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

                                    FORM 10-K

      (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934
                    For the fiscal year ended January 2, 1998
                                       OR

          ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
           For the transition period from _____________ to ___________

                         Commission File Number: 0-18645

                           TRIMBLE NAVIGATION LIMITED
             (Exact name of Registrant as specified in its charter)
 
           California                                 94-2802192
(State or other jurisdiction of           (I.R.S. Employer Identification No.)
incorporation or organization)               
              

      645 North Mary Avenue 
           Sunnyvale, CA                               94088
(Address of principal executive offices)             (Zip Code)
                    
     
       Registrant's telephone number, including area code: (408) 481-8000

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

           Securities registered pursuant to Section 12(g) of the Act:

                                  Common Stock
                                (Title of Class)

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

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

     The  aggregate  market  value  of the  registrant's  Common  Stock  held by
non-affiliates of the registrant was approximately  $430,009,338 as of March 13,
1998,  based upon the closing sale price of the common stock on the Nasdaq Stock
Market for that date.
 
     There were 23,243,748  shares of the  registrant's  Common Stock issued and
outstanding as of March 13, 1998.

                       DOCUMENTS INCORPORATED BY REFERENCE


     Items 10, 11, 12 and 13 of Part III  incorporate  information  by reference
from  the   registrant's   Proxy  Statement  for  its  1998  Annual  Meeting  of
Shareholders  to be held on May 5, 1998.  Except  with  respect  to  information
specifically  incorporated by reference into this Form 10-K, the Proxy Statement
is not deemed to be filed as a part hereof.



<PAGE>



     This  report  contains  forward-looking  statements  within the  meaning of
Section 27A of the  Securities  Act of 1933 and  Section  21E of the  Securities
Exchange  Act of  1934.  Actual  results  could  differ  materially  from  those
indicated in the forward-looking  statements as a result of the risk factors set
forth in, or  incorporated  by  reference  into,  this  report.  The Company has
attempted to identify  forward-looking  statements  in this report by placing an
asterisk (*) in the left-hand margin of paragraphs containing such material.

                                     PART I


Item 1. Business

General

     Trimble  Navigation  Limited,  a  California  corporation  (Trimble  or the
Company),  is a leader in the emerging markets for  satellite-based  navigation,
position and  communication  data products using the Global  Positioning  System
(GPS).  Trimble  designs,  manufactures  and markets  electronic  products  that
determine precise geographic location.  The Company's principal products,  which
utilize substantial amounts of proprietary software and firmware, are integrated
systems  for  collecting,  analyzing  and  displaying  position  data  in  forms
optimized for specific end-user applications.
 
*    Trimble has defined and currently addresses a number of markets
for  its  GPS  products:  surveying,  mapping,  marine  navigation,  mining  and
construction, tracking systems, aviation, military systems, OEM and cellular and
mobile computing  platforms.  The Company has developed or is developing systems
for seismology,  geographic information systems,  delivery fleets, buses, ships,
airplanes,  automobiles and hand-held units. Trimble anticipates that additional
markets will emerge to make use of the highly accurate  position data obtainable
from GPS.

Background

     Precise determination of locations both on and above the earth's surface is
a fundamental requirement for many human activities.  For example, position data
is used for  navigation  on land,  sea and air, and to conduct  surveys and draw
maps. Previous technologies have limited users to simultaneous  determination of
only two  dimensions-latitude  and  longitude-while  altitude and time  required
separate  measurements with different  equipment.  GPS technology provides users
with all of these  measurements  using  one  instrument.  GPS is a system  of 24
orbiting Navstar satellites  established and funded by the U.S.  Government.  On
April 27, 1995, GPS was declared to have achieved Full Operational Capability by
the U.S.  Air  Force  Space  Command.  The U.S.  Government  intends  for GPS to
complement  or replace many other forms of  electronic  navigation  and position
data  systems.  GPS  offers  major  advantages  over  previous  technologies  in
precision and accuracy with worldwide  coverage in three dimensions (in addition
to providing time and velocity measurement capabilities).

     GPS  positioning  is  based on a  triangulation  technique  that  precisely
measures  distances  from  three  or more  Navstar  satellites.  The  satellites
continuously  transmit  precisely timed radio signals using  extremely  accurate
atomic clocks. A GPS receiver  calculates  distances from the satellites in view
by determining  the travel time of the  satellites'  signals.  The receiver then
triangulates  its position using its known distance from various  satellites and
calculates  latitude,  longitude and  altitude.  Under normal  circumstances,  a
stand-alone  GPS  receiver  is able to  calculate  its  position at any point on
earth, in the earth's atmosphere, or in lower earth orbit, to within 100 meters,
24 hours a day.  When a GPS receiver is coupled with a known  precise  position,
accuracies of less than one centimeter are possible.  In addition,  GPS provides
highly accurate time measurement.

*    The usefulness of GPS is dependent on the number and locations of GPS
satellites that are above the horizon at any given time. The current  deployment
of 24 satellites  permits  three-dimensional  worldwide coverage 24 hours a day.
However,  reception of GPS signals requires line-of-sight visibility between the
Navstar  satellites and the receiver,  which can be blocked by buildings,  hills


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<PAGE>



and dense  foliage.  For the  receiver  to  collect a  sufficient  signal,  each
satellite  must be above the horizon and the receiver  must have a line of sight
to  at   least   three   satellites   to   determine   its   location   in   two
dimensions-latitude  and longitude-and at least four satellites to determine its
location in three dimensions-latitude,  longitude, and altitude. The accuracy of
GPS may also be limited by distortion of GPS signals from  ionospheric and other
atmospheric  conditions,  and intentional or inadvertent signal  interference or
Selective  Availability (SA). Selective  Availability,  the largest component of
GPS  distortion,  is controlled by the  Department of Defense and is a currently
activated,  intentional system-wide degradation of stand-alone GPS accuracy from
approximately 25 meters to approximately 100 meters.  Selective Availability may
be  implemented by the Department of Defense in order to deny hostile forces the
highly  accurate  position,  time and velocity  information  supplied by GPS. In
certain military applications,  classified devices are utilized to decode the SA
degradation and return accuracies to their original levels.

     By using a technique  called  "differential  GPS" involving two or more GPS
receivers,  accuracies  can currently be improved to  approximately  one to five
meters for navigation and one  centimeter for survey  applications,  even in the
presence of SA. This technique compensates for a number of potential measurement
distortions,  including  distortions caused by ionospheric and other atmospheric
conditions,  as well as distortions  intentionally introduced into the satellite
data itself,  such as SA.  Differential  GPS involves  placing one receiver at a
known location and continuously comparing its calculated location with its known
location to measure  distortions  in the signal  transmission  and errors in the
satellite  data. At any one time,  such  distortions  and errors are  reasonably
constant  over large  areas,  so that one or more remote GPS  receivers  can use
these  measurements  to correct  their own  position  calculations.  Measurement
corrections can be transmitted either in real-time over a suitable communication
link such as radio or telephone,  or integrated later with accumulated  data, as
is frequently the practice in survey applications.

     Each of  Trimble's  GPS  products is based on  proprietary  GPS  receivers.
Trimble's  GPS  receivers  are capable of tracking  all  satellites  in view and
automatically  selecting  the optimum  combination  of  satellites  necessary to
provide the most  accurate  set of  measurements  possible.  Communications  and
computational modules, such as databases, database management systems, radio and
other  communication  equipment and various user interfaces,  are added to these
receivers to create fully integrated application solutions.

     Navstar  satellites and their ground support systems are complex electronic
systems subject to electronic and mechanical failures and possible sabotage. The
satellites  have  design  lives of 7.5  years and are  subject  to damage by the
hostile  space  environment  in  which  they  operate.   To  repair  damaged  or
malfunctioning  satellites is not economically feasible. If a significant number
of satellites  were to become  inoperable,  there could be a  substantial  delay
before they are  replaced  with new  satellites.  A  reduction  in the number of
operating  satellites would impair the current utility of the GPS system and the
growth of current and additional market opportunities. In addition, there can be
no assurance that the U.S. government will remain committed to the operation and
maintenance of GPS  satellites  over a long period of time, or that the policies
of the U.S.  Government for the use of GPS without charge will remain unchanged.
However,  the 1996 Presidential  Decision  Directive marks the first time in the
evolution of GPS that access and use for the consumer,  civilian and  commercial
use has a  solid  foundation  in  law.  Because  of  ever-increasing  commercial
applications of GPS, other U.S.  Government  agencies may become involved in the
administration or the regulation of the use of GPS signals. Any of the foregoing
factors  could affect the  willingness  of buyers of the  Company's  products to
select  GPS-based  systems instead of products based on competing  technologies.
Any  resulting  change in market  demand for GPS products  would have a material
adverse effect on the Company's  financial  results.  In 1995,  certain European
government  organizations  expressed concern regarding the susceptibility of GPS
equipment to intentional or inadvertent signal interference.  Such concern could
translate into reduced demand for GPS products in certain  geographic regions in
the future.

Business Strategy

     The Company  sees GPS as an  information  utility.  In order to exploit the
wide range of  applications  made  possible  by this  information  utility,  the
Company has implemented the following strategies:

*    Targeted markets. The Company targets specific markets for its GPS
products  based on end-user  applications.  The Company  believes that by adding
application-specific  features and  functionality to its GPS technology,  it can
deliver value-added products into its targeted markets. To date, the Company has
identified markets that it believes represent significant economic opportunities


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due to the broad range of potential applications for accurate and cost-effective
position, velocity and time information.  The Company also continuously seeks to
identify new markets into which GPS products and systems can be introduced.  The
Company  believes  that its  continued  growth  will depend in large part on its
ability to identify and penetrate new markets for GPS applications.

     Differentiated  Product  Solutions.  The  Company  seeks to  establish  and
sustain  leadership  in its  targeted  markets  by  offering  products  that are
differentiated  through software,  firmware,  customized user interfaces and the
Company's  service  and  support.   Where  feasible,   the  Company   emphasizes
application-specific systems that solve specific sets of problems in its various
markets.  The Company  believes that a  substantial  portion of the value of its
products  is  derived  from the  firmware  that is  embedded  in the  product or
software provided, along with the product for post-processing  applications.  In
addition, the Company incorporates other technologies into some of its products,
such as  communications,  computational  capabilities  and  non-GPS  positioning
technologies in order to optimize product features for specific markets.

     Time-to-Market  Advantage. The modular design of Trimble's products enables
the Company to create and maintain a broad line of products without  necessarily
repeating  development  efforts or  requiring  extensive  redesigns  for product
upgrades. To facilitate fast product introduction while minimizing manufacturing
costs and  maximizing  quality,  the Company  has  acquired  advanced  automated
manufacturing  equipment  that allows  rapid  turnaround  of  prototypes  during
development  and rapid  changeovers  between  product  lines during  production.
Trimble  further  believes that its approach of providing many product  software
features enables the Company to respond quickly to the needs of rapidly evolving
markets through software upgrades.
 
*    Multichannel Distribution. The Company seeks direct communication with
its customers in order to develop and modify its product designs as necessary to
maximize  utility and payback to the user.  Trimble has built a worldwide  sales
and service organization of Company employees, distributors and dealers for each
major  market it  addresses.  In  addition,  the Company  intends to continue to
develop new, and to strengthen  existing,  alliances and OEM relationships  with
established  foreign and domestic companies as part of its strategy to penetrate
certain  targeted  markets.  The Company has pursued such alliances with several
companies in various markets, including Philips Car Systems, Pioneer Electronics
Corporation,  Delco  Electronics  and  Xanavi  Informatics  Corporation  in  car
navigation; Honeywell Inc. in aviation and military; E-systems, Inc. in transit;
PRC Public Sector, Inc. in public safety;  Adobe Systems  Incorporated and Intel
Corporation  in  the  emerging  consumer   applications  area;  American  Mobile
Satellite Corporation in long-haul fleet management; Caterpillar, Inc. in mining
and construction; and Case Corporation for agricultural applications.

     Integration with Communication Technologies. GPS technology is increasingly
being integrated with wireless communication technologies, offering economic and
strategic  advantages in areas such as  navigation,  vehicle  fleet  management,
long-haul  trucking  and public  safety.  Accordingly,  the Company is currently
devoting  research  and  development  efforts to  products  that  integrate  the
Company's proprietary GPS receivers with wireless communication technologies.

Markets

     Trimble  currently  addresses  multiple  markets for the application of GPS
technology,  which the Company has divided into three business units: Commercial
Systems,  Software and Component  Technologies  (including  OEM) and  Aerospace.
Though the Company  believes that these markets have growth  potential for sales
of GPS  products,  there can be no assurance  that such markets will continue to
develop,  particularly  given that GPS-based systems are still in an early stage
of adoption in some of these markets. The Company's future growth will depend on
the timely  development of the markets in which the Company currently  competes,
and on the Company's ability to continue to identify and exploit new markets for
its  products.  Each  business  unit  is  managed  by a vice  president  who has
responsibility for strategy, marketing,  manufacturing,  product development and
financial  performance.  The  business  units are  further  split into  vertical
markets that address specific product markets.


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Commercial Systems

     The  Commercial  Systems  business unit consists of the following  vertical
markets:  Land  Survey;   Mapping  and  GIS  Systems;   Mobile  Positioning  and
Communications; Marine; and Precise Positioning.
 
     Land Survey.  Surveying involves establishing precise points and boundaries
for legal and  construction  purposes.  It consists  primarily of collecting and
processing position information. Typically, surveying accuracy is expected to be
within a centimeter. The Company believes that its products substantially reduce
the cost,  time, and number of people  required to obtain and process  surveying
and mapping data points for a given level of  accuracy,  compared to optical and
laser  products.  Applications,  which the Company  addresses  in the  surveying
market, include control surveying, construction and engineering surveying, route
surveying  and geodetic  research.  GPS does not require  line-of-sight  between
land-based  reference  points  and is  not  affected  by  most  adverse  weather
conditions  (as  compared  to  traditional  methods  such as  optical  or  laser
measurements), providing advantages in many survey applications.

     The   Company's  GPS   surveying   products  lead  the  control   surveying
instrumentation  market.  Control surveying is the precise  determination of the
location of local geodetic  reference  points from which further local surveying
can be based.  The GPS  technique has reduced the cost of  establishing  control
points,  compared  to  conventional  techniques,  and has become  the  preferred
technology for conducting control surveying.
 
     The Company's surveying products are also used in large-scale  construction
projects,  such as new housing  developments or public works projects,  in which
the  position  of  a  large  number  of  points  needs  to  be  cost-effectively
established.  Trimble  products are  particularly  efficient for applications in
areas with ground-level obstructions to visibility.  Trimble also supplies route
surveying markets,  which require a cost-and  time-effective  means of precisely
locating  a large  number of points  and  physical  features  along  routes  and
rights-of-way,  such as roads,  pipelines,  and telephone  and power lines.  The
Company has introduced a product with kinematic data collection features,  which
provides the capabilities for surveying  applications  while the equipment is in
motion.  This kinematic  product is targeted at the  engineering and topographic
surveying  markets,  which  represent a major  portion of the overall  surveying
market. Through the use of the kinematic GPS surveying technique,  large numbers
of points can be rapidly  measured to accuracies  approaching  those for control
surveying.  The kinematic product allows one surveyor,  on foot, to collect data
enabling creation of a construction-grade topographic map.

     With conventional  post-processed GPS techniques, GPS satellite signal data
are collected at the point, but the point coordinates aren't actually determined
until  later,  back  in the  office  on a  personal  computer  with  specialized
software.   In  1993  the   Company   introduced   "real-time"   GPS   surveying
instrumentation.  With  real-time  GPS  surveying,  the  point  coordinates  are
generated  virtually  instantaneously  as the surveyor surveys or "occupies" the
point.  Compared to traditional  post-processed  GPS surveying and  conventional
optical-based    land   surveying    techniques   (which   can   also   generate
centimeter-level coordinates as the point is surveyed),  real-time GPS surveying
allows  surveyors to enjoy the many field  logistics  advantages of GPS, such as
saving  time  by  eliminating  the  data  processing  step  in the  office.  The
advantages  and  cost  savings  of  real-time  GPS  surveying  results  in large
productivity   gains  for   surveyors   when   compared   to  both   traditional
post-processed GPS and conventional surveying techniques.

     In addition to serving the commercial  surveying  market,  GPS has become a
standard  technique for geodetic research.  Research  geodesists have found that
long  baseline  accuracies  using  GPS  are  significantly  greater  than  those
obtainable  with  optical  and  electronic  distance-measuring  equipment.  This
capability has led to programs to remeasure  previous geodetic control points to
sharply increase precision and eliminate errors.  High accuracy has also created
a significant  market for GPS in seismic  research where earth movements of less
than one centimeter can now be measured and monitored.
 
     In the surveying market,  the Company faces growing  competition from other
GPS vendors,  such as Ashtech,  Inc. (now part of Magellan via Orbital  Sciences
Corp),  and NovAtel  Inc.;  and from vendors of  traditional  optical  surveying
products,  such as Leica AG,  Sokkia  Company,  Ltd.,  Karl  Zeiss,  and Spectra
Precision of which all have entered the GPS surveying market and are introducing
GPS products of their own.


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     Mapping  and GIS  Systems.  For  mapping  applications,  large  amounts  of
position and  attribute  data (such as color,  size and condition of the object)
must be obtained.  Compared to surveying,  mapping  involves more  extensive but
less  precise  location  and plotting of  geographical  and  man-made  features.
Mapping  applications  include  large-scale  mapping of geographic  and man-made
features,  data collection for Geographic  Information  Systems (GIS) databases,
natural resource management and ground contour mapping.  Required accuracies are
typically from twenty-five centimeters to three meters.
 
     Currently,   large-scale   accurate  mapping  is  usually  accomplished  by
photogrammetric  analysis  of  aerial  photographs,   a  complex  and  expensive
technique.  The Company supplies the mapping market with its products,  enabling
the user to capture  position data while in aircraft,  or traversing  terrain on
foot or in a vehicle. The Company is also developing additional products for the
mapping market.  The Company  believes that these products can lower the cost of
position and attribute data collection.
 
     GIS databases are used by federal,  state, county, and city governments and
by  utility  companies  for  a  variety  of  applications   requiring   accurate
information on the location of natural  resources and municipal  infrastructure,
such as utilities and transport  networks.  Currently,  building such a database
requires  time-consuming  compilation  of data from  numerous  existing maps and
digitized  photographs,  as well  as  costly  physical  surveys.  The  Company's
products,  used in connection with commercially  available  databases,  have the
potential to reduce  substantially the cost of constructing GIS databases and to
increase their accuracy.
 
     In the mapping market,  the Company faces  competition  from Ashtech,  Inc.
(now part of Magellan via Orbital  Sciences  Corp),  NovAtel  Inc.,  CMT,  Inc.,
Garmin  Corporation,  Magellan  Corporation  (a subsidiary  of Orbital  Sciences
Corporation),  Motorola, Inc., Sokkia Company, Ltd., and others.  Competition in
the mapping market has increased as competitors have introduced new products.
 
     Mobile Positioning and Communications. The Company is an established leader
in providing  tracking and  communications  products in the public safety,  long
haul  trucking,  and marine  markets.  These  products  typically  include  GPS,
combined with conventional radios or satellite  communications,  and application
software for use in the vehicles and at a base station.  The software  generally
addresses the need for map displays, communications control, vehicle monitoring,
and messaging.  These products are used in a variety of fleets,  such as transit
buses,  police  cars,  fire trucks,  ambulances,  trucking,  and ships.  In some
instances   the  Company   provides   additional   services  such  as  training,
installation,  custom  features,  and program  management.  More  recently,  the
Company  has  introduced   similar  products  for  trunked  radio  and  cellular
communications  which are  addressing  productivity  and  security  needs in the
commercial fleet markets.

     In some instances,  the Company markets its products directly to end-users,
but the large majority of its products are sold through resellers.  Direct sales
to  end-users  are  focused on  opportunities  in which the  Company's  standard
products  closely match the customer's  requirements.  Public sector sales often
require significant customization, and the Company uses integrator partners such
as E-Systems,  IBM, and Motorola to interface directly with the end-user.  Other
tracking  and  communication  products  are sold  through  OEM  integrators  and
value-added resellers, some of whom address the international market.

     The public sector customers are highly dependent on government  funding for
fleet modernization. Capital equipment funding for U.S. public transit operators
comes primarily from congressional  appropriations  under the Intermodal Surface
Transportation Efficiency Act. Public safety organizations are dependent largely
on local government  funding.  Failure of the funding authorities to appropriate
funds for these purposes could have  substantial  impact on the Company's future
revenue.

     Because  the  availability  of GPS is  still  new,  its use and  subsequent
benefits  have not been  understood by the broad vehicle  tracking  market.  The
Company must therefore devote considerable  resources to communicating these GPS
benefits and to educating the market.  This market education  requirement  could
result in a delay in market development and growth.

     In addition,  because the Company is involved in these  market  segments at
the component,  subsystem,  and system level, other companies,  such as Motorola
and Qualcomm,  have at various times been both  customers and  competitors.  The
Company believes that its GPS and data  communications  management  technologies


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are superior to those of its competitors in these market  segments.  The Company
intends to  leverage  its GPS  technology  to continue  to supply  these  market
segments  at the  component,  subsystem  and system  levels.  However,  there is
significant  competition,  and since the markets and  products  are in the early
phases of their maturity, with competition that has far greater resources and is
well  established in these markets,  there is no assurance that the Company will
be successful in its effort.

     In the Mobile  Positioning  and  Communications  market,  the Company faces
competition  from  Rockwell  International  Corp.,  AutoTrac,  Thrane &  Thrane,
Motorola,  Inc., Coded Communication,  QUALCOMM  Incorporated,  Orbital Sciences
Corporation, and others.

     Marine.  Trimble has pioneered GPS in many marine  markets and is an active
leader in the marine navigation, marine survey and marine construction markets.

     Trimble's GPS receivers are used on recreational, commercial, research, and
military vessels to provide  real-time  latitude,  longitude,  time,  course and
speed  information.  This data may be displayed  on digital  readouts or graphic
displays and may be integrated with other on-board  electronic mapping databases
to indicate vessel position and performance in an easily understood  manner. The
Company's  navigation  products conform to a number of international  standards,
making  them  capable of  providing  navigation  information  to other  on-board
equipment such as radars and  autopilots.  The Company faces  competition in the
GPS commercial and recreational marine navigation market from manufacturers such
as Northstar (subsidiary of Canadian Marconi Corp.) and Leica AG.
 
     Marine  survey,  which is  concerned  with  precise,  dynamic  positioning,
includes such activities as oil exploration, hydrographic surveys, environmental
surveys,   marine  construction,   cable  and  pipe  laying,   dredging,   barge
positioning,  ship  trialing  and many  others.  The Company  provides  complete
software solutions that utilize its GPS sensors, often in conjunction with other
equipment,  for many of these  applications.  Trimble's marine survey activities
also include the design and marketing of MSK Radiobeacon Differential GPS (DGPS)
reference stations, and equipment to monitor the integrity of DGPS broadcasts.

     In marine survey and marine  construction  applications,  the Company faces
competition from CSI,  Sercel,  Leica,  Ashtech,  Inc. (now part of Magellan via
Orbital Sciences Corp), and Coastal Engineering.

     Precise  Positioning.  Trimble's  GPS  receivers  and  data  communications
products are used on machine-type  vehicles to provide real-time positioning and
other  key  information  for  the  vehicle  operator.  This  information  may be
displayed on digital  readouts or graphic  displays and may be  integrated  with
other  on-board  electronic  information  systems to guide and indicate  machine
position and performance in an easily understood  manner. As the availability of
highly  accurate,   cost-effective   and  robust  real-time  GPS  solutions  has
increased,  numerous  potential  machine guidance and control  applications have
been identified. Among the emerging applications on large, mobile field machines
are precision farming equipment,  mining equipment,  construction  machinery and
aerial spraying.

     Guidance and control of large, mobile field machines has traditionally been
done  by the  machine  operator  without  the  aid of  advanced  navigation  and
positioning  technology.  Lasers have been used on a limited, though increasing,
basis for some applications. These traditional techniques have frequently proven
less than optimal because they are limited to positioning in elevation,  or have
complex  methods for  horizontal  guidance.  Lasers,  for example,  provide good
vertical  height  information  but  are  not  inherently  well-suited  to  three
dimensional   position   information  and  rely  on  line-of-sight  to  function
effectively. As field machinery is very expensive to own and operate, maximizing
efficiency is paramount and even small  productivity  gains can have significant
economic  returns.  GPS has the  potential to provide  more  accurate and robust
positioning information. When this information is used in conjunction with other
critical  information  about the materials  being worked on, such as location of
target ores, overall operational efficiency can increase.

     Products,  including  sensors and systems,  are  marketed to OEMs,  systems
integrators  and directly to end-users.  Because some mobile machine markets are
dominated by a relatively small number of OEMs, success can be influenced by the
ability to maintain  favorable  relationships  with  selected  OEMs.  Currently,
Trimble  has  established  a  relationship  with many of these  OEMs,  including
Caterpillar Inc. and Case Corporation.  However,  this type of dependency on key
OEMs results in a measure of risk in this type of business.


                                       7

<PAGE>



     Since the  applicability  of GPS for these types of  applications  is still
new, its use and subsequent  benefits are not yet widely  understood or adapted.
The Company must, therefore,  devote significant efforts to educating the market
and evangelizing the advantages of GPS in these applications. This can result in
a delay in market development.

     The Company faces  competition from traditional GPS  manufacturers  such as
Ashtech,  Inc. (now part of Magellan via Orbital  Sciences Corp),  Leica AG, and
NovAtel  Inc.,  as well  as  from  established,  laser-based  integrated  system
providers.

Software and Component Technologies (including OEM)

     The Software and  Component  Technologies  (SCT)  business unit consists of
four  vertical  markets:  Embedded GPS,  Automotive,  Timing,  and Consumer.  In
addition, this business unit is responsible for developing software licenses and
other rights for the use of GPS to third parties.

     The  Company's  SCT group has built a leadership  position in the worldwide
market for embedded GPS products.  Already in its seventh-generation design, SCT
products  provide  full-function,  high-performance  embedded  GPS  engines  for
systems integrators. The extensive range of GPS products is used in such diverse
applications as car navigation, vehicle and high-value cargo tracking, precision
agriculture, mobile computing, and synchronization of communications networks.

     Trimble's  SCT  Group  has  a  reputation  for  providing  high-performance
products, high-level technical support, and custom product engineering.  Trimble
continues to maintain  leadership  in the embedded GPS board market for tracking
applications,  thus securing a strong  position  through  partnerships  with key
customers.  In the  tracking  market,  new  applications  such as  safety,  loss
prevention,  and emergency  assistance systems continue to emerge as a result of
the increased  availability of smaller-sized  and lower power boards.  Trimble's
SCT group provides key technology for these applications.

*    According to the U.S. GPS Industry Council, the car navigation market is
expected to grow to $3 billion by 2000. Trimble with approximately 30 percent of
the  world-wide  market is at the center of this fast growing  sector of the GPS
industry. Trimble supplies GPS boards, chipsets, and licenses technology to some
of the leading automotive  electronics  suppliers,  including Xanavi Informatics
Corporation;  Philips Car Systems; Pioneer Electronics; Magneti Marelli; VDO Car
Communication  (a division of the  Mannesmann  Group);  and  Blaupunkt (a wholly
owned  subsidiary  of Robert Bosch GMBH).  Trimble is also part of the reference
design  for  Intel's  initiative  to  develop  in-car  Pentium   processor-based
computing, and Microsoft's Auto PC platform.

     The growth and  expansion of data and wireless  communication  networks has
increased  the need for GPS  timing  products.  Trimble's  timing  products  are
popular with system integrators who require reliable, precise synchronization of
wireless network infrastructure. By accessing the cesium clocks on board the GPS
satellites,  a GPS receiver can provide  atomic clock  accuracy at a fraction of
the cost of rubidium.  Trimble's SCT group provides  technically advanced timing
products to major infrastructure  providers in this market, such as Nortel. Such
timing  products  range from smart  antennas,  a GPS receiver  combined  with an
antenna in one enclosure, to a time and frequency output device, Thunderbolt GPS
disciplined clock.

     Competitors  in the  embedded GPS board market are  Motorola,  Inc.,  Japan
Radio Corporation, Rockwell International Corporation, and others.

Aerospace

     The Aerospace  business unit consists of the Commercial  Avionics  Systems,
General Aviation Avionics Systems and Military and Advanced Systems businesses.

     During 1994,  the Federal  Aviation  Administration  (FAA) adopted a policy
establishing  GPS as the future  standard for aviation  navigation and initiated
the Wide  Area  Augmented  System  (WAAS)  program  to allow  the use of GPS for



                                       8

<PAGE>



primary navigation and precision  approaches by 1998. This followed the December
1992 FAA publication of certification  procedures that allow the use of GPS as a
supplemental  source of  navigation  information  for aircraft  operating  under
Instrument  Flight  Rules  (IFR).  In 1995,  the FAA  published  procedures  for
approving GPS as a primary means of navigation for oceanic flights.

     Commercial  Avionics  Systems.  The  Company  was the first to certify  its
equipment  under the  regulations,  as  discussed  above.  The Company  also has
certified  equipment  that is used  in  conjunction  with  other  FAA  certified
navigation systems incorporating Omega and LORAN-C capabilities.  Currently, the
Company believes it has received FAA  Certification  for the Technical  Standard
Order C-129, covering more products than any competitor.

     The  Company  believes  that  GPS has  significant  advantages  in terms of
accuracy and coverage  over current  primary and  supplemental  systems.  During
1994, the U.S.  Government issued statements to the International Civil Aviation
Organization  (ICAO)  guaranteeing  the GPS signal for a minimum of 10 years. In
addition,  GPS technology  faces  competition  from more mature and  established
technologies  that  are  currently  in  widespread  use and  have in  place  the
infrastructure required for administering these systems.

*    Currently, the primary FAA required navigation system is the VOR/DME
system,  a ground-based  transmitter  network.  The Company believes GPS has the
potential  to replace  VOR/DME as the primary FAA and  ICAO-required  navigation
system.  The range for VOR/DME is limited to 50 to 150 miles, line of sight from
a transmitter, leaving large areas of the world uncovered, including significant
portions of the airspace within the U.S. Though VOR/DME accuracy is adequate for
two-dimensional  navigation,  GPS provides greater accuracy while also providing
precise timing information.

*    Aviation navigation also currently utilizes supplemental technologies to
VOR/DME,  including LORAN C, Omega,  Inertial  Navigation Systems (INS) and GPS.
The Company believes GPS will eventually  replace all these  technologies as the
primary  and  sole  means  of  aircraft   navigation.   The  Omega   system  was
decommissioned  during 1997 and LORAN C is scheduled for decommission by the end
of this decade.  INS units are useable  anywhere in the world,  but they cost as
much as $150,000 per unit and multiple  units are often  required.  GPS provides
greater accuracy than INS and provides  worldwide coverage as well. In addition,
GPS has the  additional  advantages  of  having  lower  maintenance  costs  than
existing navigation systems,  and GPS can be used in remote regions of the globe
without additional infrastructure investment.

     The  Company has  recognized  the  potential  of GPS for  aviation  and, in
addition to airborne  navigation and flight  management  units, is also pursuing
GPS technology in flight trajectory truth systems, tracking systems, sensors and
other  aviation  applications.  During 1995,  the Company began an alliance with
Honeywell  Incorporated,  a major  supplier  of aviation  equipment,  to produce
GPS-based  equipment for the air  transport,  commercial  and business  aviation
markets.

*    The Company's strategy for Commercial Avionics Systems is to build on its
advanced  position in GPS navigation as the foundation for developing full lines
of avionics products.  Trimble acquired the assets of Terra Corporation in 1996,
and  continues to market  those  products  under the brand Terra by Trimble.  In
addition, technology acquired in the Terra acquisition is helping the Company to
build new avionics product lines, including TrimLine, which was announced during
1997. This new line of aircraft audio panels,  communication radios,  navigation
radios,  transponders,  and  displays  will  be  targeted  to OEM  and  retrofit
customers of general  aviation  aircraft.  The Company also expects to develop a
leadership   position  in  future  advances  in  aircraft   communications   and
surveillance.  These two areas,  in combination  with the navigation  revolution
enabled by GPS, is changing the fundamental  architecture of airspace management
worldwide.  The Company expects product innovation and market growth to continue
well into the next century as modern Communication/Navigation/Surveillance (CNS)
is implemented.
 
     Competition   in  the  Commercial   Avionics   Systems  market  comes  from
manufacturers  of GPS products,  as well as  traditional  navigation  and flight
management system manufacturers. Competing manufacturers of GPS products include
Rockwell  Collins,  AlliedSignal  Aerospace  (through its Electronics & Avionics
Systems Division), Universal Navigation Corporation, Canadian Marconi Company (a
subsidiary of the General Electric Company plc), Garmin  Corporation,  Northstar
Avionics (a  subsidiary  of  Canadian  Marconi),  IIMorrow,  Inc. (a division of
United Parcel Service of America,  Inc.), and Magellan Corporation (a subsidiary
of Orbital Sciences  Corporation).  Traditional navigation and flight management
system  manufacturers  include Honeywell  Incorporated,  AlliedSignal  Aerospace
(through its Air Transport Avionics Division) and Smiths Industries. Competition
in the  flight  trajectory  truth  system  is from  Ashtech,  Inc.  (now part of
Magellan via Orbital Sciences Corp), and in the tracking system from ARNAV.


                                       9

<PAGE>


     Military  and  Advanced  Systems.  The  Company  has  been  developing  GPS
receivers  for  aerospace and military  applications  since 1986.  The Company's
approach to the market has been as a commercial manufacturer of GPS electronics,
modified and enhanced for military use. The Aerospace  business unit designs and
manufactures  GPS equipment  capable of utilizing the civilian C/A code, as well
as the P(Y) code reserved for users  authorized by the United States  Department
of Defense. These Precise Positioning Service (PPS) receivers provide authorized
users with GPS  equipment  that  removes the effects of  Selective  Availability
(allowing higher accuracy), and includes anti-spoofing protection and additional
immunity from jamming signals.  The Company sells equipment to the United States
Department  of  Defense,  aerospace  prime  contractors,  and  foreign  military
organizations.

     Applications  of GPS in  aerospace  and  military  markets  include  ground
vehicles,  handheld units, military aircraft,  missiles,  unmanned air vehicles,
and navy vessels. Military GPS equipment efficiently provides accurate position,
velocity, and timing information to and from battlefield management systems that
coordinate and control the deployment of equipment and personnel.

     The  Company's  Military and Advanced  Systems  strategy is to build on its
advanced   position  in  GPS   technology  as  the   foundation  for  developing
partnerships  with major military  manufacturers  and to offer complete airborne
and ground-  based,  time and  positioning  solutions for military and aerospace
applications.  In these markets,  Trimble competes,  partners,  and subcontracts
with a number of companies,  some of which have substantially  greater financial
and marketing  resources,  and substantial  experience and resources  devoted to
military sales.  Interstate  Electronics  (subsidiary of Figgie  International),
Magnavox  (subsidiary  of Hughes),  Raytheon,  Litton  Industries,  and Rockwell
International  Corp.,  as well as a number of  European  companies,  manufacture
products that are competitive with the Company's military products.

     Military sales are subject to various  uncertainties,  including the timing
and  availability of funding for U.S. and foreign  military  contracts,  and the
competitive nature of government  contracting in general.  There is no assurance
that the Company will be awarded future U.S.  military  contracts.  In addition,
the U.S.  government retains the right to impose restrictions on the sale of GPS
products to foreign military organizations at any time.

Products
 
The following is a list of the Company's principal products, organized by
its strategic markets:

Commercial Systems Products

Land Survey Products
- --------------------

     4000 Series.  Historically  one of the Company's  most  successful  product
lines,  the 4000 series GPS  receivers  and their  associated  GPS  antennas are
instruments  that,  in the survey mode,  provide  position  information  that is
accurate down to 5mm. The Company offers survey grade 4000 series receivers that
use the L1 frequency (i.e.,  single frequency  receivers) and both the L1 and L2
frequencies   (i.e.,  dual  frequency   receivers)   broadcast  by  the  Navstar
satellites.  Dual frequency  receivers offer users greater  productivity and, in
some cases, better accuracy,  especially over longer distances. Single frequency
receivers  are less  costly  and  include  the 4600 and 4000Si  receivers.  Dual
frequency  receivers include the 4000SSi,  4400, and 4800.  Products differ from
one another in their form  factor and in certain  specific  functions  that they
provide  the  surveyor.  The  units  can be  used in  either  a  real-time  mode
(positions are generated virtually instantaneously for the surveyor as he or she
surveys  a  point),  or  in a  post-processing  mode  (in  post-processing,  raw
satellite data are collected and stored for subsequent  processing on a computer
utilizing specialized software).
 
     GPS  Total  Station.  In 1994  Trimble  introduced  the GPS  Total  Station
surveying system.  This complete surveying system consists of two or more survey
grade GPS receivers (for example  4000SSi's),  GPS antennas,  a handheld  Survey
Controller for managing the real-time GPS survey and collecting coordinates as a
land survey is conducted,  plus radio modems for  transmitting  data between the
GPS receivers. One receiver is used as a base station and the other as a "rover"
that a surveyor carries around in order to survey individual  points. The system


                                       10

<PAGE>

  
incorporates advanced features that make real-time GPS surveying practical as an
everyday surveying technique. The GPS Total Station 4800, introduced in 1997, is
a highly compact system that  integrates all of its rover elements onto a single
lightweight  pole,  thereby  eliminating  the need for a backpack and any cables
strung  between the surveyor and the survey pole. The GPS Total Station 4400 and
4000 each utilize a separate GPS antenna that can offer logistical advantages in
certain  situations.  The system's  advanced handheld  controller,  the TSC1, is
designed and manufactured by the Company.

     GPSurvey,  Trimble Survey Office,  Survey  Controller and TRIMMAP software.
GPSurvey,  Trimble Survey Office and TRIMMAP are PC-based office software suites
that provide  surveyors with the tools they need to complete their GPS surveying
projects.  GPSurvey  post-processes data collected in the field and provides the
user with  finished  data  sets and  reports.  GPSurvey  also  includes  project
planning and network adjustment capabilities. Trimble Survey Office manages data
collected by real-time GPS and conventional  optical survey methods, and reduces
the data into  finished  data sets.  TRIMMAP  software  includes  many  specific
surveying  modules that use the finished data for such  applications  as drawing
contour maps or creating  profiles.  Survey  Controller  software resides on the
TSC1 handheld and is used to control and manage  survey tasks in the field.  All
of these products are generally sold as part of survey product systems.

     Trimble Exchange.  Trimble Exchange for Microsoft Windows based software is
an aid for civil  engineers,  project  engineers,  and surveyors to achieve high
levels of accuracy and productivity when staking out with Trimble's GPS systems.
The Trimble Exchange  software  converts design data from highway design systems
into a suitable format for loading into a Trimble  handheld  Survey  Controller,
which is then  combined  with a Trimble  GPS Total  Station  system  for  higher
productivity.  The Trimble Exchange software offers significant  improvements in
efficiency by dramatically  reducing the time spent  transferring  data from the
client's construction design package to a usable GPS format.

     TRIMTALK and TRIMMARK Radios. These radio modems are used for real-time GPS
applications.  They provide broadcast and receive functions for VHF, UHF and 900
MHz spread spectrum data transmission, and they operate at baud rates sufficient
to carry the data needed for real-time GPS survey  applications.  These products
are sold as part of survey product systems.

Mapping and GIS Products
- ------------------------

     Mapping and GIS Systems.  The  Company's  products are  typically  used for
mapping  and GPS/GIS  data  collection  in such  markets as  utilities,  natural
resources,   urban  and  municipal  government,   environmental  and  scientific
monitoring, and public safety.

     Pathfinder Pro Family.  The GPS Pathfinder Pro XR/XRS  system's  integrated
real-time  positioning  capabilities  allow the user to  collect,  relocate  and
update  geographic  information with an accuracy of better than one meter.  When
combined with  Trimble's  handheld Asset  Surveyor or pen  computer-based  ASPEN
software,  the Pro XR/XRS  offers a complete  system for  real-time  mapping and
GPS/GIS data collection.

     Pathfinder  Card.  The  GPS  Pathfinder  Card  is a  GPS  receiver,  in  an
industry-standard  PC Card format,  that is capable of  collecting  data with an
accuracy  of 1 to 3 meters.  The  GeoExplorer  II is a  self-contained  handheld
system offering submeter mapping and GPS/GIS data collection at a reduced cost.

     The GPS positions and  descriptive  information  collected by each of these
systems are downloaded to a personal computer using Trimble's  Pathfinder Office
software, where the information can be processed,  edited, and plotted or output
into standard GIS, CAD and database formats.

Mobile Positioning and Communications Products 
 
     The Company offers a line of products designed to meet many of the needs of
customers desiring to track mobile assets using wireless  communications.  These
products  include  GPS  receivers,  and  GPS  receivers  integrated  with  other
technologies such as dead reckoning,  industry specific applications processors,
mobile radio modems, cellular telephones, satellite communications,  mobile data
terminals, communications control software, and automatic vehicle location (AVL)
display software.


                                       11

<PAGE>



     GPS Receivers.  The Company's tracking product line includes the Placer GPS
400 (a stand-alone  receiver) and the Placer 450 family (receivers  configurable
for fleet tracking  applications).  The Placer 455 is a GPS receiver  integrated
with a gyroscope and an odometer interface.

     Integrated  GPS and Cellular Phone  Products.  The Company offers a line of
GPS/cellular products known as GPS Cellular Messenger,  targeted at small fleets
and transportation of high-value cargo.

     Communications  Control  Software.  The Company  offers a software  program
designed  to  manage  communications  between  its  Intelligent   Communications
Controller mobile units and a customer's command center.

     AVL Display  Software.  AVL Manager  displays the  locations of vehicles in
tabular  form.   FleetVision   displays  vehicle   locations  for  small  fleets
graphically on scanned maps.

     Public Sector Services.  In some public safety  opportunities,  the Company
provides  certain  services   including   training,   equipment   installations,
integration of third party radios and computers and program management.

     Galaxy  Inmarsat-C/GPS.  Galaxy is the first  system to combine  Inmarsat-C
with GPS to provide  rapid  digital  global  communication  with precise  global
positioning.  Inmarsat-C  provides  worldwide,  two-way  store-and-forward  text
communication  via  Packet  Switched  Data  Network  (PSDN) or  Public  Switched
Telephone Network, and fax delivery of inbound messages.  Galaxy is designed for
use by truck,  rail and other  land  applications,  as well as  merchant  ships,
commercial  fishing  boats,  yachts and other vessels  requiring  cost-effective
two-way  communication  links plus precise  position  information for emergency,
safety, navigation and tracking needs.

Marine Products
- ---------------

     NT Series.  This is a series of three marine GPS  navigation  products that
provide position and graphical  steering  information on a  high-resolution  LCD
display. The models in the NT Series provide a range of price and performance to
satisfy the needs of a wide range of  customers.  The  high-end  version of this
product  includes  a  built-in  differential  receiver.  The  NT  200D  receives
international standard differential corrections that are broadcast on the marine
beacon band, and which greatly improve the accuracy of the position and velocity
solution.  The NT Series  GPS is sold to  recreational  boaters,  coast  guards,
navies,  workboat operators,  shipping lines and operators of commercial fishing
fleets.
 
     NT300D. This product is a high resolution display which can be added to the
single frequency GPS and dual channel DGPS receivers,  which provides navigation
and  positioning   features.   The  NT300D  is  ideal  for  many  marine  survey
applications.

     7400RSi/DSi.  The  marine  versions  of  the  7400  series  products  bring
centimeter level accuracy to the marine environment for the first time. The 7400
series  products  utilize  Trimble's  Real-Time  Kinematic/On  The Fly (RTK/OTF)
technology  to  achieve  high  accuracy  even in the  dynamic  and fluid  marine
environment by removing the need for static  calibration  stations.  The dynamic
performance  of the 7400  RSi/DSi GPS sensors  makes it suited for  applications
such as the control and docking of  high-speed  ferries and the  positioning  of
large marine structures, such as bridge spans for marine construction.

     4000RSi/DSi.  The 4000 series products provide  sub-meter  accuracy and are
suited to marine survey  applications that do not require the performance of the
7400 series  products  described  above.  The 4000 series GPS sensors  address a
broad segment of the marine survey market and provide customers with a choice of
price and  performance in GPS sensors.  The 4000 series  products also integrate
well with  total  solutions,  such as Hydro  and  Target:  Structures  products,
discussed  below. The 4000 series products also form the basis of Trimble's DGPS
MSK Reference  Station and  Integrity  Monitoring  offerings,  which comply with
internationally  accepted Radio Technical  Committee Marine (RTCM) standards for
broadcast on radio beacon frequencies.  Trimble equipment is in use in more than
20 countries, broadcasting DGPS corrections and monitoring their integrity.


                                       12

<PAGE>



     DSM. These products are GPS sensors and reference  stations targeted mainly
to value-added resellers. They provide a source of accurate GPS data in the form
of a "black box". The DSM allows for comprehensive custom solutions developed by
third parties.

     Hydro.  This  software  program  provides  total  solutions for many marine
survey applications. It provides the capability to integrate the best of Trimble
designed  and  built  GPS  sensors  with  additional  equipment,  such as  depth
sounders,  to provide  customers  with highly  customizable  solutions to a wide
range of marine survey and construction  challenges.  The newest program in this
line is HydroPro, which is a Windows 95 and Windows NT software suite.

     Target: Structures.  This Windows and Windows NT based program provides for
precise positioning of large mobile offshore structures or platforms.  Utilizing
real-time  GPS  receivers  such as the  7400RSi  and  7400DSi,  this  innovative
software enables barge and crane operators to efficiently and safely guide large
structures to any target location for marine contruction.

Precise Positioning Products 
- -----------------------------

     7400MSi.  The rugged 7400MSi is designed  specifically  for dynamic machine
guidance  and  control  applications.   Centimeter-level  position  updates  are
computed five times per second, ensuring the response and accuracy necessary for
precise dynamic applications on moving equipment.

     Eurocard  DSM. The Eurocard DSM is based on Trimble's  advanced  low-power,
low-noise,   high-accuracy  Maxwell  chip  technology.   Advanced  carrier-aided
filtering  techniques  applied to exceptionally  low-noise C/A code measurements
are used to generate  real-time,  sub-meter  differential  (DGPS) positions at a
maximum rate of 10 Hz, even under challenging conditions.

     BenchGuide. The Trimble BenchGuide system provides mining machine operators
with  precision   GPS-based  guidance  in  locating  correct  bench  or  terrain
elevations  without  using  survey  stakes.  It can be used with  Trimble  radio
modems,  and  it  provides  accurate,  low-latency  GPS  positions  in  a  local
coordinate system.  BenchGuide provides numerous benefits over traditional bench
elevation  systems.  It is maintenance free and operates in bad weather or under
dusty conditions that limit the range of other systems.

     TRIMCOMM 900. The rugged  TRIMCOMM 900 is a high-speed  data radio link for
real-time differential and real-time kinematic (RTK) GPS solutions, and is ideal
for machine guidance applications. It provides a versatile means of establishing
a wireless  broadcast  network,  supporting  up to four  repeaters  for extended
coverage.  A dual  port  TRIMCOMM  900 makes it  possible  to  maintain  two-way
communications throughout the coverage area, allowing real-time machine position
and office design information updates.

     TrimFlight. TrimFlight is a sub-meter guidance, logging, and mapping system
for aircraft that provides  assurance of proper  application  of farm  chemicals
when used in crop  spraying.  TrimFlight  eliminates the need for human flaggers
and it generates  reports and maps providing  flight  information  and the exact
location of application.  TrimFlight's computer interface allows for integration
to other  applications,  such as photogrammetry  and remote sensing.  TrimFlight
data is compatible with most major GIS software.

     AgGPS 122.  The AgGPS 122 is a combined  MSK  beacon and  differential  GPS
receiver  for  sub-meter  agricultural  positioning  applications.   The  system
integrates with other devices such as harvest yield monitors.

     AgGPS 132.  The AgGPS 132 is a combined  MSK  beacon and  differential  GPS
receiver plus an L-band satellite  differential receiver, all in one system. The
system  integrates with other devices,  such as harvest yield monitors,  and can
provide sub-meter positions which can be output to yield monitors, variable rate
planters,  application  controllers  and field  computers.  A Parallel  Swathing
Option further enhances  productivity,  especially in low-visibility  conditions
and reduces operator fatigue.


                                       13

<PAGE>



Software And Component Technologies Products

Embedded and Automotive Products
- --------------------------------

     ACE GPS Module.  The newest  miniature board product is the ACE GPS Module.
This powerful 8-channel architecture,  with the popular Core Module form factor,
is designed for  applications  requiring  high  performance at low cost. ACE GPS
delivers fast GPS signal acquisition and low power consumption,  making it ideal
for mobile and battery-powered applications.

     Lassen-SK8.  The Lassen-SK8 board,  based on the Sierra GPS technology,  is
used in the automotive and embedded  markets.  Two-thirds the size of a business
card,  this  miniature  8-channel  GPS board  provides  high  performance,  fast
acquisition  and  reacquisition   time,  low  power  consumption  and  two-meter
accuracy.

     Sierra  GPS  Chipset.  The  Sierra GPS  Chipset  features  state-of-the-art
performance,  small  size,  low  power  consumption  and low cost.  The  chipset
consists of two ASICs, fully developed software and unmatched technical support.
The two ASICs are  composed of Trimble's  GPS DSP ASIC and RF/IF  down-converter
chip.

     SveeSix.  SVeeSix  is a family of GPS boards and  assemblies  designed  for
high-performance  embedded GPS  applications  for tracking.  The family includes
SVeeSix and Sveesix-CM3.

     SCT Antennas. Trimble offers a variety of miniature GPS antennas for mobile
or vehicle  applications.  These antennas  include the Miniature GPS Antenna,  a
compact,  active micropatch antenna with a 5-meter cable and magnetic mount; the
Hard-mount  Antenna,  a compact,  hard mount,  active  micropatch  antenna  with
single-hole  0.75" threaded mount and TNC  connector;  and the Rooftop  Antenna,
consisting  of the Bullet II HE antenna  with  23-meter  cable and SMB  adapter.
These antennas are widely used for vehicle tracking, car navigation systems, and
harsh timing environments.

     SCT Starter Kits.  Trimble  offers  Starter Kits for developers who want to
evaluate  and  integrate  GPS  receivers  and  antennas.  The kits  contain  all
components required to evaluate the receiver's features and to begin integration
into the  user's  application.  Generally,  a starter  kit will  include  a GPS
receiver, a GPS antenna, documentation and required cables and software.

Timing Products
- ---------------

     SCT Timing Products.  The newest generation of GPS synchronization  devices
is the Company's  Thunderbolt  GPS  disciplined  clock.  This clock  combines an
8-channel GPS receiver, control circuitry and a high quality ovenized oscillator
on a single board. This level of integration  provides  superior  performance to
precise timing applications, such as CDMA wireless infrastructure,  Enhanced 911
(E911) positioning and wireless local loop.

     Smart Antennas.  Trimble's family of smart antennas  includes  Palisade and
AcutimeII.  Smart antennas combine a GPS receiver and an antenna in one package.
They provide OEMs and system  integrators with a "plug-in" GPS module,  allowing
them to quickly and easily add GPS capability to their product lines.  AcutimeII
offers  integrators  a stand alone GPS time  source with one  micro-second-level
accuracy  at a  fraction  of  the  cost  of  other  time  sources  with  similar
performance. Palisade, based on Trimble's Sierra GPS technology, is an 8-channel
receiver designed to provide accurate  synchronization and frequency control for
wireless voice and data networks.
 
Consumer Products
- -----------------

     ScoutMaster  GPS.  The  ScoutMaster  is a handheld  GPS  receiver  designed
exclusively  for land users to provide an  affordable  GPS  solution  in a broad
range of professional  and recreational  applications.  The ScoutMaster has many
features some of which are patented.  Features include Over and Up which enables
users to pinpoint  their  location  on any  topographical  map and to  calculate
specific  map  locations   without  having  to  interpolate   latitude/longitude
coordinates.  Target Track is a function  which  displays  distance,  direction,
speed and  estimated  time of  arrival  (ETA).  ScoutMaster  can store up to 250


                                       14

<PAGE>


locations and display navigation  information in familiar terms. In addition the
ScoutMaster is a real-time  differential-capable receiver which records location
data within 2-5 meters. The ScoutMaster can also tell the user where the sun and
moon will be at any time of day,  anywhere on Earth, and when they will rise and
set. The  ScoutMaster  Library  Utility  (SMLTU)  provides the ability to upload
location data from a computer to  ScoutMaster  or download data collected in the
field from the ScoutMaster to a computer.
 
Aerospace Products

Commercial Aviation Products
- ----------------------------

     Trimble 2000 A and 2000  Approach Plus.  This product family is an aviation
navigation  system  available for VFR or IFR navigation.  The 2000 Approach Plus
was  introduced in 1997. It is certified to FAA TSO C129-A1 for IFR  operations,
including non-precision approaches. In addition, it was the first product in its
class to support the new  European  Basic Area  Navigation  Requirements.  These
products are targeted toward general aviation customers worldwide.

     Trimble 2101 Plus and 2101 I/O Plus.  These new products were introduced in
1997.  Both feature  certification  to FAA TSO C129-A1  allowing IFR operations,
including  non-precision  approaches.  In addition,  both  products  support new
European  Basic  Area  Navigation  Requirements.  The  2101  I/O  Plus  provides
extensive  interfacing to other aircraft systems to drive flight instruments and
other aircraft systems in integrated  digital and analog cockpits.  The 2101 I/O
Plus is also approved for primary navigation in remote/oceanic areas.

     Trimble  8100.  This product  family is an IFR certified  C129-A1  aviation
navigation  system and provides  GPS  position,  velocity and course data,  plus
flight  management  information  for the business,  commercial and air transport
markets. It incorporates an electronically  replaceable navigation database. The
system is capable of extensive  interface with other compatible aircraft systems
to drive flight and other instruments.  The Trimble 8100 is approved for Primary
Oceanic Navigation and non-precision IFR Approaches.

     Honeywell/Trimble HT9100/HT9000.  These products are developed and marketed
in partnership with Honeywell  Incorporated and are true GPS FMS systems,  which
enable air  transport  customers to upgrade  existing  analog air  transport and
commercial  aircraft  to  modern  GPS  navigation.  Used by many of the  world's
leading airlines, these products are in continuous service around the world on a
daily basis.
 
     Other aviation products.  Trimble also provides training tools for advanced
GPS  navigation  systems.  Trimble  introduced  Computer  Based Training for its
HT9100,  2000 Approach and 2000 Approach  Plus, and 2101 Plus and 2101 I/O Plus.
These  products  allow  initial  pilot  training  and  recurrent  training  in a
classroom setting, and have received excellent  acceptance among customers,  the
aviation press, and the editorial community.

General Aviation Products
- -------------------------

     Terra by Trimble.  This product line  provides  sport and general  aviation
customers with advanced and  feature-rich  audio panels,  communication  radios,
navigation radios, transponders, radar altimeters, and navigation displays. This
long standing  product line is a market leader in the sport aviation field,  and
is now in production in the Company's Austin factory.

     TrimLine  Avionics System.  This  comprehensive IFR avionics suite provides
the  general  aviation  community  with the most  innovative  technology  in the
industry while maintaining its ease of use. TrimLine includes the communications
transceiver,  IFR approved  GPS  navigator,  audio  system,  nav  receiver  with
glideslope, Mode C transponder and altitude digitizer. Overall, the full cockpit
solution offers significant benefits in space, weight and power consumption that
are unmatched in the industry.

     TrimConnect 3100D. A high quality,  cost-effective  communications solution
for corporate aviation,  this Flight Telephone System provides airborne wireless
voice and data  communications  and full  compatibility  with a wide spectrum of


                                       15

<PAGE>



U.S. ground mobile networks.  TrimConnect 3100D is a versatile tool for business
aircraft  users  who  want  to  equip  their  aircraft  with   state-of-the  art
telecommunications without sacrificing cost-effectiveness.

Military and Advanced Systems Products
- --------------------------------------
 
     Cargo Utility GPS Receiver  (CUGR).  Introduced in 1997,  this product is a
Dzus-mount  P(Y)  GPS  navigational  system  for  world-wide  military  aviation
operations.  It provides U.S.  military  helicopter  pilots Precise  Positioning
Service GPS navigation and capabilities  similar to Trimble's FAA certified 2101
I/O Approach,  and meets the performance  standards for Instrument  Flight Rules
for en route, terminal and non-precision approach phases of flight.

     TRIMPACK. The TRIMPACK, a four-pound,  portable,  ruggedized,  handheld GPS
product,  is approximately  the size of a pair of binoculars (120 cubic inches).
Position  information  is  displayed  on  a  four-line,   20-character-per-line,
back-lit LCD screen.  Troops  deployed in Operation  Desert Storm used  TRIMPACK
units to determine their location in the featureless desert.
 
     CENTURIAN.  The  CENTURIAN  is  a  precision  positioning  version  of  the
Trimpack, developed for vehicle applications.  The sale and distribution of this
set is restricted to the U.S. Armed Forces and selected allies.

     MUGR.  MUGR  (Military  Underwater  GPS  Receiver)  is a  handheld  product
developed under contract to the U.S. Navy. It is marketed primarily for Navy and
Marine special forces activities.  The receiver is reduced in size and sealed so
that it can be carried by shallow water divers.

     TANS  Series.  The Trimble  Advanced  Navigation  System  (TANS)  series of
products includes a ruggedized  sensor consisting of the basic GPS receiver,  an
antenna,  and a digital  interface to transmit GPS  information to various other
devices; a further ruggedized version with enhanced tolerance for vibration; and
a version that is upgradable to PPS. The TANS series has been sold  primarily to
the military for vehicles piloted from a remote station. The system was designed
to replace Omega systems currently used in such vehicles and its primary purpose
is to add GPS capabilities to other existing systems.

     TASMAN.  A PPS  version  of  the  TANS  III,  TASMAN  is  used  where  high
anti-jamming  and spoof  requirements  exist. It is sold primarily to U.S. Armed
Forces and selected allies.

     "FORCE" GPS Module  Series.  The "FORCE" family of military GPS modules has
been developed for integration into higher tier navigation system  equipment.  A
series of custom designs has been developed and delivered into numerous military
programs  for the U.S.  Army,  Navy and Air Force,  as well as foreign  military
organizations.
 
Sales and Marketing
 
     The Company recognizes that selling,  marketing,  and product  distribution
are critical to its future  success.  The Company  currently  has nine  regional
sales offices in the United States and six in Europe,  and offices in Australia,
Brazil,  Canada, Japan, Mexico, New Zealand,  Russia and Singapore.  The Company
has developed its sales and marketing  capabilities to anticipate and respond to
customer  needs as they arise in its  multiple  markets.  Each  market  requires
specific  attention to the needs of its sales and distribution  channels,  which
are rapidly  changing.  The Company  must  continue to manage its future  growth
effectively,  otherwise, customer support and operating results may be adversely
affected.

     Domestic.  The Company  sells its products in the United  States  primarily
through dealers,  distributors and authorized representatives,  supplemented and
supported by the  Company's  direct  sales  force.  The Company has also pursued
alliances and OEM relationships with established  foreign and domestic companies
to assist it in penetrating certain markets.

     International.  Trimble markets to end-users through a network of more than
150 dealers and distributors in more than 85 countries.  Distributors  carry one
or more product lines and are generally limited to selling either in one country
or in a portion of a country.  Trimble  occasionally  grants exclusive rights to
market certain products within specified countries.


                                       16

<PAGE>

 
     Sales  to   unaffiliated   customers   in  foreign   locations   represents
approximately 45%, 47%, and 53% of Trimble's total revenue in fiscal years 1997,
1996, and 1995, respectively.  Sales to unaffiliated customers from shipments to
Europe  represented 22%, 21%, and 23% of net revenue in such periods,  and sales
to unaffiliated  customers from shipments to the Far East  represented 15%, 19%,
and 23% of  total  revenue  in such  periods,  respectively.  See  Note 2 to the
Consolidated Financial Statements.
 
     Support.  The  Company's  general  terms  and  conditions  for  sale of its
products include a one-year warranty. Aviation navigation products, however, are
generally sold with a three-year warranty period, while select military programs
may require extended  warranty  periods.  The Company supports its products on a
board replacement level from locations in the United Kingdom,  Singapore, Japan,
and Sunnyvale,  California.  The Company's dealers and distributors also provide
factory-trained  third-party  maintenance,  including  warranty and  nonwarranty
repairs.  The Company  reimburses  dealers and  distributors  for all authorized
warranty repairs they perform. The Company does not derive a significant portion
of its revenues from support activities.

Competition

*    In the markets currently being addressed by the Company, competition is
intense.  Within  each  of its  markets,  the  Company  has  encountered  direct
competition  from both  foreign and  domestic  GPS  suppliers,  and expects that
competition  will continue to  intensify.  Specific  competitors  in each of the
markets the Company currently  addresses are mentioned in the section "Markets."
Due to competitive  pressure,  prices of certain of the Company's  products have
declined  substantially since their introduction,  and increased  competition is
likely to result in further  price  reduction  and loss of market  share,  which
could adversely affect the Company's net revenue.
 
     A  number  of  these   markets  are  also  served   primarily   by  non-GPS
technologies,  many of which are currently more accepted and less expensive than
GPS-based  systems.  The success of GPS-based  systems  against these  competing
technologies  depends  in part on  whether  GPS  systems  can offer  significant
improvements in  productivity,  accuracy,  and  reliability in a  cost-effective
manner.
 
     The principal competitive factors in the markets that the Company addresses
include ease of use, physical characteristics (including size, weight, and power
consumption),   product   features   (including   differential   GPS),   product
performance,   product  reliability,  price,  size  of  installed  base,  vendor
reputation  and  financial  resources.  The Company  believes  that its products
currently  compete  favorably  with  other  products  on most  of the  foregoing
factors,  though the Company may be at a competitive  disadvantage against other
companies having greater financial, marketing, service and support resources.

*    The Company believes that its ability to compete successfully in the
future against  existing and additional  competitors  will depend largely on its
ability  to  execute  its  strategy  to  provide  systems  and  products  having
significantly  differentiated  features  which are more  responsive  to customer
needs.  There can be no  assurances  that the Company  will be able to implement
this strategy successfully, or that the Company's competitors, many of whom have
substantially greater resources than the Company, will not apply those resources
to compete  successfully against the Company on the basis of systems and product
features.

Research and Development
 
     The  Company's  leadership  position in  commercial  GPS  technology is the
result, in large part, of its strong commitment to research and development. The
Company invests  heavily in developing GPS  technology,  including the design of
proprietary  software  and  integrated  circuits  for GPS  receivers.  Moreover,
Trimble develops substantial systems expertise and user interfaces for a variety
of applications. Below is a table showing how much Trimble has spent on research
and development over the last three years.
 

                                       17

<PAGE>



                                       Years Ended December 31,
                            ------------------------------------------------

                               1997 *            1996              1995
- ----------------------------------------------------------------------------
(In thousands)

Research and development        $ 40,662          $ 36,705         $ 31,895


* Actual year end for 1997 is January 2, 1998. See Note 1 of the Consolidated
  Financial Statements.


     Often a new product is initially  developed for an individual  customer who
is willing to purchase development stage products. The Company has used feedback
from such initial  customers as a primary source of information in designing and
refining its products, and in defining,  with greater precision,  customer needs
in emerging market areas.  During 1996, the Company created Trimble Labs,  where
it devotes a portion of its corporate  research and development  expenditures to
advance core GPS technology and its integration  into  synergistic  technologies
such as communications, sensors, and computing technologies. These technological
advances  are  often  financially  supported  through  strategic  alliances  and
partnerships.

*    The Company expects that a significant portion of future revenues will be
derived from sales of newly  introduced  products.  Consequently,  the Company's
future success depends on its ability to continue to develop and manufacture new
competitive  products  with  timely  market  introduction.  Advances  in product
technology  will  require  continued  substantial  investment  in  research  and
development in order to maintain and enhance the Company's  market  position and
achieve high gross profit margins.  Development and manufacturing  schedules for
technology products are difficult to predict, and there can be no assurance that
the Company will achieve  timely  initial  customer  sales of new products.  The
timely  availability  of these  products  in  volume,  and their  acceptance  by
customers,  are  important to the future  success of the  Company.  In addition,
certain of the  Company's  products  are  subject to  governmental  and  similar
certifications  before  they can be sold.  For  example,  FAA  certification  is
required for all  aviation  products.  An  inability or delay in obtaining  such
certifications could have an adverse effect on the Company's operating results.

Manufacturing
 
     The  Company  seeks to be a  low-cost  producer  and to serve the growth in
demand for  GPS-based  products  and  systems  through  flexible  automation  of
assembly lines, semiconductor  integration,  and the design of products around a
common core of receivers.
 
     The Company's  manufacturing  operations  consist primarily of assembly and
testing of products, material and procurement management,  quality assurance and
manufacturing engineering.  The Company first installed surface mount technology
(SMT)  assembly  equipment in a dedicated  facility in 1991.  This  facility was
upgraded in 1995,  increasing  its  capacity by thirty  percent.  The  Company's
experience  with  SMT  has  allowed  it not  only  to  reduce  the  reliance  on
independent  third  parties  for printed  circuit  board  assembly,  but also to
significantly  reduce the turnaround time to produce  prototype  printed circuit
board assemblies.

     The  Company  maintains  quality  control   procedures  for  its  products,
including  testing  during  design,  prototype,  and pilot stages of production,
inspection of incoming raw materials and subassemblies,  and testing of finished
products using automated test equipment in strife chambers.
 
     The Company has historically  manufactured its products in relatively small
quantities.  However,  the Company must  successfully  manage the  transition to
higher volume manufacturing, including the establishment of adequate facilities,
the  control of  overhead  expenses  and  inventories,  and the  management  and
training of its employee base. Although the Company has substantially  increased
the number of its senior manufacturing  personnel and significantly expanded its
manufacturing  capacity,  there can be no  assurance  that the Company  will not
experience  manufacturing  or other  delays  which  could  adversely  affect the
Company's operating results.


                                       18

<PAGE>


     The  Company  takes a modular  and  upgradable  approach  to its  products,
building  around a common core of GPS  receivers  with  customized  software and
hardware  systems to analyze and  present  position  data.  The  Company's  core
receiver  technology has evolved since the development of its first GPS receiver
product in 1984,  as the  Company has worked to reduce the size,  weight,  power
consumption,  and cost of the basic GPS receiver.  In this process,  the Company
has designed its own semi-custom, single-chip GPS processor, but, when possible,
the Company attempts to utilize standard parts and components, including RAM and
ROM devices that are available from multiple vendors.
 
     The Company believes that there are a number of acceptable vendors for most
of the parts and components used in its products.  However, a significant number
of components  are available  only from sole sources.  Furthermore,  despite the
availability of multiple sources,  the Company may in many cases select a single
source  in  order  to  maintain  quality  control  and to  develop  a  strategic
relationship with the supplier.  Components for which the Company currently does
not have  multiple  sources  include  application-specific  integrated  circuits
manufactured  to the Company's  proprietary  design by Lucent  Technologies  and
Motorola Inc.; displays manufactured by Optrex Corporation,  Kyocera Corporation
and Hosiden  Corporation;  and filters  supplied by Murata  Electronics of North
America,  Inc.,  Tokyo America,  Inc., and Transtech,  Inc. and  microprocessors
supplied  by  Motorola.  The  Company is taking  steps to protect  its supply of
component  parts,  either by  qualifying  alternative  sources or by  creating a
strategic  stocking  plan.  However,  if the  Company  is  unable  to  obtain  a
sufficient  supply of  components  from its  current  vendors,  it is likely the
Company could experience a delay or interruption in product shipments, adversely
affecting the Company's  operating results and damaging customer  relationships.
Furthermore,  a  significant  increase  in the  price  of one or more  of  these
components could adversely affect the Company's  operating results. In the past,
the Company has experienced  delays in production caused by insufficient  supply
of certain  components,  but to date,  such delays  have not caused  significant
adverse effects on the Company's operating results.
 
     The  Company has  experienced  problems  with the  quality of certain  high
volume electronic components that have required modification of products both in
manufacturing and in the field. Although the Company has instituted vendor audit
programs, there can be no assurance that the Company will not in the future face
problems  with the quality of  components,  problems  that could cause delays in
supplies,  interrupt shipments and require modification of products already sold
by the Company,  any of which could  adversely  affect the  Company's  operating
results.

Backlog
 
     The Company  believes that backlog is not a meaningful  indicator of future
business   prospects  due  to  the  volume  of  products  delivered  from  shelf
inventories and the shortening of product  delivery  schedules.  Therefore,  the
Company believes that backlog information is not material to an understanding of
its business.

Patents, Trademarks, and Licenses
 
     The Company currently holds 146 U.S. patents and 16 related foreign patents
that expire at various  dates no earlier than 2005,  and also has numerous  U.S.
and foreign patent applications  pending. The Company currently licenses certain
peripheral aspects of its technology from Spectrum Information Technologies.

     Although  the Company  believes  that its patents and  trademarks  may have
value,  there can be no  assurance  that those  patents and  trademarks,  or any
additional  patents and  trademarks  that may be  obtained  in the future,  will
provide meaningful protection from competition. The Company believes its success
will depend primarily on the experience,  creative skills,  technical expertise,
and marketing and sales ability of its personnel.
 
     The Company does not believe that any of its  products  infringe  patent or
other proprietary rights of third parties, but it cannot be certain that they do
not do so. (See Note 14 to Consolidated  Financial  Statements.) If infringement
is alleged, legal defense costs could be material, and there can be no assurance
that the necessary  licenses could be obtained on terms or conditions that would
not have a material adverse effect on the Company.

     In 1992,  the Company  entered  into a  Memorandum  of  Understanding  with
Pioneer Electronic  Corporation,  pursuant to which the Company licensed certain



                                       19

<PAGE>



of the  technology  contained  in its TANS product for  inclusion in  in-vehicle
navigation  products sold in Japan to entities that integrate such products into
other  products sold within or outside Japan under Japanese  trademarks.  In the
third  quarter of 1995, a  $1,333,000  licensing  fee was received  from Pioneer
Electronics  Corporation  in  connection  with  expansion of the  original  1992
license for in-vehicle navigation  technology.  In the second quarter of 1997, a
$2,222,000  licensing fee was received from Pioneer  Electronics  Corporation in
connection with expansion of the original 1992 license for in-vehicle navigation
technology.

     The Company has also granted a license to DMT Marinetechnik  GmbH, formerly
AEG  Aktiengesellschaft,  to design,  manufacture,  sell,  and  repair  products
incorporating an improved version of the Company's TANS technology.  The license
is exclusive as to such  activities in Germany,  and is  nonexclusive in Austria
and  Switzerland.  The  license  terminates  automatically  (except  as  to  the
licensee's right to replace,  repair,  and service existing  products) after the
production  of 10,000  units of such  products,  and may also be  terminated  by
either party upon six months prior notice.

     In 1993,  the Company  entered  into a contract  with Space  Systems/Loral,
pursuant  to which the Company  licensed  certain  technology  based on its TANS
product.  The license is  irrevocable,  exclusive  and limited to certain  space
flight market applications.

     The  Company  expects  that  it  will  continue  to  enter  into  licensing
arrangements relating to its technologies.

     Trimble  with  the  sextant   logo,   "TrimbleNavigation,"   "GeoExplorer,"
"Flightmate,"  "GPS Total  Station,"  "Scout GPS," and "Aspen" are trademarks of
Trimble Navigation Limited, registered in the United States and other countries.
Additional  trademarks are pending.  Trimble Navigation Limited acknowledges the
trademarks  of other  organizations  for their  respective  products or services
mentioned in this document.

Employees

     As of  December  31,  1997,  the Company  employed  1,292  persons:  345 in
research  and  product  development,   385  in  sales  and  marketing,   407  in
manufacturing,  and 155 in administration and finance. Of these, 72 were located
in Europe, 155 in New Zealand, 23 in Japan, 9 in Singapore, 5 in Australia,  and
1,028 in the U.S.  The Company also  currently  employs  temporary  and contract
personnel. Use of such personnel has increased over the last three years, and is
not included in the above headcount numbers. Competition in recruiting personnel
is  intense.  The Company  believes  that its  continued  ability to attract and
retain  highly  skilled  management,   marketing,  and  technical  personnel  is
essential to its future growth and success.  None of the Company's  employees is
represented by a labor union, and the Company has experienced no work stoppages.

     The  Company's  future  success  depends  in  large  part on the  continued
availability and  participation  of Charles R. Trimble,  its President and Chief
Executive Officer.  Mr. Trimble founded the Company and continues to be the only
executive with full responsibility for all aspects of the Company's  operations,
including  marketing and manufacturing  strategies and resource allocation among
the Company's strategic business units. The loss of Mr. Trimble, for any reason,
could have a material adverse effect on the Company.

     The  Company's  success  also  depends on the  continued  contribution  and
long-term  effectiveness  of its other  executive  officers  and key  technical,
sales,  marketing,  support,  research  and  development,   manufacturing,   and
administrative personnel, many of whom would be difficult to replace.


                                       20

<PAGE>

  


Executive Officers of the Registrant

The names, ages, and positions of the Company's executive officers are as 
follows:

     Name                             Age               Position
     ----                             ---               --------
Charles R. Trimble..................  56    President, Chief Executive Officer,
                                            and Director
Dennis R. Ing.......................  50    Executive Vice President and Chief
                                            Financial Officer
Charles E. Armiger, Jr. ............  43    Vice President, Sales
Ralph F. Eschenbach.................  52    Vice President, Chief Technical
                                            Officer
Michael P. Gagliardi................  40    Vice President, Aerospace
David M. Hall.......................  49    Vice President, Software & Component
                                            Technologies
James L. Sorden.....................  60    Executive Vice President, 
                                            Commercial Systems
David E. Vaughn ....................  52    Executive Vice President, Business
                                            Development
Mary Ellen Genovese ................  38    Vice President, Finance, and 
                                            Corporate Controller

     All officers serve at the  discretion of the Board of Directors.  There are
no family  relationships  between any of the directors or executive  officers of
the Company.
 
     Charles R. Trimble has served as President,  Chief Executive  Officer and a
director of the Company  since 1981 and was one of the  founders  and the senior
executive officer of the predecessor limited  partnership  organized in November
1978  and has  strategically  guided  Trimble  to its  dominant  role in the GPS
information  technology market.  Prior to founding the Company,  Mr. Trimble was
Manager of Integrated  Circuit  Research and  Development  at Hewlett  Packard's
Santa Clara division. He holds four patents in signal processing and one in GPS,
and is  currently  serving as the  Chairman  of the United  States GPS  Industry
Council (USGIC).  Mr. Trimble received his B.S. degree in Engineering  (Physics)
with honors in 1963 and an M.S.  degree in Electrical  Engineering  in 1964 from
the California Institute of Technology.
 
     Dennis  R. Ing  joined  Trimble  in May 1996 as Vice  President,  Corporate
Controller.  In September 1996 he was appointed  Vice President of Finance,  and
Chief Financial Officer and appointed Executive Vice President in November 1997.
Prior to Trimble, Mr. Ing was employed by Amdahl Corporation,  a high technology
company  based in  Sunnyvale,  California,  most  recently  serving in  Amdahl's
Corporate  Alliances and  Acquisitions  group.  Prior to that, Mr. Ing served as
Chief Financial Officer of Open Enterprise  Systems,  a $200 million division of
Amdahl. He also served as Vice President of Finance and  Administration for both
Amdahl Canada  Limited and Amdahl  Communications  Inc.  Before  joining  Amdahl
Corporation in 1979, Mr. Ing worked at Touche Ross & Co., Chicago & NorthWestern
Transportation,  and the Chicago  Hospital  Council.  He currently serves on the
Board of Directors of Lexa Software  Corporation.  Mr. Ing received his MBA from
DePaul  University  in 1977 and a B.S. in  Engineering  from the  University  of
Illinois in 1972.

     Charles  E.  Armiger,  Jr.  joined  Trimble  in  January  1989 as Sales and
Marketing Manager for aviation products.  From January 1991 to December 1993, he
served as Director of U.S. Domestic Sales. Mr. Armiger held the post of Director
of Sales for North  American  West from January 1993 to November  1994.  Then in
December 1994 he moved to Trimble's European office in Hook,  England,  to serve
as Director of Sales for Europe,  the Middle East and Africa.  In September 1996
he was appointed to serve as Vice President for Commercial  Systems Sales. Prior
to joining  Trimble,  Mr.  Armiger was Director of Sales and Marketing for ARNAV
Systems,  Inc. He received a B.S.  degree in Business from the University of the
State of New York, Regents College, in 1996.

     Ralph F.  Eschenbach  joined  Trimble as Vice  President  of  Research  and
Development  in 1983.  From  November  1989 to  February  1993 he served as Vice
President of Avionics and Sensor  Products,  and from February 1993 to July 1994
as Vice  President of Navigation  Products.  In July 1994,  Mr.  Eschenbach  was
appointed to the position of Vice  President of Business  Development,  where he
was responsible for defining and developing business opportunities to create new
solutions for the GPS market in areas not covered by Trimble's  current product
lines. In September 1996 he was appointed to the post of Vice  President,  Chief



                                       21

<PAGE>




Technology Officer.  Prior to joining the Company, he was an engineering manager
with  Hewlett-Packard  Company from June 1968,  where he was responsible for the
development of a low-cost GPS receiver.  In 1997,  Mr.  Eschenbach was appointed
Chairman of the Federal  Aviation  Administration's  Research,  Engineering  and
Development (RE&D) Advisory Committee.  He is also a member of NASA's Research &
Development Advisory Committee. Mr. Eschenbach currently serves on the Boards of
Directors of ProShot Golf,  Inc.,  Pinpoint Golf  Advertising,  and  Powerstream
Technologies.  He  received a B.S.  degree in  Electrical  Engineering  from the
University of  California  at Berkeley in 1968 and an M.S.  degree in Electrical
Engineering from Stanford University in 1970.

     Michael P.  Gagliardi  joined Trimble in January 1997 as Vice President and
General Manager of the Aerospace  Business Unit based in Austin,  Texas. He came
to Trimble from  BFGoodrich  Company where, he served as Group Vice President of
the Water Systems and Services Group;  President of Arrowhead  Industrial Water,
Inc.; and President of FlightSystems, Inc. Prior to his tenure at BFGoodrich, he
worked  for 11 years at The  General  Electric  Company  in  several  management
positions, including technical engineering assignments, then progressing through
critical marketing roles, and on to general management and executive  positions.
Mr.  Gagliardi  received  his B.S.  degree in  Electrical  Engineering  from the
University of Pittsburgh in 1979, an M.S. degree in Electrical  Engineering from
Southern Methodist University in 1981, and an MBA from Duke University in 1989.

     David M. Hall joined  Trimble in February  1994 as Managing  Director,  OEM
products.  In November 1996 he was appointed Vice President and General  Manager
of the Software and Component  Technologies  business unit. He previously worked
for Raychem  Corporation  for  twenty-one  years in a variety of  positions  and
divisions.  He served as  Director  of Sales and  Marketing  for the  Automotive
Division, National Distribution Manager for the Electronics Sector, and Director
of Marketing and Product  Management for the Interconnect  Systems Division,  as
well as District Sales Manager,  Area Sales Manager, and Operations Manager. Mr.
Hall received his B.S.  degree in  Industrial  Technology in 1971 and his MBA in
Marketing and Finance in 1973 from the California  Polytechnic  State University
in San Luis Obispo, California.

     James L. Sorden joined Trimble as Vice President of Product  Development in
May 1987.  From February 1993 to 1994, he served as Vice  President of Surveying
and  Mapping.  In November  1994,  Mr.  Sorden was  appointed to the position of
Executive   Vice   President  of   Surveying,   Mapping,   Military  and  Marine
Instrumentation  Systems.  In September  1996, he was appointed  Executive  Vice
President of  Commercial  Systems,  which  consolidates  Surveying & Mapping and
Tracking  &  Communications.  Prior to joining  Trimble,  Mr.  Sorden  worked in
various  engineering,  marketing  and  management  positions at  Hewlett-Packard
between  1964 and 1987.  He holds  U.S.  and  foreign  patents  in the fields of
electronic  measurement,  surveying  instrumentation,  and vehicle  safety.  Mr.
Sorden currently serves on the Board of Directors of Datacom Software  Research,
New Zealand,  and Aquila Mining Systems Ltd,  Canada.  He received his BSEE from
the University of Wisconsin in 1962 and undertook  engineering  graduate studies
at Wisconsin and Stanford University.

     David E. Vaughn joined Trimble as Vice President of Operations in May 1991.
From  1993 to  1994,  he  served  as Vice  President  of  Tracking  Systems  and
Communications.  In November 1994 he became Executive Vice President of Tracking
Systems and  Communications.  In September  1996 he was appointed to the post of
Executive Vice President of Business Development, which includes Trimble's newly
formed  Trimble  Labs.  Prior to joining  Trimble,  Mr. Vaughn was President and
Chief Executive Officer of Magnesys, a manufacturer of integrated circuits, from
1987 to 1991. From 1985 to 1987 he was Vice President of Manufacturing for Asyst
Technologies,  a manufacturer of clean room material  handling robots.  Prior to
1985, he worked in  manufacturing  management  positions with Apple Computer and
Hewlett-Packard.  Mr. Vaughn currently serves on the Board of Directors of TEN (
The Enterprise Network), a non-profit  organization  dedicated to the growth and
expansion of start up corporations  in Silicon  Valley.  Mr. Vaughn received his
B.S.  degree in Electronics  in 1971 and an MBA in Operations  Research in 1973
from California Polytechnic State University.

     Mary  Ellen  Genovese   joined  Trimble  as  Controller  of   Manufacturing
Operations  in December  1992.  From 1994 to 1997,  she served as Business  Unit
Controller   for  Software  and   Component   Technologies,   and  Tracking  and
Communications Business Unit. In December 1997 she was appointed Vice President,
Finance and Corporate Controller. Prior to joining Trimble, Ms. Genovese was CFO
for Minton Company,  a distributing  company to the commercial  building market,
from 1991 to 1992.  Prior to 1991,  she worked for 10 years with General  Signal
Corporation  in  several  management   positions  including  European  Financial
Controller for the  Semiconductor  Equipment  Group  International,  Director of
Finance for Semiconductor  Systems, and Materials Manager for Ultratech Stepper.
Ms.  Genovese is a Certified  Public  Accountant and received her B.S. degree in
accounting in 1981 from Fairfield University in Connecticut.


                                       22

<PAGE>


I
tem 2. Properties

     The Company  currently  leases and  occupies  14  buildings  in  Sunnyvale,
California,  totaling  approximately  387,000  square feet.  The leases on these
buildings expire at various dates through 2003. In addition,  the Company leases
and occupies three buildings in Austin, Texas, approximately 50,600 square feet,
to manufacture  GPS-based aviation products;  the leases expire at various dates
through  2001.  The  Company  also  leases  a  47,000  square-foot  facility  in
Christchurch,  New Zealand, for software development.  The Company's two largest
international sales offices are those in the United Kingdom (16,800 square feet)
and Japan (5,900 square feet).  In addition the Company  leases sales offices in
Australia, Brazil, France, Germany, Mexico, Spain, Singapore, and Russia, and in
various cities throughout the United States. The Company's  international office
leases expire at various dates through 2005.  Certain of the leases have renewal
options.  The Company  believes that its  facilities are adequate to support its
current and anticipated near-term future operations.


Item 3. Legal Proceedings

     The information with respect to legal proceedings  required by this item is
included in Part II, Item 8, Note 14 to the Consolidated  Financial  Statements,
hereof under the caption "Pending Matters."



Item 4. Submission of Matters to a Vote of Security Holders

     Not applicable.


                                     PART II



Item 5.   Market for Registrant's Common Equity and Related Stockholder Matters

     The Company's  Common Stock is traded on the Nasdaq  National  Market under
the symbol TRMB. The following table sets forth, for the quarter indicated,  the
range of high and low closing sales prices for the Company's Common Stock on the
Nasdaq National Market:

                                    High              Low      
                                    ----              ---      
         1996:
             First                 24                15 3/4
             Second                26 1/4            18 3/8
             Third                 21 3/8            14 3/4
             Fourth                16 5/8            10 7/8

         1997:
             First                 14 3/4            11 1/4
             Second                19                10 7/8
             Third                 21 5/8            16 1/2
             Fourth                24 5/16           18 1/8



     The Company had 1,686 shareholders of record as of March 13, 1998.

     The Company's stock price is subject to significant volatility. If revenues
or earnings fail to meet the  expectations  of the investment  community,  there
could be an  immediate  and  significant  impact  on the  trading  price for the




                                       23

<PAGE>




Company's  stock.  Due to stock  market  forces  that are beyond  the  Company's
control,  and due also to the nature of the Company's business,  such shortfalls
can be sudden.

     The Company has never paid cash dividends on its Common Stock.  The Company
presently intends to retain earnings to finance the development of the Company's
business  and does not  presently  intend to declare any cash  dividends  in the
foreseeable future.  Under the Company's current  $50,000,000  revolving line of
credit  agreement,  the Company is restricted from paying dividends  without the
lender's consent. Under the Company's  Subordinated  Promissory Notes Agreement,
pursuant to which the Company issued $30,000,000 of its subordinated  promissory
notes in June 1994, the Company is also  restricted from paying  dividends.  See
Notes 4 and 7 to the Consolidated Financial Statements contained in Item 8.



                                       24

<PAGE>



  

Item 6. Selected Financial Data

HISTORICAL FINANCIAL REVIEW

Summary Consolidated Statements of Operations Data


<TABLE>
<CAPTION>

 Years ended December 31,                        1997 *        1996         1995          1994         1993
- -------------------------------------------------------------------------------------------------------------
 (In thousands, except per share data)
<S>                                            <C>          <C>           <C>          <C>          <C>    

 Revenue                                      $ 272,305    $ 233,660     $ 235,360    $ 175,694    $ 149,491
                                           ------------------------------------------------------------------

 Operating expenses:
     Cost of sales                              132,104      112,596       102,666       69,294       67,814
     Research and development                    40,662       36,705        31,895       24,763       23,070
     Sales and marketing                         60,327       64,391        62,672       51,621       37,409
     General and administrative                  28,785       30,142        24,824       14,735       13,414
     Restructuring charges                            -        2,134             -            -            -
                                           ------------------------------------------------------------------
 
           Total operating expenses             261,878      245,968       222,057      160,413      141,707
                                           ------------------------------------------------------------------

 Operating income (loss)                         10,427      (12,308)       13,303       15,281        7,784
 Nonoperating income (expense), net               1,172          706           773       (3,057)      (3,580)
                                           ------------------------------------------------------------------

 Income (loss) before income taxes               11,599      (11,602)       14,076       12,224        4,204
 Income tax provision (benefit)                   2,320         (300)        2,815        2,200          755
                                           ------------------------------------------------------------------
 Net income (loss)                              $ 9,279    $ (11,302)     $ 11,261     $ 10,024      $ 3,449
                                           ==================================================================

                                           ==================================================================
      Basic net income (loss) per share          $ 0.42      $ (0.51)       $ 0.56       $ 0.55       $ 0.20
                                           ==================================================================
       Shares used in calculating basic
               earnings per share                22,293       22,005        19,949       18,340       17,665
                                           ==================================================================
 Cash dividends per share                           $ -          $ -           $ -          $ -          $ -
                                           ==================================================================

                                           ==================================================================
      Diluted net income (loss) per share        $ 0.40      $ (0.51)       $ 0.53       $ 0.53       $ 0.19
                                           ==================================================================
       Shares used in calculating diluted
               earnings per share                22,947       22,005        21,318       19,053       18,408
                                           ==================================================================
 Cash dividends per share                           $ -          $ -           $ -          $ -          $ -
                                           ==================================================================


Selected Balance Sheet Data

As of December 31,                              1997 *        1996         1995          1994         1993
- -------------------------------------------------------------------------------------------------------------
 (In thousands)

 Working capital                              $ 136,708    $ 124,545     $ 135,896     $ 70,207     $ 29,251
 Total assets                                   207,663      189,841       196,763      109,363       67,647
 Bank borrowings                                      -            -             -            -        1,311
 Noncurrent portion of long-term debt            29,600       29,507        29,739       31,736        4,539
 Shareholders' equity                         $ 139,483    $ 124,045     $ 129,937     $ 53,574     $ 38,890


* Actual year end for 1997 is January 2, 1998.
</TABLE>



                                       25

<PAGE>


Item 7.   Management's Discussion and Analysis of Financial Condition and 
          Results of Operations

     During  fiscal  year 1997,  the  Company  changed  its  fiscal  year from a
calendar year ending on  December 31 to an annual period which varies from 52 to
53 weeks and which always ends on the Friday  nearest to December 31,  effective
for the  Company's  1997  fiscal  year  end,  such that the  actual  date of the
Company's  fiscal  year-end  for 1997 is January 2, 1998.  For ease of financial
statement presentation, comparison and consistency, the Company has continued to
present each prior fiscal year as ending on  December 31  and has not  otherwise
restated  or adjusted  its prior  financial  statements  on this new fiscal year
basis. (See Note 1 of the Consolidated Financial Statements).
 
     In 1997, the Company's annual revenues  increased by 17% to $272.3 million.
In 1997, the Company had net income of $9.3 million,  or $0.40 diluted  earnings
per share,  compared to a net loss of $11.3 million, or ($0.51) diluted loss per
share, in 1996.

     In  September  1996,  the  Company  implemented  a workforce  reduction  of
approximately  10%  and  consolidated  certain   manufacturing   facilities  and
services. These actions reduced sales and general and administrative expenses by
approximately  10% in the fourth quarter of 1996,  compared to the third quarter
of 1996.

RESULTS OF OPERATIONS

     The  following  table  sets  forth,  for  the  periods  indicated,  certain
financial data as a percentage of total revenue:

Years ended December 31                   1997 *           1996            1995
- --------------------------------------------------------------------------------

 Revenue                                   100%             100%            100%
                                    -----------     ------------    ------------

Operating expenses:
    Cost of sales                           49               48              44
    Research and development                15               16              13
    Sales and marketing                     22               27              27
    General and administrative              10               13              10
    Restructuring charges                    0                1               0
                                    -----------     ------------    ------------
 
          Total operating expenses          96              105              94
                                    -----------     ------------    ------------

Operating income (loss)                      4               (5)              6

Nonoperating income (expense), net           0                0               0
                                    -----------     ------------    ------------
Income (loss) before income taxes            4               (5)              6

Income tax provision                         1                0               1

                                    ------------    ------------    ------------
Net income (loss)                            3%              (5%)             5%
                                    ===========     ============    ============

* Actual year end for 1997 is January 2, 1998.



                                       26

<PAGE>


     Revenue.  In 1997,  total revenue  increased to $272.3  million from $233.7
million in 1996,  which  represents a percentage  increase of 17%. Total revenue
decreased  in  1996 to  $233.7  million  from  $235.4  million  in  1995,  which
represents a percentage decrease of less than 1%. The following table breaks out
the Company's revenues by business unit:


<TABLE>
<CAPTION>

                                                                        Years Ended December 31,
                                     -----------------------------------------------------------------------------------------------
                                                          % Total                       % Total                         % Total
                                            1997 *         Revenue          1996         Revenue          1995           Revenue
- ------------------------------------------------------------------------------------------------------------------------------------
(In thousands)
  <S>                                    <C>                 <C>         <C>               <C>         <C>                 <C>

   Commercial Systems                   $ 168,606             62%       $ 158,273           68%       $ 162,393             69%
   Software & Component Technologies       43,417             16%          38,054           16%          35,416             15%
   Aerospace                               60,282             22%          37,333           16%          37,551             16%
                                                               
                                     ----------------   ------------  --------------- ------------  ---------------   ------------
    Total revenue                       $ 272,305            100%       $ 233,660          100%       $ 235,360            100%
                                     ----------------   ------------  --------------- ------------  ---------------   ------------

* Actual year end for 1997 is January 2, 1998.
</TABLE>


Commercial Systems

     The  Commercial  Systems  business unit revenues had a growth rate of 7% in
1997 over  1996,  and a  decrease  of 3% in 1996 from  1995.  The 1997  increase
compared to 1996 is  primarily  in the GIS  Systems,  Precise  Positioning,  and
Mobile  Positioning and  Communications  vertical markets.  The decrease in 1996
compared to 1995 was  primarily  in the Land Survey and Mobile  Positioning  and
Communications vertical markets.

     The  increase  in the GIS  Systems  market  came from  strong  sales of the
Pathfinder  product  line,  where unit sales  increased  50% in 1997 compared to
1996.  Precise  Positioning  products  continued to grow from the prior year and
were up 51% on an annual basis.

     Mobile  Positioning  and  Communications  revenues  also  increased in 1997
compared to 1996,  due to the  resumption of shipments in March 1997 to American
Mobile Satellite Corporation (AMSC), a company based in Reston,  Virginia,  that
provides a variety of voice and data services via satellite.  In March 1995, the
Company  signed a large  contract  for the  supply  of  Galaxy/GPS  land  mobile
satellite  terminals to AMSC. AMSC contracted for delivery of product  beginning
in mid-1995 and  continuing  through 1996.  Late in the fourth  quarter of 1995,
AMSC requested that the Company cease delivery,  in part due to delays in AMSC's
completion of software. Shipments under the original contract were halted in the
fourth  quarter of 1995 and the contract was amended.  On February 20, 1997,  an
agreement  was  signed  between  Trimble  and AMSC to  resume  shipments  of its
Galaxy/GPS  terminals  at the rate of 500 units per  month,  beginning  in March
1997.  On August 28,  1997,  an amendment to the  February  1997  agreement  was
signed,  to reduce the number of units  shipped  from 500 units to 250 units per
month.   Mobile  Positioning  and  Communications   revenues  in  1997  included
$6,400,000 in sales to AMSC on 3,750 units  shipped.  Revenues from shipments to
Systems under this contract  during 1995 were  $4,176,000 in the second  quarter
and $3,125,000 in the third quarter.  Contract  renegotiation fees of $1,080,000
were recognized in the first quarter of 1996. The amended  contract  between the
Company  and AMSC  calls for  production  line  shutdown  fees for the time that
Trimble  is  not  manufacturing  product  for  shipment  to  AMSC.  Due  to  the
uncertainty  about AMSC's  ability to pay,  revenues  for  products  shipped and
contractual  shutdown fees were not recognized  until  collection was considered
probable.  In the second quarter of 1996, the Company  recognized  $1,700,000 in
revenue from products shipped in December 1995 and March 1996, and $1,000,000 of
shutdown fees, all of which have been paid.  During the second half of 1996, the
Company recognized $400,000 of shutdown fees after the payments were received.

     The decrease in the Land Survey  vertical  market sales in 1997 compared to
1996 and 1996 compared to 1995 is primarily due to a continued slowdown in sales
in Japan.  Shipments of the higher-end  Real-Time Kinematic (RTK) survey product


                                       27

<PAGE>


in Japan have slowed due to the Japanese  Government's  decision to evaluate RTK
survey methods before  certifying its use for official  surveys.  The Company is
now selling at the low cost end of the market as opposed to the high cost end of
the market.  Also, new product  introductions  for Land Survey  occurred late in
third  quarter,  therefore,  customers  held off on placing orders until the new
product  introductions.  Shipments of these  products in the U.S.,  Europe,  and
Latin America were higher than last year.

*    In September 1996, the Company entered into a contract with Caterpillar
Inc. to develop and market products for the construction and mining markets. The
Company  agreed  to  develop,  without  funding  from  Caterpillar,   customized
equipment  starting in the fourth quarter of 1996, and to sell it exclusively to
Caterpillar  for use in this market.  Shipments  began in 1997.  The Company had
sales of $1,910,000 in 1997 to Caterpillar.

     The Company also expects that average  selling  prices will likely  decline
with  increased  competition.  In addition to the markets the Company  currently
addresses in the  surveying  and mapping  arena  (primarily  land  survey),  the
Company is addressing new markets, including the mining and construction market.
If the Company cannot adequately  compete in new markets through the development
and  manufacture  of new  products,  there can be no assurance  that growth will
continue.

     In 1995,  Commercial  Systems  revenue  was  supplemented  by $1.0  million
received  under a contract  with a customer,  whereby the Company  agreed not to
compete, and sold exclusive distribution rights.

Software and Component Technologies

     The  Software  and  Component  Technologies  business  unit  revenues  have
increased 14% in 1997 over 1996,  and 7% in 1996 from 1995. The increase in 1997
from 1996 is  primarily  due to the  Company's  receiving  $1.8  million  from a
development  agreement in  connection  with an  irrevocable  non-refundable  and
non-recurring  engineering fee recorded in the third quarter of 1997, and a $2.2
million  technology license from Pioneer  Electronics  Corporation in connection
with  the  expansion  of  the  original  1992  licensee  for  in-car  navigation
technology,  which was recorded in the second quarter of 1997. In 1995, Software
and Component  Technologies  revenue was supplemented by technology  licenses of
$1.3 million.  The Software and Component  Technologies  market  consists of OEM
(original equipment manufacture) and consumer products.
 
Aerospace

*    Aerospace product sales increased 61% in 1997 from 1996, and had a slight
decrease in 1996 from 1995.  The increase in 1997 was primarily due to shipments
to the  government  under  the CUGR  program,  as well as  strong  sales for the
Honeywell-Trimble  product  (HT9100)  and  strong  sales  for the  Military  and
Advanced  Systems market.  The slight decrease in 1996 from 1995 was due to weak
sales for  military  products  in 1996.  The  Company  considers  its  Aerospace
products to be a long-term growth opportunity.  It believes that success in this
area will be dependent  upon the success of a current  strategic  alliance  with
Honeywell.  On September 18, 1996, the Company received FAA certification of the
HT9100 product,  allowing production and installation to begin late in the third
quarter of 1996.

*    Military sales are highly dependent on contracts that are subject to
government approval and are,  therefore,  expected to continue to fluctuate from
period to period.  The Company  believes that  opportunities in this market have
been substantially reduced by cutbacks in U.S. and foreign military spending.

Export Sales

*    Export sales from domestic operations, as a percentage of total revenue,
were 28% in 1997, 25% in 1996, and 21% in 1995. Sales to unaffiliated  customers
in foreign locations, as a percentage of total revenue, were 45% in 1997, 47% in
1996, and 53% in 1995. (See Note 2 to the  Consolidated  Financial  Statements.)
The Company  anticipates  that export revenue and sales made by its subsidiaries
in locations outside the U.S. will continue to account for a significant portion
of its revenue, and, therefore,  the Company is subject to the risks inherent in
these sales, including unexpected changes in regulatory  requirements,  exchange
rates,  governmental  approval,  and tariffs or other barriers.  Even though the
U.S. government  announced on March 29, 1996, that it would support and maintain


                                       28

<PAGE>


the GPS system, as well as eliminate the use of Selective  Availability (S/A) (a
method of  degrading  GPS  accuracy),  there  may be a  reluctance  to  purchase
products based on GPS technology in certain foreign  markets,  given the control
of GPS by the U.S.  Government.  The Company's  results of  operations  could be
adversely   affected  if  the  Company  were  unable  to  continue  to  generate
significant sales in locations outside the U.S.

     No  single  customer,  including  the  U.S.  Government  and its  agencies,
accounted for 10% or more of total revenue of the Company in 1997, 1996 or 1995.
It is possible, however, that in future periods the failure of one or more large
customers  to purchase  products in  quantities  anticipated  by the Company may
adversely affect the results of operations.

     Gross  Margin.  Gross margin  varies due to a number of factors,  including
product mix, domestic versus international sales,  customer type, the effects of
production volumes and fixed  manufacturing costs on unit product costs, and new
product  start-up costs.  In 1997, the gross margin  percentage on product sales
was  51%,  compared  with 52% in 1996 and 56% in  1995.  The 1997  margins  were
enhanced by the positive impact of non-product  revenues recognized from Pioneer
Electronic  Corporation  of $2.2  million and from a  development  agreement  in
connection with an irrevocable non-refundable,  non-recurring engineering fee of
$1.8 million.  (See "RESULTS OF  OPERATIONS-REVENUE"  for more details.) In 1996
and 1995 the Company  also  recorded  non-recurring  items,  including  revenues
recognized from AMSC of $2.48 million in 1996 and $2.3 million in 1995; however,
there can be no  assurance  that  similar  items will recur in the  future.  The
decrease in the gross margin  percentages  primarily reflects a shift in product
mix from  higher  margin  commercial  systems  sales to  lower  margin  avionics
products,  and decreases in the margins  obtained on sales of commercial  system
products.  In  addition,  because of mix changes  within and among the  business
units,   market   pressures  on  unit  selling  prices,   fluctuations  in  unit
manufacturing  costs,  and other  factors,  there is no  assurance  that current
margins will be sustained.  While  commercial  systems products have the highest
gross  margins of all the  Company's  products,  their  margins have  decreased,
primarily  due to the need to lower  prices  in  response  to  competition.  The
Company expects competition to increase in its commercial system markets, and it
is therefore likely that further price erosion will occur, with consequent lower
gross margin percentages.

*    The Company expects that in the future a higher percentage of its
business will be conducted  through  alliances with  strategic  partners such as
Honeywell and  Caterpillar.  As a result of volume pricing and the assumption of
certain  operating costs by the partner,  margins on this business are likely to
be lower than sales directly to end-users.

     Operating  Expenses.  The following table shows operating  expenses for the
periods  indicated,  it  should  be  read  in  conjunction  with  the  narrative
descriptions of those operating expenses below:


                                        Years Ended December 31,
                            -------------------------------------------------
                                   1997 *             1996             1995
- -----------------------------------------------------------------------------
(In thousands)

Research and development        $ 40,662           $ 36,705         $ 31,895
Sales and marketing               60,327             64,391           62,672
General and administrative        28,785             30,142           24,824
Restructuring charges                  -              2,134                -
                            -------------     --------------   --------------
 Total                         $ 129,774          $ 133,372        $ 119,391
                            -------------     --------------   --------------

* Actual year end for 1997 is January 2, 1998.


     Research and Development.  Research and development  spending  increased in
absolute dollars during 1997, representing 15% of revenue,  compared with 16% in
1996 and 13% in 1995. The dollar  increase from 1996 to 1997 is due primarily to
an increase  in  personnel  and the  related  expenses  that  accompany  such an
increase in the number of employees. There was also an increase in the number of
specialized  engineering  consultants and temporary  employees.  The increase in
research  and  development  is  part  of  the  Company's  continuing  aggressive
development of future products.


 
                                       29

<PAGE>



*    Sales and Marketing. Sales and marketing expenses decreased during 1997,
representing  22% of  revenue,  compared  with 27% in both  1996 and  1995.  The
primary reason for the dollar  decreases in expenses since 1995 is a decrease in
personnel  due to the Company's  restructuring  in 1996 and  advertising  costs.
Other less significant reasons for the decreases are lower marketing related and
field service support costs.  Selling and marketing  expenses are expected to be
approximately  20% in the  future as a  percentage  of  revenue,  as a result of
continued cost containment  programs.  In 1996,  sales offices in China,  Egypt,
Italy and Poland were closed,  and the sizes of certain offices in the U.S. have
been reduced.

*    The Company's future growth will depend on the timely development and
continued viability of the markets in which the Company currently competes,  and
on the Company's ability to continue to identify and exploit new markets for its
products. In addition,  the Company has encountered  significant  competition in
selected  markets,  and expects such  competition to intensify as the market for
GPS applications  receives acceptance.  Several of the Company's competitors are
major corporations with substantially  greater financial,  technical,  marketing
and  manufacturing  resources.  Increased  competition  is  likely  to result in
reduced market share and in price reductions of GPS-based products,  which could
adversely affect the Company's revenues and profitability.

     General and Administrative.  General and administrative  expenses decreased
in absolute dollars during 1997, representing 10% of revenue,  compared with 13%
in 1996,  and remained flat as a percentage of revenue  compared to 1995 at 10%.
The dollar  decrease  from 1996 to 1997 is due primarily to decreases in outside
services  related  to  legal  fees  associated  with  certain   arbitration  and
litigation  matters  during 1996.  The increase in 1996 over 1995 is primarily a
result of the higher litigation and legal settlement costs incurred in the first
six  months  of the year,  compared  to the same  period in 1995,  as well as an
increase in the bad debt  expense and  amortization  of goodwill  related to the
Terra acquisition.

     Restructuring Charges. During the year ended December 31, 1996, the Company
recorded a restructuring charge of $2,134,000.  Components of this restructuring
reserve  included  employee  severance  packages,  the costs of redundant office
space and  write-downs of idle assets.  The Company took this action in order to
bring  operating  expenses into line with revenues and to  restructure  existing
operations in a more efficient manner.

     Nonoperating income (expense),  net.  Nonoperating  income (expense),  net,
includes  interest  income and  expense,  as well as gains and losses on foreign
currency transactions.

     Foreign  exchange  gains were  $234,000  in 1997,  compared  with a loss of
$4,000 in 1996 and a gain of $1.1  million  in 1995.  In the  second  quarter of
1995, the Company  adopted a policy of hedging its exposure to foreign  currency
transactions  to  minimize  the effect of changes in foreign  currency  exchange
rates on  consolidated  results of  operations.  Gains and losses  arising  from
foreign  currency  forward  contracts offset gains and losses resulting from the
underlying hedged  transactions.  Most of the foreign exchange gains recorded in
1995 were incurred in the period before this policy was in place.

     Interest  income  decreased in 1997 from 1996 due to lower interest  income
received on cash and short term  investments  due to lower average  balances for
the year.  Interest income increased in 1996 over 1995,  primarily due to higher
interest income received on cash and short term investments in the first half of
1996,  compared  with the  first  half of  1995,  primarily  from the  Company's
secondary public offering proceeds in August 1995.
 
     Interest  expense  increased  slightly in 1997 due to higher fees on unused
lines of credit. Interest expense includes interest on a $30 million note issued
in August 1995,  and fees on unused  lines of credit.  (See Notes 4 and 7 to the
Consolidated  Financial  Statements  for details of long-term  debt and lines of
credit.)

     Income Tax Provision  The Company's  effective tax rates of 20% in 1997 and
20% in 1995 are less than the federal statutory rate of 35% primarily due to the
realization  of  previously  reserved  deferred tax assets.  The 1996 income tax
benefit  rate of 3% is  less  than  the  statutory  tax  rate  primarily  due to
limitations on the utilization of the 1996 operating loss.

     Inflation. The effects of inflation on the Company's financial results have
not been significant to date.


                                       30

<PAGE>

LITIGATION

*    The Company is involved in a number of legal matters that occupy
management  time and expense.  These matters are more fully discussed in Note 14
to the Consolidated  Financial Statements.  While the Company does not expect to
suffer  significant  adverse  effects from this  litigation,  or from unasserted
claims, the nature of litigation is unpredictable, and there can be no assurance
that it will not do so.

LIQUIDITY AND CAPITAL RESOURCES

*    In 1997, the cash used in operating activities was $2.1 million. Cash
provided by sales of common stock in 1997  represents  proceeds  from  purchases
made pursuant to the Company's  stock option and employee stock purchase  plans,
and totaled $9.0 million.  During 1997, the Company has relied primarily on cash
provided by financing activities and net sales of short-term investments to fund
operations,  capital expenditures and other investing activities.  The Company's
ability to generate cash from  operations will depend in large part on revenues,
the rate of  collections  of accounts  receivable,  and  management of inventory
levels.

     In August 1997, the Company entered into a three year $50,000,000 unsecured
revolving credit facility with four banks (the "Credit Agreement").  This credit
facility replaced the previous two year $30,000,000  unsecured line that expired
in August  1997.  The  Credit  Agreement  enables  the  Company  to borrow up to
$50,000,000,  provided that certain financial and other covenants are met. Under
a separate  agreement  the Company has an additional  $5,000,000  line of credit
provided only by the lead bank under the Credit Agreement for "Letter of Credit"
purposes,  and this is also subject to the covenants in the main  facility.  The
Credit  Agreement  provides  for  payment  of a  commitment  fee  of  0.25%  and
borrowings  to bear interest at 1% over LIBOR if the total funded debt to EBITDA
is less than or equal to 1.00 times,  0.3% and  borrowings  to bear  interest at
1.25% over LIBOR if the ratio is greater  than 1.00 times and less than or equal
to 2.00 times,  or 0.4% and  borrowings  to bear interest at 1.75% over LIBOR if
the ratio is greater than 2.00 times.  In addition to borrowing at the specified
LIBOR rate,  the Company has the right to borrow with  interest at the higher of
(i) one of the bank's  annual  prime rate and (ii) the  federal  funds rate plus
0.5%.  To date,  the Company  has not made any  borrowings  under the lines.  In
addition, the Company is restricted from paying dividends under the terms of the
Credit Agreement.

     In 1996,  the cash used in  operating  activities  was $3.9  million.  Cash
provided by sales of common stock in 1996  represents  proceeds  from  purchases
made pursuant to the Company's  stock option and employee stock purchase  plans,
and totaled $5.8  million.  During 1996,  the Company  relied  primarily on cash
provided by financing activities and net sales of short-term investments to fund
operations, capital expenditures and other investing activities.

*    In February 1996, the Company announced that it had approved a
discretionary  program  whereby up to 600,000  shares of its common stock may be
repurchased  on the open  market to offset  the  potential  dilutive  effects to
earnings per share from the issuance of stock  options.  The Company  intends to
use existing cash, cash  equivalents  and short-term  investments to finance any
stock repurchases under this program.  In 1996, 250,000 shares were purchased at
a cost of  $3,545,000.  In 1997,  139,500  shares  were  purchased  at a cost of
$1,834,000,  and the Company intends to continue  repurchasing  its common stock
under this program.

*    The Company presently expects 1998 capital expenditures to be
approximately  $19.0  million,  primarily  for  production  equipment,  computer
equipment,   software,  and  leasehold  improvements  associated  with  business
expansion.

*    At January 2, 1998, the Company had cash and cash equivalents of $20.0
million  and  $53.2  million  in short  term  investments.  Its  long-term  debt
consisted  primarily of a $30.0  million note  obligation  due in 2001,  and the
Company had no debt outstanding  under its line of credit.  The Company believes
that its current cash  balances,  available bank  financing,  and cash flow from
operations  will be  sufficient  to  meet  its  anticipated  cash  needs  in the
foreseeable future.


                                       31

<PAGE>

YEAR 2000 ISSUE
 
     Issues  involving the year 2000 are the result of computer  programs  being
written using two digits rather than four to define the applicable  year. Any of
the Company's computer programs that have time-sensitive  software may recognize
a date using "00" as the year 1900 rather than the year 2000.  This could result
in a system  failure  or  miscalculations  causing  disruptions  of  operations,
including,  among other things, a temporary  inability to process  transactions,
send invoices, or engage in similar normal business activities.

*    Based on a recent assessment, the Company determined that it will be
required to modify or replace  significant  portions of its software so that its
computer  systems will function  properly with respect to dates in the year 2000
and  thereafter.  The Company  presently  believes  that with  modifications  to
existing software and conversions to new software,  the Year 2000 Issue will not
pose significant operational problems for its computer systems. However, if such
modifications  and  conversions  are not made,  or are not completed in a timely
manner,  the Year 2000 Issue could have a material  impact on the  operations of
the Company.
 
     The Company has formulated a plan and  methodology for addressing year 2000
problems  and is  currently  implementing  such plan.  The  Company  anticipates
completing  the year 2000 project within the year but no later than December 31,
1998 which is prior to any anticipated impact on its operating systems.

*    Anticipated spending for the modifications will be expensed as incurred
and is not expected to have a material impact on the Company's  on-going results
of operations.

CERTAIN OTHER RISK FACTORS

     The Company's  revenue has tended to fluctuate on a quarterly  basis due to
the timing of shipments  of products  under  contracts  and the sale of licensee
rights. A significant  portion of quarterly revenues occurs from orders received
and  immediately  shipped  to  customers  in the  last few  weeks  and days of a
quarter.  If orders are not received,  or if shipments  were to be delayed a few
days at the end of a quarter,  the operating  results and reported  earnings per
share for that quarter  could be  significantly  impacted.  Future  revenues are
difficult to predict,  and projections are based primarily on historical models,
which are not necessarily accurate representations of the future.

*    The Company has a relatively fixed cost structure in the short term which
is  determined  by the  business  plans and  strategies  the Company  intends to
implement in the three markets it addresses.  This  effective  leveraging  means
that increases or decreases in revenues have more than a proportional  impact on
net income or losses.  The Company estimates that a change in product revenue of
$1 million would change earnings per share by 2 to 3 cents.

*    In the longer term, the Company believes that the Software and Component
Technologies  business unit will produce a significant  portion of the Company's
business.  The  Software and  Component  Technologies  business  unit differs in
nature from most of the Company's  markets  because volumes are high and margins
relatively  low.  Software and  Component  Technologies  customers are extremely
price  sensitive.  As  costs  decrease  through  technological  advances,  these
advances  will be passed on to the  customer.  To  compete in the  Software  and
Component  Technologies market requires high-volume production and manufacturing
techniques.  Customers expect high quality standards with very low defect rates.
Compared to  competitors  which have far greater  resources in such  high-volume
manufacturing  and  associated  support  activities,  the Company is  relatively
inexperienced.

     The Company's stock price is subject to significant volatility. If revenues
and/or earnings fail to meet the expectations of the investment community, there
could  be an  immediate  and  significant  impact  on the  trading  price of the
Company's stock.


                                       32

<PAGE>

     The value of the Company's  products relies  substantially on its technical
innovation in fields in which there are many current patent filings. The Company
recognizes  that as new  patents  are  issued or are  brought  to the  Company's
attention by the holders of such patents, it may be necessary for the Company to
withdraw products from the market,  take a license from such patent holders,  or
redesign  its  products.  The Company  does not believe that any of its products
infringe  patents or other  proprietary  rights of third parties,  but cannot be
certain  that  they  do  not.  (See  Note  14  to  the  Consolidated   Financial
Statements.)  In  addition,  the legal costs and  engineering  time  required to
safeguard  intellectual  property or to defend against litigation could become a
significant  expense of  operations.  Such events could have a material  adverse
effect on the Company's revenues or profitability.

     The Company is continuously  evaluating  alliances and external investments
in technologies related to its business,  and has already entered into alliances
and made  relatively  small  investments  in a number of GPS related  technology
companies.  Acquisitions of companies,  divisions of companies,  or products and
alliances  entail  numerous  risks,  including  (i) the  potential  inability to
successfully   integrate   acquired   operations  and  products  or  to  realize
anticipated  synergies,  economies of scale,  or other value;  (ii) diversion of
management's attention;  and (iii) loss of key employees of acquired operations.
Any  such  problems  could  have a  material  adverse  effect  on the  Company's
business,  financial condition, and results of operations.  No assurances can be
given that the Company will not incur problems from current or future alliances,
acquisitions,  or investments.  Furthermore,  there can be no assurance that the
Company  will  realize  value  from  any  such   alliances,   acquisitions,   or
investments.

     Information  with  respect to GPS Navstar  satellite  system is included in

P
art I of this report, under the caption "Background," paragraph 6.

NEW ACCOUNTING STANDARDS

     In February 1997, the Financial Accounting Standards Board issued Statement
No. 128,  (SFAS 128)  "Earnings  Per Share,"  which the Company was  required to
adopt on December  31, 1997.  In  preparing  its  financial  statements  for the
current  fiscal  year,  the  Company  has been  required  to change  the  method
previously used to compute earnings per share, and to restate all prior periods.
Under the new  requirements,  primary  earnings per share has been replaced by a
simpler calculation called "basic" earnings per share. This calculation excludes
all common stock  equivalents  and other  dilutive  securities  (i.e.,  options,
warrants and convertible  instruments).  Under the new requirements,  "dilutive"
earnings  per share  replaces  the  existing  fully  diluted  earnings per share
calculation.  The new  diluted  earnings  per share  includes  the effect of all
dilutive instruments if they meet certain  requirements.  The impact of SFAS 128
on the calculation of basic and dilutive earnings per share for the fiscal years
reported is not material.

     In July 1997, the Financial  Accounting Standards Board issued Statement of
Accounting Standards No. 130 (SFAS 130), "Reporting Comprehensive Income", which
requires a separate financial statement showing changes in comprehensive  income
and is effective  for  financial  statements  issued for fiscal years  beginning
after December 15, 1997. SFAS 130 requires  reclassification of all prior-period
financial  statements  for  comparative  purposes.  The  Company  is  evaluating
alternative  formats for presenting this  information,  but does not expect this
pronouncement to materially impact the Company's results of operations.

     In June 1997, the Financial  Accounting Standards Board issued Statement of
Financial  Accounting  Standards No. 131, (SFAS 131) "Disclosures about Segments
of an Enterprise and Related  Information,"  which is effective for fiscal years
beginning after December 15, 1997.  SFAS 131  establishes  standards for the way
that public business  enterprises report information about operating segments in
annual financial  statements and requires that those enterprises report selected
information  about  operating  segments in interim  financial  reports.  It also
establishes  standards  for related  disclosures  about  products and  services,
geographic  areas,  and  major  customers.  Because  SFAS 131 is  effective  for
financial  statements  for fiscal years  beginning  after December 15, 1997, the
Company will adopt the new  requirements  for  reporting in fiscal year 1998 and
retroactively  restate fiscal year 1997. Management has not completed its review
of SFAS 131, but does not  anticipate  that the adoption of this  statement will
have a significant effect on the Company's reported segments.


                                       33

<PAGE>




Item 8.     Financial Statements and Supplementary Data

CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>


December 31                                                           1997 *            1996
- ---------------------------------------------------------------------------------------------
(In thousands)
<S>                                                                 <C>              <C>   

ASSETS

Current assets:
     Cash and cash equivalents                                     $ 19,951         $ 22,671
     Short-term investments                                          53,171           59,867
     Accounts receivable, less allowance for doubtful
        accounts of $2,464 and $2,393                                49,101           34,374
     Inventories                                                     47,773           38,858
     Other current assets                                             4,195            3,633
                                                               -------------    -------------
        Total current assets                                        174,191          159,403

Property and equipment, at cost less accumulated
   depreciation                                                      21,965           21,504
Intangible assets less accumulated amortization                       3,725            4,493
Deferred income taxes                                                   356              383
Other assets                                                          7,426            4,058
                                                               -------------    -------------
        Total assets                                              $ 207,663        $ 189,841
                                                               =============    =============


LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
     Current portion of long-term debt                                 $ 44            $ 316
     Accounts payable                                                18,724           13,763
     Accrued compensation and benefits                                5,830            6,552
     Customer advances                                                  830            3,000
     Accrued liabilities                                              9,391           10,358
     Income taxes payable                                             2,664              869
                                                               -------------    -------------
        Total current liabilities                                    37,483           34,858

Noncurrent portion of long-term debt and other liabilities           30,697           30,938
                                                               -------------    -------------
        Total liabilities                                            68,180           65,796
                                                               -------------    -------------

Commitments and contingencies

Shareholders' equity:
     Preferred stock, no par value; 3,000 shares
        authorized; none outstanding                                      -                -
     Common stock, no par value; 40,000 shares
        authorized; 22,813 and 22,063 outstanding, respectively     132,655          125,535
     Common stock warrants                                              700              700
     Retained earnings (accumulated deficit)                          6,676           (2,603)
     Unrealized gain on short-term investments                            8               20
     Foreign currency translation adjustment                           (556)             393
                                                               -------------    -------------
        Total shareholders' equity                                  139,483          124,045

                                                               -------------    -------------
        Total liabilities and shareholders' equity                $ 207,663        $ 189,841
                                                               =============    =============

* Actual year end for 1997 is January 2, 1998.


See accompanying notes to consolidated financial statements.

</TABLE>



                                       34

<PAGE>



CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>

Years ended December 31                           1997 *            1996             1995
- -------------------------------------------------------------------------------------------
 (In thousands, except per share data)

<S>                                             <C>              <C>              <C>    

Revenue                                        $ 272,305        $ 233,660        $ 235,360
                                            -------------    -------------    -------------


Operating expenses:
    Cost of sales                                132,104          112,596          102,666
    Research and development                      40,662           36,705           31,895
    Sales and marketing                           60,327           64,391           62,672
    General and administrative                    28,785           30,142           24,824
    Restructuring charges                              -            2,134                -
                                            -------------    -------------    -------------
       Total operating expenses                  261,878          245,968          222,057
                                            -------------    -------------    -------------
Operating income (loss)                           10,427          (12,308)          13,303

Nonoperating income (expense):
    Interest and investment income                 4,462            4,635            3,594
    Interest  and other expense                   (3,524)          (3,925)          (3,909)
    Foreign exchange gain (loss)                     234               (4)           1,088
                                            -------------    -------------    -------------
       Total nonoperating income (expense)         1,172              706              773
                                            -------------    -------------    -------------
Income (loss) before income taxes                 11,599          (11,602)          14,076
Income tax provision (benefit)                     2,320             (300)           2,815
                                            -------------    -------------    -------------
Net income (loss)                                $ 9,279        $ (11,302)        $ 11,261
                                            =============    =============    =============

Basic net income (loss) per share                 $ 0.42          $ (0.51)          $ 0.56
                                            =============    =============    =============

Shares used in calculating basic
     net income (loss) per share                  22,293           22,005           19,949
                                            =============    =============    =============


Diluted net income (loss) per share               $ 0.40          $ (0.51)          $ 0.53
                                            =============    =============    =============

Shares used in calculating diluted
     net income (loss) per share                  22,947           22,005           21,318
                                            =============    =============    =============

* Actual year end for 1997 is January 2, 1998.

See accompanying notes to consolidated financial statements
</TABLE>




                                       35

<PAGE>



 CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY

<TABLE>
<CAPTION>

                                                                                                          
                                                   Common stock          Notes                Unrealized    Foreign            
                                                   and warrants        receivable  Retained    loss on      currency       Total
                                                --------------------      from     earnings   short term   translation  shareholders
                                                   Shares     Amount   shareholders (deficit) investments   adjustment    equity
- -----------------------------------------------------------------------------------------------------------------------------------
 (In thousands)
<S>                                               <C>         <C>            <C>      <C>            <C>        <C>      <C>

 Balance at December 31, 1994                      18,731    $ 56,458      $ (215)  $ (2,562)      $ (71)     $ (36)    $ 53,574
 Issuances of stock under employee plans              811       7,283           -          -           -          -        7,283
 Issuance of stock under common stock offering      2,100      57,248           -          -           -          -       57,248
 Tax benefit from stock option exercises                -         160           -          -           -          -          160
 Collection of notes receivable                         -           -         215          -           -          -          215
 Net income                                             -           -           -     11,261           -          -       11,261
 Translation adjustments                                -           -           -          -           -         23           23
 Unrealized gain (loss) on short term investments       -           -           -          -         173          -          173
                                                  -------- ----------- ----------- ---------- ----------- ---------- ------------
 Balance at December 31, 1995                      21,642     121,149           -      8,699         102        (13)     129,937
 Issuances of stock under employee plans              530       5,774           -          -           -          -        5,774
 Issuance of stock in connection with acquisition     141       2,857           -          -           -          -        2,857
 Repurchases of common stock                         (250)     (3,545)          -          -           -          -       (3,545)
 Net income                                             -           -           -    (11,302)          -          -      (11,302)
 Translation adjustments                                -           -           -          -           -        406          406
 Unrealized gain (loss) on short term investments       -           -           -          -         (82)         -          (82)
                                                  -------- ----------- ----------- ---------- ----------- ---------- ------------
 Balance at December 31, 1996                      22,063     126,235           -     (2,603)         20        393      124,045
 Issuances of stock under employee plans              890       8,954           -          -           -          -        8,954
 Repurchases of common stock                         (140)     (1,834)          -          -           -          -       (1,834)
 Net income                                             -           -           -      9,279           -          -        9,279
 Translation adjustments                                -           -           -          -           -       (949)        (949)
 Unrealized gain (loss) on short term investments       -           -           -          -         (12)         -          (12)
                                                  ======== =========== =========== ========== =========== ========== ============
 Balance at December 31, 1997 *                    22,813   $ 133,355         $ -    $ 6,676         $ 8     $ (556)   $ 139,483
                                                  ======== =========== =========== ========== =========== ========== ============

* Actual year end for 1997 is January 2, 1998.

See accompanying notes to consolidated financial statements

</TABLE>


 
                                       36

<PAGE>



CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>


 Years ended December 31                                1997 *           1996            1995
- -----------------------------------------------------------------------------------------------
 (In thousands)
<S>                                                     <C>            <C>             <C>    

 Cash flow from operating activities:
      Net income (loss)                                $ 9,279       $ (11,302)       $ 11,261
      Adjustments to reconcile net income (loss)
      to cash flows from operating activities:
         Depreciation and amortization expense          12,208          10,140           8,042
         Deferred revenue amortization                       -               -             (79)
         Rental inducement receipts                          -               -            (111)
         Other                                          (1,283)            178             673
      Decrease (increase) in assets:
         Accounts receivable, net                      (14,727)          5,501         (10,519)
         Inventories                                    (8,915)         (7,073)         (7,618)
         Other current and noncurrent assets            (1,537)         (2,603)         (3,020)
         Deferred income taxes                              27           1,191             248
      Increase (decrease) in liabilities:
         Accounts payable                                4,961          (2,102)          5,180
         Accrued compensation and benefits                (722)            807           1,909
         Customer advances                              (2,170)          1,920           1,080
         Accrued liabilities                              (967)          1,608           2,777
         Income taxes payable                            1,795          (2,133)          1,561
                                                  -------------    ------------    ------------
 Net cash provided (used) by operating activities       (2,051)         (3,868)         11,384
                                                  -------------    ------------    ------------

 Cash flow from investing activities:
      Equity investments                                (1,889)              -               -
      Acquisition of property and equipment            (10,991)        (10,359)        (14,553)
      Costs of capitalized patents                        (910)           (762)           (915)
      Purchase of short-term investments               (63,854)        (75,663)       (115,527)
      Maturities of short-term investments              70,538          83,247          68,600
                                                  -------------    ------------    ------------
 Net cash used by investing activities                  (7,106)         (3,537)        (62,395)
                                                  -------------    ------------    ------------

 Cash flow from financing activities:
      Issuance of common stock                           8,954           5,774           7,283
      Net proceeds from common stock offering                -               -          57,248
      Repurchase of common stock                        (1,834)         (3,545)              -
      (Payment)/collection of notes receivable            (504)             66             145
      (Payments)/proceeds on long-term debt and
            revolving credit facilities                   (179)         (1,930)         (1,597)
                                                  -------------    ------------    ------------
 Net cash provided by financing activities               6,437             365          63,079
                                                  -------------    ------------    ------------
 Increase (decrease) in cash and cash equivalents       (2,720)         (7,040)         12,068
 Cash and cash equivalents, beginning of period         22,671          29,711          17,643
                                                  =============    ============    ============
 Cash and cash equivalents, end of period             $ 19,951        $ 22,671        $ 29,711
                                                  =============    ============    ============

* Actual year end for 1997 is January 2, 1998.

 See accompanying notes to consolidated financial statements

</TABLE>



                                       37

<PAGE>





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Summary of significant accounting policies:

     Use of estimates.  The  preparation  of financial  statements in conformity
with  generally  accepted  accounting  principles  requires  management  to make
estimates  and  assumptions  that affect the amounts  reported in the  financial
statements  and  accompanying  notes.  Due  to  the  inherent  nature  of  those
estimates, actual results could differ from expectations.

     Basis of  presentation.  During fiscal year 1997,  the Company  changed its
fiscal year from a calendar year ending on  December 31 to an annual period that
varies  from 52 to 53 weeks  and  that  always  ends on the  Friday  nearest  to
December 31,  effective  for the  Company's  1997 fiscal year end, such that the
actual date of the Company's  fiscal  year-end for 1997 is January 2, 1998.  For
ease of  financial  statement  presentation,  comparison  and  consistency,  the
Company has continued to present each prior fiscal year as ending on December 31
and has not  otherwise  restated or adjusted its prior  financial  statements on
this new fiscal year basis.  In addition,  because the change in fiscal year was
made effective only as of the end of fiscal year 1997, the Company's prior three
reporting  quarters  continue to be accounted  for as ending on a calendar  year
basis (i.e., March 31, June 30 and September 30.)

     The effect of changing  to a 52-53 week  fiscal year for 1997,  resulted in
the Company  reporting an extra two days when compared to the same calendar year
period.  The effect of any  differences due to the change in the fiscal year-end
dates are not expected to be material; specifically, the effect of changing to a
52-53 week  fiscal year for 1997 was that the  Company  recorded  an  additional
$3,176,000 of revenue and gross margin impact of $1,524,000  for shipments  from
January 1, 1998 to January 2, 1998, inclusive.

     In the future,  the  Company's  fiscal year will  normally  consist of four
equal  quarters of 13 weeks  each,  or 52 weeks;  however,  due to the fact that
there are not  exactly  52 weeks in a calendar  year and that there is  slightly
more than one  additional  day per year (not including the effects of leap year)
in each  calendar  year as compared to a 52 week fiscal  year,  the Company will
have a fiscal year composed of 53 weeks in certain  fiscal years,  as determined
by how Friday falls closest to December 31 in consecutive calendar years.

     In those  resulting  fiscal  years which have 53 weeks,  the  Company  will
record  an  extra  week of  revenues,  costs  and  related  financial  activity.
Therefore,  the  financial  results of those fiscal  years,  and the  associated
quarter,  having the extra week, will not be exactly comparable to the prior and
subsequent  52 week fiscal years,  and the  associated  quarters  having only 12
weeks.  Thus,  due to the inherent  nature of adopting a 52-53 week fiscal year,
the  Company,  analysts,  shareholders,  investors  and others will have to make
appropriate  adjustments to any analysis  performed when comparing the Company's
activities  and  results  in fiscal  years  that  contain 53 weeks to those that
contain the standard 52 weeks.

     Principles of consolidation.  The consolidated financial statements include
the accounts of Trimble  Navigation  Limited (the Company) and its  wholly-owned
subsidiaries  after  elimination  of  all  material  intercompany  balances  and
transactions.
 
     Foreign  currency  translation.  Assets and  liabilities  of the  Company's
foreign subsidiaries are translated into U.S. dollars at year-end exchange rates
and revenues and expenses are translated at average rates prevailing  during the
year.  Local  currencies are considered to be the functional  currencies for the
Company's  non-U.S.  subsidiaries.  Translation  adjustments  are  deferred in a
separate component of shareholders'  equity.  Foreign currency transaction gains
and losses are included in results of operations as incurred.

     Forward  foreign  currency  exchange  contracts The Company's  policy is to
hedge its known exposure to foreign currency transactions to minimize the effect
of  changes  in  foreign  currency  exchange  rates on  consolidated  results of
operations. The Company enters into simple forward foreign exchange contracts to
either buy or sell currency if the net position  exceeds  $400,000.  The forward
foreign  exchange  contract  obligates  the  Company to  exchange  predetermined
amounts of specified foreign currencies at specified exchange rates on specified
dates or to make an equivalent  U.S.  dollar  payment equal to the value of such
exchange.  For contracts that are designated and effective as hedges,  discounts
or  premiums  (the  difference  between the spot  exchange  rate and the forward
exchange  rate at inception of the  contract) are accreted or amortized to other



                                       38

<PAGE>



operating expenses over the contract lives using the straight-line  method while
realized  and  unrealized  gains and losses  resulting  from changes in the spot
exchange rate (including those from open,  matured,  and terminated  contracts),
are  included  in results of  operations.  The  related  amounts  due to or from
counterparties  are  included  in other  assets or other  liabilities.  Contract
amounts are marked to market,  with changes in market value recorded in earnings
as foreign  exchange  gains or losses.  To date,  the Company  has entered  into
simple  forward  foreign  currency  exchange  contracts to offset the effects of
changes in exchange rates on foreign-denominated  intercompany  receivables.  At
January 2, 1998, the Company had forward foreign currency exchange  contracts to
sell  $5,337,000  of  Japanese  Yen and  $561,000  of German  Marks,  and to buy
$1,572,000 of New Zealand dollars and $1,425,000 of British Pound  Sterling,  at
contracted rates that mature over the next five months.

     Cash and cash equivalents.  Cash and cash equivalents  include all cash and
highly liquid investments with original  maturities of three months or less. The
carrying amount of cash and cash equivalents  approximates fair value because of
the short maturity of those instruments.

     Short-term  investments.  The Company  has  classified  all its  short-term
investments as "available for sale."  Available-for-sale  securities are carried
at fair value, with the unrealized holding gains and losses, net of tax effects,
reported in a separate component of shareholders' equity. Fair value is based on
quoted market  prices.  The cost of debt  securities in this  classification  is
adjusted for  amortization  of premiums and  accretion of discounts to maturity.
Such  amortization,  as well as  interest,  dividends,  and  realized  gains and
losses,  is included in interest and investment  income.  The cost of securities
sold is based on the specific identification method.

     At January 2, 1998, the Company's short-term  investments consisted of U.S.
Treasury securities totaling  $53,171,000 at cost, which had unrealized gains of
$8,000  and had  original  maturities  of less  than one  year  from the date of
purchase.  At December 31, 1996,  the Company's  short-term  investments in U.S.
Treasury  securities and Federal  Government  Agencies had a cost of $59,867,000
and had unrealized gains of $20,000.

     Concentration  of credit risk.  In entering into forward  foreign  exchange
contracts,  the Company has assumed the risk that might arise from the  possible
inability  of  counterparties  to  meet  the  terms  of  their  contracts.   The
counterparties to these contracts are major multinational  commercial banks, and
the Company does not expect any losses as a result of counterparty defaults. The
Company performs ongoing credit  evaluations of its customers and generally does
not require  collateral.  The expenses recorded for doubtful accounts receivable
were $315,000 in 1997, $1,159,000 in 1996, and $352,000 in 1995.

     Inventories.  Inventories  are  stated  at the  lower of  standard  cost or
market. Standard costs approximate average actual costs.

     In December 1995,  the Company  announced  that it had  temporarily  halted
shipments of certain tracking and  communications  products  deliverable under a
large contract with a single customer.  Shipments under this contract resumed in
March 1997,  accordingly,  the Company has not provided any reserves against the
products included in inventory Inventories included approximately  $2,170,000 of
materials at January 2, 1998,  and $3,348,000 of materials at December 31, 1996,
that have been received in anticipation of making shipments to this customer.

     Revenue  recognition.  The Company recognizes revenue from product sales at
the time of  shipment,  except as to  revenue  deferred  for  extended  warranty
obligations.  Substantially  all technology  licenses and research  revenue have
consisted of initial  license fees and  royalties,  which were  recognized  when
earned.

     Product warranty.  The Company provides for estimated warranty costs at the
time of sale.  The  warranty  period  is  generally  for one year  from  date of
shipment,  except for aviation products, for which the period is generally three
years; select military programs may require extended warranty periods.

     Advertising Costs. The Company expenses the production costs of advertising
as incurred. Advertising expenses were $6,328,000, $7,587,000, and $7,683,000 in
1997, 1996, and 1995, respectively.


                                       39

<PAGE>


     Stock  Compensation.  In  accordance  with the  provisions  of Statement of
Financial  Accounting  Standards  (SFAS) No. 123,  "Accounting  for  Stock-Based
Compensation," the Company applies  Accounting  Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related  Interpretations
in accounting for its stock option plans and stock  purchase plan.  Accordingly,
it does not recognize  compensation  cost for stock options  granted at or above
market.  Note 11 to the Consolidated  Financial  Statements  describes the plans
operated  by the  Company,  and  contains a summary of the pro forma  effects to
reported  net income and  earnings per share for 1997 and 1996 as if the Company
had  elected  to  recognize  compensation  cost  based on the fair  value of the
options granted at grant date, as prescribed by SFAS No. 123.

     Depreciation and amortization. Depreciation of property and equipment owned
or under capitalized leases is computed using the straight-line  method over the
shorter of the  estimated  useful lives or the lease  terms.  Useful lives range
from three years for  machinery  and  equipment to five years for  furniture and
fixtures. Amortization of intangibles is computed using the straight-line method
over periods of four years or less.

     Interest.  All  interest  costs  incurred  have been  charged  to  interest
expense.

     Net  income  (loss)  per  share.  In 1997,  the  Financial  Accounting  and
Standards Board issued  Statement No. 128,  "Earnings Per Share".  Statement 128
replaced the  calculation  of primary and fully diluted  earnings per share with
basic and diluted earnings per share.  Unlike primary earnings per share,  basic
earnings  per share  excludes  any  dilutive  effects of options,  warrants  and
convertible  securities.  Diluted  earnings  per  share is very  similar  to the
previously  reported  fully diluted  earnings per share.  All earnings per share
amounts for all periods have been presented, and where appropriate,  restated to
conform to the Statement 128 requirements.

Note 2 - The Company, industry segment, geographic, and customer information:

     The Company  operates in a single industry segment as a leading supplier of
products that determine  precise  geographic  location and time using the Global
Positioning  System (GPS).  The Company  develops,  manufactures and markets its
products for applications in surveying and mapping, tracking and communications,
OEM,  avionics and military  markets.  The Company sells its products  through a
direct salesforce  located in twelve  countries,  as well as through a worldwide
network of dealers,  distributors and authorized  representatives.  Research and
development  activities are conducted at the Company's  facilities in Sunnyvale,
California;  Austin,  Texas;  and  Christchurch,  New Zealand.  Manufacturing is
performed primarily in Sunnyvale,  California, and to a lesser extent in Austin,
Texas.


     The  following  table sets forth  revenue by market.  Revenues in 1995 have
been reclassified to conform with the Company's  organization  structure in 1996
and 1997.


                                           1997 *          1996           1995
- -------------------------------------------------------------------------------
(In thousands)

   Commercial Systems                    $168,606      $ 158,273      $ 162,393
   Software & Component Technologies       43,417         38,054         35,416
   Aerospace                               60,282         37,333         37,551
                                    --------------   -------------  -----------
    Total revenue                        $272,305      $ 233,660      $ 235,360
                                    --------------   -------------  -----------

* Actual year end for 1997 is January 2, 1998.


                                       40

<PAGE>

     Information regarding geographic areas is as follows:


<TABLE>
<CAPTION>

                                                            Geographic Area
                                          ----------------------------------------------
                                                           Europe /       Pac. Rim, Asia
                                            Domestic      Middle East      and Japan       Eliminations      Total
- --------------------------------------------------------------------------------------------------------------------
(In thousands)
<S>                                          <C>             <C>             <C>           <C>            <C>    

1997 *
       Sales to unaffiliated customers      $ 211,781       $ 45,769        $ 14,755            $ -      $ 272,305
       Intergeographic transfers               29,481          2,482           1,198        (33,161)           $ -
                                         -------------  -------------   -------------  -------------  -------------
       Total revenue                        $ 241,262       $ 48,251        $ 15,953      $ (33,161)     $ 272,305
                                         -------------  -------------   -------------  -------------  -------------
       Operating income (loss)                $ 5,349       $ 14,093        $ (9,284)         $ 269       $ 10,427
       Identifiable assets                  $ 185,915       $ 11,830        $ 10,584         $ (666)     $ 207,663
1996
       Sales to unaffiliated customers      $ 164,663       $ 47,972        $ 21,025            $ -      $ 233,660
       Intergeographic transfers               70,366              -           1,474        (71,840)           $ -
                                         -------------  -------------   -------------  -------------  -------------
       Total revenue                        $ 235,029       $ 47,972        $ 22,499      $ (71,840)     $ 233,660
                                         -------------  -------------   -------------  -------------  -------------
       Operating income (loss)              $ (18,670)      $ 14,917        $ (8,382)        $ (173)     $ (12,308)
       Identifiable assets                  $ 166,405       $ 14,355        $ 10,037         $ (956)     $ 189,841

1995
       Sales to unaffiliated customers      $ 158,800       $ 51,040        $ 25,520            $ -      $ 235,360
       Intergeographic transfers               42,621              -           1,361        (43,982)           $ -
                                         -------------  -------------   -------------  -------------  -------------
       Total revenue                        $ 201,421       $ 51,040        $ 26,881      $ (43,982)     $ 235,360
                                         -------------  -------------   -------------  -------------  -------------
       Operating income (loss)                $ 3,902       $ 19,000        $ (8,858)        $ (741)      $ 13,303
       Identifiable assets                  $ 170,390       $ 14,112        $ 13,105         $ (844)     $ 196,763

* Actual year end for 1997 is January 2, 1998.

</TABLE>


     Transfers between domestic and foreign  geographic areas are made at prices
based on total costs and  contributions  of the supplying  geographic  area. The
Company's  subsidiaries  in the Pacific Rim, Asia and Japan have derived revenue
from  commissions  from domestic  operations  in each of the periods  presented.
These  commission  revenues and expenses  are  excluded  from total  revenue and
operating  income  (loss) in the  preceding  table.  Since April 1995,  sales to
unaffiliated  customers  in  Japan  have  been  made by the  Company's  Japanese
subsidiary. Previously, such sales were treated as domestic export sales.

     Export  revenue  (defined  as sales to  unaffiliated  customers  in foreign
countries,  made by the Company's domestic  operations) as a percentage of total
revenue was as follows:

                                        1997 *           1996            1995
- ------------------------------------------------------------------------------

 Europe/Middle East                         7  %            2  %           2  %
 Pacific Rim, Asia and Japan               10              13             12
 Other                                     11              10              7
                                 -------------    ------------    -----------
                                           28  %           25  %          21  %

* Actual year end for 1997 is January 2, 1998.


     No single  customer  accounted  for 10% or more of total  revenues in 1997,
1996 or 1995.



                                       41

<PAGE>


     The geographic  distribution of sales to unaffiliated customers by customer
location as a percentage of total revenue was as follows:


                                         1997 *           1996            1995
- -------------------------------------------------------------------------------

 United States                              55  %           53  %          47  %
 Europe/Middle East                         22              21             23
 Pacific Rim, Asia and Japan                15              19             23
 Other                                       8               7              7
                                  -------------    ------------    -----------
                                           100  %          100  %         100  %

* Actual year end for 1997 is January 2, 1998.

Note 3 -  Balance sheet components:

 December 31,                                     1997 *           1996
- -------------------------------------------------------------------------
 (In thousands)

 Inventories
       Raw materials                            $ 32,123        $ 24,145
       Work-in-process                             7,123           5,174
       Finished goods                              8,527           9,539
                                            -------------    ------------
                                                $ 47,773        $ 38,858
                                            =============    ============

 Property and equipment
       Machinery and equipment                  $ 60,674        $ 52,277
       Furniture and fixtures                      5,060           4,758
       Leasehold improvements                      6,451           6,231
                                            -------------    ------------
                                                  72,185          63,266
       Less accumulated depreciation              50,220          41,762
                                            -------------    ------------
                                                $ 21,965        $ 21,504
                                            =============    ============

* Actual year end for 1997 is January 2, 1998.

Note 4 - Bank line of credit:

     In August 1997, the Company entered into a three year $50,000,000 unsecured
revolving credit facility with four banks (the "Credit Agreement").  This credit
facility  replaced  the previous two year  $30,000,000  unsecured  line that was
expiring.  The Credit Agreement enables the Company to borrow up to $50,000,000,
provided that certain  financial and other  covenants are met.  Under a separate
agreement the Company has an additional  $5,000,000 line of credit provided only
by the lead bank for "Letter of Credit"  purposes  which is also  subject to the
covenants in the main facility.  The Credit Agreement  provides for payment of a
commitment  fee of 0.25% and borrowings to bear interest at 1% over LIBOR if the
total  funded  debt to  EBITDA  is less  than or equal to 1.00  times,  0.3% and
borrowings  to bear  interest  at 1.25% over LIBOR if the ratio is greater  than
1.00 times and less than or equal to 2.00 times,  or 0.4% and borrowings to bear
interest  at 1.75%  over  LIBOR if the  ratio is  greater  than 2.00  times.  In
addition to  borrowing  at the LIBOR  rate,  the Company has the right to borrow
with  interest at the higher of (i) one of the banks' annual prime rate and (ii)
the  federal  funds rate plus 0.5%.  No  borrowings  were made under the line of
credit during 1997 and 1996.  Under the line of credit the Company is restricted
from paying dividends.


                                       42

<PAGE>



     At January 2, 1998, the Company was contingently  liable to a Japanese bank
for $43,500 at a year end  exchange  rate of 130.57 yen per dollar  arising from
customers' notes receivable which the Company sold with recourse to the bank. In
the event of a customer's  default,  the Company must  repurchase the receivable
from the bank. Losses resulting from defaults have not been significant.

Note 5 - Acquisition:

     On July 2, 1996, the Company  purchased  certain assets and assumed certain
liabilities  of  Terra  Corporation  (Terra),  a  New  Mexico  corporation  that
manufactured  components for the aviation market, in exchange for 140,860 shares
of the  Company's  common  stock and  options to purchase  12,000  shares of the
Company's common stock. The Company's results of operations  include the results
of  operations  of Terra  Corporation  from July 2, 1996.  The Company  recorded
$3,189,000  of  goodwill on the  acquisition.  The  Company is  amortizing  this
goodwill  over five  years.  As of January 2, 1998,  the  Company  had  recorded
accumulated amortization of $956,700.

     Prior to its  acquisition  by the Company,  Terra had limited  revenues and
operated  at a  loss.  As of  July 2,  1996,  Terra  had  cumulative  losses  of
approximately  $255,000. The amount of the loss is not determinable with respect
to individual periods. If the acquisition had occurred at January 1, 1995, based
on the purchase price recorded,  the Company would have recorded amortization of
goodwill  and a reduction  of net income  before  taxes of $637,800 in 1995,  or
$0.03 per share and additional  amortization  of goodwill and an increase in net
loss before income taxes of $318,900 in 1996, or $ 0.01 per share.

Note 6 - Restructuring:
 
     During 1996,  the Company  recorded  restructuring  charges of  $2,134,000.
Components of this restructuring  reserve included employee severance  packages,
the costs of redundant office space,  write-downs of idle assets,  and the costs
of moving people.

Note 7 - Long-term debt and other noncurrent liabilities:

         Long-term debt consists of the following:

December 31,                                       1997 *           1996
- --------------------------------------------------------------------------
 (In thousands)

 Subordinated notes                              $ 29,600        $ 29,507
 Capitalized leases (Note 8)                            -               -
 Equipment financing obligations                        -             316
 Other                                              1,141           1,431
                                              ------------    ------------
                                                   30,741          31,254
 Less-current portion                                  44             316
                                              ------------    ------------
 Noncurrent portion                              $ 30,697        $ 30,938
                                              ============    ============

* Actual year end for 1997 is January 2, 1998.

     Scheduled  payments of equipment  loan  obligations  are as follows:  $0 in
1998.
 
     During June 1994, the Company issued $30 million of subordinated promissory
notes bearing interest at an annual rate of 10% , with principal due on June 15,
2001.  Interest payments are due monthly in arrears.  The notes are subordinated
to the Company's senior debt, which is defined as all pre-existing  indebtedness
for  borrowed  money  and  certain  future   indebtedness   for  borrowed  money
(including,  subject  to  certain  restrictions,  secured  bank  borrowings  and
borrowed money for the acquisition of property and capital  equipment) and trade
debt  incurred in the ordinary  course of business.  If the Company  prepays any
portion of the  principal,  it is  required  to pay  additional  amounts if U.S.
Treasury  obligations of a similar maturity exceed a specified yield.  Under the
agreement the Company is restricted from paying dividends.


                                       43

<PAGE>



     The  issuance  of the notes also  included  warrants  entitling  holders to
purchase  400,000  shares of common  stock at a price of $10.95 per share at any
time through June 15, 2001. The warrants are included in shareholders' equity at
their appraised fair value of $700,000 at the time of issue. The net proceeds of
the notes were $29,348,000 after issuance costs of $652,000. The notes are shown
under  noncurrent  liabilities,  net of appraised  fair value  attributed to the
warrants.  The value of the warrants and the issuance costs are being  amortized
and included in interest expense using the interest rate method over the term of
the  subordinated  promissory  notes.  The effective annual interest rate on the
notes is 11.5%.  Under the terms of the note,  the Company is required to, among
other things, meet certain specified amounts of tangible net worth.

     Other  long-term debt primarily  represents  deferred rent  obligations and
rental  inducements  on certain of the Company's  leased  facilities.  The lease
agreements  provide for scheduled  increases in lease payments over the terms of
the leases.

Note 8 - Lease obligations and commitments:

     The  Company's  principal  facilities in the United States are leased under
noncancelable  operating  leases that expire at various  dates from 1998 through
2001.  The  Company has options to renew  these  leases for an  additional  five
years.  The  Company's  United  Kingdom  subsidiary  leases a facility  under an
operating lease that expires in 2015.

     At  January  2,  1998,  the  Company  had no  outstanding  equipment  lease
obligations.

 Future minimum payments required under noncancelable operating leases
 are as follows: 
                                                 Operating
                                                   Leases
- -----------------------------------------------------------
 (In thousands)

 1998                                              $ 6,480
 1999                                                4,991
 2000                                                4,131
 2001                                                1,752
 2002                                                1,372
 Thereafter                                          1,595
                                              =============
 Total                                            $ 20,321
                                              =============

Rent expense under operating  leases was $5,472,400 in 1997,  $6,004,800 in
1996, and $5,577,000 in 1995.

                                       44

<PAGE>


Note 9 - Fair value of financial instruments:

     Statement of Financial Accounting Standard No. 107, "Disclosures about Fair
Value  of  Financial   Instruments,"   requires   disclosure  of  the  following
information about the fair value of certain  financial  instruments for which it
is practicable  to estimate that value.  None of the financial  instruments  are
held or issued for trading purposes. The carrying amounts and fair values of the
Company's financial instruments are as follows:

                                                Carrying         Fair
                                                 Amount          Value
                                               ---------      -----------
December 31, 1997 *
- -------------------------------------------------------------------------
 (In thousands)

 Assets:
 Cash and cash equivalents (Note 1)           $ 19,951           $ 19,951
 Short-term investments (Note 1)                53,171             53,171
 Forward foreign exchange contracts (Note 1)       294                294

 Liabilities:
 Subordinated notes (Note 7)                    29,600             29,451

* Actual year end for 1997 is January 2, 1998.


     The fair  value of the  subordinated  notes  has  been  estimated  using an
estimate of the interest  rate the Company  would have had to pay on issuance of
notes with a similar maturity,  and discounting the cash flows at that rate. The
fair values do not give an  indication of the amount that the Company would have
to pay to extinguish any of this debt.

     The fair value of forward foreign exchange  contracts is estimated based on
quoted market prices of comparable contracts and these contracts are restated at
the end of every month to the fair value.

Note 10 - Income taxes:

 The income tax provision (benefit) consists of the following:

 Years ended December 31,               1997 *           1996           1995
- -------------------------------------------------------------------------------
 (In thousands)
 Federal:
      Current                           $ 1,168        $ (2,557)       $ 1,380
      Deferred                                -           1,208            389
                                   -------------   -------------  -------------
                                          1,168          (1,349)         1,769
                                   -------------   -------------  -------------
 State:
      Current                                10               5              4
      Deferred                                -               -              -
                                   -------------   -------------  -------------
                                             10               5              4
                                   -------------   -------------  -------------
 Foreign:
      Current                             1,116           1,060          1,183
      Deferred                               26             (16)          (141)
                                   -------------   -------------  -------------
                                          1,142           1,044          1,042
                                   -------------   -------------  -------------
 Income tax  provision (benefit)        $ 2,320          $ (300)       $ 2,815
                                   =============   =============  =============

* Actual year end for 1997 is January 2, 1998.

     The domestic  income (loss) before income taxes  (including  royalty income
subject   to   foreign   withholding   taxes)   was   approximately   $9,400,00,
($13,300,000), and $12,800,000, in 1997, 1996, and 1995.

                                       45

<PAGE>


     The income tax  provision  (benefit)  differs  from the amount  computed by
applying the  statutory  federal  income tax rate to income  before  taxes.  The
sources and tax effects of the differences are as follows:

 Years ended December 31,                        1997 *       1996        1995
- --------------------------------------------------------------------------------
 (In thousands)

 Expected tax at 35% in all years              $ 4,060    $ (4,061)     $ 4,926
 Tax account valuation adjustments              (2,390)     (1,630)      (2,464)
 Operating loss not utilized                         -       4,577            -
 Foreign withholding taxes                         403         170          242 
 Foreign tax rate differential                     (28)        277          356 
 State income taxes                                 10           5            4
 Benefit of Foreign Sales Corporation, net           -           -         (312)
 Other                                             265         362           63
                                            -----------  ----------   ----------
 Income tax provision (benefit)                $ 2,320      $ (300)     $ 2,815
                                            ===========  ==========   ==========
     Effective tax rate                            (20%)        (3%)         20%
                                            ===========  ==========   ==========

* Actual year end for 1997 is January 2, 1998.

The components of deferred taxes consist of the following:

                                                               December 31,
                                                    ---------------------------
                                                          1997 *          1996
- -------------------------------------------------------------------------------
 (In thousands)

 Deferred tax liabilities:
      Goodwill                                             $ 866        $ 1,139
      Other individually immaterial items                    290            229
                                                    -------------  ------------
      Total deferred tax liabilities                       1,156          1,368
                                                    -------------  ------------

 Deferred tax assets:
      Inventory valuation differences                      6,480          6,645
      Federal credit carryforwards                         6,316          5,793
      State credit carryforwards                           2,099          1,626
      Warranty                                             1,234            752
      Federal net operating loss (NOL) carryforward            -          1,410
      Deferred revenue                                       134          1,371
      Other individually immaterial items                  4,871          4,095
                                                    -------------  ------------
      Total deferred tax assets                           21,134         21,692

      Valuation allowance                                (19,622)       (19,941)
                                                    -------------  ------------
      Total deferred tax assets                            1,512          1,751
                                                    -------------  ------------

 Total net deferred tax assets                             $ 356          $ 383
                                                    =============  ============

* Actual year end for 1997 is January 2, 1998.

     The NOL and  credit  carryforwards  listed  above  expire in the years 1999
through 2012.

     The valuation  allowance  increased by $7.3 million in 1996.  Approximately
$6.9 million of the valuation allowance at December 31, 1997, relates to the tax
benefits  of stock  option  deductions  which will be  credited  to equity  when
realized.


                                       46

<PAGE>


Note 11 - Shareholders' equity:

     Employees  and others have been granted  options to purchase  common shares
under stock option plans adopted in 1990, 1992 and 1993. Details of these plans,
the 1988 Employee Stock Purchase  Plan, and similar  compensation  plans are set
out below.

     1993 Stock Option Plan In 1992,  the Company's  Board of Directors  adopted
the 1993 Stock Option Plan to replace the 1983 Stock  Option Plan which  expired
in January  1993.  The 1993 Stock  Option  Plan  provides  for the  granting  of
incentive and  nonstatutory  stock options for up to 3,200,000  shares of Common
Stock to employees,  consultants  and directors of the Company.  Incentive stock
options  may be granted for  exercise  prices that are not less than 100% of the
fair market value of Common Stock on the date of grant. All options granted have
63 month terms, and vest at a rate of 20% at the first anniversary of grant, and
monthly  thereafter at an annual rate of 20%, with full vesting occurring at the
fifth  anniversary of grant.  The exercise price of  nonstatutory  stock options
must be at least 85% of the fair  market  value of  Common  Stock on the date of
grant.  As of  December  31,  1997,  options to purchase  2,548,430  shares were
outstanding  and 222,922  shares were  available for future grant under the 1993
Stock Option Plan. The 1983 Stock Option Plan expired in 1997.

     1990 Director  Stock Option Plan In December  1990,  the Company  adopted a
Director  Stock Option Plan under which the Company has reserved  280,000 shares
of Common Stock for options to be granted to nonemployee directors.  At December
31, 1997, options to purchase 138,333 shares were outstanding and 165,833 shares
were available for future grants under the Director Stock Option Plan.

     1992  Management  Discount Stock Option Plan In 1992 the Company's Board of
Directors and  shareholders  approved the 1992 Management  Discount Stock Option
Plan ("Discount  Plan").  Under the Discount Plan,  300,000  nonstatutory  stock
options were reserved for grant to management  employees at exercise prices that
are  significantly  discounted from the fair market value of Common Stock on the
dates of grant.  Options are generally  exercisable  six months from the date of
grant. As of December 31, 1997,  there were 129,974 shares  available for future
grants.  For accounting  purposes,  compensation  cost is measured by the excess
over the discounted  exercise prices of the fair market value of Common Stock on
the  dates of  option  grant.  Noncash  compensation  cost  related  to  options
exercised in 1997 amounted to $274,572.  As of December 31, 1997, all shares had
been exercised.

     1988 Employee  Stock  Purchase  Plan In 1988,  the Company  established  an
employee stock purchase plan under which  1,700,000  shares of common stock were
reserved for issuance.  The plan permits full-time  employees to purchase Common
Stock through payroll deductions at 85% of the lower of the fair market value of
the  Common  Stock at the  beginning  or at the end of each  six-month  offering
period.  In 1997,  223,858  shares  were  issued  under  the plan for  aggregate
proceeds of $2,674,989.  At December 31, 1997, the number of shares reserved for
future purchases was 81,921.

     As stated in Note 1, the  Company  has elected to follow APB 25 and related
Interpretations  in accounting for its employee stock options and stock purchase
plans.  The  alternative  fair  value  accounting  provided  for under  SFAS 123
requires use of option pricing models that were not developed for use in valuing
employee  stock  options.  Under  APB 25,  because  the  exercise  price  of the
Company's employee stock options equals the market price of the underlying stock
on date of grant, no compensation expense is recognized.

     Pro forma  information  regarding  net  income  and  earnings  per share is
required by SFAS 123 and has been determined as if the Company had accounted for
its employee stock options and purchases  under the Employee Stock Purchase Plan
using the fair value method of that Statement.  The fair value for these options
was estimated at the date of grant using a  Black-Scholes  option  pricing model
with the following weighted-average assumptions for 1997, 1996, and 1995:


                                       47

<PAGE>



                                           1997 *           1996           1995
                                          -------        --------        -------
Expected dividend yield                      $ -             $ -            $ -
Expected stock price volatility            58.07%          58.76%         59.48%
Risk-free interest rate                     6.36%           6.29%          6.79%
Expected life of options after vesting      1.19            0.77           0.77

* Actual year end for 1997 is January 2, 1998.

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

     For  purposes of pro forma  disclosures,  the  estimated  fair value of the
options is amortized to expense over the options' vesting period.  The estimated
fair value of purchases  under the Employee  Stock  Purchase Plan is expensed in
the year of purchase.  The Company's pro forma  information (in thousands except
for per share data) is as follows:

                                                   1997 *      1996       1995
                                                 --------   --------   --------

Net income (loss) - as reported                  $ 9,279   $ (11,302)  $ 11,261

Net income (loss) - pro forma                    $ 2,899   $ (15,806)   $ 9,166

Basic income (loss) per share - as reported       $ 0.42     $ (0.51)    $ 0.56

Basic income (loss) per share - pro forma         $ 0.13     $ (0.72)    $ 0.46

Diluted income (loss) per share - as reported     $ 0.40     $ (0.51)    $ 0.53

Diluted income (loss) per share - pro forma       $ 0.13     $ (0.72)    $ 0.43


* Actual year end for 1997 is January 2, 1998.

     Because  the fair  value  method  is  applicable  only to  options  granted
subsequent  to December 31, 1994 pro forma  effects will not be fully  reflected
until 1998. Accordingly,  these figures are unlikely to be representative of the
effects on reported net income for future years.

     Exercise prices for options outstanding as of December 31, 1997 ranged from
$8.00 to  $23.00.  The  weighted  average  remaining  contractual  life of those
options is 3.86 years. In view of the wide range of exercise prices, the Company
considers it  appropriate  to provide the following  additional  information  in
respect of options outstanding:



                                       48

<PAGE>



<TABLE>
<CAPTION>

                                                     Total                                         Currently exercisable
                               Number           Weighted-average       Weighted- average       Number         Weighted- average
        Range             (in thousands)         exercise price   remaining contractul life (in thousands)     exercise price
- -----------------------   ---------------    -------------------  ------------------------- -------------     -----------------
<S>    <C>                     <C>                 <C>                   <C>                     <C>                <C>  
$8.000-$10.000                  328                 $9.37                 2.13                    254                $9.29
$11.000-$12.500                 354                $12.17                 3.89                     52                $11.40
$13.125-$13.125                 143                $13.13                 2.12                     81                $13.13
$15.375-$15.375                 999                $15.38                 3.96                    196                $15.38
$16.875-$17.000                  47                $17.00                 3.37                     19                $17.00
$17.500-$17.500                 481                $17.50                 4.96                      0                 $0.00
$17.875-$21.000                 269                $19.27                 4.15                     81                $18.32
$22.250-$22.250                   9                $22.25                 2.92                      4                $22.25
$22.750-$22.750                   8                $22.75                 3.11                      3                $22.75
$23.000-$23.000                  58                $23.00                 6.42                     10                $23.00
- -----------------------   --------------    ------------------   -------------------------  ----------------  -----------------
$8.000-$23.000                2,696                $15.10                 3.86                    700                $13.20

</TABLE>


 
     Activity  during  1997,  1996 and 1995  under  the  combined  plans  was as
follows:

<TABLE>
<CAPTION>
    
                                              1997 *                          1996                           1995               
                                                    Weighted average               Weighted average               Weighted average 
                                       Options       exercise price     Options     exercise price      Options     exercise price
                                      ------------- ----------------  ------------ ------------------ ----------   ---------------  
<S>                                    <C>                <C>             <C>            <C>           <C>             <C>    
Outstanding at beginning of year        2,577             $13.06           2,525         $13.49         2,392           $8.98  
     Granted                              962             $16.45           1,522         $16.57           907          $21.19  
     Exercised                           (635)             $8.78            (316)         $9.35          (663)          $7.49     
     Canceled                            (208)            $15.40          (1,154)        $19.61          (111)         $14.80       

Outstanding at end of year              2,696             $15.10           2,577         $13.06         2,525          $13.49       

Exercisable at end of year                700             $13.20             886          $9.99           764           $9.13  

Weighted-average fair value of options
    granted during year                                    $8.30                          $5.24                        $10.21

* Actual year end for 1997 is January 2, 1998.
</TABLE>


     During  1996,  under a  program  approved  by the  Board of  Directors  all
employees,  with the exception of officers,  were offered an exchange  option to
replace the stock options  previously issued to them, with new stock options (at
an exchange  ratio of 1 to 1, with a vesting  period  commencing  on the date of
exchange)  at a new  lower  price.  Options  on  825,456  shares  were  canceled
(reported  above as  cancellations)  and  replaced  (reported  above as  options
granted).

     401(k) Plan Under the Company's 401(k) Plan, U.S. employee participants may
direct the  investment of  contributions  to their accounts among certain mutual
funds and the Trimble  Navigation  Limited Common Stock Fund. The Fund purchased
35,661 shares of Common stock for an aggregate of $532,293 in 1997. The Company,
at its discretion,  matches individual  employee 401(k) Plan contributions up to
$100 per month.  The Company's  matching  contributions  to the 401(k) Plan were
$1,033,000 in 1997, $1,031,000 in 1996 and $827,000 in 1995.

     Profit  Sharing Plan In 1995,  the Company  introduced  an employee  profit
sharing plan in which all employees, excluding executives, participate. The plan
distributes  to employees  approximately  5% of quarterly  income  before taxes.
Payments under the plan during 1997, 1996, and 1995 were $549,000,  $43,000, and
$722,000 respectively.

     Common shares  reserved for future  issuances As of December 31, 1997,  the
Company has  reserved  3,441,103  common  shares for issuance  upon  exercise of
options outstanding and options available for grant under the 1993 Stock Option,



                                       49

<PAGE>



1990 Director Stock Option, and 1992 Management Discount Stock Option plans, and
available for issuance under the 1988 Employee Stock Purchase plan.

Note 12 - Earnings Per Share:

     In February 1997, the Financial Accounting Standards Board issued Statement
of Financial  Accounting Standards No. 128, "Earnings Per Share." The Registrant
adopted  this  standard,  as  required  for  its  December  31,  1997  Financial
Statements.  For the years  presented,  the  Registrant  presents both basic and
diluted earnings per share.

     The  following  data show the amounts used in computing  earnings per share
and the effect on the  weighted-average  number of shares of dilutive  potential
common stock.

<TABLE>
<CAPTION>


                                                                       Years Ended December 31,
                                                           --------------------------------------------------

                                                               1997 *             1996             1995
- -------------------------------------------------------------------------------------------------------------
(in thousands except per share amounts)
<S>                                                             <C>              <C>               <C>    

Numerator:
    Income available to common shareholders
     used in basic and diluted income (loss) per share          $ 9,279         $ (11,302)        $ 11,261

Denominator:
     Weighted-average number of Common
      Shares used in basic income (loss) per share               22,293            22,005           19,949

     Effect of dilutive securities:
      Common stock options                                          530                 -            1,169
      Common stock warrants                                         124                 -              200
                                                           ---------------   ---------------  ---------------

     Weighted-average number of Common
      Shares and dilutive potential Common Shares
      used in diluted income (loss) per share                    22,947            22,005           21,318
                                                           ===============   ===============  ===============


 Basic income (loss) per share                                     0.42             (0.51)            0.56
                                                           ===============   ===============  ===============
 Diluted income (loss) per share                                   0.40             (0.51)            0.53
                                                           ===============   ===============  ===============

* Actual year end for 1997 is January 2, 1998.

</TABLE>



                                       50

<PAGE>



Note 13 - Statement of cash flows data:

<TABLE>
<CAPTION>

Years ended December 31                                  1997 *           1996              1995
- -----------------------------------------------------------------------------------------------------
 (In thousands)
<S>                                                       <C>               <C>              <C>    

 Supplemental schedule of noncash financing activities:

 Tax benefit from stock options exercises                      $ -             $ -             $ 160
                                                       ------------    ------------     -------------


 Supplemental schedule of noncash investing activities:

 Common stock issued for Terra Corporation                     $ -         $ 2,857               $ -
                                                       ------------    ------------     -------------

 Supplemental disclosure of cash flow information:

 Interest paid                                             $ 3,313         $ 3,457           $ 3,678
                                                       ------------    ------------     -------------
 Income taxes paid                                           $ 167           $ 483           $ 1,032
                                                       ------------    ------------     -------------

* Actual year end for 1997 is January 2, 1998.
</TABLE>


Note 14 - Litigation:

     Settled Matters.  In November 1994, the Company was named as a defendant in
an action  commenced  in the United  States  District  Court for the District of
Rhode Island, NovAtel Communication Ltd. v. Trimble Navigation Limited, C.A. No.
94-0498 (ML).  Plaintiff  NovAtel sought  preliminary  and permanent  injunctive
relief,  unspecified  damages and  interest  thereon,  costs and  disbursements,
including   reasonable   attorneys'  fees,   based  on  the  Company's   alleged
infringement of U.S. Patent No. 5,101,416 (the '416 patent).

     On April 21, 1995, the Company filed suit against NovAtel for  infringement
of the  Company's  U.S.  Patent No.  4,754,465  (the '465  patent) in the United
States  District  Court,  Northern  District of  California,  San Jose Division,
Trimble  Navigation  v. NovAtel  Communications  Ltd,  C.A. No.  C95-2405 SI. On
February  27,  1996,   Trimble  filed  a  Complaint   against   NovAtel  at  the
International Trade Commission in Washington,  D.C., alleging unfair acts in the
importation of goods,  namely,  infringement  of its '465 patent,  and seeking a
permanent  exclusion  order to  interdict  the  importation  by or on  behalf of
NovAtel into this country of infringing GPS receivers  manufactured  and sold by
NovAtel.

     On July 16,  1996,  the  Company  and  NovAtel  entered  into an  agreement
resolving all matters in dispute and cross-licensing  certain technologies.  The
agreement ends all litigation between the parties.
 
     In February 1995, DAC  International  Inc.  (DAC),  then a distributor  and
sales  representative  of  the  Company,  terminated  its  sales  representative
agreement with the Company and thereafter filed an arbitration claim against the
Company in Palo Alto, California,  seeking damages of approximately  $2,100,000.
On July 15, 1996, the Arbitrator issued a Final Liability and Opinion Award that
called for the Company to pay a total of $1,021,000,  including interest, all of
which has now been paid.

     On March 26, 1996,  DAC filed a lawsuit  titled DAC  International,  Inc. v
Trimble  Navigation  Ltd.,  Case No.  96-02032,  filed in the District  Court of
Travis  County,  Texas.  In April  1996,  the Company  removed  this case to the
Federal  District  Court for the Western  District of Texas.  On August 6, 1996,
Trimble  agreed to pay DAC  $500,000,  which was charged to income in the second
quarter of 1996.  As a result of this  agreement,  all  litigation  between  the
Company and DAC has been settled.

 

                                       51

<PAGE>




     In March  1995,  the  Company  signed a large  contract  for the  supply of
Galaxy/GPS  land  mobile  satellite   terminals  to  American  Mobile  Satellite
Corporation (AMSC), a Reston, Virginia, based company that provides a variety of
voice and data services via satellite.  AMSC  contracted for delivery of product
beginning in mid-1995 and continuing through 1996. Late in the fourth quarter of
1995 AMSC  requested that the Company cease  delivery,  due in part to delays in
the completion of software. Shipments under the original contract were halted in
the fourth quarter of 1995, and the contract was modified.

     In October 1996, the Company filed a complaint against AMSC in the Superior
Court of  California  in Santa Clara  County.  The  complaint  alleges that AMSC
breached  its  March  1995  contract  with the  Company  by  refusing  to accept
additional  deliveries of Galaxy  product.  The complaint also alleges that AMSC
fraudulently  induced  the Company to execute a  modification  to the March 1995
contract.  The complaint seeks unspecified  damages,  including lost profits and
exemplary damages. AMSC acknowledged receipt of the complaint but did not file a
responsive  pleading.  On  February  20,  1997,  the  Company and AMSC signed an
agreement  to  resume  shipments  of  product  to AMSC,  and as a result of this
agreement the complaint has been dropped by the Company.

     In September  1996,  the British  Technology  Group (BTG)  brought suit for
alleged  infringement of its RE.34,004 patent. BTG has also brought suit against
two other  defendants  over the same patent.  Trimble  terminated its litigation
with BTG over U.S. Patent RE. 34,004 ('004 patent).  After a series of pre-trial
rulings  favorable  to  Trimble,  BTG  agreed  to  dismiss  its  complaint  with
prejudice.  BTG also agreed to release Trimble's receiver  architecture that was
the  subject  matter of the lawsuit  from  liability  with  respect to any other
infringement  allegations  that BTG might  have made in a  lawsuit.  In  return,
Trimble agreed to dismiss its  counterclaim  against BTG. The agreement does not
require either party to pay any money to the other and each party is to bear its
own costs.  An order  dismissing  BTG's case against Trimble has been entered by
Judge Bartle of the federal court of Philadelphia.

     Pending Matters. On December 6, 1995, two shareholders filed a class action
lawsuit  against the Company and certain  directors and officers of the Company.
Subsequent to that date,  additional  lawsuits were filed by other shareholders.
The lawsuits were subsequently amended and consolidated into one complaint which
was filed on April 5, 1996. The amended  consolidated  complaint sought to bring
an action as a class action  consisting  of all persons who purchased the common
stock of the Company during the period April 18, 1995,  through December 5, 1995
(the "Class  Period").  The  plaintiffs  alleged that the  defendants  sought to
induce the members of the Class to purchase  the  Company's  common stock during
the Class Period at artificially  inflated prices. The plaintiffs seek recissory
or compensatory damages with interest thereon, as well as reasonable  attorneys'
fees and extraordinary  equitable and/or injunctive  relief. The Company filed a
motion to dismiss,  which was heard by the Court on August 16,  1996.  The court
rejected  the  plaintiffs'  lawsuit,  but allowed  thirty  days to resubmit  its
complaint.  On September 24, 1996, the plaintiffs filed an amended complaint. On
April 28, 1997,  the Court  granted in part,  and denied in part,  the Company's
motion to dismiss.  The Court further  granted the  plaintiffs  leave to replead
certain dismissed claims. On June 19, 1997, the plaintiffs filed a third amended
and  consolidated  complaint.  The Company has answered the complaint by denying
all  liability.  The Company does not believe that it is possible to predict the
outcome of this litigation.

     On January  31,  1997,  counsel  for one  Philip M. Clegg  wrote to Trimble
asserting  that a license under  Clegg's U.S.  Patent No.  4,807,131,  which was
issued  February  21,  1989,  would be  required  by Trimble  because of a joint
venture Trimble had entered into with Caterpillar Corporation concerning the use
of Trimble GPS products in combination with earth moving equipment.  To date, no
infringement  action has been initiated on behalf of Mr. Clegg. The Company does
not  believe  that there will be any  adverse  consequences  to the Company as a
result of this inquiry.

     In July 1993, an individual filed a complaint  against the Company in which
the  individual  alleges the Company has an  obligation  to him for  commissions
earned and services provided in an amount in excess of $1,500,000.  In June 1995
the  Company's  motion for  summary  judgment  on all claims was  granted by the
court.  The individual  filed an appeal with the California Court of Appeals for
the Sixth District.  On November 26, 1996, the summary  judgment was affirmed by
the California Court of Appeals for the Sixth District.  On January 8, 1997, the
individual  petitioned  for  review  by the  Supreme  Court of  California.  The
petition  for  review was  denied by the  Supreme  Court.  The  judgment  in the
Company's favor is now final and nonappealable.

                                       52

<PAGE>

     A former  shareholder  has filed an action  against  the  Company  claiming
rights to shares that were  previously  canceled on the Company's  stock records
pursuant to lost stock certificate indemnification agreements. The complaint was
dismissed  for a lack of  jurisdiction.  The Company does not believe that there
will be any adverse consequences to the Company as a result of this case.

     In October  1995,  an employee  who was  terminated  by the Company in 1992
filed a complaint against the Company, alleging that his incentive stock options
continued  to  vest  subsequent  to  his  termination.   He  sought  damages  of
approximately  $1,000,000.  The Company filed a general  denial in answer to the
complaint.  The trial was concluded on September 25, 1997, and the jury rendered
its  verdict in favor of the  Company  on all  causes of  action.  It is unclear
whether the time for appeal has past, although no appeal has been filed to date.
The Company does not believe that an appeal, if any, would be successful.

     The Company is also a party to other  disputes  incidental to its business.
The Company  believes the ultimate  liability of the Company as a result of such
disputes,  if any,  would not be  material to its  overall  financial  position,
results of operations, or liquidity.
 
Note 15 - Selected quarterly financial data (unaudited):

<TABLE>
<CAPTION>

                                                      First          Second          Third          Fourth
                                                     Quarter        Quarter         Quarter        Quarter
- --------------------------------------------------------------------------------------------------------------
(In thousands, except per share data)
<S>                                                     <C>            <C>             <C>            <C>    

1997 *
         Total revenue                                 $ 60,551       $ 68,944        $ 64,719       $ 78,091
         Gross margin                                  $ 31,506       $ 36,689        $ 34,199       $ 37,807
         Operating income (loss)                        $ 1,751        $ 4,354         $ 1,573        $ 2,749
         Net income (loss)                              $ 1,429        $ 3,865         $ 1,592        $ 2,393

         Basic net income (loss) per share               $ 0.06         $ 0.18          $ 0.07         $ 0.11
                                                   =============  =============   =============  =============

         Dilutive net income (loss) per share            $ 0.06         $ 0.17          $ 0.07         $ 0.10
                                                   =============  =============   =============  =============

1996
         Total revenue                                 $ 56,722       $ 58,602        $ 54,086       $ 64,250
         Gross margin                                  $ 30,707       $ 31,565        $ 26,632       $ 32,160
         Operating income (loss)                       $ (1,594)      $ (3,480)       $ (8,466)       $ 1,232
         Net income (loss)                             $ (1,146)      $ (2,585)       $ (8,834)       $ 1,263

         Basic net income (loss) per share              $ (0.05)       $ (0.12)        $ (0.40)        $ 0.06
                                                   =============  =============   =============  =============

         Dilutive net income (loss) per share           $ (0.05)       $ (0.12)        $ (0.40)        $ 0.06
                                                   =============  =============   =============  =============

* Actual year end for 1997 is January 2, 1998.

</TABLE>

     Significant quarterly items include the following: (i) in the first quarter
of 1996 the Company recorded revenue of $1,080,000 from AMSC related to contract
renegotation  fees;  (ii) in the  second  quarter of 1996 the  Company  recorded
$1,000,000  from AMSC related to contractual  shutdown fees;  (iii) in the third
quarter of 1996 the Company  recorded  $2,046,000 of  restructuring  charges and
recorded an additional $88,000 in the fourth quarter of 1996; (iv) in the second
quarter of 1997 the Company  recorded  revenue of  $2,222,000  from a technology
license;  (v) in the third  quarter  of 1997 the  Company  recorded  revenue  of
$1,800,000  from a  development  agreement  in  connection  with an  irrevocable
non-refundable non-recurring engineering fee.


                                       53

<PAGE>


                REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

     The Board of Directors and Shareholders Trimble Navigation Limited
 
     We have audited the  accompanying  consolidated  balance  sheets of Trimble
Navigation  Limited as of January 2, 1998 and December 31, 1996, and the related
consolidated statements of operations,  shareholders' equity, and cash flows for
each of the three  years in the period  ended  January 2, 1998.  Our audits also
included the  financial  statement  schedule  listed in the index at Item 14(a).
These financial  statements and schedule are the responsibility of the Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements and schedule based on our audits.

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

     In our opinion,  the financial  statements  and schedule  referred to above
present fairly, in all material respects, the consolidated financial position of
Trimble  Navigation  Limited at January 2, 1998 and December  31, 1996,  and the
consolidated  results  of its  operations  and its cash flows for each the three
years in the period ended January 2, 1998 in conformity with generally  accepted
accounting  principles.  Also, in our opinion,  the related financial  statement
schedule, when considered in relation to the basic financial statements taken as
a whole,  presents  fairly in all material  respects the  information  set forth
therein.




                                                    /s/ERNST & YOUNG LLP

Palo Alto, California
January 27, 1998





                                       54

<PAGE>

                        


I
tem 9.  Changes in and Disagreements with Accountants on Accounting 
         Financial Disclosure

     Not applicable.



                                    PART III


Item 10. Directors and Executive Officers of the Registrant

     The section  titled  "Nominees"  and the section  titled  "Compliance  with
Section 16(a) of the Exchange Act" in the Company's Proxy Statement for its 1998
annual meeting of  shareholders to be held on May 5, 1998,  ("Proxy  Statement")
with respect to directors of the Company and  compliance  of the  directors  and
executive  officers  of the  Company  with  Section  16(a) of the  Exchange  Act
required by this item are incorporated herein by reference.

     The  information  with  respect to the  executive  officers  of the Company
required by this item is included in Part I hereof under the caption  "Executive
Officers of the Registrant."


Item 11. Executive Compensation

     The following  sections of the Proxy Statement are  incorporated  herein by
reference:  "Compensation of Executive  Officers,"  "Compensation of Directors,"
"Compensation Committee Interlocks and Insider Participation," and "Compensation
Committee Report' and "Company Performance."


Item 12. Security Ownership of Certain Beneficial Owners and Management

     The section titled  "Security  Ownership of Certain  Beneficial  Owners and
Management" of the Proxy Statement is incorporated herein by reference.


Item 13. Certain Relationships and Related Transactions

     The section titled "Certain  Relationships and Related Transactions" of the
Proxy Statement is incorporated herein by reference.

  

                                       55

<PAGE>




                                     PART IV


Item 14. Exhibits, Financial Statement Schedules, and  Reports on Form 8-K

(a)  1.   Financial Statements

     The following  consolidated  financial statements required by this item are
included in Part II Item 8 hereof under the caption  "Financial  Statements  and
Supplementary Data."

 
                                                                   Page In This
                                                                   Annual Report
                                                                   On Form 10-K
 
     Consolidated Balance Sheets at January 2,
     1998 and December 31, 1996.................                          34

     Consolidated Statements of Operations for
     each of the three fiscal years in the period
     ended January 2, 1998......................                          35

     Consolidated Statement of Shareholders'
     Equity for the three  fiscal years
     ended January 2, 1998......................                          36
 

     Consolidated Statements of Cash Flows for
     each of the three fiscal years in the period
     ended January 2, 1998.......................                         37
 

     Notes to Consolidated Financial Statements                        38-53

     2.   Financial Statement Schedules

     The following financial statement schedule is filed as part of this report:

                                                                   Page In This
                                                                   Annual Report
                                                                   On Form 10-K

     Schedule II - Valuation and Qualifying
     Accounts...........................                                S-1

     All other  schedules  have been  omitted as they are either not required or
not  applicable,  or the required  information  is included in the  consolidated
financial statements or the notes thereto.



                                       56

<PAGE>




     3. Exhibits
 
Exhibit
Number 

3.1  Restated Articles of Incorporation of the Company filed June 25, 1986.(1)
 
3.2  Certificate of Amendment of Articles of Incorporation of the Company filed
     October 6, 1988. (1)
 
3.3  Certificate of Amendment of Articles of Incorporation of the Company filed
     July 17, 1990. (1)
 
3.7  Bylaws of the Company, as amended. (14)
 
4.1  Specimen copy of certificate for shares of Common Stock of the Company. (1)

10.1(a)+ 1983 Stock Option Plan. (4)

10.1(b)+ Forms of Incentive and Nonstatutory Stock Option Agreements under the 
         1983 Stock Option Plan. (8)

10.2+    1988 Employee Stock Purchase Plan, as amended, and form of Subscription
         Agreement. (8)
 
10.3      Form of Employee Restricted Stock Purchase Agreement. (1)
 
10.4      Form of Indemnification Agreement between the Company and its officers
          and directors. (1)

10.5      Loan Agreement dated December 21, 1984, between the Company and 
          certain lenders. (1)

10.6      Note Purchase Agreement dated July 7, 1986, between the Company and 
          certain purchasers. (1)

10.7      Form of Common Stock Purchase Agreement dated March 1989 between the 
          Company and certain investors.(1)
 
10.8*     Memorandum of Understanding dated March 11, 1988, and License 
          Agreement dated September 5, 1988, between the Company and AEG 
          Aktiengesellschaft, with Amendments No. 1, No. 2, and No. 3 thereto, 
          and Letter Agreement dated December 22, 1989, between Trimble and 
          Telefunken Systemtechnik GmbH. (1)
 
10.9      Note Purchase Agreement dated December 6, 1988, between the Company 
          and AEG Aktiengesellschaft. (1)
 
10.10     Master Equipment Lease Agreement dated April 26, 1990, between the 
          Company and MATSCO Financial Corporation, and schedule of  lease 
          extensions. (1)
 
10.11*    Agreement dated February 6, 1989, between the Company and Pioneer
          Electronic Corporation. (1)
 
10.15     International OEM Agreement dated May 30, 1989, between the Company
          and Geotronics AB. (1)
 
10.16     Patent License Agreement dated January 18, 1990, between the Company
          and the United States Navy. (1)

10.18     Asset Purchase Agreement dated April 19, 1990, between the Company;
          TR Navigation Corporation, a subsidiary of the Company; and  Tracor 
          Aerospace, Inc. (1)

10.19     Promissory Note dated April 20, 1990, for the principal amount of
          $400,000 issued by TR Navigation Corporation to DAC International, 
          Inc. (1)
 
10.20     Guarantee dated April 20, 1990, between the Company and DAC
          International, Inc. (1)

10.21     Indemnification Agreement dated April 20, 1990, between the Company;
          TR Navigation Corporation, a subsidiary of the Company; DAC 
          International, Inc.; and Banner Industries, Inc. (1)


                                       57

<PAGE>



10.22     Distributor Agreement dated April 20, 1990, between TR Navigation
          Corporation, a subsidiary of the Company, and DAC International, 
          Inc. (1)
 
10.23     Distributor Agreement dated December 6, 1989, between the Company and
          DAC International, Inc. (1)

10.24     Lease Agreement dated April 26, 1990, between the Company and NCNB
          Texas National Bank,  Trustee for the Company's  offices  located at 
          2105 Donley Drive, Austin, Texas. (1)
 
10.32     1990 Director Stock Option Plan, as amended, and form of Outside
          Director Non statutory Stock Option Agreement. (8)
 
10.35     Sublease Agreement dated January 2, 1991, between the Company, Aetna
          Insurance  Company,  and Poqet Computer  Corporation for property 
          located at 650 North Mary Avenue, Sunnyvale, California. (2)

10.36     Lease Agreement dated February 20, 1991, between the Company, John
          Arrillaga Separate Property Trust , and Richard T. Peery Separate 
          Property Trust for property located at 880 West Maude, Sunnyvale, 
          California. (2)

10.37     Share and Asset Purchase Agreement dated February 22, 1991, among the
          Company and Datacom Group Limited and Datacom Software Research 
          Limited. (3)
 
10.38     License Agreement dated June 29, 1991 between the Company and Avion
          Systems, Inc. (3)
 
10.40     Industrial Lease Agreement dated December 3, 1991 between the Company
          and Aetna Life Insurance  Company for property located at 585 North 
          Mary Avenue, Sunnyvale, California. (5)
 
10.41     Industrial Lease Agreement dated December 3, 1991 between the Company
          and Aetna Life  Insurance  Company  for  property  located  at 570 
          Maude  Court, Sunnyvale, California. (5)

10.42     Industrial Lease Agreement dated December 3, 1991 between the Company
          and Aetna Life  Insurance  Company  for  property  located  at 580 
          Maude  Court, Sunnyvale, California. (5)

10.43     Industrial Lease Agreement dated December 3, 1991 between the Company
          and Aetna Life  Insurance  Company for property  located at 490 
          Potrero  Avenue, Sunnyvale, California. (5)

10.44     Master Lease Agreement dated September 18, 1991 between the Company
          and United States Leasing Corporation. (5)

10.45     Equipment Financing Agreement dated May 15, 1991 between the Company
          and Corestates Bank, N.A. (5)
 
10.46+    1992 Management Discount Stock Option and form of Nonstatutory Stock
          Option Agreement (5).

10.48     Equipment Financing Agreement dated April 27, 1992 with AT&T Systems
          Leasing Corporation. (7)

10.49**   Memorandum of Understanding dated December 24, 1992 between the
          Company and Pioneer Electronics Corporation.(7)

10.50+    1993 Stock Option Plan, as amended, and Forms of Incentive and
          Nonstatutory Stock Option Agreements. (14)

10.51     Revolving Credit Agreement for $15,000,000 dated January 27, 1993
          with Barclays Business Credit, Inc. (7)

10.52     $30,000,000 Note and Warrant Purchase Agreement dated June 13, 1994
          with John Hancock Life Insurance Company. (9)

10.53     Revolving Credit Agreement for $20,000,000 and $10,000,000, dated
          August 4, 1995,  with The First  National  Bank of Boston and Mellon  
          Bank N.A., respectively. (11)

10.54     Revolving Credit Agreement - First Amendment (12)

10.55     Revolving Credit Agreement - Second Amendment (12)



                                       58

<PAGE>


10.56     Revolving Credit Agreement - Third Amendment (13)

10.57     Revolving Credit Agreement - Fourth Amendment (14)

10.58     Revolving Credit Agreement for $50,000,000 dated August 27, 1997,
          with Fleet National Bank, Bank of Boston N.A., Sanwa Bank of 
          California, and ABN Amro Bank N.V., respectively. (15)

21.1      Subsidiaries of the Company. (16)
 
23.1      Consent of Ernst & Young LLP, independent auditors (see page 66).

24.1      Power of Attorney (included on page 61).

27        Financial Data Schedule (16)


     * Confidential  treatment has been previously  granted for certain portions
of this exhibit pursuant to an order dated July 11, 1990.

     ** Confidential  treatment has been previously granted for certain portions
of this exhibit pursuant to an order dated March 2, 1995.

     + Management  contract or compensatory  plan or arrangement  required to be
filed as an exhibit to this  Annual  Report on Form 10-K  pursuant to Item 14(c)
thereof.
 
(1)  Incorporated by reference to identically numbered exhibits filed in
     response to Item 16(a),  "Exhibits," of the registrant's  Registration 
     Statement on Form S-1, as amended (File No.  33-35333),  which became  
     effective  July 19, 1990.

(2)  Incorporated by reference to identically numbered exhibits filed in
     response to Item 14(a),  "Exhibits," of the  registrant's  Annual Report 
     on Form 10-K for the fiscal year ended December 31, 1990.

(3)  Incorporated by reference to identically numbered exhibits filed in
     response to Item 16,  "Exhibits  and Forms 8-K," of the  registrant's  
     Report on 10-Q for the  quarter  ended  September  30,  1991,  as  amended
     on Form 8 filed February 11, 1992.

(4)  Incorporated by reference to Exhibit No. 4.1 filed in response to Item
     8, "Exhibits," of the registrant's  Registration Statement on Form S-8 
     (File No. 33-45167), which became effective January 21, 1992.

(5)  Incorporated by reference to identically numbered exhibits filed in
     response to Item 16(a) "Exhibits," of the registrant's Registration 
     Statement on Form S-1 (File No. 33-45990), which was filed
     February 18, 1992.

(6)  Incorporated by reference to Exhibits 4.1, 4.2 and 4.3 filed in
     response to Item 8,  "Exhibits," of the registrant's  Registration  
     Statement on Form S-8 (File No. 33-57522), which was filed on 
     January 28, 1993.

(7)  Incorporated by reference to identically numbered exhibits filed in
     response to Item 14(a),  "Exhibits," of the  registrant's  Annual Report 
     on Form 10-K for the fiscal year ended December 31, 1992.

(8)  Incorporated by reference to identically numbered exhibits filed in
     response to Item 14(a),  "Exhibits," of the  registrant's  Annual Report 
     on Form 10-K for the fiscal year ended December 31, 1993.

(9)  Incorporated by reference to identically numbered exhibits filed in
     response to Item 6A, "Exhibits," of the registrant's  Annual Report on 
     Form 10-Q for the quarter ended June 30, 1994.

(10) Incorporated by reference to identically numbered exhibits filed in
     response to Item 14(a),  "Exhibits," of the  registrant's  Annual Report 
     on Form 10-K for the fiscal year ended December 31, 1994.

(11) Incorporated by reference to identically numbered exhibits filed in
     response to Item 14(a),  "Exhibits," of the  registrant's  Annual Report 
     on Form 10-K for the fiscal year ended December 31, 1995.

(12) Incorporated by reference to identically numbered exhibits filed in
     response to Item 6A, "Exhibits," of the registrant's  Annual Report on 
     Form 10-Q for the quarter ended June 30, 1996.



                                       59

<PAGE>



(13) Incorporated by reference to identically numbered exhibits filed in
     response to Item 6A, "Exhibits," of the registrant's  Annual Report on 
     Form 10-Q for the quarter ended September 30, 1996.

(14) Incorporated by reference to identically numbered exhibits filed in
     response to Item 6A, "Exhibits," of the registrant's  Annual Report on 
     Form 10-Q for the quarter ended June 30, 1997.

(15) Incorporated by reference to identically numbered exhibits filed in
     response to Item 6A, "Exhibits," of the registrant's  Annual Report on 
     Form 10-Q for the quarter ended September 30, 1997.

(16) Filed herewith.

     (b) Reports on Form 8-K.

          No  reports  on Form 8-K were  filed by the  registrant  during  the 
          fourth quarter ended January 2, 1998.


                                       60

<PAGE>





                                   SIGNATURES


     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the registrant has duly caused this Report on Form 10-K to
be signed on its behalf by the undersigned, thereunto duly authorized.


                                   TRIMBLE NAVIGATION LIMITED



                                    By:/s/CHARLES R. TRIMBLE         
                                       Charles R. Trimble,
                                       President and Chief
                                       Executive Officer


                                       March 30, 1998



                                POWER OF ATTORNEY

     Know all  persons  by these  presents,  that each  person  whose  signature
appears   below   constitutes   and   appoints   Charles   R.   Trimble  as  his
attorney-in-fact,  with  the  power  of  substitution,  for  him in any  and all
capacities,  to sign any amendments to this Report on Form 10-K, and to file the
same, with exhibits  thereto and other documents in connection  therewith,  with
the Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact,  or his substitute or substitutes,  may do or cause to be
done by virtue hereof.



                                       61

<PAGE>



     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
Annual  Report on Form 10-K has been signed  below by the  following  persons on
behalf of the registrant and in the capacities and on the dates indicated:




 Signature                 Capacity in which Signed                    Date
 ---------                 ------------------------                    ----

/s/CHARLES R. TRIMBLE      President, Chief Executive            March 30, 1998
- ------------------------   Officer (principal executive
Charles R. Trimble         officer) and Director 
        

/s/DENNIS R. ING           Executive Vice President, and         March 30, 1998
- ------------------------   Chief Financial Officer
Dennis R. Ing             (principal financial and principal
                           accounting officer)
             

/s/ROBERT S. COOPER        Director                              March 25, 1998
- ------------------------                           
Robert S. Cooper


/s/JOHN B. GOODRICH       Director                              March 30, 1998
- ------------------------                         
John B. Goodrich


/s/WILLIAM HART           Director                              March 23, 1998
- ------------------------                        
William Hart


/s/BRADFORD W. PARKINSON  Director                              March 16, 1998
- ------------------------                         
Bradford W. Parkinson



                                       62

<PAGE>


                                                                 SCHEDULE II

                           TRIMBLE NAVIGATION LIMITED
                       VALUATION AND QUALIFIYING ACCOUNTS
                            (IN THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>

                                     Balance at                                     Balance at
                                    beginning of    (Reductions)                      end of
Allowance for doubtful accounts:       period         Additions     Write-Offs **     period
                                   ---------------  --------------  --------------  ------------
<S>                                        <C>             <C>               <C>         <C>              
   Year ended December 31, 1995            $1,092            $165            $183        $1,074
   Year ended December 31, 1996             1,074           1,595             276         2,393
   Year ended December 31, 1997 *           2,393             205             134         2,464




                                     Balance at                                     Balance at
                                    beginning of    (Reductions)                      end of
Inventory Reserves:                    period         Additions     Write-Offs **     period
                                   ---------------  --------------  --------------  ------------
   Year ended December 31, 1995            $5,131          $1,126            $688        $5,569
   Year ended December 31, 1996             5,569           6,189           1,876         9,882
   Year ended December 31, 1997 *           9,882           2,389           2,862         9,409

- -----------------------------------------
* Actual year end for 1997 is January 2, 1998.
** Net of recoveries

</TABLE>



                                      S-1



                                       63

<PAGE>


      


                          INDEX TO EXHIBITS


                                                                SEQUENTIALLY
         EXHIBIT                                                  NUMBERED
         NUMBER           EXHIBIT                                  PAGE
         ------           -------                                  ----

         21.1             Subsidiaries of the Company               64

         23.1             Consent of  Ernst & Young LLP,
                          Independent Auditors                      65

         27.1             Financial Data Schedule for the
                          years ended January 2, 1998 and
                          December 31, 1996                         66

         

                                       64

<PAGE>








                           TRIMBLE NAVIGATION LIMITED
                                  EXHIBIT 21.1
                       LIST OF SUBSIDIARIES OF REGISTRANT
 

TR Navigation Corporation                 Trimble Middle East WLL
(incorporated in California)             (incorporated under the laws of Egypt)

Trimble Specialty Products, Inc.          Trimble Brasil Limitada
(incorporated in California)             (incorporated under the laws of Brazil)

Trimble Navigation Europe Limited         Trimble Mexico S. de R.L.
(organized under the laws of  the        (incorporated under the laws of Mexico)
 United Kingdom)                       
 
Trimble Navigation International          Datacom Software Limited ("DSL")
   Foreign Sales Corporation             (incorporated in California)
(organized under the laws of  Barbados)                                

Trimble Navigation International Limited
(incorporated in California)

TNL Flight Services, Inc.
(incorporated in Texas)

Trimble Navigation New Zealand Limited
(organized under the laws of New Zealand)

DataCom Software Research Limited
(organized under the laws of New Zealand)

Trimble Navigation Italia s.r.l.
(organized under the laws of Italy)

Trimble Navigation Deutchland GmbH
(organized under the laws of Germany)

Trimble Navigation France S.A.
(organized under the laws of France)
 
Trimble Navigation Singapore PTE Limited
(organized under the laws of Singapore)
 
Trimble Navigation
 Iberica S.L.
(organized under the laws of Spain)

Trimble Navigation Australia Pty Limited
(organized under the laws of Australia)

Trimble Japan K.K.
(organized under the laws of Japan)

Trimble Export Limited
(incorporated in California)


                                       65

<PAGE>








                           TRIMBLE NAVIGATION LIMITED
                                  EXHIBIT 23.1


               CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS


     We consent to the use of our report  dated  January 27, 1998 in this Annual
Report (Form 10-K) of Trimble  Navigation  Limited for the year ended January 2,
1998.

 
     We also  consent to the  incorporation  by  reference  in the  Registration
Statement  (Form S-8 Nos.  33-37384,  33-39647,  33-45167,  33-45604,  33-46719,
33-50944,  33-57522,  33-62078,  33-78502,  33-84362,  33-91858,  333-04670, and
333-28429)  pertaining  to the 1983 Stock  Option Plan,  the Trimble  Navigation
Savings and Retirement  Plan, the 1990 Director Stock Option Plan, the "Position
for Us for  Progress"  1992  Employee  Stock  Bonus  Plan,  the 1992  Management
Discount  Stock  Option Plan,  and the 1993 Stock  Option Plan,  and the related
Prospectuses,  of  our  report  dated  January  27,  1998  with  respect  to the
consolidated  financial  statements and schedule of Trimble  Navigation  Limited
included in the Annual Report (Form 10-K)for the year ended January 2, 1998.





     /s/ERNST & YOUNG LLP
     Palo Alto, California 
     March 27, 1998
 




                                       66

<PAGE>







<TABLE> <S> <C>
                                              
<ARTICLE>                     5
<LEGEND>                                      
     THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
     CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF EARNINGS AND
     IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>                                     
<MULTIPLIER>  1,000
                                                    
<S>                                  <C>                    <C>
<PERIOD-TYPE>                         YEAR                   YEAR                
<FISCAL-YEAR-END>                     JAN-02-1998            DEC-31-1996
<PERIOD-END>                          JAN-02-1998            DEC-31-1996
<CASH>                                           19,951               22,671    
<SECURITIES>                                     53,171               59,867
<RECEIVABLES>                                    49,101               34,374
<ALLOWANCES>                                          0                    0
<INVENTORY>                                      47,773               38,858
<CURRENT-ASSETS>                                174,191              159,403
<PP&E>                                           21,965               21,504 
<DEPRECIATION>                                        0                    0
<TOTAL-ASSETS>                                  207,663              189,841 
<CURRENT-LIABILITIES>                            37,483               34,858 
<BONDS>                                               0                    0
<PREFERRED-MANDATORY>                                 0                    0
<PREFERRED>                                           0                    0    
<COMMON>                                        138,034              129,080
<OTHER-SE>                                        1,449               (5,035)  
<TOTAL-LIABILITY-AND-EQUITY>                    207,663              189,841 
<SALES>                                         272,305              233,660
<TOTAL-REVENUES>                                272,305              233,660 
<CGS>                                           132,104              112,596
<TOTAL-COSTS>                                   132,104              112,596
<OTHER-EXPENSES>                                129,774              133,372
<LOSS-PROVISION>                                      0                    0
<INTEREST-EXPENSE>                                3,525                3,925
<INCOME-PRETAX>                                  11,599              (11,602)
<INCOME-TAX>                                      2,320                 (300)
<INCOME-CONTINUING>                               9,279              (11,302)
<DISCONTINUED>                                        0                    0       
<EXTRAORDINARY>                                       0                    0
<CHANGES>                                             0                    0
<NET-INCOME>                                      9,279              (11,302)
<EPS-PRIMARY>                                         0.42                (0.51)  
<EPS-DILUTED>                                         0.40                (0.51)

          

</TABLE>