
 
          (vii) to construe and interpret the terms of the Plan;
 
                                      A-2
<PAGE>
         (viii)  to prescribe, amend and  rescind rules and regulations relating
       to the Plan;
 
          (ix) to determine whether and  under what circumstances grants,  sales
       and  awards may be settled  in cash instead of  Stock or Stock instead of
       cash;
 
           (x) to reduce the exercise price of any grants, sales and awards;
 
          (xi) subject to paragraph 14 of this Plan, to modify or amend  grants,
       sales  and awards, including the ability  to correct any defect or supply
       any omission or reconcile any inconsistency  in the Plan or in any  stock
       bonus, stock purchase or option agreement in the manner and to the extent
       it shall deem expedient to carry the Plan into effect;
 
          (xii)  to authorize any person to execute on behalf of the Company any
       instrument required to effect grants, sales and awards previously granted
       by the Administrator;
 
         (xiii) to determine  the terms and  restrictions applicable to  grants,
       sales and awards and any restricted Stock; and
 
         (xiv)  to make all  other determinations deemed  necessary or advisable
       for administering the Plan.
 
        (c)  EFFECT OF ADMINISTRATOR'S DECISION.  The Administrator's decisions,
    determinations and  interpretations  shall  be  final  and  binding  on  all
    optionees and any other holders of grants, sales and awards.
 
    5.  GRANTS, AWARDS AND SALES.
 
        (a)    TYPE OF  SECURITY.   The  Administrator may,  from time  to time,
    separately or in combination: (i) grant Incentive Stock Options, as  defined
    in  Section 422 of  the Code and  as provided in  paragraph 5(b); (ii) grant
    options other than Incentive  Stock Options ("Non-Statutory Stock  Options")
    as provided in paragraph 5(c); (iii) grant stock appreciation rights or cash
    bonus  rights as  provided in  paragraphs 10 and  11; (iv)  award bonuses of
    Stock as  provided  in  paragraph  5(d);  and  (v)  sell  Stock  subject  to
    restrictions  as provided in paragraph  5(e). The Administrator shall select
    the employees to whom awards shall be made. The Administrator shall  specify
    the  action taken with respect  to each person granted,  awarded or sold any
    option or Stock under the Plan and shall specifically designate each  option
    granted  under the Plan as an  Incentive Stock Option or Non-Statutory Stock
    Option.
 
        (b)  INCENTIVE STOCK OPTIONS.  Incentive Stock Options shall be  subject
    to the following terms and conditions:
 
           (i)  To the extent  that the aggregate  fair market value  of (a) the
       Stock with respect to which options designated as Incentive Stock Options
       plus (b) the shares  of stock of the  Company, any parent and  subsidiary
       with  respect to which other Incentive  Stock Options are exercisable for
       the first time by an optionee during any calendar year under all plans of
       the Company and any parent and subsidiary exceeds $100,000, such  options
       shall  be treated  as Non-Statutory  Stock Options.  For purposes  of the
       preceding sentence,  (a)  Incentive Stock  Options  shall be  taken  into
       account  in the order in which they were granted, and (b) the fair market
       value of the Stock shall be determined as of the time the Incentive Stock
       Option is granted.
 
           (ii) An Incentive Stock  Option may be granted  under the Plan to  an
       employee  possessing more  than 10 percent  of the  total combined voting
       power of  all  classes of  stock  of the  Company  or of  any  parent  or
       subsidiary  of  the Company  only if  the  option price  is at  least 110
       percent of the fair market  value of the Stock  subject to the option  on
       the date it is granted, as described in paragraph 5(b)(v), and the option
       by  its terms is not exercisable after  the expiration of five years from
       the date it is granted.
 
                                      A-3
<PAGE>
          (iii) Incentive Stock Options  may be granted under  the Plan only  to
       employees  of the  Company or  any parent  or subsidiary  of the Company,
       including employees who are directors. Except as provided in paragraph 8,
       no Incentive Stock Option granted under the Plan may be exercised  unless
       at  the time of such exercise the  optionee is employed by the Company or
       any parent or subsidiary of the  Company and shall have been so  employed
       continuously  since the date such option was granted. Absence on leave or
       on account  of  illness or  disability  under rules  established  by  the
       Administrator shall not, however, be deemed an interruption of employment
       for this purpose.
 
          (iv)  Subject to  paragraphs 5(b)(ii)  and 5(b)(iii),  Incentive Stock
       Options granted under the  Plan shall continue in  effect for the  period
       fixed  by the Administrator, except that  no Incentive Stock Option shall
       be exercisable  after the  expiration of  10 years  from the  date it  is
       granted.
 
           (v)   The  option  price  per  share   shall  be  determined  by  the
       Administrator at  the time  of  grant. Except  as provided  in  paragraph
       5(b)(ii), the option price shall not be less than 100 percent of the fair
       market  value of the shares covered by  the Incentive Stock Option at the
       date the option is granted. The fair market value of shares covered by an
       Incentive Stock Option shall be determined by the Administrator.
 
        (c)  NON-STATUTORY STOCK OPTIONS.  Non-Statutory Stock Options shall  be
    subject to the following terms and conditions:
 
           (i) Non-Statutory Stock Options granted under the Plan shall continue
       in  effect  for the  period fixed  by the  Administrator, except  that no
       Non-Statutory Stock Option shall be  exercisable after the expiration  of
       10 years plus 7 days from the date it is granted.
 
           (ii)   The  option  price  per  share  shall  be  determined  by  the
       Administrator at the time of grant. The option price may be more or  less
       than  or equal  to the  fair market  value of  the shares  covered by the
       Non-Statutory Stock Option  on the date  the option is  granted, and  the
       option   price  may  fluctuate  based   on  criteria  determined  by  the
       Administrator, provided that in no event and at no time shall the  option
       price  be less than 50 percent of the  fair market value of the shares on
       the date of  grant. The fair  market value  of shares covered  by a  Non-
       Statutory Stock Option shall be determined by the Administrator.
 
        (d)   STOCK  BONUS.  Stock  awarded as a  bonus shall be  subject to the
    terms, conditions, and restrictions determined  by the Administrator at  the
    time  the Stock  is awarded  as a bonus.  The Administrator  may require the
    recipient to sign  an agreement as  a condition  of the award,  but may  not
    require  the recipient to pay any  money consideration except as provided in
    this  paragraph.  The   agreement  may  contain   such  terms,   conditions,
    representations  and  warranties  as  the  Administrator  may  require.  The
    certificates representing  the  shares  of Stock  awarded  shall  bear  such
    legends as shall be determined by the Administrator.
 
        (e)   RESTRICTED  STOCK.   The Administrator  may issue  shares of Stock
    under the  Plan  for  such consideration  (including  promissory  notes  and
    services)  as  determined by  the Administrator  and with  such restrictions
    concerning transferability,  repurchase  by  the Company  or  forfeiture  as
    determined  by  the  Administrator,  provided that  in  no  event  shall the
    consideration be less than 50  percent of fair market  value at the time  of
    issuance,  nor shall any of the shares  issued hereunder be or become freely
    transferable or not subject  to such restrictions within  six months of  the
    date  such shares are  issued. All shares  of Stock issued  pursuant to this
    paragraph 5(e) shall  be subject  to a  Purchase Agreement,  which shall  be
    executed  by the Company and the prospective recipient of the Stock prior to
    the delivery of certificates representing such shares to the recipient.  The
    Purchase   Agreement   shall   contain  such   terms   and   conditions  and
    representations and  warranties  as  the Administrator  shall  require.  The
    certificates  representing such Stock shall  bear such legends as determined
    by the Administrator.
 
                                      A-4
<PAGE>
    6.  EXERCISE OF OPTIONS.  Except as provided in paragraphs 8 and 11, options
granted under the Plan may be exercised from time to time over the period stated
in each option in such amounts and at  such times as shall be prescribed by  the
Administrator,  provided  that options  shall  not be  exercised  for fractional
shares. Unless otherwise determined by  the Administrator, if the optionee  does
not exercise an option in any one year with respect to the full number of shares
to  which the optionee is entitled in  that year, the optionee's rights shall be
cumulative and the  optionee may purchase  those shares in  any subsequent  year
during the term of the option.
 
    7.  NONTRANSFERABILITY.
 
        (a)   OPTIONS AND AWARDS.  Each  option and award granted under the Plan
    by its terms  shall be  nonassignable and nontransferable  by the  optionee,
    either  voluntarily or by operation of law, except by will or by the laws of
    descent and distribution of the state or country of the optionee's  domicile
    at  the time  of death,  and each  option and  award by  its terms  shall be
    exercisable during the optionee's lifetime only by the optionee.
 
        (b)  STOCK.   Stock issued upon  exercise of an option  or awarded as  a
    bonus  or  sold under  the Plan  may  have, in  addition to  restrictions on
    transfer imposed  by law,  any restrictions  on transfer  determined by  the
    Administrator at the time the grant, sale or award is made.
 
    8.  TERMINATION OF EMPLOYMENT OR DEATH.
 
        (a)  If an  optionee's employment  by the  Company or  by any  parent or
    subsidiary of the  Company is terminated  by retirement or  for any  reason,
    voluntarily  or  involuntarily, with  or without  cause,  other than  in the
    circumstances specified in  paragraph 8(b)  below, any option  held by  such
    optionee  may be exercised at  any time prior to  its expiration date or the
    date  specified  by  the  Administrator  in  the  optionee's  option  grant,
    whichever  is the shorter period, but only if and to the extent the optionee
    was entitled to exercise the option on the date of such termination. Subject
    to such  terms  and  conditions  as the  Administrator  may  determine,  the
    Administrator  may extend the  exercise period any length  of time not later
    than the expiration date of the option  and may increase the portion of  the
    option  that may be exercised on termination, provided that any extension of
    the exercise  period of  an Incentive  Stock Option  shall be  subject to  a
    written  acknowledgment by the optionee  that the extension disqualifies the
    option as an Incentive Stock Option.
 
        (b) If  an optionee's  employment by  the Company  or by  any parent  or
    subsidiary  of  the  Company  is terminated  because  of  death  or physical
    disability (within the meaning of Section 22(e)(3) of the Code), the option,
    including portions  not  yet exercisable,  may  be exercised  prior  to  the
    earlier  of  the expiration  of  12 months  from the  date  of death  or the
    expiration of  the option.  If  an optionee's  employment is  terminated  by
    death,  any option  held by  the optionee shall  be exercisable  only by the
    person or persons  to whom such  optionee's rights under  such option  shall
    pass  by the optionee's will  or by the laws  of descent and distribution of
    the state  or country  of the  optionee's  domicile at  the time  of  death.
    Subject to such terms and conditions as the Administrator may determine, the
    Administrator  may extend the  exercise period any length  of time not later
    than the expiration date of the  option, provided that any extension of  the
    exercise  period of an Incentive Stock Option  shall be subject to a written
    acknowledgment by  the optionee  or the  optionee's personal  representative
    that the extension disqualifies the option as an Incentive Stock Option.
 
        (c)  To the  extent an option  held by  any deceased optionee  or by any
    optionee whose employment is terminated is not exercised within the  limited
    periods  provided above, all  further rights to  purchase shares pursuant to
    such option and all other related rights shall terminate at the end of  such
    periods.
 
    9.   PURCHASE  OF SHARES  PURSUANT TO  OPTION.   Shares may  be purchased or
acquired pursuant to an option granted under  the Plan only upon receipt by  the
Company  of notice in writing  from the optionee of  the optionee's intention to
exercise,   specifying    the   number    of   shares    as   to    which    the
 
                                      A-5
<PAGE>
optionee  desires to  exercise the  option and  the date  on which  the optionee
desires to complete the transaction, which shall not be more than 30 days  after
receipt of the notice, and unless in the opinion of counsel for the Company such
a  representation is not required in order  to comply with the Securities Act of
1933, as amended, containing a representation that it is the optionee's  present
intention  to  acquire  the  shares  for  investment  and  not  with  a  view to
distribution. On or before the date specified for completion of the purchase  of
shares  pursuant to an option, the optionee  must have paid the Company the full
purchase price of such shares in cash  (including cash that may be the  proceeds
of  a loan  from the Company),  in whole or  in part  in shares of  Stock of the
Company previously acquired  and, if  acquired directly or  indirectly from  the
Company,  held for at least six months by the optionee, unless the Administrator
consents to  accepting  Stock held  for  a lesser  period  of time.  Any  shares
surrendered  on payment  for the  exercise of  options shall  be valued  at fair
market value at  the time of  surrender as determined  by the Administrator.  No
shares  shall be  issued until  full payment  therefor has  been made.  With the
consent  of  the  Administrator   an  optionee  may   request  the  Company   to
automatically  apply the  shares received  upon the exercise  of a  portion of a
stock option  (even though  stock  certificates have  not  yet been  issued)  to
satisfy  the  exercise price  for additional  portions of  the option.  With the
consent of the  Administrator the  Company may allow  the exercise  price to  be
satisfied  by  delivery of  a such  documentation as  the Administrator  and any
broker approved  by the  Company,  if applicable,  shall  require to  effect  an
exercise  of the option and delivery to the Company of the sale or loan proceeds
required to pay the exercise price.
 
    10.  STOCK APPRECIATION RIGHTS.
 
        (a)  GRANT.  Stock appreciation rights may be granted under the Plan  by
    the  Administrator,  subject  to such  rules,  terms and  conditions  as the
    Administrator prescribes.
 
        (b)  EXERCISE.
 
           (i) A stock appreciation right shall be exercisable only at the  time
       or  times established by the Administrator. If a stock appreciation right
       is granted in  connection with an  option, then it  shall be  exercisable
       only  to the extent  and on the  same conditions that  the related option
       could be  exercised. Upon  exercise of  a stock  appreciation right,  any
       option  or portion thereof to which  the stock appreciation right relates
       must be  surrendered. Stock  appreciation rights  granted independent  of
       options shall expire not later than 10 years plus 7 days from the date of
       grant.
 
           (ii)  The  Administrator may  withdraw  any stock  appreciation right
       granted under the Plan at any time and may impose any conditions upon the
       exercise of a  stock appreciation  right or adopt  rules and  regulations
       from  time to time affecting the  rights of holders of stock appreciation
       rights. Such rules and regulations may govern the right to exercise stock
       appreciation rights granted  before adoption or  amendment or such  rules
       and regulations as well as stock appreciation rights granted thereafter.
 
          (iii)  Each stock  appreciation right  shall entitle  the holder, upon
       exercise, to  receive from  the Company  in exchange  therefor an  amount
       equal  in value  to the excess  of the fair  market value on  the date of
       exercise of one share of Stock of the Company over its fair market  value
       on  the date  of grant  (or, in  the case  of a  stock appreciation right
       granted in connection with  an option, the option  price per share  under
       the  option to which the stock appreciation right relates), multiplied by
       the number  of shares  covered by  the stock  appreciation right  or  the
       option,  or portion thereof,  that is surrendered.  No stock appreciation
       right shall be  exercisable at a  time that the  amount determined  under
       this  subparagraph is negative. Payment by the Company upon exercise of a
       stock appreciation right may be made  in Stock valued at its fair  market
       value,  in cash, or partly in Stock  and partly in cash, as determined by
       the Administrator.
 
          (iv) The fair market value of  the Stock shall be determined for  this
       purpose by the Administrator.
 
                                      A-6
<PAGE>
           (v)  No fractional  shares shall be  issued upon exercise  of a stock
       appreciation right. In lieu thereof cash  may be paid in an amount  equal
       to  the value of the fraction or, in the discretion of the Administrator,
       the number of shares may be rounded downward to the next whole share.
 
          (vi) Cash  payments of  stock appreciation  rights as  well as  Common
       Stock  issued upon exercise of stock appreciation rights shall be applied
       against the maximum number of shares  of Common Stock that may be  issued
       pursuant  to the Plan.  The number of  shares to be  applied against such
       maximum number of  shares in such  circumstances shall be  the number  of
       shares   subject  to  options  surrendered   upon  exercise  of  a  stock
       appreciation right  or  for  stock appreciation  rights  not  granted  in
       connection with an option, shares equal to the amount of the cash payment
       divided  by the fair market value of a  share of Common Stock on the date
       the stock appreciation right is granted.
 
    11.  CASH BONUS RIGHTS.
 
        (a)  GRANT.  The Administrator may grant bonus rights under the Plan  in
    connection  with (i)  an option  granted or  previously granted,  (ii) Stock
    awarded, or  previously  awarded,  as  a  bonus  and  (iii)  Stock  sold  or
    previously sold under the Plan. Bonus rights will be subject to rules, terms
    and conditions as the Administrator may prescribe.
 
        (b)   BONUS RIGHTS IN CONNECTION WITH OPTIONS.  A bonus right granted in
    connection with an option will entitle an optionee to a cash bonus when  the
    related  option is exercised (or terminates  in connection with the exercise
    of a stock appreciation right related to the option) in whole or in part, or
    at such other time as determined by the Administrator as the bonus right  is
    granted.  If an  optionee purchases shares  and does not  exercise a related
    stock appreciation right, then the amount  of the bonus shall be  determined
    by multiplying the excess of the total fair market value of the shares to be
    acquired  upon the exercise  over the total  option price for  shares by the
    applicable bonus percentage. If the  optionee is exercising a related  stock
    appreciation right in connection with the termination of an option, then the
    bonus  shall be determined by multiplying the total fair market value of the
    shares and cash received pursuant to the exercise of the stock  appreciation
    right  by  the  applicable  bonus  percentage.  For  the  purposes  of  this
    paragraph, the  fair market  value  of shares  shall  be determined  by  the
    Administrator.  The bonus  percentage applicable to  a bonus  right shall be
    determined from time  to time  by the Administrator  but shall  in no  event
    exceed  40 percent of the amount by which the fair market value of the Stock
    received on exercise of the related  option at the time of exercise  exceeds
    the option price of such option.
 
        (c)  BONUS RIGHTS IN CONNECTION WITH STOCK BONUS.  A bonus right granted
    in  connection with Stock awarded as a bonus will entitle the person awarded
    such Stock to a cash bonus at the time the Stock is awarded, at such time as
    restrictions, if any, to which the Stock is subject lapse, or at such  other
    time  as determined by the  Administrator as the bonus  right is granted. If
    Stock awarded is subject to restrictions  and is repurchased by the  Company
    or  forfeited by the holder the bonus  right granted in connection with such
    Stock shall terminate and may not be exercised. The amount of cash bonus  to
    be  awarded and the time  such cash bonus is to  be paid shall be determined
    from time to time by the Administrator.
 
        (d)  BONUS RIGHTS  IN CONNECTION WITH STOCK  PURCHASE.  The bonus  right
    granted  in  connection  with  Stock  purchased  hereunder  (excluding Stock
    purchased pursuant to an option) shall terminate and may not be exercised in
    the event the Stock is repurchased by the Company or forfeited by the holder
    pursuant to restrictions applicable to the  Stock. The amount of cash  bonus
    to be awarded and the time such cash bonus is to be paid shall be determined
    from time to time by the Administrator.
 
    12.   CHANGES IN CAPITAL  STRUCTURE.  If the  outstanding shares of Stock of
the Company are hereafter  increased or decreased or  changed into or  exchanged
for  a different number or kind of shares  or other securities of the Company by
reason   of    any    reorganization,    merger,    consolidation,    plan    of
 
                                      A-7
<PAGE>
exchange,  recapitalization,  reclassification, stock  split-up,  combination of
shares or dividend payable  in shares, appropriate adjustment  shall be made  by
the  Administrator in the number and kind  of shares for which grants, sales and
awards may be  made under the  Plan. In addition,  the Administrator shall  make
appropriate  adjustment in the number and kind of shares as to which outstanding
grants, sales  and  awards,  or  portions thereof  then  unexercised,  shall  be
exercisable.  Adjustments in outstanding options shall be made without change in
the total price applicable to the unexercised  portion of any option and with  a
corresponding  adjustment in  the option price  per share and  shall neither (i)
make the ratio, immediately after  the event, of the  option price per share  to
the  fair market value per share more  favorable to the optionee than that ratio
immediately before the event,  nor (ii) make  the aggregate spread,  immediately
after  the event, between the fair market value of shares as to which the option
is exercisable  and  the option  price  of such  shares  more favorable  to  the
optionee   than  that  aggregate  spread   immediately  before  the  event.  The
Administrator may  also require  that any  securities issued  in respect  of  or
exchanged  for Stock issued hereunder that is subject to restrictions be subject
to similar restrictions. Notwithstanding the foregoing, the Administrator  shall
have  no obligation to effect  any adjustment that would  or might result in the
issuance of  fractional shares,  and any  fractional shares  resulting from  any
adjustment  may be disregarded or  provided for in any  manner determined by the
Administrator.  Any  such  adjustment  made   by  the  Administrator  shall   be
conclusive.   In  the  event  of  dissolution   of  the  Company  or  a  merger,
consolidation or plan of  exchange affecting the Company,  in lieu of  providing
for  options as provided above  in this paragraph 12,  the Administrator may, in
its sole discretion, provide  a 30-day period prior  to such event during  which
optionees  shall have the right to exercise  options in whole or in part without
any limitation on exercisability.
 
    13.  CORPORATE MERGERS, ACQUISITIONS, ETC.  The Administrator may also grant
options and  stock appreciation  rights,  award Stock  bonuses and  issue  Stock
subject  to restrictions having terms, conditions  and provisions that vary from
those specified in this  Plan provided that any  options and stock  appreciation
rights  granted,  any  stock bonuses  awarded  and any  restricted  stock issued
pursuant to this section are granted  in substitution for or in connection  with
the  assumption of, existing  options, stock appreciation  rights, stock bonuses
and restricted  stock granted,  awarded  or issued  by another  corporation  and
assumed  or otherwise agreed to be provided for by the Company pursuant to or by
reason of a transaction involving a corporate merger consolidation,  acquisition
of  property or  stock, separation, reorganization  or liquidation  to which the
Company or a subsidiary is a party.
 
    14.  AMENDMENT OF  PLAN.  The Board  of Directors may at  any time and  from
time  to  time modify  or  amend the  Plan  in such  respects  as it  shall deem
advisable because of changes in the law while  the Plan is in effect or for  any
other  reason. Except as provided in paragraphs  8, 10 and 12, however no change
in an option already  granted or modification of  restrictions on Stock  already
issued shall be made without the written consent of the holder of such option or
Stock.  Furthermore, unless the  Company obtains stockholder  approval in such a
manner and degree as required by applicable law, no amendment or change shall be
made in the Plan that increases the  total number of shares that may be  awarded
or  purchased under  the Plan  or that  otherwise requires  stockholder approval
under applicable law.
 
    15.  APPROVALS.  The obligations of  the Company under the Plan are  subject
to  the approval of state and  federal authorities or agencies with jurisdiction
in the matter. The Company will use  its best efforts to take steps required  by
state  or federal law or applicable regulations, including rules and regulations
of the Securities and  Exchange Commission and any  stock exchange on which  the
Company's  shares may  then be  listed, in connection  any grant,  sale or award
hereunder, or  the  listing of  such  shares  of said  exchange.  The  foregoing
notwithstanding,  the Company shall not be  obligated to issue or deliver shares
of Common Stock under the  Plan if the Company is  advised by its legal  counsel
that  such  issuance  or  delivery would  violate  applicable  state  or federal
securities laws.
 
    16.  EMPLOYMENT RIGHTS.  Nothing in  the Plan, nor any grant, award or  sale
hereunder,  shall confer upon (i) any employee  any right to be continued in the
employment of the Company or any parent  or subsidiary of the Company, or  shall
interfere    in    any    way   with    the    right   of    the    Company   or
 
                                      A-8
<PAGE>
any parent or subsidiary  of the Company  by whom such  employee is employed  to
terminate  such  employee's employment  at  any time,  for  any reason,  with or
without cause, or to increase or decrease such employee's compensation, or  (ii)
any  person engaged by the  Company any right to be  retained or employed by the
Company or  to the  continuation,  extension, renewal,  or modification  of  any
compensation, contract, or arrangement with or by the Company.
 
    17.   RIGHTS AS  A STOCKHOLDER.  The  holder of an  option, the recipient of
Stock awarded as a  bonus or the purchaser  of Stock shall have  no rights as  a
stockholder with respect to any shares covered by any grant, sale or award until
the  date of issue of a stock certificate  to him or her for such shares. Except
as otherwise expressly  provided in the  Plan, no adjustment  shall be made  for
dividends  or other rights for  which the record date is  prior to the date such
stock certificate is issued.
 
    18.  STOCK WITHHOLDING TO SATISFY WITHHOLDING TAX OBLIGATIONS.
 
        (a)   ABILITY TO  USE STOCK  TO SATISFY  WITHHOLDING.   The Company  may
    require any recipient of a grant, sale or award under the Plan to pay to the
    Company  amounts necessary to satisfy any applicable federal, state or local
    tax withholding  requirements.  At  the  discretion  of  the  Administrator,
    optionees  and  award  recipients  may  satisfy  withholding  obligations as
    provided in this Section 18. When an optionee or award recipient incurs  tax
    liability  in connection with a grant, sale or award, which tax liability is
    subject to tax  withholding under  applicable tax  laws (including  federal,
    state  and  local  laws),  the  optionee  may  satisfy  the  withholding tax
    obligation (up to an amount  calculated by applying such optionee's  maximum
    marginal  tax rate) by electing to have  the Company withhold from the Stock
    to be  issued in  connection with  a grant,  sale or  award that  number  of
    shares,  or by  delivering to  the Company  that number  of previously owned
    shares (which, in the case of Stock acquired directly or indirectly from the
    Company, has been held for at least six months), having a fair market  value
    equal  to the amount required  to be withheld. The  fair market value of the
    shares to be withheld or delivered, as the case may be, shall be  determined
    on  the date that the  amount of tax to be  withheld is determined (the "Tax
    Date").
 
        (b)  ELECTION TO HAVE STOCK WITHHELD.   All elections by an optionee  to
    have  Stock withheld or to deliver  previously owned Shares pursuant to this
    Section  18  shall  be  made  in  writing  in  a  form  acceptable  to   the
    Administrator and shall be subject to the following restrictions:
 
           (i) the election must be made on or prior to the applicable Tax Date;
 
           (ii)  all elections shall be subject to the consent or disapproval of
       the Administrator; and
 
          (iii) if the optionee is subject to liability under Section 16 of  the
       Exchange  Act, the election must comply with the applicable provisions of
       Rule 16b-3  and  shall  be  subject  to  such  additional  conditions  or
       restrictions  as may  be required thereunder  to qualify  for the maximum
       exemption from  Section 16  of  the Exchange  Act  with respect  to  Plan
       transactions.
 
        (c)  SECTION 83(b) ELECTIONS.  In the event that (i) an election to have
    Shares  withheld is  made by  an optionee, (ii)  no election  is filed under
    Section 83(b)  of the  Code  by such  optionee and  (iii)  the Tax  Date  is
    deferred  under Section 83 of the Code,  the optionee shall receive the full
    number of shares subject to  the grant, sale or award,  as the case may  be,
    but  such optionee shall be unconditionally  obligated to tender back to the
    Company the proper number of shares on the Tax Date.
 
    19.  RULE 16b-3.  Grants, sales and awards to Insiders must comply with  the
applicable provisions of Rule 16b-3 and shall contain such additional conditions
or  restrictions  as  may be  required  thereunder  to qualify  for  the maximum
exemption from Section 16 of the Exchange Act with respect to Plan transactions.
 
    20.  PERFORMANCE-BASED COMPENSATION.
 
        (a)  OPTIONS AND STOCK  APPRECIATION RIGHTS.  The following  limitations
    shall  apply to grants of options and stock appreciation rights to employees
    of the Company.
 
                                      A-9
<PAGE>
           (i) No employee shall be granted, in any fiscal year of the  Company,
       options  or stock appreciation rights to purchase, in the aggregate, more
       than 500,000 shares of Stock.
 
           (ii) In connection with  his or her  initial employment, an  employee
       may  be granted options and stock appreciation rights to purchase, in the
       aggregate, up to an  additional 500,000 shares of  Stock which shall  not
       count against the limit set forth in subsection (i) above.
 
          (iii)  The foregoing limitations shall  be adjusted proportionately in
       connection with any change in  the Company's capitalization as  described
       in Section 12.
 
          (iv) If an option or stock appreciation right is cancelled in the same
       fiscal  year  of the  Company  in which  it  was granted  (other  than in
       connection with a  transaction described  in Section  12), the  cancelled
       option  will be counted  against the limits set  forth in subsections (i)
       and (ii) above. For this purpose, if  the exercise price of an option  is
       reduced,  the transaction will be treated as a cancellation of the option
       and the grant of a new option.
 
        (b)  OTHER GRANTS, AWARDS AND  SALES.  The Administrator shall have  the
    discretion  to set Performance Goals (as  defined below) which, depending on
    the extent to which they are  met during the Performance Period (as  defined
    below),  shall  determine the  number or  value of  grants, awards  or sales
    (excluding options)  that shall  be made  to Covered  Employees (as  defined
    below). The Performance Goals shall be set by the Administrator on or before
    the  latest date  permissible to  enable the awards  or sales  to qualify as
    "performance-based compensation" within the meaning of Section 162(m) of the
    Code. Each grant,  sale or  award pursuant to  this Section  20(b) shall  be
    evidenced  by an  agreement that shall  specify the  Performance Period, and
    such  other  terms  and  conditions  as  the  Administrator,  in  its   sole
    discretion,  shall  determine. To  the extent  necessary to  qualify grants,
    awards or sales  as "performance-based compensation"  within the meaning  of
    Section  162(m) of the Code, the Administrator shall certify in writing that
    the Performance  Goals applicable  to  such grant,  sale  or award  for  the
    relevant Performance Period have been satisfied. Notwithstanding anything to
    the  contrary contained herein, the maximum  value of all grants, awards, or
    sales pursuant to this  Section 20(b) that an  individual may receive for  a
    fiscal year is 2.5% of operating profit for such fiscal year.
 
        (c)    DEFINITIONS.   As used  herein,  the following  definitions shall
    apply:
 
           (i) "COVERED EMPLOYEE" means a "covered employee" within the  meaning
       of Section 162(m) of the Code.
 
           (ii)  "PERFORMANCE GOAL"  means the goal  or goals  determined by the
       Administrator, in  its discretion,  to be  applicable with  respect to  a
       grant,  sale  or   award  intended   to  qualify   as  "performance-based
       compensation" within the meaning of  Section 162(m) of the Code  pursuant
       to   this  Section  20(b).  As   determined  by  the  Administrator,  the
       Performance Goal(s) applicable to  a grant, sale  or award shall  provide
       for  a targeted level or  levels of achievement based  upon any or all of
       the following for the Performance Period: corporate profitability; growth
       in sales;  growth in  income;  share price  appreciation; and  return  on
       investment.  The Performance Goal(s) may differ from employee to employee
       and from grant, sale or award to grant, sale or award.
 
           (iii) "PERFORMANCE PERIOD" means the period of time during which  the
       Performance Goals must be met.
 
                                      A-10
<PAGE>
 
                    LATTICE SEMICONDUCTOR CORPORATION
           PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
             ANNUAL MEETING OF STOCKHOLDERS, AUGUST 10, 1998

The undersigned stockholder of LATTICE SEMICONDUCTOR CORPORATION, a Delaware 
corporation, hereby acknowledges receipt of the Notice of Annual Meeting of 
Stockholders and Proxy Statement, each dated July 7, 1998, and hereby 
appoints Cyrus Y. Tsui and Stephen A. Skaggs, and each of them, proxies and 
attorneys-in-fact, with full power to each of substitution, on behalf and in 
the name of the undersigned, to represent the undersigned at the Annual 
Meeting of Stockholders of Lattice Semiconductor Corporation to be held on 
August 10, 1998, at 1:00 p.m., Pacific Time, at The Greenwood Inn, 10700 S.W. 
Allen Blvd., Beaverton, OR 97005, and at any adjournment or adjournments 
thereof, and to vote all shares of Common Stock which the undersigned would 
be entitled to vote if then and there personally present, on the matters set 
forth below:

                       -  FOLD AND DETACH HERE  -
<PAGE>

Please mark your votes as indicated in this example   /X/



1. Election of Mark O. Hatfield and Cyrus Y. Tsui as Class III Directors:

FOR all nominees listed above except as noted below.  / /

WITHHOLD authority to vote for all nominees listed below.  / /

                                                     FOR   AGAINST   ABSTAIN
2. Proposal to approve an amendment to the           / /     / /       / /
   Company's 1996 Stock Incentive Plan increasing 
   the number of shares reserved for issuance 
   thereunder by 2,300,000 shares:

                                                     FOR   AGAINST   ABSTAIN
3. Proposal to ratify the appointment of Price       / /     / /       / /
   Waterhouse LLP as the independent accountants 
   of the Company for the fiscal year ending 
   April 3, 1999:


4. In their discretion, the proxies are authorized 
   to vote upon such other matter or matters which 
   may properly come before the meeting or any 
   adjournment or adjournments thereof.

THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED HEREOF.  IF 
NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE 
NOMINEES FOR DIRECTOR, FOR APPROVAL OF THE AMENDMENT TO INCREASE SHARES IN 
THE COMPANY'S 1996 STOCK INCENTIVE PLAN, AND FOR THE RATIFICATION OF THE 
APPOINTMENT OF PRICE WATERHOUSE LLP AS INDEPENDENT ACCOUNTANTS OF THE 
COMPANY. IF ANY OTHER BUSINESS PROPERLY COMES BEFORE THE MEETING, THIS PROXY 
WILL BE VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS OF MANAGEMENT.

PLEASE MARK, DATE, SIGN AND RETURN THE PROXY CARD PROMPTLY.


(Signature)________________________________________

(Signature)________________________________________  DATED:___________, 1998

(This proxy should be marked, dated and signed by the stockholder(s) exactly 
as his or her name appears hereon, and returned promptly in the enclosed 
envelope. Persons signing in a fiduciary capacity should so indicate.  If 
shares are held by joint tenants or as community property, both should sign.)

                      -  FOLD AND DETACH HERE  -


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