<PAGE>
                                   UNITED STATES
                         SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, D.C.  20549

                                     FORM 10-K
     FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15 (d) OF THE
                          SECURITIES EXCHANGE ACT OF 1934

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
    ACT OF 1934
                    FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997

                                         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 0-25864

                                 AVANT! CORPORATION
               (Exact name of registrant as specified in its charter)

                 DELAWARE                                     94-3133226
     (State or other jurisdiction of                       (I.R.S. Employer
     incorporation or organization)                       Identification No.)

                                46871 BAYSIDE PARKWAY
                              FREMONT, CALIFORNIA  94538
            (Address of principal executive offices, including Zip Code)

                                   (510) 413-8000
                (Registrant's telephone number, including area code)

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

            Securities registered pursuant to section 12(g) of the Act:
                  Common Stock, $.0001 par value (Title of Class)

Indicate by check mark whether the registrant:  (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of  1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports); and (2) has been subject
to such filing requirements for the past 90 days.  [ x ]  Yes   [  ]  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.  [  ]

The aggregate market value of the voting stock held by non-affiliates of the
registrant, as of February 27, 1998 was approximately $454,236,000 (based on the
last sale price of such stock as reported by the Nasdaq National Market).

The number of shares of the registrant's Common Stock outstanding as of February
27, 1998 was 32,445,460.

                        DOCUMENTS INCORPORATED BY REFERENCE

Portions of: (1) the Proxy Statement to be filed by the Company with the
Securities and Exchange Commission within 120 days of the Company's fiscal year
ended December 31, 1997,  are incorporated by reference in Part III of this Form
10-K; and (2) the Annual Report to Stockholders for the fiscal year ended
December 31, 1997 are incorporated by reference in Part II of this Form 10-K.


<PAGE>

                                 AVANT! CORPORATION

                              FORM 10-K ANNUAL REPORT

                        FOR THE YEAR ENDED DECEMBER 31, 1997

                                 Table of Contents

<TABLE>
                                                                                 Page
                                                                                 ----
<S>                                                                              <C>
PART I.

Item 1.   Business                                                                  1

Item 2.   Properties                                                               19

Item 3.   Legal Proceedings                                                        19

Item 4.   Submission of Matters to a Vote of Security Holders                      22

PART II

Item 5.   Market for Registrant's Common Equity and Related Stockholder Matters    23

Item 6.   Selected Consolidated Financial Data                                     23

Item 7.   Management's Discussion and Analysis of Financial Condition and
          Results of Operation                                                     23

Item 8.   Consolidated Financial Statements and Supplementary Data                 23

Item 9.   Changes in and Disagreements With Accountants on Accounting
          and Financial Disclosure                                                 23

PART III.

Item 10.  Directors and Executive Officers of the Registrant                       24

Item 11.  Executive Compensation                                                   25

Item 12.  Security Ownership of Certain Beneficial Owners and Management           25

Item 13.  Certain Relationships and Related Transactions                           25

PART IV.

Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K         25

SIGNATURE PAGE

</TABLE>

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                                      PART I.

This Report contains forward-looking statements within the meaning of Section
27A of the Securities Act and Section 21E of the Exchange Act that involve risks
and uncertainties.  The Company's actual results may differ significantly from
the results discussed in the forward-looking statements.  Factors that might
cause such a difference include, but are not limited to, those discussed in Item
1 under the heading "Business-Risk Factors that May Affect Future Results."

ITEM 1.        BUSINESS

GENERAL

Avant! Corporation (the "Company" or "Avant!") resulted from the merger of
ArcSys, Inc. ("ArcSys") and Integrated Silicon Systems, Inc. ("ISS") on November
27, 1995.  Avant! merged with Anagram, Inc. ("Anagram") on September 27, 1996,
Meta-Software, Inc. ("Meta") on October 29, 1996, FrontLine Design Automation,
Inc. ("FrontLine") on November 27, 1996, acquired Nexsyn Design Technology Inc.
("Nexsyn") on December 31, 1996, Compass Design Automation, Inc. ("Compass") on
September 12, 1997 and Datalink Far East Ltd, ("Datalink") on September 30,
1997.   On January 16, 1998, the Company merged with Technology Modeling
Associates, Inc. ("TMA").   Avant! is a Delaware corporation that develops,
markets and supports software products that assist design engineers in the
physical layout, design, verification, simulation, timing and analysis of
advanced integrated circuits ("ICs").

The Company's objective is to establish a significant market position as a
supplier of design software for the integrated circuit design automation
("ICDA") market.  To achieve this objective, Avant! has adopted its mission,
which is to provide innovative technology, products and business models that
enable customers to solve the toughest problems in deep submicron (less than
0.5-micron feature size) and very deep-submicron (less than 0.18-micron) feature
size IC design, improve their productivity and achieve a high return on their
investment.  To effect its mission, Avant! has adopted the strategies of
maintaining focus on technological innovation and creating strategic
relationships with customers.

As the 21st century approaches, reusable silicon libraries, silicon intellectual
property ("SIP"), design blocks, and optimized design-flow management are
becoming critical to creating complex new "systems-on-a-chip." During 1997,
Avant! formed a new wholly owned subsidiary Galax!, Inc. ("Galax!") to help IC
manufacturers to develop and implement innovative design methodologies aimed at
providing faster turnaround on complex new designs.

PRODUCTS

Avant! products are based on the Company's proprietary architecture and
technology, which provide a breadth of automated IC physical design
capabilities.  Avant!'s product architecture is designed to solve the
problems inherent in deep-submicron (less than 0.5-micron feature size) and
very deep-submicron (less than 0.18-micron) IC design and to offer improved
time-to-market, reduced development and manufacturing costs and enhanced IC
performance when compared to previous generations of ICDA software.

Avant! products are designed to be compatible with the most commonly used ICDA
tools and to be easily integrated into the customer's existing design
environments and methodologies through industry standard interfaces.  Avant!'s
products are primarily written in C, run on UNIX workstations such as those from
Sun Microsystems, Silicon Graphics and Hewlett-Packard, and support industry
standards such as Motiff,  Xwindows, GDSII Stream format, EDIF, SDF, SPICE and
Verilog.

The Company's Milkyway system is the first common database for handling complex,
very deep-submicron designs.  This database, along with a graphical user
interface, creates a foundation for efficient interoperability of next
generation design tools. Milkyway is designed to dynamically create database
objects for each application, and its patent-pending turbo-compression technique
reduces design database size and provides the best-in-class tool performance.

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The Company's Apollo family of cell-based place and route products, which
replaced the Company's Aquarius line of products, are the industry's leading
place and route software for very deep-submicron IC design.  Apollo uses
fourth-generation place and route algorithms developed at Avant! and
addresses difficult design issues such as optimization for area, timing,
noise, and power.  For placement algorithms, Apollo contains the
next-generation HotPlace hierarchical placement optimization technology,
improved timing optimization, power and rail-driven placement. For very
deep-submicron routing, it includes timing-driven routing, innovative coupled
noise-driven routing, automatic wiring sizing, multiple clock tree
construction methods and clock tree synthesis with gated clocks.

Avant!'s Planet product is a physical and logical floorplanning and analysis
solution for accurate prediction of the impact of physical effects on design
performance and routability early in the design process. It provides tight
linkage between synthesis-based design entry and physical layout.  It
dramatically improves designer's productivity by increasing the probability of
first-time design success with early access to physical behavior during logic
synthesis.

The Company's Saturn product is the all-path, all-cell physical design
optimization solution that addresses very deep-submicron design needs by
creating the most efficient area and timing performance designs using actual
place and route information.

The Company believes its Hercules family of design verification software is the
industry's most advanced suite of IC physical verification products.  The
Hercules family of products provide geometric and electrical verification
physical design layouts, and handles designs containing hundreds of millions of
transistors with breakthrough speed and enhanced ease of use.

The Company's Star-Hspice product is an industry-standard circuit simulator that
validates critical paths, performs noise margin analysis and optimizes the
tradeoffs between IC speed and power prior to commencement of fabrication.
Star-Hspice incorporates special analysis features for performance and for yield
optimization, which has become increasingly important in deep submicron chip
design.

Avant!'s Star-Sim family of products are high-capacity circuit simulators for
deep submicron process applications such as graphics, memory, communications
and mixed-signal IC designs.  The Star-Sim family of products help increase
IC performance and reliability and increase designer productivity by enabling
designers to characterize large blocks; to accurately simulate mixed-signal,
dynamic logic and memory circuits where performance, signal integrity and
power analyses are essential; and to reuse high-performance intellectual
property without changing the design process.  Star-RC is a full-chip
hierarchical capacitance extractor and a critical net resistance and
capacitance extractor. It is the first extraction tool capable of identifying
nets with cross-talk problems.  Star-Power is a full-chip power
analysis/verification tool that enables designers to perform oversight
analysis.  It provides accurate parasitic extraction of power and ground
rails, statis and dynamic power analysis, voltage drop and electromigration
analysis.  Star-Time is a high-performance, full-chip circuit simulator that
provides transistor-level dynamic analysis for post-layout verification of
timing, signal integrity and reliability for complex designs of up to 50
million components.  All of Avant!'s Star products are tightly integrated
with Avant!'s hierarchical layout and verification tools, Aquarius and
Hercules, to provide efficient, accurate and predictable IC performance.

The Company's Polaris family of products utilize innovative Verilog
simulation solutions to ease the simulation, automated design verification
and optimization of IC design.  To handle the complexity of large designs the
Polaris family of products is capable of several levels of design abstraction
and uses a variety of design capture techniques.  The products run on Unix
and Windows workstation platforms and are therefore attractive tools for a
variety of hardware logic designers.

The Company's Libra family of design library products were developed through
close relationships with IC foundries around the world, and utilizes advanced
silicon process technology.  These products have received strong market
acceptance worldwide.

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During each of 1997, 1996 and 1995, the Company derived substantially all of
its total revenue from the licensing and support of Aquarius, its cell-based
place and route software product, Hercules, its hierarchical physical
verification software product, Star-Hspice, its circuit simulator, the
Star-Sim products, its high-capacity circuit simulation and high-accuracy
timing analysis software, the Polaris products, its Verilog simulation
product, and Libra, its design library product.  Absent any unfavorable
results from existing litigation, the Company currently expects that these
products will continue to account for a significant portion of the Company's
revenue for the foreseeable future.  As a result, the Company's future
operating results are significantly dependent upon continued market
acceptance of these products.  The Company believes that a number of factors
will be necessary for its products to achieve continued market acceptance.
These factors include performance of the Company's existing products,
successful development of advanced features, adaptability into the user's
design environment, the Company's technical, managerial, service and support
expertise and the customer's assessment of the Company's financial resources.
A decline in demand for these products as a result of competition,
technological change or other factors would have a material adverse effect on
the business, operating results and financial condition of the Company.
There can be no assurance that these products will achieve continued market
acceptance or that the Company will be successful in marketing any new or
enhanced products.

During 1997, 1996 and 1995, the Company derived 41%, 34%, and 32%,
respectively, of its total revenue from the licensing and support of its
software products internationally.  In 1997, Asian and European sales
represented 31% and 10% of the Company's total revenue, respectively.  In
1996 and 1995, international sales were primarily in Asia.  The Company
currently expects continued growth in both the Asian and European
countries.  Many Asian countries are currently experiencing banking and
currency difficulties that could lead to economic recession in those
countries which could result in a decline in the purchasing power of the
Company's Asian customers.  This in turn could result in the cancellation or
delay of orders for the Company's products from Asian customers, thus
adversely affecting the Company's results of operations. In addition, the
Company's international revenue involves a number of other risks, including
the impact of possible recessionary environments in economies outside the
United States, longer receivables collection periods and greater difficulty
in accounts receivable collection, difficulties in staffing and managing
foreign operations, political and economic instability, unexpected changes in
regulatory requirements, reduced protection for intellectual property rights
in some countries and tariffs and other trade barriers.  There can be no
assurance that the Company will be able to sustain or increase revenue
derived from international licensing and service or that the forgoing factors
will not have a material adverse effect on the Company's future international
license and service revenue, and, consequently, on the Company's business,
operating results and financial condition.  Failure to sustain or increase
such revenue would materially and adversely affect the Company's business,
operating results and financial condition.  Although the Company has
attempted to reduce the risk of fluctuations in exchange rates associated
with international revenue by pricing its products and services in United
States dollars, the Company pays the expenses of its international operations
in local currencies and does not currently engage in hedging transactions
with respect to such obligations. Currency exchange fluctuations in countries
in which the Company licenses its products could have a material adverse
effect on the Company's business, operating results or financial condition by
resulting in prices that are not competitive with products priced in local
currencies.  Furthermore, there can be no assurance that in the future the
Company will be able to continue to price its products and services
internationally in United States dollars.  See "Management's Discussion and
Analysis of Financial Condition and Results of Operations".

The ICDA industry is characterized by extremely rapid technological change,
frequent new product introductions and enhancements, evolving industry
standards and rapidly changing customer requirements.  The development of
more complex ICs embodying new technologies will require increasingly
sophisticated design tools. The Company's future results of operations will
depend in part upon its ability to enhance its current products and to
develop and introduce new products on a timely and cost-effective basis that
will keep pace with technological developments and evolving industry
standards and methodologies, as well as address the increasingly
sophisticated needs of the Company's customers.  For example, all of the
Company's current products operate in, and planned future products will
operate in, the Unix operating system.  In the event that another operating
system, such as Windows NT, were to achieve broad acceptance in the ICDA
industry, the Company would be required to port its products to such an
operating system, which would be costly, time consuming and could have a
material adverse effect on the Company's business, operating results or
financial condition.  The Company has in the past and may in the future
experience delays in new product development.  The introduction of certain
products in the past have

                                     3
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been delayed by as much as 12 months beyond their original scheduled release
dates.  There can be no assurance that the Company will be successful in
developing and marketing product enhancements or new products that respond to
technological change, evolving industry standards and changing customer
requirements, that the Company will not experience difficulties that could
delay or prevent the successful development, introduction and marketing of
these products or product enhancements, or that its new products and product
enhancements will adequately meet the requirements of the marketplace and
achieve any significant degree of market acceptance. Failure of the Company,
for technological or other reasons, to develop and introduce new products and
product enhancements in a timely and cost-effective manner would have a
material adverse effect on the Company's business, operating results and
financial condition.  In addition, the introduction or even announcement of
products by the Company or one or more of its competitors embodying new
technologies or changes in industry standards or customer requirements could
render the Company's existing products obsolete or unmarketable.  There can
be no assurance that the introduction or announcement of new product
offerings by the Company or one or more of its competitors will not cause
customers to defer purchases of existing Company products.  Such deferment of
purchases could have a material adverse effect on the Company's business,
operating results or financial condition.

CUSTOMERS

Avant! focuses its sales and marketing efforts on creating strategic
relationships with technology leaders in IC design and with early adopters of
the most advanced electronic design automation (EDA) tools.  By creating
strong relationships with industry leaders, Avant! receives critical
technical feedback that enables it to develop and implement proprietary
design technologies and methodologies.  In addition, strategic relationships
with these companies can create influential references for other prospective
customers.

The market for the Company's physical layout, design, verification,
simulation, timing and analysis products, and design libraries encompasses a
wide range of industries, including semiconductor, computer, consumer
electronics, multimedia and telecommunications IC companies worldwide.
End-users of the Company's products range from small companies to a number of
the world's largest manufacturing organizations.

No one customer accounted for greater than 10% of the Company's revenue in
1997, 1996 or 1995.  The Company does not believe that seasonality is a
significant factor in sales.

SALES AND MARKETING

The Company markets its products in North America and Europe primarily
through its direct sales and support force.  Avant! employs highly skilled
engineers and technically proficient sales people capable of serving the
sophisticated needs of its prospective customers' engineering and management
staffs.  Avant! has domestic sales and support offices in or near Austin,
Texas; Boston, Massachusetts; Chicago, Illinois; Dallas, Texas; Los Angeles,
California; Phoenix, Arizona; Portland, Oregon; Philadelphia, Pennsylvania;
Mount Olive, New Jersey; Colorado Springs, Colorado; Orlando, Florida;
Research Triangle Park, North Carolina; and Fremont, California; sales and
support offices in Ontario, Canada; London, England; Paris, France and Tokyo,
Japan; and support offices in Munich, Germany; Geneva, Switzerland, and
Taipei, Taiwan.  In addition to its direct sales and marketing efforts,
Avant! participates in industry trade shows and organizes seminars to promote
the adoption of its products and methodologies.

In Asia, the Company markets its products primarily through a limited number
of distributors and manufacturer's representatives ("Third Party Sellers")
that license and service Avant! products in this market.  Avant! also
supports these distributors and representatives and their customers with
technical, sales and management personnel.

In 1997 and 1996, the Company consolidated its Japanese and Korean sales
channel by forming two joint ventures, MainGate Electronics, KK ("MainGate")
and DavanTech Co., Ltd. ("DavanTech"), respectively.  The joint ventures were
formed for the purpose of consolidating distribution in Japan and Korea.  The
Company has ownership of 35% and 39.6% of MainGate and DavanTech,
respectively, and accounts for the joint ventures by the equity method.
Gerry C. Hsu, the Company's Chairman of the Board, President and Chief
Executive Officer owns

                                      4
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40% and 2.6%, of MainGate and DavanTech, respectively.  The Company believes
that this arrangement optimizes its competitive advantage in the Asian
markets to an extent that could not be achieved by using another distributor
or by directly selling into these markets.  Distribution and marketing in
these markets are dominated by local companies, making it difficult for
non-local manufacturers to distribute their products directly.  Thus, the
Company created MainGate and DavanTech, which are locally managed and
operated and have significant local ownership.  By providing local ownership
of MainGate and DavanTech through equity incentives, the Company believes
that it is best able to attract and retain top local talent.  However, there
can be no assurance that MainGate or DavanTech will be successful.  If they
are not successful, the Company's, business, operating results or financial
condition would be materially adversely affected.

In 1997, the Company acquired the assets of Datalink Far East Ltd., a Taiwan
EDA distribution corporation ("Datalink"), pursuant to an asset purchase
agreement. The acquisition of Datalink helped the Company consolidate
Avant!'s distribution channels in Taiwan, Hong Kong, Singapore and Mainland
China.

The Company has relied on Third Party Sellers and joint ventures for
licensing and support of its products in Japan, Korea and Singapore.  A
substantial portion of the Company's international license and service
revenue has resulted from a limited number of these Third Party Sellers and
joint ventures.  During 1997, 1996, and 1995, revenue from these channels
accounted for an aggregate of approximately 31%, 27% and 28%, respectively,
of the Company's total revenue.

Since the Company's products are used by highly skilled professional
engineers, in order to be effective, a Third Party Seller or a joint venture
must possess sufficient technical, marketing and sales resources and must
devote these resources to a lengthy sales cycle, customer training and
product service and support.  Only a limited number of Third Party Sellers
and joint ventures possess such resources. In addition, the Company's Third
Party Sellers and joint ventures generally offer products of several
different companies, including, in some cases, products that are competitive
with the Company's products.  There can be no assurance that the Company's
current Third Party Sellers or joint ventures will choose to or be able to
market or service and support the Company's products effectively, that
economic conditions or industry demand will not adversely affect these or
other Third Party Sellers or joint ventures, that any Third Party Seller or
joint venture will continue to market and support the Company's products or
that these Third Party Sellers will not devote greater resources to marketing
and supporting products of other companies.  The loss of, or a significant
reduction in revenue from, one of the Company's Third Party Sellers or joint
ventures could have a material adverse effect on the Company's business,
operating results or financial condition.  See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

The license of the Company's software products generally involves a
significant commitment of capital by prospective customers, with the
attendant delays frequently associated with large capital expenditures and
lengthy acceptance procedures.  For these and other reasons, the sales cycle
associated with the license of the Company's products is typically lengthy
and subject to a number of significant risks over which the Company has
little or no control and, as a result, the Company believes that its
quarterly operating results are likely to vary significantly in the future.
Due to the nature of the Company's business, the Company does not believe any
of its backlog orders to be firm.

CUSTOMER SERVICE AND SUPPORT

Avant!'s product management group provides customers with technical support,
training and consulting services.  Avant! believes that a high level of
customer service and support is critical to the adoption and successful
utilization of its physical design technology and products.

To address technical issues, Avant! has established both field and corporate
technical application engineering groups that understand the design
methodologies of Avant!'s customers and generally have IC design backgrounds.
Most of Avant!'s customers currently have maintenance agreements that entitle
them to receive software updates, documentation updates and a formal problem
identification and resolution process through a support hotline.  Questions
or suggestions may be submitted by facsimile or through the Internet network
mail

                                      5
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system.  Avant! also offers additional training and consulting services for a
fee.  The Company provides on-site and in-house training on all products.

Avant! consultants are available to work closely with customer design
engineering teams for all phases of physical design from conception through
implementation.  Avant! consultants provide customers with in-depth technical
expertise in the use of the Company's physical design methodology and
products.

RESEARCH AND DEVELOPMENT

The ICDA industry is characterized by extremely rapid technological change,
frequent product introductions and enhancements, evolving industry standards
and rapidly changing customer requirements.  The development of more complex
ICs embodying new technologies will require increasingly sophisticated design
tools. Avant! believes that its future competitive position and future
results of operations will depend in large part on its ability to quickly and
cost-effectively develop new products, maintain and enhance its current
product line, maintain technological competitiveness and meet an expanding
range of customer requirements.  In addition to supporting and enhancing its
existing physical layout, design, verification, simulation, timing and
analysis products, Avant! maintains an advanced research group that is
responsible for exploring new directions and applications of Avant!'s
proprietary technologies, migrating new technologies into the existing
product lines and maintaining strong research relationships outside Avant!
with industry and academia.

During 1997, 1996, and 1995 the Company's research and development
expenditures were approximately $29,573,000, $20,696,000, and $15,318,000
respectively (including capitalized software development costs of $63,000 in
1995, and no amounts were capitalized in 1997 or 1996, as achievement of
technological feasibility was typically concurrent with availability for
general release). The amount of capitalized software development costs
amortized was $62,000, $88,000 and $228,000 for 1997, 1996, and 1995,
respectively.

The Company believes that it must continue to commit substantial resources to
enhance and extend its product lines in order to remain competitive in the
ICDA market.  The Company intends to continue to increase its
internally-funded product development program and, if appropriate, to enter
into development agreements with customers and other third parties to develop
specific new product applications and features.  The Company currently has no
material third-party funded development agreements.

COMPETITION AND RELATED LITIGATION

The ICDA software market, in which the Company competes, is intensely
competitive and subject to rapid change.  The Company currently faces
competition from major ICDA vendors, including Cadence Design Systems, Inc.
("Cadence"), which currently holds a dominant share of the market for IC
physical design software, and Mentor Graphics Corporation ("Mentor") and
Synopsys, Inc. ("Synopsys").  As the Company expands its product offerings to
include other library generation tools and other EDA tools, it will compete
increasingly with these EDA vendors.  Each of these major ICDA vendors has a
longer operating history, significantly greater financial, technical and
marketing resources, greater name recognition and a larger installed customer
base than the Company.  In addition, each of these competitors will likely be
able to respond more quickly to new or emerging technologies and changes in
customer requirements, and to devote greater resources to the development,
promotion and sale of their products than the Company.  These companies also
have established relationships with current and potential customers of the
Company and can devote substantial resources aimed at preventing the Company
from enhancing relationships with existing customers or establishing
relationships with potential customers.  Moreover, the industry in which the
Company competes is undergoing a trend toward consolidation that is expected
to result in large, more financially flexible competitors with a broad range
of product offerings.  Further, other companies may develop and bring new
products to the market which could create significant competition for the
Company and its products.  Competition from EDA companies that currently
offer only functional or logic design products and that choose to enter the
physical design market could present particularly formidable competition due
to their relationships with the Company's current and potential customers,
their ability to offer a complete integrated IC design solution which Avant!
does not currently offer and their knowledge of the EDA industry.

                                      6
<PAGE>

The Company also competes with the internal ICDA development groups of its
existing and potential customers, many of whom design and develop customized
design tools for their particular needs and therefore may be reluctant to
purchase products offered by independent vendors, such as the Company.
Furthermore, because there are relatively low barriers to entry in the
software industry, the Company expects additional competition from other
established and emerging companies.  There can be no assurance that the
Company's current or potential competitors will not develop products
comparable or superior to those developed by the Company or adapt more
quickly than the Company to new technologies, evolving industry trends or
changing customer requirements. Increased competition could result in price
reductions, reduced margins or loss of market share, any of which could
materially and adversely affect the Company's business, operating results or
financial condition.  In addition, the EDA industry has become increasingly
concentrated in recent years as a result of consolidations, acquisitions and
strategic alliances.  Accordingly, it is possible that new competitors or
alliances among competitors could emerge and rapidly acquire significant
market share.  Alliances among competitors could present particularly
formidable competition to the Company by combining their resources.  There
can be no assurance that the Company will be able to compete successfully
against current and future competitors or that competitive pressures faced by
the Company will not have a material adverse effect on its business,
operating results and financial condition.  If the Company is unable to
compete successfully against current and future competitors, the Company's
business, operating results and financial condition will be materially and
adversely affected.

The Company competes on the basis of certain factors, including
first-to-market product capabilities, product performance, price, support of
industry standards, ease of use and customer technical support and service.
The Company believes that it currently competes favorably overall with
respect to these factors, particularly first-to-market product capabilities,
technical support and customer service.

In addition, competitors and potential competitors may resort to litigation
as a means of competition.  Cadence has initiated litigation against the
Company and certain of its officers and employees alleging trade secret
misappropriation and other claims.  See "Legal Proceedings."  There can be no
assurance that competitors of the Company, in particular Cadence, will not
initiate additional litigation against the Company and its officers,
directors, employees or consultants.  The pending litigation against the
Company and any future litigation against the Company or its employees,
regardless of the outcome, may result in substantial costs and expenses to
the Company and significant diversion of effort by the Company's technical
and management personnel.  Any such litigation could have a material adverse
effect on the Company's business, operating results or financial condition.

PROPRIETARY RIGHTS

The Company relies on a combination of license agreements, patents,
copyright, trademark and trade secret laws to establish and protect
proprietary rights to its technology.  The Company holds several patents
covering certain aspects of its products.  The Company generally provides
products to end-users under non-exclusive licenses, which typically have  a
perpetual term unless terminated for breach.  The license provides that the
software may be used solely for internal operations in designated computers
at specified sites.  The Company's software is shipped with a software
security lock which limits software access to authorized users.  The source
code of the Company's products is protected both as a trade secret and as an
unpublished copyrighted work, and is not made available to third parties.
Despite these precautions, it may be possible for a third party to copy or
otherwise obtain and use the Company's products or technology without
authorization or to develop similar technology independently. In addition,
effective copyright and trade secret protection may be unavailable or limited
in certain foreign countries.  The Company believes that, due to the rapid
pace of innovation within the ICDA software industry, factors such as the
technological and creative skills of its personnel, new product developments,
frequent product enhancements, name recognition and reliable product
maintenance are more important to establishing and maintaining a technology
leadership position than are the various legal protections of its technology.

The Company is heavily dependent upon its proprietary software technology.
The Company currently holds several patents and also relies on a combination
of trade secret, copyright and trademark laws, nondisclosure and other
contractual agreements and technical measures to protect its proprietary
rights in its products.  Although the Company holds several patents, there
can be no assurance that the Company will develop additional proprietary
products or technologies that are patentable, that any issued patent will
provide the Company with any competitive

                                      7
<PAGE>

advantages or will not be challenged by third parties or that the patents of
others will not have an adverse effect on the Company's ability to do
business.  Furthermore, there can be no assurance that others will not
independently develop similar products, duplicate the Company's products or,
if patents are issued to the Company, design around the patents currently
issued or that might be issued in the future to the Company.  There can be no
assurance that the steps taken by the Company will prevent misappropriation
of its technology, and such protections may not preclude competitors from
developing products with functionality or features similar to the Company's
products.  In addition, effective copyright and trade secret protection may
be unavailable or limited in certain foreign countries.  The Company expects
that software companies will increasingly be subject to infringement claims
as the number of products and competitors in the industry in which the
Company competes grows and the functionality of products in different
industry segments overlaps.  In particular, Avant!'s current litigation with
Cadence involves such infringement claims.  The Company believes that its
products and trademarks do not infringe upon the proprietary rights of third
parties.  There can be no assurance, however, that third parties will not
assert infringement claims, regardless of merit, against the Company in the
future or that such claims will not require the Company to cease use of
certain technology or enter into expensive royalty arrangements, if licenses
are available, or result in costly litigation, any of which could materially
and adversely affect the Company's business, operating results or financial
condition.

EMPLOYEES

As of March 12, 1998, the Company had 701 employees, including, 406 in
research and development, 196 in sales, marketing and related customer
support services, and 99 in finance and administration.  Of these employees,
644 were located in the United States, 32 in Europe, 8 in Japan, 3 in Korea
and 14 in Taiwan.  None of the Company's employees is represented by a labor
union or is subject to a collective bargaining agreement, nor has Avant!
experienced any work stoppage.  Avant! considers its relations with its
employees to be good.

The Company has experienced a growth and expansion, due to the various
acquisitions and mergers, that has placed and continues to place a
significant strain upon its management systems and resources.  The Company
currently plans to continue to expand its staff.  To accommodate the growth,
the Company will be required to implement procedures and controls, some of
which currently require substantial management effort.  There can be no
assurance that the Company will be able to do so successfully.  The increase
in the number of the Company's employees and the Company's market
diversification and product development activities have resulted in increased
responsibility for the Company's management.  The Company anticipates that
continued growth, if any, will require it to recruit and hire a substantial
number of new engineering, managerial, finance, sales and marketing and
support personnel; however, there can be no assurance that the Company will
be successful at hiring or retaining these personnel.  The Company's ability
to compete effectively and to manage future growth, if any, will require the
Company to continue to implement and improve operational, financial and
management information systems on a timely basis and to expand, train,
motivate and manage its work force.  There can be no assurance that the
Company's personnel, systems, procedures and controls will be adequate to
support the Company's operations.  Any failure to implement and improve the
Company's operational, financial and management systems or to expand, train,
motivate or manage employees, could have a material adverse effect on the
Company's business, operating results or financial condition.

The Company's future operating results depend in significant part upon the
continued service of its key technical and senior management personnel,
including in particular, Gerald C. Hsu, the Company's President and Chief
Executive Officer.  None of the Company's employees is bound by an employment
agreement with the Company, and their employment may be terminated at any
time at the discretion of management or the Board of Directors, with the
exception of Gerald C. Hsu, who has entered into an employment agreement
under which he may only be terminated upon at least 30 days' notice.  The
Company's business, operating results and financial condition also depend on
its continuing ability to attract and retain highly qualified technical and
managerial personnel. Competition for such personnel is intense, and there
can be no assurance that the Company will retain its key technical and
managerial personnel or attract such personnel in the future.  Uncertainty
during the existing litigation may adversely affect the Company's ability to
attract and retain such personnel.  In particular, there are only a limited
number of qualified ICDA engineers, and competition for such individuals is
especially intense.  The Company has at times experienced and continues to
experience difficulty in recruiting qualified personnel, and

                                      8
<PAGE>

there can be no assurance that the Company will not experience such
difficulties in the future.  The Company, either directly or through
personnel search firms, actively recruits qualified research and development,
financial and sales personnel.  If the Company is unable to hire and retain
qualified personnel in the future, such inability could have a material
adverse effect on the Company's business, operating results or financial
condition.

ENVIRONMENTAL AFFAIRS

The Company's operations are subject to numerous federal, state and local
laws and regulations designed to protect the environment.  There are no
administrative or judicial proceedings pending or threatened against the
Company alleging violations of such environmental laws and regulations.
Compliance with these laws and regulations has not had, and is not expected
to have, a material adverse effect on the capital expenditures, earnings and
competitive position of the Company.

RISK FACTORS THAT MAY AFFECT FUTURE RESULTS

Litigation Risk

The Company is subject to a number of litigation matters that, if decided
adversely to the Company, could affect the Company's future results.

    CADENCE LITIGATION.

On December 6, 1995, Cadence Design Systems, Inc. ("Cadence") filed an action
against the Company and certain of its officers in the United States District
Court for the Northern District of California alleging copyright
infringement, unfair competition, misappropriation of trade secrets,
conspiracy, breach of contract, inducing breach of contract and false
advertising.  The essence of the complaint is that certain of the Company's
employees who were formerly Cadence employees allegedly misappropriated and
improperly copied source code for certain important functions of the
Company's place and route products from Cadence, and that the Company has
allegedly competed unfairly by making false statements concerning Cadence and
its products.  The action also alleges that the Company induced certain
individual defendants to breach their agreements of employment and
confidentiality with Cadence.  The matter is currently awaiting trial,
pending further pretrial matters.  A trial date has not been set.  On July
25, 1997, a federal judge stayed the Cadence civil action pending completion
of the criminal proceedings described below, except for limited discovery on
certain matters approved by the District Court. Avant! posted a $5.0 million
bond pending the resumption of the civil action.

In addition to actual and punitive damages, which were not quantified by
Cadence, Cadence is seeking to enjoin the sale of the Company's place and
route products pending trial of the action. On March 18, 1997, the District
Court granted in part and denied in part Cadence's motion for a preliminary
injunction.   Cadence appealed the order denying a preliminary injunction. On
September 23, 1997, the United States Court of Appeals for the Ninth Circuit
overruled the District Court's denial of Cadence's motion with respect to the
Company's ArcCell product, a product Avant! no longer sells, and held that a
preliminary injunction should be granted against the further sale of the
ArcCell product.  The Court of Appeals did not enjoin the Company's Aquarius
place and route products, but rather remanded this aspect of Cadence's motion
to the District Court for further consideration.  The Court of Appeals stated
that, if the Company's Aquarius products are determined to infringe Cadence
products, the sale of Aquarius products should be enjoined.   The Company
requested a rehearing on the issue, but on November 21, 1997, the Ninth
Circuit denied this request.  On December 19, 1997, the District Court
entered an injunction against continued sales or licensing of any product or
work copied or derived from Cadence's Design Framework II, specifically
including, but not limited to, ArcCell products.  The injunction also barred
the Company from possessing or using any copies or any portion of the source
code or object code for ArcCell or any other product, to the extent that
portion is copied or derived from Cadence's Design Framework II.  (The
Company no longer sells or licenses ArcCell products or code).  The
injunction also required the Company to inform its customers of the
injunction, to obtain confirmation as to whether the customers have a
functioning copy of ArcCell or other such product, and to provide certain
information to the court.  A copy of the injunction is attached hereto as
Exhibit 99.1.  On January 25, 1998, the District Court entered a modified
preliminary injunction "to remove any implication that the Company's

                                     9
<PAGE>

customers are authorized by the preliminary injunction to continue to use the
enjoined products without exposure to claims of copyright violation."  A copy
of the modified injunction is attached hereto as Exhibit 99.2. Cadence
continues to allege that the Company's Aquarius products infringe Cadence's
Design Framework II and the District Court is allowing Cadence to take
discovery concerning the Company's Aquarius and Apollo products to determine
whether those products infringe.  At the December 19, 1997 hearing, the
District Court did not rule on Cadence's request to enjoin the sale, license
or support of the Company's Aquarius place and route products from which the
Company derives a significant portion of its total revenue.  On February 28,
1998, the District Court requested an additional briefing regarding whether
Aquarius should be enjoined.  The District Court will hold future hearings
regarding the Aquarius products.  There can be no assurance that the District
Court will not, upon further consideration, grant a preliminary injunction
with respect to the sale of the Aquarius products, which could have a
material adverse effect on the Company's business, financial position and
results of operations.

On January 16, 1996, the Company filed a counterclaim against Cadence
alleging antitrust violations, racketeering, false advertising, defamation,
trade libel, unfair competition, unfair trade practices, negligent and
intentional interference with prospective economic advantage and intentional
interference with contractual relations.  On December 19, 1997, the Company
stipulated to temporarily dismissing its counterclaim in order to file more
detailed allegations. The Company refiled its counterclaim on January 29,
1998.

The Company believes it has defenses to all of Cadence's claims and intends
to defend itself vigorously.  If, however, the Company's defenses are
unsuccessful, the Company may ultimately be permanently enjoined from selling
certain place and route products and may be required to pay damages to
Cadence.  In addition, upon further consideration by the District Court, the
Company could be preliminarily enjoined from selling its Aquarius place and
route products.  In such event, the Company's business, financial condition
and results of operations would be materially adversely affected.  In
addition, it is likely that an adverse judgment against the Company would
result in a steep decline in the market price of the Company's Common Stock.
 Although it is reasonably possible the Company may incur a loss upon
conclusion of these claims, an estimate of any loss or range of loss cannot
be made, based on information the Company presently possesses.  There can be
no assurance that an adverse judgement, if granted on any claim would not
have a material adverse effect on the Company's business, financial position
or results of operations.   Furthermore, there can be no assurance that the
Company's relationships with its customers and/or partners will not be
adversely affected in the future as  a result of the Cadence litigation.

    CRIMINAL COMPLAINT.

The Santa Clara County District Attorney's office is also investigating the
allegations of misappropriation of trade secrets set forth in Cadence's
lawsuit, described above.   On April 11, 1997, the Santa Clara County
District Attorney filed a criminal complaint alleging felony level offenses
against,  among others, the Company and the following employees and/or
directors of the Company, Gerald C. Hsu, President, Chief Executive Officer
and Chairman of the Board of Directors, Y. Eric Cho, a former officer and
current member of the Board of Directors, Y. Z. Liao, Corporate Fellow,
Stephen Wuu, CEO Staff Operations, Leigh Huang, Marketing Manager and Eric
Cheng, Research and Development Manager, for allegedly violating various
California Penal Code Sections relating to the theft of trade secrets.  The
Company and the individuals above have pleaded not guilty and are awaiting
further proceedings.  The criminal complaint could result in criminal fines
against the Company, as well as the potential incarceration of certain
members of its management team.  Such outcomes could result in canceled or
postponed orders, increased future expenditures, the loss of management and
other key personnel, additional shareholder litigation, loss of goodwill and
would have other material adverse effects on the Company's business,
financial position and results of operations.

    SILVACO LITIGATION.

In March 1993, Meta Software Inc., which the Company acquired in October 1996
and which is now a wholly owned subsidiary of the Company ("Meta"), filed a
complaint in the Superior Court of California for Santa Clara County against
Silvaco Data Systems, Inc. and related parties (collectively, "Silvaco")
seeking monetary damages and injunctive relief.  Meta's complaint alleged,
among other things, that Silvaco breached its representative agreement with
Meta by withholding customer payments for products and services that had been
delivered, and by

                                     10
<PAGE>

failing to pay royalties on software that Silvaco sold to others.  In August
1995, Meta was awarded $529,828 under the Superior Court's judicial
arbitration program. Both parties rejected the award and requested a trial de
novo on the issues involved. In August 1995, Silvaco filed a cross-complaint
against Meta alleging, among other things, that Meta owes Silvaco royalties
and license fees pursuant to a product development and marketing program and
unpaid commissions related to Silvaco's sale of Meta's products and services
under such program.  Meta filed an answer to the cross-complaint denying the
allegations contained therein.  In July 1996, Silvaco filed a first amended
cross-complaint, adding Shawn Hailey, then the President, Chief Executive
Officer and a major shareholder of Meta, and, until July 1997, the Senior
Vice President of the Company's Silicon Division, as a personal defendant,
and further alleging defamation, interference with economic advantage, unfair
competition and abuse of process by acts or statements made by Meta or its
agents.

In August 1997, the Superior Court entered a default judgment against Mr.
Hailey for failure to timely answer the complaint.  In October 1997, Mr.
Hailey's application for relief from the default judgment was denied.  In
August 1997, the Superior Court entered a default judgment against Meta as to
the defamation and interference with economic advantage claims.  On October
31, 1997, Meta's application for relief from the default judgment was denied.
 On October 28, 1997, Silvaco first presented its theory of damages and a
trial began on November 3, 1997.  On November 4, 1997, the Superior Court
dismissed Meta's remaining affirmative claims.  On November 5, 1997, the
Superior Court awarded Silvaco $20 million in damages against Mr. Hailey and
Meta related to the defamation and interference with economic advantage
claims, and on November 6, 1997, the Superior Court awarded Silvaco $11.4
million in damages related to the unfair competition claim.  On November 12,
1997, the Superior Court awarded nominal damages to Silvaco related to the
product development claim.  Silvaco's claims based on the marketing program
and abuse of process were dismissed.   The Company filed an appeal on behalf
Shawn Hailey, and, if necessary, intends to file an appeal on its own behalf.
A default judgment in the aggregate amount of $31.4 million was entered
against the Company.  As required, the Company posted a bond on behalf of
itself and Shawn Hailey in excess of the amount necessary to satisfy the
judgment. The bond is collateralized by a $23,583,000 letter of credit.

Meta intends to pursue all remedies available to it in connection with the
litigation with Silvaco.  Meta believes it has substantial appellate issues
which could cause the judgment to be remanded to the trial court for further
proceedings.  Should Meta be permitted to participate fully in further trial
court proceedings, Meta believes it would have substantial defenses to
Silvaco's claims.  However, there can be no assurance that any such remedies
will be successful.  Although it is reasonably possible Meta will incur a
loss in relation to this claim, it is currently unable to estimate the actual
loss or range of loss. Payment of the damages previously awarded, and damages
which may be awarded in the future, would have a material adverse effect on
the Company's business, financial condition and results of operations.

    PESIC LITIGATION.

In September 1996, Katherine Ngai Pesic and Ivan Pesic commenced an action
entitled PESIC, ET AL. V. WHITE, EL AL., No.760469 in the Superior Court of
California for Santa Clara County naming as defendants the Company (as
successor in interest to Meta), Shawn Hailey, Meta's former Chief Executive
Officer, and Thomas N. White, Jr. and George S. Cole, both of whom were
Meta's former counsel in the Silvaco matter, described above.  The action
asserts claims for invasion of privacy under California common law and the
California Constitution and seeks compensatory and punitive damages. Avant!
has answered the complaint, but no trial date has been set.  The Company
believes it has defenses to these claims and intends to defend itself
vigorously.  Although it is reasonably possible the Company will incur a loss
in relation to these claims, it is currently unable to estimate the actual
loss or range of loss.  In the event the Company's defenses are unsuccessful,
the Company may be required to pay damages to the plaintiffs, and such a
judgment could have a material adverse effect on the Company's business,
financial condition and results of operations.

    MICROUNITY LITIGATION.

On October 14, 1997, Microunity Systems Engineering, Inc. filed in the United
States District Court for the Northern District of California a complaint
against Precim Corporation ("Precim"), captioned MICROUNITY SYSTEMS
ENGINEERING, INC. V. PRECIM CORP., No. C 97 20904 JW (PVT).  Precim was a
wholly owned subsidiary of

                                       11
<PAGE>

Technology Modeling Associates, Inc., which was acquired by the Company in
January, 1998. This lawsuit alleges liability for patent infringement, unfair
competition, and tortious interference with prospective economic advantage.
The action requests unspecified damages and an injunction against Precim.
Precim has accepted service of the complaint but has not yet responded.
Precim believes it has defenses to these claims and intends to defend itself
vigorously. Although it is reasonably possible the Company will incur a loss
in relation to these claims, it is currently unable to estimate the actual
loss or range of loss. In the event Precim's defenses are unsuccessful,
Precim may be required to pay damages to the plaintiffs, and such a judgment
could have a material adverse effect on the Company's business, financial
condition and results of operations.

    SECURITIES CLASS ACTION CLAIMS.

On December 15, 1995, Paul Margetis and Helen Margetis filed in the United
States District Court for the Northern District of California a securities
fraud class action complaint against the Company.  In addition, on December
19, 1995, Fred Tarca filed in the United States District Court for the
Northern District of California a class action complaint against the Company
for violations of the federal securities laws.  These class action lawsuits
allege certain securities law violations, including omissions and/or
misrepresentation of material facts. The alleged omissions and/or
misrepresentations are largely consistent with those outlined in the Cadence
claim, described above.  In February 1997, plaintiff Tarca voluntarily
dismissed his action and the Margetis plaintiffs were certified as class
representatives in their action.  On July 25, 1997, a federal judge stayed
the Margetis action, except for certain documentary and third-party
discovery, pending resolution of the Cadence suit.

On May 30, 1997, Joanne Hoffman filed in the United States District Court for
the Northern District of California a purported class action alleging
securities claims on behalf of purchasers of the Company's stock between
March 29, 1996 and April 11, 1997, the date of the filing of the criminal
complaints against the Company and six of its employees and/or officers.
Plaintiff alleges that the Company and various of its officers misled the
market as to the likelihood of criminal charges being filed and as to the
validity of the Cadence allegations.  The Company moved to dismiss the
Hoffman complaint for failure to state a claim, but the District Court in
December 1997 denied the motion.  The court also denied without prejudice
plaintiff Hoffman's motion for appointment as lead plaintiff.  Counsel for
plaintiff has indicated that the stay of the Margetis securities class action
pending resolution of the Cadence suit will likely apply to this securities
action as well.

The Company believes it has defenses to all of the securities class action
claims, described above, and intends to defend itself vigorously.  There can
be no assurance, however, that the Company's defenses will be successful.
Although it is reasonably possible the Company will incur a loss in relation
to these claims, it is currently unable to estimate the actual loss or range
of loss, either individually or in aggregate.   In the event the Company's
defenses are unsuccessful, the Company may be required to pay damages to the
securities class action plaintiffs, and such a judgment would likely  have a
material adverse effect on the Company's business, financial condition and
results of operations.

Litigation Costs

The pending litigation and any future litigation against the Company and the
Company's employees, regardless of the outcome, is expected to result in
substantial costs and expenses to the Company.   The Company charged to
expenses approximately $8,720,000 and $6,850,000 for the years 1997 and 1996,
respectively, related to the various litigation issues.  The Company
currently expects legal costs to continue in the future as a result of its
current litigation issues.  Accordingly, any such litigation could have a
material adverse effect on the Company's business, financial position and
results of operations.  Furthermore, if Avant! is required to satisfy the
default judgments in full in the Silvaco litigation, Avant! could be required
to pay up to $31.4 million in damages, which would have a material adverse
effect on Avant!'s business, financial condition and results of operations.

                                     12
<PAGE>

Uncertainty Relating to Integration of Multiple Operations and Product Lines;
Management of Growth

In the third quarter of 1997 and first quarter of 1998, the Company acquired
Compass and TMA, respectively.  The integration of Compass' and TMA's
business and personnel following the Compass and TMA acquisitions present
difficult challenges for the Company's management, particularly in light of
the increased time and resources required to effect the combination with
these parties. Further, the Company will be more complex and diverse than
Avant! individually, and the combination and continued operation of their
distinct business operations will be difficult.  While the Company's
management believes that the combination of Avant!, Compass and TMA can be
effected in a manner that will realize the value of the Company, the
management group has limited experience in combinations of this complexity or
size.  Accordingly, there can be no assurance that the process of effecting
these business combinations can be effectively managed to realize the
synergies anticipated to result therefrom.

The Company acquired Compass and TMA, among other reasons, in order to
achieve potential mutual benefits from combining each of their respective
expertise and product lines for the physical design of high-density,
high-performance ICs. Realization of these potential benefits will require,
among other things, integrating the companies' respective product offerings
and coordinating the combined company's sales and marketing and research and
development efforts. Avant!, Compass and TMA each have different systems and
procedures in many operational areas that must be rationalized and
integrated.  There can be no assurance that such integration will be
accomplished effectively, expeditiously or efficiently.  The difficulties of
such integration may be increased by the necessity of coordinating
geographically separated divisions, integrating personnel with disparate
business backgrounds and combining three different corporate cultures.  The
integration of certain operations will require the dedication of management
resources that may temporarily distract attention from the Company's
day-to-day business.  The business of the combined company may also be
disrupted by employee uncertainty and lack of focus during such integration.
In fact, a substantial number of Compass employees have been terminated by
the Company in an effort to streamline and integrate the operations of Avant!
and Compass.  There can also be no assurance that the Company will be able to
retain all of its key technical, sales and other key personnel.  Failure to
effectively accomplish the integration of the operations of Avant!, Compass
and TMA could have a material adverse effect on Avant!'s business,  financial
condition and results of operations.  Moreover, uncertainty in the
marketplace or customer hesitation relating to the two acquisitions could
negatively affect the Company's business, financial condition and results of
operations.

The Company has experienced periods of rapid growth and expansion that has
placed and will continue to place significant strains upon its management
systems and resources.  The Company's ability to compete effectively and to
manage future growth, if any, will require the Company to continue to
implement and improve operational, financial and management information
systems on a timely basis and to expand, train, motivate and manage its
workforce.  There can be no assurance that the Company's personnel, systems,
procedures and control will be adequate to support its operations.

The Company also recently acquired the assets of Datalink, a Taiwanese
distribution corporation.  Pursuant to an asset purchase agreement (the
"Datalink Acquisition"), the Company will pay $900,000 to acquire Datalink
over five installments at specified times during the next two years.

Dependence Upon Key Personnel

Avant!'s future operating results depend in significant part upon the
continued service of its key management and technical personnel.  Few of the
Company's employees are bound by employment or non-competition agreements,
and due to the intense competition for such personnel, as well as the
uncertainty caused by the integration of Avant!'s, Compass' and TMA's
businesses, it is possible that Avant! will be unable to retain such key
technical and managerial personnel.  In fact, Avant! terminated a significant
number of Compass employees following the acquisition of Compass thereby
adding to any uncertainty which may be felt by Avant! employees.  There are
only a limited number of qualified ICDA engineers, and competition for such
individuals is intense.  If the Company is unable to attract, hire and retain
qualified personnel in the future, the development of new products and the
management of an increasingly complex business would be impaired which would
materially adversely affect the

                                    13
<PAGE>

Company's business, financial condition and results of operations.
Additionally, if the criminal complaint filed relating to the matters
underlying the pending litigation between the Company and Cadence results in
a loss of the Company's personnel, then the Company's business, financial
condition and results of operations may be materially adversely affected.
See "Legal Proceedings".

Competition

The ICDA software market in which the Company competes is intensely
competitive and subject to rapid change.  The Company currently faces
competition from major ICDA vendors, including Cadence, which currently holds
a dominant share of the market for IC physical design software, Mentor
Graphics Corporation ("Mentor") and Synopsys, Inc. ("Synopsys").  As the
Company expands its product offerings to include other library generation
tools and other EDA tools, it will compete increasingly with these
established EDA vendors.  Certain of these established vendors have longer
operating histories, significantly greater financial, technical and marketing
resources, greater name recognition and a larger installed customer base
than the Company.   It is possible that these large, well established EDA
companies may acquire the technology of one or more of the Company's
competitors in order to gain access to the markets in which the Company
competes.  With significantly more financial resources than the Company and
large existing customer bases, these potential competitors could increase the
competition faced by the Company.  Each of these competitors will likely be
able to respond more quickly to new or emerging technologies and changes in
customer requirements, and to devote greater resources to the development,
promotion and sale of their products than the Company.  Moreover, the
industry in which the Company competes is undergoing a trend toward
consolidation that is expected to result in large, more financially flexible
competitors with a broad range of product offerings.  In addition to
competition from EDA vendors, the Company also faces competition from
semiconductor companies that have internal design groups that develop their
own customized EDA tools for their own particular needs and therefore may be
reluctant to purchase products offered by the Company or other independent
vendors.  There can be no assurance that the Company will be able to compete
successfully against current and future competitors or that competitive
pressures faced by the Company will not have a material adverse effect on its
business, financial condition and results of operations. Furthermore, the
Company has experienced pricing pressures in the past, and increased
competition from current competitors or new market entrants could result in
additional price reductions, reduced margins or loss of market share, any of
which could have a material adverse effect on the company's business,
financial condition and results of operations.  If the Company is unable to
compete successfully against current and future competitors, the Company
business, financial condition and results of operations will be materially
adversely affected.

Potential Fluctuations in Quarterly Results

The quarterly operating results of the Company have varied, and it  is
anticipated that the quarterly operating results of the Company will vary,
substantially from period to period depending on factors such as the outcome
of the litigation described under "-Litigation Risk", increased competition,
the size, timing and structure of significant licenses, the timing of revenue
recognition under its time-based license agreements, the timing of new or
enhanced product announcements, introductions, or delays in the introductions
of new or enhanced versions of the Company's products, changes in pricing
policies by the Company or its competitors, market acceptance of new and
enhanced versions of the Company's products, conditions in the semiconductor
industry, the cancellation of time-based licenses or maintenance agreements,
the dependency on products of third parties, including that of Cadence and
Mentor, which is incorporated in certain of the products of the Company, the
mix of direct and indirect sales, changes, in operating expenses, changes in
the Company's strategy, seasonal factors, personnel changes, economic
conditions in the Asian markets, the ability of the Company to continue to
market its products in Asian markets, foreign currency exchange rate and
general economic factors. Due to the foregoing factors, and particularly the
variability of the size, timing and structure of significant licenses,
quarterly revenue and operating results are difficult to forecast.  In
particular, the Company has adopted a flexible pricing strategy pursuant to
which the Company offers both perpetual and time-based software licenses to
customers, depending on customer requirements and financial constraints.
Because each time-based license may have a different structure and could be
subject to cancellations, future revenue is unpredictable.  The Company's
expense levels are based, in part, on expectations as to future revenue
levels.  Accordingly, net income, if any, may be disproportionately affected
by a reduction in revenue in a quarter because only a small portion of the
Company's expenses fluctuate with revenue. If revenue

                                   14
<PAGE>

levels are below expectations, the Company's business, financial
condition and results of operations are likely to be materially adversely
affected.  Such shortfalls in the Company's revenue or operating results from
levels expected by public market analysts and investors could have an
immediate and significant material adverse effect on the market price of the
Company's Common Stock.  Additionally, the Company may not learn of such
revenue shortfalls or earnings shortfalls or other failures to meet market
expectations for results of operations until late in the fiscal quarter,
which could result in an even more immediate and material adverse effect on
the trading price of the Company's Common Stock.  In such event, the market
price of the Company's Common Stock would be materially adversely affected.
Due to the foregoing, the Company believes that period to period comparisons
of its results of operations are not necessarily meaningful and should not be
relied upon as indications of future performance.

Potential Volatility of Stock Price

The market prices of the Company's Common Stock have fluctuated significantly
in the past and the market price of the shares of the Company's Common Stock
is likely to be highly volatile and may be significantly affected by many
factors, including, but not limited to, the outcome of outstanding
litigation, actual or anticipated fluctuations in the Company's operating
results, announcements of technological innovations and new products by
competitors, new contractual relationships with strategic partners by the
Company or its competitors, proposed acquisitions by the Company or its
competitors and financial results that fail to meet public market analyst
expectations of performance.  In addition, the U.S. equity markets have from
time to time experienced significant price and volume fluctuations that have
particularly affected the market prices for the common stock of technology
companies.  These broad market fluctuations may materially adversely affect
the market price of the Company's Common Stock in the future periods.

Cost of Integration; Transaction Expenses.

Transaction costs relating to the TMA acquisition and the anticipated
combination of certain operations of the Company and TMA are expected to
result in one-time charges to the Company's earnings in the quarter of March
31, 1998, the time at which the TMA acquisition was completed.  Although it
will not be feasible to determine the actual amount of these charges until
the operational and transition plans are completed, the management of the
Company believes that the aggregate charge will be approximately $10.8
million before taxes, although such amounts may be increased by unanticipated
additional expenses incurred in connection with the TMA acquisition.  This
aggregate charge is expected to include the estimated costs associated with
financial advisory, accounting and legal fees, printing expenses, filing fees
and other merger-related costs.  In addition, in the third quarter of 1997,
the Company incurred an expense of approximately $41.2 million for acquired
in-process research and development costs associated with the Compass
acquisition.

Lengthy Sales Cycle

Because of the complexity and substantial cost of the Company's products,
licensing these products to customers typically involves a significant
technical evaluation and commitment of cash and other resources, with the
attendant delays frequently associated with customers' internal procedures to
approve large expenditures and to evaluate and accept new technologies that
affect key operations.  In addition, certain of the Company's foreign
customers have lengthy purchasing cycles that may increase the amount of time
the Company must dedicate to placing its products with these customers.  For
these and other reasons, the sales cycle associated with the licensing of the
Company's products has been and is expected to continue to be lengthy and
subject to a number of significant risks, including customers' budgetary
constraints and internal acceptance evaluations that are beyond the Company's
control.  Because of the lengthy sales cycle and the large size of customers'
average orders, if revenue projected from a specific customer for a
particular period is not realized in that period, the Company's results of
operations for that period could be materially adversely affected.


                                         15
<PAGE>

Product Concentration

The Company derives a significant portion of its total revenue from the
licensing and support of Aquarius products which are the subject of pending
litigation with Cadence.  See "Legal Proceedings".  In addition, prior the
merger, TMA derived a significant majority of its total revenue from the
licensing and maintenance of two software products, TSUPREM-4 and Medici.
The Company expects that revenue from the licensing and support of Apollo
(replaced Aquarius), TSUPREM-4 and Medici will account for a substantial
percentage of the Company's revenues for the foreseeable future.  As a
result, the Company's business, financial condition and results of operations
are significantly dependent upon continued market acceptance and purchases of
Apollo, TSUPREM-4 and Medici.  A decline in demand for any of these products
as a result of competition, technological change or other factors would have
a material adverse effect on the business, financial condition and results of
operations.  These products could be rendered obsolete by future technical
advanced by competitors or even by certain of its customers or marketing
partners.  There can be no assurance that Apollo, TSUPREM-4 and Medici will
achieve continued market acceptance and that the Company will be successful
in marketing such products or any new or enhanced products, or that
competitors will not introduce competing products that gain market
acceptance.  Failure to develop or acquire additional products or product
lines, or to successfully market such products on a profitable basis, could
have a material adverse effect on the Company's business, financial condition
and results of operations.

Substantial Dependence on International Sales

International revenue accounted for approximately 41%, 34% and 32% for the
years ended 1997, 1996 and 1995, respectively, of its total revenue from the
licensing and support of its software products . In 1997, Asian and European
sales represented 31% and 10% of the Company's total revenue, respectively.
In 1996 and 1995, international sales were primarily in Asia.  The Company
expects that international license and service revenue will continue to
account for a significant portion of the Company's total revenue.  The
Company's international revenue involves a number of risks,  including the
impact of possible recessionary environments in economics outside the U.S.,
longer receivable collection periods and greater difficulty in accounts
receivable collection, difficulties in staffing and managing foreign
operations, political and economic instability, unexpected changes in
regulatory requirements, reduced protection of intellectual property rights
in some countries and tariffs and other trade barriers.  Currency exchange
fluctuations in countries in which the Company licenses its products could
also materially adversely affect its business, financial condition and
results of operations by resulting in pricing that is not competitive with
products priced in local currencies.  Furthermore, there can be no assurance
that in the future the Company will be able to continue to price its products
and services internationally in U.S. dollars because of changing sovereign
restrictions on importation and exportation of foreign currencies as well as
other practical considerations.  In addition, the laws of certain countries
do not protect the Company's products and intellectual property rights to the
same extent as do the laws of the U.S.  Accordingly, there can be assurance
that these factors will not have a material adverse effect on the Company's
future international sales and, consequently, on the Company's business,
financial condition and results of operations.  In addition, there can be no
assurance the Company will be able to sustain or increase revenue derived
from international licensing and service or that the foregoing factors will
not have a material adverse effect on the Company's future international
license and service revenue, and, consequently, on the Company's business,
financial condition and results of operations.

Dependence Upon Distributors and Manufacturer's Representatives

The Company relies on Third Party Sellers for licensing and support of its
products in Asia.  A substantial portion of the Company's international
license and service revenue results from a limited number of these Third
Party Sellers, although the Company had no individual customer representing
over ten percent of revenue in any of 1997, 1996 or 1995.  In 1997, the
Company consolidated its Japanese sales channel by forming a distributor,
MainGate Electronics, Inc. ("MainGate"), owned by the Company, Gerald C. Hsu,
the Company's Chairman of the Board, President and Chief Executive Officer,
and other parties (including other Avant! employees and former employees of
Avant!'s third party distributors). Sales of TMA product licenses to
customers in Japan are made exclusively through a single distributor,
Innotech Corporation ("Innotech") a company in which Cadence, a competitor of
Avant!, holds a minority interest.   Effective April 1, 1998, MainGate will
assume sales and support of TMA

                                        16
<PAGE>

products from Innotech.   In Korea, license to TMA customers have been made
through a single independent sale representative, C&G Technology, Inc.,
("C&G"); however, TMA terminated its relationship with C&G in 1997 and now
sells directly in Korea thorough a newly formed subsidiary in Korea.  Sale to
customers in Taiwan were also carried out through a single independent sales
representative, Business Technology , Inc. ("BTI").  TMA expects that sales
to customers in Japan, Korea and Taiwan will continue to make up a
significant proportion of TMA's total product revenue for the foreseeable
future.  Futhermore, TMA's agreement with BTI renews automatically every year
but may not be terminated if either party gives notice 90 days prior to
expiration.  There an be no assurance that Avant!'s current Third Party
Sellers or joint ventures will choose to or be able to market or service and
support the Company's products effectively, that economic conditions or
industry demand will not materially adversely affect these or other Third
Party Sellers or that these Third Party Sellers or joint venture will not
devote greater resources to marketing and supporting products of the
Company's competitors.  Additionally, because of the Company's products are
used by highly skilled professional engineers, a Third Party Seller must
possess sufficient technical, marketing and sales resources in order to be
effective and must devote these resources to a lengthy sales cycle, customer
training and product service and support.  Only a limited number of Third
Party Sellers must possess such resources.  Accordingly, the loss of, or a
significant reduction in revenue from, one of Avant!'s Third Party Sellers or
joint venture or any other Third Party Sellers on which revenues may, in the
future, become dependent, could have a material adverse effect on the
Company's business, financial condition and results of operations.

New Products and Rapid Technological Change

The ICDA industry is characterized by extremely rapid technological change,
frequent new product introductions and enhancements, evolving industry
standards and rapidly changing customer requirements.  The Company's future
business, financial condition and results of operations will depend in part
upon its ability to enhance its current products and to develop and introduce
new products on a timely and cost-effective basis that will keep pace with
technological developments and evolving industry standards and methodologies,
as well as address the increasingly sophisticated needs of customers.  New
technologies developed by the Company or its competitors could render
existing products obsolete.  The Company's success will depend upon its
ability to enhance existing products and to introduce new products on a
timely and cost-effective basis that meet changing customer requirements.
There can be no assurance that the Company will be successful in developing
new products or enhancing existing products or that such new or enhanced
products will receive market acceptance.  On occasion, the Company has
experienced delays in the scheduled introductions of new and enhanced
products, and there can be no assurance that the Company will be able to
introduce products on a timely basis in the future.  Delays in the scheduled
availability of products, for technological or other reasons, or a lack of
market acceptance of such products or the Company's failure to accurately
anticipate customer demand, would have a material adverse effect on its
business, financial condition and results operations.

Dependence Upon Semiconductor and Electronics Industries; General Economic
and Market Conditions

The Company is dependent upon the semiconductor and, more generally, the
electronics industries.  Each of these industries is characterized by rapid
technological change, short product life cycles, fluctuations in
manufacturing capacity and pricing and gross margin pressures.  Segments of
these industries have from time to time experienced significant economic
downturns characterized by decreased product demand, production
over-capacity, price erosion, work slowdowns and layoffs.  Over the past few
years, these industries have experienced an extended period of significant
economic growth.  There can be no assurance that economic growth in these
industries will continue, and if it does not, any downturn could be
especially severe on the Company.  During such downturns, the number of new
IC design products often decreases.  Because acquisitions of new licenses
from the Company are largely dependent upon the commencement of new design
projects, any slowdown in these industries could have a material adverse
effect on the Company's business, financial condition and results of
operations.  For example, in the past, the Company has derived a substantial
portion of its product revenue from sales to manufacturers of memory chips
and other products that use advanced semiconductor technology.  Recently,
manufacturers of memory chips have experienced intense market pressure to
reduce prices and manufacturing costs.  These market pressures could lead
these or other manufacturers to reduce their research and development efforts
and consequently reduce or eliminate their use of the Company's products.
The Company's business, financial condition and results

                                   17
<PAGE>

of operations may in the future reflect substantial fluctuations from period
to period as a consequence of patterns and general economic conditions in
either the semiconductor or electronics industry.

Limitations on Protection of Intellectual Property and Proprietary Rights

The Company relies on a combination of patents, trade secrets, copyrights and
trademarks, as well as contractual commitments, to protect its proprietary
rights in software products.  The Company generally enters into
confidentiality or license agreements with its employees, distributors and
customers, and limits access to and distribution of its software,
documentation and other proprietary information.  Despite these precautions,
there can be no assurance that a third party will not copy or otherwise
obtain and use the Company's products or technology without authorization, or
develop similar technology independently. In addition, effective patent,
copyright and trade secret protection may be unavailable or limited in
certain foreign countries.  The Company expects that software companies will
increasingly be subject to infringement claims as the number of products and
competitors in the industry in which the Company currently competes grows and
the functionality of products in different industry segments overlaps.  In
particular, the Company's current litigation with Cadence involves such
infringement claims. Responding to such claims, regardless of merit, could be
time-consuming, result in costly litigation, cause product shipment delays or
require the Company to enter into royalty or licensing agreements. Such
royalty or licensing agreements, if available, may not be available on terms
acceptable to the Company, which could have  a material adverse effect upon
the Company's business, financial condition and results of operations.  There
can be no assurance that infringement claims will not be asserted against the
Company in the future or that any such claims will not require the company to
enter into royalty arrangements or result in costly litigation, which could
materially adversely affect the Company's business, financial condition and
results of operations.  TMA licenses from third parties software code that
has been incorporated into certain of TMA's products.  Such licenses contain
provisions that could lead to termination upon TMA's breach or abandonment.
Any such termination could have a material adverse effect upon the Company's
business, financial condition and results of operations.

Risk of Product Defects

Software products as complex as those offered by the Company may contain
defects or failures when introduced or when new versions are released.  The
Company  has in the past discovered software defects in certain of its
products and may experience delays or lost revenue to correct such defects in
the future.  There can be no assurance that, despite testing by the Company,
errors will not be found in new products or releases after commencement of
commercial shipments, resulting in loss of market share or failure to achieve
market acceptance.  Any such occurrence could have a material adverse effect
upon the Company's business, financial condition and results of operations.

Year 2000

During 1997, the Company licensed an enterprise-wide resource planning
software application package to replace its existing operational and
financial system. The Company currently is in the process of installing and
implementing the new system.  The new system is warranted to be Year 2000
compliant.

The Company has undertaken a preliminary evaluation of the Company's products
to determine if the Company's products are Year 2000 compliant.  The Company
believes that its products are Year 2000 compliant and that costs to be
incurred to make the Company's products Year 2000 compliant, if any, will not
have a material impact on the Company's results of operations.

The Company believes that the purchasing patterns of customers and potential
customers may be affected by Year 2000 issues as companies expend significant
resources to correct or patch their current software systems for Year 2000
compliance.  These expenditures may result in reduced funds available to
purchase software products such as those offered by the Company, which could
result in a material adverse effect on the Company's business, financial
condition and results of operation.

                                    18
<PAGE>

ITEM 2.  PROPERTIES

In February 1997, the Company signed a lease for its new headquarters in
Fremont, California.  The lease covers four buildings with an aggregate of
approximately 281,000 square feet of space with an aggregate annual base rent
amount of approximately $4,800,000.  The lease for three of the buildings
expires on September 30, 2010 and the lease for the fourth building expires
on August 31, 2012.  The Company also occupies a facility near Research
Triangle Park in Durham, North Carolina with an annual base rent of
approximately $666,000.  This lease expires on November 30, 2005.  The
Company also leases sales and support offices in the United States, Europe,
Japan Korea and Taiwan. Avant! believes that its existing facilities are
adequate for its current needs.

ITEM 3.  LEGAL PROCEEDINGS

Litigation Risk

The Company is subject to a number of litigation matters that, if decided
adversely to the Company, could affect the Company's future results.

    CADENCE LITIGATION.

On December 6, 1995, Cadence Design Systems, Inc. ("Cadence") filed an action
against the Company and certain of its officers in the United States District
Court for the Northern District of California alleging copyright
infringement, unfair competition, misappropriation of trade secrets,
conspiracy, breach of contract, inducing breach of contract and false
advertising.  The essence of the complaint is that certain of the Company's
employees who were formerly Cadence employees allegedly misappropriated and
improperly copied source code for certain important functions of the
Company's place and route products from Cadence, and that the Company has
allegedly competed unfairly by making false statements concerning Cadence and
its products.  The action also alleges that the Company induced certain
individual defendants to breach their agreements of employment and
confidentiality with Cadence.  The matter is currently awaiting trial,
pending further pretrial matters.  A trial date has not been set.  On July
25, 1997, a federal judge stayed the Cadence civil action pending completion
of the criminal proceedings described below, except for limited discovery on
certain matters approved by the District Court. Avant! posted a $5.0 million
bond pending the resumption of the civil action.

In addition to actual and punitive damages, which were not quantified by
Cadence, Cadence is seeking to enjoin the sale of the Company's place and
route products pending trial of the action. On March 18, 1997, the District
Court granted in part and denied in part Cadence's motion for a preliminary
injunction.   Cadence appealed the order denying a preliminary injunction. On
September 23, 1997, the United States Court of Appeals for the Ninth Circuit
overruled the District Court's denial of Cadence's motion with respect to the
Company's ArcCell product, a product Avant! no longer sells, and held that a
preliminary injunction should be granted against the further sale of the
ArcCell product.  The Court of Appeals did not enjoin the Company's Aquarius
place and route products, but rather remanded this aspect of Cadence's motion
to the District Court for further consideration.  The Court of Appeals stated
that, if the Company's Aquarius products are determined to infringe Cadence
products, the sale of Aquarius products should be enjoined.   The Company
requested a rehearing on the issue, but on November 21, 1997, the Ninth
Circuit denied this request.  On December 19, 1997, the District Court
entered an injunction against continued sales or licensing of any product or
work copied or derived from Cadence's Design Framework II, specifically
including, but not limited to, ArcCell products.  The injunction also barred
the Company from possessing or using any copies or any portion of the source
code or object code for ArcCell or any other product, to the extent that
portion is copied or derived from Cadence's Design Framework II.  (The
Company no longer sells or licenses ArcCell products or code).  The
injunction also required the Company to inform its customers of the
injunction, to obtain confirmation as to whether the customers have a
functioning copy of ArcCell or other such product, and to provide certain
information to the court.  A copy of the injunction is attached hereto as
Exhibit 99.1. On January 25, 1998, the District Court entered a modified
preliminary injunction "to remove any implication that the Company's
customers are authorized by the preliminary injunction to continue to use the
enjoined products without exposure to claims of copyright violation." A copy
of the modified injunction is attached hereto as Exhibit 99.2. Cadence
continues to allege that the Company's Aquarius products infringe Cadence's
Design Framework II and the District Court is

                                       19
<PAGE>

allowing Cadence to take discovery concerning the Company's Aquarius and
Apollo products to determine whether those products infringe.  At the
December 19, 1997 hearing, the District Court did not rule on Cadence's
request to enjoin the sale, license or support of the Company's Aquarius
place and route products from which the Company derives a significant portion
of its total revenue.  On February 28, 1998, the District Court requested an
additional briefing regarding whether Aquarius should be enjoined.  The
District Court will hold future hearings regarding the Aquarius products.
There can be no assurance that the District Court will not, upon further
consideration, grant a preliminary injunction with respect to the sale of the
Aquarius products, which could have a material adverse effect on the
Company's business, financial position and results of operations.

On January 16, 1996, the Company filed a counterclaim against Cadence
alleging antitrust violations, racketeering, false advertising, defamation,
trade libel, unfair competition, unfair trade practices, negligent and
intentional interference with prospective economic advantage and intentional
interference with contractual relations.  On December 19, 1997, the Company
stipulated to temporarily dismissing its counterclaim in order to file more
detailed allegations. The Company refiled its counterclaim on January 29,
1998.

The Company believes it has defenses to all of Cadence's claims and intends
to defend itself vigorously.  If, however, the Company's defenses are
unsuccessful, the Company may ultimately be permanently enjoined from selling
certain place and route products and may be required to pay damages to
Cadence.  In addition, upon further consideration by the District Court, the
Company could be preliminarily enjoined from selling its Aquarius place and
route products.  In such event, the Company's business, financial condition
and results of operations would be materially adversely affected.  In
addition, it is likely that an adverse judgment against the Company would
result in a steep decline in the market price of the Company's Common Stock.
 Although it is reasonably possible the Company may incur a loss upon
conclusion of these claims, an estimate of any loss or range of loss cannot
be made, based on information the Company presently possesses.  There can be
no assurance that an adverse judgement, if granted on any claim would not
have a material adverse effect on the Company's business, financial position
or results of operations.   Furthermore, there can be no assurance that the
Company's relationships with its customers and/or partners will not be
adversely affected in the future as  a result of the Cadence litigation.

    CRIMINAL COMPLAINT.

The Santa Clara County District Attorney's office is also investigating the
allegations of misappropriation of trade secrets set forth in Cadence's
lawsuit, described above.   On April 11, 1997, the Santa Clara County
District Attorney filed a criminal complaint alleging felony level offenses
against,  among others, the Company and the following employees and/or
directors of the Company, Gerald C. Hsu, President, Chief Executive Officer
and Chairman of the Board of Directors, Y. Eric Cho, a former officer and
current member of the Board of Directors, Y. Z. Liao, Corporate Fellow,
Stephen Wuu, CEO Staff Operations, Leigh Huang, Marketing Manager and Eric
Cheng, Research and Development Manager, for allegedly violating various
California Penal Code Sections relating to the theft of trade secrets.  The
Company and the individuals above have pleaded not guilty and are awaiting
further proceedings.  The criminal complaint could result in criminal fines
against the Company, as well as the potential incarceration of certain
members of its management team.  Such outcomes could result in canceled or
postponed orders, increased future expenditures, the loss of management and
other key personnel, additional shareholder litigation, loss of goodwill and
would have other material adverse effects on the Company's business,
financial position and results of operations.

    SILVACO LITIGATION.

In March 1993, Meta Software Inc., which the Company acquired in October 1996
and which is now a wholly owned subsidiary of the Company ("Meta"), filed a
complaint in the Superior Court of California for Santa Clara County against
Silvaco Data Systems, Inc. and related parties (collectively, "Silvaco")
seeking monetary damages and injunctive relief.  Meta's complaint alleged,
among other things, that Silvaco breached its representative agreement with
Meta by withholding customer payments for products and services that had been
delivered, and by failing to pay royalties on software that Silvaco sold to
others.  In August 1995, Meta was awarded $529,828 under the Superior Court's
judicial arbitration program. Both parties rejected the award and requested a
trial de novo on the issues involved. In August 1995, Silvaco filed a
cross-complaint against Meta alleging, among other things, that

                                      20
<PAGE>

Meta owes Silvaco royalties and license fees pursuant to a product
development and marketing program and unpaid commissions related to Silvaco's
sale of Meta's products and services under such program.  Meta filed an
answer to the cross-complaint denying the allegations contained therein.  In
July 1996, Silvaco filed a first amended cross-complaint, adding Shawn
Hailey, then the President, Chief Executive Officer and a major shareholder
of Meta, and, until July 1997, the Senior Vice President of the Company's
Silicon Division, as a personal defendant, and further alleging defamation,
interference with economic advantage, unfair competition and abuse of process
by acts or statements made by Meta or its agents.

In August 1997, the Superior Court entered a default judgment against Mr.
Hailey for failure to timely answer the complaint.  In October 1997, Mr.
Hailey's application for relief from the default judgment was denied.  In
August 1997, the Superior Court entered a default judgment against Meta as to
the defamation and interference with economic advantage claims.  On October
31, 1997, Meta's application for relief from the default judgment was denied.
On October 28, 1997, Silvaco first presented its theory of damages and a
trial began on November 3, 1997.  On November 4, 1997, the Superior Court
dismissed Meta's remaining affirmative claims.  On November 5, 1997, the
Superior Court awarded Silvaco $20 million in damages against Mr. Hailey and
Meta related to the defamation and interference with economic advantage
claims, and on November 6, 1997, the Superior Court awarded Silvaco $11.4
million in damages related to the unfair competition claim.  On November 12,
1997, the Superior Court awarded nominal damages to Silvaco related to the
product development claim.  Silvaco's claims based on the marketing program
and abuse of process were dismissed.   The Company filed an appeal on behalf
Shawn Hailey, and, if necessary, intends to file an appeal on its own behalf.
A default judgment in the aggregate amount of $31.4 million was entered
against the Company.  As required, the Company posted a bond on behalf of
itself and Shawn Hailey in excess of the amount necessary to satisfy the
judgment. The bond is collateralized by a $23,583,000 letter of credit.

Meta intends to pursue all remedies available to it in connection with the
litigation with Silvaco.  Meta believes it has substantial appellate issues
which could cause the judgment to be remanded to the trial court for further
proceedings.  Should Meta be permitted to participate fully in further trial
court proceedings, Meta believes it would have substantial defenses to
Silvaco's claims.  However, there can be no assurance that any such remedies
will be successful.  Although it is reasonably possible Meta will incur a
loss in relation to this claim, it is currently unable to estimate the actual
loss or range of loss. Payment of the damages previously awarded, and damages
which may be awarded in the future, would have a material adverse effect on
the Company's business, financial condition and results of operations.

    PESIC LITIGATION.

In September 1996, Katherine Ngai Pesic and Ivan Pesic commenced an action
entitled PESIC, ET AL. V. WHITE, EL AL., No.760469 in the Superior Court of
California for Santa Clara County naming as defendants the Company (as
successor in interest to Meta), Shawn Hailey, Meta's former Chief Executive
Officer, and Thomas N. White, Jr. and George S. Cole, both of whom were
Meta's former counsel in the Silvaco matter, described above.  The action
asserts claims for invasion of privacy under California common law and the
California Constitution and seeks compensatory and punitive damages. Avant!
has answered the complaint, but no trial date has been set.  The Company
believes it has defenses to these claims and intends to defend itself
vigorously.  Although it is reasonably possible the Company will incur a loss
in relation to these claims, it is currently unable to estimate the actual
loss or range of loss.  In the event the Company's defenses are unsuccessful,
the Company may be required to pay damages to the plaintiffs, and such a
judgment could have a material adverse effect on the Company's business,
financial condition and results of operations.

    MICROUNITY LITIGATION.

On October 14, 1997, Microunity Systems Engineering, Inc. filed in the United
States District Court for the Northern District of California a complaint
against Precim Corporation ("Precim"), captioned MICROUNITY SYSTEMS
ENGINEERING, INC. V. PRECIM CORP., No. C 97 20904 JW (PVT).  Precim was a
wholly owned subsidiary of Technology Modeling Associates, Inc., which was
acquired by the Company in January, 1998. This lawsuit alleges liability for
patent infringement, unfair competition, and tortious interference with
prospective economic advantage.  The action requests unspecified damages and
an injunction against Precim. Precim has accepted service of the

                                    21
<PAGE>

complaint but has not yet responded.  Precim believes it has defenses to
these claims and intends to defend itself vigorously. Although it is
reasonably possible the Company will incur a loss in relation to these
claims, it is currently unable to estimate the actual loss or range of loss.
In the event Precim's defenses are unsuccessful, Precim may be required to
pay damages to the plaintiffs, and such a judgment could have a material
adverse effect on the Company's business, financial condition and results of
operations.

    SECURITIES CLASS ACTION CLAIMS.

On December 15, 1995, Paul Margetis and Helen Margetis filed in the United
States District Court for the Northern District of California a securities
fraud class action complaint against the Company.  In addition, on December
19, 1995, Fred Tarca filed in the United States District Court for the
Northern District of California a class action complaint against the Company
for violations of the federal securities laws.  These class action lawsuits
allege certain securities law violations, including omissions and/or
misrepresentation of material facts. The alleged omissions and/or
misrepresentations are largely consistent with those outlined in the Cadence
claim, described above.  In February 1997, plaintiff Tarca voluntarily
dismissed his action and the Margetis plaintiffs were certified as class
representatives in their action.  On July 25, 1997, a federal judge stayed
the Margetis action, except for certain documentary and third-party
discovery, pending resolution of the Cadence suit.

On May 30, 1997, Joanne Hoffman filed in the United States District Court for
the Northern District of California a purported class action alleging
securities claims on behalf of purchasers of the Company's stock between
March 29, 1996 and April 11, 1997, the date of the filing of the criminal
complaints against the Company and six of its employees and/or officers.
Plaintiff alleges that the Company and various of its officers misled the
market as to the likelihood of criminal charges being filed and as to the
validity of the Cadence allegations.  The Company moved to dismiss the
Hoffman complaint for failure to state a claim, but the District Court in
December 1997 denied the motion.  The court also denied without prejudice
plaintiff Hoffman's motion for appointment as lead plaintiff.  Counsel for
plaintiff has indicated that the stay of the Margetis securities class action
pending resolution of the Cadence suit will likely apply to this securities
action as well.

The Company believes it has defenses to all of the securities class action
claims, described above, and intends to defend itself vigorously.  There can
be no assurance, however, that the Company's defenses will be successful.
Although it is reasonably possible the Company will incur a loss in relation
to these claims, it is currently unable to estimate the actual loss or range
of loss, either individually or in aggregate.   In the event the Company's
defenses are unsuccessful, the Company may be required to pay damages to the
securities class action plaintiffs, and such a judgment would likely  have a
material adverse effect on the Company's business, financial condition and
results of operations.

Litigation Costs

The pending litigation and any future litigation against the Company and the
Company's employees, regardless of the outcome, is expected to result in
substantial costs and expenses to the Company.   The Company charged to
expenses approximately $8,720,000 and $6,850,000 for the years 1997 and 1996,
respectively, related tot he various litigation issues.  The Company
currently expects legal costs to continue in the future as a result of its
current litigation issues.  Accordingly, any such litigation could have a
material adverse effect on the Company's business, financial position and
results of operations.  Furthermore, if Avant! is required to satisfy the
default judgments in full in the Silvaco litigation, Avant! could be required
to pay up to $31.4 million in damages, which would have a material adverse
effect on Avant!'s business, financial condition and results of operations.

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

The Company did not submit any matters to a vote of its shareholders during
the fourth quarter of the fiscal year ended December 31, 1997.

                                     22
<PAGE>

                                      PART II.

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Company's Common Stock has traded on the Nasdaq National Market under the
Nasdaq symbol "AVNT" since November 27, 1995.  The Company's Common Stock
traded on the National Market System under the Nasdaq symbol ARCS from the
Company's initial public offering on June 7, 1995 until November 26, 1995.
The Company has not paid cash dividends in the past and none are expected to
be paid in the future.  As of February 27, 1998, the Company had
approximately 221 shareholders of record.

The information required by Item 5 concerning the high and low sales prices
for the Company's common stock is set forth on page 14 of the Company's 1997
Annual Report to Shareholders and is incorporated herein by reference.  Such
quotations reflect inter-dealer prices without mark-up, mark-down or
commissions and may not necessarily represent actual transactions.

ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA

The information required by this item is set forth on page 1 of the Company's
1997 Annual Report to Shareholders and is incorporated herein by reference.

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

The information required by this item is set forth on pages 15 through 22 of the
Company's 1997 Annual Report to Shareholders and is incorporated herein by
reference.

ITEM 8.  CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The consolidated financial statements required by this item are included on
pages 24 through 39 of the Company's 1997 Annual Report to Shareholders and
are incorporated herein by reference.  With the exception of the
aforementioned information and the information incorporated in Items 5, 6, 7
and 8, the Company's 1997 Annual Report to Shareholders is not to be deemed
filed as part of this Annual Report on Form 10-K.  The report of the
Company's Independent Auditors on the Company's consolidated financial
statements is included on page 23 of the Company's 1997 Annual Report and is
incorporated herein by reference.  The report of the Company's Independent
Auditors on the financial statement schedule and consent of independent
auditors is required by this item and is included as Exhibit 23.1 hereto.

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

The Company filed a report on Form 8-K, under Items 4 and 5, dated December
20, 1996.  Pursuant to this report, the Company announced that it dismissed
Roberts Accountancy Corporation as the independent accountant for Anagram and
appointed KPMG Peat Marwick LLP as principal accountants.  The Company
acquired Anagram on September 27, 1996, and the Company's principal
accountants previously expressed reliance on Roberts Accountancy
Corporation's report in the Company's registration statement on Form S-4
dated September 30, 1996.  The Company's Audit Committee of the Board of
Directors approved the decision to change accountants.  The Company provided
historical selected financial data, quarterly financial information
management's discussion and analysis and consolidated financial statements
which gave effect to the acquisition of Anagram consummated on September 27,
1996.  The Company also provided supplemental selected financial data,
quarterly financial information management's discussion and analysis and
consolidated financial statements which gave effect to the acquisition of
Meta and FrontLine.

                                      23
<PAGE>

                                     PART III.

ITEM 10.       DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by Item 10 as to directors is incorporated by
reference from the Company's Proxy Statement to be filed by the Company with
the Securities and Exchange Commission within 120 days of the Company's
fiscal year ended December 31, 1997.

Executive officers of the Company are appointed by the Board of Directors on
an annual basis and serve at the discretion of the Board of Directors.  The
executive officers of the Company are as follows:

<TABLE>

Name                Age       Position
----                ---       --------
<S>                 <C>       <C>
Gerald C. Hsu       50        President, Chief Executive Officer and
                                Chairman of the Board of Directors
Roy E. Jewell       43        CEO Staff, Corporate Affairs
                                General Manager of TCAD Business Unit
David H. Stanley    51        CEO Staff of Legal and
                                General Counsel
Linda Chinn         46        Head of Finance and Administration

</TABLE>

Gerald C. Hsu joined the Company in March 1994 as President, Chief Executive
Officer and a director, and has been Chairman of the Avant! Board of
Directors since November 1995.  From July 1991 to March 1994, Mr. Hsu was
employed by Cadence, where his last position was President and General
Manager of the IC Design Group.  From June 1988 to July 1991, Mr. Hsu was
employed by Sun Microsystems, Inc., an engineering workstation company, where
his last position was Director of Strategic Business Development.  Mr. Hsu
holds an M.S. in Ocean Engineering from the Massachusetts Institute of
Technology, an M.S. in Mechanics and Hydraulics from the University of Iowa
and a B.S. in Applied Mathematics from the National Chung-Hsing University,
Taiwan.  On April 11, 1997, the Santa Clara District Attorney filed a
criminal complaint alleging felony level offenses against, among others, Mr.
Hsu, the Company and certain other of the Company's employees for allegedly
violating various California Penal Code sections relating to the theft of
trade secrets.  Mrs. Hsu has pleaded not guilty to such complaint and is
awaiting further proceedings.

Roy E. Jewell joined Avant! in January 1998 as CEO Staff for Corporate
Affairs and General Manager of Avant!'s TCAD business unit following the
acquisition of Technology Modeling Associates, Inc. ("TMA"), where he was
employed for 10 years, rising to the position of Chief Executive Officer in
July 1992. Before joining TMA, Mr. Jewell spent eight years at Texas
Instruments, a semiconductor company. Mr. Jewell, holds his B.S. and M.A.
degrees from the University of South Florida and his M.S. from the University
of Texas, Dallas.

David H. Stanley joined Avant! as CEO Staff of Legal and General Counsel in
November 1997. Prior to joining Avant!, Mr. Stanley was employed by Informix
Corporation, a database software company,  where he served as General Counsel
for nine years. Mr. Stanley, holds a B.A. from Dartmouth College and a J.D.
from the University of San Francisco.

Linda Chinn was named Head of Finance and Administration in January 1998. Ms.
Chinn joined Avant! following a twenty year career in finance with Pacific
Bell, a telecommunications company. As the Assistant Treasurer at Pacific
Bell, Ms. Chinn supervised more than 2000 line employees in financial
operations. Ms. Chinn, holds a B.A. from Stanford and an M.B.A. from the
University of California, Berkeley.

The information required by Item 10 as to the filings of Forms 3, 4, and 5 as
required by Section 16(a) of the Securities Exchange Act of 1934 is
incorporated by reference from the Company's Proxy to be filed by the Company
with the Securities and Exchange Commission within 120 days of the Company's
fiscal year ended December 31, 1997.

                                     24
<PAGE>

ITEM 11.       EXECUTIVE COMPENSATION

The information required by Item 11 is incorporated by reference from the
Company's Proxy Statement to be filed by the Company with the Securities and
Exchange Commission within 120 days of the Company's fiscal year ended
December 31, 1997.

ITEM 12.       SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by Item 12 is incorporated by reference from the
Company's Proxy Statement to be filed by the Company with the Securities and
Exchange Commission within 120 days of the Company's fiscal year ended
December 31, 1997.

ITEM 13.       CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by Item 13 is incorporated by reference from the
Company's Proxy to be filed by the Company with the Securities and Exchange
Commission within 120 days of the Company's fiscal year ended December 31,
1997.

                                      PART IV.

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

<TABLE>

                                                                               PAGE NUMBER
                                                                             IN ANNUAL REPORT
                                                                             ----------------
(a) 1.    FINANCIAL STATEMENTS
     <S>                                                                     <C>
     Independent Auditors' Report                                                   23
     Consolidated Balance Sheets as of December 31, 1997 and 1996                   25
     Consolidated Statements of Income for the Years Ended December 31,
          1997, 1996 and 1995                                                       24
     Consolidated Statements of Shareholders' Equity for the Years Ended
          December 31, 1997, 1996 and 1995                                          26
     Consolidated Statements of Cash Flows for the Years Ended December 31,
          1997, 1996 and 1995                                                       27
     Notes to Consolidated Financial Statements                                     28

</TABLE>

<TABLE>
                                                                                  PAGE NUMBER
                                                                               IN THIS FORM 10-K
(a)2.     FINANCIAL STATEMENT SCHEDULE                                         -----------------

     <S>                                                                       <C>
     Schedule II -  Valuation and Qualifying Accounts for the
     years ended December 31, 1997, 1996 and 1995                                     28

     All other financial statement schedules required under Regulation S-X are
     omitted as the required information is not applicable.

(a)3.     Exhibits

     The Exhibits filed as part of this Form 10-K are listed on the Exhibit
     Index immediately preceding such Exhibits and are incorporated by
     reference.

</TABLE>
                                     25
<PAGE>

(b)  Reports on Form 8-K

The Company filed a report on Form 8-K/A, under item 7, dated November 25,
1997.  Pursuant to this report, the Company filed audited financial
statements and unaudited pro forma condensed financial statements relating to
the Company's acquisition of Compass Design Automation, Inc.

                                   26
<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 to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                                        AVANT! CORPORATION
                                                        ------------------
                                                          (Registrant)


March 27, 1998                         /s/  GERALD C. HSU
--------------                         -------------------
                                         Gerald C. Hsu
                                         President, Chief Executive Officer,
                                         and Chairman of the Board of
                                         Directors

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.

<TABLE>

    Signature                       Capacity                       Date
    ---------                       --------                       ----
<S>                      <C>                                   <C>
/s/  GERALD C. HSU       President (principal executive        March 27, 1998
------------------       officer), Chief Executive Officer
Gerald C. Hsu            and Chairman of the Board of
                         Directors

/s/  LINDA CHINN         Head of Finance and Administration    March 27, 1998
----------------         (Principal accounting officer and
Linda Chinn              principal financial officer)


/s/ ERIC A. BRILL        Director                              March 27, 1998
-----------------
Eric A. Brill

/s/ Y. ERIC CHO          Director                              March 27, 1998
---------------
Y. Eric Cho

/s/ TENCH COXE           Director                              March 27, 1998
--------------
Tench Coxe

/s/ CHARLES ST. CLAIR    Director                              March 27, 1998
---------------------
Charles St. Clair

/s/ MORIYUKI CHIMURA     Director                              March 27, 1998
--------------------
Moriyuki Chimura

</TABLE>

                                       27
<PAGE>

                                                                   Schedule II


                                  AVANT! CORPORATION
                         VALUATION AND QUALIFYING ACCOUNTS -
                           ALLOWANCE FOR DOUBTFUL ACCOUNTS
                                    (in thousands)



<TABLE>

                                     Balance      Additions                              Balance
                                   At Beginning    Charged                   Adjust-      At End
                                    of Period     to Expense  Deductions     ments(1)   of Period
                                   ------------   ----------  ----------     --------   ---------
<S>                                <C>            <C>         <C>            <C>        <C>
Year ended December 31, 1995         $ 437          $  590      $ 128         $     -      $  899
Year ended December 31, 1996           899             454        591               -         762
Year ended December 31, 1997           762           1,385        493           2,496       4,150

</TABLE>

(1)   Compass Design Automation, Inc. balance as of 9/12/97.

                                         28
<PAGE>

                             INDEX TO EXHIBITS

(a)3.     Exhibits

<TABLE>

EXHIBIT NO.                      DESCRIPTION
-----------                      -----------
<S>    <C>
2.1    Agreement and Plan of Reorganization dated as of August 18, 1996 among
       the Registrant, AGM Acquisition Corporation and Anagram, Inc. (2)
2.2    Agreement and Plan of Reorganization dated as of August 22, 1996 among
       the Registrant, Natasha Merger Corporation and Meta-Software, Inc. (2)
2.3    Agreement and Plan of Reorganization dated as of October 9, 1996 among
       the Registrant, DSM Acquisition Corporation and FrontLine Design
       Automation, Inc. (3)
2.4    Agreement and Plan of Reorganization dated as of July 31, 1997, as
       amended on August 27, 1997 among the Registrant,  GB Acquisition
       Corporation, VLSI Technology, Inc. and Compass Design Automation, Inc.
       (6)
2.5    Agreement and Plan of Reorganization dated as of September 10, 1997
       among the Registrant,  Cardinal Merger Corporation and Technology
       Modeling Associates, Inc. (5)
3.1    Restated Certificate of Incorporation (1)
3.2    Bylaws (1)
4.1    Amended and Restated Investors Rights Agreement between the Company and
       the Investors specified therein dated September 24, 1993 (1)
4.2    Specimen Common Stock Certificate (1)
4.3    Registration Rights Agreement between the Registrant and certain
       investors dated November 27, 1996 (4)
10.1   1995 Stock Option/Stock Issuance Plan (1)
10.2   Employee Stock Purchase Plan (1)
10.3   Form of Indemnification Agreement (1)
10.4   Indemnification Agreement entered into between the Company and Gerald C.
       Hsu dated May 24, 1994 (1)
11.1   Statement regarding Computation of Net Income Per Share
21.1   List of subsidiaries of the Company
23.1   Consent of KPMG Peat Marwick LLP, Independent Auditors
99.1   Preliminary Injunction, Cadence Design Systems, Inc. v. Avant! Inc.
99.2   Modification of Preliminary Injunction, Cadence Design Systems, Inc. v.
       Avant! Inc.

</TABLE>

______________
(1)    Incorporated by reference from the Company's Registration Statement on
Form S-1 (File No. 33-91128) as declared effective on June 6, 1995.
(2)   Incorporated by reference from the Company's Registration Statement on
Form S-4 (File No. 333-11659) as declared effective on September 30, 1996.
(3)  Incorporated by reference from the Company's  Report on Form 8-K filed with
the SEC on October 24, 1996.
(4)  Incorporated by reference from the Company's Registration Statement on Form
S-3 (File No. 333-18445) as filed on January 27, 1997.
(5) Incorporated by reference from the Company's Registration Statement on Form
S-4 (File No. 333-42923) as filed on December 22, 1997.
(6) Incorporated by reference from the Company's Registration Statement on Form
S-3 (File No. 333-43087) as filed on January 13, 1998.


                                       29