ANSOFT CORP, 424B4, 1998-02-25

ANSOFT CORP
424B4, 1998-02-25
PREPACKAGED SOFTWARE

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<PAGE> 1

FILED PURSUANT TO RULE 424(B)(4)
REGISTRATION NUMBER 333-41089

PROSPECTUS

2,000,000 SHARES

ANSOFT LOGO

COMMON STOCK

All of the 2,000,000 shares of Common Stock offered hereby are being sold
by Ansoft Corporation ("Ansoft" or the "Company"). The Company's Common Stock is
quoted on the Nasdaq National Market under the symbol ANST. On February 24,
1998, the last reported sale price of the Common Stock was $13.00 per share. See
"Price Range of Common Stock."

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

THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 5.

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

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
==================================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Per Share.......................... $12.00 $0.70 $11.30
- ------------------------------------------------------------------------------------------------------------------
Total(3)........................... $24,000,000 $1,400,000 $22,600,000
==================================================================================================================
</TABLE>

(1) See "Underwriting" for a description of indemnification arrangements with
the several Underwriters.

(2) Before deducting expenses payable by the Company estimated at $450,000.

(3) The Company has granted the Underwriters a 30-day option to purchase up to
300,000 additional shares of Common Stock solely to cover over-allotments,
if any. If all such shares are purchased, the total Price to Public,
Underwriting Discount and Proceeds to Company will be $27,600,000,
$1,610,000 and $25,990,000, respectively. See "Underwriting."

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

The shares of Common Stock are offered by the several Underwriters subject
to prior sale, receipt and acceptance by them and subject to the right of the
Underwriters to reject any order in whole or in part and certain other
conditions. It is expected that certificates for such shares will be available
for delivery on or about
March 2, 1998, at the office of the agent of Hambrecht & Quist LLC in New York,
New York.

HAMBRECHT & QUIST WESSELS, ARNOLD & HENDERSON

February 25, 1998
<PAGE> 2
[Graphic depicts satellite dish, computers, video camera, airplane, car and
cellular phone surrounding Company logo within a triangle with the terms
"performance," "miniaturization" and "yield" at the points of the triangle.]

ANSOFT'S ELECTROMAGNETICS-BASED EDA SOFTWARE IS USED BY ENGINEERS TO DESIGN
COMPONENTS AND SYSTEMS INCORPORATED IN PRODUCTS SUCH AS THE ONES DEPICTED ABOVE.

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING BY ENTERING STABILIZING BIDS, EFFECTING SYNDICATE COVERING
TRANSACTIONS OR IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "UNDERWRITING."

IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON
THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE 103 OF REGULATION M UNDER THE
SECURITIES EXCHANGE ACT OF 1934. SEE "UNDERWRITING."
<PAGE> 3

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements and notes thereto of the
Company appearing elsewhere in this Prospectus. Prospective investors should
consider carefully the information under "Risk Factors."

THE COMPANY

Ansoft Corporation ("Ansoft" or the "Company") develops, markets and
supports electronic design automation ("EDA") software based on fundamental
electromagnetic principles. The Company's products are used by design engineers
in a wide range of industries, including the rapidly evolving wireless
communications and RF markets as well as the semiconductor, computer, automotive
and consumer electronics industries. The Company's software is used in the
design of high performance electrical devices and systems, such as cellular
phones, communications systems, computer circuit boards and motors.

Traditional EDA tools lack the requisite degree of precision in modeling
electromagnetic interactions in components and systems and, as a result, the
current process for designing and manufacturing wireless and electronic
components and systems is often iterative, time-consuming and inaccurate. By
using the Company's software, design engineers can more accurately predict
electromagnetic interactions at the component and system level. This allows the
Company's customers to produce more compact systems with higher performance
while reducing time-to-market, lowering risk of design failure and eliminating
costly and time-consuming product redesign. The Company believes that its
software products, which are based on Maxwell's Equations, more accurately model
electromagnetic interaction than do traditional EDA tools.

The Company's software products are targeted at three markets:
high-frequency ("HF"), signal integrity ("SI") and electromechanical ("EM"). The
HF software enables users to design RF integrated circuits, antenna and radar
systems and microwave components. The SI software enables users to design
computer interconnects, IC packaging structures and electronic systems by
accurately capturing the degradation in signal quality due to higher clock
speeds and smaller physical dimensions. The EM software enables designers of
electromechanical components and systems to optimize the electrical performance
of their designs while increasing manufacturing yields. Ansoft products may be
used as an independent design platform or integrated with complementary EDA
tools within a customer's existing design environment and are available for Unix
and Microsoft Windows 95/NT operating systems.

The Company's objective is to become a leading worldwide supplier of EDA
software. Using its proprietary electromagnetic technology as a primary
competitive advantage, the Company pursues its objectives through the following
strategies: leveraging its technology leadership to solve emerging
electromagnetic design issues in high performance electrical devices and
systems; capitalizing on the growing need for electromagnetic analysis in
increasingly compact and complex electronic and electromechanical components and
systems operating at higher speeds; and expanding its broad range of product
applications to address emerging customer design requirements.

Ansoft markets and sells its products through its direct sales force and
distributors. As of December 31, 1997, the Company had a direct sales force of
35 representatives, supported by 56 employees in application engineering,
marketing and sales administration. The Company has sold licenses for its
products to over 500 organizations worldwide. Ansoft's customers include
industry leaders in wireless communications and RF markets, as well as in the
automotive, computer and consumer electronics industries. The Company's
customers include Andrew Corporation, Applied Materials, GM, IBM, Intel, Lucent
Technologies, Mitsubishi, Motorola, Nissan and Texas Instruments.

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THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by the Company......................... 2,000,000 shares
Common Stock outstanding after the offering(1).............. 11,204,369 shares
Use of Proceeds............................................. For working capital, repayment of
indebtedness and other general
corporate purposes, including
possible acquisitions.
Nasdaq National Market Symbol............................... ANST
</TABLE>

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

<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEAR ENDED APRIL 30, OCTOBER 31,
---------------------------------------------- -----------------
1993 1994 1995 1996 1997 1996 1997
------- ------- ------- ------ ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Total revenue.............. $ 3,471 $ 5,121 $ 6,154 $8,695 $14,188 $ 5,652 $11,619
Income (loss) from
operations(2)........... (774) (46) (289) 653 (7,552) (2,782) 1,064
Net income (loss)(2)....... $ (967) $ (140) $ (305) $1,300 $(6,450) $(2,404) $ 1,641
Net income (loss) per
share(2)................ $ (0.40) $ (0.06) $ (0.06) $ 0.19 $ (0.81) $ (0.31) $ 0.17
Weighted average shares
outstanding............. 2,394 2,394 5,528 6,873 7,955 7,878 9,859
</TABLE>

<TABLE>
<CAPTION>
OCTOBER 31, 1997
-------------------------
ACTUAL AS ADJUSTED(3)
------ --------------
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents................................. $ 1,040 $21,281
Working capital........................................... 3,096 25,246
Total assets.............................................. 21,762 42,003
Total stockholders' equity................................ $17,595 $39,745
</TABLE>

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

(1) Based on the number of shares outstanding as of December 31, 1997. Excludes
(i) 2,350,000 shares of Common Stock reserved for issuance under the
Company's 1988 and 1995 Stock Option Plans, of which 1,193,917 shares were
subject to outstanding options as of December 31, 1997, at a weighted
average exercise price of $4.17 per share, and (ii) 260,000 shares reserved
for issuance upon exercise of options outstanding as of December 31, 1997,
at a weighted average exercise price of $5.23 per share. See
"Management--Employee Stock Option Plans" and Note 8 of Notes to the
Consolidated Financial Statements of the Company.

(2) Includes acquired in process research and development charges of $8,754, or
$1.10 per share, recognized in fiscal 1997.

(3) As adjusted to reflect the sale of shares of Common Stock offered by the
Company hereby and the repayment of approximately $1,909,000 in
indebtedness. See "Use of Proceeds" and "Capitalization."

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

Except as otherwise indicated, (i) all information in this Prospectus
assumes no exercise of the Underwriters' over-allotment option and (ii) all
references herein to the "Company" or "Ansoft" include Ansoft Corporation and
its wholly-owned subsidiaries. All references herein to a particular fiscal year
are to the fiscal year ending April 30 of that year.

Compact Software(R), Maxwell(R), Harmonica(R), Ensemble(R), ParlCs(R) and
Serenade(R) are registered United States trademarks of Ansoft. All other
trademarks, service marks and trade names referred to in this Prospectus are the
property of their respective owners.

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<PAGE> 5

RISK FACTORS

This Prospectus contains forward-looking statements that involve risks and
uncertainties. Actual results could differ materially from those discussed in
the forward-looking statements as a result of certain factors, including those
set forth below and elsewhere in this Prospectus. The following risk factors
should be considered carefully in addition to the other information in this
Prospectus before purchasing the shares of the Common Stock offered hereby.

Uncertainty of Broad Market Acceptance. Historically, substantially all of
the Company's revenue has been derived from the licensing and support of its
electromagnetic analysis software. To date, there has been a limited market for
electromagnetic analysis software. The failure of this market to develop or the
slow development of this market would have a material adverse effect on the
Company's business, operating results and financial condition. The Company
believes that a number of factors will be necessary for its products to achieve
broad market acceptance. These factors include increased demand for performance,
miniaturization and manufacturing yield in the communications, computer and
electronics industries; integration of its products with existing design systems
and complementary EDA software; and user familiarity with the Company's products
and capabilities. A decreased demand for electromagnetic analysis software as a
result of competition, technological change or other factors would have a
material adverse effect on the Company's business, operating results and
financial condition. There can be no assurance that markets for the Company's
products will develop further or, if they do, that the Company's products will
achieve broad market acceptance. See "Business--Products" and "Business--Product
Development."

Competition. The EDA software industry is highly competitive and is
characterized by continuing advances in products and technologies. In general,
competition comes from major EDA vendors, many of which have a longer operating
history, significantly greater financial, technical and marketing resources,
greater name recognition and a larger installed customer base than the Company.
These companies also have established relationships with current and potential
customers of the Company. The Company competes directly with certain major EDA
vendors and privately-held companies which also provide products based on
electromagnetic principles derived from Maxwell's Equations. There can be no
assurance that the major EDA vendors and other EDA companies will not expand and
develop new products in the electromagnetics-based EDA market. The Company also
competes, on a limited basis, with the internal development groups of its
existing and potential customers, many of whom design and develop customized
design tools for their particular needs. In addition, the EDA industry has
become increasingly concentrated in recent years as a result of acquisitions,
and further concentration within the EDA industry could result in increased
competition for the Company. The Company's software products currently compete
with certain software offerings from Hewlett-Packard Corporation ("HP"). The
Company entered into a distribution arrangement with HP under which HP formerly
distributed the Company's HFSS 4.0 product on an exclusive basis (the "HP
Agreement"). The HP Agreement has since expired, although HP retains the right
to distribute HFSS 4.0 through January 1998. HP has publicly announced the
introduction of a follow-on product called HP HFSS 5.0. The Company currently
sells the latest version of its HFSS product, Ansoft HFSS 5.0, through its own
sales force and other distributors. There can be no certainty that the Company
will be able to compete successfully against HP, or that any failure to compete
successfully with the introduction of HP's own HFSS product will not have an
adverse impact on the Company's operations and prospects. The failure of the
Company to compete successfully against current and future competitors would
have a material adverse effect on the Company's business, operating results and
financial condition. See "Business--Competition."

History of Losses; Future Operating Results Uncertain. The Company has
incurred net losses in each fiscal year since its founding with the exception of
fiscal 1996. Although the Company is experiencing revenue growth and reported
net income in six of its last eight fiscal quarters, such growth and
profitability should not be considered to be indicative of future revenue
growth, if any, or of future operating results. There can be no assurance that
the Company's revenue and net income will grow or be sustained in future periods
or that the Company will remain profitable in any future period. Future
operating results will depend on many factors, including the degree and the rate
of growth of the markets in which the Company competes and the accompanying
demand for the Company's products, the level of product and price competition,
the ability of the Company to develop and market new products and to control
costs, the ability of the Company to expand its

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<PAGE> 6

direct sales force and the ability of the Company to attract and retain key
personnel. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

Potential Fluctuations in Quarterly Results. The Company's quarterly
operating results have varied in the past and may in the future vary
significantly depending on factors such as increased competition, the timing of
new product announcements and changes in pricing policies by the Company or its
competitors, market acceptance of new and enhanced versions of the Company's
products, the size and timing of significant license purchases, the cancellation
of maintenance agreements, the mix of direct and indirect sales, future
acquisitions, changes in operating expenses and changes in general economic
factors. The sales cycle associated with licensing the Company's products is
typically lengthy and subject to a number of significant risks over which the
Company has little or no control, including customers' budgetary constraints and
internal acceptance reviews. Due to the foregoing factors, and particularly the
variability of the size and timing of significant license purchases, quarterly
revenue and operating results are difficult to forecast.

As is common in the software industry, the Company frequently ships more
product in the third month of each quarter than in either of the first two
months of the quarter, and shipments in the third month are higher at the end of
that month. This pattern is likely to continue. The concentration of sales in
the last month of the quarter makes the Company's quarterly financial results
difficult to predict. Also, any failure of sufficient business to materialize or
a disruption in the Company's production or shipping near the end of a quarter
could have a material adverse effect on the Company's business, operating
results and financial condition. In addition, the Company's business has been
seasonal, with revenues in the first fiscal quarter typically lower than those
in the fourth quarter of the preceding fiscal year.

The Company's expense levels are based, in part, on its expectations as to
future revenue levels. If revenue levels are below expectations, it could have a
material adverse effect on the Company's business, operating results and
financial condition. In particular, net income, if any, may be
disproportionately affected by a reduction in revenue because only a small
portion of the Company's expenses varies with revenue. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Quarterly Results of Operations."

Limited Trading History of Common Stock; Potential Volatility of Stock
Price. The Company's Common Stock first became publicly traded on April 3, 1996
after the Company's initial public offering at $8.50 per share. The market price
of the Common Stock has and could continue to fluctuate substantially due to a
variety of factors, including quarterly fluctuations in results of operations,
adverse circumstances affecting the introduction or market acceptance of new
products and services offered by the Company, announcements of new products and
services by competitors, changes in the EDA environment, changes in earnings
estimates by analysts, changes in accounting principles, sales of Common Stock
by existing holders, loss of key personnel and other factors. The market price
for the Company's Common Stock may also be affected by the Company's ability to
meet securities or industry analysts' expectations, and any failure to meet such
expectations, even if minor, could have a material adverse effect on the market
price of the Company's Common Stock. In addition, the stock market is subject to
extreme price and volume fluctuations. This volatility has had a significant
effect on the market prices of securities issued by many companies for reasons
unrelated to the operating performance of these companies. In the past,
following periods of volatility in the market price of a company's securities,
securities class action litigation has often been instituted against such a
company. Any such litigation instituted against the Company could result in
substantial costs and a diversion of management's attention and resources, which
could have a material adverse effect on the Company's business, operating
results and financial condition. See "Price Range of Common Stock."

Risks Associated with Acquisitions. The Company's strategy includes the
acquisition of businesses, products and technologies that are complementary to
those of the Company. Promising acquisitions are difficult to identify and
complete for a number of reasons, including competition among prospective
buyers. In furtherance of this strategy, in fiscal 1997 and 1998 the Company
acquired three businesses, Compact Software, Inc. ("Compact"), the Electronic
Business Unit (the "EBU") of MacNeal Schwendler Company ("MSC") and Boulder
Microwave Technologies, Inc. ("Boulder"). There can be no assurance that the
Company will be able to complete future acquisitions or that the Company will be
able to successfully integrate these and any future acquired businesses. The
failure of the Company to integrate any acquired businesses could have a
material adverse effect on the

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<PAGE> 7

Company's business, operating results and financial condition. In order to
finance any future acquisitions, it may be necessary for the Company to raise
additional funds through public or private financings. Any equity or debt
financing, if available at all, may be on terms which are not favorable to the
Company and, in the case of equity financing, may result in dilution to the
Company's stockholders. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital
Resources--Acquisitions."

Risks Associated with Company Investments. The Company invested a portion
of the proceeds of its initial public offering in certain long-, medium- and
short-term investment grade, interest-bearing securities, and currently holds
$3.0 million (as valued on its balance sheet as of October 31, 1997) in such
securities. The value of the Company's investment in such instruments is subject
to the normal risks of interest-bearing investments. Over time, the level of
interest rates available in the market changes. As prevailing interest rates
fall, the prices of bonds and other securities that trade on a yield basis tend
to rise. Conversely, when prevailing interest rates rise, bond prices generally
will fall. Generally, the longer the maturity of a fixed-income security, the
higher its yield and the greater its price volatility. As a consequence, the
value of the bonds and other instruments held by the Company could fluctuate
substantially over time, depending upon long-term and short-term trends and
interest rates. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources."

Dependence on Proprietary Technology. The Company's success is heavily
dependent upon its proprietary software technology. The Company does not
currently have any patents and relies principally on trade secret and copyright
laws and contractual protections to establish and protect its proprietary
rights. However, there can be no assurance that the steps taken by the Company
will prevent misappropriation or infringement of its technology. Moreover, third
parties could independently develop competing technologies that are
substantially equivalent to the Company's technologies. Although the Company
believes that its products and proprietary rights do not infringe patents and
proprietary rights of third parties, there can be no assurance that infringement
claims, regardless of merit, will not be asserted against the Company in the
future or that any such assertion will not result in costly litigation or
require the Company to obtain a license to intellectual property rights of such
third parties. In addition, there can be no assurance that such licenses will be
available on reasonable terms or at all, which could have a material adverse
effect on the Company's business, operating results and financial condition. See
"Business--Proprietary Rights."

Dependence on Key Personnel. The Company's future operating results depend
in large part upon the continued services of its key technical and management
personnel, including Dr. Zoltan J. Cendes, a founder, Chairman of the Board of
Directors and Chief Technology Officer of the Company. The Company does not have
employment contracts with Dr. Cendes or any other executive officer. The Company
also believes that its future success will also depend in large part on its
ability to continue to attract and retain highly-skilled technical, marketing
and management personnel. The competition for such personnel, as well as for
qualified EDA engineers, is intense. There can be no assurance that the Company
will be able to continue to attract and retain the qualified technical and other
personnel necessary for the development of its business. The Company maintains
key-man life insurance with respect to Dr. Cendes in the amount of $5,000,000.
See "Business--Product Development," and "--Employees" and "Management."

Rapid Technology Change and Need for New Products. The EDA software
industry is characterized by rapid and continuing advances in products and
technologies. The Company's future success will depend upon its ability to
enhance continually its current products, to develop and introduce new products
that keep pace with technological advancements and changes in computer systems
and design environments and to address the increasingly sophisticated needs of
its customers. However, there can be no assurance that the Company will be
successful in developing and marketing product enhancements or new products that
will adequately meet the requirements of the marketplace. In addition, the
introduction of products embodying new technologies and the emergence of new
industry standards could render the Company's existing products, and products
currently under development, obsolete and unmarketable. From time to time, the
Company and others may announce new products, capabilities or technologies that
have the potential to replace or shorten the life cycle of the Company's
existing product offerings. There can be no assurance that announcements of
currently planned or other new product offerings will not cause customers to
defer purchasing existing Company products. See "Business--Products" and
"--Product Development."

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Use of Distributors and Shift in Distribution Model. A significant portion
of the Company's license and service revenue results from a limited number of
international distributors. During fiscal 1996, 1997 and for the six month
period ended October 31, 1997, revenue from international distributors accounted
for approximately 19%, 19%, and 21%, respectively, of the Company's total
revenue. In addition, pursuant to the HP Agreement, HP formerly distributed the
Company's HFSS 4.0 product on an exclusive basis. The HP Agreement has since
expired, although HP retains the right to distribute HFSS 4.0 through January
1998. The Company currently sells the latest version of its HFSS product, Ansoft
HFSS 5.0, through its own sales force and other distributors. During fiscal
1996, 1997 and for the six month period ended October 31, 1997, revenue from the
HP Agreement accounted for approximately 13%, 12%, and 6%, respectively, of the
Company's total revenue.

The Company's distributors are not obligated to purchase products from the
Company and may also represent other products. There can be no assurance that
the Company's current international distributors will continue to market,
service and support the Company's products effectively, that they will choose to
continue to license such products or that they will not devote greater resources
to marketing or licensing products of other companies.

The Company has recently shifted its distribution model to the use of
direct sales personnel in Japan and other foreign markets. There can be no
assurance that this transition will not result in dislocations or delays in
penetration in these markets or that the recent shift will not result in
start-up costs and other expenses. These expenses may be incurred before a
commensurate level of revenues are generated in these markets. Failure to
generate a requisite level of revenues in light of these expenses could have a
material adverse effect on the Company's business, operating results and
financial condition. See "Business--Sales and Marketing."

Risks Associated with International Licensing. International license and
service revenue accounted for 33%, 41% and 48% of total product revenue in
fiscal 1996, 1997 and the six month period ended October 31, 1997, respectively.
The Company expects that international license and service revenue will continue
to account for a significant portion of its revenue. The majority of the
Company's international sales are priced in foreign currencies which the Company
does not hedge and as such the Company's revenues and profits from such sales
are subject to fluctuation due to variable foreign currency exchange rates.
International licenses involve a number of inherent risks, including
fluctuations in foreign currency exchange rates, variability of foreign economic
conditions, changing restrictions imposed by United States export laws, the
impact of recessionary environments in economies outside the United States,
generally longer receivables collection periods, unexpected changes in and
compliance with regulatory requirements, reduced protection for intellectual
property rights in some countries, tariffs and other trade barriers. See
"Business--Sales and Marketing."

Management of Growth. The Company's business has experienced rapid growth
in recent years which has placed and could continue to place a significant
strain on the Company's managerial and other resources. Revenues have grown from
$3.5 million in fiscal 1993 to $14.2 million in fiscal year 1997, and the number
of employees has grown from 69 in April 1996 to 175 as of December 31, 1997. The
Company's ability to manage growth effectively will require it to continue to
improve its operational and financial systems, hire and train new employees and
add additional space, both domestically and internationally. The Company's
success abroad will depend in part on its ability to manage its foreign
operations. There can be no assurance that such efforts can be accomplished
successfully. The failure to manage growth effectively or to generate sufficient
increased revenues necessary to cover any higher costs resulting from such
growth could have a material adverse effect on the Company's business, operating
results and financial condition. See "Business."

Susceptibility to Changing Economic Factors. The Company is dependent upon
the communications, semiconductor, automotive/industrial, computer, consumer
electronics and defense/aerospace industries. Because these industries are
characterized by technological change, short product life cycles, fluctuations
in manufacturing capacity and pricing and gross margin pressure, they have from
time to time experienced sudden economic downturns. During these periods,
capital spending is commonly curtailed and the number of design projects often
decreases. Since the Company's sales are dependent upon capital spending trends
and new design project in these industries, negative factors affecting these
industries could have a material adverse effect on the Company's business,
operating results and financial condition.

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Risk of Product Defects. Complex software products, such as those offered
by the Company, may contain defects, undetected errors or failures when
introduced or when new versions are released. There can be no assurance that,
despite testing by the Company, errors will not be found in new products or
versions after commencement of commercial shipments, resulting in loss of market
share or failure to achieve market acceptance. Any such occurrence could have a
material adverse effect upon the Company's business, operating results and
financial condition.

Concentration of Stock Ownership. Upon completion of this offering, the
directors and executive officers of the Company and their affiliates will
beneficially own approximately 53% (51% if the Underwriters' overallotment
option is exercised in full) of the Company's outstanding Common Stock. As a
result, these stockholders will be able to exercise control over all matters
requiring stockholder approval, including the election of directors and approval
of significant corporate transactions. Such concentration of ownership may have
the effect of delaying, deterring or preventing a change in control of the
Company. See "Principal and Selling Stockholders."

Effect of Certain Charter Provisions, Antitakeover Effects of Certificate
of Incorporation, Bylaws and Delaware Law. The Company's Board of Directors has
the authority to issue up to 1,000,000 shares of Preferred Stock without any
further vote or action by the Company's stockholders. The rights of the holders
of the Common Stock will be subject to, and may be adversely affected by, the
rights of the holders of any Preferred Stock that may be issued in the future.
The issuance of Preferred Stock, while providing desirable flexibility in
connection with certain corporate purposes, could have the effect of making it
more difficult for a third party to acquire a majority of the outstanding voting
stock of the Company. The Company currently has no plans to issue shares of
Preferred Stock. Further, certain provisions of the Company's Certificate of
Incorporation and Bylaws and of Delaware law could delay or make more difficult
a merger, tender offer or proxy contest involving the Company. See "Description
of Capital Stock."

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THE COMPANY

The Company was incorporated under the laws of Delaware in 1984. The
Company has three subsidiaries, Ansoft California, Inc. ("Ansoft California"),
Compact Software, Inc. ("Compact") which was acquired by the Company in 1997,
and Ansoft Japan K.K. Compact and Ansoft California were incorporated under the
laws of the State of Delaware in 1983 and 1996, respectively. The results of
operations of the subsidiaries are consolidated into the Company's operating
results for financial reporting purposes. The Company's principal executive
offices are located at Four Station Square, Pittsburgh, PA 15219. The Company's
telephone number is (412) 261-3200 and e-mail address is [email protected].

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 2,000,000 shares of
Common Stock offered by the Company hereby (after deducting underwriting
discounts and commissions and estimated offering expenses) will be approximately
$22,150,000 ($25,540,000 if the Underwriters' over-allotment option is exercised
in full). Approximately $1,909,000 of the net proceeds from this offering will
be used to repay in full indebtedness owed to a financial institution from whom
the Company borrowed funds. The amounts borrowed are secured by certain
investment securities held by the Company and accrue interest at a rate of 2%
over the Broker Call Rate. The Company intends to use the remainder of the net
proceeds from this offering for working capital, settlement of outstanding
indebtedness and other general corporate purposes. From time to time, in the
ordinary course of business, the Company evaluates potential acquisitions of
complementary businesses, products or technologies, for which a portion of the
net proceeds may also be used. However, the Company currently has no
understandings, commitments or agreements with respect to any material
acquisition of other businesses, products or technologies. Pending such uses,
the net proceeds of the offering may be invested in investment-grade,
interest-bearing securities.

DIVIDEND POLICY

The Company has never paid any cash dividends on its Common Stock. The
Company currently intends to retain the earnings from operations for use in the
operation of its business and does not anticipate paying cash dividends with
respect to its Common Stock in the foreseeable future. The payment of any future
dividends will be determined by the Board of Directors in light of the then
current conditions, including the Company's earnings and financial condition.

10
<PAGE> 11

PRICE RANGE OF COMMON STOCK

The Company's Common Stock has been traded on the Nasdaq National Market
under the symbol ANST since April 3, 1996. The following table sets forth, for
the periods indicated, the range of high and low last reported sale prices for
the Common Stock as reported on the Nasdaq National Market.

<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
FISCAL YEAR ENDED APRIL 30, 1996
4th Quarter (From April 3, 1996 through April 30, 1996)... $ 9.500 $ 7.125

FISCAL YEAR ENDED APRIL 30, 1997
1st Quarter............................................... 8.750 4.000
2nd Quarter............................................... 7.250 5.000
3rd Quarter............................................... 6.875 4.500
4th Quarter............................................... 5.875 4.625

FISCAL YEAR ENDED APRIL 30, 1998
1st Quarter............................................... 9.000 4.875
2nd Quarter............................................... 23.250 8.375
3rd Quarter............................................... 16.688 10.000
4th Quarter (through February 24, 1998)................... $15.375 $13.000
</TABLE>

On February 24, 1998, the last reported sale price of the Company's Common
Stock was $13.00 per share. On February 24, 1998, the Company had approximately
143 shareholders of record.

11
<PAGE> 12

CAPITALIZATION

The following table sets forth the capitalization of the Company as of
October 31, 1997 (i) on an actual basis and (ii) as adjusted to give effect to
the sale by the Company of 2,000,000 shares of Common Stock offered hereby and
the application of the estimated net proceeds therefrom. This table should be
read in conjunction with the Consolidated Financial Statements of the Company
and the Notes thereto and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in this Prospectus:

<TABLE>
<CAPTION>
OCTOBER 31, 1997
-----------------------
ACTUAL AS ADJUSTED
------ -----------
(IN THOUSANDS)
<S> <C> <C>
Stockholders' equity:
Preferred Stock, $0.01 par value; 1,000,000 shares
authorized;
no shares outstanding................................ $ -- $ --
Common Stock, $0.01 par value; 25,000,000 shares
authorized; 9,177,833 shares issued and outstanding;
11,177,833 shares issued and outstanding, as adjusted
(1)................................................... 92 112
Additional paid-in capital............................. 25,170 47,300
Net unrecognized gain (loss) on marketable
securities............................................ 131 131
Accumulated deficit.................................... (7,798) (7,798)
-------- --------
Total stockholders' equity........................ $ 17,595 $ 39,745
======== ========
</TABLE>

- ---------

(1) Based on the number of shares outstanding as of October 31, 1997. Excludes
(i) 2,350,000 shares of Common Stock reserved for issuance under the
Company's 1988 and 1995 Stock Option Plans, of which 1,239,417 shares were
subject to outstanding options as of October 31, 1997, at a weighted average
exercise price of $4.05 per share, and (ii) 260,000 shares reserved for
issuance upon exercise of options outstanding as of October 31, 1997, at a
weighted average exercise price of $5.23 per share. See
"Management--Employee Stock Option Plans" and Note 8 of Notes to the
Consolidated Financial Statements of the Company.

12
<PAGE> 13

SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data presented below for the five years
ended April 30, 1997 are derived from the Company's Consolidated Financial
Statements and related Notes thereto which have been audited by KPMG Peat
Marwick LLP, independent certified public accountants. The selected consolidated
financial data as of and for the interim periods ended October 31, 1996 and
October 31, 1997, are unaudited but, in the opinion of management, include all
adjustments that are necessary for a fair presentation of the results for the
interim period, and all such adjustments are of a recurring nature. The
operating results for the six months ended October 31, 1997 are not necessarily
indicative of the results to be expected for any other interim period or any
future fiscal year. The selected consolidated financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Consolidated Financial Statements and related
Notes thereto appearing elsewhere in this Prospectus.

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
FISCAL YEAR ENDED APRIL 30, OCTOBER 31,
------------------------------------------------------- -------------------
1993 1994 1995 1996 1997 1996 1997
------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenue
License.................... $3,350 $4,944 $5,921 $ 7,995 $11,950 $4,811 $ 8,907
Service and other.......... 121 177 233 700 2,238 841 2,712
------- ------- ------- ------- ------- ------- -------
Total revenue......... 3,471 5,121 6,154 8,695 14,188 5,652 11,619
------- ------- ------- ------- ------- ------- -------
Costs and expenses
Sales and marketing........ 1,699 2,734 3,935 5,007 7,939 3,348 5,424
Research and development... 1,450 1,296 1,462 1,766 2,993 1,247 3,374
General and
administrative........... 1,096 1,137 1,046 1,269 1,647 649 1,067
Amortization............... -- -- -- -- 407 136 690
Acquired in process
research and
development.............. -- -- -- -- 8,754 3,054 --
------- ------- ------- ------- ------- ------- -------
Total costs and
expenses............ 4,245 5,167 6,443 8,042 21,740 8,434 10,555
------- ------- ------- ------- ------- ------- -------
Income (loss) from
operations................... (774) (46) (289) 653 (7,552) (2,782) 1,064
Interest income (expense),
net.......................... (193) (94) (16) 35 682 378 187
------- ------- ------- ------- ------- ------- -------
Income (loss) before income
taxes........................ (967) (140) (305) 688 (6,870) (2,404) 1,251
Income taxes benefit........... -- -- -- 612 420 -- 390
------- ------- ------- ------- ------- ------- -------
Net income (loss).............. $ (967) $ (140) $ (305) $ 1,300 $(6,450) $(2,404) $ 1,641
======= ======= ======= ======= ======= ======= =======
Net income (loss) per share.... $(0.40) $(0.06) $(0.06) $ 0.19 $(0.81) $(0.31) $ 0.17
======= ======= ======= ======= ======= ======= =======
Weighted average shares
outstanding.................. 2,394 2,394 5,528 6,873 7,955 7,878 9,859
</TABLE>

<TABLE>
<CAPTION>
APRIL 30,
------------------------------------------------------- OCTOBER 31, 1997
1993 1994 1995 1996 1997 ----------------
------- ------- ------- ------- -------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents............ $ 10 $ 43 $ 116 $10,728 $ 312 $ 1,040
Working capital (deficit)............ (748) 259 593 11,931 (1,936) 3,096
Total assets......................... 950 1,417 1,792 15,391 21,951 21,762
Total stockholders' equity
(deficit).......................... (3,295) (3,435) 1,161 14,291 14,917 17,595
</TABLE>

13
<PAGE> 14

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

The following Management's Discussion and Analysis of Financial Condition
and Results of Operations contains certain forward-looking statements that
involve substantial risks and uncertainties. When used in this Prospectus, the
words "anticipate," "plan," "believe," "estimate," "expect" and similar
expressions as they relate to the Company or its management are intended to
identify such forward-looking statements. The Company's actual results,
performance or achievements could differ materially from the results expressed
in, or implied by, these forward-looking statements. Factors that could cause or
contribute to such differences include those discussed in "Risk Factors."

OVERVIEW

Ansoft Corporation ("Ansoft" or the "Company") develops, markets and
supports electronic design automation ("EDA") software based on fundamental
electromagnetic principles. The Company's software is used by engineers in the
design of high performance electronic devices and systems, such as cellular
phones, communications systems, computer circuit boards and motors. As the
marketplace demands higher levels of system performance and miniaturization, the
need to model accurately the electromagnetic interaction in communications,
computer devices and electromechanical components and systems is becoming
increasingly important, yet traditional EDA tools do not provide accurate
modeling of electromagnetic interaction. By using the Company's software,
companies can more easily predict electromagnetic interaction in such systems
and components, thus reducing time to market and simultaneously lowering design
and manufacturing costs. The Company's products are used by design engineers in
a wide range of industries, particularly the rapidly evolving wireless
communications and RF (radio frequency) markets as well as the semiconductor,
computer, automotive and consumer electronics industries.

License revenue consists principally of revenue from the licensing of the
Company's software and is generally recognized when the software has been
shipped and there are no significant remaining obligations. Service revenue
consists of maintenance fees for providing system updates, user documentation
and technical support for software products, and is recognized ratably over the
term of the maintenance agreement. Other revenue consists primarily of revenue
earned on development contracts with government-sponsored entities. Revenue
under these arrangements is recognized as the service is performed.

In accordance with Statement of Financial Accounting Standards (SFAS) No.
86, the Company has evaluated the establishment of technological feasibility of
its various products during the development phase. Due to the dynamic changes in
the market, the Company has concluded that it cannot determine, with any
reasonable degree of accuracy, technological feasibility until the development
phase of the project is nearly complete. The time period during which costs
could be capitalized from the point of reaching technological feasibility until
the time of general product release is generally very short and, consequently,
the amounts that could be capitalized pursuant to SFAS No. 86 are not material
to the Company's financial position or results of operations. Therefore, the
Company charges all research and development expenses to operations in the
period incurred.

Effective July 24, 1996, April 9, 1997 and August 8, 1997, the Company
acquired the Electronic Business Unit (the "EBU") of The MacNeal Schwendler
Company ("MSC"), Compact Software Inc. ("Compact"), and Boulder Microwave
Technologies, Inc. ("Boulder"), respectively. The cost of these acquisitions has
been allocated on the basis of the estimated fair value of the assets acquired
and the liabilities assumed. The allocation of the EBU and Compact acquisitions
resulted in charges of $3.1 million and $5.7 million recorded, respectively, in
fiscal 1997 based on the future expected cash flows of certain acquired in
process research and development that had not reached technological feasibility.
The acquisitions have been accounted for as purchases, and their respective
financial results have been included in the accompanying consolidated financial
statements since the date of their respective acquisitions.

14
<PAGE> 15

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, the percentage
of total revenue of each item in the Company's consolidated statements of
operations:

<TABLE>
<CAPTION>
PERCENTAGE OF REVENUE
-------------------------------------------------------
SIX MONTHS
ENDED
FISCAL YEAR ENDED APRIL 30, OCTOBER 31,
----------------------------- -----------------
1995 1996 1997 1996 1997
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Revenue
License....................................... 96% 92% 84% 85% 77%
Service and other............................. 4 8 16 15 23
----- ----- ----- ----- -----
Total revenue............................... 100 100 100 100 100
----- ----- ----- ----- -----
Costs and expenses
Sales and marketing........................... 64 58 56 59 47
Research and development...................... 24 20 21 22 29
General and administrative.................... 17 15 12 12 9
Amortization.................................. -- -- 3 2 6
Acquired in process research and
development................................. -- -- 62 54 --
----- ----- ----- ----- -----
Total costs and expenses.................... 105 93 153 149 91
----- ----- ----- ----- -----
Income (loss) from operations................... (5) 7 (53) (49) 9
Interest, net................................... -- -- 5 7 2
----- ----- ----- ----- -----
Income (loss) before income taxes............... (5) 7 (48) (42) 11
Income taxes benefit............................ -- 8 3 -- 3
----- ----- ----- ----- -----
Net income (loss)............................... (5)% 15% (45)% (42)% 14%
===== ===== ===== ===== =====
</TABLE>

SIX MONTHS ENDED OCTOBER 31, 1997 COMPARED WITH SIX MONTHS ENDED OCTOBER 31,
1996

Revenue. Total revenue in the six-month period ended October 31, 1997
increased 105% to $11.6 million from $5.7 million in the comparable period of
the preceding fiscal year, primarily due to increases in license revenue.
License revenue during the six month period ended October 31, 1997 increased 85%
to $8.9 million from $4.8 million during the comparable period in the prior
fiscal year. The growth of license revenue is attributable to the continued
increase in sales of existing Ansoft products as well as sales of the expanded
suite of products offered by Ansoft as a result of the acquisitions. The
increase in service and other revenue is attributable to an increase in revenue
recognized under research and development cost sharing agreements as well as the
continued growth of the installed base of customers and increased focus on
marketing annual maintenance agreements.

International revenue accounted for 48% and 39% of the Company's total
product revenue in the six-month period ended October 31, 1997 and 1996,
respectively.

The Company entered into a distribution arrangement with HP under which HP
formerly distributed the Company's HFSS product on an exclusive basis (the "HP
Agreement"). The HP Agreement has since expired, although HP retains the right
to distribute HFSS 4.0 through January 1998. The Company currently sells the
latest version of its HFSS product, Ansoft HFSS 5.0, through its own sales force
and other distributors. Revenue from the HP Agreement accounted for 6% and 13%
of total revenue in the six-month period ended October 31, 1997 and 1996,
respectively. The Company expects that HP will account for a decreasing
percentage of its total revenues over the next three months. Management believes
that the expiration of the HP Agreement will not have a material adverse effect
on the consolidated financial condition or results of operations.

Sales and Marketing Expenses. Sales and marketing expenses consist of
salaries, commissions paid to internal sales and marketing personnel and
international distributors, promotional costs and related operating expenses.
Sales and marketing expenses increased by 62% to $5.4 million in the six-month
period ended October 31, 1997, as compared to $3.3 million in the same period in
the previous fiscal year. The increase is

15
<PAGE> 16

attributable to an increase in the Company's sales force as a result of the
acquisitions as well as increased marketing efforts, including advertising in
trade publications and increased participation in industry trade shows. Sales
and marketing expenses represented 47% and 59% of total revenue in the six-month
period ended October 31, 1997 and 1996, respectively. The Company expects to
increase sales and marketing expenditures both domestically and internationally
as part of its continuing effort to expand its markets, introduce new products,
build marketing staff and programs and expand its international presence. The
Company expects that sales and marketing expenses will increase in absolute
dollars in future periods.

Research and Development Expenses. Research and development expenses
include all costs associated with the development of new products and
enhancements to existing products. Research and development expenses for the
six-month period ended October 31, 1997 increased 171% to $3.4 million, as
compared to $1.2 million for the same period in the previous fiscal year. The
increase is due to increased research and development personnel primarily as a
result of the acquisitions. Research and development expenses represented 29%
and 22% of total revenue in the six-month period ended October 31, 1997 and
1996, respectively. The Company anticipates that research and development
expenses will increase in absolute dollars in future periods.

General and Administrative Expenses. General and administrative expenses
for the six-month period ended October 31, 1997 increased 64% to $1.1 million,
as compared to $649,000 for the same period in the previous fiscal year. The
increase is due to additional costs required to support the increase in
operations, including the hiring of additional administrative personnel. General
and administrative expenses represented 9% and 12% of total revenue in the
six-month period ended October 31, 1997 and 1996, respectively. The Company
anticipates that general and administrative expenses will increase in absolute
dollars in future periods.

Amortization Expense. Amortization expense for the six-month period ended
October 31, 1997 increased to $690,000, as compared to $136,000 for the same
period in the previous fiscal year. The increase is due to the amortization of
the additional intangible assets acquired during fiscal 1997 and fiscal 1998.

Acquired In Process Research and Development Expenses. On July 24, 1996,
the Company acquired the EBU for $5.6 million in cash. The cost of the
acquisition has been allocated on the basis of the estimated fair value of the
assets acquired and the liabilities assumed. The allocation of the cost of the
acquisition resulted in an in process research and development charge of $3.1
million based on the future expected cash flows of certain acquired in process
research and development that had not reached technological feasibility.

Interest (net). Interest income for the six-month period ended October 31,
1997 decreased to $300,000, compared to $432,000 for the same period in the
previous fiscal year. Interest income decreased due to the use of cash in
partial payment for the fiscal 1997 and fiscal 1998 acquisitions. Interest
expense for the six-month period ended October 31, 1997 increased to $113,000,
compared to $54,000 for the same period in the previous fiscal year. Interest
expense increased due to increased borrowing by the Company.

Income Taxes. In the six-month period ended October 31, 1997, the Company
recorded a net income tax benefit of $390,000, resulting from the partial
recognition of previously unrecognized deferred tax assets in accordance with
the Financial Accounting Standards Board's SFAS No. 109, "Accounting for Income
Taxes." The Company's net deferred tax asset of $1.5 million as of October 31,
1997, consists primarily of net operating loss carryforwards for federal income
tax purposes, which are available to offset future taxable income, and expire in
increments beginning in April 2004, through April 2012.

YEAR ENDED APRIL 30, 1997 COMPARED WITH YEAR ENDED APRIL 30, 1996

Revenue. The Company's license revenue increased by 49% to $12.0 million
for the year ended April 30, 1997, as compared with $8.0 million in the previous
year. The revenue growth was attributable to the continued growth of the
installed base of customers licensing the Company's existing products and to the
expanded suite of products offered by Ansoft as a result of the acquisition of
the EBU. Service and other revenue increased by 220% to $2.2 million for the
year ended April 30, 1997, as compared with $0.7 million in the previous year.
The increase in service and other revenue is attributed to increased purchased
annual maintenance agreements, and reflects the continued growth of the
installed base of customers and increased focus on marketing annual

16
<PAGE> 17

maintenance agreements as well as an increase in revenue recognized under
research and development cost sharing agreements.

International revenue accounted for 41% and 33% of the Company's total
product revenue in fiscal 1997 and 1996, respectively. Revenue from the HP
Agreement accounted for 12% and 13% of total revenue in fiscal 1997 and 1996,
respectively.

Sales and Marketing Expenses. Sales and marketing expenses increased by
59% to $7.9 million in fiscal 1997, as compared to $5.0 million in fiscal 1996.
The increase was attributable to increased marketing efforts, including
advertising in trade publications and increased participation in industry trade
shows and the increase in sales force as a result of the 1997 acquisitions.
Sales and marketing expenses represented 56% and 58% of total revenue in fiscal
1997 and fiscal 1996, respectively.

Research and Development Expenses. Research and development expenses
increased 70% to $3.0 million in fiscal 1997, as compared to $1.8 million in
fiscal 1996. The increase was due to increased costs associated with continuing
product development and enhancement of existing products in addition to the
increased personnel as a result of the EBU acquisition. Research and development
expenses represented 21% and 20% of total revenue in fiscal 1997 and 1996,
respectively.

General and Administrative Expenses. General and administrative expenses
increased 30% to $1.6 million in fiscal 1997, as compared to $1.3 million in
fiscal 1996. The increase was due to additional costs required to support the
increase in operations, including the hiring of additional administrative
personnel, along with other general cost increases. General and administrative
expenses represented 12% and 15% of total revenue in fiscal 1997 and 1996,
respectively. The decrease as a percentage of revenue was due to certain of the
expenses being of a fixed nature which have not increased proportionately with
the increase in revenue.

Amortization Expense. Amortization expense in fiscal 1997 of $407,000 was
recognized as a result of the amortization of the intangible assets acquired
during fiscal 1997.

Acquired In Process Research and Development Expenses. On July 24, 1996,
the Company acquired the EBU for $5.6 million in cash. On April 9, 1997, the
Company acquired Compact for approximately $10.0 million in cash and stock.
These acquisitions have been accounted for as purchases and the cost of these
acquisitions has been allocated on the basis of the estimated fair value of the
assets acquired and the liabilities assumed. The allocation of the EBU and
Compact acquisitions resulted in charges of $3.1 million and $5.7 million,
respectively, based on the future expected cash flows of certain acquired in
process research and development that had not reached technological feasibility.

Interest (net). Interest income increased to $902,000 in fiscal 1997, as
compared to $41,000 in fiscal 1996. Interest income increased due to larger cash
and marketable securities balances resulting primarily from the net proceeds of
the Company's initial public offering which was completed in April 1996.
Interest expense increased to $220,000 in fiscal 1997, as compared to $6,000 in
fiscal 1996. Interest expense increased due to increased borrowing by the
Company.

Income Taxes. During fiscal 1997 the Company recorded a net income tax
benefit of $420,000, resulting from the partial recognition of previously
unrecognized deferred tax assets in accordance with the Financial Accounting
Standards Board's SFAS No. 109, "Accounting for Income Taxes."

YEAR ENDED APRIL 30, 1996 COMPARED WITH YEAR ENDED APRIL 30, 1995

Revenue. The Company's license revenue increased by 35% to $8.0 million
for the year ended April 30, 1996, as compared with $5.9 million in the previous
year. The increase in revenue was primarily attributable to the increase in the
number of licenses sold. Service and other revenue increased by 200% to $700,000
for the year ended April 30, 1996, as compared with $233,000 in the previous
year. The increase in service and maintenance revenue was primarily attributable
to purchased annual maintenance agreements and reflected the continued growth of
the installed base of customers and increased focus on marketing annual
maintenance agreements and to a lesser extent, revenue recognized on the
research and development cost sharing agreement.

17
<PAGE> 18

International revenue accounted for 33% and 31% of the Company's total
product revenue in fiscal 1996 and 1995, respectively. Revenue from the HP
Agreement accounted for 13% and 18% of total revenue in fiscal 1996 and 1995,
respectively.

Sales and Marketing Expenses. Sales and marketing expenses increased by
27% to $5.0 million in fiscal 1996, as compared to $3.9 million in fiscal 1995.
Sales and marketing expenses increased primarily due to the expansion of the
Company's sales and marketing organization and, to a lesser extent,
participation in domestic and international conferences and trade shows. Sales
and marketing expenses represented 58% and 64% of total revenue in fiscal 1996
and fiscal 1995, respectively. The decrease as a percentage of revenue was due
to certain of the expenses being of a fixed nature which have not increased
proportionately with the increase in revenue.

Research and Development Expenses. Research and development expenses
increased 21% to $1.8 million in fiscal 1996, as compared to $1.5 million in
fiscal 1995. The increase was due to increased costs associated with continuing
product development and enhancement of existing products. Research and
development expenses represented 20% and 24% of total revenue in fiscal 1996 and
1995, respectively. The decrease as a percentage of revenue was due to certain
of the expenses being of a fixed nature which did not increase proportionately
with the increase in revenue.

General and Administrative Expenses. General and administrative expenses
increased 21% to $1.3 million in fiscal 1996, as compared to $1.0 million in
fiscal 1995. The increase was due to additional costs required to support the
increase in operations, including the hiring of additional administrative
personnel, along with other general cost increases. General and administrative
expenses represented 15% and 17% of total revenue in fiscal 1996 and 1995,
respectively.

Interest (net). The Company recorded interest income of $35,000 in fiscal
1996, as compared to interest expense of $16,000 in fiscal 1995. Interest income
resulted primarily from the net proceeds of the Company's initial public
offering which was completed in April 1996.

Income Taxes. During fiscal 1996 the Company recorded a net income tax
benefit of $612,000, resulting from the partial recognition of previously
unrecognized deferred tax assets in accordance with the Financial Accounting
Standards Board's SFAS No. 109, "Accounting for Income Taxes."

QUARTERLY RESULTS OF OPERATIONS

The following table presents unaudited quarterly results in dollar amounts
and as a percentage of total revenue for each quarter of fiscal 1997 and the
first two quarters of fiscal 1998. The information has been prepared on a basis
consistent with the Company's annual consolidated financial statements and, in
the opinion of management, contains all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the information for
such periods. The Company's quarterly results have been in the past, and may be
in the future, subject to fluctuations due to increased competition, the timing
of new product announcements, changes in pricing policies by the Company or its
competitors, market acceptance of new and enhanced versions of the Company's
products and the size and timing of significant licenses. The Company believes
that results of operations for the interim periods are not necessarily
indicative of the results to be expected for any future period.

18
<PAGE> 19

The Company's business has been seasonal, with revenues in the first fiscal
quarter typically lower than the fourth quarter of the preceding fiscal year.

<TABLE>
<CAPTION>
QUARTER ENDED
--------------------------------------------------------------------------
FISCAL 1997 FISCAL 1998
------------------------------------------------ ---------------------
JULY 31, OCT. 31, JAN. 31, APRIL 30, JULY 31, OCT. 31,
1996 1996 1997 1997 1997 1997
-------- -------- -------- --------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Revenue
License.................................. $ 1,961 $2,850 $3,010 $ 4,129 $4,016 $ 4,891
Service and other........................ 357 484 565 832 1,319 1,393
-------- ------ ------ ------- ------ --------
Total Revenue.......................... 2,318 3,334 3,575 4,961 5,335 6,284
-------- ------ ------ ------- ------ --------
Costs and expenses
Sales and marketing...................... 1,429 1,919 1,977 2,614 2,557 2,867
Research and development................. 498 749 720 1,026 1,510 1,864
General and administrative............... 294 355 442 555 470 597
Amortization............................. -- 136 136 136 314 376
Acquired in process research and
development............................ 3,054 -- -- 5,700 -- --
-------- ------ ------ ------- ------ --------
Total costs and expenses............... 5,275 3,159 3,275 10,031 4,851 5,704
-------- ------ ------ ------- ------ --------
Income (loss) from operations.............. (2,957) 175 300 (5,070) 484 580
Interest income (expense).................. 220 158 167 137 91 96
Income (loss) before taxes................. (2,737) 333 467 (4,933) 575 676
Income tax benefit......................... -- -- -- 420 170 220
-------- ------ ------ ------- ------ --------
Net income (loss)........................ $ (2,737) $ 333 $ 467 $(4,513) $ 745 $ 896
======== ====== ====== ======= ====== ========
Net income (loss) per share.............. $ (0.35) $ 0.04 $ 0.06 $ (0.54) $ 0.08 $ 0.09
======== ====== ====== ======= ====== ========
Weighted average number of shares
outstanding.............................. 7,907 8,170 8,184 8,308 9,621 10,121
</TABLE>

<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL REVENUE
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenue
License.................................. 85% 85% 84% 83% 75% 77%
Service and other........................ 15 15 16 17 25 23
------ ------ ------ ------- ------ -------
Total Revenue.......................... 100 100 100 100 100 100
------ ------ ------ ------- ------ -------
Costs and expenses
Sales and marketing...................... 62 58 55 53 48 46
Research and development................. 21 22 21 20 28 30
General and administrative............... 13 11 12 11 9 9
Amortization............................. -- 4 4 3 6 6
Acquired in process research and
development............................ 132 -- -- 115 -- --
------ ------ ------ ------- ------ -------
Total costs and expenses............... 228 95 92 202 91 91
------ ------ ------ ------- ------ -------
Income (loss) from operations.............. (128) 5 8 (102) 9 9
Interest income (expense).................. 10 5 5 3 2 2
------ ------ ------ ------- ------ -------
Income (loss) before taxes................. (118) 10 13 (99) 11 11
Income tax benefit......................... -- -- -- 8 3 3
------ ------ ------ ------- ------ -------
Net income (loss).......................... (118)% 10% 13% (91)% 14% 14%
====== ====== ====== ======= ====== =======
</TABLE>

19
<PAGE> 20

LIQUIDITY AND CAPITAL RESOURCES

As of October 31, 1997, the Company had $1.0 million in cash and cash
equivalents. Net cash provided by operating activities was $716,000 and $403,000
in fiscal 1996, fiscal 1997, respectively. Net cash used in operating activities
was $340,000 and $99,000 in fiscal 1995 and the first six months ended October
31, 1997, respectively.

Net cash provided by (used in) investing activities was ($277,000), ($1.9
million), ($15.1 million) and $3.0 million in fiscal 1995, fiscal 1996, fiscal
1997 and the six months ended October 31, 1997, respectively. During fiscal
1996, fiscal 1997, and the six months ended October 31, 1997, the Company
purchased (sold) marketable securities of $1.5 million, $5.7 million, and $(4.3)
million respectively. The Company used $8.6 million in the acquisitions of the
EBU and Compact in fiscal 1997 and $660,000 (net of cash acquired) in the
acquisition of Boulder in the first six months of fiscal 1998.

Capital expenditures, consisting primarily of purchases of computer
equipment, were $277,000, $400,000 and $811,000 in fiscal 1995, 1996 and 1997,
respectively and $676,000 in the six months ended October 31, 1997. The Company
expects that purchases of computer equipment will increase as the Company's
employee base grows.

Net cash provided by financing activities includes proceeds from the
issuance of Common Stock and stockholders advances totaling $714,000, $11.8
million and $120,000, in fiscal 1995, 1996 and 1997, respectively, and $119,000
in the six months ended October 31, 1997. In addition, during fiscal 1997 the
Company borrowed $4.2 million on its secured line of credit with a financial
institution which was used primarily as part of the cash payment for the
acquisitions. During the six months ended October 31, 1997, the Company repaid
$2.3 million on its line of credit.

As of October 31, 1997, the Company had working capital of $3.1 million.
The Company also has available an unused portion of a secured line of credit
with a financial institution at an interest rate varying from a minimum of 2%
below the Broker Call Rate to a maximum equaling the Broker Call Rate. The line
of credit is collateralized by marketable securities owned by the Company. As of
October 31, 1997, $1.9 million was outstanding under the line of credit with
approximately $30,000 available for borrowing on this line of credit. The total
funds that may be available for borrowing may vary as the market value of the
underlying securities varies. The Company intends to use a portion of the net
proceeds from this offering to repay in full the indebtedness under the line of
credit. The Company believes that the available funds, cash flows from
operations and the net proceeds of this offering will be sufficient to meet its
anticipated cash needs for working capital and capital expenditures for at least
the next twelve months. Thereafter, if cash generated from operations is
insufficient to satisfy the Company's liquidity requirements, the Company may
seek additional funds through equity or debt financing. There can be no
assurance that additional financing will be available or that, if available,
such financing will be on terms favorable to the Company.

Acquisitions. On July 24, 1996, the Company acquired the EBU for $5.6
million in cash. The acquisition was accounted for as a purchase, and the
financial results of the EBU have been included in the accompanying consolidated
financial statements since the date of the acquisition.

On April 9, 1997, the Company acquired all of the outstanding capital stock
of Compact for $3.0 million in cash and 1,272,728 shares of the Company's Common
Stock. The acquisition was accounted for as a purchase and the financial results
of Compact have been included in the accompanying consolidated financial
statements since the date of the acquisition.

On August 11, 1997, the Company acquired Boulder by the merger of Boulder
with and into the Company, in consideration for $743,000 in cash and 108,146
shares of the Company's Common Stock. The acquisition was accounted for as a
purchase, and the financial results of Boulder have been included in the
accompanying consolidated financial statements since the date of the
acquisition.

EFFECTS OF INFLATION

To date, inflation has not had a material impact on the Company's
consolidated financial results.

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<PAGE> 21

RECENT OPERATING RESULTS

Revenue for the third quarter of fiscal 1998 totaled $6.8 million, an
increase of 91% from the $3.6 million reported in the previous fiscal year's
third quarter. Net income for the third quarter of fiscal 1998 was $1.1 million,
or $0.11 per diluted share, compared with $467,000, or $0.06 per diluted share,
reported for the same quarter in the prior fiscal year. Operating income for the
third quarter of fiscal 1998 was $729,000, an increase of 143% from the $300,000
reported for the same quarter of fiscal 1997.

RECENT ACCOUNTING PRONOUNCEMENTS

In February 1997, SFAS No. 128 "Earnings Per Share" was issued by the
Financial Accounting Standards Board. SFAS 128 specifies modifications to the
calculation of earnings per share from that currently used by the Company. Under
SFAS 128, "basic earnings per share" will be calculated based upon the weighted
average number of common shares actually outstanding, and "diluted earnings per
share" will be calculated based upon the weighted average number of common
shares outstanding and other potential common shares if they are dilutive. SFAS
128 is effective for the Company's third quarter of fiscal 1998 and will be
adopted at that time. Prior periods will be restated. Had the Company determined
earnings per share in accordance with SFAS 128, basic earnings (loss) per share
for fiscal 1995, 1996, 1997 and the first six months of fiscal 1998 ended
October 31, 1997 would have been $(0.06), $0.21, $(0.83) and $0.18,
respectively, and diluted earnings per share would have been $(0.06), $0.19,
$(0.81) and $0.17, respectively.

On May 1, 1996, the Company adopted SFAS No. 123 "Accounting for
Stock-Based Compensation." This statement permits a company to choose either a
new fair value based method of accounting for its stock-based compensation
arrangements or to comply with the current APB Opinion 25 intrinsic value based
method adding pro forma disclosures of net income and earnings per share
computed as if the fair value based method had been applied in the financial
statements. The Company has adopted SFAS 123 by retaining the APB Opinion 25
method of accounting for stock-based compensation with annual pro forma
disclosures of net income and earnings (loss) per share.

SFAS No. 130, "Reporting Comprehensive Income," and SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information," are
effective for the year ended April 30, 1999. The Registrant does not believe
these statements will have a material impact on its financial statements.

YEAR 2000 ISSUES

The Company is evaluating Year 2000 issues and their potential impact on
its information systems and computer technologies. All evaluation costs will be
expensed as incurred. Year 2000 issues are not expected to have a significant
impact on the Company's ongoing results of operations.

CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995

The statements contained in this "Management's Discussion and Analysis of
Financial Condition and Results of Operations" which are not historical are
"forward looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. These forward-looking statements represent the Company's present
expectations or beliefs concerning future events. The Company cautions that such
statements are qualified by important factors that could cause actual results to
differ materially from those in the forward looking statements including those
factors identified in "Risk Factors." Results actually achieved thus may differ
materially from expected results included in these statements.

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<PAGE> 22

BUSINESS

Ansoft Corporation ("Ansoft" or the "Company") develops, markets and
supports electronic design automation ("EDA") software based on fundamental
electromagnetic principles. The Company's software is used by engineers in the
design of high performance electronic devices and systems, such as cellular
phones, communications systems, computer circuit boards and motors. As the
marketplace demands higher levels of system performance and miniaturization, the
need to model accurately the electromagnetic interaction in communications,
computer devices and electromechanical components and systems is becoming
increasingly important, yet traditional EDA tools do not provide accurate
modeling of electromagnetic interaction. By using the Company's software,
companies can more easily predict electromagnetic interaction in such systems
and components, thus reducing time-to-market and simultaneously lowering design
and manufacturing costs. The Company's products are used by design engineers in
a wide range of industries, particularly the rapidly evolving wireless
communications and RF (radio frequency) markets as well as the semiconductor,
computer, automotive and consumer electronics industries.

INDUSTRY BACKGROUND

In recent years, engineers have used EDA software to automate the
previously manual, time-consuming and error-prone design process, resulting in
dramatic increases in productivity and efficiency. EDA software can be used in
each of the three phases of the electronic design process: Logic Design and
Synthesis, which provides an outline of the system's overall architecture;
Functional Design and Analysis, which encompasses the specification of desired
functionality, functional design, simulation and analysis; and Physical Design
and Verification, which involves the creation of physical layout (i.e.,
placement and routing) and verification that the design meets required
specifications.

As the marketplace demands higher levels of system performance and
miniaturization, the need to model accurately the electromagnetic interaction in
communication and computing devices and electromechanical components is becoming
increasingly important. The design requirement to fit more devices and
interconnections into smaller spaces results in increased electromagnetic
interaction. Moreover, high performance systems, with frequencies of
approximately 500 MHz and beyond, exhibit a high level of electromagnetic
interaction causing the degradation of the quality of electrical signals. In
addition, the electromagnetic radiation emitted by electronic products is
regulated by the Federal Communications Commission ("FCC") and equivalent
regulatory bodies in Europe and Japan, and commercialization of these products
is contingent upon meeting government-specified electromagnetic compatibility
requirements. These problems are exacerbated by time-to-market pressures and the
need to reduce design and development costs.

While traditional EDA tools have become more sophisticated, they lack the
requisite degree of precision in modeling electromagnetic interactions in
components and systems. As a result, the current process for designing and
manufacturing wireless and electronic components and systems is often iterative,
time-consuming and inaccurate. Designs are generated, devices and systems are
developed, prototypes are manufactured, performance is measured and assessed and
designs are then refined to meet the original performance specifications. This
entire process is typically repeated a number of times, lengthening the design
process, increasing costs and resulting in lost market opportunities.

THE ANSOFT SOLUTION

The Company's software products allow design engineers to model component
level and system level electromagnetic interaction which the Company believes is
crucial to the effective design of electronic systems and components. The
Company's products apply electromagnetic principles, derived from Maxwell's
Equations, to more accurately model electromagnetic interaction. By using Ansoft
software products to analyze electromagnetic interaction, the Company believes
that end users of its products are able to reduce the time-to-market for their
products, lower the risks of design failure and eliminate costly and
time-consuming product redesign. Ansoft's software products may be used as an
independent design platform or integrated with complementary EDA tools within a
customer's existing design environment. The Company's research and development
team has

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<PAGE> 23

broad expertise in electromagnetic simulation, electrical engineering, applied
mathematics and software development, enabling Ansoft to continue to advance its
electromagnetics-based EDA software.

The following diagram illustrates the phases of design in which the
Company's electromagnetics-based EDA software is used in the high frequency
(HF), signal integrity (SI) and electromechanical (EM) markets.

[GRAPH]

ANSOFT STRATEGY

Ansoft's objective is to become a leading worldwide supplier of EDA
software. Using its proprietary electromagnetics technology as a primary
competitive advantage, the Company pursues its objective through the following
strategies:

Leverage Expertise in Electromagnetic Analysis. The Company continually
seeks to develop new technologies and design new products and interfaces which
leverage the Company's expertise in electromagnetic modeling and its focused
team of research and development engineers. For example, the Company has applied
its technology expertise to solve high frequency modeling and device design
issues confronting wireless communications engineers.

Capitalize on Growing Need for Electromagnetic Analysis. Ansoft seeks to
capitalize on the increased need in the marketplace for the accurate modeling of
electromagnetic interaction. More accurate modeling of electromagnetic
interaction is becoming increasingly critical as compact electronic and
electromechanical components and systems operate at higher speeds and with
greater complexity.

Expand Broad Range of Product Applications. The Company offers products
which address a wide range of design problems including electromagnetic
interference in communications industries, IC packaging and signal integrity
issues in the semiconductor and computer industries, and electromagnetic
performance and yield issues in the automotive and consumer electronics
industries. The Company continually seeks to develop new applications and
product enhancements, as well as new interfaces for its existing products.

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<PAGE> 24

Integrate with Multiple Design Environments. Ansoft's software products
may be used as independent design platforms or integrated with complementary EDA
tools within a customer's existing design environment. Ansoft participates in
industry standardization efforts and supports a wide range of Unix-based
workstations and personal computers running Microsoft Windows 95 and Windows NT.

Focus on Customer Service. The Company focuses on providing worldwide
customer service to achieve a high degree of customer satisfaction and provides
a wide range of support services to maximize the success of its tools in the
customer's design environment. The Company offers on-site and in-house training
programs and on-line and telephone support for its customers.

PRODUCTS

The Company's high-frequency ("HF") software enables users to design RF
ICs, antenna and radar systems and microwave components. The Company's signal
integrity ("SI") software enables users to design computer interconnects, IC
Packaging structures and electronic systems by accurately capturing the
degradation in signal quality due to higher clock speeds and smaller physical
dimensions. The Company's Maxwell Eminence software combines both HF and SI
functionality. The Company's electromechanical ("EM") software products enable
designers of electromechanical components and systems to optimize the electrical
performance of their designs while increasing manufacturing yields. Ansoft
products are available for Unix-based workstations and personal computers
running Microsoft Windows 95 and Windows NT.

The following table sets forth each of the Company's primary products:

CHART

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<PAGE> 25

Ansoft HF Software

Maxwell Strata. This product enables the design of RF ICs, MMICs
(Monolithic Microwave Integrated Circuits), and planar antennas for customers in
the communications markets. The product is priced at $29,900 stand-alone and
$19,900 if bundled with another Ansoft product.

Ansoft HFSS (High-Frequency Structure Simulator). Ansoft HFSS enables
engineers to compute functional models and expected characteristics for passive
devices, particularly RF and wireless components such as couplers,
high-frequency filters and antennas. The Company sells the latest version of
this product, Ansoft HFSS 5.0, worldwide through its direct sales force and its
distributors. The Company continues to supply HP with HFSS 4.0 in accordance
with the terms of the HP Agreement which expired in January 1997 and has not
been renewed. HP has the right to sell HFSS 4.0 through January 1998. The U.S.
list price of Ansoft HFSS 5.0 is $41,900.

Serenade. This software suite provides integrated design support for
microwave, RF and lightwave circuit designs. The software supports schematic,
circuit analysis and layout capabilities concurrently. The Serenade suite
complements Ansoft HFSS and Strata, allowing users to include rigorous analysis
of electromagnetic coupling effects within their circuit analysis. The U.S. list
price of this product suite ranges from $19,900 to $39,900.

Ensemble. This product offers similar but reduced levels of functionality
as Maxwell Strata and is focused on the needs of designers of printed circuit
antennas. The U.S. list price of this product is $16,500.

Maxwell Eminence

This product combines the functionality of the Company's HF and SI products
to enable designers of wireless communication systems to design RF components
and sub-systems and to evaluate the interaction between the digital and RF
portions of communications systems. This product allows system designers to
model critical path PCB emissions, evaluate component level electromagnetic
interference and to study shielding effectiveness enabling them to design for
FCC and other regulatory guidelines proactively. The U.S. list price of this
product is $64,900.

Ansoft SI Software

Maxwell SI 2D and Maxwell SI 3D. These products import interconnect
geometry from design databases and create device models in HSPICE (Meta
Software), PSpice (MicroSim), or DF/SigNoise (Cadence) formats. These models
accurately capture the degradation in signal quality due to higher clock speeds
and smaller physical dimensions. The U.S. list price of each of these products
is $19,900.

Maxwell Spicelink. This product creates physical models of IC Packaging
structures in industry standard JEDEC (Joint Electronic Device Engineering
Committee) format and creates SPICE models for these devices. The package, which
includes a schematic capture tool and circuit simulation tool, allows system
designers to study the effect of connectors, packages and cables on system
performance. The U.S. list price of this product is $34,900.

Ansoft EM Software

Maxwell 2D Field Simulator. This product performs electromagnetic field
simulation at the design stage based on the geometry and material properties of
the component. Electromagnetic field simulation provides designers with critical
device parameters such as forces, torques, saturation effects, inductance,
capacitance and power losses. The parametrics capability of the two-dimensional
field simulator allows the user to easily perform "what-if" analysis by
automatically varying physical dimensions, material properties and excitation
levels. By evaluating field solutions and device characteristics, the designer
is able to determine where material substitutions and geometry changes can be
made to reduce production costs while increasing device performance. The U.S.
list price of this product ranges from $2,900 to $13,900.

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<PAGE> 26

Maxwell 3D Field Simulator. This product provides similar electromagnetic
field simulation of devices as the Maxwell 2D Field Simulator for applications
that require three dimensional analysis. The U.S. list price for this product
ranges from $14,900 to $34,900 and includes Maxwell 2D Field Simulator.

EMSS. This product allows devices designed at the component level in
Maxwell 2D and 3D Field Simulators to be simulated on a larger system level by
coupling the electromagnetic behavior of a device with electrical and mechanical
drive and load components, and permits the critical evaluation of both transient
and steady state system level behavior. The integrated solution is used to study
issues such as the effects of non-linear magnetic components on system level
behavior, source and load transients, induced voltages and currents, as well as
position and velocity of moving parts. The U.S. list price of this product
ranges from $19,900 to $24,900.

EMAS. This product is a two- and three-dimensional field simulation tool
for engineers requiring comprehensive analysis capability. EMAS complements EMSS
and the Maxwell Field Simulators by bridging the gap between electromagnetic,
structural, and thermal analysis and by permitting customers to analyze
structural and thermal characteristics concurrently in order to avoid
unacceptable levels of heat generation. The U.S. list price of this product
ranges from $37,000 to $65,000.

ANSOFT TECHNOLOGY

Electrical components and systems exhibit behavior determined by
fundamental electromagnetic forces. Electromagnetic fields can be analyzed by
using a set of equations known as Maxwell's Equations, derived by the physicist
James Clerk Maxwell in 1869. While Maxwell's Equations describe electromagnetic
phenomena completely, they are difficult to apply to complex, real-life
problems. Traditional EDA tools rely on circuit theory to approximate
electromagnetic behavior by reducing designs to simple systems of large isolated
components where electrical signs vary, or "switch," relatively slowly. However,
as frequencies and structural complexities increase, the amount of
electromagnetic interaction in a system rises dramatically. The Company believes
that software based on circuit theory cannot model such systems with the
requisite degree of accuracy.

Ansoft has a team of research engineers focused on the mathematical and
physical underpinnings of the Company's simulation algorithms. Dr. Zoltan
Cendes, a founder of the Company, serves as the technical leader of the group.
By virtue of over 15 years of research and development by Dr. Cendes prior to
the Company's inception in 1984, and by its internal research and development
staff thereafter, Ansoft has pioneered the following technologies: automatic and
adaptive convergence to solutions, asymptotic waveform evaluation for spectral
domain solutions, transfinite elements, basis evaluation state-space techniques
and fast multipole acceleration algorithms. As a result of the work of Dr.
Cendes and the Ansoft research and development team, the Company's technology
applies Maxwell's Equations to complex, real-life problems in the following
three stages:

Preprocessing. The first stage is preprocessing and consists of building a
computer model of the device to be simulated. This is accomplished by creating a
model of the device geometry, using either Ansoft's solid modeling system or
other mechanical CAD systems, and then defining the physical properties (such as
material, voltage, current and charge) of the device components.

Solution. The second stage is the solution process, which involves
calculating electromagnetic fields for the devices generated during the
preprocessing stage. These procedures provide accurate and stable solutions for
field problems, inductance and capacitance calculations used in signal integrity
simulation of digital components and wide-band frequency response of
high-frequency devices. Since Ansoft's solution procedure is fully automatic and
essentially invisible to the user, analysis involving this high level of
sophistication can be used by designers with varying levels of experience.

Post-processing. The third stage is post-processing, which consists of
applying additional proprietary procedures to analyze the results from the
second stage in light of the specific design environment. Examples of these
procedures are the "transfinite element method," which provides accurate
s-parameters for high-frequency engineers, and the basis evaluation state-space
technique, which is used to couple the electromagnetic devices with electronic
circuits and mechanical loads.

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PRODUCT DEVELOPMENT

The Company continually seeks to design and develop new technologies,
products and interfaces based on its core electromagnetic expertise. This effort
includes releasing improved versions of its products on a regular basis as well
as developing new products. The Company assigns an interdisciplinary team of
personnel from research and development, software development, documentation,
quality assurance, customer support and marketing to each product development
project. Ansoft develops cooperative relationships with major customers with
respect to beta-testing its new products or enhancements and implementing
suggestions for new product features. The Company also maintains cooperative
relationships with the major hardware vendors on which the Company's products
operate. The Company believes that its team approach and cooperative
relationships allow it to design products that respond on a timely basis to
emerging trends in computing, graphics and networking technologies.

As of December 31, 1997, the Company's product development group consisted
of 72 employees. The Company seeks to hire experts in the fields of
electromagnetic engineering, high speed circuit simulation, applied mathematics
and software development.

During fiscal 1996, 1997 and the six month period ended October 31, 1997,
research and development expenses were $1.8 million, $3.0 million and $3.4
million, respectively. See also "Management's Discussion and Analysis--Liquidity
and Capital Resources--Acquisitions."

SALES AND MARKETING

Ansoft markets and sells its products worldwide through its direct sales
force and distributors. The Company hires application engineers with significant
industry experience who can analyze the needs of its customers and gain
technical insight into the development of future products and enhancements to
existing products. The Company's application engineers work with the direct
sales force to provide on-site support during critical stages of the user's
benchmark, evaluation and implementation processes. The Company generates sales
leads through customer referrals, advertising in trade publications and on the
World Wide Web. In addition, the Company participates in industry trade shows
and organizes seminars to promote and expand the adoption of its products.

Direct. In North America, the Company maintains sales and support offices
in Arizona, Northern and Southern California, Florida, Massachusetts, Michigan,
New Jersey, Ohio, Pennsylvania, Texas, Wisconsin, and a telemarketing sales
group operating from its Pittsburgh headquarters. In Asia, the Company maintains
direct sales and support offices in Japan, China and Singapore. In Europe, the
Company maintains sales and support offices in England, Germany and Italy. As of
December 31, 1997, the Company had a direct sales force of 35 representatives,
supported by 56 employees in application engineering, marketing and sales
administration.

Distributors and HP. In 1989, the Company entered into a distribution
arrangement with Hewlett-Packard Corporation ("HP") under which HP formerly
distributed the Company's HFSS 4.0 product on an exclusive basis (the "HP
Agreement"). The HP Agreement has since expired, although HP retains the right
to distribute HFSS 4.0 through January 1998. The Company currently sells the
latest version of its HFSS product, Ansoft HFSS 5.0, through its own sales force
and other distributors. During fiscal 1996, 1997 and the six month period ended
October 31, 1997, revenue from HP accounted for approximately 13%, 12% and 6%,
respectively, of the Company's total revenue. The Company expects that HP will
account for a decreasing percentage of its total revenues over the next three
months. Management believes that the expiration of the HP agreement will not
have a material adverse effect on the Company's future financial condition or
results of operations.

The Company also has distribution agreements with various international
distributors. The Company supports its distributors and their customers with
technical, sales and management personnel.

CUSTOMERS

The Company has significant breadth in its installed base with over 500
customers in the communications, semiconductor, automotive/industrial, computer,
consumer electronics and defense/aerospace industries. No single customer in the
Company's installed base accounted for more than 10% of total revenue within any
of the

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<PAGE> 28

past three fiscal years. The following are customers by industry from whom the
Company has received more than $50,000 in revenues in either fiscal 1997 or the
first six months of fiscal 1998.

<TABLE>
<S> <C> <C>
COMMUNICATIONS SEMICONDUCTOR AUTOMOTIVE/INDUSTRIAL
- -------------- ------------ -------------------
Andrew Corporation Amkor Electronics ABB
Celwave Anam Semiconductor Chrysler
GEC-Marconi Applied Materials Cutler Hammer
Generaldirektion PTT Conductus Delphi Packard
Hughes ETRI Dupont
Italtel S.p.A. Harris Semiconductor Eaton
Lucent Technologies Intel Ford Motor
Metawave Communications LG General Motors
Motorola Molex Hyundai
Pacific Antenna Teradyne Nissan
Communications Texas Instruments Robert Bosch
Rockwell Wolff Controls
Siemens
StarFire Antenna
Wave Trace

COMPUTER CONSUMER ELECTRONICS DEFENSE/AEROSPACE
- -------- ------------------- ----------------
Fujitsu Daewoo Electronics AlliedSignal
Hitachi Daido Tokushukokk Australian Dept. of Defense,
Honeywell General Electric Navy
IBM Mitsubishi Bell Helicopter
NEC Nikon Boeing
Seagate Phillips Defense Science Org.
Tektronix Sharp Jet Propulsion Laboratory
Sony Lawrence Livermore National
Toshiba Lab.
Lockheed-Martin
Northrop Grumman
Raytheon
TRW
US Naval Research Laboratory
</TABLE>

CUSTOMER SERVICE AND SUPPORT

Sales of the Company's software include one year of customer support
services; thereafter annual one year maintenance contracts may be purchased.
Customer support services include on-line and telephone support for design
engineers and on-site and in-house training on all products. Customers with
maintenance agreements receive all product enhancement releases without
additional charge. Product upgrades that add significant new functionality are
provided to customers for an additional fee.

The Company offers a variety of training programs for customers ranging
from introductory level courses to advanced training.

COMPETITION

The EDA software industry is highly competitive and is characterized by
continuing advances in products and technologies. In general, competition comes
from major EDA vendors, many of which have a longer operating history,
significantly greater financial, technical and marketing resources, greater name
recognition and a larger installed customer base than the Company. These
companies also have established relationships with current and potential
customers of the Company. The Company competes directly with certain major EDA
vendors and privately-held companies which also provide products based on
electromagnetic principles derived from Maxwell's Equations. There can be no
assurance that the major EDA vendors and other EDA companies will not expand and
develop new products in the electromagnetics-based EDA market. The Company also
competes, on a limited basis, with the internal development groups of its
existing and potential customers, many of whom design and develop customized
design tools for their particular needs. In addition, the EDA industry has

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become increasingly concentrated in recent years as a result of acquisitions,
and further concentration within the EDA industry could result in increased
competition for the Company. The Company's software products currently compete
with certain software offerings from Hewlett-Packard Corporation ("HP"). The
Company entered into a distribution arrangement with HP under which HP formerly
distributed the Company's HFSS 4.0 product on an exclusive basis (the "HP
Agreement"). The HP Agreement has since expired, although HP retains the right
to distribute HFSS 4.0 through January 1998. HP has publicly announced the
introduction of a follow-on product called HP HFSS 5.0. The Company currently
sells the latest version of its HFSS product, Ansoft HFSS 5.0, through its own
sales force and other distributors. There can be no certainty that the Company
will be able to compete successfully against HP, or that any failure to compete
successfully with the introduction of HP's own HFSS product will not have an
adverse impact on the Company's operations and prospects. The failure of the
Company to compete successfully against current and future competitors would
have a material adverse effect on the Company's business, operating results and
financial condition. Ansoft believes that its current products compete
effectively on the basis of product functionality, solution speed and accuracy,
reliability, price, ease of use and technical support for applications which
require accurate modeling of electromagnetic interaction. However, there is no
assurance that the Company will not face competitive technologies that could
hinder its future prospects.

PROPRIETARY RIGHTS

The Company is heavily dependent on its proprietary software technology.
The Company relies on a combination of non-competition and confidentiality
agreements with its employees, license agreements, copyrights, trademarks and
trade secret laws to establish and protect proprietary rights to its technology.
The Company does not hold any patents. All Ansoft software is shipped with a
security lock which limits software access to authorized users. In addition, the
Company does not license or release its source code. Effective copyright and
trade secret protection of the Company's proprietary technology may be
unavailable or limited in certain foreign countries.

Compact Software, Maxwell(R), Harmonica(R), Ensemble(R), ParICs(R) and
Serenade(R) are registered United States trademarks of Ansoft.

EMPLOYEES

As of December 31, 1997, the Company had a total of 175 employees,
including 72 in research and development, 91 in sales, marketing, and customer
support services and 12 in administration. None of the Company's employees is
represented by a collective bargaining agreement, nor has the Company
experienced any work stoppage. The Company considers its relations with its
employees to be good. Many of the Company's employees are highly skilled, and
there is no assurance that the Company will be able to attract and retain
sufficient technical personnel in the future.

LITIGATION

The Company is not a party to any litigation and is not aware of any
threatened litigation, unasserted claims or assessments that could have material
adverse effect on the Company's business, operating results or financial
condition.

FACILITIES

The Company occupies approximately 18,000 square feet of space at its
headquarters in Pittsburgh, Pennsylvania under a lease expiring in 1998. The
current annual base rent is approximately $286,000. The Company also leases
sales and support offices in California, Colorado, New Jersey, Wisconsin, Europe
and Japan. The Company's current aggregate annual rental expenses for these
additional facilities is approximately $345,000. Ansoft believes that its
existing facilities are adequate for its current needs and that suitable
additional space will be available when needed.

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MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth certain information concerning each of the
directors and executive officers of the Company:

<TABLE>
<CAPTION>
NAME AGE TITLE
- ----------------------------------- ---- --------------------------------------------------
<S> <C> <C>
Zoltan J. Cendes, Ph.D............. 51 Chief Technology Officer and Chairman of the Board
Nicholas Csendes................... 53 President, Chief Executive Officer and Director
Padmanabhan Premkumar.............. 34 Vice President-Marketing
Jack Parkes........................ 38 Vice President-Engineering
Anthony L. Ryan.................... 29 Chief Financial Officer
Thomas A.N. Miller................. 50 Director
Ulrich L. Rohde, Ph.D.............. 57 Director
John N. Whelihan (1)............... 54 Director
Jacob K. White, Ph.D.(1)........... 38 Director
</TABLE>

- ---------

(1) Member of the Compensation and Audit Committees.

Dr. Zoltan J. Cendes is a founder of Ansoft and has served as Chairman of
the Board of Directors of the Company and its chief research scientist since its
formation in 1984. Since 1982, Dr. Cendes has been a university professor in
electrical and computer engineering at Carnegie Mellon University. Dr. Cendes
has lectured throughout North America, Europe and Asia on the topic of
electromagnetics and finite element analysis and has published over 100
publications on these topics. Dr. Cendes directs the research efforts of Ansoft.

Nicholas Csendes is a founder of Ansoft and has served as President, Chief
Executive Officer and Secretary since 1992 and a director since 1984. Mr.
Csendes was a senior investment officer with Sun Life of Canada, a major
international financial institution focusing on the sale of life insurance and
retirement products ("Sun Life"), for over 15 years. Since 1985, Mr. Csendes has
been involved with various public and private companies including a
publicly-held interactive software company, and has been an officer, director
and a controlling stockholder of American Banner Resources, Inc. ("ABR"), a
privately-held holding company with various interests in real estate and public
and private securities, including a 24% beneficial ownership interest in Ansoft
as of January 26, 1998.

Padmanabhan Premkumar joined Ansoft in 1989. From 1991 to 1995, Mr.
Premkumar was in charge of Ansoft's software development programs as Vice
President-Development. Since 1995, Mr. Premkumar has been Vice
President-Marketing, responsible for product planning, marketing and
commercialization of existing software product enhancements and the commercial
development of new products. Prior to joining Ansoft, Mr. Premkumar was a
research associate in the Robotics Laboratory at the University of Toledo.

Jack Parkes joined Ansoft in 1990. In May 1997, Mr. Parkes was appointed
Vice President-Engineering. Mr. Parkes joined Ansoft in 1990 with over 10 years
of experience in electrical engineering. Prior to joining Ansoft, Mr. Parkes was
a senior design and development engineer with Loral Corporation ("Loral") and,
prior to joining Loral, with Texas Instruments, Inc.

Anthony L. Ryan joined Ansoft in 1995 as corporate controller. In May 1997,
Mr. Ryan was appointed Chief Financial Officer. From 1991 to 1995, Mr. Ryan
worked as a certified public accountant with KPMG Peat Marwick LLP, an
international accounting firm.

Thomas A.N. Miller is a founder of Ansoft and has served as a director
since 1984 and served as Chief Financial Officer from 1994 to May 1997. From
1989 to 1994, Mr. Miller was an officer, director and controlling stockholder of
Southwest Gas, a privately-held natural gas company which was sold to Enserch
Corporation in 1994. Mr. Miller was a founder of IT Network, Inc. ("ITN"), the
predecessor of Source Media Inc., a publicly-held interactive information
service company and served as Chairman of the Board of ITN from its inception in

30
<PAGE> 31

1988 to 1994, and as chief executive officer of ITN from its inception to
December 1992. Since 1981, Mr. Miller has been President, director and a
controlling stockholder of ABR and its predecessor companies.

Dr. Ulrich L. Rohde became a director of the Company in April 1997 in
connection with Ansoft's acquisition of Compact on April 9, 1997. From 1985 to
1997, Dr. Rohde was the majority shareholder, president and chief executive
officer of Compact and he has over 20 years of expertise in microwave systems
technology. Dr. Rohde was an adjunct professor of electrical engineering at the
University of Florida, Gainesville, and is currently an adjunct professor at
George Washington University. Dr. Rohde has lectured on the topic of microwave
circuit simulation and design throughout North America, Europe and Asia and has
published numerous articles and books on these topics.

John N. Whelihan became a director of the Company in March 1996. Since 1994
Mr. Whelihan has served as Vice President of Sun Life of Canada, a major
international financial institution. Mr. Whelihan is in charge of U.S. private
placements.

Dr. Jacob K. White became a director of the Company in February 1996. Since
1991, Dr. White has been an Associate Professor of electrical engineering and
computer science at the Massachusetts Institute of Technology ("MIT"). From 1987
to 1991, he was an Assistant Professor at MIT.

All directors hold office until the next annual meeting of the stockholders
and until their successors have been elected and qualified. Officers are
appointed by the Board of Directors and serve at the discretion of the Board.
Dr. Zoltan J. Cendes and Mr. Nicholas Csendes are brothers. There are no other
family relationships between any of the directors or executive officers of the
Company.

EXECUTIVE COMPENSATION

Summary Compensation

The following table summarizes the aggregate cash compensation for services
in all capacities to the Company for the fiscal year ended April 30, 1997 for
the Chief Executive Officer and each executive officer of the Company whose
total annual salary and bonus exceeded $100,000 during the fiscal year ended
April 30, 1997, and compensation received by each such individual for the
Company's two prior years (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
----------------------
AWARDS
ANNUAL COMPENSATION ----------------------
----------------------- SECURITIES UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#)
- ---------------------------------------------- ---- ---------- --------- ----------------------
<S> <C> <C> <C> <C>
Nicholas Csendes.............................. 1997 $ 120,000 $ 4,800 --
President and Chief Executive Officer 1996 120,000 -- --
1995 120,000 -- --
Zoltan J. Cendes, Ph.D........................ 1997 120,000 4,800 --
Chairman of the Board and Chief Technology 1996 108,333 -- --
Officer 1995 80,000 -- 200,000
</TABLE>

31
<PAGE> 32

Option Grants and Exercises

The following table sets forth the aggregate dollar value of all options
exercised and the total number of unexercised options held, on April 30, 1997,
by each of the Named Executive Officers:

AGGREGATED OPTION EXERCISES DURING FISCAL 1997
AND FISCAL YEAR END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT FISCAL YEAR OPTIONS/SARS AT FISCAL YEAR
EXECUTIVE OFFICER END (#) END ($)(1)
- --------------------------------------------- --------------------------- ---------------------------
EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
<S> <C> <C>
Nicholas Csendes............................. -- --
Zoltan J. Cendes............................. 155,200/120,000 $225,750/$0
</TABLE>

- ---------

(1) The closing price for the Company's Common Stock as reported by The Nasdaq
National Market on April 30, 1997 was $4.75. Value is calculated on the
basis of the difference between the exercise price and $4.75, multiplied by
the number of shares of Common Stock underlying the option.

The Company did not grant any options to the Named Executive Officers
during the fiscal year ended April 30, 1997.

BOARD COMMITTEES

Compensation Committee. The Board has a Compensation Committee, consisting
of Mr. Whelihan and Dr. White, each of whom is an independent director. The
Compensation Committee is responsible for reviewing and approving matters
involving the compensation of directors and executive officers of the Company,
periodically reviewing management development plans, administering the Company's
incentive compensation plans and making recommendations to the full Board on
these matters. The Compensation Committee did not meet during fiscal 1997 and
has met once in fiscal 1998.

Audit Committee. The Board has an Audit Committee comprised of Mr.
Whelihan and Dr. White. The Audit Committee's duties include recommending to the
Board of Directors the firm of independent accountants to audit the Company's
consolidated financial statements, reviewing the scope and results of the
independent auditors' activities and the fees proposed and charged therefor,
reviewing the adequacy of internal controls and reviewing the scope and results
of internal audit activities, and reporting the results of the committee's
activities to the full Board. The Audit Committee met once during fiscal year
1997.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Jacob K. White and John N. Whelihan serve as members of the Compensation
Committee of the Board of Directors. Neither Dr. White nor Mr. Whelihan is or
has been an officer or employee of the Company.

On September 16, 1997, the Company entered into a Consulting Agreement (the
"Agreement") with Dr. Jacob White pursuant to which Dr. White has agreed to
develop a computer program for use within the Company's products and under which
the Company may be obligated to pay Dr. White to a maximum of $25,500 plus
related expenses. Pursuant to the Agreement, any resulting software is to be
commercialized and fully supported by the Company. Further, all applicable
copyrights, patents, technology and intellectual property developed under this
Agreement are transferred on an exclusive basis to the Company, who will own
them and have the unlimited, exclusive and unimpeded rights to commercialize the
work.

DIRECTOR COMPENSATION

Directors receive $1,000 per meeting which they attend and are reimbursed
for all reasonable expenses incurred by them in attending meetings of the Board
of Directors and its committees. At the closing of the Company's initial public
offering in April 1996, Dr. White and Mr. Whelihan each received an option to
purchase 30,000 shares of Common Stock of the Company at an exercise price per
share equal to $8.50, the initial offering price per share. Such options are
subject to vesting over a five-year period commencing from the date of grant.

32
<PAGE> 33

On September 10, 1996, the Board of Directors (Dr. White and Mr. Whelihan
abstaining) approved the repricing of the exercise price on those stock options
held by Dr. White and Mr. Whelihan from $8.50 to $6.00.

EMPLOYEE STOCK OPTION PLANS

1988 Stock Option Plan. The Company's 1988 Stock Option Plan (the "1988
Plan") provides for grants of both "incentive stock options" within the meaning
of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"),
and "non-qualified stock options" which are not eligible for preferential
treatment under Section 422 of the Code. The purposes of the 1988 Plan are to
encourage ownership of the Common Stock of the Company by employees in order to
attract employees, induce them to remain in the employ of the Company and
provide additional incentive for such employees to promote the success of the
Company.

The term of the options granted under the 1988 Plan has generally been
three years, although the 1988 Plan permits the grant of options which may
remain outstanding for up to ten years from the date of grant. If an employee
who has been granted an option ceases to be an employee of the Company for any
reason other than death, disability or termination by the Company for cause,
such employee may exercise that option only during the three-month period
following the date of termination, and only to the extent that the option was
exercisable on the date of termination. An employee of the Company whose
employment is terminated due to death or disability may exercise outstanding
options up to six months following the date of such termination to the extent
that such options are exercisable on the date of termination. Options
automatically expire upon termination of an employee for cause. No option
granted under the 1988 Plan is transferable.

As of December 31, 1997, options to purchase 408,209 shares of the
Company's Common Stock were outstanding under the 1988 Plan. The Company does
not expect to grant any additional options under the 1988 Plan.

1995 Stock Option Plan. The Company's 1995 Stock Option Plan (the "1995
Plan") provides for grants of both "incentive stock options" within the meaning
of Section 422 of the Code and "non-qualified stock options" which are not
eligible for preferential treatment under the Code. The purposes of the 1995
Plan are to attract, retain and reward persons providing services to the Company
and to provide incentive for such persons to contribute to the growth and
profits of the Company in the future.

The 1995 Plan provides that the options shall expire no more than ten years
from the date of grant. If an employee who has been granted an option ceases to
be an employee of the Company for any reason other than termination by the
Company for cause, such employee may exercise that option only during the
three-month period following the date of termination, and only to the extent
that the option was exercisable on the date of termination. Options
automatically expire upon termination of an employee for cause. No option
granted under the 1995 Plan is transferable.

The Board of Directors has approved the reservation of up to 1,500,000
shares of Common Stock eligible for issuance under the 1995 Plan.

As of December 31, 1997, options to purchase 785,708 shares of the
Company's Common Stock were outstanding under the 1995 Plan and 693,992 shares
of the Company's Common Stock were reserved and available for future grants
under the 1995 Plan.

EMPLOYMENT CONTRACTS AND CHANGE OF CONTROL AGREEMENTS

Other than the Company's standard form of non-competition and
confidentiality agreement, the Company does not presently have any employment
contracts in effect including any compensatory plans or arrangements resulting
from the resignation, retirement or other termination or change-in-control with
either of the Named Executive Officers or the other executive officers of the
Company. Compensation for the Named Executive Officers and the other executive
officers of the Company is currently set by the Compensation Committee of the
Board of Directors of the Company.

33
<PAGE> 34

CERTAIN TRANSACTIONS

On March 15, 1995, the Company entered into an agreement with ABR, a
principal stockholder of the Company which is controlled by Nicholas Csendes and
Thomas A. N. Miller. This agreement provided for the funding by ABR of the
repurchase obligations that the Company incurred as a result of the Company's
agreement to redeem up to 197,008 shares of Common Stock held by employees of
the Company upon their request between March 15, 1996 and March 15, 1997 for the
initial purchase price paid by such employees plus 10%, or an aggregate amount
of $358,136.90 (assuming all employees were to have exercised their redemption
rights). No such requests for redemption were made. The funding was to have been
provided by ABR purchasing from the Company that number of shares of Common
Stock equal to the number of shares redeemed by Ansoft from the employees at the
same price paid to the employees. The Company believes that the agreement was
made on terms no less favorable to the Company than could have been obtained
from unaffiliated third parties.

On March 15, 1995, ABR purchased 151,500 shares of the Company's Common
Stock for $200,000 of cash and a receivable for the remaining balance of
$103,000, which was paid in full on January 31, 1996. The purchase price of the
foregoing transaction was equal to the fair market value of the Company's Common
Stock on the date of such transaction as determined by the Board of Directors.

On April 30, 1995, Dr. Zoltan Cendes, an officer and director of the
Company, received a non-transferable option to purchase 200,000 shares of the
Company's Common Stock at an exercise price of $5.00 per share, a price at that
time determined by the Board of Directors to be above the fair market value of
the Company's Common Stock. The option provides that the shares vest at a rate
of 40,000 shares per year for five years beginning in fiscal year 1996; however,
the option shall become fully vested upon a change of control of the Company, as
defined in the option agreement. Upon Dr. Cendes' death, vested options as of
such date may be exercised within 90 days. The option, which expires on April
30, 2005, has not been exercised.

In fiscal 1995, certain stockholders, including the Company's principal
stockholders, advanced funds to the Company and the Company issued shares of
Common Stock in consideration for these advances at prices ranging from $1.00 to
$1.27 (the estimated fair market value of the Company's Common Stock at the
dates of the respective advances, as determined by the Board of Directors) as
follows: 1,797,600 shares to ABR for advances of $2,072,000; 651,953 shares to
Nicholas Csendes, an officer and director of the Company, for advances of
$724,551; 651,953 shares to Thomas A. N. Miller, a director and former officer
of the Company, for advances of $724,551; 110,618 shares to Dr. Zoltan Cendes
for advances of $141,027; and 700,000 shares to the Maier Trust for advances of
$734,951.

On April 9, 1997, Dr. Ulrich L. Rohde, a director of the Company, sold 810
shares of common stock of Compact to the Company pursuant to a stock purchase
agreement. Additionally, in the same transaction, Dr. Meta Rohde, the wife of
Dr. Ulrich Rohde, sold 190 shares of common stock of Compact to the Company.
(Hereinafter, Dr. Ulrich Rohde's Compact shares and Dr. Meta Rohde's Compact
shares are collectively referred to as the "Compact Shares".) The Compact Shares
represented all of the issued and outstanding shares of Compact. As
consideration for the Compact Shares, Dr. Ulrich Rohde and Dr. Meta Rohde
received in the aggregate $3,000,000 in cash and 1,272,728 shares of Ansoft
Common Stock.

In connection with the acquisition of the Compact Shares, the Company
entered into a registration rights agreement with Dr. Ulrich Rohde and Dr. Meta
Rohde pursuant to which Dr. Ulrich Rohde and Dr. Meta Rohde, jointly, were given
the right, exercisable at any time after the first anniversary of the
transaction, to make two demands on the Company to register the shares of Ansoft
Common Stock received by them for the Compact Shares. In addition, pursuant to
the registration rights agreement, Dr. Ulrich Rohde and Dr. Meta Rohde were
given the right to register the shares of Ansoft Common Stock received by them
for the Compact Shares whenever the Company proposed to register any of its
securities under the Securities Act (other than pursuant to a registration
statement on Forms S-4 or S-8).

It is the Company's policy that transactions between the Company and its
officers, directors and principal stockholders and their affiliates are approved
by a majority of the Board of Directors, including a majority of the
disinterested directors, and are on terms no less favorable to the Company than
could be obtained from unaffiliated third parties.

34
<PAGE> 35

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of January 26, 1998, and as adjusted
to reflect the sale of the Common Stock offered by the Company, (i) by each
person who is known by the Company to beneficially own more than five percent of
the Company's Common Stock, (ii) by each director of the Company, (iii) by each
of the Named Executive Officers, and (iv) by all executive officers and
directors as a group. Except as noted, all persons listed below have sole voting
and investment power with respect to their shares of Common Stock, subject to
community property laws where applicable.

<TABLE>
<CAPTION>
PERCENTAGE OWNED(1)
--------------------
NUMBER OF BEFORE AFTER
BENEFICIAL OWNER SHARES OFFERING OFFERING
- --------------------------------------------------------------- ----------- -------- --------
<S> <C> <C> <C>
American Banner Resources, Inc.(2)(3).......................... 2,174,100 23.6 19.4
Thomas A. N. Miller(2)(4)...................................... 2,949,053 32.0 26.3
Nicholas Csendes(2)(5)......................................... 2,944,053 32.0 26.3
Ulrich L. and Meta M. Rohde(2)(6).............................. 1,272,728 13.8 11.4
Zoltan J. Cendes(2)(7)......................................... 865,818 9.2 7.6
Jacob K. White(8).............................................. 12,000 * *
John N. Whelihan(9)............................................ 18,000 * *
All directors and officers as a group (8
persons)(4)(5)(6)(7)(8)(9)(10)............................... 6,031,552 63.5 52.5
</TABLE>

- ---------

* Less than 1%.

(1) The information contained in the table above reflects "beneficial
ownership" of the Common Stock within the meaning of Rule 13d-3 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). Unless
otherwise indicated, all shares of Common Stock are held directly with sole
voting and dispositive power.

(2) The business address of the stockholder is Four Station Square, Suite 660,
Pittsburgh, PA 15219

(3) Does not include 774,953 shares held by Thomas A. N. Miller, an officer,
director and controlling stockholder of ABR, or 769,953 shares held by
Nicholas Csendes, also an officer, director and controlling stockholder.

(4) Includes 2,174,100 shares held by ABR, of which Mr. Miller is an officer,
director and controlling stockholder, but excludes 147,000 shares held by
trusts for the benefit of certain family members of Mr. Miller with respect
to which trusts Mr. Miller is not a trustee and disclaims any beneficial
ownership.

(5) Includes 2,174,100 shares held by ABR, of which Mr. Csendes is an officer,
director and controlling stockholder, but excludes 152,000 shares held by
trusts for the benefit of certain family members of Mr. Csendes with
respect to which trusts Mr. Csendes is not a trustee and disclaims any
beneficial ownership.

(6) Dr. Ulrich Rohde and Dr. Meta Rohde share voting power and dispositive
power with respect to all such 1,272,728 shares.

(7) Includes 155,200 shares issuable upon exercise of options exercisable
within 60 days of January 26, 1998.

(8) Includes 12,000 shares issuable upon exercise of options exercisable within
60 days of January 26, 1998.

(9) Includes 12,000 shares issuable upon exercise of options exercisable within
60 days after January 26, 1998. Also includes 6,000 shares jointly owned
with Mr. Whelihan's spouse.

(10) Includes 144,000 shares beneficially owned by certain other executive
officers of which 104,000 are issuable upon exercise of options within 60
days after January 26, 1998.

35
<PAGE> 36

DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company consists of 25,000,000 shares
of Common Stock, par value $0.01 per share, and 1,000,000 shares of Preferred
Stock, par value $0.01 per share ("Preferred Stock").

COMMON STOCK

The holders of Common Stock are entitled to one vote per share on all
matters to be voted on by the stockholders. Subject to preferences that may be
applicable to any outstanding Preferred Stock, the holders of Common Stock are
entitled to receive dividends ratably, if any such dividends are declared by the
Board of Directors, out of funds legally available therefor. See "Dividend
Policy." In the event of a liquidation, dissolution or winding up of the
Company, the holders of Common Stock are entitled to share ratably in all assets
remaining after payment of liabilities, subject to prior rights of the holders
of the Preferred Stock then outstanding. There are no redemption or sinking fund
provisions available to the Common Stock. All outstanding shares of Common Stock
are fully paid and non-assessable and the shares of Common Stock to be issued
upon completion of this offering will be fully paid and non-assessable.

As of February 24, 1998, approximately 9,200,169 shares of Common Stock
were outstanding and held of record by approximately 143 stockholders. As of
December 31, 1997, options to purchase an aggregate of 1,193,917 shares of
Common Stock were also outstanding (excluding options to purchase 260,000 shares
of Common Stock not issued pursuant to either the 1988 Plan or the 1995 Plan).

PREFERRED STOCK

The Company is authorized to issue 1,000,000 shares of Preferred Stock. The
Board of Directors is authorized, subject to any limitations prescribed by law,
without further stockholder approval, to issue from time to time such shares of
Preferred Stock in one or more classes or series. Each class or series of
Preferred Stock shall have such number of shares, designations, preferences,
voting powers, qualifications and special or relative rights or privileges as
shall be determined by the Board of Directors, which may include, among other
provisions, dividend rights, voting rights, redemption and sinking fund
provisions, liquidation preferences, conversion rights and preemptive rights.

The stockholders of the Company have granted the Board of Directors
authority to issue the Preferred Stock and to determine its rights and
preferences in order to eliminate delays associated with a stockholder vote on
specific issuances. The issuance of Preferred Stock, while providing desirable
flexibility in connection with possible acquisitions and other corporate
purposes, could, depending on the rights of any series of Preferred Stock issued
and outstanding, have the effect of making it more difficult for a third party
to acquire the Company, discourage a third party from acquiring the Company
and/or deter a third party from paying a premium to acquire a majority of the
outstanding voting stock of the Company. Additionally, depending on the rights
and preferences of any series of Preferred Stock issued and outstanding, the
issuance of Preferred Stock may adversely affect the voting and other rights of
the holders of the Common Stock, including the possibility of the loss of voting
control to others.

The Company has no shares of Preferred Stock outstanding. At present, the
Company has no plans to issue any shares of Preferred Stock.

ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE CERTIFICATE OF INCORPORATION, BYLAWS
AND DELAWARE LAW

Delaware General Corporation Law

The Company is subject to Section 203 of the Delaware General Corporation
Law ("Section 203") which, subject to certain exceptions, prohibits a Delaware
corporation, the voting stock of which is generally publicly traded (i.e.,
listed on a national securities exchange or authorized for quotation on an
inter-dealer quotation system of a registered national securities association)
or held of record by more than 2,000 stockholders, from engaging in any business
combination with any interested stockholder for a period of three years
following the date that such stockholder became an interested stockholder,
unless: (i) prior to such date, the board of directors of the corporation
approved either the business combination or the transaction which resulted in
the stockholder
36
<PAGE> 37

becoming an interested stockholder; (ii) upon consummation of the transaction
which resulted in the stockholder becoming an interested stockholder, the
interested stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned (x) by persons
who are directors and also officers and (y) by employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer,
or (iii) on or subsequent to such date, the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.

Section 203 defines business combination to include: (i) any merger or
consolidation involving the corporation and an interested stockholder, (ii) any
sale, transfer, pledge or other disposition of 10% or more of the assets of the
corporation involving an interested stockholder, (iii) subject to certain
exceptions, any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to an interested stockholder; (iv)
any transaction involving the corporation which has the effect of increasing the
proportionate share of the stock of any class or series of the corporation
beneficially owned by an interested stockholder or (v) the receipt by an
interested stockholder of the benefit of any loans, advances, guarantees,
pledges or other financial benefits provided by or through the corporation. In
general, Section 203 defines an interested stockholder as any entity or person
beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by such entity or person.

Certificate of Incorporation and Bylaws

The Company's Certificate of Incorporation authorizes the Board of
Directors to issue up to 1,000,000 shares of Preferred Stock and to determine
its rights and preferences in order to eliminate delays associated with a
stockholder vote on specific issuances. The issuance of Preferred Stock, while
providing desirable flexibility in connection with possible acquisitions and
other corporate purposes, could, depending on the rights of any series of
Preferred Stock issued and outstanding, have the effect of making it more
difficult for a third party to acquire the Company, discourage a third party
from acquiring the Company and/or deter a third party from paying a premium to
acquire a majority of the outstanding voting stock of the Company. Additionally,
depending on the rights and preferences of any series of Preferred Stock issued
and outstanding, the issuance of Preferred Stock may adversely affect the voting
and other rights of the holders of the Common Stock, including the possibility
of the loss of voting control to others.

The Company's Amended and Restated Bylaws allow the Board of Directors to
increase the number of directors from time to time (though a decrease in the
number of directors may not have the effect of shortening the term of any
incumbent director) and to fill any vacancies on the Board of Directors,
including vacancies resulting from an increase in the number of directors. This
provision is designed to provide the Board of Directors with flexibility to deal
with an attempted hostile takeover by a shareholder who may acquire a majority
voting interest in the Company without paying a premium therefor. This provision
allows the Board of Directors to increase its size and prevent a "squeeze-out"
of any remaining minority interest soon after a new majority shareholder gains
control over the Company. Further, the Bylaws limit the new majority
shareholder's power to remove a current or all current directors before the
annual meeting in the absence of "cause." Cause for removal of a director is
limited to: (i) a judicial determination that a director is of unsound mind;
(ii) a conviction of a director of an offense punishable by imprisonment for a
term of more than one year; (iii) a breach or failure by a director to perform
the statutory duties of said director's office if the breach or failure
constitutes self-dealing, willful misconduct or recklessness or (iv) a failure
of a director, within 60 days after notice of his or her election, to accept
such office either in writing or by attending a meeting of the Board of
Directors and fulfilling such other requirements of qualification as the bylaws
or certificate of incorporation may provide.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the Common Stock is American Stock
Transfer & Trust Company, New York, New York.

37
<PAGE> 38

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below, through their Representatives, Hambrecht & Quist LLC
and Wessels, Arnold & Henderson, L.L.C. (the "Representatives"), have severally
agreed to purchase from the Company the following respective number of shares of
Common Stock:

<TABLE>
<CAPTION>
NAME NUMBER OF SHARES
---- ----------------
<S> <C>
Hambrecht & Quist LLC....................................... 1,020,000
Wessels, Arnold & Henderson, L.L.C.......................... 680,000
Janney Montgomery Scott Inc................................. 100,000
Needham & Company, Inc...................................... 100,000
Pennsylvania Merchant Group Ltd............................. 100,000
---------
Total....................................................... 2,000,000
=========
</TABLE>

The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent, including the absence
of any material adverse change in the Company's business and the receipt of
certain certificates, opinions and letters from the Company and its counsel and
independent auditors. The nature of the Underwriters' obligation is such that
they are committed to purchase all shares of Common Stock offered hereby if any
such shares are purchased.

The Underwriters propose to offer the shares of Common Stock directly to
the public at the public offering price set forth on the cover page of this
Prospectus and to certain dealers at such price less a concession not in excess
of $0.38 per share. The Underwriters may allow and such dealers may reallow a
concession not in excess of $0.10 per share to certain other dealers. After the
public offering of the shares, the offering price and other selling terms may be
changed by the Representatives of the Underwriters.

The Company has granted to the Underwriters an option, exercisable no later
than 30 days after the date of this Prospectus, to purchase up to 300,000
additional shares of Common Stock at the public offering price, less the
underwriting discount, set forth on the cover page of this Prospectus. To the
extent that the Underwriters exercise this option, each of the Underwriters will
have a firm commitment to purchase approximately the same percentage thereof
which the number of shares of Common Stock to be purchased by it shown in the
above table bears to the total number of shares of Common Stock offered hereby.
The Company will be obligated, pursuant to the option, to sell shares to the
Underwriters to the extent the option is exercised. The Underwriters may
exercise such option only to cover over-allotments made in connection with the
sale of the shares of Common Stock offered hereby.

The offering of the shares is made for delivery when, as and if accepted by
the Underwriters and subject to prior sale and to withdrawal, cancellation or
modification of the offering without notice. The Underwriters reserve the right
to reject an order for the purchase of shares in whole or in part.

The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, and to contribute
to payments the Underwriters may be required to make in respect thereof.

Certain stockholders as well as the executive officers and directors of the
Company, who will own in the aggregate 6,624,514 shares of Common Stock after
the offering, and the Company have agreed that without the prior consent of
Hambrecht & Quist LLC, they will not, directly or indirectly sell, offer,
contract to sell, make any short sale, pledge, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase or otherwise transfer or dispose of any shares of Common
Stock or any securities convertible into or exchangeable or exercisable for or
any rights to purchase or acquire Common Stock or enter into any swap or other
agreement that transfers, in whole or in part, any of the economic consequences
or ownership of Common Stock, whether any such transaction described above is
settled by delivery of Common Stock or such other securities, in cash or
otherwise, during the 90-day period following the effective date of the
Registration Statement of which this Prospectus is a part, except that the
Company may issue, and grant options to purchase, shares of Common Stock
pursuant to its existing stock option plans and under currently outstanding
options.

38
<PAGE> 39

Certain persons participating in this offering may over-allot or effect
transactions which stabilize, maintain or otherwise affect the market price of
the Company's Common Stock at levels above those which might otherwise prevail
in the open market, including by entering stabilizing bids or effecting
syndicate covering transactions. A stabilizing bid means the placing of any bid
or effecting of any purchase, for the purpose of pegging, fixing or maintaining
the price of the Company's Common Stock. A syndicate covering transaction means
the placing of any bid on behalf of the underwriting syndicate or the effecting
of any purchase to reduce a short position created in connection with the
offering. Such transactions may be effected on the Nasdaq National Market, in
the over-the-counter market, or otherwise. Such stabilizing, if commenced, may
be discontinued at any time.

LEGAL MATTERS

The validity of the issuance of the Common Stock offered hereby and certain
other legal matters in connection with this offering will be passed upon for the
Company by Buchanan Ingersoll Professional Corporation, Pittsburgh,
Pennsylvania. Certain legal matters in connection with this offering will be
passed upon for the Underwriters by Hale and Dorr LLP, Boston, Massachusetts.

EXPERTS

The Consolidated Financial Statements included in this Prospectus and the
Financial Schedule included in this Registration Statement have been audited by
KPMG Peat Marwick LLP, independent certified public accountants, to the extent
and for the periods as indicated in their reports with respect thereto and have
been included herein upon the authority of said firm as experts in accounting
and auditing.

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Commission. Reports,
proxy statements and other information filed by the Company with the Commission
pursuant to the informational requirements of the Exchange Act may be inspected
and copies at the public reference facilities maintained by the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549 and at the Commission's regional
offices located at Seven World Trade Center, 13th Floor, New York, New York
10048, and at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such materials also may be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549 at prescribed rates. The Common Stock of the Company is traded on the
Nasdaq National Market. Reports and other information concerning the Company may
be inspected at the National Association of Securities Dealers, Inc., 1801 K
Street, N.W., Washington, D.C. 20006. In addition, the Company is required to
file electronic versions of these documents with the Commission through the
Commission's Electronic Data Gathering, Analysis and Retrieval (EDGAR) system.
The Commission maintains a World Wide Web site at http://www.sec.gov that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission.

The Company has filed with the Securities and Exchange Commission,
Washington, D.C. 20549, a Registration Statement on Form S-1 under the
Securities Act (the "Registration Statement") with respect to the Common Stock
offered hereby. This Prospectus, which constitutes part of the Registration
Statement, does not contain all of the information set forth in the Registration
Statement and the exhibits and schedules thereto. For further information with
respect to the Company and the Common Stock, reference is hereby made to the
Registration Statement and the exhibits and schedules filed therewith.
Statements contained in this Prospectus as to the contents of any contract or
other document are not necessarily complete and in each instance reference is
made to the copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference. The Registration Statement, including the exhibits and schedules
thereto, may be inspected without charge at the principal office of the
Commission in Washington, D.C. and copies of all or any part of which may be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Judiciary Plaza, Room 1024, Washington,
D.C. 20549, and at the Commission's Regional Offices located at Citicorp Center,
500 West Madison Street, Suite 1400, Chicago,

39
<PAGE> 40

Illinois 60661-2511 and Seven World Trade Center, Suite 1300, New York, New York
10048. Copies of such material may be obtained at prescribed rates by mail from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549.

40
<PAGE> 41

ANSOFT CORPORATION

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors Report.......................................................... F-2
Balance Sheets as of April 30, 1996 and 1997 and October 31, 1997 (unaudited)........ F-3
Statements of Operations for the years ended April 30, 1995, 1996 and 1997 and six
months ended (unaudited) October 31, 1996 and 1997................................. F-4
Statements of Stockholders' Equity (Deficit) for the years ended April 30, 1995, 1996
and 1997 and six months ended (unaudited) October 31, 1997......................... F-5
Statements of Cash Flows for the years ended April 30, 1995, 1996 and 1997 and six
months ended (unaudited) October 31, 1996 and 1997................................. F-6
Notes to Consolidated Financial Statements........................................... F-7
</TABLE>

F-1
<PAGE> 42

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
Ansoft Corporation:

We have audited the accompanying consolidated balance sheets of Ansoft
Corporation and subsidiaries as of April 30, 1996 and 1997, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the years in the three-year period ended April 30, 1997. 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, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Ansoft
Corporation and subsidiaries as of April 30, 1996 and 1997, and the results of
their operations and their cash flows for each of the years in the three-year
period ended April 30, 1997, in conformity with generally accepted accounting
principles.

KPMG Peat Marwick LLP

Pittsburgh, Pennsylvania
May 27, 1997

F-2
<PAGE> 43

ANSOFT CORPORATION

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
APRIL 30,
------------------- OCTOBER 31,
1996 1997 1997
------- ------- ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents............................... $10,728 $ 312 $ 1,040
Accounts receivable, net of allowance for doubtful
accounts of $125..................................... 1,666 4,129 4,998
Marketable securities................................... 119 55 --
Deferred income taxes................................... 427 320 680
Prepaid expenses and other assets....................... 91 282 349
------- ------- -------
Total current assets...................................... 13,031 5,098 7,067
Plant and equipment....................................... 724 1,995 2,628
Marketable securities..................................... 1,340 7,095 2,982
Other asset............................................... 13 3 455
Deferred taxes--non current............................... 273 800 830
Intangible assets......................................... 10 6,960 7,800
------- ------- -------
Total assets.............................................. $15,391 $21,951 $ 21,762
======= ======= =======

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Line of credit.......................................... $ -- $ 4,208 $ 1,909
Accounts payable........................................ 345 149 351
Accrued expenses........................................ 131 1,017 122
Accrued wages........................................... 209 500 234
Deferred revenue........................................ 415 1,160 1,355
------- ------- -------
Total current liabilities................................. 1,100 7,034 3,971
Other liabilities......................................... -- -- 196
------- ------- -------
Total liabilities......................................... 1,100 7,034 4,167
Stockholders' equity:
Preferred stock, par value $.01 per share; 1,000 shares
authorized, no shares outstanding.................... -- -- --
Common stock, par value $.01 per share; 25,000
authorized shares; issued and outstanding 7,636,
8,989 and 9,178 shares, respectively................. 76 90 92
Additional paid-in capital.............................. 17,204 24,310 25,170
Net unrealized gain (loss) on marketable securities..... -- (44) 131
Accumulated deficit..................................... (2,989) (9,439) (7,798)
------- ------- -------
Total stockholders' equity................................ 14,291 14,917 17,595
------- ------- -------
Total liabilities and stockholders' equity................ $15,391 $21,951 $ 21,762
======= ======= =======
</TABLE>

See accompanying notes to consolidated financial statements.

F-3
<PAGE> 44

ANSOFT CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEAR ENDED APRIL 30, OCTOBER 31,
----------------------------- -----------------------
1995 1996 1997 1996 1997
------ ------ ------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue
License.............................. $5,921 $7,995 $11,950 $ 4,811 $ 8,907
Service and other.................... 233 700 2,238 841 2,712
------ ------ ------- ------ ------
Total revenue................... 6,154 8,695 14,188 5,652 11,619
Cost and expenses
Sales and marketing.................. 3,935 5,007 7,939 3,348 5,424
Research and development............. 1,462 1,766 2,993 1,247 3,374
General and administrative........... 1,046 1,269 1,647 649 1,067
Amortization......................... -- -- 407 136 690
Acquired in process research and
development....................... -- -- 8,754 3,054 --
------ ------ ------- ------ ------
Total costs and expenses........ 6,443 8,042 21,740 8,434 10,555
------ ------ ------- ------ ------
Income (loss) from operations.......... (289) 653 (7,552) (2,782) 1,064
Interest income........................ -- 41 902 432 300
Interest expense....................... (16) (6) (220) (54) (113)
------ ------ ------- ------ ------
Income (loss) before income taxes...... (305) 688 (6,870) (2,404) 1,251
Income tax benefit..................... -- 612 420 -- 390
------ ------ ------- ------ ------
Net income (loss)............... $ (305) $1,300 $(6,450) $(2,404) $ 1,641
====== ====== ======= ====== ======
Net income (loss) per share............ $(0.06) $ 0.19 $ (0.81) $ (0.31) $ 0.17
====== ====== ======= ====== ======
Weighted average shares outstanding.... 5,528 6,873 7,955 7,878 9,859
====== ====== ======= ====== ======
</TABLE>

See accompanying notes to consolidated financial statements.

F-4
<PAGE> 45

ANSOFT CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
UNREALIZED
COMMON STOCK RECEIVABLE ADDITIONAL GAIN (LOSS) ON
---------------- FROM PAID-IN ACCUMULATED MARKETABLE
SHARES AMOUNT STOCKHOLDERS CAPITAL DEFICIT SECURITIES TOTAL
------ ------ ------------ ---------- ----------- -------------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, April 30, 1994..... 1,680 $ 17 $ -- $ 532 $(3,984) -- $(3,435)
Net loss.................... -- -- -- 33 (305) -- (272)
Issuance of common stock.... 4,413 44 (442) 5,266 -- -- 4,868
----- --- ----- ------- ------- ---- -------
Balance, April 30, 1995..... 6,093 $ 61 $ (442) $ 5,831 $(4,289) -- $ 1,161
Net income.................. -- -- -- -- 1,300 -- 1,300
Issuance of common stock.... 1,543 15 -- 11,373 -- -- 11,388
Payments from
stockholders.............. -- -- 442 -- -- -- 442
----- --- ----- ------- ------- ---- -------
Balance, April 30, 1996..... 7,636 $ 76 $ -- $ 17,204 $(2,989) -- $14,291
Net loss.................... -- -- -- -- (6,450) -- (6,450)
Issuance of common stock.... 1,353 14 -- 7,106 -- -- 7,120
Unrecognized loss on
marketable securities..... -- -- -- -- -- (44) (44)
----- --- ----- ------- ------- ---- -------
Balance, April 30, 1997..... 8,989 $ 90 $ -- $ 24,310 $(9,439) $(44) $14,917
Net income (unaudited)...... -- -- -- -- 1,641 -- 1,641
Issuance of common stock
(unaudited)............... 189 2 -- 860 -- -- 862
Unrecognized gain on
marketable securities
(unaudited)............... -- -- -- -- -- 175 175
----- --- ----- ------- ------- ---- -------
Balance, October 31, 1997
(unaudited)............... 9,178 $ 92 $ -- $ 25,170 $(7,798) $131 $17,595
===== === ===== ======= ======= ==== =======
</TABLE>

See accompanying notes to consolidated financial statements.

F-5
<PAGE> 46

ANSOFT CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEAR ENDED APRIL 30, OCTOBER 31,
-------------------------------- ---------------------
1995 1996 1997 1996 1997
----- ------- -------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities
Net income (loss)......................... $(305) $ 1,300 $ (6,450) $(2,404) $ 1,641
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities:
Depreciation.............................. 145 197 299 133 270
Amortization.............................. 24 24 429 153 690
Acquired in process research and
development............................. -- -- 8,754 3,054 --
Non-cash compensation..................... 33 -- -- -- --
Deferred taxes............................ -- (700) (420) -- (390)
Changes in assets and liabilities
Accounts receivable....................... (194) (566) (1,971) (821) (869)
Prepaid expenses and other assets......... -- (83) (191) (45) (67)
Other long-term assets.................... -- -- 10 13 (452)
Accounts payable.......................... (65) 130 (196) (88) 202
Accrued wages and expenses................ (23) 148 (13) (81) (1,319)
Deferred revenue.......................... 45 266 152 66 195
----- ------- -------- ------- -------
Net cash provided by (used in)
operating activities............. (340) 716 403 (20) (99)
----- ------- -------- ------- -------
Cash flows from investing activities
Purchases of plant and equipment.......... (277) (400) (811) (340) (676)
Investment in acquired businesses......... -- -- (8,600) (5,600) (660)
Sale of marketable securities............. -- -- 5,878 (8,592) 4,343
Purchases of marketable securities........ -- (1,459) (11,614) -- --
----- ------- -------- ------- -------
Net cash provided by (used in) investing
activities................................ (277) (1,859) (15,147) (14,532) 3,007
----- ------- -------- ------- -------
Cash flows from financing activities
Proceeds from line of credit, net......... -- -- 4,208 4,169 (2,299)
Repayment of borrowings................... (24) (75) -- -- --
Proceeds from the issuance of common
stock, net.............................. 14 11,388 120 41 119
Proceeds from related party stockholders,
net..................................... 700 442 -- -- --
----- ------- -------- ------- -------
Net cash provided by (used in) financing
activities................................ 690 11,755 4,328 4,210 (2,180)
----- ------- -------- ------- -------
Net increase (decrease) in cash and cash
equivalents............................... 73 10,612 (10,416) (10,342) 728
Cash and cash equivalents at beginning of
period.................................... 43 116 10,728 10,728 312
----- ------- -------- ------- -------
Cash and cash equivalents at end of
period.................................... $ 116 $10,728 $ 312 $ 386 $ 1,040
===== ======= ======== ======= =======
Supplemental disclosures of cash flow
information
Cash paid for interest.................... $ 15 $6 $ 221 $ 54 $ 113
===== ======= ======== ======= =======
Cash paid for income taxes................ $ 2 $ 72 $ 13 $ 10 $ 29
===== ======= ======== ======= =======
</TABLE>

See accompanying notes to consolidated financial statements.

F-6
<PAGE> 47

ANSOFT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(INFORMATION AS OF OCTOBER 31, 1996 AND 1997 AND FOR THE SIX MONTHS THEN ENDED
IS UNAUDITED)

1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

Ansoft is a leading developer of electronic design automation ("EDA")
software. Its products are used by engineers in the design of high performance
electrical devices and systems, such as cellular phones, satellite
communications, computer circuit boards, motors and ABS braking systems.

Principles of Consolidation and Basis of Presentation

The accompanying consolidated financial statements include the accounts of
the Company and its subsidiaries, from the date of inception or acquisition. On
July 24, 1996, the Company acquired The MacNeal Schwendler Corporation's
Electronic Business Unit ("EBU") for $5,600 in cash. On April 9, 1997, the
Company acquired Compact Software, Inc., ("Compact") for approximately $3,000 in
cash and 1,273 shares of Common Stock. The costs of the acquisitions have been
allocated on the basis of the estimated fair value of the assets acquired and
the liabilities assumed. The acquisitions have been accounted for as a purchase,
and the financial results of the EBU and Compact have been included in the
accompanying consolidated financial statements since the date of their
respective acquisitions.

Use of Estimates

The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues
and expenses and disclosure of contingent assets and liabilities. The estimates
and assumptions used in the accompanying financial statements are based on
management's evaluation of the relevant facts and circumstances as of the date
of the financial statements. Actual results may differ from those estimates.

Cash Equivalents

Cash equivalents include only highly liquid debt instruments purchased with
original maturity dates of three months or less.

Marketable Securities

In fiscal 1995, the Company adopted Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" ("SFAS 115"). Marketable Securities portfolio consists of corporate
bonds and government agency issues and are classified as of April 30, 1997 and
1996, as available for sale. In accordance with SFAS 115, marketable securities
available for sale are recorded at fair market value and any unrecorded gains or
losses are recorded as part of stockholders' equity. Costs of investments sold
are determined on the basis of specific identification.

Plant and Equipment

Plant and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation for financial reporting purposes is computed using
the straight-line method based upon the estimated useful lives of the assets
which range from three to seven years. Assets acquired under capital leases and
leasehold improvements are amortized over their useful life or the lease term,
as appropriate.

F-7
<PAGE> 48

ANSOFT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(INFORMATION AS OF OCTOBER 31, 1996 AND 1997 AND FOR THE SIX MONTHS THEN ENDED
IS UNAUDITED)

Revenue Recognition

The Company recognizes revenue in accordance with the provisions of
American Institute of Certified Public Accountants Statement of Position No.
91-1, Software Revenue Recognition.

License revenue consists principally of revenue from licensing the
Company's software and is generally recognized when the software has been
shipped and there are no significant remaining obligations. Service revenue
consists of maintenance fees for providing system updates, user documentation
and technical support for software products, and is recognized ratably over the
term of the maintenance agreement. Other revenue consists primarily of revenue
earned on development contracts with government-sponsored entities. Revenue
under these arrangements is recognized as the service is performed.

The Company uses distributors for certain of its international sales.
Revenue generated through distributors is generally recorded at the gross sales
price paid by the customer. Commissions withheld by distributors are recorded as
sales and marketing expense. License revenue also includes royalties earned on
sales of certain products under terms of an agreement with Hewlett-Packard
Corporation (see also note 9). Related royalty revenue is recognized upon
shipment of product as reported to the Company by Hewlett-Packard. All
obligations of the Company are satisfied upon shipment of product by
Hewlett-Packard.

Software Development Costs

Income Taxes

Income taxes are provided for under the provisions of SFAS No. 109,
"Accounting for Income Taxes," for all periods presented. Under the asset and
liability method of SFAS No. 109, 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. 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. Under
SFAS No. 109, 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. Valuation allowances are established when necessary to reduce deferred tax
assets to the amounts expected to be realized.

Net Income (Loss) Per Share

Net income (loss) per share is computed using the weighted average number
of common and common equivalent shares outstanding during the period. Common
equivalent shares are not included in the per share calculations where their
inclusion would be antidilutive, except that in accordance with certain SEC
Staff Accounting Bulletins, common and common equivalent shares issued during
the 12 months preceding the initial

F-8
<PAGE> 49

ANSOFT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(INFORMATION AS OF OCTOBER 31, 1996 AND 1997 AND FOR THE SIX MONTHS THEN ENDED
IS UNAUDITED)

filing of the Registration Statement for the Company's initial public offering
have been included in the calculation using the treasury stock method as if they
were outstanding for all periods presented.

In February 1997, Statement of Financial Accounting Standards No. 128
"Earnings Per Share" ("SFAS 128") was issued by the Financial Accounting
Standards Board. SFAS 128 specifies modifications to the calculation of earnings
per share from that currently used by the Company. Under SFAS 128, "basic
earnings (loss) per share" will be calculated based upon the weighted average
number of common shares actually outstanding, and "diluted earnings per share"
will be calculated based upon the weighted average number of common shares
outstanding and other potential common shares if they are dilutive. FAS 128 is
effective for the Company's third quarter of fiscal 1998 and will be adopted at
that time. Prior periods will be restated. Had the Company determined earnings
per share in accordance with FAS 128, basic earnings (loss) per share for fiscal
1995, 1996, 1997 would have been $(0.06), $0.21 and $(0.83), respectively, and
diluted earnings (loss) per share would have been $(0.06), $0.19 and $(0.81),
respectively. For the six months ended October 31, 1996 and 1997, basic earnings
per share would have been $(0.31) and $0.18, respectively, and diluted earnings
per share would have been $(0.31) and $0.17, respectively.

Stock Based Compensation

On May 1, 1996, the Company adopted the Financial Accounting Standards
Board's Statement of Financial Accounting Standards (SFAS) No. 123 "Accounting
for Stock-Based Compensation." This statement permits a company to choose either
a new fair value based method of accounting for its stock-based compensation
arrangements or to comply with the current APB Opinion 25 intrinsic value based
method adding pro forma disclosures of net income and earnings per share
computed as if the fair value based method had been applied in the financial
statements. The Company has adopted SFAS No. 123 by retaining the APB Opinion 25
method of accounting for stock-based compensation with annual pro forma
disclosures of net income and earnings per share.

Reclassifications

Certain reclassifications have been made in the accompanying consolidated
financial statements for 1996 and 1995 to conform with the 1997 presentation.

2. ACQUISITIONS AND RELATED INTANGIBLE ASSETS

On July 24, 1996, the Company acquired the EBU for $5,600 in cash. The
acquisition has been accounted for as a purchase, and the financial results of
the EBU have been included in the accompanying consolidated financial statements
since the date of the acquisition. The cost of the acquisition has been
allocated on the basis of the estimated fair value of the assets acquired and
the liabilities assumed. The allocation of the acquisition costs resulted in an
acquired in process research and development charge of $3,054 based on the
future expected cash flows of certain acquired technology that had not reached
technological feasibility. The intangible assets of $2,227 (net of amortization
of $267) and $420 (net of amortization of $140) as of April 30, 1997, consist of
the customer list and established work force, respectively. They are being
amortized on a straight line basis over a seven and three year life,
respectively, commencing in August 1996.

F-9
<PAGE> 50

ANSOFT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(INFORMATION AS OF OCTOBER 31, 1996 AND 1997 AND FOR THE SIX MONTHS THEN ENDED
IS UNAUDITED)

The allocation of fair values are presented below:

<TABLE>
<S> <C>
Plant and equipment......................................... $ 215
Other assets................................................ 11
Accrued liabilities......................................... (491)
Deferred revenue............................................ (243)
In process research and development......................... 3,054
Intangible assets........................................... 3,054
------
Total purchase price........................................ $5,600
======
</TABLE>

On April 9, 1997, the Company acquired Compact for approximately $3,000 in
cash and 1,273 shares of common stock. The cost of the acquisition has been
allocated on the basis of the estimated fair value of the assets acquired and
the liabilities assumed. The acquisition has been accounted for as a purchase,
and the financial results of Compact have been included in the accompanying
consolidated financial statements since the date of the acquisition. The
allocation of the acquisition costs resulted in an acquired in process research
and development charge of $5,700, based on the future expected cash flows of
certain acquired technology that had not reached technological feasibility. The
intangible assets of $3,813 and $500 as of April 30, 1997, consist of the
customer list and established work force, respectively. They are being amortized
on a straight line basis over a seven and three year life, respectively,
commencing in May 1997.

The allocation of fair values are presented below:

<TABLE>
<S> <C>
Accounts receivable........................................ $ 492
Plant and equipment........................................ 544
Accrued liabilities........................................ (568)
Accrued wages.............................................. (131)
Deferred revenue........................................... (350)
In process research and development........................ 5,700
Intangible assets.......................................... 4,313
-------
Total purchase price....................................... $10,000
=======
</TABLE>

The following unaudited pro forma summary presents information as if the
acquisitions of the EBU and Compact occurred at the beginning of the periods
presented but does not include the impact of the acquisition of Boulder
Microwave Technologies, Inc. on August 8, 1997 as it was not significant. The
EBU has no separate legal status as it was an integral part of MSC's overall
operations. As a result, separate financial statements have not been maintained
for the EBU. Historically, MSC did not allocate general and administrative costs
to the EBU, so any such allocation at this time would be arbitrary. In process
research and development charges are considered nonrecurring charges related
directly to the acquisitions and have therefore been excluded from pro forma net
income and net income per share. The pro forma information is provided for
information purposes only. It is based on historical information and does not
necessarily reflect the actual results that would have occurred, nor is it
necessarily indicative of future results of operations of the combined
enterprise.

<TABLE>
<CAPTION>
YEAR ENDING APRIL SIX MONTHS ENDED
30, OCTOBER 31,
------------------ ------------------
1996 1997 1996 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenue....................... $17,633 $21,030 $ 9,463 $11,619
Net income.................... $ 841 $ 2,456 $ 1,056 $ 1,647
Net income per share.......... $ 0.10 $ 0.27 $ 0.12 $ 0.17
</TABLE>

F-10
<PAGE> 51

ANSOFT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(INFORMATION AS OF OCTOBER 31, 1996 AND 1997 AND FOR THE SIX MONTHS THEN ENDED
IS UNAUDITED)

3. PLANT AND EQUIPMENT

Plant and equipment consist of the following:

<TABLE>
<CAPTION>
APRIL 30,
------------------ OCTOBER 31,
1996 1997 1997
------- ------- ----------------
<S> <C> <C> <C>
Computers and equipment........... $ 1,404 $ 2,856 $ 3,448
Furniture and fixtures............ 262 298 583
Leasehold improvements............ 2 84 110
------- -------
1,668 3,238 4,141
Less allowances for depreciation
and amortization................ 944 1,243 1,513
------- -------
$ 724 $ 1,995 $ 2,628
======= =======
</TABLE>

4. MARKETABLE SECURITIES

Marketable securities, classified as available for sale, are summarized as
follows:

<TABLE>
<CAPTION>
UNREALIZED
AMORTIZED GAIN MARKET
COST (LOSS) VALUE
--------- ---------- ------
<S> <C> <C> <C>
October 31, 1997
Marketable Securities..................... $ 2,851 $131 $2,982
April 30, 1997
Marketable Securities..................... $ 7,194 $(44) $7,150
April 30, 1996
Marketable Securities..................... $ 1,459 $ -- $1,459
</TABLE>

The carrying values of debt securities as of October 31, 1997, by
contractual maturity is shown below:

<TABLE>
<S> <C>
Due in one to five years.................................... $ 515
Due in five to ten years.................................... 1,959
Due in over ten years....................................... 508
------
$2,982
======
</TABLE>

Gross realized and unrealized gains (losses) on sales of securities in
fiscal 1996 and 1997 and the six months ended October 31, 1996 and 1997 were
immaterial.

5. LINE OF CREDIT

The Company has available a secured line of credit from a domestic
financial institution at an interest rate varying from a minimum of 2% below the
Broker Call Rate to a maximum equaling the Broker Call Rate. The line of credit
is secured by the marketable securities held with the institution. As of April
30, 1997 and October 31, 1997, the interest rate charged was 6.5%. The
availability of the unused line of credit, approximately $30 as of October 31,
1997, is subject to certain borrowing base requirements.

6. LEASES

The Company leases its corporate headquarters in Pittsburgh, Pennsylvania,
and other facilities under operating lease agreements which expire over the next
six years. Rental expense incurred by the Company under

F-11
<PAGE> 52

ANSOFT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(INFORMATION AS OF OCTOBER 31, 1996 AND 1997 AND FOR THE SIX MONTHS THEN ENDED
IS UNAUDITED)

operating lease agreements totaled $154, $187 and $548 for the years ended April
30, 1995, 1996 and 1997, respectively, and $137 and $283 for the six month
periods ended October 31, 1996 and 1997. The future minimum lease payments for
such operating leases as of October 31, 1997, are:

<TABLE>
<CAPTION>
YEAR ENDING APRIL 30,
---------------------
<S> <C>
1998................................................... $ 345
1999................................................... 534
2000................................................... 380
2001................................................... 349
2002................................................... 312
Thereafter............................................. 330
------
$2,250
======
</TABLE>

7. STOCKHOLDERS' EQUITY AND ADVANCES

In May and December 1994, the Company issued 1,398 shares and 400 shares,
respectively, to a corporation whose sole stockholders had been directors and
executive officers of the Company since the formation of the Company, for
settlement of prior advances totaling $2,072. In May 1994, the Company issued
615 shares to three directors and executive officers of the Company at that time
for settlement of prior advances totaling $670. In September 1994, the Company
issued 1,332 shares to nine persons (including three directors and executive
officers of the Company at that time) for settlement of prior advances totaling
$1,413. In December 1994, the Company issued 400 shares to two of the directors
and executive officers of the Company at that time for settlement of advances in
fiscal 1995 totaling $500. The exchange rates for such advances were fixed at
the time of the initial advances, at the estimated fair market value of the
Common Stock on the date of such advance. Interest expense in 1994 includes
interest on stockholder advances totaling $67.

In April 1996, the Company closed its initial public offering of 1,500
shares of common stock at $8.50 per share. The net proceeds of the offering were
approximately $11,400, after deducting applicable costs and expenses.

8. COMMON STOCK OPTIONS

The Company's 1988 Stock Option Plan (1988 Plan) authorizes the issuance of
850 shares of Common Stock for the grant of incentive or nonstatutory stock
options to employees and directors. Under the terms of the 1988 Plan, options to
purchase Common Stock are granted at no less than the stock's estimated fair
market value at the date of the grant and may be exercised during specified
future periods as determined by the Board of Directors. The 1988 Plan provides
that the options shall expire no more than ten years after the date of the
grant.

In March 1995, the Board of Directors approved a 1995 Stock Option Plan
(1995 Plan) that authorized the issuance of up to 350 shares of Common Stock for
the grant of incentive or nonstatutory stock options to employees and directors.
The Board of Directors approved an additional 850 shares of Common Stock for
grant. Under the terms of the 1995 Plan, options to purchase Common Stock are
granted at no less than the stock's estimated fair market value at the date of
the grant and may be exercised during specified future periods as determined by
the Board of Directors. The 1995 Plan provides that the options shall expire no
more than ten years after the date of the grant. Under the 1995 Plan, the Board
approved the granting of incentive stock options to employees who elected to
exercise up to 50% of their currently outstanding incentive stock options under
the 1988 Plan. Employees were also offered the ability to finance the stock
purchased from the exercise of their 1988 Plan options through the origination
of two-year, 8% loans from American Banner Resources, Inc., a company

F-12
<PAGE> 53

ANSOFT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(INFORMATION AS OF OCTOBER 31, 1996 AND 1997 AND FOR THE SIX MONTHS THEN ENDED
IS UNAUDITED)

wholly owned by two directors of the Company. In connection with this
transaction, the Company recorded a charge to fiscal 1995 operations of $33
representing compensation equal to the 10% per share premium on the 1988 options
which were exercised pursuant to the 1995 Plan. Shares underlying outstanding
options under the 1988 Plan and the 1995 Plan are as follows:

<TABLE>
<CAPTION>
SHARES UNDERLYING
OUTSTANDING OPTIONS
-------------------------
SHARES PRICE
------ --------------
<S> <C> <C>
Outstanding, April 30, 1994.................. 788 $0.32-$1.75
Granted.................................... 341 $1.75-$2.00
Exercised.................................. (218) $0.32-$1.75
Canceled................................... (149) $1.75
------ --------------
Outstanding, April 30, 1995.................. 762 $0.32-$2.00
Granted.................................... 174 $1.75-$2.00
Exercised.................................. (43) $0.32-$1.75
Canceled................................... (58) $1.75
------ --------------
Outstanding, April 30, 1996.................. 835 $1.00-$2.00
Granted.................................... 270 $5.00-$6.50
Exercised.................................. (80) $1.14-$2.00
Canceled................................... (33) $2.00-$5.38
------ --------------
Outstanding, April 30, 1997.................. 992 $1.00-$6.50
===== ============
Granted.................................... 419 $5.00-$11.38
Exercised.................................. (79) $1.00-$5.00
Canceled................................... (33) $2.00-$3.50
------ --------------
Outstanding, October 31, 1997................ 1,299 $1.00-$11.39
===== ============
</TABLE>

Options to purchase 627 shares of Common Stock were exercisable as of
October 31, 1997 and options to purchase 686 shares of Common Stock were
available for future grant as of October 31, 1997.

In addition to the options described above, the Chairman of the Board of
Directors received an option to purchase 200 shares of Common Stock at an
exercise price of $5.00 per share in April 1995. At that time, such exercise
price was considered to be above the estimated fair market value. As of October
31, 1997, all such options were still outstanding and unexercised. The options
expire ten years after the date of the grant.

As permitted under Statement of Financial Accounting Standards No. 123
("SFAS 123"), "Accounting for Stock-Based Compensation," the Company has elected
to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" ("APB 25"), and related Interpretations, in accounting for
stock-based awards to employees. Under APB 25, because the exercise price of the
Company's employee stock options generally equals the market price of the
underlying stock on the date of grant, no compensation expense is recognized in
the Company's consolidated financial statements for all periods presented other
than the $33 discussed above.

Pro forma information regarding net income and earnings (loss) per share is
required by SFAS 123. This information is required to be determined as if the
Company had accounted for its employee stock options (including shares issued
under the Stock Purchase Plan, collectively called "options") granted subsequent
to April 30, 1995 under the fair value method prescribed by SFAS 123. The fair
value of options granted in fiscal

F-13
<PAGE> 54

ANSOFT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(INFORMATION AS OF OCTOBER 31, 1996 AND 1997 AND FOR THE SIX MONTHS THEN ENDED
IS UNAUDITED)

years 1996 and 1997 and the six months ended October 31, 1996 and 1997, reported
below has been estimated at the date of grant using a Black-Scholes option
pricing model with the following weighted average assumptions:

<TABLE>
<CAPTION>
FISCAL YEAR ENDED SIX MONTHS ENDED
APRIL 30, OCTOBER 31,
------------------ -------------------
1996 1997 1996 1997
---- ----- ----- -----
<S> <C> <C> <C> <C>
Risk-free rate (%)...... 6.00 6.00 6.00 6.00
Volatility (%).......... n/a 55.92 55.92 55.92
Expected Life (in
years)................ 10.0 10.0 10.0 10.0
Dividend Yield (%)...... 0.00 0.00 0.00 0.00
</TABLE>

The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options that have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions, including the expected stock price
volatility. Because the Company's options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in the opinion
of management, the existing models do not necessarily provide a reliable single
measure of the fair value of its options. However, based solely on this
analysis, the weighted average estimated fair value of employee stock options
granted through April 30, 1996, 1997 and October 31, 1997 was $1.06, $3.94 and
$2.79 per share, respectively.

For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information follows unaudited:

<TABLE>
<CAPTION>
FISCAL YEAR ENDED SIX MONTHS ENDED
APRIL 30, OCTOBER 31,
------------------ ------------------
1996 1997 1996 1997
------ ------- ------- ------
<S> <C> <C> <C> <C>
Pro forma net income
(loss).................. $1,060 $(6,711) $(2,534) $1,245
Pro forma net income
(loss) per common
share................... $ 0.15 $ (0.84) $ (0.32) $ 0.13
</TABLE>

Because the Company anticipates making additional grants and options vest
over several years, the effects on pro forma disclosures of applying SFAS 123
are not likely to be representative of the effects on pro forma disclosures of
future years. SFAS 123 is applicable only to options granted subsequent to April
30, 1995.

The following table summarizes information about stock options outstanding
as of October 31, 1997.

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
------------------------------------------- OPTIONS EXERCISABLE
WEIGHTED- ----------------------------
NUMBER AVERAGE WEIGHTED- NUMBER WEIGHTED
RANGE OF OUTSTANDING REMAINING AVERAGE EXERCISABLE AVERAGE
EXERCISE AT OCTOBER 31, CONTRACTUAL EXERCISE AT OCTOBER 31, EXERCISE
PRICES 1997 LIFE PRICE 1997 PRICE
- ----------------- -------------- ----------- -------- -------------- ---------
<S> <C> <C> <C> <C> <C>
1.00-$2.00 482 6.34 $ 1.82 482 $1,82
$3.50 105 7.95 $ 3.50 98 $3.50
$5.00-$7.625 882 8.89 $ 5.46 127 $5.19
$10.125-$11.375 30 9.96 $10.66 0 $0.00
</TABLE>

F-14
<PAGE> 55

ANSOFT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(INFORMATION AS OF OCTOBER 31, 1996 AND 1997 AND FOR THE SIX MONTHS THEN ENDED
IS UNAUDITED)

9. EXPORT SALES, MAJOR CUSTOMERS AND CREDIT RISK

Export sales, principally to Asia, accounted for 31%, 33% and 41% of total
revenue in 1995, 1996 and 1997, respectively and 39% and 48% of total revenue
for the six months ended October 31, 1996 and 1997. Included in export sales to
Asia were sales to Japan, which accounted for approximately 14%, 13% and 13% of
total revenue in fiscal 1995, 1996, and 1997, respectively, and 9% and 15% of
total revenue for the six months ended October 31, 1996 and 1997. No other
foreign country accounted for more than 10% of total revenue during these
periods.

Revenue from one distributor accounted for approximately $684 of total
revenue in fiscal 1995.

The Company entered into a distribution arrangement with Hewlett-Packard
Corporation ("HP") under which HP formerly distributed the Company's HFSS
product on an exclusive basis (the "HP Agreement"). The HP Agreement has since
expired, although HP retains the right to distribute HFSS 4.0 through January
1998. The Company currently sells the latest version of its HFSS product, Ansoft
HFSS 5.0, through its own sales force and other distributors. Revenue from the
HP Agreement accounted for 18%, 13% and 12% of total revenue in fiscal 1995,
1996 and 1997, respectively, and 6% and 13% of total revenue in the six-month
periods ended October 31, 1997 and 1996, respectively. The Company expects that
HP will account for a decreasing percentage of its total revenues over the next
three months. Management believes that the expiration of the HP Agreement will
not have a material adverse effect on the consolidated financial condition or
results of operations.

The Company markets its software products to customers throughout the world
directly and through distributors and generally does not require collateral.
However, letters of credit are obtained from certain international customers
prior to shipment. The Company performs ongoing credit evaluations of its
customers and maintains an allowance for potential credit losses. The Company
believes that it has adequately provided for credit losses.

10. INCOME TAX

The provisions for income taxes consisted of the following:

<TABLE>
<CAPTION>
APRIL 30, OCTOBER 31,
------------------------- ---------------
1995 1996 1997 1996 1997
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Current:
Federal............. $ -- $ 14 $ -- $ -- $ --
Foreign............. -- 72 -- -- --
State............... -- 2 -- -- --
----- ----- ----- ----- -----
Total............ -- 88 -- -- --
Deferred:
Federal............. -- (638) (316) -- (331)
State............... -- ( 62) (104) -- (59)
----- ----- ----- ----- -----
Total............ -- (700) (420) -- (390)
----- ----- ----- ----- -----
Total benefit for
income taxes........ $ -- $(612) $(420) $ -- $(390)
===== ===== ===== ===== =====
</TABLE>

F-15
<PAGE> 56

ANSOFT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(INFORMATION AS OF OCTOBER 31, 1996 AND 1997 AND FOR THE SIX MONTHS THEN ENDED
IS UNAUDITED)

The Company's actual income tax expense (benefit) differs from the expected
income tax benefit computed by applying the statutory federal income before
income taxes as a result of the following:

<TABLE>
<CAPTION>
APRIL 30, OCTOBER 31,
----------------------------- ---------------
1995 1996 1997 1996 1997
------- ----- ------- ----- -----
<S> <C> <C> <C> <C> <C>
Income tax expense (benefit) at statutory
rate..................................... $ (104) $ 234 $(2,335) $(817) $ 427
State income tax, net of federal offset.... (18) 41 (419) (144) 75
Net deductible intangible assets........... -- -- -- -- 51
Expiration of state net operating losses... -- 91 61 30 --
Change in valuation allowance.............. 114 (992) 2,258 921 (975)
Other, net................................. 8 14 15 10 32
----- ----- --- ----- -----
Actual income tax benefit.................. $ -- $(612) $ (420) $ -- $(390)
===== ===== === ===== =====
</TABLE>

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are presented
below:

<TABLE>
<CAPTION>
APRIL 30, OCTOBER 31,
----------------- -----------
1996 1997 1997
------ ------ -----------
<S> <C> <C> <C>
Deferred tax assets:
Net operating loss
carryforward................. $1,245 $3,885 $ 3,272
Allowance for doubtful
accounts..................... 51 75 75
Alternative minimum tax credit
carryforward................. 14 6 6
Foreign Tax Credit
carryforward................. 72 -- --
Intangible Assets............... -- 141 194
------ ------ ------
Total gross deferred tax assets... $1,382 $4,107 $ 3,547
Less valuation allowance.......... 599 2,857 1,882
------ ------ ------
Net deferred tax assets........... 783 1,250 1,665
------ ------ ------
Deferred tax liabilities:
Property, plant, and
equipment.................... (83) (130) (155)
------ ------ ------
Total gross deferred tax
liability....................... (83) (130) (155)
------ ------ ------
Net deferred taxes................ $ 700 $1,120 $ 1,510
====== ====== ======
</TABLE>

The Company has established a valuation allowance against its net deferred
tax assets due to the uncertainty surrounding the realization of such assets
pursuant to SFAS No. 109. The increase in the valuation allowance during the
year ended April 30, 1997 was due in part to the successful competition of the
Company's acquisitions of the EBU and Compact, which resulted in an acquired in
process research and development charge of $8,754, creating additional federal
tax net operating losses. A valuation allowance has been established on a
portion of these net operating losses because management has determined that it
is more likely than not that a portion of the net operating losses will not be
realized due to a lack of sufficient taxable income. The ultimate realization of
the remaining deferred tax assets is dependent upon the generation of future
taxable income beyond that which is deemed more likely than not at this time.
Management evaluates on a quarterly basis the recoverability of the deferred tax
assets and the level of the valuation allowance. Due to the uncertainty of the
future financial results of the company, a valuation allowance is maintained for
the remaining deferred tax assets. The valuation allowance will be reduced at
such time as it is determined that it is more likely than not that the remaining

F-16
<PAGE> 57

ANSOFT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(INFORMATION AS OF OCTOBER 31, 1996 AND 1997 AND FOR THE SIX MONTHS THEN ENDED
IS UNAUDITED)

deferred tax assets are realizable or increased if estimates of future taxable
income during the carryforward period are reduced.

As of April 30, 1997, the Company had net operating loss carryforwards for
federal income tax purposes of $9,984 which are available to offset future
federal taxable income, if any, and expire in increments of between $112 and
$884, beginning April 30, 2004 through April 30, 2010, and $6,652 in April 30,
2012.

11. RELATED PARTY TRANSACTIONS

Certain of the Company's principal stockholders are also members of the
Board of Directors and executive management.

In 1992, the Company entered into an agreement with a distributor under
which distribution rights in Japan were granted for certain Company products. In
addition, the distributor purchased 120 shares of the Company's Common Stock at
a price of $2.50 per share. Sales through the distributor were approximately
$684 in 1995. These transactions were on terms no less favorable to the Company
than could be obtained from unrelated third parties. In fiscal 1995, the Company
terminated the distribution agreement.

12. EMPLOYEE BENEFIT PLAN

The Company has a 401(k) savings and retirement plan which covers its
full-time employees who have attained the age of 21 and have completed six
months of service. Eligible employees make voluntary contributions to the plan
up to 15% of their annual compensation. The Company is not required to
contribute, nor has it contributed, to the 401(k) Plan.

13. COMMITMENTS AND CONTINGENCIES

The Company is not a party to any litigation and is not aware of any
threatened litigation, unasserted claims or assessments that could have a
material adverse effect on the Company's business, consolidated operating
results or consolidated financial condition.

F-17
<PAGE> 58

[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 59

[Excerpts from computer screens detailing computer models of components and
systems including RF ICs, IC packages, connectors, sensors and solenoids.]
<PAGE> 60

===============================================================================

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION WOULD BE UNLAWFUL OR TO ANY PERSON TO WHOM IT IS UNLAWFUL. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary................. 3
Risk Factors....................... 5
The Company........................ 10
Use of Proceeds.................... 10
Dividend Policy.................... 10
Price Range of Common Stock........ 11
Capitalization..................... 12
Selected Consolidated Financial
Data............................. 13
Management's Discussion and
Analysis of Financial Condition
and Results of Operations........ 14
Business........................... 22
Management......................... 30
Certain Transactions............... 34
Principal Stockholders............. 35
Description of Capital Stock....... 36
Underwriting....................... 38
Legal Matters...................... 39
Experts............................ 39
Available Information.............. 39
Index to Consolidated Financial
Statements....................... F-1
</TABLE>

===============================================================================
===============================================================================

2,000,000 SHARES

LOGO

COMMON STOCK

-----------------------
PROSPECTUS
-----------------------

HAMBRECHT & QUIST

WESSELS, ARNOLD & HENDERSON

FEBRUARY 25, 1998

===============================================================================