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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

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

                                   FORM 10-K

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

                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999

                         COMMISSION FILE NUMBER 0-25864

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

                               AVANT! CORPORATION

             (Exact name of registrant as specified in its charter)

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

                             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. Yes /X/  No / /

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

    The aggregate market value of the shares of voting stock held by
non-affiliates of the registrant, as of February 14, 2000 was approximately
$486,983,894 (based on the last sale price of such stock as reported by the
Nasdaq National Market). For the purposes of this report shares of common stock
held by persons who own 5% or more of the shares of outstanding common stock and
shares of common stock held by each officer and director have been excluded
because such persons may be deemed "affiliates" as that term is defined under
the general rules and regulations of the Securities Exchange Act of 1934. This
determination of affiliate status is not necessarily a conclusive determination
for other purposes.

    The number of shares of the registrant's Common Stock outstanding as of
February 14, 2000 was 39,034,965.

                      DOCUMENTS INCORPORATED BY REFERENCE

    Portions of: (1) the Avant! Corporation Proxy Statement for the Annual
Meeting of Stockholders to be held in 2000 are incorporated by reference in
Part III of this Form 10-K.

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                               AVANT! CORPORATION
                            FORM 10-K ANNUAL REPORT
                      FOR THE YEAR ENDED DECEMBER 31, 1999
                               TABLE OF CONTENTS

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PART I.

Item 1.                Business....................................................      1

Item 2.                Properties..................................................     13

Item 3.                Legal Proceedings...........................................     13

Item 4.                Submission of Matters to a Vote of Security Holders.........     16

PART II

Item 5.                Market for Registrant's Common Equity and Related                16
                       Stockholder Matters.........................................

Item 6.                Selected Consolidated Financial Data........................     17

Item 7.                Management's Discussion and Analysis of Financial Condition      17
                       and Results of Operation....................................

Item 7a.               Quantitative and Qualitative Disclosure About Market Risk        17
                       Derivatives and Financial Instruments.......................

Item 8.                Consolidated Financial Statements and Supplementary Data....     18

Item 9.                Changes in and Disagreements With Accountants on Accounting      18
                       and Financial Disclosure....................................

PART III.

Item 10.               Directors and Executive Officers of the Registrant..........     18

Item 11.               Executive Compensation......................................     20

Item 12.               Security Ownership of Certain Beneficial Owners and              20
                       Management..................................................

Item 13.               Certain Relationships and Related Transactions..............     20

PART IV.

Item 14.               Exhibits, Financial Statement Schedules, and Reports on Form     20
                       8-K.........................................................

                       Signatures..................................................     21
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                                    PART I.

    This Form 10-K contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Any statements contained herein that are not statements of
historical fact may be deemed to be forward-looking statements. Without limiting
the foregoing, the words "believes", "anticipates", "plans", "expects" and
similar expression are intended to identify forward-looking statements. These
forward-looking statements include, without limitation, statements about the
market opportunity for integrated circuit design automation software and
services, our strategy, competition and expected revenues and expense levels,
and business expansion plans, liquidity and other financial resources. Our
actual results could differ materially from those expressed or implied by these
forward-looking statements as a result of various factors, including the risk
factors described in Risk Factors and elsewhere in this report. We undertake no
obligation to update publicly any forward-looking statements for any reason,
even if new information becomes available or other events occur in the future.

ITEM 1. BUSINESS

GENERAL

    Avant! Corporation (the "Company" or "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").

    Avant! resulted from the merger of ArcSys, Inc. ("ArcSys") and Integrated
Silicon Systems, Inc. ("ISS") on November 27, 1995. Effective August 20, 1999,
August 6, 1999, January 16, 1998, November 27, 1996, October 29, 1996 and
September 27, 1996, Chrysalis Symbolic Design Inc. ("Chrysalis"), Xynetix Design
Systems, Inc. ("Xynetix"), Technology Modeling Associates ("TMA"), FrontLine
Design Automation ("FrontLine"), Meta-Software Inc. ("Meta"), and Anagram, Inc
("Anagram"), respectively, merged into the Company. On November 19, 1998,
November 13, 1998, September 12, 1997, September 30, 1997 and December 31, 1996,
the Company acquired ACEO Technology Inc. ("ACEO"), interHDL Inc. ("interHDL"),
Compass Design Automation, Inc. ("Compass"), Datalink Far East, Ltd.
("Datalink") and Nexsyn Design Technology Inc. ("Nexsyn"), respectively.

    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! focuses on providing
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 0.35-micron) feature size IC design,
improve their productivity and achieve a high return on their investment. The
Company believes that as IC designers seek to create ICs of constantly
increasing complexity, reusable silicon libraries, silicon intellectual property
("SIP"), design blocks, and optimized design-flow management and tool
interoperability will be critical.

PRODUCTS

    The Company's products are based on its proprietary architecture and
technology, which provide a breadth of automated IC 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 0.35-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.

    The Company's products are primarily software tools that allow users to
create, simulate and verify in IC design and manufacturing process on computer.
Avant!'s products are compatible with most commonly used ICDA tools and to be
easily integrated into the customer's existing design environments and

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methodologies through industry standard interfaces. Avant!'s products are
primarily written in C programming language, run on UNIX workstations such as
those from Sun Microsystems, Silicon Graphics and Hewlett-Packard, and support
industry standards such as GDSII Stream format, EDIF, VHDL, Verilog, SDF, SPEF,
SPF, DSPF and PDEF.

    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 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, Apollo includes timing-driven
routing, innovative cross-talk noise-driven routing, automatic wiring sizing,
multiple clock tree construction methods and clock tree synthesis with gated
clocks.

    Avant!'s Planet product is a 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.

    The Mars Family includes Mars-Rail and Mars-Crosstalk that work in
conjunction with Apollo tools on Milkyway to automatically analyze direct power
driven placements and noise driven routing. These tools are significant examples
of design automation tools that improve design productivity and improve the
quality of results for very deep submicron designs.

    The Hercules family of design verification software is one of the industry's
most advanced suite of IC physical verification products. Hercules provides
geometric and electrical verification of physical design layouts, and handles
designs containing hundreds of millions of transistors, hierarchically, with
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 are 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. Star-Sim accurately simulates
mixed-signal, dynamic logic and memory circuits where performance, signal
integrity and power analyses are essential. StarRCXT is a full-chip hierarchical
parasitic capacitance and resistance extractor and a critical net resistance and
capacitance extractor. It is 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, statics 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 with up to 50 million components. All of Avant!'s Star products are
tightly integrated with Avant!'s hierarchical layout and verification tools,
Apollo and Hercules, to provide efficient, accurate and predictable IC
performance.

    The Company's TCAD, Technology Computer-Aided Design, tools simulate the
physical effects of individual on-chip elements, such as transistors and
interconnect structures. TCAD tools simulate process technologies, device
electrical characteristics and interconnect effects. The Company's Taurus,
TSUPREM-4, Medici, Aurora, and Raphael products are included as TCAD tools.

                                       2
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    During each of 1999, 1998 and 1997, the Company derived substantially all of
its total revenue from the licensing and support of the above mentioned
products. 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, new product
developments, 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 1999, 1998 and 1997, the Company derived 28%, 31% and 40%,
respectively, of its total revenue from the licensing and support of its
software products internationally. In 1999, Asian and European sales represented
18% and 10% of the Company's total revenue, respectively. In 1998, Asian and
European sales represented 19% and 12% of the Company's total revenue,
respectively. In 1997, international sales were primarily in Asia. The Company
currently expects continued growth in both the Asian and European markets. 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.

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
1999, 1998, or 1997. The Company does not believe that seasonality is a
significant factor in sales.

COMPETITION

    The integrated circuit design automation software market in which Avant!
competes is very competitive and subject to rapid change. Avant! currently faces
competition from major integrated circuit design automation vendors, including
Cadence Design Systems, Inc., Synopsys, Inc. and Mentor Graphics Corporation. In
order to compete effectively, the Company needs to respond quickly to new or
emerging technologies and changes in customer requirements, and devote resources
to the development, promotion and sale of our products.

                                       3
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    Moreover, the integrated circuit design automation software industry is
undergoing a trend toward consolidation that is expected to result in larger,
more financially flexible competitors with a broad range of product offerings.
Alliances among competitors could present increased competition to Avant!.
Furthermore, because there are relatively low barriers to entry in the software
industry, Avant! expects additional competition from other established and
emerging companies. Avant! also competes with the internal integrated circuit
design automation development groups of its existing and potential customers,
many of whom design and develop customized design tools for their particular
needs. Avant!'s current or potential competitors may develop products comparable
or superior to those developed by Avant! or adapt more quickly than Avant! 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 have a materially adverse impact on Avant!'s
business, operating results or financial condition.

SALES AND MARKETING

    The Company markets its products in North America, Asia 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
staff. 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; Minneapolis, Minnesota; Bothell, Washington;
Rochester, New York; Montpelier, Vermont; Concord, New Hampshire; and Fremont,
California; sales and support offices in Ontario and Vancouver, Canada; London,
England; Paris, France; Tokyo, Japan; Munich, Germany; Herzeliya, Israel; Seoul,
Korea; Singapore; India; 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 or 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
Davan Tech Co., Ltd. ("Davan Tech"), respectively. The joint ventures were
formed to consolidate distribution in Japan and Korea. The Company has ownership
of 35% and 39.6% of Maingate and Davan Tech, respectively, and accounts for the
joint ventures by the equity method. The Company believes that these
relationships provide more effective distribution in the Asian markets. By
providing local ownership of Maingate and Davan Tech 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 Davan Tech will be
successful. If they are not successful, the Company's business, operating
results or financial condition could be materially adversely affected. Gerry C.
Hsu, the Company's Chairman of the Board, President and Chief Executive Officer
owns 40% and 2.6%, of Maingate and Davan Tech, respectively. Noriko Ando, the
Company's Executive Operating Officer, Operations, owns 2% of Maingate.

    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

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1999, 1998, and 1997 revenue from these channels accounted for an aggregate of
approximately 10%, 20%, and 31%, 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 could
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
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,

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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.

    Another part of the company's growth strategy is to acquire companies that
have strong technologies that are complementary to our business. Avant! has been
active in acquiring several companies that have expanded the markets that we
serve and accelerated our growth through successful mergers. On September 12,
1997 the Company acquired Compass Design Automation and assimilated their tool
technologies into enhanced products and also continued to support Compass'
established library business that supports the largest number of IC foundries.
On November 19, 1998, the Company also acquired ACEO Technologies which had
developed a market for synthesis technologies in the Field Programmable Gate
Array market and applied those technologies to some new products and important
enhancements to several EDA tools that make them more competitive and provide
additional functionality and capability for our customers. On November 13, 1998,
the Company acquired interHDL, which had developed some unique technological
capability and products that allows the development of clean or purified RTL
design code. interHDL was recognized as a leader in this emerging front-end
market and their technologies have been used to extend the solutions offered by
Avant! and extend our reach into new markets. In 1999 the Company acquired
Chrysalis Symbolic Design and Xynetix Design Systems. The addition of Chrysalis,
which is the formal verification leader in the EDA industry, expanded Avant!'s
growing expertise with front-end solutions for the next generation of
high-performance very deep submicron designs. The addition of Xynetix enables
the Company to broaden its ECAD-to-TCAD product offerings and become a leader in
advanced IC packaging design software, and to extend its SinglePass methodology
from register transfer level to silicon packaging.

    During 1999, 1998, and 1997 the Company's research and development
expenditures were approximately $71.4 million, $62.9 million, and $42.9 million
respectively. The amount of capitalized software development costs amortized was
$0.06 million for 1997. All capitalized software development costs were fully
amortized as of December 31, 1997.

    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 third-party
funded development agreements.

EMPLOYEES

    As of January 31, 2000, the Company had 989 employees, including, 416 in
research and development, 453 in sales, marketing and related customer support
services, and 120 in finance and administration. Of these employees, 702 were
located in the United States, 97 in Europe and, 190 in Asia. 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.

RISK FACTORS THAT MAY AFFECT FUTURE RESULTS

WE ARE INVOLVED IN SEVERAL LITIGATION MATTERS THAT COULD SERIOUSLY HARM OUR
BUSINESS

    Avant! and its subsidiaries are engaged in a number of material litigation
matters, including: a civil action brought by Cadence Design Systems, Inc., the
criminal indictment of Avant! and certain of its employees, officers and
directors, securities class action and defamation claims stemming from the
Cadence litigation and the criminal indictment, and civil actions brought by
Silvaco Data Systems, Inc. The

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pending litigation against Avant! and any future litigation against Avant! or
its employees, regardless of the outcome, may result in substantial costs and
expenses and significant diversion of effort by Avant!'s management. An adverse
result in any of these litigation matters could seriously harm Avant!'s
business, financial condition and results of operations, and cause Avant!'s
stock price to decline substantially. See "Item 3. Legal Proceedings."

    In addition, on December 16, 1998, after a grand jury investigation, the
Santa Clara County District Attorney's office filed a criminal indictment
alleging felony level offenses related to the allegations of misappropriation of
trade secrets set forth in Cadence's lawsuit.

    The indictment charges the Company and certain current and former directors,
officers, other employees and consultants, including our Chairman and CEO,
Gerald C. Hsu, with conspiring to commit trade secret theft, trade secret theft,
inducing the theft of a trade secret, conspiracy to commit fraudulent practices
in connection with the offer or sale of security and fraudulent practices in
connection with the offer or sale of a security. Trial of the case, which had
been set for February 22, 1999 has been rescheduled to begin on May 15, 2000.
This matter will result in additional defense costs to Avant! and could result
in criminal fines against Avant!, as well as the potential incarceration of key
members of its management team. Any of these outcomes could seriously harm
Avant!'s business, financial condition and results of operations and might
result in canceled or postponed orders, substantial additional legal fees and
personnel costs, the loss of senior management and other key personnel,
additional stockholder litigation and loss of reputation and goodwill. See "Item
3. Legal Proceedings".

WE MAY BE UNABLE TO SUCCESSFULLY INTEGRATE OUR OPERATIONS AND PRODUCT LINES WITH
THOSE OF THE ACQUIRED COMPANIES

    Avant! and its acquired companies each have different systems and procedures
in various operational areas that must be integrated. Avant! may not be
successful in completing such integration 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 different corporate
cultures. The integration of certain operations will require the dedication of
management resources, temporarily distracting attention from Avant!'s day-to-day
business. The business of the combined company may also be disrupted by employee
uncertainty and lack of focus during the integration process. Accordingly,
Avant! may not be able to retain all of its key technical, sales and other key
personnel. Avant!'s failure to effectively integrate its operations with its
newly acquired companies could seriously harm Avant!'s business, financial
condition and results of operations.

WE NEED TO SUCCESSFULLY MANAGE OUR EXPANDING OPERATIONS

    Avant! has experienced periods of rapid growth and significant expansion of
its operations that have placed a significant strain upon its management systems
and resources. In addition, Avant! has recently hired a significant number of
employees, and plans to further increase its total headcount. Avant! also plans
to expand the geographic scope of its customer base and operations. This
expansion has resulted and will continue to result in substantial demands on
Avant!'s management resources. Avant!'s ability to compete effectively and to
manage future expansion of its operations, if any, will require Avant! to
continue to improve its financial and management controls, reporting systems and
procedures on a timely basis and expand, train and manage its employee work
force. Avant! may not be successful in addressing such risks, and the failure to
do so would seriously harm Avant!'s business, financial condition and results of
operations.

                                       7
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WE MAY BE UNABLE TO ATTRACT AND RETAIN THE KEY MANAGEMENT AND TECHNICAL
PERSONNEL THAT WE NEED TO SUCCEED

    Avant!'s future operating results depend in significant part upon the
continued service of key management and technical personnel. Several of Avant!'s
key personnel, including Gerald C. Hsu, have been criminally indicted on charges
relating to the matters underlying the pending litigation between Avant! and
Cadence. If any of the individuals criminally indicted are found guilty and
incarcerated or are otherwise unable to continue to provide services to Avant!,
its business, financial condition and results of operations could be seriously
harmed. In addition, few of Avant!'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
businesses and pending litigation, it is possible that Avant! will fail to
retain such key technical and managerial personnel. Moreover, there are only a
limited number of qualified integrated circuit design automation engineers, and
competition for these individuals is intense. If Avant! is unable to attract,
hire and retain qualified personnel in the future, the development of new
products and the management of Avant!'s increasingly complex business would be
impaired. This would seriously harm Avant!'s business, operating results and
financial condition. See "--We are involved in several litigation matters that
could seriously harm our business."

WE MAY BE UNABLE TO SUCCESSFULLY COMPETE IN THE HIGHLY COMPETITIVE INTEGRATED
CIRCUIT DESIGN AUTOMATION SOFTWARE MARKET

    The integrated circuit design automation software market in which Avant!
competes is intensely competitive and subject to rapid change. Avant! currently
faces competition from major integrated circuit design automation vendors,
including Cadence Design Systems, Inc., which currently holds a dominant share
of the market for integrated circuit physical design software, Synopsys, Inc.
and Mentor Graphics Corporation. Avant! may not be able to maintain a
competitive position against these competitors. This is particularly true
because each of these companies has a longer operating history, significantly
greater financial, technical and marketing resources, greater name recognition
and a larger installed customer base than Avant!. In addition, each of these
competitors may 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 Avant!. These competitors also have
established relationships with current and potential customers of Avant!, and
they can devote substantial resources aimed at preventing Avant! from enhancing
relationships with existing customers or establishing relationships with
potential customers.

    Moreover, the integrated circuit design automation software industry is
undergoing a trend toward consolidation that is expected to result in large,
more financially flexible competitors with a broad range of product offerings.
Alliances among competitors could present particularly formidable competition to
Avant!. Furthermore, because there are relatively low barriers to entry in the
software industry, Avant! expects additional competition from other established
and emerging companies. Avant! also competes with the internal integrated
circuit design automation 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 Avant!. Avant!'s current or potential competitors
may develop products comparable or superior to those developed by Avant! or
adapt more quickly than Avant! 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
seriously harm Avant!'s business, operating results or financial condition.
Avant! may be unable to compete successfully against current and future
competitors, and competitive pressures faced by Avant! could seriously harm
Avant!'s business, operating results and financial condition.

OUR QUARTERLY OPERATING RESULTS ARE DIFFICULT TO PREDICT

    We are unable to accurately forecast our future revenues primarily because
of the emerging nature of the market in which we compete and because of the
unpredictability of the various litigation matters to

                                       8
<PAGE>
which we are a party. Our revenues and operating results generally depend on the
size, timing and structure of significant licenses. These factors have
historically been, and are likely to continue to be, difficult to forecast. In
particular, we have adopted a flexible pricing strategy pursuant to which we
offer 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 cancellation, future
revenue received under these licenses is unpredictable. In addition, our current
and future expense levels are based largely on our operating plans and estimates
of future revenues and are, to an extent, fixed. We may be unable to adjust
spending sufficiently quickly to compensate for any unexpected revenue
shortfall.

    Accordingly, any significant shortfall in revenues in relation to our
planned expenditures would seriously harm our business, financial condition and
results of operations. Such shortfalls in our revenue or operating results from
levels expected by public market analysts and investors could seriously harm the
trading price of our common stock. Additionally, we may not learn of such
revenue shortfalls, earnings shortfalls or other failure to meet market
expectations until late in a fiscal quarter, which could result in an even more
immediate and serious harm to the trading price of our common stock.

    Our quarterly operating results have varied, and it is anticipated that our
quarterly operating results will vary, substantially from period to period
depending on various factors, many of which are outside our control. In addition
to the factors discussed in the previous paragraph, other factors that could
affect our quarterly operating results include:

    - Increased competition;

    - The length of our sales cycle;

    - The timing of new or enhanced product announcements, introductions, or
      delays in the introductions of new or enhanced versions of products by us
      or our competitors;

    - Market acceptance of new and enhanced versions of our products;

    - Changes in pricing policies by us or our competitors;

    - Conditions in the semiconductor and electronics industries;

    - Cancellation of time-based licenses or maintenance agreements;

    - The unavailability of technology of third parties;

    - The mix of direct and indirect sales;

    - Changes in operating expenses;

    - Economic conditions in domestic and international markets;

    - Our ability to continue to market our products in domestic and
      international markets;

    - Foreign currency exchange rates; and

    - General economic factors.

    Due to the foregoing factors, we cannot predict with any significant degree
of certainty our quarterly revenue and operating results. Further, we believe
that period-to-period comparisons of our operating results are not necessarily a
meaningful indication of future performance.

                                       9
<PAGE>
OUR STOCK PRICE IS VOLATILE

    The trading price of our common stock has fluctuated significantly in the
past, and the trading price of our common stock is likely to be highly volatile
and could be subject to wide fluctuations in price in response to such factors
as:

    - The outcome of the various litigation matters to which we are a party;

    - Actual or anticipated fluctuations in our operating results;

    - Announcements of technological innovations and new products by us or our
      competitors;

    - New contractual relationships with strategic partners by us or our
      competitors;

    - Proposed acquisitions by us or our competitors; and

    - Financial results that fail to meet public market analyst expectations of
      performance.

    In addition, the stock market in general, and The Nasdaq National Market and
the market for technology companies in particular has experienced extreme price
and volume fluctuations that have often been unrelated or disproportionate to
the operating performance of such companies. These broad market and industry
factors may seriously harm the market price of our common stock in future
periods.

WE HAVE RELIED AND EXPECT TO CONTINUE TO RELY ON A LIMITED NUMBER OF PRODUCTS
FOR SUBSTANTIALLY ALL OF OUR REVENUE

    Historically, we have derived substantially all of our total revenue from
the licensing and support of the following products:

    - Apollo (place and route);

    - Hercules (design verification);

    - Star-Hspice (circuit simulator);

    - Star-Sim (high-capacity circuit simulator);

    - Star-RC (high-performance parasitic extraction tool); and

    - TCAD tools (family of silicon manufacturing process simulation tools, such
      as Taurus Process and Taurus OPC).

    Absent any adverse results from existing litigation, we currently expect
that these products will continue to account for a significant portion of our
revenue for the foreseeable future. As a result, our business, operating results
and financial condition are significantly dependent upon the continued market
acceptance of these products and upon our ability to continue to sell, license
and support each of these products.

WE DEPEND ON INTERNATIONAL SALES FOR A SIGNIFICANT PERCENTAGE OF OUR REVENUE

    International revenue, principally from Asian customers, accounted for
approximately 28%, 31%, and 40% of our total revenue in 1999, 1998, and 1997,
respectively. We expect that international license and service revenue,
particularly in Asia, will continue to account for a significant portion of our
total revenue for the foreseeable future. Our international business activities
are subject to a variety of potential risks, including:

    - The impact of recessionary environments in foreign economies;

    - Longer receivables collection periods and greater difficulty in accounts
      receivable collection;

    - Difficulties in staffing and managing foreign operations;

                                       10
<PAGE>
    - 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 we license our products
could also seriously harm our business, financial condition and results of
operations by resulting in pricing that is not competitive with products priced
in local currencies. Furthermore, we may not be able to continue to generally
price our 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 our products and intellectual property rights
to the same extent, as do the laws of the United States. Moreover, it is
possible that we may fail to sustain or increase revenue derived from
international licensing and service or that the foregoing factors will seriously
harm our future international license and service revenue, and, consequently,
seriously harm our business, financial condition and results of operations.

OUR FUTURE SUCCESS WILL DEPEND ON OUR ABILITY TO KEEP PACE WITH THE RAPIDLY
EVOLVING TECHNOLOGY STANDARDS OF OUR INDUSTRY

    Because the semiconductor industry has made significant technological
advances recently, integrated circuit design automation companies, such as
Avant!, that license software to semiconductor companies have been required to
continuously develop new products and enhancements for existing products to keep
pace with the evolving industry standards and rapidly changing customer
requirements. The evolving nature of the integrated circuit design automation
industry could render our existing products and services obsolete. Our success
will depend, in part, on our ability to:

    - Enhance our existing products and services;

    - Develop and introduce new products and services on a timely and
      cost-effective basis that will keep pace with technologic developments and
      evolving industry standards; and

    - Address the increasingly sophisticated needs of our customers.

    If we are unable, for technical, legal, financial or other reasons, to
respond in a timely manner to changing market conditions or customer
requirements, our business, financial condition and results of operations could
be seriously harmed.

WE DEPEND ON THE GROWTH OF THE SEMICONDUCTOR AND ELECTRONICS INDUSTRIES

    Avant! is dependent upon the semiconductor industry and, more generally, the
electronics industry. Both of these industries are 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. During such downturns, the number of new integrated
circuit design projects often decreases. Because acquisitions of new licenses
from Avant! are largely dependent upon the commencement of new design projects,
any slowdown in these industries could seriously harm Avant!'s business,
financial condition and results of operations.

                                       11
<PAGE>
WE MAY BEAR INCREASED EXPENSES TO PROTECT OUR PROPRIETARY RIGHTS OR DEFEND
AGAINST CLAIMS OF INFRINGEMENT, AND WE MAY LOSE COMPETITIVE ADVANTAGES IF OUR
PROPRIETARY RIGHTS ARE INADEQUATELY PROTECTED

    We rely on a combination of patents, trade secrets, copyrights, trademarks
and contractual commitments to protect our proprietary rights in our software
products. We generally enter into confidentiality or license agreements with our
employees, distributors and customers, and limit access to and distribution of
our software, documentation and other proprietary information. Despite these
precautions, a third party may still copy or otherwise obtain and use our
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. We expect
that software companies will increasingly be subject to infringement claims as
the number of products and competitors in the integrated circuit design
automation industry grows and the functionality of products in different
industry segments overlaps. In particular, our current litigation with Cadence
involves such infringement claims. Responding to such claims, regardless of
merit, could consume valuable time, result in costly litigation, cause product
shipment delays or require us to enter into royalty or licensing agreements.
Such royalty or licensing agreements, if available, may not be available on
terms acceptable to us. A forced license could seriously harm our business,
financial condition and results of operations.

ERRORS IN OUR SOFTWARE PRODUCTS COULD RESULT IN LOSS OF MARKET SHARE OR FAILURE
TO ACHIEVE MARKET ACCEPTANCE

    Software products as complex as those offered by Avant! may contain defects
or failures when introduced or when new versions are released. Avant! 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. Despite testing by
Avant!, errors may still 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 seriously harm Avant!'s business,
financial condition and results of operations.

OUR BUSINESS COULD BE AFFECTED BY YEAR 2000 ISSUES

    Computer systems and software products coded to accept only two digit
entries in the date code field cannot distinguish 21(st) century dates from 20th
century dates. This could have resulted in system failure or miscalculations
causing disruptions of operations, including, among other things, a temporary
inability to process transactions, send invoices or engage in similar normal
business activities. As a result, many companies' software and computer systems
may need to be upgraded or replaced in order to comply with such "Year 2000"
requirements. During 1998, Avant! undertook an evaluation of its currently
supported products to determine if they are Year 2000 compliant. The results of
this evaluation revealed that most currently supported products are Year 2000
compliant. Avant! has also provided for those supported products not Year 2000
compliant with fix patch or upgrade, as part of the Company's standard
maintenance programs. Although to the best of Avant!'s knowledge, the Company
has offered Year 2000 solutions for those products, and as of February 29, 2000,
has received no report of any Year 2000 problems on its Year 2000 ready
products, unpredicted Year 2000 problems might occur. Any unpredicted Year 2000
problem occurring in Avant!'s products could result in:

    - A decrease in sales of our products;

    - An increase in the allocation of resources to address the Year 2000
      problems of our customers without additional revenue commensurate with
      such dedication of resources; and

    - An increase in litigation costs relating to losses suffered by our
      customers due to such Year 2000 problems.

    During 1998, Avant! conducted a preliminary review of its internal computer
systems to identify the systems that could be affected by the Year 2000 issue
and to develop a plan to resolve the issues. Avant!

                                       12
<PAGE>
has adopted SAP R/3 software as an enterprise system managing its financial and
logistical operations in the United States and Europe. SAP R/3 software has been
certified by SAP as Year 2000 compliant. Avant! performed testing on selected
critical business functions on January 01, 2000 and found no Year 2000 problems.
As of February 29, 2000, Avant! has not experienced any material impact due to a
Year 2000 problem on its internal systems and applications.

ITEM 2. PROPERTIES

    In February 1997, the Company signed a lease for its new facility in
Fremont, California. The lease covers four buildings with an aggregate of
approximately 281,000 square feet of space and a total of annual base rent
amount of approximately $4.8 million. Three of the buildings were occupied on
December 31, 1999 and the fourth is scheduled for occupancy in the second
quarter of 2000. The lease for three of the buildings expires on September 30,
2010 and the lease for the fourth building expires on October 19, 2012. The
Company also occupies a facility near Research Triangle Park in Durham, North
Carolina with an annual base rent of approximately $0.7 million. This lease
expires on November 30, 2005. The Company also leases sales and support offices
in the United States, Europe, and Asia. Avant! believes that its existing
facilities are adequate for its current needs.

ITEM 3. LEGAL PROCEEDINGS

    Avant! and its subsidiaries are engaged in a number of material litigation
matters, including: a civil action brought by Cadence Design Systems, Inc., the
criminal indictment of Avant! and certain of its employees, officers and
directors, securities class action and defamation claims stemming from the
Cadence litigation and the criminal indictment, and civil actions brought by
Silvaco Data Systems, Inc. The pending litigation against Avant! and any future
litigation against Avant! or its employees, regardless of the outcome, may
result in substantial costs and expenses and significant diversion of effort by
Avant!'s management. An adverse result in any of these litigation matters could
seriously harm Avant!'s business, financial condition and results of operations,
and cause Avant!'s stock price to decline substantially.

CADENCE LITIGATION.

    On December 6, 1995, Cadence filed an action against Avant! 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 complaint alleges that some of Avant!'s employees
formerly employed by Cadence misappropriated and improperly copied Cadence's
source code for important functions of Avant!'s place and route products, and
that Avant! has competed unfairly against Cadence by making false statements
about Cadence and its products. The action also alleges that Avant! induced
individuals, who have been named as defendants, to breach their employment and
confidentiality agreements with Cadence. No trial date has been set for this
matter.

    In addition to seeking actual and punitive damages, which Cadence has not
fully quantified, Cadence has sought to enjoin the sale of Avant!'s ArcCell and
Aquarius place and route products. On December 19, 1997, the District Court
entered a preliminary injunction against continued sales or licensing of any
product or work copied or derived from Cadence's Design Framework II ("DFII"),
specifically including, but not limited to, the ArcCell products. The
preliminary injunction also bars Avant! from possessing or using any copies of
any portion of the source code or object code for ArcCell or any other product,
to the extent it had been copied or derived from DFII. (Avant! had ceased
licensing its ArcCell products in mid-1996.) On December 7, 1998, the District
Court also entered a preliminary injunction against Avant! prohibiting Avant!
from directly or indirectly marketing, selling, leasing, licensing, copying or
transferring the Aquarius, Aquarius XO and Aquarius BV products. Pending the
outcome of the trial of Cadence's action, the injunction further prohibits
Avant! from marketing, selling, leasing, licensing, copying or transferring any
translation code for any Aquarius product that infringes any protected right of
Cadence

                                       13
<PAGE>
and prohibits Avant! from possessing or using any copies of any portion of the
source code or object code for the Aquarius products to the extent that it has
been copied or derived from DFII. Avant! ceased licensing the Aquarius products
in February 1999. Nevertheless, the preliminary injunctions could seriously harm
Avant!'s business, financial condition and results of operations going forward.

    On January 16, 1996, Avant! filed an answer to the complaint denying
wrongdoing. On the same day, the Company filed a counterclaim against Cadence
and its CEO, Joseph Costello, 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. The
counterclaim alleges, among other things, that Cadence's lawsuit is part of a
scheme to harm Avant! competitively, because Avant! is winning against Cadence
in the marketplace. On December 19, 1997, pursuant to a stipulation by the
parties, the District Court dismissed Avant!'s counterclaim with leave to amend.
Avant! filed its amended counterclaim on January 29, 1998. Pursuant to a
stipulated court order, Cadence and the other counterclaim defendants have not
responded to the amended counterclaim, and Avant!'s counterclaim is currently
stayed.

    In April 1999, Avant! and Cadence filed cross-motions for summary
adjudication as to whether a 1994 written release agreement between the two
companies extinguished all Cadence claims regarding Avant!'s continued use of
intellectual property claimed by Cadence in any Avant! place and route product
in existence when the release was signed by the parties. On September 8, 1999,
the District Court granted Avant!'s motion in part and ruled that Cadence's
trade secret claim regarding use of DFII source code was barred by the release.
The District Court also ruled that the release did not bar Cadence's copyright
infringement claims regarding Avant!'s alleged use of DFII source code. Avant!
believes that this ruling makes it likely that Cadence will prevail on its
copyright infringement claims regarding Avant!'s use of DFII source code in the
ArcCell products. While the ruling also increases the likelihood that Cadence
will prevail on the same claims as they might apply to the Aquarius products,
Avant! believes that it possesses additional meritorious defenses with respect
to Aquarius that are not available with respect to ArcCell. On October 15, 1999,
the District Court issued an amended order certifying its September 8, 1999
order for interlocutory appeal to the United States Circuit Court of Appeals for
the Ninth Circuit. Cadence and Avant! petitioned for leave to file an
interlocutory appeal, and the Circuit Court granted their petitions on
December 20, 1999. Proceedings in the District Court have been stayed pending
the Circuit Court's decision on appeal.

    Avant! believes it has defenses to all of Cadence's claims and intends to
defend itself vigorously. Should Cadence ultimately succeed in the prosecution
of its claims, however, Avant! could be permanently enjoined from using and
marketing any place and route products held to incorporate DFII source code, and
may be required to pay substantial monetary damages to Cadence. In addition,
Avant! could be enjoined preliminarily from selling its current Apollo place and
route products. It is possible that Avant!'s relationships with its customers
and will be seriously harmed in the future as a result of the Cadence
litigation. Accordingly, an adverse judgment, if entered on any Cadence claim,
could seriously harm Avant!'s business, financial position and results of
operations and cause Avant!'s stock price to decline substantially.

CRIMINAL INDICTMENT.

    On December 16, 1998, after a grand jury investigation, the Santa Clara
County District Attorney's office filed a criminal indictment alleging felony
level offenses related to the allegations of misappropriation of trade secrets
set forth in Cadence's lawsuit. This criminal action is currently pending
against, among others, Avant! and the following current or former employees
and/or directors of Avant!: Gerald C. Hsu, President, Chief Executive Officer
and Chairman of the board of directors; Y. Z. Liao, Corporate Fellow; Stephen
Wuu, Executive Operating Officer, Sales; Leigh Huang, consultant for Avant!;
Eric Cheng, Research and Development Manager; and Mike Tsai, former officer and
former member of Avant!'s board of directors.

                                       14
<PAGE>
    The indictment charges the defendants listed above with conspiring to commit
trade secret theft, inducing the theft of a trade secret, conspiracy to commit
fraudulent practices in connection with the offer or sale of a security and
fraudulent practices in connection with the offer or sale of a security. The
criminal indictment will result in additional defense costs to Avant! and could
result in criminal fines against Avant!, as well as the potential incarceration
of key members of its management team, including its Chairman of the Board of
Directors. Any of these outcomes could seriously harm Avant!'s business,
financial condition and results of operations and might result in canceled or
postponed orders, substantial additional legal fees and personnel costs, the
loss of senior management and other key personnel, additional stockholder
litigation and loss of reputation and goodwill. Trial of the case, which has
been set for February 22, 1999 has been rescheduled to begin on May 15, 2000.
One former defendant has been dismissed from the action, but the District
Attorney has appealed the dismissal order.

SILVACO LITIGATION.

    In March 1993, Meta Software Inc., which Avant! acquired in October 1996 and
which is now a wholly owned subsidiary of Avant!, filed a complaint in the
Superior Court of California for Santa Clara County against Silvaco Data
Systems, Inc. seeking monetary damages and injunctive relief. In August 1995,
Silvaco filed a cross-complaint against Meta and Shawn Hailey, then the
President and Chief Executive Officer of Meta, alleging that Meta owed 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. In November 1997, a judgment in the aggregate
amount of $31.4 million was entered against Avant!. Avant! filed appeals on its
own behalf and on behalf of Mr. Hailey. In order to appeal the judgment, Avant!
had to post a bond, which has been collateralized with a $23.6 million letter of
credit. If Avant!'s and Mr. Hailey's appeals are unsuccessful, Avant! will be
required to pay substantial monetary damages to Silvaco. Payment of the damages
previously awarded, and damages which may be awarded in the future, would
seriously harm Avant!'s business, financial condition and results of operations,
and could cause the price of its stock to decline substantially.

    On March 31, 1998, Silvaco filed an additional lawsuit, against Avant! and
Roy Jewell, a former member of Avant!'s Executive Staff, in the Superior Court
of California for Santa Clara County. The lawsuit alleges causes of action for
defamation, negligent and intentional interference with economic advantage,
unfair competition, Lanham Act violations and consumer fraud. On February 8,
2000, the Court granted Silvaco's motion to add President, Chief Executive
Officer and Chairman Hsu as a party to the action. Silvaco seeks $20.0 million
in compensatory damages, punitive damages and an injunction. Avant! believes it
has defenses to these claims and intends to defend itself vigorously. In the
event Avant!'s defenses are unsuccessful, Avant! may be required to pay damages
to Silvaco, and such a judgment could seriously harm Avant!'s business,
financial condition and results of operations.

SECURITIES CLASS ACTION CLAIMS.

    On December 15, 1995, Paul Margetis and Helen Margetis filed a securities
fraud class action complaint against Avant! in the United States District Court
for the Northern District of California. This lawsuit alleges securities laws
violations, including omissions and/or misrepresentations of material facts
related to the events and transactions which are the subject of the claims
contained in Cadence's civil lawsuit against Avant!. In addition, on May 30,
1997, Joanne Hoffman filed a securities fraud class action in the United States
District Court for the Northern District of California on behalf of purchasers
of Avant!'s stock between March 29, 1996 and April 11, 1997, the date of the
filing of a criminal complaint against Avant! and six of its employees and/or
directors. The plaintiff alleges that Avant! and its officers misled the market
as to the likelihood of the criminal indictment and as to the validity of the
Cadence allegations. If the plaintiff is successful, Avant! may be required to
pay substantial damages to plaintiffs, and such a judgment could seriously harm
Avant!'s business, financial condition and results of operations, and cause its
stock price to decline substantially.

                                       15
<PAGE>
NEQUIST LITIGATION.

    On July 15, 1998, Eric Nequist, a Cadence employee, filed a complaint
against Avant! in the Santa Clara County Superior Court. The complaint alleges
causes of action for defamation, intentional infliction of emotional distress,
negligent and intentional interference with economic advantage, abuse of process
and violations of California Business and Profession Code Section 17200. In the
event Avant!'s defenses are unsuccessful, Avant! may be required to pay damages
to Mr. Nequist, which judgment could seriously harm Avant!'s business, financial
condition and results of operation, and cause its stock price to decline
substantially.

    In addition, from time to time, Avant! is subject to legal proceedings and
claims in the ordinary course of business, which even if not meritorious, could
result in the expenditure of significant financial and managerial resources.
Aside from the matters described above, the Company does not believe that it is
a party to any legal proceedings or claims that it believes would materially
harm its 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's legal expenses for
these matters have been $14.7 million, $12.3 million, and $8.7 million for the
years 1999, 1998 and 1997, respectively. The Company currently expects legal
costs to substantially increase in the future as a result of its current
litigation issues. Thus, this litigation could seriously harm 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 stockholders during
the fourth quarter of the fiscal year ended December 31, 1999.

                                    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
theNasdaq symbol "AVNT" since November 27, 1995. The Company has not paid
cashdividends in the past and none are expected to be paid in the future. As of
February 14, 2000, the Company had approximately 348 stockholders of record. We
believe that a significant number of beneficial owners of our Common Stock hold
their shares in the name of a brokerage firm or bank.

                                       16
<PAGE>
    The following table sets forth the high and low closing sales prices of our
common stock from January 1, 1997 through December 31, 1999.

<TABLE>
<CAPTION>
                                                                HIGH       LOW
                                                              --------   --------
<S>                                                           <C>        <C>
FISCAL 1997
First Quarter...............................................   $31.25     $23.75
Second Quarter..............................................   $32.75     $20.38
Third Quarter...............................................   $35.13     $27.63
Fourth Quarter..............................................   $24.63     $14.75

FISCAL 1998
First Quarter...............................................   $21.75     $12.25
Second Quarter..............................................   $26.55     $22.63
Third Quarter...............................................   $15.00     $11.75
Fourth Quarter..............................................   $17.00     $12.13

FISCAL 1999
First Quarter...............................................   $23.56     $15.00
Second Quarter..............................................   $17.88     $10.75
Third Quarter...............................................   $23.81     $11.75
Fourth Quarter..............................................   $17.19     $12.88
</TABLE>

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

    The information required by this item is set forth in the portion of the
Company's 1999 Annual Report to Stockholders which is included in this
Form 10-K as Exhibit 13.1 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 in the portion of the
Company's 1999 Annual Report to Stockholders which is included in this
Form 10-K as Exhibit 13.1 and is incorporated herein by reference.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK, DERIVATIVES
  AND FINANCIAL INSTRUMENTS

    Information relating to this item is also set forth on Item 1 of this
Form 10-K and in the Company's 1999 Annual Reports to Stockholders under the
caption "Factors That may Affect Future Results" in Management's Discussion and
Analysis of Financial Condition and Results of Operations. Such information is
incorporated herein by reference.

FOREIGN CURRENCY HEDGING INSTRUMENTS

    The Company transacts business in various foreign currencies. Accordingly,
the Company is subject to exposure from adverse movements in foreign currency
exchange rates. This exposure is primarily related to payments from Maingate
Electronics, KK ("Maingate"), an affiliated Japanese distributor. There were no
hedging contracts outstanding as of December 31, 1999.

    The Company assesses the need to utilize financial instruments to hedge
currency exposures on an ongoing basis. The Company does not use derivative
financial instruments for speculative trading purposes, nor does the Company
hedge its foreign currency exposure in a manner that entirely offsets the
effects of changes in foreign exchange rates. The Company regularly reviews its
hedging program and may as part of this review determine at any time to change
its hedging program.

                                       17
<PAGE>
FIXED INCOME INVESTMENTS

    The Company places its investments with high credit quality issuers and
endeavors to limit the amount of its credit exposure to any one issuer. The
Company's general policy is to limit the risk of principal loss and ensure the
safety of invested funds by limiting market and credit risk. The Company's
exposure to market risks for changes in interest rates arises from its
investments in debt securities issued by U.S. government agencies and corporate
debt securities. All highly liquid investments with a maturity of 90 days or
less at the date of purchase are considered to be cash equivalents. The Company
does not expect any material loss with respect to its investment portfolio.

    The following table presents the carrying value and related weighted average
annualized return rates for the Company's investment portfolio. The carrying
value approximates fair value at December 31, 1999, in thousands:

<TABLE>
<CAPTION>
                                                         CARRYING     AVERAGE
                                                          AMOUNT    RETURN RATE
                                                         --------   -----------
<S>                                                      <C>        <C>
Cash equivalents-variable rates........................  $ 64,738       5.30%
Short-term investments-variable rates..................   160,631       5.40%
                                                         --------       ----
                                                         $225,369       5.37%
                                                         ========       ====
</TABLE>

    As of December 31, 1999, the underlying maturities of financial instruments
are $78.0 within one year, and $147.4 million from 2001 to 2031.

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

    Reference is made to the financial statements listed under the heading
"(a)(1) Consolidated Financial Statements" of Item 14 hereof, which financial
statements are incorporated herein by reference in response to this item 8, and
to the schedule listed under the heading "(a)(2) Financial Statement Schedule,"
which is incorporated herein by reference in response to this item 8.

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

    Not Applicable.

                                   PART III.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

    The information required by Item 10 as to directors is incorporated herein
by reference from the section entitled "Election of Directors" in 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, 1999.

    The executive officers of the Company on December 31, 1999 were:

<TABLE>
<CAPTION>
NAME                       AGE                               POSITION
----                     --------   -----------------------------------------------------------
<S>                      <C>        <C>
Gerald C. Hsu..........     54      President, Chief Executive Officer and Chairman of the
                                    Board of Directors
Mark Chimura...........     51      Executive Operating Officer, Engineering and Director
Stephen Tzyh-Lih Wuu...     46      Executive Operating Officer, Sales
Noriko Ando............     44      Executive Operating Officer, Operations
Sam Chang..............     48      Head of Finance
Chi-Ping Hsu...........     44      Executive Staff, Technology and Product Management
</TABLE>

                                       18
<PAGE>
    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 Design Systems, Inc., where his last position was President and General
Manager of the IC Design Group. 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 December 16, 1998, after a grand jury
investigation, the Santa Clara District Attorney's office filed a criminal
indictment 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.
Mr. Hsu has pleaded not guilty to such complaint and is awaiting further
proceedings.

    Mark Chimura has served as Executive Operating Officer, Engineering since
April 1999 and as Executive Staff, Customers since November 1998. Prior to that
he was General Manager of Galax!, Inc. ("Galax!"), a subsidiary of the Company
since April 1998 and has served as a director of the Company since March 17,
1998. Prior to joining Galax!, Mr. Chimura served as President of Panasonic
Semiconductor Development Company, a division of Matusushita Semiconductor
Corporation of America and a developer of microcontroller systems and ASIC
products, since April 1997. From April 1992 to March 1997, Mr. Chimura served as
General Manager of the Semiconductor Group of Matsushita Electronics
Corporation. Mr. Chimura holds an M.S. in Electrical Engineering from Gifu
University.

    Stephen Tzyh-Lih Wuu has served as Executive Operating Officer, Sales since
April 1999. He joined Avant! in November 1995 as Executive Staff, Operations
following the acquisition of ArcSys. Prior to that he co-founded ArcSys in
February 1991. Since that time he has served as the Vice President of
Engineering. Dr. Wuu holds a Ph.D. in Electrical Engineering from the University
of California, Berkeley and an M.S. in Electrical Engineering from National
Chiao-Tung University, Taiwan.

    Noriko Ando has served as Executive Operating Officer, Operations since
April 1999, and has served as a member of Avant!'s CEO staff and its head of
Asia distribution since January 1999. In 1996 Ms. Ando founded Maingate
Electronics, KK, a major distributor of Avant! software in Japan. Ms. Ando also
established Avant! Japan KK, a subsidiary of Avant!, as its representative in
1996, and served as head of strategic business development in Japan for ArcSys
from March 1994 to November 1995. Ms. Ando holds a bachelor's degree from Otsuma
College in Japan.

    Sam Chang was appointed to his current position in June 1999. He joined
Avant! in April 1999 as head of corporate planning, where he focused on Avant!'s
long-range strategy and mergers and acquisitions. From May 1998 to April 1999,
Mr. Chang was an independent investor focused on environmental technology
startup ventures. Prior to that, Mr. Chang was the head of East Asia mergers and
acquisitions for Union Bank of Switzerland for three years. Preceding that
Mr. Chang was Executive Director of Washington Capital Group for a year.
Preceding that Mr. Chang worked for Salomon Brothers. Mr. Chang holds a degree
from Harvard College and received his master's degree in business administration
from the Wharton School.

    Dr. Chi-Ping Hsu joined Avant! Corporation in December 1994 as CEO Staff for
Products, directing product strategy and management. Dr. Hsu holds a B.S.E.E.
degree from National Taiwan University in 1977, and a Ph.D. in electrical
engineering from the University of California, Berkeley, in 1983.

    The information regarding security ownership of certain beneficial owners
and management 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
herein by reference to 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, 1999.

                                       19
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION

    The information regarding executive compensation required by Item 11 is
incorporated herein by reference to 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, 1999.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

    The information regarding security ownership of certain beneficial owners
and management required by Item 12 is incorporated herein by reference to 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, 1999.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

    The information regarding certain relationships and related transactions
required by Item 13 is incorporated herein 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, 1999.

                                    PART IV.

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

<TABLE>
<S>        <C>
(a)1.      Financial Statements:
           Independent Auditors' Report
           Consolidated Statements of Earnings for the Years Ended
           December 31, 1999, 1998 and 1997
           Consolidated Balance Sheets as of December 31, 1999 and 1998
           Consolidated Statements of Stockholders' Equity for the
           Years Ended December 31, 1999, 1998 and 1997
           Consolidated Statements of Cash Flows for the Years Ended
           December 31, 1999, 1998 and 1997
           Notes to Consolidated Financial Statements

           The above information is incorporated by reference from the
           portion of the Company's 1999 Annual Report to Stockholders
           which is included in this Form 10-K as Exhibit 13.1.

(a)2.      Financial Statement Schedule:
           Schedule II--Valuation and Qualifying Accounts for the Years
           Ended December 31, 1999, 1998 and 1997

           The Schedule is included in this Form 10-K following
           Exhibit 13.1. All other schedules are omitted because they
           are not required or the required information is shown in the
           financial statements or notes thereto.

(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.

(b)        Reports on Form 8-K:
           The Company filed no reports on Form 8-K during its fourth
           quarter ended December 31, 1999.
</TABLE>

                                       20
<PAGE>
                                   SIGNATURES

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

<TABLE>
<S>                                                    <C>
                                                                     AVANT! CORPORATION
                                                                        (Registrant)

March 9, 2000                                                        /s/ GERALD C. HSU
                                                       ---------------------------------------------
                                                                       Gerald C. Hsu
                                                           President, Chief Executive Officer and
                                                             Chairman of the Board of Directors
                                                               (Principal Executive Officer)

March 9, 2000                                                          /s/ SAM CHANG
                                                       ---------------------------------------------
                                                                         Sam Chang
                                                               Head of Finance and Treasurer
                                                        (Principal Accounting and Financial Officer)
</TABLE>

                               POWER OF ATTORNEY

    KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Gerald C. Hsu and Sam Chang, and each of them, as
his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Report on Form 10-K, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof. 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>
<CAPTION>
                      SIGNATURE                                   CAPACITY                  DATE
                      ---------                                   --------                  ----
<C>                                                    <S>                              <C>
                  /s/ GERALD C. HSU                    President, Chief Executive       March 9, 2000
     -------------------------------------------       Officer and Chairman of the
                    Gerald C. Hsu                      Board of Directors

                    /s/ SAM CHANG                      Head of Finance and Treasurer    March 9, 2000
     -------------------------------------------
                      Sam Chang
</TABLE>

                                       21
<PAGE>

<TABLE>
<CAPTION>
                      SIGNATURE                                   CAPACITY                  DATE
                      ---------                                   --------                  ----
<C>                                                    <S>                              <C>
                   /s/ KENNETH TAI                     Director                         March 9, 2000
     -------------------------------------------
                     Kenneth Tai

                /s/ CHARLES ST. CLAIR                  Director and Secretary           March 9, 2000
     -------------------------------------------
                  Charles St. Clair

                /s/ MORIYUKI CHIMURA                   Executive Operating Officer,     March 9, 2000
     -------------------------------------------       Engineering and Director
                  Moriyuki Chimura

                /s/ DANIEL D. TAYLOR                   Director                         March 9, 2000
     -------------------------------------------
                  Daniel D. Taylor
</TABLE>

                                       22
<PAGE>
                               INDEX TO EXHIBITS

(a)3. Exhibits

<TABLE>
<CAPTION>
     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)

  2.6                   Agreement and Plan of Reorganization dated as of November 4,
                        1998, as amended on November 12, 1998 among the Registrant,
                        Artemis Corporation and interHDL, Inc.(10)

  3.1                   Restated Certificate of Incorporation(1)

  3.1.1                 Certificate of Amendment of the Restated Certificate of
                        Incorporation of Avant! Corporation

  3.1.2                 Certificate of Designations of Series A Junior Participating
                        Preferred Stock(8)

  3.2                   Amended and Restated Bylaws(9)

  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)

  4.5                   Rights Plan dated September 4, 1998 between the Registrant
                        and Harris Trust Company of California(8)

 10.1                   1995 Stock Option/Stock Issuance Plan, as amended(7)

 10.2                   Employee Stock Purchase Plan, as amended(7)

 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)

 10.5                   Employment Agreement with Gerald C. Hsu

 10.6                   Executive Deferred Compensation Plan

 10.7                   Form of Confidential Severance Agreement

 13.1                   Portions of the 1999 Annual Report to Stockholders
                        The Exhibit is included on pages 25-62 of this Form 10-K
</TABLE>

                                       23
<PAGE>

<TABLE>
<CAPTION>
     EXHIBIT NO.                                DESCRIPTION
---------------------                           -----------
<S>                     <C>
 21.1                   List of subsidiaries of the Company
                        The Exhibit is included on page 64 of this Form 10-K

 23.1                   Report on Financial Statement Schedule and Consent of KPMG
                        LLP, Independent Auditors
                        The Exhibit is included on page 65 of this Form 10-K

 27.1                   Financial Data Schedule
</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 current 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.

(7) Incorporated by reference from the Company's Definitive Proxy Statement on
    Schedule 14A filed with the SEC on April 7, 1998.

(8) Incorporated by reference from the Company's Current Report on Form 8-K
    filed with the SEC on September 18, 1998.

(9) Incorporated by reference from the Company's Registration Statement on
    Form 8-A12G filed with the SEC on September 18, 1998.

(10) Incorporated by reference from the Company Current Report on Form 8-K filed
    with the SEC on November 19, 1998.

                                       24
<PAGE>

<TABLE>
<CAPTION>
                                                                 PAGE
EXHIBIT 13.1 PORTIONS OF THE 1999 ANNUAL REPORT TO STOCKHOLDERS  ----
<S>                                                              <C>
Selected Consolidated Financial Data.........................     26
Selected Quarterly Financial Data............................     27
Management's Discussion and Analysis of Financial Condition and   27
  Results of Operations......................................
Independent Auditors' Report.................................     35
Consolidated Statements of Earnings..........................     36
Consolidated Balance Sheets..................................     37
Consolidated Statements of Stockholders' Equity..............     38
Consolidated Statements of Cash Flows........................     40
Notes to Consolidated Financial Statements...................     42
</TABLE>

                                       25
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA (3)
  (IN THOUSANDS, EXCEPT EARNINGS PER SHARE DATA)

<TABLE>
<CAPTION>
                                                           YEARS ENDED DECEMBER 31,
                                             ----------------------------------------------------
                                               1999       1998       1997       1996       1995
                                             --------   --------   --------   --------   --------
<S>                                          <C>        <C>        <C>        <C>        <C>
Consolidated Statement of Earnings Data:
Total revenue..............................  $303,620   $248,330   $181,150   $137,438   $95,179
Earnings (losses) from operations..........    80,646     42,342     (3,081)    14,782     8,511
Net earnings (1)...........................    56,620     22,578      2,390      8,824     4,520
Earnings per share:
  Basic....................................  $   1.49   $   0.62   $   0.07   $   0.29   $  0.18
  Diluted..................................  $   1.42   $   0.59   $   0.07   $   0.26   $  0.15
Pro forma earnings per share: (2)
  Basic....................................  $   1.55   $   1.23   $   0.84   $   0.60   $  0.39
  Diluted..................................  $   1.48   $   1.16   $   0.78   $   0.55   $  0.33
Weighted average shares outstanding:
Basic......................................    38,084     36,504     34,315     30,687    25,338
Diluted....................................    39,746     38,454     36,697     33,467    29,247
</TABLE>

<TABLE>
<CAPTION>
                                                                DECEMBER 31,
                                            ----------------------------------------------------
                                              1999       1998       1997       1996       1995
                                            --------   --------   --------   --------   --------
<S>                                         <C>        <C>        <C>        <C>        <C>
Consolidated Balance Sheet Data:
Cash and cash equivalents.................  $ 79,766   $126,180   $ 81,982   $ 58,772   $ 57,136
Working capital...........................   216,246    135,399    132,284    152,448     95,901
Total assets..............................   435,527    337,508    272,896    211,656    142,659
Long-term obligations.....................     1,668      2,535      2,026     13,025     10,101
Stockholders' equity......................   314,301    245,834    208,208    157,959     99,079
</TABLE>

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

(1) Pro forma in 1995.

(2) Pro forma earnings per share excludes merger, in-process research and
    development expenses and equity income (losses) from venture capital
    investment.

(3) The Selected Consolidated Financial Data has been restated to reflect the
    poolings of interests with Xynetix and Chrysalis in 1999.

                                       26
<PAGE>
SELECTED QUARTERLY FINANCIAL DATA (2)
  (In thousands, except earnings per share data)

<TABLE>
<CAPTION>
                                 Q1/99      Q2/99      Q3/99      Q4/99      Q1/98      Q2/98      Q3/98      Q4/98
                                --------   --------   --------   --------   --------   --------   --------   --------
<S>                             <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>
Revenue.......................  $71,679    $75,350    $75,484    $81,107    $56,903    $59,652    $63,406    $68,369
Costs of revenue..............  $ 6,073    $ 6,048    $ 5,277    $ 5,893    $ 5,633    $ 5,491    $ 6,133    $ 6,282
Earnings from operations......  $20,764    $21,098    $14,762    $24,022    $ 3,022    $16,643    $16,211    $ 6,466
Net earnings (losses).........  $13,904    $13,860    $ 8,837    $20,019    $  (618)   $11,214    $11,404    $   578
Earnings (losses) per share:
  Basic.......................  $  0.37    $  0.37    $  0.23    $  0.52    $ (0.02)   $  0.31    $  0.31    $  0.02
  Diluted.....................  $  0.34    $  0.35    $  0.22    $  0.51    $ (0.02)   $  0.28    $  0.30    $  0.02
Pro forma earnings per share:
  (1)
  Basic.......................  $  0.37    $  0.37    $  0.39    $  0.42    $  0.28    $  0.31    $  0.31    $  0.33
  Diluted.....................  $  0.34    $  0.36    $  0.37    $  0.41    $  0.27    $  0.28    $  0.30    $  0.31
</TABLE>

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

(1) Pro forma earnings per share excludes merger, in-process research and
    development expenses and equity income (losses) from venture capital
    investment.

(2) The Selected Quarterly Financial Data has been restated to reflect the
    poolings of interests with Xynetix and Chrysalis in 1999.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
  OPERATION

    This Management's Discussion and Analysis of Financial Condition and Results
of Operation should be read in conjunction with the accompanying consolidated
financial statements and notes included in this report. This discussion contains
forward-looking statements that involve risks and uncertainties. Our actual
results could differ materially from those expressed or implied by these
forward-looking statements as a result of various factors, including the risk
factors described in Risk Factors and elsewhere in this report. Factors that
could cause or contribute to such differences include, but are not limited to,
those discussed in "Item 1. Business--Risk Factors That May Affect Future
Results" below, as well as those discussed in this section and elsewhere in this
Form 10-K; and other risks detailed from time to time in our Securities and
Exchange Commission reports. In addition, past results and trends should not be
used by investors to anticipate future results and trends.

OVERVIEW

    Avant! develops, markets and supports software products that assist design
engineers in the physical layout, design, verification, simulation and timing
analysis of advanced integrated circuits (ICs). The Company's strategy is to
focus on productivity enhancing software for the integrated circuit design
automation (ICDA) segment of the electronic design automation (EDA) market.

    The Company's products compete with similar products from both larger and
smaller EDA vendors and with dissimilar EDA products for a share of their
customers' EDA budgets. The EDA industry, and as a result the Company's
business, has benefited from the rapid worldwide growth of the semiconductor
industry. There can be no assurance that this growth will continue. The EDA
industry as a whole may experience pricing and margin pressures from a decrease
in growth in the semiconductor industry, or other changes in the overall
computer industry. In addition, the EDA industry is experiencing consolidation
as the major EDA vendors are seeking to provide a complete range of EDA products
to customers. There can be no assurance that the Company will be able to compete
successfully against current and future competitors, or that market conditions
faced by the Company will not adversely affect its business, financial condition
and results of operations.

                                       27
<PAGE>
    The Company sells its software products and provides services to customers
located throughout the world. Managing global operations and sites located
throughout the world presents challenges associated with cultural differences
and organizational alignment. Moreover, each region in the global EDA market
exhibits unique characteristics that can cause purchasing patterns to vary
significantly from period to period. Although international markets historically
have provided the Company with significant revenue opportunities, periodic
economic downturns, trade balance issues, political instability and fluctuations
in interest and foreign currency exchange rates are all risks that could affect
global product and service demand.

    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.

    The Company's future success depends upon its ability to improve current
products and develop new products that address the increasingly sophisticated
needs of its customers. There can be no assurance that the Company will continue
to be successful in developing technologically acceptable products on a timely
basis. The Company's ability to develop and improve products is dependent on key
individuals for their technical and other contributions. There can be no
assurance that the Company can continue to attract and retain these key
personnel. Loss of certain key personnel could result in loss of the Company's
market advantage and could adversely affect its business, financial condition
and results of operations.

    As discussed in the notes to the consolidated financial statements, the
Company is involved in several litigation matters, including a lawsuit with
Cadence. As result of the litigation issues, some customers may return, or
cancel, or postpone orders of, the Company's products. As of December 31, 1999,
such cancellations, postponements and returns had not had a material financial
impact on the Company's revenues. However, cancellations, returns, or a
significant delay of orders in the future would have a material adverse effect
on the Company's business, financial condition and results of operations.

RESULTS OF OPERATIONS

REVENUE

    The Company's total revenue increased 22% to $303.6 million in 1999 from $
248.3 million in 1998 and 37% in 1998 from $181.2 million in 1997. The
percentage of the Company's revenue attributable to software licenses decreased
to 67% in 1999 from 68% in 1998 and 70% in 1997. The decrease in 1999 and 1998
was primarily due to the faster increase of service revenue as compared to
software license revenue as a result of the larger user base.

    Software revenue increased 21% to $203.9 million in 1999 from
$168.8 million in 1998 and 33% in 1998 from $126.6 million in 1997. Increases in
software revenue were due primarily to increased license revenue from the
Company's place and route, physical verification, simulation and timing
software. Services revenue increased 25% to $99.7 million in 1999 from
$79.5 million in 1998 and 46% in 1998 from $54.6 million in 1997, reflecting the
growing base of installed systems. Through December 31, 1999, price increases
have not been a material factor in the Company's revenue growth. The Company
does not believe that period-to-period comparisons of past revenue growth should
be relied upon as indications of future performance.

COSTS OF SOFTWARE AND SERVICES

    Costs of software consist primarily of expenses associated with product
documentation, production costs and personnel. Costs of software increased to
$5.7 million in 1999 from $5.5 million in 1998 and $4.6 million in 1997. In 1999
and 1998, the increase was attributable to product documentation costs due to
new releases.

                                       28
<PAGE>
    Costs of services consist of costs of maintenance and customer support and
direct costs associated with providing other services. Maintenance includes
activities undertaken after the product is available for general release to
customers to correct errors, make routine changes and provide additional
features. Customer support includes any installation assistance, training
classes, telephone question and answer services, newsletters, on-site visits and
software or data modifications. Costs of services decreased to $17.6 million in
1999 from $18.1 million in 1998 compared to $15.5 million in 1997, representing
18%, 23% and 28% of services revenue for 1999, 1998 and 1997, respectively. The
decrease in cost of services in 1999 resulted primarily from the reduction in
emphasis on design-related consulting services and the related personnel
support. The increase in costs of services in 1998 was due primarily to
increases in personnel and expenses necessary to support the Company's growing
base of installed software. For both 1999 and 1998, the reduction in costs of
services as a percentage of service revenue reflects higher revenue growth and
improved productivity of the Company's customer support resources in serving its
increasing customer base.

SELLING AND MARKETING

    Selling and marketing expenses consist primarily of costs, including sales
commissions, of all personnel involved in the sales process. This includes sales
representatives, marketing associates and application engineers. Selling and
marketing expenses also include costs of advertising, public relations,
conferences, trade shows and allowance for doubtful accounts. Selling and
marketing expenses increased to $84.7 million in 1999 from $69.7 million in 1998
and $57.5 million in 1997. In 1999, the increase resulted primarily from
increased promotional activities, headcount and allowance for doubtful accounts.
The allowance for doubtful accounts was increased by $4.0 million in the fourth
quarter of 1999 to reflect collection experience, such that substantially all
receivables that have been outstanding over one year are included. In 1998, the
increase was due to increased advertising, promotional activities and bad debt
allowances. Selling and marketing expenses represented 28%, 28% and 32% of total
revenue in 1999, 1998 and 1997, respectively. The decrease in selling and
marketing expenses as a percentage of total revenue during 1998 resulted
primarily from revenue growth and improved productivity of the sales force. The
Company expects to hire additional sales personnel and to increase promotion and
advertising costs throughout 2000.

RESEARCH AND DEVELOPMENT

    Research and development expenses include all costs associated with the
development of new products and enhancement of existing products. Research and
development expenses increased to $71.4 million in 1999 from $62.9 million in
1998 and $42.9 million in 1997. In all years, the increases were primarily due
to increased headcount and higher incentive compensation. Research and
development expenses represented 24%, 25% and 24% of total revenue in 1999, 1998
and 1997, respectively. This is consistent with the Company's policy of
investing heavily in research and development for future growth. The Company
anticipates that it will continue to devote substantial resources to product
research and development throughout 2000.

GENERAL AND ADMINISTRATIVE

    General and administrative expenses increased to $37.7 million in 1999 from
$27.8 million in 1998 and $22.6 million in 1997. In 1999 and 1998, the increases
resulted primarily from legal costs relating to the Company's ongoing litigation
matters, and increased personnel and related costs necessary to support the
Company's growth. General and administrative expenses represented 12%, 11% and
12%, of total revenue in 1999, 1998 and 1997, respectively. The consistency in
general and administrative expenses as a percentage of total revenue resulted
primarily from the Company's continued effort to maintain efficiency in the
general and administrative area. The Company charged to expenses approximately
$14.7 million, $12.3 million and $8.7 million for the years 1999, 1998 and 1997,
respectively, related to the various

                                       29
<PAGE>
litigation matters. The Company expects to incur significant legal costs in the
future as a result of its current litigation matters.

IN-PROCESS RESEARCH AND DEVELOPMENT

    On November 19, 1998 and November 13, 1998, the Company acquired ACEO and
interHDL. In connection with these acquisitions, intangibles of $5.9 million and
$33.1 million were acquired of which $1.3 million and $10.0 million were related
to acquired in-process research and development. These in-process research and
development amounts were expensed, as the underlying technology had not reached
technological feasibility and, in management's opinion, had no probable
alternative future use. In September 1997, the Company acquired Compass. In
connection with the acquisition, intangibles of $56.0 million were acquired, of
which $41.2 million related to acquired in-process research and development.
These in-process research and development amounts were expensed, as the
underlying technology had not reached technological feasibility and, in
management's opinion, had no probable alternative future use.

    In connection with the purchase of ACEO and interHDL in November 1998, the
Company allocated $1.3 million and $10.0 million respectively, of the
$7.2 million and $35.0 million purchase prices to in-process research and
development projects. These allocations represent the estimated fair value based
on risk-adjusted cash flows related to the incomplete research and development
projects. At the date of the acquisitions, these amounts were expensed as a
non-recurring charge as the in-process technology had not yet reached
technological feasibility and had no alternative future uses. ACEO had one major
project in progress at the time of the acquisition. As of the acquisition date,
costs to complete the project acquired were expected to be approximately
$0.3 million and $0.5 million in fiscal 1999 and 1998, respectively. interHDL
had two major projects in progress at the time of the acquisition. As of the
acquisition date, costs to complete the projects acquired were expected to be
approximately $1.1 million and $0.4 million in fiscal 1999 and 1998,
respectively. The Company believes there has been no significant changes to
these estimates as of December 31, 1999. During 1999, one of the projects of
interHDL had been completed and the related product had been released upon
completion. The Company currently expects to complete the development of the
ACEO project and the remaining interHDL project in fiscal 2000 and to publish
the products upon completion.

    In connection with the purchase of Compass in September 1997, the Company
allocated $41.2 million of the $65.4 million purchase price to in-process
research and development projects. This allocation represents the estimated fair
value based on risk-adjusted cash flows related to the incomplete research and
development projects. At the date of the acquisition, this amount was expensed
as a non-recurring charge as the in-process technology had not yet reached
technological feasibility and had no alternative future uses. Compass had three
major projects in progress which were not completed at the time of the
acquisition.

    In the case of the ACEO and interHDL projects, the nature of the efforts
required to develop the acquired in-process technology into commercially viable
products principally relates to the completion of all planning, designing and
testing activities necessary to establish that the product can be produced to
meet its design requirements including functions, features and technical
performance requirements. Though the Company currently expects that the acquired
in-process technology will be successfully developed, there can be no assurance
that commercial or technical viability of these products will be achieved.
Furthermore, future developments in the industry, changes in technology, changes
in other product offerings or other developments may cause the Company to alter
or abandon these plans. Compass' acquired in-process technology entered
commercial production during 1998.

    The value assigned to purchased in-process technology was determined by
estimating the completion percentage of research and development efforts at the
acquisition date, forecasting expected revenues for the purchased in-process
technology once it is completed, estimating the resulting net cash flows from
the

                                       30
<PAGE>
projects, estimating the portion of net cash flows attributable to completed
research and development and excluding cash flows attributable to research and
development yet to be completed, and discounting the net cash flows to their
present values at risk-adjusted discount rates appropriate for each project. The
completion percentages were estimated based on cost incurred to date, importance
of the completed development tasks and the elapsed portion of the total project
time. The revenue projection used to value the in-process research and
development is based on sales forecasts for worldwide sales territories. Net
cash flow estimates include cost of goods sold and sales, continued research and
development, sales and marketing and general and administrative expenses and
taxes forecasted based on historical operating experience. In addition, net cash
flow estimates were adjusted to allow for fair return on working capital and
fixed assets, charges for franchise and technology leverage and return on other
intangibles. Cash flows were also adjusted to include only cash flows
attributable to completed research and development and excluding cash flows
attributable to research and development yet to be completed. Material net cash
flows from the ACEO and interHDL projects are expected to commence in two to
three years. Material net cash flows from the Compass projects commenced during
1998.

    Next, the present values of net cash flows related to completed in-process
research and development efforts were determined by discounting the relevant
cash flows at risk-adjusted discount rates appropriate for the risks of each
project. Because of the relatively high technological and market risk associated
with in-process research and development acquired from ACEO and interHDL a
risk-adjusted discount rate of 35% was used in both cases. The present values of
net cash flows related to in-process research and development projects acquired
from Compass were determined using risk-adjusted discount rates between 18% and
20%, depending on the relative risks of each project.

    The remaining identified intangibles are being amortized from date of
acquisition on a straight-line basis over five years based on expected useful
lives of franchise trade names, existing products and technologies, retention of
workforce, and other intangible assets.

MERGER EXPENSES

    On August 20, 1999, Avant! acquired Chrysalis, which designs, develops and
sells software products that assist designers of complex and
application-specific integrated circuits in the validation and verification of
electronic designs, for approximately $42 million by issuing approximately
3,042,000 shares of Avant! common stock in a merger exchange for all of the
outstanding stock of Chrysalis. The Company also assumed Chrysalis stock options
representing the right to purchase 446,370 shares of Avant! common stock at a
weighted average exercise price of $3.99 per share and assumed Chrysalis
warrants representing the right to purchase 116,213 shares of Avant! common
stock at a weighted average exercise price of $14.25 per share. In connection
with the acquisition, the Company incurred expenses of $4.4 million, including
fees to professional advisors and others totaling $2.0 million, $1.2 million of
personnel-related and $1.2 million other costs. Substantially all of the
Company's expenses related to the Chrysalis acquisition constituted of cash
expenditures. As of December 31, 1999 the unpaid merger related expenses were
$3.2 million of which $1.6 million was related to professional advisors costs
and $1.6 million was related to personnel and other costs. The Company expects
to pay the majority of these costs by June 30, 2000.

    On August 6, 1999, Avant! acquired Xynetix, which develops EDA software for
advanced IC packaging and complex system design, for approximately $19 million
by issuing approximately 1,441,000 shares of Avant! common stock in a merger
exchange for all of the outstanding stock of Xynetix. The Company also assumed
outstanding Xynetix stock options representing the right to purchase 126,492
shares of Avant! common stock at a weighted average exercise price of $1.86 per
share. In connection with the acquisition, the Company incurred expenses of
approximately $1.5 million, including professional fees totaling $0.6 million,
and facilities costs of $0.5 million and other costs of $0.4 million.
Substantially all of the Company's expenses related to the Xynetix acquisition
consisted of cash expenditures. As of December 31, 1999 the unpaid merger
related expenses were $1.0 million of which $0.4 million was related to

                                       31
<PAGE>
professional fees and $0.6 million was related to facilities and other costs.
The Company expects to pay the majority of these costs by June 30, 2000.

    In connection with the merger with TMA in January 1998, the Company recorded
direct transaction costs and merger-related integration expenses of
approximately $10.7 million, consisting of transaction fees for investment
bankers, attorneys, accountants, financial printing and stockholder meeting of
approximately $5.4 million, charges for the elimination of duplicate facilities
of approximately $2.2 million and severance and certain other related costs of
approximately $3.1 million. As of December 31, 1998, the remaining accrued
liabilities relating to the merger were not material. Of the $10.7 million of
merger related costs, approximately $7.9 million related to cash expenditures
while approximately $2.8 million related to non-cash charges.

    All of the above transactions were accounted for as poolings of interests.

EQUITY INCOME FROM UNCONSOLIDATED SUBSIDIARIES

    The Company had equity income from unconsolidated subsidiaries of
$6.1 million, $1.0 million and $0.5 million in 1999, 1998 and 1997,
respectively. These represent the Company's share of equity interest in
investments in Forefront Venture Partners, L.P. ("Forefront"), Maingate
Electronics, KK ("Maingate") and Davan Tech Co., Ltd. ("Davan Tech"). The equity
income in 1999 primarily resulted from unrealized appreciation of the Company's
venture capital investments in Forefront which occurred in the fourth quarter.
The Company believes that due to the nature of venture capital investing, the
value of its investment in Forefront may be subject to significant fluctuation
which may result in the Company recording significant gains and losses in the
future.

INTEREST INCOME AND OTHER, NET

    Interest income and other, net was $7.7 million, $3.8 million and
$5.7 million in 1999, 1998 and 1997, respectively. The increase in 1999 related
primarily to increased interest income resulting from the increase in the
short-term investments balance. The decrease in 1998 related primarily to
foreign exchange losses of $0.9 million and lower interest income resulting from
a decrease in the short-term investments balance.

INCOME TAXES

    The provision for income taxes, as a percentage of pre-tax income was 40.1%,
52.0% and 23.6% for 1999, 1998 and 1997, respectively. The percentages in 1999
and 1998 were higher than the federal statutory income tax rate of approximately
35% due primarily to the effect of certain merger expenses and in process
research and development financial accounting charges that were not deductible
for income tax purposes. The lower effective tax rate in 1997 resulted from the
relative tax benefits of tax credits and the foreign sales corporation.

NET EARNINGS AND EARNINGS PER SHARE

    Net earnings excluding merger and in-process research and development
expenses and equity income (losses) from the venture capital investment was
$59.0 million, $44.7 million and $28.7 million in 1999, 1998 and 1997,
respectively. Reported net earnings was $56.6 million, $22.6 million and
$2.4 million in 1999, 1998 and 1997, respectively. Net earnings per share on a
diluted basis excluding merger, in-process research and development expenses and
equity income (losses) from the venture capital investment was $1.48, $1.16 and
$0.78 in 1999, 1998 and 1997, respectively. Reported net earnings per share on a
diluted basis was $1.42, $0.59 and $0.07 in 1999, 1998 and 1997, respectively.

                                       32
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES

    Net cash provided by operating activities was $95.0 million, $59.5 million
and $7.7 million in 1999, 1998 and 1997, respectively. The increase in 1999 was
primarily attributable to the increase in operating income, accrued
compensation, deferred revenue and accounts payable, offset by an increase in
accounts receivable. The increase in 1998 was primarily attributable to the
increase in operating income (net of acquired in-process research and
development), accrued income taxes and deferred revenue, offset by an increase
in accounts receivable, due from affiliates, prepaid expenses and a decrease in
accrued liabilities.

    Investing activities used $147.8 million, $4.9 million and $2.0 million of
net cash in 1999, 1998 and 1997, respectively. In 1999, cash was used for the
purchase of short-term investments and purchase of equipment, furniture and
fixtures, offset by net maturities of short-term investments. In 1998, net cash
used in investing activities was used for the purchase of interHDL and ACEO, a
$10 million investment in Forefront Venture Partners, L.P., a limited
partnership investing primarily in technology start up companies, and purchase
of equipment, furniture and fixtures primarily for the Company's Fremont,
California facility, offset by net maturities of short-term investments. In
1997, cash was used for the purchase of Compass and purchase of leasehold
improvements for the Company's Fremont facility, including furniture, computer
workstations and file servers, for use by the Company's employees, offset by net
maturities of short term investments.

    Net cash provided by financing activities was $6.4 million and
$17.5 million for 1999 and 1997, respectively. Net cash used in financing
activities was $10.3 million for 1998. Net cash provided by financing activities
in 1999 and 1997 related primarily to the issuance of common stock under the
Company's employee stock purchase plan and exercise of stock options. Net cash
used in financing activities in 1998 primarily related to repurchase of common
stock. The Company did not issue any significant amounts of common stock in
1999, 1998 and 1997 except for stock issued in connection with option exercises,
the employee stock purchase plan and the interHDL, ACEO and Compass
acquisitions.

    On December 3, 1999, The Company announced a definitive agreement under
which the Company will acquire Analogy, Inc. ("Analogy") for a total cash
purchase price of approximately $24 million subject to possible adjustment for
certain Analogy expenses. The acquisition has been approved by the board of
directors of both companies and is subject to certain conditions, including
compliance with applicable regulatory requirements and approval by Analogy's
stockholders. The Company expects to close the transaction by the end of the
first quarter of 2000. Analogy is a leader in mixed-signal and mixed-technology
simulation, analysis and design. Analogy's products are used in the aerospace,
automotive/ transportation, semiconductor, communications, computer peripherals,
medical and industrial control industries. Its Saber product, which includes the
Calaveras algorithm and other patented technology, is the world's most advanced
and flexible simulator for mixed-signal and mixed-technology simulation.

    The Company's stated payment terms generally are net 30 days. However, in
the Company's experience, many customers may not comply with stated terms due to
industry practice of slower payment by certain major companies and most foreign
customers and due to general economic conditions. The Company believes that its
allowance for doubtful accounts is adequate.

    As of December 31, 1999, the Company had $240.4 million of cash and
short-term investments and $216.2 million in working capital. As of
December 31, 1999, the Company had $119.6 million in current liabilities,
including $45.9 million of deferred revenue. In connection with the Silvaco
litigation, the Company was required to post a bond. The bond is collateralized
by a $23.6 million irrevocable standby letter of credit.

    Based on its current Year 2000 operating plan and without regard to the
potential consequences of any adverse judgements in any pending litigation
matters, the Company believes that it has available cash and short-term
investments sufficient to fund the Company's operations through at least the
next twelve months.

                                       33
<PAGE>
RECENT ACCOUNTING PRONOUNCEMENTS

    The FASB recently issued Statement of Financial Accounting Standards
("SFAS") No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES.
SFAS No. 133 establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts (collectively referred to as derivatives), and for hedging activities.
It requires an entity to recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. The Company must adopt SFAS No. 133 by January 1, 2001.
Management does not believe the adoption of SFAS No. 133 will have a material
effect on the financial position or results of operations of the Company.

    Effective January 1, 1999, the Company adopted the American Institute of
Certified Public Accountants ("AICPA") Statement of Position ("SOP") 98-1 ("SOP
98-1"), ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE DEVELOPED OR OBTAINED FOR
INTERNAL USE. SOP 98-1 provides guidance on accounting for the costs of computer
software developed or obtained for internal use and for determining when
specific costs should be capitalized and when they should be expensed. There was
no impact as a result of adopting SOP 98-1.

    In December 1998, the AcSEC issued SOP 98-9, SOFTWARE REVENUE RECOGNITION,
WITH RESPECT TO CERTAIN ARRANGEMENTS ("SOP 98-9"), which requires recognition of
revenue using the "residual method" in a multiple element arrangement when fair
value does not exist for one or more of the delivered elements in the
arrangement. Under the "residual method", the total fair value of the
undelivered elements is deferred and subsequently recognized in accordance with
SOP 97-2, SOFTWARE REVENUE RECOGNITION. The Company does not expect a material
change to its accounting for revenues as a result of the provisions of SOP 98-9.

YEAR 2000 ISSUES

    During 1998, Avant! conducted a preliminary review of its internal computer
systems to identify the systems that could be affected by the Year 2000 issue
and to develop a plan to resolve the issues. Avant! has adopted SAP R/3 software
as an enterprise system managing its financial and logistical operations in the
United States and Europe. SAP R/3 software has been certified by SAP as Year
2000 compliant. Avant! performed testing on selected critical business functions
on January 01, 2000 and found no Year 2000 problems. As of February 29, 2000,
Avant! has not experienced any material impact due to a Year 2000 problem on its
internal systems and applications.

                                       34
<PAGE>
                          INDEPENDENT AUDITORS' REPORT

The Board of Directors
Avant! Corporation:

    We have audited the accompanying consolidated balance sheets of Avant!
Corporation and subsidiaries as of December 31, 1999 and 1998, and the related
consolidated statements of earnings, stockholders' equity, and cash flows for
each of the years in the three-year period ended December 31, 1999. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

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

    In our opinion, based on our audits, the consolidated financial statements
referred to above present fairly, in all material respects, the financial
position of Avant! Corporation and subsidiaries as of December 31, 1999 and
1998, and the results of their operations and their cash flows for each of the
years in the three-year period ended December 31, 1999, in conformity with
generally accepted accounting principles.

                                             /S/ KPMG LLP

January 24, 2000
Mountain View, California

                                       35
<PAGE>
                      AVANT! CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF EARNINGS

                 (IN THOUSANDS, EXCEPT EARNINGS PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                 YEARS ENDED DECEMBER 31,
                                                              ------------------------------
                                                                1999       1998       1997
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
Revenue:
  Software..................................................  $203,929   $168,848   $126,567
  Services..................................................    99,691     79,482     54,583
                                                              --------   --------   --------
    Total revenue...........................................   303,620    248,330    181,150
                                                              --------   --------   --------
Costs and expenses:
  Costs of software.........................................     5,664      5,457      4,556
  Costs of services.........................................    17,627     18,082     15,523
  Selling and marketing.....................................    84,698     69,730     57,501
  Research and development..................................    71,430     62,896     42,854
  General and administrative................................    37,653     27,808     22,611
  Merger and in-process research and development expenses...     5,902     22,015     41,186
                                                              --------   --------   --------
    Total operating expenses................................   222,974    205,988    184,231
                                                              --------   --------   --------
    Earnings (loss) from operations.........................    80,646     42,342     (3,081)
Equity income from unconsolidated subsidiaries, net.........     6,122        956        485
Interest income and other, net..............................     7,716      3,771      5,724
                                                              --------   --------   --------
    Earnings before income taxes............................    94,484     47,069      3,128
Income taxes................................................    37,864     24,491        738
                                                              --------   --------   --------
    Net earnings............................................  $ 56,620   $ 22,578   $  2,390
                                                              ========   ========   ========

Earnings per share:
Basic.......................................................  $   1.49   $   0.62   $   0.07
                                                              ========   ========   ========
Diluted.....................................................  $   1.42   $   0.59   $   0.07
                                                              ========   ========   ========

Weighted average shares outstanding:
Basic.......................................................    38,084     36,504     34,315
                                                              ========   ========   ========
Diluted.....................................................    39,746     38,454     36,697
                                                              ========   ========   ========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       36
<PAGE>
                      AVANT! CORPORATION AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS

                (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                              -------------------
                                                                1999       1998
                                                              --------   --------
<S>                                                           <C>        <C>
                                     ASSETS
Current assets:
  Cash and cash equivalents.................................  $ 79,766   $126,180
  Short-term investments....................................   160,631     21,389
  Accounts receivable, net of allowances of $12,772 and
    $9,277, respectively....................................    52,730     37,965
  Due from affiliates.......................................     4,555      8,947
  Deferred income taxes.....................................    21,266     15,077
  Prepaid expenses and other current assets.................    16,856     14,980
                                                              --------   --------
    Total current assets....................................   335,804    224,538
Equipment, furniture and fixtures, net......................    26,562     30,152
Deferred income taxes.......................................    22,789     23,910
Goodwill and other intangibles, net.........................    31,009     41,343
Other assets................................................    19,363     17,565
                                                              --------   --------
    Total assets............................................  $435,527   $337,508
                                                              ========   ========

                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable..........................................  $ 11,075   $  6,292
  Accrued compensation......................................    19,297     10,109
  Accrued income taxes......................................    25,614     25,457
  Current portion of long term obligation...................        61      1,053
  Other accrued liabilities.................................    17,595     13,614
  Deferred revenue..........................................    45,916     32,614
                                                              --------   --------
    Total current liabilities...............................   119,558     89,139
Long-term obligation, less current portion..................        --        657
Other noncurrent liabilities................................     1,668      1,878
                                                              --------   --------
    Total liabilities.......................................   121,226     91,674
                                                              --------   --------
Commitments and contingencies
Stockholders' equity:
Series A convertible preferred stock, $.0001 par value;
  5,000,000 shares authorized; none issued and
  outstanding...............................................        --         --
Series A junior participating preferred stock, $.0001 par
  value, 75,000 shares authorized; none issued and
  outstanding...............................................        --         --
Common stock, $.0001 par value; 75,000,000 shares
  authorized, 38,874,000 and 37,474,000 shares issued and
  outstanding in 1999 and 1998, respectively................         4          4
Additional paid-in capital..................................   230,733    218,204
Deferred compensation.......................................      (329)    (1,306)
Other accumulated comprehensive loss........................    (1,678)       (19)
Retained earnings...........................................    85,571     28,951
                                                              --------   --------
    Total stockholders' equity..............................   314,301    245,834
                                                              --------   --------
    Total liabilities and stockholders' equity..............  $435,527   $337,508
                                                              ========   ========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       37
<PAGE>
                      AVANT! CORPORATION AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                  YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                            ACCUMULATED
                            COMMON STOCK       ADDITIONAL                      OTHER                      TOTAL
                         -------------------    PAID-IN       DEFERRED     COMPREHENSIVE   RETAINED   STOCKHOLDERS'   COMPREHENSIVE
                          SHARES     AMOUNT     CAPITAL     COMPENSATION   (LOSS)/INCOME   EARNINGS      EQUITY           INCOME
                         --------   --------   ----------   ------------   -------------   --------   -------------   --------------
<S>                      <C>        <C>        <C>          <C>            <C>             <C>        <C>             <C>
Balances as of
  December 31, 1996....   32,876     $   3      $158,404      $(4,335)        $   (96)     $ 3,983      $157,959
Comprehensive income:
  Net earnings.........       --        --            --           --              --        2,390         2,390         $ 2,390
  Unrealized gain on
    short-term
    investments, net of
    tax effects of
    $14................       --        --            --           --              25           --            25              25
                                                                                                                         -------
Comprehensive income...                                                                                                  $ 2,415
                                                                                                                         =======
Stock issued under
  stock option plans,
  including tax
  benefits of $2,992...    1,716         1        10,024           --              --           --        10,025
Stock issued under
  stock purchase
  plan.................      171        --         2,844           --              --           --         2,844
Issuance of common
  stock................      418        --         7,532           --              --           --         7,532
Stock issued in
  connection with
  acquisitions.........      778        --        17,500           --              --           --        17,500
Repurchase of common
  stock................     (123)       --          (964)          --              --           --          (964)
Deferred compensation..       --        --           102         (102)             --           --            --
Amortization of
  deferred
  compensation.........       --        --            --        1,454              --           --         1,454
Conversion of note
  payable..............      467                   9,158           --              --           --         9,158
Forgiveness and payment
  of notes receivables
  from stockholders....       --        --            --          285              --           --           285
                         -------     -----      --------      -------         -------      -------      --------

Balances as of
  December 31, 1997....   36,303         4       204,600       (2,698)            (71)       6,373       208,208
Comprehensive income:
  Net earnings.........       --        --            --           --              --       22,578        22,578         $22,578
  Unrealized gain on
    short-term
    investments, net of
    tax effects of
    $27................       --        --            --           --              52           --            52              52
                                                                                                                         -------
Comprehensive income...                                                                                                  $22,630
                                                                                                                         =======
Stock issued under
  stock option plans,
  including tax
  benefits of $448.....      536        --         2,021           --              --           --         2,021
Stock issued under
  stock purchase
  plan.................      244        --         4,444           --              --           --         4,444
Issuance of common
  stock................      320        --         4,838           --              --           --         4,838
Repurchase of common
  stock................   (1,185)       --       (18,280)          --              --           --       (18,280)
Stock issued in
  connection with
  acquisitions.........    1,256        --        20,713           --              --           --        20,713
Deferred compensation..       --        --           782         (782)             --           --            --
Amortization of
  deferred
  compensation.........       --        --          (914)       1,985              --           --         1,071
Forgiveness and payment
  of notes receivables
  from stockholders....       --        --            --          189              --           --           189
                         -------     -----      --------      -------         -------      -------      --------
</TABLE>

                                       38
<PAGE>
                      AVANT! CORPORATION AND SUBSIDIARIES

          CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (CONTINUED)

                  YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                            ACCUMULATED
                            COMMON STOCK       ADDITIONAL                      OTHER                      TOTAL
                         -------------------    PAID-IN       DEFERRED     COMPREHENSIVE   RETAINED   STOCKHOLDERS'   COMPREHENSIVE
                          SHARES     AMOUNT     CAPITAL     COMPENSATION   (LOSS)/INCOME   EARNINGS      EQUITY           INCOME
                         --------   --------   ----------   ------------   -------------   --------   -------------   --------------
<S>                      <C>        <C>        <C>          <C>            <C>             <C>        <C>             <C>
Balances as of
  December 31, 1998....   37,474     $   4      $218,204      $(1,306)        $   (19)     $28,951      $245,834
Comprehensive income:
  Net earnings.........       --        --            --           --              --       56,620        56,620         $56,620
  Unrealized loss on
    short-term
    investments, net of
    tax effects of
    $479...............       --        --            --           --          (1,659)          --        (1,659)         (1,659)
                                                                                                                         -------
Comprehensive income...                                                                                                  $54,961
                                                                                                                         =======
Stock issued under
  stock option plans,
  including tax benefit
  of $3,687............      898        --         9,731           --              --           --         9,731
Stock issued under
  stock purchase
  plan.................      163        --         1,685           --              --           --         1,685
Issuance of common
  stock................      367        --           876           --              --           --           876
Repurchase of common
  stock................      (28)       --           (33)          --              --           --           (33)
Deferred compensation..       --        --           270         (270)             --           --            --
Amortization of
  deferred
  compensation.........       --        --            --        1,247              --           --         1,247
                         -------     -----      --------      -------         -------      -------      --------
Balances as of
  December 31, 1999....   38,874     $   4      $230,733      $  (329)        $(1,678)     $85,571      $314,301
                         =======     =====      ========      =======         =======      =======      ========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       39
<PAGE>
                      AVANT! CORPORATION AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                  YEARS ENDED DECEMBER 31,
                                                              ---------------------------------
                                                                1999        1998        1997
                                                              ---------   ---------   ---------
<S>                                                           <C>         <C>         <C>
Cash flows from operating activities:
  Net earnings..............................................  $  56,620   $  22,578   $   2,390
  Adjustments to reconcile net earnings to net cash provided
    by operating activities:
    Depreciation and amortization...........................     20,656      18,370       9,057
    Acquired in-process research and development............         --      11,268      41,186
    Compensation expenses related to stock option and
      purchase plans........................................      1,247       1,740       1,454
    Amortization of discount on promissory note.............         --          --         182
    Write off of note receivable from stockholder...........         --         189         122
    Loss on disposal of assets..............................        517          18         445
    Equity income from unconsolidated subsidiaries..........     (6,122)       (956)       (485)
    Amortization of capitalized software costs..............         --          --          62
    Non cash charges related to TMA merger..................         --       2,847          --
    Deferred income taxes...................................     (5,068)     (4,895)    (20,567)
    Tax benefit related to stock options....................      3,687         448       2,992
    Deferred rent...........................................        648         706         (29)
    Provision for doubtful accounts.........................      7,282       4,937       2,080
    Changes in operating assets and liabilities, net of
      effects from acquisitions:
      Accounts receivable...................................    (22,047)    (15,312)     (8,257)
      Due from affiliates...................................      4,392      (2,776)     (6,171)
      Prepaid expenses and other assets.....................      1,748      (2,029)     (1,848)
      Accounts payable......................................      4,783      (1,294)    (11,921)
      Accrued compensation..................................      9,188         619        (381)
      Accrued income taxes..................................        157      18,628       4,349
      Other accrued liabilities.............................      3,981      (6,744)     (4,438)
      Deferred revenue......................................     13,302      11,143      (2,565)
                                                              ---------   ---------   ---------
        Net cash provided by operating activities...........     94,971      59,485       7,657
                                                              ---------   ---------   ---------
Cash flows from investing activities:
  Purchases of short-term investments.......................   (591,857)   (368,253)   (113,982)
  Maturities and sales of short-term investments............    451,354     404,178     154,797
  Purchases of equipment, furniture, fixtures and other
    assets..................................................     (7,249)     (8,283)    (27,163)
  Investment in joint ventures..............................         --     (10,935)        310
  Repayment of note receivable..............................         --          --         250
  Purchase of acquired entities.............................         --     (21,653)    (16,183)
                                                              ---------   ---------   ---------
        Net cash used in investing activities...............   (147,752)     (4,946)     (1,971)
                                                              ---------   ---------   ---------
</TABLE>

                                       40
<PAGE>
                      AVANT! CORPORATION AND SUBSIDIARIES

               CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                  YEARS ENDED DECEMBER 31,
                                                              ---------------------------------
                                                                1999        1998        1997
                                                              ---------   ---------   ---------
<S>                                                           <C>         <C>         <C>
Cash flows from financing activities:
  Principal payments under capital lease obligations........       (602)       (989)     (1,146)
  Payments on notes payable.................................     (1,905)        (75)     (1,056)
  Proceeds from issuance of notes payable...................         --         982       1,078
  Payments on technology acquisition payable................         --          --        (642)
  Repurchase of common stock................................        (33)    (18,280)       (964)
  (Issuance) repayment of notes receivable from officers....        700      (2,300)        163
  Exercise of stock options.................................      6,044       1,573       7,032
  Issuance of common stock under employee stock purchase
    plan....................................................      1,685       4,444       2,844
  Issuance of common stock, net.............................        478       4,304      10,215
                                                              ---------   ---------   ---------
        Net cash provided by (used in) financing
          activities........................................      6,367     (10,341)     17,524
                                                              ---------   ---------   ---------
Net increase(decrease) in cash and cash equivalents.........    (46,414)     44,198      23,210
Cash and cash equivalents, beginning of year................    126,180      81,982      58,772
                                                              ---------   ---------   ---------
Cash and cash equivalents, end of year......................  $  79,766   $ 126,180   $  81,982
                                                              =========   =========   =========

Supplemental disclosures:
  Cash paid during the year for:
    Interest................................................  $     335   $     258   $     448
    Income taxes............................................  $  35,003   $   8,873   $   8,500
Noncash investing activities:
  Issuance of common stock to acquire Compass...............         --          --   $  17,500
  Issuance of common stock to acquire interHDL..............         --   $  17,584          --
  Issuance of options to acquire ACEO and interHDL..........         --   $   3,129          --
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       41
<PAGE>
                      AVANT! CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       DECEMBER 31, 1999, 1998, AND 1997

1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF BUSINESS

    Avant! Corporation ("the Company" or "Avant!") develops, markets and
supports software products that assist design engineers in the automated design,
layout, physical verification and analysis of advanced integrated circuits. Its
primary customers are semiconductor companies in the United States, Asia and
Europe.

PRINCIPLES OF PRESENTATION AND USE OF ESTIMATES

    The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation. The
consolidated financial statements have been restated to reflect the effect of
the merger with Chrysalis Symbolic Design, Inc. ("Chrysalis"), Xynetix Design
Systems Inc. ("Xynetix"), and Technology Modeling Associates, Inc. ("TMA"). The
ACEO Technology, Inc. ("ACEO"), interHDL Inc. ("interHDL") and Compass Design
Automation, Inc. ("Compass") acquisitions were accounted for under the purchase
method. Accordingly, the Company's consolidated financial statements do not
include the results of operations, financial position or cash flows prior to
their acquisitions.

    The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.

REVENUE RECOGNITION

    Revenue consists primarily of fees for licenses of the Company's software
products, maintenance and customer support.

SOFTWARE REVENUE

    Prior to October 1, 1997, the Company complied with the American Institute
of Certified Public Accountants' ("AICPA") Statement of Position ("SOP") 91-1,
SOFTWARE REVENUE RECOGNITION. Revenue from the sale of software licenses was
recognized after shipment of the products, delivery of permanent authorization
codes and fulfillment of acceptance terms, if any, providing that no significant
vendor and post-contract support obligations remained and collection of the
related receivable was probable. Any remaining insignificant vendor or
post-contract support obligations were accrued at the time the revenue was
recognized. In instances where there was a contingency regarding the sale,
revenue recognition was delayed until the contingency had been resolved. When
the Company received advance payments for software products, such payments were
reported as deferred revenue until all conditions for revenue recognition were
met. The Company had entered into certain license agreements under which
software, support and other services were provided to customers for a bundled
price for a specific period of time. Generally, revenue under such agreements
was recognized ratably over the contract period.

    In the fourth quarter of 1997, the Company adopted the provisions of the
AICPA SOP 97-2, SOFTWARE REVENUE RECOGNITION ("SOP 97-2"). SOP 97-2 generally
requires revenue earned on software arrangements involving multiple elements to
be allocated to each element based on the relative fair values of the

                                       42
<PAGE>
                      AVANT! CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                       DECEMBER 31, 1999, 1998, AND 1997

1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
elements. The revenue allocated to software products, including time-based
software licenses, generally is recognized after shipment of the products,
delivery of permanent authorization codes and fulfillment of acceptance terms.
In connection with the adoption of SOP 97-2, revenue for contracts with extended
payment terms (generally greater than twelve months) is recognized as payments
become due. The effect of adopting SOP 97-2 on October 1, 1997 was not material.

    In December 1998, the AcSEC issued SOP 98-9, SOFTWARE REVENUE RECOGNITION,
WITH RESPECT TO CERTAIN ARRANGEMENTS ("SOP 98-9"), which requires recognition of
revenue using the "residual method" in a multiple element arrangement when fair
value does not exist for one or more of the delivered elements in the
arrangement. Under the "residual method", the total fair value of the
undelivered elements is deferred and subsequently recognized in accordance with
SOP 97-2. The Company does not expect a material change to its accounting for
revenues as a result of the provisions of SOP 98-9.

SERVICES REVENUE

    Maintenance revenue is deferred and recognized ratably over the term of the
maintenance agreement, which is typically twelve months. Revenue from customer
training, support and other services is recognized as the service is performed.

CASH AND CASH EQUIVALENTS

    The Company considers all highly liquid investments with a remaining
maturity of three months or less at the date of acquisition to be cash
equivalents. Cash equivalents are stated at cost and consist of money market
funds, certificates of deposit and commercial paper. The carrying amount of cash
and cash equivalents approximates fair value.

SHORT-TERM INVESTMENTS

    Short-term investments, which are classified as available-for-sale, consist
of demand deposit investments in short-term debt securities, U.S. Government
Agency debt securities, municipal/corporate auction preferred stock and
municipal bonds, and are reported at fair value. The cost of securities sold is
determined using the specific identification method when computing realized
gains and losses. Fair value is determined using available market information.

FOREIGN CURRENCY HEDGING INSTRUMENTS

    The Company transacts business in various foreign currencies. Accordingly,
the Company is subject to exposure from adverse movements in foreign currency
exchange rates. This exposure is primarily related to amounts due from Maingate
Electronics, KK ("Maingate"), a Japanese distributor. There were no hedging
contracts outstanding as of December 31, 1999. Net losses related to hedging
contracts and foreign exchange transactions were $0.9 million in 1998 and were
immaterial in 1999 and 1997.

    The Company assesses the need to utilize financial instruments to hedge
currency exposures on an ongoing basis. The Company does not use derivative
financial instruments for speculative trading purposes, nor does the Company
hedge its foreign currency exposure in a manner that entirely offsets the
effects of changes in foreign exchange rates. The Company regularly reviews its
hedging program and may as part of this review determine at any time to change
its hedging program.

                                       43
<PAGE>
                      AVANT! CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                       DECEMBER 31, 1999, 1998, AND 1997

1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ACCOUNTS RECEIVABLE AND DEFERRED REVENUE

    Accounts receivable includes amounts due from customers for which revenue
has been recognized. Deferred revenue includes amounts received from customers
for which revenue has not been recognized.

EQUIPMENT, FURNITURE AND FIXTURES

    Equipment, furniture and fixtures are stated at cost. Equipment, furniture
and fixtures are depreciated using the straight-line method over the estimated
useful lives of the assets, which range from three to five years. Leasehold
improvements are amortized using the straight-line method over the shorter of
the lease term or the estimated useful life of the asset. Expenditures for
repairs and maintenance are charged to expense as incurred.

GOODWILL AND OTHER INTANGIBLES

    Intangibles consist principally of goodwill representing purchased
technology and other intangible assets resulting from the excess of the cost of
a purchased business over the cost of the net assets acquired. Goodwill is
amortized using the straight-line method over five years. As of December 31,
1999, goodwill and related intangibles was $47.2 million and accumulated
amortization was $16.2 million. The Company periodically evaluates whether
changes have occurred that would require revision of the remaining estimated
useful life of the assigned goodwill or render the goodwill not recoverable. If
such circumstances arise, the Company would use an estimate of the undiscounted
value of expected future operating cash flows to determine whether the goodwill
is recoverable. If the goodwill is not recoverable, the carrying amount of the
goodwill will be reduced to the undiscounted amount of expected future operating
cash flows resulting in a charge to earnings.

    The Company assesses the recoverability of its identifiable tangible and
intangible assets under Statement of Financial Accounting Standards ("SFAS")
No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED
ASSETS TO BE DISPOSED OF. This statement requires identifiable tangible and
intangible assets to be evaluated for impairment whenever events or changes in
circumstances indicate that the carrying value of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If an asset is considered to be impaired, the
carrying amount of that asset is reduced to the fair value, based on
undiscounted future cash flows, resulting in a charge to earnings. As of
December 31, 1999, the Company does not believe any of its identifiable tangible
or intangible assets are impaired.

INCOME TAXES

    Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.

                                       44
<PAGE>
                      AVANT! CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                       DECEMBER 31, 1999, 1998, AND 1997

1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NET EARNINGS AND EARNINGS PER SHARE

    Basic earnings per share is computed based on the weighted-average number of
common shares outstanding during each year. Diluted earnings per share is based
on the sum of the weighted-average number of common shares outstanding plus
common stock equivalents arising out of employee stock options. Excluded from
the computation of diluted earnings per share for the year ended December 31,
1999, 1998 and 1997, are options to acquire 2,159,285, 929,201, and 973,190
shares, respectively, of common stock with a weighted-average exercise prices of
$19.72, $25.08 and $33.68, respectively, because their effects are
anti-dilutive.

    The following is a reconciliation of the numerators and denominators of the
basic and diluted EPS computations for the years presented (in thousands):

<TABLE>
<CAPTION>
                                                                1999       1998       1997
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
Weighted average number of common shares outstanding........   38,084     36,504     34,315
  Common stock equivalents:
    Stock options and awards................................    1,662      1,950      2,382
                                                               ------     ------     ------
  Total weighted average number of common and common
    equivalent shares outstanding...........................   39,746     38,454     36,697
                                                               ======     ======     ======
</TABLE>

STOCK OPTION AND STOCK PURCHASE PLANS

    The Company accounts for its stock-based compensation plans in accordance
with the provisions of Accounting Principles Board ("APB") Opinion No. 25,
ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, and related interpretations. As such,
compensation expense is recorded on the date of grant when the current market
price of the underlying stock exceeds the exercise price. Pursuant to SFAS
No. 123, the Company discloses the pro forma effects of using the fair value
method of accounting for stock-based compensation arrangements.

FOREIGN CURRENCY TRANSLATION

    The functional currency of the Company's foreign subsidiaries is the U.S.
dollar. Accordingly, the financial statements of those subsidiaries, which are
maintained in the local currency, are remeasured into U.S. dollars in accordance
with SFAS No. 52, FOREIGN CURRENCY TRANSLATION. Exchange gains or losses from
remeasurement of monetary assets and liabilities that are not denominated in
U.S. dollars were not material for any period presented and are included in the
statement of earnings.

ADVERTISING EXPENSE

    The cost of advertising is expensed as incurred. Such costs are included in
selling and marketing expense and totaled approximately $4.9 million,
$5.8 million and $3.0 million during the years ended December 31, 1999, 1998,
and 1997, respectively.

                                       45
<PAGE>
                      AVANT! CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                       DECEMBER 31, 1999, 1998, AND 1997

1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECENT ACCOUNTING PRONOUNCEMENTS

    The FASB recently issued Statement of Financial Accounting Standards
("SFAS") No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES.
SFAS No. 133 establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts (collectively referred to as derivatives), and for hedging activities.
It requires an entity to recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. The Company must adopt SFAS No. 133 by January 1, 2001.
Management does not believe the adoption of SFAS No. 133 will have a material
effect on the financial position or results of operations of the Company.

    Effective January 1, 1999, the Company adopted the American Institute of
Certified Public Accountants ("AICPA") Statement of Position ("SOP") 98-1 ("SOP
98-1"), ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE DEVELOPED OR OBTAINED FOR
INTERNAL USE. SOP 98-1 provides guidance on accounting for the costs of computer
software developed or obtained for internal use and for determining when
specific costs should be capitalized and when they should be expensed. There was
no impact as a result of adopting SOP 98-1.

RECLASSIFICATION

    Certain amounts in the 1998 and 1997 consolidated financial statements have
been reclassified to conform to the 1999 presentation.

2. FINANCIAL INSTRUMENTS

CASH EQUIVALENTS AND INVESTMENTS

    All short-term investments have been classified as available-for-sale
securities. As of December 31, 1999, cash equivalents consist primarily of money
market funds. Cash equivalents and short-term investments consist of the
following as of December 31, (in thousands):

<TABLE>
<CAPTION>
                                                             1999       1998
                                                           --------   --------
<S>                                                        <C>        <C>
Cash equivalents.........................................  $ 64,738   $ 1,014
Short-term debt securities...............................     8,472     3,457
U.S. government agency debt securities...................    53,037     6,575
Municipal/corporate auction preferred stock..............    13,750       402
Municipal bonds..........................................    85,372    10,955
                                                           --------   -------
  Total financial instruments............................  $225,369   $22,403
                                                           ========   =======
</TABLE>

    The cost of the securities held is based on the specific identification
method. The carrying value of cash and cash equivalents and short-term
investments approximate the fair value (based on quoted market prices) of such
investments. Accordingly, unrealized gains and losses were immaterial at
December 31, 1999. As of December 31, 1999, the underlying maturities of
financial instruments are $78.0 within one year, and $147.4 million from 2001 to
2031.

                                       46
<PAGE>
                      AVANT! CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                       DECEMBER 31, 1999, 1998, AND 1997

3. EQUIPMENT, FURNITURE AND FIXTURES

    As of December 31, equipment, furniture and fixtures consisted of the
following (in thousands):

<TABLE>
<CAPTION>
                                                            1999       1998
                                                          --------   --------
<S>                                                       <C>        <C>
Furniture and fixtures..................................  $  8,473   $  8,337
Equipment...............................................    32,572     32,222
Leasehold improvements..................................    11,487     11,441
                                                          --------   --------
                                                            52,532     52,000
Less accumulated depreciation and amortization..........   (25,970)   (21,848)
                                                          --------   --------
                                                          $ 26,562   $ 30,152
                                                          ========   ========
</TABLE>

4. MERGERS AND ACQUISITIONS

    On August 20, 1999, Avant! acquired Chrysalis, which designs, develops and
sells software products that assist designers of complex and
application-specific integrated circuits in the validation and verification of
electronic designs, for approximately $42 million by issuing approximately
3,042,000 shares of Avant! common stock in a merger exchange for all of the
outstanding stock of Chrysalis. The Company also assumed Chrysalis stock options
representing the right to purchase 446,370 shares of Avant! common stock at a
weighted average exercise price of $3.99 per share and assumed Chrysalis
warrants representing the right to purchase 116,213 shares of Avant! common
stock at a weighted average exercise price of $14.25 per share. As of
December 31, 1999, all the related warrants have been exercised or expired.

    In connection with the acquisition, the Company incurred expenses of
$4.4 million, including fees to professional advisors and others totaling
$2.0 million, $1.2 million of personnel-related and $1.2 million other costs.
Substantially all of the Company's expenses related to the Chrysalis acquisition
consisted of cash expenditures. As of December 31, 1999 the unpaid merger
related expenses were $3.2 million of which $1.6 million was related to
professional advisors costs and $1.6 million was related to personnel and other
costs. The Company expects to pay the majority of these costs by June 30, 2000.

    On August 6, 1999, Avant! acquired Xynetix, which develops electronic design
automation software for advanced integrated circuits packaging and complex
system design, for approximately $19 million by issuing approximately 1,441,000
shares of Avant! common stock in a merger exchange for all of the outstanding
stock of Xynetix. The Company also assumed outstanding Xynetix stock options
representing the right to purchase 126,492 shares of Avant! common stock at a
weighted average exercise price of $1.86 per share.

    In connection with the acquisition, the Company incurred expenses of
approximately $1.5 million, including professional fees totaling $0.6 million,
and facilities costs of $0.5 million and other costs of $0.4 million.
Substantially all of the Company's expenses related to the Xynetix acquisition
consisted of cash expenditures. As of December 31, 1999 the unpaid merger
related expenses were $1.0 million of which $0.4 million was related to
professional fees and $0.6 million was related to facilities and other costs.
The Company expects to pay the majority of these costs by June 30, 2000.

    Both acquisitions were accounted for using the pooling of interests
accounting method. Accordingly, the Company's consolidated financial statements
have been restated to include the financial position and results of operations
for Chrysalis and Xynetix for all periods presented. Summarized below are
revenue

                                       47
<PAGE>
                      AVANT! CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                       DECEMBER 31, 1999, 1998, AND 1997

4. MERGERS AND ACQUISITIONS (CONTINUED)
and net earnings for the separate entities, Avant!, Chrysalis and Xynetix, and
combined amounts presented in the accompanying consolidated financial statements
(in thousands):

<TABLE>
<CAPTION>
                                               NINE MONTHS        YEARS ENDED
                                                  ENDED          DECEMBER 31,
                                              SEPTEMBER 30,   -------------------
                                                  1999          1998       1997
                                              -------------   --------   --------
                                               (UNAUDITED)
<S>                                           <C>             <C>        <C>
Revenue:
Avant!......................................     $207,911     $227,141   $164,384
Chrysalis...................................       10,608       14,009      7,531
Xynetix.....................................        3,994        7,180      9,235
                                                 --------     --------   --------
                                                 $222,513     $248,330   $181,150
                                                 ========     ========   ========
Net earnings (losses):
Avant!......................................     $ 39,586     $ 27,163   $  5,398
Chrysalis...................................         (632)        (692)    (4,013)
Xynetix.....................................       (2,955)      (4,840)    (2,289)
                                                 --------     --------   --------
                                                   35,999       21,631       (904)
Adjustment for deferred taxes...............          602          947      3,294
                                                 --------     --------   --------
Net earnings................................     $ 36,601     $ 22,578   $  2,390
                                                 ========     ========   ========
</TABLE>

    On November 19, 1998, the Company acquired ACEO for approximately
$6.1 million in cash, 99,995 stock options with a fair value of $0.9 million,
and direct acquisition costs of $0.2 million. Fair value of stock options are
calculated using the Black-Scholes model with the following assumptions:
expected volatility of 74%, risk-free interest rate of 5.29%, expected lives of
4 years and no dividend yield. The net tangible assets of $1.3 million assumed
were allocated as follows: $1.31 million to current assets and $0.02 million to
equipment, furniture and fixtures. The allocation of the excess purchase price
over the net tangible assets assumed was $5.9 million of which, based on
management's estimates prepared in conjunction with a third party valuation
consultant, $1.3 million was allocated to purchased in-process research and
development and $4.6 million was allocated to other intangible assets. Amounts
allocated to other intangibles include franchise trade names of $0.5 million,
existing technology of $3.6 million, workforces of $0.2 million and other
goodwill of $0.4 million, and are being amortized over lives of five years.
Purchased in-process research and development includes the value of products in
the development stage that are not considered to have reached technological
feasibility or to have alternative future use. Accordingly, this non-recurring
item was expensed upon consummation of the acquisition. The results of
operations of ACEO and the estimated fair value of assets acquired and
liabilities assumed are included in the Company's financial statements from the
date of acquisition.

    On November 13, 1998, the Company acquired interHDL for approximately
$13.7 million in cash, 1,256,026 shares of its common stock with a value of
$17.6 million, 378,366 stock options with a fair value of $2.2 million, and
direct acquisition costs of $1.5 million. Fair value of stock options are
calculated using the Black-Scholes model with the following assumptions:
expected volatility of 74%, risk-free interest rate of 5.29%, expected lives of
4 years and no dividend yield. The net tangible assets of $1.9 million assumed
were allocated as follows: $3.6 million to current assets, $0.1 million to
equipment, furniture and fixtures

                                       48
<PAGE>
                      AVANT! CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                       DECEMBER 31, 1999, 1998, AND 1997

4. MERGERS AND ACQUISITIONS (CONTINUED)
and $1.8 million to assumed liabilities. The allocation of the excess purchase
price over the net tangible assets assumed was $33.1 million of which, based on
management's estimates prepared in conjunction with a third party valuation
consultant, $10.0 million was allocated to purchased in-process research and
development and $23.1 million was allocated to other intangible assets. Amounts
allocated to other intangibles include franchise trade names of $1.8 million,
existing technology of $5.8 million, workforces of $0.5 million and other
goodwill of $15.0 million, and are being amortized over lives of five years.
Purchased in-process research and development includes the value of products in
the development stage that are not considered to have reached technological
feasibility or to have alternative future use. Accordingly, this non-recurring
item was expensed upon consummation of the acquisition. The results of
operations of interHDL and the estimated fair value of assets acquired and
liabilities assumed are included in the Company's financial statements from the
date of acquisition.

    The unaudited pro forma consolidated results of operations of the Company,
ACEO and interHDL for the years ended December 31, after giving effect to the
poolings of Xynetix and Chrysalis in 1999, are as follows (in thousands):

<TABLE>
<CAPTION>
                                                            1998       1997
                                                          --------   --------
<S>                                                       <C>        <C>
Pro forma revenue.......................................  $252,689   $184,766
Pro forma net earnings (losses).........................  $ 15,491   $ (2,499)
Pro forma basic earnings per share......................  $   0.42   $  (0.07)
Pro forma diluted earnings per share....................  $   0.40   $  (0.07)
</TABLE>

    Included in the combined pro forma net earnings amounts are amortization of
goodwill and other intangibles over the expected useful lives of five years and
related tax benefit. Write off of in-process research and development is
excluded from the pro forma calculation.

    In connection with the merger with ACEO and interHDL, the Company incurred
direct transaction costs and merger-related integration expenses of
approximately $0.2 million and $1.5 million, respectively. Expense incurred for
the ACEO acquisition consists of transaction fees for attorneys and accountants
of approximately $0.19 million and charges for the elimination of duplicate
facilities of approximately $0.04 million. Expense incurred for the interHDL
acquisition consists of transaction fees for investment bankers, attorneys, and
accountants of approximately $0.9 million and charges for the elimination of
duplicate facilities of approximately $0.6 million. All of the $0.2 million and
$1.5 million merger related costs for ACEO and interHDL, respectively, are
related to cash expenditures. As of December 31, 1999, substantially all of the
amounts have been paid.

    On January 16, 1998, Avant! acquired TMA in a transaction accounted for as a
pooling of interests. The Company issued approximately 5,396,000 shares of its
common stock valued at approximately $95.0 million in exchange for all of the
outstanding common stock of TMA. The Company also assumed approximately
1,141,000 in TMA stock options, thereby allowing participants to purchase Avant!
stock in amounts and at prices adjusted to reflect the relative exchange ratios
of the merger.

                                       49
<PAGE>
                      AVANT! CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                       DECEMBER 31, 1999, 1998, AND 1997

4. MERGERS AND ACQUISITIONS (CONTINUED)
    The results of operations previously reported by the separate entities,
Avant! and TMA, and the combined amounts represented in the accompanying
consolidated financial statements for 1997, after giving effect to the poolings
of Xynetix and Chrysalis in 1999, are summarized as follows (in thousands):

<TABLE>
<CAPTION>
                                                                1997
                                                              --------
<S>                                                           <C>
Revenue:
Avant!......................................................  $164,112
TMA.........................................................    17,038
                                                              --------
                                                              $181,150
                                                              ========
Net earnings (losses):
Avant!......................................................  $  3,533
TMA.........................................................    (1,567)
                                                              --------
                                                                 1,966
Adjustment for deferred taxes...............................       424
                                                              --------
Net earnings................................................  $  2,390
                                                              ========
</TABLE>

    In connection with the merger with TMA, the Company incurred direct
transaction costs and merger-related integration expenses of approximately
$10.7 million, consisting of transaction fees for investment bankers, attorneys,
accountants, financial printing and stockholder meetings of approximately
$5.4 million, charges for the elimination of duplicate facilities of
approximately $2.2 million and severance costs and certain other related costs
of approximately $3.1 million in the first quarter of 1998. Of the
$10.7 million of merger related costs, approximately $7.9 million related to
cash expenditures while approximately $2.8 million related to non-cash charges.
As of December 31, 1998, there were no material remaining accrued liabilities
relating to the 1998 merger.

    On September 12, 1997, the Company completed the acquisition of Compass, a
subsidiary of VLSI Technology, Inc., for approximately $17.5 million in cash,
522,192 shares of its common stock with a value of $17.5 million and acquisition
costs of $4.9 million. The net tangible liabilities of $16.1 million assumed
were allocated as follows: $6.7 million to current assets, $4.4 million to
equipment, furniture and fixtures and $27.2 million to assumed liabilities. The
allocation of the excess purchase price over the net tangible liabilities
assumed was $56.0 million of which, based on management's estimates prepared in
conjunction with a third party valuation consultant, $41.2 million was allocated
to purchased in-process research and development and $14.8 million was allocated
to other intangible assets. Amounts allocated to other intangibles include
franchise trade names of $1.0 million, existing technology of $6.1 million,
workforces of $2.3 million and other goodwill of $5.4 million, and are being
amortized over five years. Purchased in-process research and development
includes the value of products in the development stage that are not considered
to have reached technological feasibility or to have alternative future use.
Accordingly, this non-recurring item was expensed upon consummation of the
acquisition. The results of operations of Compass and the estimated fair value
of assets acquired and liabilities assumed are included in the Company's
financial statements from the date of acquisition.

                                       50
<PAGE>
                      AVANT! CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                       DECEMBER 31, 1999, 1998, AND 1997

4. MERGERS AND ACQUISITIONS (CONTINUED)
    The unaudited pro forma consolidated results of operations of the Company
and Compass for 1997, after giving effect to the poolings of Xynetix and
Chrysalis in 1999, are as follows (in thousands):

<TABLE>
<CAPTION>
                                                                1997
                                                              --------
<S>                                                           <C>
Pro forma revenue...........................................  $214,150
Pro forma net loss..........................................  $ (6,010)
Pro forma basic earnings per share..........................  $  (0.18)
Pro forma diluted earnings per share........................  $  (0.18)
</TABLE>

    Included in pro forma revenue and net loss for 1997 were revenues of
$33.0 million and net loss of $8.4 million from Compass operations. Included in
the combined pro forma net earnings amounts are amortization of goodwill and
other intangibles over the expected useful lives ranging from four to five years
and related tax benefit.

    In connection with the merger with Compass, the Company incurred direct
transaction costs and merger-related integration expenses of approximately
$4.9 million, consisting of transaction fees for investment bankers, attorneys,
accountants, financial printing and stockholder meetings of approximately
$0.6 million, charges for the elimination of duplicate facilities of
approximately $2.4 million and severance costs and certain other related costs
of approximately $1.9 million in the third quarter of 1997. Of the $4.9 million
of merger related costs, approximately $3.8 million related to cash expenditures
while approximately $1.1 million related to non-cash charges. As of
December 31, 1998, there were no remaining accrued liabilities relating to the
1997 merger.

    On December 3, 1999, The Company announced a definitive agreement under
which the Company will acquire Analogy, Inc. ("Analogy") for a total cash
purchase price of $24 million, subject to possible adjustment for certain
Analogy expenses. The acquisition has been approved by the board of directors of
both companies and is subject to certain conditions, including compliance with
applicable regulatory requirements and approval by Analogy's stockholders. The
Company expects to close the transaction by the end of the first quarter of
2000. Analogy is a leader in mixed-signal and mixed-technology simulation,
analysis and design. Analogy's products are used in the aerospace,
automotive/transportation, semiconductor, communications, computer peripherals,
medical and industrial control industries. Its Saber product, which includes the
Calaveras algorithm and other patented technology, is the world's most advanced
and flexible simulator for mixed-signal and mixed-technology simulation.

                                       51
<PAGE>
                      AVANT! CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                       DECEMBER 31, 1999, 1998, AND 1997

5. STOCKHOLDERS' EQUITY

STOCK REPURCHASE PROGRAM

    In July 1998, the Board of Directors authorized the purchase of up to
2,000,000 shares of the Company's stock. Prior to November 1998, under this
stock repurchase program the Company repurchased approximately 1,185,000 shares
at prices ranging from $12.00 to $17.00 per share. In November 1998, the Company
reissued all of the treasury shares in connection with the 1,256,000 shares
issued in the acquisition of interHDL.

STOCKHOLDER RIGHTS PLAN

    The Company's Stockholder Rights Plan adopted September 4, 1998, is intended
to protect stockholders from unfair or unfriendly takeover practices. In
accordance with this plan, the Board of Directors declared a dividend
distribution of one preferred stock purchase right on each outstanding share of
its common stock held as of October 2, 1998, and on each share of common stock
issued by the Company thereafter. Each right entitles the registered holder to
purchase from the Company a one one-thousandth share of preferred stock at $100.
The rights become exercisable in certain circumstances including upon an entity
acquiring or announcing the intention to acquire beneficial ownership of
15 percent or more of the Company's common stock without the approval of the
Board of Directors or upon the Company being acquired by any person in a merger
or business combination transaction. The rights are redeemable by the Company
prior to exercise at $0.01 per right and expire on September 4, 2008.

STOCK OPTION/ISSUANCE PLAN

    In April 1995, the Company approved the 1995 Stock Option/Stock Issuance
Plan ("the 1995 Plan"). The 1995 Plan is the successor to the 1993 Stock
Option/Stock Issuance Plan and has terms similar to those of the 1993 Plan.

    The 1995 Plan has three separate equity programs: the Discretionary Option
Grant Program, the Stock Issuance Program and the Automatic Option Grant
Program. Eligible participants in the Discretionary Option Grant and Stock
Issuance Programs are employees, non-employee members of the Board of Directors
or the board of directors of any subsidiary and consultants and other
independent advisors who provide services to the Company. The term of the
options granted under the Discretionary Option Grant Program is generally ten
years with a typical vesting requirement of 25% after one year of service and
monthly thereafter, fully vesting upon completion of the fourth year of service.

    The 1995 Plan Automatic Option Grant Program provides for automatic
nonstatutory option grants to non-employee members of the Board of Directors.
Eligible directors receive an option to purchase 20,000 shares on the date of
his or her appointment to the Board of Directors. In addition, at each annual
stockholders' meeting, each individual who continues to serve as a nonemployee
member of the Board of Directors after the meeting receives an option grant to
purchase 5,000 shares of common stock provided such individual has served as an
nonemployee director for at least six months prior to the date of the meeting.
Options granted under the Automatic Grant Program are immediately exercisable.
However, any shares purchased under an option granted under the Automatic Grant
Program are subject to a repurchase right by the Company upon termination of the
grantee's service to the Company. With respect to a nonemployee director's
initial grant of an option to purchase 20,000 shares, the Company's repurchase

                                       52
<PAGE>
                      AVANT! CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                       DECEMBER 31, 1999, 1998, AND 1997

5. STOCKHOLDERS' EQUITY (CONTINUED)
right lapses with respect to 25% of the shares on each of the four anniversaries
of the director's continued service to the Company after the option grant date.

    On February 27, 1998, the Board of Directors approved a stock option
repricing program whereby each eligible stock option was amended to have an
exercise price equal to $13.9375, if elected by employees. As a result,
approximately 1,919,000 options were amended by eligible employees for an equal
number of repriced options. All other terms of the options, including expiration
dates, remain substantially the same.

    In connection with the mergers and acquisitions discussed in Note 4, various
option plans were assumed by the Company, thereby allowing participants to
purchase Avant! stock in amounts and at prices adjusted to reflect the relative
exchange ratios of the mergers.

    The Company applies APB Opinion No. 25 in accounting for its stock option
and purchase plans and accordingly no compensation expense has been recognized
for its stock options in the accompanying financial statements, except that, as
of December 31, 1999 the Company has recorded deferred compensation of
$0.3 million, representing the difference between the exercise price and the
fair value of the underlying common stock for options assumed in the Company's
various mergers and acquisitions. The deferred compensation will be amortized to
compensation expense over the period during which the options become
exercisable, generally four years. Had the Company determined compensation
expense based on the fair value at the grant date for its stock plans under SFAS
No. 123, the Company's net earnings and earnings per share would have been
reduced to the pro forma amounts indicated below for the years ended
December 31 (in thousands, except per share data):

<TABLE>
<CAPTION>
                                                                1999       1998       1997
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
Net earnings as reported....................................  $56,620    $22,578    $ 2,390
  Additional compensation cost resulting from:
    Stock options, including the effects of option
      repricing.............................................  (11,178)   (11,054)    (6,475)
    Employee stock purchase rights (Note 6).................     (664)      (233)    (1,032)
                                                              -------    -------    -------
  Pro forma.................................................  $44,778    $11,291    $(5,117)
                                                              =======    =======    =======
Basic earnings (loss) per share
  As reported...............................................  $  1.49    $  0.62    $  0.07
  Pro forma.................................................  $  1.18    $  0.31    $ (0.15)
Diluted earnings (loss) per share
  As reported...............................................  $  1.42    $  0.59    $  0.07
  Pro forma.................................................  $  1.18    $  0.31    $ (0.15)
</TABLE>

                                       53
<PAGE>
                      AVANT! CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                       DECEMBER 31, 1999, 1998, AND 1997

5. STOCKHOLDERS' EQUITY (CONTINUED)
    The fair value of each option and purchase right is estimated on the date of
grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions:

<TABLE>
<CAPTION>
                                                        1999        1998        1997
                                                      --------    --------    --------
<S>                                                   <C>         <C>         <C>
Stock Option Plan:
Expected life (years)...............................    4.32        3.81        4.41
Risk-free interest rate.............................    5.61%       5.29%       6.05%
Volatility..........................................      72%         74%         74%
Dividend yield......................................       0%          0%          0%

Stock Purchase Plan:
Expected life (years)...............................     0.5         0.5         0.5
Risk-free interest rate.............................    4.86%       5.27%       5.66%
Volatility..........................................      72%         74%         74%
Dividend yield......................................       0%          0%          0%
</TABLE>

    The effects of applying SFAS No. 123 for disclosing compensation cost may
not be representative of the effects on reported net earnings for future years
because pro forma net earnings reflects compensation costs for stock options
granted since January 1, 1996 and does not consider compensation cost for stock
options granted prior to January 1, 1996.

                                       54
<PAGE>
                      AVANT! CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                       DECEMBER 31, 1999, 1998, AND 1997

5. STOCKHOLDERS' EQUITY (CONTINUED)
    A summary of the status of the Company's stock option plans for the years
ended December 31, is presented below (in thousands, except per share data):

<TABLE>
<CAPTION>
                                                           OPTIONS OUTSTANDING
                                                       ---------------------------
                                                                  WEIGHTED-AVERAGE
                                                       OPTIONS     PRICE EXERCISE
                                                       --------   ----------------
<S>                                                    <C>        <C>
Balances, December 31, 1996..........................    5,019         $12.40

Granted..............................................    3,337         $21.16
Exercised............................................   (1,716)        $ 3.92
Canceled.............................................     (870)        $19.56
                                                        ------         ------
Balances, December 31, 1997..........................    5,770         $16.28

Granted..............................................    4,293         $12.05
Exercised............................................     (536)        $ 2.93
Canceled.............................................   (2,611)        $22.23
                                                        ------         ------
Balances, December 31, 1998..........................    6,916         $12.44

Granted..............................................      882         $14.84
Exercised............................................     (898)        $ 6.73
Canceled.............................................   (1,096)        $10.53
                                                        ------         ------
Balances, December 31, 1999..........................    5,804         $14.06
                                                        ======         ======
</TABLE>

<TABLE>
<CAPTION>
                                                          1999       1998       1997
                                                        --------   --------   --------
<S>                                                     <C>        <C>        <C>
Weighted average fair value of options granted........   $8.90      $5.98      $11.92
</TABLE>

    The following summarizes information about stock options outstanding as of
December 31, 1999:

<TABLE>
<CAPTION>
                                       OPTIONS OUTSTANDING                      OPTIONS EXERCISABLE
                        --------------------------------------------------   --------------------------
                                         WEIGHTED-AVERAGE                                     WEIGHTED-
                            NUMBER          REMAINING         WEIGHTED-          NUMBER        AVERAGE
      RANGE OF           OUTSTANDING       CONTRACTUAL         AVERAGE        EXERCISABLE     EXERCISE
   EXERCISE PRICE       (IN THOUSANDS)      LIFE (YRS)      EXERCISE PRICE   (IN THOUSANDS)     PRICE
---------------------   --------------   ----------------   --------------   --------------   ---------
<S>                     <C>              <C>                <C>              <C>              <C>
0.07Below $.............        195            6.9              $ 0.03             114         $ 0.03
0.30$-$1.00.......             258             5.2                0.14             190           0.68
1.21$-$1.57.......             119             5.5                1.52              95           1.53
2.40$-$3.52.......             105             6.3                2.87              59           2.96
6.84$-$9.81.......             294             6.7                8.24             207           8.28
10.8$8-$15.5......           3,641             7.7               13.95           1,711          13.97
16.6$7-$23.25.....             802             7.6               19.34             461          18.88
25.1$3-$37.22.....             369             7.1               30.81             265          30.80
41.2$5-$41.50.....              21             5.9               41.49              21          41.49
                            ------                                               -----
0.01$-$41.50......           5,804             7.4              $14.06           3,123         $14.02
                            ======                                               =====
</TABLE>

                                       55
<PAGE>
                      AVANT! CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                       DECEMBER 31, 1999, 1998, AND 1997

6. EMPLOYEE BENEFIT PLANS

EXECUTIVE DEFERRED COMPENSATION PLAN

    During the fourth quarter of 1999, the Company adopted an Executive Deferred
Compensation Plan which permits eligible executive employees to supplement their
retirement income through deferral of pre-tax income. The Board of Directors, at
its sole discretion, determines those employees who are eligible to participate
in the plan.

401(K) PLAN

    The Company has a 401(k) retirement savings plan covering substantially all
employees in the United States. Contributions are matched at the discretion of
the Board of Directors. The matching contributions amounted to $2.3 million,
$2.1 million and $1.5 million for 1999, 1998 and 1997, respectively.

EMPLOYEE STOCK PURCHASE PLAN

    The Company has a Qualified Employee Stock Purchase Plan ("Stock Purchase
Plan"), which currently permits eligible employees to purchase common stock of
the Company. The Stock Purchase Plan is qualified under Section 423 of the
Internal Revenue Code of 1986, as amended. Under the Stock Purchase Plan, during
six-month offering periods, employees may purchase from the Company a designated
number of shares through payroll deductions at a price per share equal to 85% of
the lesser of the fair market value of the Company's common stock as of the date
of the grant or the date the right to purchase is exercised. Under the Stock
Purchase Plan, the Company sold 163,000, 244,000 and 171,000 shares to employees
in 1999, 1998 and 1997, respectively.

    The fair value of employee purchase rights, for purposes of SFAS No. 123
disclosure (see Note 5) was estimated using the Black-Scholes model with the
following assumptions for 1999, 1998 and 1997, respectively: expected volatility
of 72%, 74% and 74%, respectively, risk-free interest rates of 4.86%, 5.29% and
6.05%, respectively, expected life of six months and no dividend yield. The
weighted average fair value of those purchase rights (including the 15% discount
to the fair value of the Company's common stock) granted in 1999, 1998 and 1997
were $4.26, $5.09 and $8.49, respectively.

7. INCOME TAXES

    The components of the Company's total earnings before provision for income
taxes for the years ended December 31, are as follows (in thousands):

<TABLE>
<CAPTION>
                                                      1999       1998       1997
                                                    --------   --------   --------
<S>                                                 <C>        <C>        <C>
United States.....................................  $89,781    $40,761     $4,887
Foreign...........................................    4,703      6,308     (1,759)
                                                    -------    -------     ------
  Total...........................................  $94,484    $47,069     $3,128
                                                    =======    =======     ======
</TABLE>

                                       56
<PAGE>
                      AVANT! CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                       DECEMBER 31, 1999, 1998, AND 1997

7. INCOME TAXES (CONTINUED)
    The components of income tax expense (benefit), as presented in the
accompanying consolidated statements of earnings, are comprised of federal
taxes, state taxes and certain foreign taxes. The components of income taxes as
of December 31, are as follows (in thousands):

<TABLE>
<CAPTION>
                                                     1999       1998       1997
                                                   --------   --------   --------
<S>                                                <C>        <C>        <C>
Provision for income taxes:
Current:
  Federal........................................  $29,896    $19,284    $14,692
  Foreign........................................    2,591      5,125      1,290
  State..........................................    6,757      4,529      2,331
                                                   -------    -------    -------
    Total........................................   39,244     28,938     18,313
                                                   -------    -------    -------
Deferred:
  Federal........................................   (1,653)    (4,264)   (18,001)
  State..........................................   (3,415)      (631)    (2,565)
                                                   -------    -------    -------
    Total........................................   (5,068)    (4,895)   (20,566)
                                                   -------    -------    -------
Charge in lieu of taxes attributable to employee
  stock plans....................................    3,688        448      2,991
                                                   -------    -------    -------
    Total provision for income taxes.............  $37,864    $24,491    $   738
                                                   =======    =======    =======
</TABLE>

    The Company's effective tax rate differs from the federal statutory income
tax rate of 35% as follows (in thousands):

<TABLE>
<CAPTION>
                                                      1999       1998       1997
                                                    --------   --------   --------
<S>                                                 <C>        <C>        <C>
Income tax expense at statutory rate..............  $33,068    $18,146     $1,110
State tax expense, net............................    5,745      2,709        322
Nondeductible merger costs........................    3,698      8,335      1,732
Change in valuation allowance.....................       --     (1,033)     1,338
Tax exempt income.................................     (996)      (474)      (839)
Tax credits.......................................   (2,548)    (3,734)    (2,589)
Foreign sales corporation.........................   (1,514)    (1,218)    (1,025)
Foreign taxes.....................................       58        847        798
Non-cash stock compensation.......................      227        758         --
Equity investment in foreign companies............     (272)      (384)        --
Other.............................................      398        539       (109)
                                                    -------    -------     ------
  Actual income tax expense.......................  $37,864    $24,491     $  738
                                                    =======    =======     ======
</TABLE>

                                       57
<PAGE>
                      AVANT! CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                       DECEMBER 31, 1999, 1998, AND 1997

7. INCOME TAXES (CONTINUED)
    The tax effects of the temporary differences that give rise to significant
portions of the deferred tax assets and liabilities as of December 31, are as
follows (in thousands):

<TABLE>
<CAPTION>
                                                              1999       1998
                                                            --------   --------
<S>                                                         <C>        <C>
Deferred tax assets:
  Accrued liabilities.....................................  $ 5,556    $ 3,745
  Accrual to cash adjustment..............................      292        437
  Allowance for doubtful accounts.........................    5,059      3,289
  Net operating loss carryforwards........................    9,116      9,955
  Deferred revenue........................................    7,058      4,953
  Property and equipment, principally due to
    depreciation..........................................       --        207
  Purchased technology....................................   17,516     15,744
  Tax credit carryforwards................................    3,701      2,330
  Other...................................................      413        544
                                                            -------    -------
    Total gross deferred tax assets.......................   48,711     41,204
    Deferred tax asset valuation allowance................   (2,188)    (2,188)
                                                            -------    -------
                                                             46,523     39,016
Deferred tax liabilities:
  Unrealized gain on venture capital investments..........   (2,330)        --
  Property and equipment, principally due to
    depreciation..........................................     (138)        --
  Other...................................................       --        (29)
                                                            -------    -------
Net deferred tax assets...................................  $44,055    $38,987
                                                            =======    =======
</TABLE>

    The Company had net operating loss carryforwards of $22.2 million for U.S.
federal income tax purpose as of December 31, 1999, expiring through the year
2019. The Company acquired these net operating loss carryforwards as a result of
the mergers with Chrysalis and Xynetix. The Company also acquired state net
operating loss carryforwards for various states in various amounts as a result
of the mergers with Chrysalis and Xynetix.

    As of December 31, 1999, the Company had foreign tax credit carryforwards of
$1.1 million. The Company also had research credit carryforwards of
approximately $2.4 million and $0.2 million for federal and California purposes,
respectively.

    Under the Tax Reform Act of 1986, the amounts of and the benefit from net
operating losses and research and development credits that can be carried
forward may be impaired or limited in certain circumstances. Events which may
cause changes in the Company's net operating loss and research and development
credit carryovers include, but are not limited to, a cumulative stock ownership
change of greater than 50%, as defined, over a three year period. The Company
experienced several of such changes due to merger activities; therefore, its
ability to utilize a portion of the total carryforwards may be subject to
certain limitations.

    The change in ownership limitations discussed above raises uncertainty
regarding the realization of the tax credit carryforwards. As a result,
management has established a valuation allowance for deferred tax assets of
$2.2 million as of December 31, 1999.

                                       58
<PAGE>
                      AVANT! CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                       DECEMBER 31, 1999, 1998, AND 1997

8. CONCENTRATIONS OF CREDIT RISK

    Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of investments and trade
accounts receivable.

    The Company invests in a variety of financial instruments issued by high
credit quality institutions. Markets for these securities generally are highly
liquid, and therefore bear minimal risk. Management regularly monitors the
composition and maturity of these securities. The Company, by policy, limits the
amount of credit exposure to any one financial institution, or commercial or
municipal issuer. The Company has not experienced any material losses on its
investments.

    To reduce credit risk, the Company performs ongoing credit evaluations of
its customers' financial condition. The Company maintains reserves for potential
credit losses, but historically has not experienced any significant losses
related to individual customers or groups of customers in any geographic area.
The Company's allowance for doubtful accounts was $12.8 million, $9.3 million
and $5.3 million as of December 31, 1999, 1998 and 1997, respectively. The
Company increased its allowance account by $4 million in the fourth quarter of
1999 to reflect aging balances of customer accounts that were over one year.

9. RELATED PARTY TRANSACTIONS

    Included in prepaid expenses and other current assets as of December 31,
1999 and 1998 was $1.6 million and $2.3 million of notes receivable due from
officers and a former officer.

    During 1996, the Company issued a total of 125,457 shares of common stock to
certain officers of the Company in exchange for notes receivable of
$0.2 million. The notes bear interest at 5.45% to 5.73% and the principal, with
interest, is due in January and April of the year 2000.

    The Company entered into certain joint ventures in Japan and Korea for the
purpose of consolidating distribution in the two countries and entered into a
limited partnership which invests primarily in technology start up companies.
See Note 11.

10. SEGMENT INFORMATION

    The Company has adopted the provisions of SFAS No. 131, DISCLOSURE ABOUT
SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION. SFAS No. 131 establishes
standards for the reporting by public business enterprises of information about
operating segments, products and services, geographic areas, and major
customers. The method for determining what information to report is based on the
way that management organizes the operating segments within the Company for
making operating decisions and assessing financial performance.

    The Company's chief operating decision-maker is considered to be the
Company's Chief Executive Officer ("CEO"). The CEO reviews financial information
presented on a consolidated basis accompanied by disaggregated information about
revenues by geographic region for purposes of making operating decisions and
assessing financial performance. The consolidated financial information reviewed
by the CEO is identical to the information presented in the accompanying
consolidated statement of operations. Therefore, the Company operates in a
single operating segment: electronic design automation software and services.

                                       59
<PAGE>
                      AVANT! CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                       DECEMBER 31, 1999, 1998, AND 1997

10. SEGMENT INFORMATION (CONTINUED)
    Revenue and asset information regarding operations in the different
geographic regions is as follows (in thousands):

<TABLE>
<CAPTION>
                                                    NORTH AMERICA    EUROPE      ASIA     CONSOLIDATED
                                                    -------------   --------   --------   ------------
<S>                                                 <C>             <C>        <C>        <C>
Revenues:
  1997............................................     $107,794     $18,371    $54,985      $181,150
  1998............................................      172,548      30,204     45,578       248,330
  1999............................................      217,224      31,262     55,134       303,620
Identifiable assets:
  As of December 31, 1998.........................     $315,243     $18,931    $ 3,334      $337,508
  As of December 31, 1999.........................      411,571      14,408      9,548       435,527
Long-lived assets:
  As of December 31, 1998.........................     $ 28,511     $ 1,011    $   630      $ 30,152
  As of December 31, 1999.........................       24,472         608      1,482        26,562
</TABLE>

    No single customer accounted for greater than 10% of revenues in any period
reported. It is not practicable to report the revenue from external customers
for each product or service.

11. JOINT VENTURES

    During 1997 and 1996, respectively, the Company entered into joint ventures
with Maingate Electronics, KK ("Maingate") of Japan and Davan Tech Co., Ltd,
("Davan Tech") of Korea. The joint ventures were formed for the purpose of
consolidating distribution in their respective countries. The Company has
ownership of 35% and 39.6% of Maingate and Davan Tech, respectively, and
accounts for them by the equity method. These investments are included in other
assets and the Company's share of equity earnings are included in the Statement
of Earnings as equity income (losses) from unconsolidated subsidiaries. The
Company's Chairman of the Board, President and Chief Executive Officer owns 40%
of Maingate and 2.6% of Davan Tech. The Company's Executive Operating Officer,
Operations, owns 2% of Maingate.

    The Company recognizes software license revenue sold to these joint ventures
when cash is collected by the joint ventures from the end users or by the
Company. Revenues from sales to Maingate and Davan Tech during 1999 were
$16.8 million and $2.1 million, respectively. Revenues from sales to Maingate
and Davan Tech during 1998 were $14.3 million and $0.9 million, respectively.
Revenues from sales to Maingate and Davan Tech during 1997 were $4.8 million and
$0.7 million, respectively. At December 31, 1999, due from affiliates included
trade receivables of $2.7 million from Maingate, $1.9 million from Davan Tech of
which a $1.0 million was a loan to Davan Tech made during 1998. At December 31,
1998, due from affiliates included trade receivables of $7.9 million from
Maingate and a $1 million loan to Davan Tech.

    During 1998, the Company invested $10 million into Forefront Venture
Partners L.P. ("Forefront"), a limited partnership which invests primarily in
technology start-up companies. This investment represented 53.85% ownership of
the partnership. The partnership is controlled and managed by a General
Partnership; a member of this partnership is a board member of the Company. The
Company accounts for this investment by the equity method because the Company
does not control Forefront. During 1999, the Company recorded $5.7 million
equity income related to Forefront which consisted primarily of unrealized
appreciation of the venture capital investments which occurred in the fourth
quarter. The Company

                                       60
<PAGE>
                      AVANT! CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                       DECEMBER 31, 1999, 1998, AND 1997

11. JOINT VENTURES (CONTINUED)
believes that due to the nature of venture capital investing, its investment in
Forefront will be subject to significant fluctuation which may result in the
Company recording significant income and losses in the future.

    The Company's equity income of $6.1 million, $1.0 million and $0.5 million
in 1999, 1998, and 1997, respectively, represented the Company's share of equity
interest in investments in Maingate, Davan Tech and Forefront.

12. COMMITMENTS

OPERATING LEASES

    The Company generally leases all its facilities under noncancelable
operating lease agreements which expire over the next thirteen years. Rental
expense incurred by the Company under operating lease agreements totaled
$7.8 million, $8.1 million and $5.5 million for the years ended December 31,
1999, 1998 and 1997, respectively.

    Future annual minimum lease payments under noncancelable operating leases
for the years ended December 31, are as follows (in thousands):

<TABLE>
<S>                                                           <C>
2000........................................................  $ 9,114
2001........................................................    8,747
2002........................................................    8,510
2003........................................................    8,366
2004........................................................    6,858
Thereafter..................................................   42,355
                                                              -------
                                                              $83,950
                                                              =======
</TABLE>

    The Company subleases certain of its facilities under noncancelable
operating sublease agreements which expire over the next six years. The minimum
operating lease payments have not been reduced by the minimum sublease rentals
of $5.8 million due under the noncancelable subleases.

13. CONTINGENCIES

    Avant! and its subsidiaries are engaged in a number of material litigation
matters, including: a civil action brought by Cadence Design Systems, Inc., the
criminal indictment of Avant! and certain of its employees, officers and
directors, securities class action and defamation claims stemming from the
Cadence litigation and the criminal indictment, and civil actions brought by
Silvaco Data Systems, Inc. The pending litigation against Avant! and any future
litigation against Avant! or its employees, regardless of the outcome, may
result in substantial costs and expenses and significant diversion of effort by
Avant!'s management. An adverse result in any of these litigation matters could
seriously harm Avant!'s business, financial condition and results of operations.

    In addition, on December 16, 1998, after a grand jury investigation, the
Santa Clara County District Attorney's office filed a criminal indictment
alleging felony level offenses related to the allegations of misappropriation of
trade secrets set forth in Cadence's lawsuit. The indictment charges the Company
and

                                       61
<PAGE>
                      AVANT! CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                       DECEMBER 31, 1999, 1998, AND 1997

13. CONTINGENCIES (CONTINUED)
certain current and former directors, officers, other employees and consultants,
including the Chairman and CEO, Gerald C. Hsu, with conspiring to commit trade
secret theft, inducing the theft of a trade secret, conspiracy to commit
fraudulent practices in connection with the offer or sale of security and
fraudulent practices in connection with the offer or sale of a security. Trial
of the case, which had been set for February 22, 2000 has been rescheduled to
begin on May 15, 2000.

    In the securities class action complaint several parties allege that the
officers of the Company misled the market by omitting material information
related to the Cadence litigation. In the civil actions brought by Silvaco Data
System, Inc., a judgment of $31.4 million was entered against the Company. The
Company has filed an appeal and posted a bond which is collateralized by a
$23.6 million letter of credit. In 1998, a Cadence employee filed a complaint
against the Company, which alleges causes of action for defamation, intentional
infliction of emotional distress, negligent and intentional interference with
economic advantage, abuse of process and violations of California Business and
Profession Code Section 17200.

    The matters discussed above will result in additional defense costs to
Avant! and could result in criminal fines against Avant!, as well as the
potential incarceration of key members of its management team. Any of these
outcomes could seriously harm Avant!'s business, financial condition and results
of operations and might result in canceled or postponed orders, substantial
additional legal fees and personnel costs, the loss of senior management and
other key personnel, additional stockholder litigation and loss of reputation
and goodwill.

    The pending litigations and any future litigations 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's legal expenses for
these matters have been $14.7 million, $12.3 million, and $8.7 million for the
years 1999, 1998 and 1997, respectively.

    Due to the nature of the above mentioned uncertainties, the Company is
unable to determine the estimated loss or range of loss, if any, from the
ultimate outcome of these matters.

                                       62
<PAGE>
SCHEDULE II

                               AVANT! CORPORATION

                       VALUATION AND QUALIFYING ACCOUNTS

                        ALLOWANCE FOR DOUBTFUL ACCOUNTS

                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                               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, 1997...............     $1,181        2,080          (503)     2,496       5,254
Year ended December 31, 1998...............     $5,254        4,937        (1,055)       141       9,277
Year ended December 31, 1999...............     $9,277        7,282        (3,787)        --      12,772
</TABLE>

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

(1) Compass Design Automation, Inc. balance as of 9/12/97. interHDL, Inc.
    balance as of 11/13/98.

                                       63
<PAGE>
EXHIBIT 21.1 SUBSIDIARIES OF REGISTRANT

<TABLE>
<CAPTION>
                                                              JURISDICTION OF
NAME                                                           INCORPORATION
----                                                          ---------------
<S>                                                           <C>
Integrated Silicon Systems, Inc.............................  North Carolina
ISS Software, Inc...........................................  California
ISS Corporate Services, Inc.................................  North Carolina
Avant! Corporation, Ltd.....................................  United Kingdom
Avant! Export FSC, Inc......................................  Barbados
Avant! Japan KK.............................................  Japan
Avant! Korea, Inc...........................................  Korea
Meta-Software KK............................................  Japan
Meta-Software SA............................................  Switzerland
Meta-Software Deutschland, GMBH.............................  Germany
AvanWise, Inc...............................................  Delaware
AvanSmart, Inc..............................................  Delaware
Gemstone Corporation, LLC...................................  Delaware
Compass Design Automation, Inc..............................  Delaware
Galax!, Inc.................................................  Delaware
Compass Design Automation, GMBH.............................  Germany
Compass Design Automation, International BV.................  Netherlands
Compass Foreign Sales Corporation...........................  Barbados
Compass Design Automation, KK...............................  Japan
Compass Design Automation, EURL.............................  France
Compass Design Automation, Korea............................  Korea
ACEO Technology, Inc........................................  California
interHDL Design Corporation.................................  California
Chrysalis Symbolic Design, Inc..............................  Delaware
Xynetix Design Systems, Inc.................................  Delaware
Xynetix Design Systems, GMBH................................  Germany
Xynetix Design Systems, Ltd.................................  United Kingdom
Xynetix Design Systems, SARL................................  France
Technology Modeling Associates Ltd..........................  United Kingdom
</TABLE>

                                       64
<PAGE>
EXHIBIT 23.1

                     REPORT ON FINANCIAL STATEMENT SCHEDULE
                      AND CONSENT OF INDEPENDENT AUDITORS

The Board of Directors
Avant! Corporation:

    The audits referred to in our report dated January 24, 2000, included the
related consolidated financial statement schedule as of December 31, 1999, and
for each of the years in the three-year period ended December 31, 1999, as
listed in Item 14 herein. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement schedule based on our audits. In our
opinion, such financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.

    We consent to incorporation by reference in the registration statements
(Nos. 333-18445 and 333-43087) on Form S-3, and in the registration statements
(Nos. 333-16981, 333-16303, 333-15159, 333-06405, 333-77196, 333-77242,
333-71473, 333-65305, 333-53365, 333-44413 333-85541 and 333-86011) on Form S-8
of our reports dated January 24, 2000 relating to the consolidated balance
sheets of Avant! Corporation as of December 31, 1999 and 1998, and the related
consolidated statements of earnings, stockholders' equity, and cash flows for
each of the years in the three-year period ended December 31, 1999, and the
related financial statement schedule, included herein.

                                                                    /S/ KPMG LLP

Mountain View, California
March 6, 2000

                                       65