AVANT CORP, 424B1, 1998-01-14

AVANT CORP
424B1, 1998-01-14
PREPACKAGED SOFTWARE

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FILED PURSUANT TO RULE 424(b)(1)
REGISTRATION NO. 333-43087

522,192 SHARES

AVANT! CORPORATION

COMMON STOCK

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This Prospectus relates to the public offering, which is not being
underwritten, of 522,192 shares (the "Shares") of Common Stock, $0.0001 par
value (the "Common Stock") of Avant! Corporation ("Avant!" or the "Company").

The Shares may be offered by a certain stockholder of the Company (the
"Selling Stockholder") from time to time in transactions on the Nasdaq National
Market, in privately negotiated transactions, or by a combination of such
methods of sale, at fixed prices that may be changed, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. The Selling Stockholder may effect such
transactions by selling the Shares to or through broker-dealers and such
broker-dealers may receive compensation in the form of discounts, concessions or
commissions from the Selling Stockholder or the purchasers of the Shares for
whom such broker-dealers may act as agent or to whom they sell as principal or
both (which compensation to a particular broker-dealer might be in excess of
customary commissions). See "Selling Stockholder" and "Plan of Distribution."

The Company will not receive any of the proceeds from the sale of the Shares
by the Selling Stockholder. The Company has agreed to bear certain expenses in
connection with the registration and sale of the Shares being offered by the
Selling Stockholder.

On January 12, 1998, the closing bid price of the Company's Common Stock on
the Nasdaq National Market was $16.875 per share. The Common Stock is traded on
the Nasdaq National Market under the symbol "AVNT."

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The Selling Stockholder and any broker-dealers or agents that participate
with the Selling Stockholder in the distribution of the Shares may be deemed to
be "underwriters" within the meaning of Section 2(11) of the Securities Act, and
any commissions received by them and any profit on the resale of the Shares
purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act.

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THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" ON PAGE 7.

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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.

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The date of this Prospectus is January 13, 1998
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AVAILABLE INFORMATION

Avant! is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and, in accordance therewith,
files reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy statements and other
information filed by the Company with the Commission can be inspected and copied
at the public reference facilities maintained by the Commission at Judiciary
Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and the
following regional offices of the Commission: New York Regional Office, Seven
World Trade Center, 13th Floor, New York, New York 10048; and Chicago Regional
Office, Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60621. Copies of such material may also be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, upon payment of prescribed fees. The Commission also
makes electronic filings publicly available on the Internet within 24 hours of
acceptance. The Commission's Internet address is http://www.sec.gov. The
Commission web site also contains reports, proxy and information statements, and
other information regarding registrants that file electronically with the
Commission. The Common Stock of the Company is quoted on the Nasdaq National
Market. Reports, proxy and information statements and other information
concerning the Company may be inspected at the National Association of
Securities Dealers, Inc. at 1735 K Street, N.W., Washington, D.C. 20006.

The Company has filed with the Commission a registration statement on Form
S-3 (herein, together with all amendments, exhibits and schedules, referred to
as the "Registration Statement") under the Securities Act of 1933, as amended
(the "Securities Act") with the Commission, with respect to the Shares offered
hereby. This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits thereto, certain parts of which are
omitted in accordance with the rules and regulations of the Commission, and to
which reference is hereby made. Statements contained in this Prospectus
regarding the contents of any contract or other document to which reference is
made 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 its entirety by such
reference. The Registration Statement, including the exhibits and schedules
thereto, may be inspected at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549. Copies of such material may be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
upon the payment of the fees prescribed by the Commission.

INFORMATION INCORPORATED BY REFERENCE

The following documents previously filed by the Company with the Commission
(File No. 0-25864) are hereby incorporated by reference in this Prospectus and
made a part hereof:

1. The Company's Annual Report on Form 10-K for the year ended December 31,
1996;

2. The Company's Quarterly Report on Form 10-Q for the quarters ended March
31, 1997, June 30, 1997 and September 30, 1997;

3. The Company's Current Reports on Form 8-K dated April 18, 1996,
September 10, 1997 and September 26, 1997;

4. The Company's Current Report on Form 8-K/A dated November 25, 1997;

5. The Company's Registration Statement on Form S-4 (File No. 333-42923) as
filed with the Commission on December 22, 1997;

6. The description of the Company's Common Stock contained in its
Registration Statement on Form 8-A as filed with the Commission on April
12, 1995; and

7. Proxy Statement for Annual Meeting of Stockholders held on May 15, 1997.

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All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the 1934 Act subsequent to the date of this Prospectus but prior to the
termination of the offering to which this Prospectus relates shall be deemed to
be incorporated by reference in this Prospectus and to be a part hereof from the
respective dates of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is incorporated herein modifies, supersedes or replaces such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified, superseded or replaced, to constitute a part of this Prospectus.

Upon written or oral request, the Company will provide without charge to
each person to whom a copy of the Prospectus is delivered a copy of the
documents incorporated by reference herein (other than exhibits to such
documents unless such exhibits are specifically incorporated by reference
herein). Requests should be submitted in writing or by telephone at (510)
413-8000 to Chief Financial Officer, Avant! Corporation, at the principal
executive offices of the Company, 46871 Bayside Parkway, Fremont, California
94538.

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This Prospectus includes trademarks of the Company and other corporations.

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FORWARD-LOOKING STATEMENTS

THIS PROSPECTUS, INCLUDING THE DOCUMENTS INCORPORATED BY REFERENCE HEREIN,
CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE
STATEMENTS CONTAINED IN THIS PROSPECTUS OR INCORPORATED BY REFERENCE HEREIN THAT
ARE NOT PURELY HISTORICAL ARE FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF
SECTION 27a OF THE SECURITIES ACT AND SECTION 21e OF THE 1934 ACT, INCLUDING
WITHOUT LIMITATION STATEMENTS REGARDING THE COMPANY'S EXPECTATIONS, BELIEFS,
INTENTIONS OR STRATEGIES REGARDING THE FUTURE. ALL FORWARD-LOOKING STATEMENTS
INCLUDED IN THIS DOCUMENT ARE BASED ON INFORMATION AVAILABLE TO THE COMPANY ON
THE DATE HEREOF, AND THE COMPANY ASSUMES NO OBLIGATION TO UPDATE ANY SUCH
FORWARD-LOOKING STATEMENTS. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY
FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF
CERTAIN FACTORS, INCLUDING, BUT NOT LIMITED TO, THOSE SET FORTH IN THIS
PROSPECTUS UNDER "RISK FACTORS." IN EVALUATING THE COMPANY'S BUSINESS,
PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY THE FACTORS SET FORTH IN THIS
PROSPECTUS UNDER "RISK FACTORS" IN ADDITION TO THE OTHER INFORMATION SET FORTH
IN THIS PROSPECTUS AND INCORPORATED BY REFERENCE HEREIN.

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THE COMPANY

Avant! develops, markets and supports integrated circuit design automation
("ICDA") software (also known as electronic design automation or "EDA") for the
physical design of high-density, high-performance integrated circuits ("ICs").
Avant!'s product architecture is designed to solve the problems inherent in
submicron (less than 1.0-micron feature size) and deep submicron (less than
0.5-micron feature size) IC design and to offer improved time-to-market, reduced
development and manufacturing costs and enhanced IC performance when compared to
previous generations of ICDA software. Avant!'s products, Aquarius, Hercules,
Planet, H-spice, Polaris and Star, are designed to be compatible with the most
commonly used ICDA tools and to be easily integrated into the customer's
existing design environment and methodology. Avant! markets its products to
major customer accounts worldwide through its direct sales force, distributors
and manufacturer's representatives and offers comprehensive customer service,
training and support. End users of Avant!'s products include a number of leading
electronics companies, such as, Matsushita, Motorola, National Semiconductor,
Fujitsu, Toshiba, Mitsubishi, Hitachi, Samsung and Sony. Avant!'s principal
executive offices are located at 46871 Bayside Parkway, Fremont, California
94538, and its telephone number is (510) 413-8000.

RECENT DEVELOPMENTS

LITIGATION DEVELOPMENTS

On December 6, 1995, Cadence Design Systems, Inc. ("Cadence") filed an
action against Avant! and certain of its officers in the United States District
Court for the District of Northern California alleging copyright infringement,
unfair competition, misappropriation of trade secrets, conspiracy, breach of
contract, inducing breach of contract and false advertising.

In addition to actual and punitive damages, which were not quantified by
Cadence, Cadence seeks to enjoin the sale of Avant!'s place and route products
pending trial of the action. On March 18, 1997, the District Court denied
Cadence's motion for a preliminary injunction. Cadence appealled the order
denying a preliminary injunction. On September 23, 1997, the United States Court
of Appeals for the Ninth Circuit overruled the District Court's denial of
Cadence's motion with respect to Avant!'s ArcCell product, a product which
Avant! no longer sells, and held that a preliminary injunction should be granted
against the further sale of the ArcCell product. The Court of Appeals did not
enjoin Avant!'s Aquarius place and route products, but rather remanded this
aspect of Cadence's motion to the District Court for further consideration. The
Court of Appeals stated that, if Avant!'s Aquarius products are determined to
infringe Cadence products, the sale of the Aquarius products should be enjoined.
Avant! requested a rehearing on the issue, but on November 21, 1997 the Ninth
Circuit denied this request. On December 19, 1997, the District Court stated its
intention to enjoin Avant! from directly or indirectly marketing, selling,
licensing, copying or transferring any work copied or derived from Cadence's
Design Framework II, specifically including, but not limited to, Avant!'s
ArcCell, ArcCellBV and ArcCellXO products. The District Court also stated that
it would direct Avant! to deliver a copy of its order to all present or former
customers that have received copies of any such infringing products and, to the
extent it has a legal right to do so, request that such customers return or
destroy any such products. Avant! also will be directed to furnish to Cadence a
list of any customers that still maintain a functioning copy of such products.
At the December 19, 1997 hearing, the District Court did not rule on Cadence's
request to enjoin the sale, license or support of Avant!'s Aquarius place and
route products.

On April 11, 1997, the Santa Clara County District Attorney's office filed a
criminal complaint alleging felony level offenses against, among others, Avant!
and the following Avant! employees and/or directors, Gerald C. Hsu, President,
Chief Executive Officer and Chairman of the Board of Directors, Y. Eric Cho, a
member of the Board of Directors, Y. Z. Liao, Corporate Fellow, Stephen Wuu, CEO
Staff, Operations, Leigh Huang, Marketing Manager, and Eric Cheng, Research and
Development Manager, for allegedly violating various California Penal Code
sections relating to the theft of trade secrets. Avant! and

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the individuals have pleaded not guilty and are awaiting further proceedings.
The criminal complaint could result in criminal fines against Avant!, as well as
the potential incarceration of certain members of its management team.

In March 1993, Meta Software, Inc., which Avant! acquired in October 1996
and which is now a wholly owned subsidiary of Avant! ("Meta"), filed a complaint
in Santa Clara Superior Court against Silvaco Data Systems, Inc. and related
parties (collectively, "Silvaco") seeking monetary damages and injunctive
relief. Meta's complaint alleged, among other things, that Silvaco breached its
representative agreement with Meta by withholding customer payments for products
and services that had been delivered, and by failing to pay royalties on
software that Silvaco sold to others. In August 1995, Meta was awarded $529,828
under the Superior Court's judicial arbitration program. Both parties rejected
the award and requested a trial de novo on the issues involved. In August 1995,
Silvaco filed a cross-complaint against Meta alleging, among other things, that
Meta owes Silvaco royalties and license fees pursuant to a product development
and marketing program and unpaid commissions related to Silvaco's sale of Meta's
products and services under such program. Meta filed an answer to the
cross-complaint denying the allegations contained therein. In July 1996, Silvaco
filed a first amended cross-complaint, adding Shawn Hailey, then the President,
Chief Executive Officer and a major shareholder of Meta, and, until July 1997,
the Senior Vice President of Avant!'s Silicon Division, as a personal defendant,
and further alleging defamation, interference with economic advantage, unfair
competition and abuse of process by acts or statements made by Meta or its
agents.

In August 1997, the Superior Court entered a default judgment against Mr.
Hailey for failure to timely answer the complaint. In October 1997, Mr. Hailey's
application for relief from the default judgment was denied. In August 1997, the
Superior Court entered a default judgment against Meta as to the defamation and
interference with economic advantage claims. On October 31, 1997, Meta's
application for relief from the default judgment was denied. On October 28,
1997, Silvaco first presented its theory of damages and a trial began on
November 3, 1997. On November 4, 1997, the Superior Court dismissed Meta's
remaining affirmative claims. On November 5, 1997, the Superior Court awarded
Silvaco $20.0 million in damages against Mr. Hailey and Meta related to the
defamation and interference with economic advantage claims, and, on November 6,
1997, the Superior Court awarded Silvaco $11.4 million in damages related to the
unfair competition claim. On November 12, 1997, the Superior Court awarded
nominal damages to Silvaco related to the product development claim. Silvaco's
claims based on the marketing program and abuse of process were dismissed.

Meta intends to pursue all remedies available to it in connection with the
litigation with Silvaco, including filing an appeal as quickly as practicable.
Meta believes it has substantial appellate issues which could cause the judgment
to be remanded to the trial court for further proceedings. Should Meta be
permitted to participate fully in further trial court proceedings, Meta believes
it would have substantial defenses to Silvaco's claims. However, there can be no
assurance that any such remedies will be successful. Payment of the damages
previously awarded, and damages which may be awarded in the future, would have a
material adverse effect on Avant!'s business, consolidated financial condition
and consolidated results of operations. See "Risk Factors--Litigation Risk."

ACQUISITIONS

Avant! acquired Compass Design Automation, Inc., a Delaware corporation
("Compass") on September 12, 1997 (the "Compass Acquisition"). Prior to the
Compass Acquisition, Compass was a subsidiary of VLSI Technology, Inc., a
Delaware corporation ("VLSI"). Upon the closing of the Compass Acquisition,
Compass became a wholly owned subsidiary of Avant! and (a) each share of Compass
capital stock owned directly or indirectly by Compass or by any entity
controlled by Compass was canceled and no stock of Avant! or other consideration
was delivered in exchange therefor, (b) the outstanding shares of Compass
preferred stock (other than those shares canceled under (a)), all of which were
owned by VLSI, were canceled and converted into the right to receive an
aggregate of $2,699,174 and 98,552 shares of Avant!

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common stock, (c) the shares of Compass common stock owned by VLSI (other than
those shares canceled under (a)) were converted into the right to receive an
aggregate of $11,602,831 and 423,640 shares of Avant!'s common stock, (d) the
shares of Compass common stock not owned by VLSI (other than those shares
canceled under (a)) were converted into the right to receive an aggregate of
$2,447,725 and (e) the unexpired and unexercised vested options to purchase
shares of Compass common stock were converted into the right to receive an
aggregate of $750,270 to the extent exercisable. Avant! accounted for the
Compass Acquisition as a purchase. In the third quarter of 1997, Avant! incurred
an expense of approximately $41.2 million for acquired in-process research and
development costs associated with the Compass Acquisition. See "Risk
Factors--Uncertainty Relating to Integration of Multiple Operations and Product
Lines; Management of Growth" and "--Cost of Integration; Transaction Expenses."

Avant! has also recently acquired Datalink Far East Ltd., a Taiwan
corporation ("Datalink") pursuant to an asset purchase agreement (the "Datalink
Acquisition"). Avant! will pay $900,000 to acquire Datalink over five
installments at specified times during the next two years.

On September 7, 1997, Avant! entered into an Agreement and Plan of
Reorganization by and among Avant!, Cardinal Merger Corporation, a wholly owned
subsidiary of Avant! ("Merger Sub") and Technology Modeling Associates, Inc.
("TMA"). If the proposed acquisition of TMA is completed, TMA will become a
wholly owned subsidiary of Avant!. Avant!'s management currently anticipates
that the proposed acquisition of TMA will be completed during the first fiscal
quarter of 1998.

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RISK FACTORS

LITIGATION RISK

Avant! is subject to a number of related litigation matters, including a
civil action brought by Cadence Design Systems, Inc. ("Cadence"), a criminal
complaint filed by the Santa Clara County District Attorney's office against
Avant! and certain of its employees and securities class action claims resulting
from these lawsuits. In addition, default judgments in the aggregate amount of
$31.4 million will be entered against Meta Software, Inc., which Avant! acquired
in October 1996 and which is now a wholly owned subsidiary of Avant! ("Meta").

CADENCE LITIGATION.

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

In addition to actual and punitive damages, which were not quantified by
Cadence, Cadence seeks to enjoin the sale of Avant!'s place and route products
pending trial of the action. On March 18, 1997, the District Court denied
Cadence's motion for a preliminary injunction. Cadence appealed the order
denying a preliminary injunction. On September 23, 1997, the United States Court
of Appeals for the Ninth Circuit overruled the District Court's denial of
Cadence's motion with respect to Avant!'s ArcCell product, a product that Avant!
no longer sells, and held that a preliminary injunction should be granted
against the further sale of the ArcCell product. The Court of Appeals did not
enjoin Avant!'s Aquarius place and route products, but rather remanded this
aspect of Cadence's motion to the District Court for further consideration. The
Court of Appeals stated that, if Avant!'s Aquarius products are determined to
infringe Cadence products, the sale of the Aquarius products should be enjoined.
Avant! requested a rehearing on the issue, but on November 21, 1997 the Ninth
Circuit denied this request. On December 19, 1997, the District Court stated its
intention to enjoin Avant! from directly or indirectly marketing, selling,
licensing, copying or transferring any work copied or derived from Cadence's
Design Framework II, specifically including, but not limited to, Avant!'s
ArcCell, ArcCellBV and ArcCellXO products. The District Court also stated that
it would direct Avant! to deliver a copy of its order to all present or former
customers that have received copies of any such infringing products and, to the
extent it has a legal right to do so, request that such customers return or
destroy any such products. Avant! also will be directed to furnish to Cadence a
list of any customers that still maintain a functioning copy of such products.
At the December 19, 1997 hearing, the District Court did not rule on Cadence's
request to enjoin the sale, license or support of Avant!'s Aquarius place and
route products from which Avant! derives a significant portion of its total
revenue. The District Court will hold future hearings regarding the Aquarius
products. There can be no assurance that the District Court will not, upon
further consideration, grant a preliminary injunction with respect to the sale
of the Aquarius products, which would have a material adverse effect on Avant!'s
business, financial position and results of operations.

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and intentional interference with prospective economic advantage and intentional
interference with contractual relations. On December 19, 1997, Avant! stipulated
to temporarily dismissing its counterclaim in order to file more detailed
allegations. Avant! intends to refile its counterclaim in January 1998.

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

CRIMINAL COMPLAINT.

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

SILVACO LITIGATION.

In March 1993, Meta filed a complaint in Santa Clara Superior Court against
Silvaco Data Systems, Inc. and related parties (collectively, "Silvaco") seeking
monetary damages and injunctive relief. Meta's complaint alleged, among other
things, that Silvaco breached its representative agreement with Meta by
withholding customer payments for products and services that had been delivered,
and by failing to pay royalties on software that Silvaco sold to others. In
August 1995, Meta was awarded $529,828 under the Superior Court's judicial
arbitration program. Both parties rejected the award and requested a trial de
novo on the issues involved. In August 1995, Silvaco filed a cross-complaint
against Meta alleging, among other things, that Meta owes Silvaco royalties and
license fees pursuant to a product development and marketing program and unpaid
commissions related to Silvaco's sale of Meta's products and services under such
program. Meta filed an answer to the cross-complaint denying the allegations
contained therein. In July 1996, Silvaco filed a first amended cross-complaint,
adding Shawn Hailey, then the President, Chief Executive Officer and a major
shareholder of Meta, and, until July 1997, the Senior Vice President of Avant!'s
Silicon Division, as a personal defendant, and further alleging defamation,
interference with economic advantage, unfair competition and abuse of process by
acts or statements made by Meta or its agents.

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denied. In August 1997, the Superior Court entered a default judgment against
Meta as to the defamation and interference with economic advantage claims. On
October 31, 1997, Meta's application for relief from the default judgment was
denied. On October 28, 1997, Silvaco first presented its theory of damages and a
trial began on November 3, 1997. On November 4, 1997, the Superior Court
dismissed Meta's remaining affirmative claims. On November 5, 1997, the Superior
Court awarded Silvaco $20.0 million in damages against Mr. Hailey and Meta
related to the defamation and interference with economic advantage claims, and,
on November 6, 1997, the Superior Court awarded Silvaco $11.4 million in damages
related to the unfair competition claim. On November 12, 1997, the Superior
Court awarded nominal damages to Silvaco related to the product development
claim. Silvaco's claims based on the marketing program and abuse of process were
dismissed.

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

SECURITIES CLASS ACTION CLAIMS.

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

On May 30, 1997, Joanne Hoffman filed in the United States District Court
for the Northern District of California a purported class action alleging
securities claims on behalf of purchasers of Avant! Common Stock between March
29, 1996 and April 11, 1997, the date of the filing of the criminal complaints
against Avant! and six of its employees. Plaintiff alleges that Avant! and
various of its officers misled the market as to the likelihood of criminal
charges being filed and as to the validity of the Cadence allegations. Avant!
has moved to dismiss the Hoffman complaint for failure to state a claim, but the
court has not yet heard argument on that motion.

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

LITIGATION COSTS.

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incurred and charged to operations approximately $6.8 million in litigation
expenses and expects to incur approximately $7.5 million in litigation expenses
in 1997. While litigation is inherently unpredictable, Avant! currently expects
that its litigation expenses during 1998 will be at least as much as those
incurred in 1997. Accordingly, any such litigation could have a material adverse
effect on Avant!'s business, operating results or financial condition.
Furthermore, if Avant! is required to satisfy the default judgments in full in
the Silvaco litigation, Avant! could be required to pay up to $31.4 million in
damages, which would have a material adverse effect on Avant!'s business,
consolidated financial condition and consolidated results of operations.

UNCERTAINTY RELATING TO INTEGRATION OF MULTIPLE OPERATIONS AND PRODUCT LINES;
MANAGEMENT OF GROWTH

In addition to the proposed acquisition of TMA, Avant! has also recently
acquired Compass. The integration of TMA's and Compass' business and personnel
following the TMA and Compass acquisitions present difficult challenges for
Avant!'s management, particularly in light of the increased time and resources
required to effect the combination with these parties. Upon completion of the
proposed TMA Merger, the combined company will be more complex and diverse than
either Avant! or TMA individually, and the combination and continued operation
of their distinct business operations, together with Compass will be difficult.
While Avant!'s management believes that the combination of Avant!, Compass and
TMA can be effected in a manner that will realize the value of the combined
company, the management group has limited experience in combinations of this
complexity or size. Accordingly, there can be no assurance that the process of
effecting these business combinations can be effectively managed to realize the
synergies anticipated to result therefrom.

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

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

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

DEPENDENCE UPON KEY PERSONNEL

Avant!'s future operating results depend in significant part upon the
continued service of its key management and technical personnel. Few of Avant!'s
employees are bound by employment or non-competition agreements, and due to the
intense competition for such personnel, as well as the uncertainty caused by the
integration of Avant!'s, Compass' and TMA's businesses, it is possible that
Avant! will be unable to retain such key technical and managerial personnel. In
fact, Avant! terminated a significant number of Compass employees following the
Compass Acquisition thereby adding to any uncertainty which may be felt by its
employees. There are only a limited number of qualified ICDA engineers, and
competition for such individuals is intense. If Avant! is unable to attract,
hire and retain qualified personnel in the future, the development of new
products and the management of an increasingly complex business would be
impaired which would materially adversely affect Avant!'s business, operating
results and financial condition. Additionally, if the criminal complaint filed
relating to the matters underlying the pending litigation between Avant! and
Cadence results in a loss of Avant! personnel, then Avant!'s business, operating
results and financial condition may be materially adversely affected. See
"--Litigation Risk" and "Business--Employees."

COMPETITION

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

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or loss of market share, any of which could materially and adversely affect
Avant!'s business, operating results or financial condition. In addition, the
EDA industry has become increasingly concentrated in recent years as a result of
consolidations, acquisitions and strategic alliances. Accordingly, it is
possible that new competitors or alliances among competitors could emerge and
rapidly acquire significant market share. Alliances among competitors could
present particularly formidable competition to Avant! by combining their
resources. There can be no assurance that Avant! will be able to compete
successfully against current and future competitors or that competitive
pressures faced by Avant! will not have a material adverse effect on its
business, operating results and financial condition. If Avant! is unable to
compete successfully against current and future competitors, Avant!'s business,
operating results and financial condition will be materially and adversely
affected.

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

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

POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS

The quarterly operating results of Avant! have varied, and it is anticipated
that the quarterly operating results of Avant! will vary, substantially from
period to period depending on factors such as the outcome of the litigation
described under "--Litigation Risk", increased competition, the size, timing and
structure of significant licenses, the timing of revenue recognition under its
time-based license agreements, the timing of new or enhanced product
announcements, introductions, or delays in the introductions of new or enhanced
versions of Avant!'s products, changes in pricing policies by Avant! or its
competitors, market acceptance of new and enhanced versions of Avant!'s
products, conditions in the semiconductor industry, the cancellation of
time-based licenses or maintenance agreements, the unavailability of technology
of third parties, the mix of direct and indirect sales, changes in operating
expenses, changes in Avant!'s strategy, seasonal factors, personnel changes,
economic conditions in the Asian markets, the ability of Avant! to continue to
market its products in Asian markets, foreign currency exchange rates and
general economic factors. Due to the foregoing factors, and particularly the
variability of the size, timing and structure of significant licenses, quarterly
revenue and operating results are difficult to forecast. In particular, Avant!
has adopted a flexible pricing strategy pursuant to which Avant! offers both
perpetual and time-based software licenses to customers, depending on customer
requirements and financial constraints. Because each time-based license may have
a different structure and could be subject to cancellation, future revenue is
unpredictable. Avant!'s expense levels are based, in part, on expectations as to
future revenue levels. Accordingly, net income, if any, may be
disproportionately affected by a reduction in revenue in a quarter because only
a small portion of Avant!'s expenses fluctuate with revenue. If revenue levels
are below expectations, Avant!'s business, operating results and financial
condition are likely to be materially adversely affected. Such shortfalls in
Avant!'s revenue or operating results from levels expected by public market
analysts and investors could have an immediate and significant material adverse
effect on the market price of Avant!'s common stock. Additionally, Avant! may
not learn of such revenue shortfalls or earnings shortfalls or other failures to
meet market expectations for results of

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operations until late in a fiscal quarter, which could result in an even more
immediate and material adverse effect on the trading price of the Avant! common
stock. In such event, the market price of Avant!'s common stock would be
materially adversely affected. Due to the foregoing, Avant! believes that period
to period comparisons of their results of operations are not necessarily
meaningful and should not be relied upon as indications of future performance.

POTENTIAL VOLATILITY OF STOCK PRICE

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

COST OF INTEGRATION; TRANSACTION EXPENSES

Transaction costs relating to the proposed TMA acquisition and the
anticipated combination of certain operations of Avant! and TMA are expected to
result in one-time charges to Avant!'s earnings. Although it will not be
feasible to determine the actual amount of these charges until the operational
and transition plans are completed, Avant!'s management believes that the
aggregate charge will be approximately $6.8 million before taxes, although such
amount may be increased by unanticipated additional expenses incurred in
connection with the such proposed acquisition. This aggregate charge is expected
to include the estimated costs associated with financial advisory, accounting
and legal fees, printing expenses, filing fees and other merger-related costs.
While the exact timing of these expenses cannot be determined at this time, the
management of Avant! anticipates that this aggregate charge to earnings will be
recorded primarily in the quarter ending March 31, 1998, the quarter in which
the proposed TMA acquisition is expected to be consummated. In addition, in the
third quarter of 1997, Avant! incurred an expense of approximately $41.2 million
for acquired in-process research and development costs associated with the
Compass Acquisition.

POTENTIAL DILUTIVE EFFECT TO STOCKHOLDERS

Although Avant! believes that beneficial synergies will result from the
proposed TMA acquisition, there can be no assurance that the combining of
Avant!'s, Compass' and TMA's businesses, even if achieved in an efficient and
effective manner, will result in combined results of operations and financial
condition superior to that which would have been achieved by each company
independently, or as to the period of time required to achieve such result. In
addition, the issuance of Avant! common stock in connection with the proposed
TMA acquisition is likely to have a dilutive effect on Avant!'s earnings per
share and there is no assurance that Avant! stockholders would not achieve
greater returns on investment were Avant! to remain an independent company.

SHARES ELIGIBLE FOR PUBLIC SALE

Sales of substantial amounts of Avant! common stock in the public market
after the consummation of the proposed TMA acquisition could materially
adversely affect prevailing market prices of Avant!'s common stock. If the
proposed TMA acquisition is completed, and assuming an Exchange Ratio of
0.662045, the Exchange Ratio as of December 19, 1997, Avant! will issue
approximately 5,376,511 shares of common stock in the TMA acquisition (based
upon 8,121,066 shares of TMA common stock outstanding

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as of December 19, 1997, but not including shares subject to options to purchase
TMA common stock to be assumed by Avant!). The shares of Avant! common stock to
be issued in the proposed TMA acquisition will be eligible for immediate sale in
the public market, subject to certain limitations under the Securities Act
applicable to affiliates of Avant! and certain agreements to be entered into by
certain affiliates of TMA which prohibit such persons from disposing of any
Avant! common stock during the period immediately following the effective time
of such merger.

LENGTHY SALES CYCLE

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

PRODUCT CONCENTRATION

During each of 1994, 1995 and 1996, Avant! derived substantially all of its
total revenue from the licensing and support of Aquarius, its cell-based place
and route software product, Hercules, its hierarchical physical verification
software product, Star-Hspice, its circuit simulator, Star-Sim products, its
high-capacity circuit simulation and high-accuracy timing analysis software, and
Polaris products, its Verilog simulation product. Absent any extraordinary
results from existing litigation, Avant! currently expects that these products
will continue to account for a significant portion of its revenue for the
foreseeable future. As a result, Avant!'s business, operating results and
financial condition are significantly dependent upon continued market acceptance
of these products. Avant! believes that a number of factors will be necessary
for its products to achieve continued market acceptance. These factors include
performance of Avant!'s existing products, successful development of advanced
features, adaptability into the user's design environment, Avant!'s technical,
managerial, service and support expertise, and the customer's assessment of
Avant!'s financial resources. A decline in demand for these products as a result
of competition, technological change or other factors would have a material
adverse effect on the business, operating results and financial condition of
Avant!. There can be no assurance that these products will achieve continued
market acceptance or that Avant! will be successful in marketing such products
or any new or enhanced products. Failure to develop or acquire additional
products, or to successfully market such products on a profitable basis, could
have a material adverse effect on Avant!'s business, operating results and
financial condition. See "Business--Products."

Avant! derives a significant portion of its total revenue from the licensing
and support of Aquarius products which are the subject of pending litigation
with Cadence. See "--Litigation Risk."

SUBSTANTIAL DEPENDENCE ON INTERNATIONAL SALES

International revenue, principally to customers in Asia, accounted for
approximately 33%, 32%, 34% and 44% of Avant!'s total revenue in 1994, 1995,
1996 and the first nine months of 1997, respectively. Avant! expects that
international license and service revenue, particularly in Asia, will continue
to account for a significant portion of its total revenue. Avant!'s
international revenue involves a number of risks, including the impact of
possible recessionary environments in economies outside the U.S., longer
receivables collection periods and greater difficulty in accounts receivable
collection, difficulties in staffing and

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managing foreign operations, political and economic instability, unexpected
changes in regulatory requirements, reduced protection of intellectual property
rights in some countries and tariffs and other trade barriers. Currency exchange
fluctuations in countries in which Avant! licenses its products could also
materially adversely affect Avant!'s business, operating results and financial
condition by resulting in pricing that is not competitive with products priced
in local currencies. Furthermore, there can be no assurance that in the future
Avant! will be able to continue to price its products and services
internationally in U.S. dollars because of changing sovereign restrictions on
importation and exportation of foreign currencies as well as other practical
considerations. In addition, the laws of certain countries do not protect
Avant!'s products and intellectual property rights to the same extent as do the
laws of the U.S. Accordingly, there can be no assurance that these factors will
not have a material adverse effect on Avant!'s future international sales and,
consequently, on Avant!'s business, operating results and financial condition.
In addition, there can be no assurance that Avant! will be able to sustain or
increase revenue derived from international licensing and service or that the
foregoing factors will not have a material adverse effect on Avant!'s future
international license and service revenue, and, consequently, on Avant!'s
business, operating results and financial condition.

DEPENDENCE UPON DISTRIBUTORS AND MANUFACTURER'S REPRESENTATIVES

Avant! relies on distributors and manufacturer's representatives ("Third
Party Sellers") for licensing and support of its products in Asia. A substantial
portion of Avant!'s international license and service revenue results from a
limited number of these Third Party Sellers, although Avant! had no individual
customer representing over ten percent of revenue in any of 1994, 1995, 1996, or
the first nine months of 1997. In 1997, Avant! consolidated its Japanese sales
channel by forming a distributor ("MainGate"), owned by Avant!, Gerald C. Hsu,
Avant!'s Chairman of the Board, President and Chief Executive Officer, and other
parties (including other Avant! employees and former employees of Avant!'s third
party distributors). There can be no assurance that Avant!'s current Third Party
Sellers or MainGate will choose to or be able to market or service and support
Avant!'s products effectively, that economic conditions or industry demand will
not materially adversely affect these or other Third Party Sellers or that these
Third Party Sellers or MainGate will not devote greater resources to marketing
and supporting products of Avant!'s competitors. Additionally, because Avant!'s
products are used by highly skilled professional engineers, a Third Party Seller
must possess sufficient technical, marketing and sales resources in order to be
effective and must devote these resources to a lengthy sales cycle, customer
training and product service and support. Only a limited number of Third Party
Sellers possess such resources. Accordingly, the loss of, or a significant
reduction in revenue from, one of Avant!'s Third Party Sellers, or MainGate or
any other Third Party Sellers on which Avant!'s revenues may, in the future,
become dependent, could have a material adverse effect on Avant!'s business,
operating results and financial condition. See "Business-- Sales and Marketing."

NEW PRODUCTS AND RAPID TECHNOLOGICAL CHANGE

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

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introduce products on a timely basis in the future. Delays in the scheduled
availability of products, for technological or other reasons, or a lack of
market acceptance of such products, or Avant!'s failure to accurately anticipate
customer demand, would have a material adverse effect on its business, operating
results and financial condition. See "Business."

DEPENDENCE UPON SEMICONDUCTOR AND ELECTRONICS INDUSTRIES; GENERAL ECONOMIC AND
MARKET CONDITIONS

Avant! is dependent upon the semiconductor and, more generally, the
electronics industries. Each of these industries is characterized by rapid
technological change, short product life cycles, fluctuations in manufacturing
capacity and pricing and gross margin pressures. Segments of these industries
have from time to time experienced significant economic downturns characterized
by decreased product demand, production over-capacity, price erosion, work
slowdowns and layoffs. Over the past few years, these industries have
experienced an extended period of significant economic growth. There can be no
assurance that economic growth in these industries will continue, and if it does
not, any downturn could be especially severe on Avant!. During such downturns,
the number of new IC design projects often decreases. Because acquisitions of
new licenses from Avant! are largely dependent upon the commencement of new
design projects, any slowdown in these industries could have a material adverse
effect on Avant!'s business, operating results and financial condition. Avant!'s
business, operating results and financial condition may in the future reflect
substantial fluctuations from period to period as a consequence of patterns and
general economic conditions in either the semiconductor or electronics industry.

LIMITATIONS ON PROTECTION OF INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS

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

RISK OF PRODUCT DEFECTS

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

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BUSINESS

INTRODUCTION

Avant! resulted from the merger of ArcSys, Inc. and Integrated Silicon
Systems, Inc. on November 27, 1995. Avant! merged with Anagram, Inc. on
September 27, 1996, Meta-Software, Inc. on October 29, 1996, FrontLine Design
Automation, Inc. on November 27, 1996 and acquired Nexsyn Design Technology Inc.
on December 31, 1996. Avant! is a Delaware corporation that develops, markets
and supports software products that assist design engineers in the physical
layout, design, verification, simulation, timing and analysis of ICs.

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

RECENT DEVELOPMENTS

LITIGATION DEVELOPMENTS.

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the individuals have pleaded not guilty and are awaiting further proceedings.
The criminal complaint could result in criminal fines against Avant!, as well as
the potential incarceration of certain members of its management team.

ACQUISITIONS.

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common stock, (c) the shares of Compass common stock owned by VLSI (other than
those shares canceled under (a)) were converted into the right to receive an
aggregate of $11,602,831 and 423,640 shares of Avant!'s common stock, (d) the
shares of Compass common stock not owned by VLSI (other than those shares
canceled under (a)) were converted into the right to receive an aggregate of
$2,447,725 and (e) the unexpired and unexercised vested options to purchase
shares of Compass common stock were converted into the right to receive an
aggregate of $750,270 to the extent exercisable. Avant! accounted for the
Compass Acquisition as a purchase. In the third quarter of 1997, Avant! incurred
an expense of approximately $41.2 million for acquired in-process research and
development costs associated with the Compass Acquisition. See "Risk
Factors--Uncertainty Relating to Integration of Multiple Operations and Product
Lines; Management of Growth" and "--Cost of Integration; Transaction Expenses."

PRODUCTS

Avant! products are based on Avant!'s proprietary architecture and
technology, which provide a breadth of automated IC physical design
capabilities. Avant!'s product architecture is designed to solve the problems
inherent in submicron (less than 1.0-micron feature size) and deep submicron
(less than 0.5-micron feature size) IC design and to offer improved
time-to-market, reduced development and manufacturing costs, and enhanced IC
performance when compared to previous generations of ICDA software.

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

Avant!'s Aquarius family of cell-based place and route products includes
Aquarius-BV, Aquarius-XO and Aquarius-GA. All products are based on Avant!'s
patented cell-path timing-driven algorithms which increase circuit performance
and reduce design iterations. Aquarius-BV is used for standard-cell IC designs
with up to three layers of metal, and Aquarius-XO is used for more complex
standard-cell and mixed-block IC designs with up to six layers of metal.
Aquarius-BV and -XO reduce die size and shorten the design cycle by combining
the advantages of over-the-cell channel routing, channel routing and channel
compaction with the flexibility of area-based maze routing.

Avant!'s Aquarius-GA product is an advanced multi-layer place and route
system for gate-array ICs. Aquarius-GA increases gate utilization and minimizes
design congestion by using proprietary congestion-driven placement and routing
algorithms. Aquarius-GA includes many of the same features as Aquarius-BV and
- -XO to improve circuit performance. Aquarius-GA supports embedded designs
through its horizontal integration with Aquarius-BV and -XO.

Avant!'s Planet product complements the Aquarius products and is a physical
floorplanning and analysis solution for accurate prediction of the impact of
physical effects on design performance and routability early in the design
process.

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Avant!'s Solar family of products are synthesis-oriented layout refinement
tools designed to optimize the performance and area of ICs to meet new deep
submicron "golden file" needs. Solar is tightly integrated with Avant!'s
Aquarius family of place and route tools.

Avant! believes its Hercules family of design verification software is the
industry's most advanced suite of IC physical verification products. The
Hercules family of products provide geometric and electrical verification
physical design layouts. Hercules' first module for design rule checking ("DRC")
was introduced in January 1992 and is the first hierarchical system offered for
complex submicron design.

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

Avant!'s Star-Sim family of products are high-capacity circuit simulators
for deep submicron process applications such as graphics, memory, communications
and mixed-signal IC designs. The Star-Sim family of products help increase IC
performance and reliability and increase designer productivity by enabling
designers to characterize large blocks; to accurately simulate mixed-signal,
dynamic logic and memory circuits where performance, signal integrity and power
analyses are essential; and to reuse high-performance intellectual property
without changing the design process. Star-RC is a full-chip hierarchical
capacitance extractor and a critical net resistance and capacitance extractor.

All of Avant!'s Star products are tightly integrated with Avant!'s
hierarchical layout and verification tools, Aquarius and Hercules, to provide
efficient, accurate and predictable IC performance.

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

During 1994, 1995, 1996, and during the first nine months of 1997, Avant!
derived 33%, 32%, 34%, and 44%, respectively, of its total revenue from the
licensing and support of its software products internationally, principally in
Asia. Avant! currently expects that the percentage from the license and support
of its software products in Asia will continue to be a significant percentage of
its total revenue.

20
<PAGE>
Any significant decline in demand for Avant!'s products in Asia would have a
material adverse effect on Avant!'s business, operating results and financial
condition. Avant!'s international revenue involves a number of risks, including
the impact of possible recessionary environments in economies outside the U.S.,
longer receivables collection periods and greater difficulty in accounts
receivable collection, difficulties in staffing and managing foreign operations,
political and economic instability, unexpected changes in regulatory
requirements, reduced protection for intellectual property rights in some
countries and tariffs and other trade barriers. There can be no assurance that
Avant! will be able to sustain or increase revenue derived from international
licensing and service or that the foregoing factors will not have a material
adverse effect on Avant!'s future international license and service revenue, and
consequently, on Avant!'s business, operating results and financial condition.
Failure to sustain or increase such revenue would materially and adversely
affect Avant!'s business, operating results and financial condition. Although
Avant! has attempted to reduce the risk of fluctuations in exchange rates
associated with international revenue by pricing its products and services in
U.S. dollars, Avant! pays the expenses of its international operations in local
currencies and does not currently engage in hedging transactions with respect to
such obligations. Currency exchange fluctuations in countries in which Avant!
licenses its products could have a material adverse effect on Avant!'s business,
operating results or financial condition by resulting in prices that are not
competitive with products priced in local currencies. Furthermore, there can be
no assurance that in the future Avant! will be able to continue to price its
products and services internationally in U.S. dollars.

The ICDA industry is characterized by extremely rapid technological change,
frequent new product introductions and enhancements, evolving industry standards
and rapidly changing customer requirements. The development of more complex ICs
embodying new technologies will require increasingly sophisticated design tools.
Avant!'s future results of operations will depend in part upon its ability to
enhance its current products and to develop and introduce new products on a
timely and cost-effective basis that will keep pace with technological
developments and evolving industry standards and methodologies, as well as
address the increasingly sophisticated needs of Avant!'s customers. For example,
all of Avant!'s current products operate in, and planned future products will
operate in, the Unix operating system. In the event that another operating
system, such as Windows NT, were to achieve broad acceptance in the ICDA
industry, Avant! would be required to port its products to such an operating
system, which would be costly, time consuming and could have a material adverse
effect on Avant!'s business, operating results or financial condition. Avant!
has in the past and may in the future experience delays in new product
development. The introduction of certain products in the past have been delayed
by as much as 12 months beyond their original scheduled release dates. There can
be no assurance that Avant! will be successful in developing and marketing
product enhancements or new products that respond to technological change,
evolving industry standards and changing customer requirements, that Avant! will
not experience difficulties that could delay or prevent the successful
development, introduction and marketing of these products or product
enhancements, or that its new products and product enhancements will adequately
meet the requirements of the marketplace and achieve any significant degree of
market acceptance. Failure of Avant!, for technological or other reasons, to
develop and introduce new products and product enhancements in a timely and
cost-effective manner would have a material adverse effect on Avant!'s business,
operating results and financial condition. In addition, the introduction or even
announcement of products by Avant! or one or more of the competitors embodying
new technologies or changes in industry standards or customer requirements could
render Avant!'s existing products obsolete or unmarketable. There can be no
assurance that the introduction or announcement of new product offerings by
Avant! or one or more of its competitors will not cause customers to defer
purchases of existing Avant! products. Such deferment of purchases could have a
material adverse effect on Avant!'s business, operating results or financial
condition.

21
<PAGE>
CUSTOMERS

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

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

No one customer accounted for greater than 10% of Avant!'s revenue in 1994,
1995, 1996 or the first nine months of 1997. Avant! does not believe that
seasonality is a significant factor in sales.

SALES AND MARKETING

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

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

Avant! has relied on Third Party Sellers for licensing and support of its
products in Japan, Korea, Taiwan and Singapore. A substantial portion of
Avant!'s international license and service revenue has resulted from a limited
number of these Third Party Sellers. During 1994, 1995, 1996, and the first nine
months of 1997, revenue from these channels accounted for an aggregate of
approximately 30%, 28%, 27%, and 34%, respectively, of Avant!'s total revenue.

In 1997, Avant! consolidated its Japanese sales channel by forming a
distributor, MainGate Electronics, Inc. ("MainGate") owned by Avant!, Gerald C.
Hsu, Avant!'s Chairman of the Board, President and Chief Executive Officer, and
other parties (including other Avant! employees and former employees of Avant!'s
third party distributors). Mr. Hsu owns approximately 40% and Avant! owns
approximately 35% of the outstanding shares of MainGate. Avant! believes that
this arrangement optimizes its competitive advantage in the Asian market to an
extent that could not be achieved by using another distributor or by directly
selling into these markets. Distribution and marketing in these markets are
dominated by local companies, making it difficult for non-local manufacturers to
distribute their products directly. Thus, Avant! created MainGate, which is
locally managed and operated and has significant local ownership. By providing
for local ownership of MainGate through equity incentives, Avant! believes that
it is best able to attract and retain top local talent. However, there can be no
assurance that MainGate will be successful. If it is not successful, it could
have a material adverse effect on Avant!'s business, operating results or
financial condition. See "Risk Factors--Dependence Upon Distributors and
Manufacturer's Representatives."

22
<PAGE>
Since Avant!'s products are used by highly skilled professional engineers,
in order to be effective, a Third Party Seller must possess sufficient
technical, marketing and sales resources and must devote these resources to a
lengthy sales cycle, customer training and product service and support. Only a
limited number of Third Party Sellers possess such resources. In addition,
Avant!'s Third Party Sellers generally offer products of several different
companies, including, in some cases, products that are competitive with Avant!'s
products. There can be no assurance that Avant!'s current Third Party Sellers or
MainGate will choose to or be able to market or service and support Avant!'s
products effectively, that economic conditions or industry demand will not
adversely affect these or other Third Party Sellers, that any Third Party Seller
or MainGate will continue to market and support Avant!'s products or that these
Third Party Sellers or Main Gate will not devote greater resources to marketing
and supporting products of other companies. The loss of, or a significant
reduction in revenue from, one of Avant!'s Third Party Sellers or MainGate could
have a material adverse effect on Avant!'s business, operating results or
financial condition.

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

CUSTOMER SERVICE AND SUPPORT

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

To address technical issues, Avant! has established both field and corporate
technical application engineering groups that understand the design
methodologies of Avant!'s customers and generally have IC design backgrounds.
Most of Avant!'s customers currently have maintenance agreements that entitle
them to receive software updates, documentation updates and a formal problem
identification and resolution process through a support hotline. Questions or
suggestions may be submitted by facsimile or through the Internet network mail
system. Avant! also offers additional training and consulting services for a
fee. Avant! provides on-site and in-house training on all products.

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

RESEARCH AND DEVELOPMENT

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

23
<PAGE>
During 1994, 1995, 1996 and the nine months ended September 30, 1997,
Avant!'s research and development expenditures were approximately $9.7 million,
$15.3 million, $20.7 million and $19.7 million, respectively (excluding
capitalized software development costs of $143,000, $63,000, none and none,
respectively, for the same periods). The amount of capitalized software
development costs amortized was $199,000, $228,000, $88,000 and $49,000 for
1994, 1995, 1996 and the nine months ended September 30, 1997, respectively.

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

COMPETITION

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

24
<PAGE>
compete successfully against current and future competitors, Avant!'s business,
operating results and financial condition will be materially and adversely
affected.

PROPRIETARY RIGHTS

Avant! relies on a combination of license agreements, patents, copyright,
trademarks and trade secrets to establish and protect proprietary rights to its
technology. Avant! holds three U.S. patents covering certain aspects of its
products expiring between August 8, 2012 and September 1, 2013, and has seven
U.S. patent applications pending. Avant! also has foreign patent applications
corresponding to one of its U.S. patents and one of its U.S. patent applications
pending in certain foreign countries. In addition, Avant! acquired certain
rights to certain technology owned by VLSI pursuant to licenses granted by VLSI
to Compass which were acquired by Avant! pursuant to the Compass Acquisition and
pursuant to licenses granted directly by VLSI to Avant!. Avant! generally
provides products to end-users under non-exclusive licenses, which typically
have a perpetual term unless terminated for breach. The license provides that
the software may be used solely for internal operations in designated computers
at specified sites. Avant!'s software is shipped with a software security lock
which limits software access to authorized users. The source code of Avant!'s
products is protected both as a trade secret and as an unpublished copyrighted
work, and is not made available to third parties. Despite these precautions, it
may be possible for a third party to copy or otherwise obtain and use Avant!'s
products or technology without authorization or to develop similar technology
independently. In addition, effective copyright and trade secret protection may
be unavailable or limited in certain foreign countries. Avant! believes that,
due to the rapid pace of innovation within the IC CAD software industry, factors
such as the technological and creative skills of its personnel, new product
developments, frequent product enhancements, name recognition and reliable
product maintenance are more important to establishing and maintaining a
technology leadership position than are the various legal protections of its
technology.

Avant! is heavily dependent upon its proprietary software technology. Avant!
currently holds several patents and also relies on a combination of trade
secret, copyright and trademark laws, nondisclosure and other contractual
agreements and technical measures to protect its proprietary rights in its
products. Although Avant! holds several patents, there can be no assurance that
Avant! will develop additional proprietary products or technologies that are
patentable, that any issued patent will provide Avant! with any competitive
advantages or will not be challenged by third parties, or that the patents of
others will not have an adverse effect on Avant!'s ability to do business.
Furthermore, there can be no assurance that others will not independently
develop similar products, duplicate Avant!'s products or design around the
patents currently issued or patents that may be issued in the future to Avant!.
There can be no assurance that the steps taken by Avant! will prevent
misappropriation of its technology, and such protections may not preclude
competitors from developing products with functionality or features similar to
Avant!'s products. In addition, effective copyright and trade secret protection
may be unavailable or limited in

25
<PAGE>
certain foreign countries. Avant! expects that software companies will
increasingly be subject to infringement claims as the number of products and
competitors in the industry in which Avant! competes grows and the functionality
of products in different industry segments overlaps. In particular, Avant!'s
current litigation with Cadence involves such infringement claims. Avant!
believes that its products and trademarks do not infringe upon the proprietary
rights of third parties. There can be no assurance, however, that third parties
will not assert infringement claims, regardless of merit, against Avant! in the
future or that such claims will not require Avant! to cease use of certain
technology or enter into expensive royalty arrangements, if licenses are
available, or result in costly litigation, any of which could materially and
adversely affect Avant!'s business, operating results or financial condition.
See "Risk Factors--Limitations on Protection of Intellectual Property and
Proprietary Rights."

ENVIRONMENTAL AFFAIRS

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

EMPLOYEES

As of November 20, 1997, Avant! had 572 employees, including 271 in research
and development, 201 in sales, marketing and related customers support services,
and 100 in finance and administration. Of these employees, 476 were located in
the United States, 72 in Europe, 4 in Japan and 20 in Taiwan. None of Avant!'s
employees is represented by a labor union or is subject to a collective
bargaining agreement, nor has Avant! experienced any work stoppage. Avant!
considers its relations with its employees to be good.

Avant! has recently experienced a period of rapid growth and expansion,
especially the mergers of four companies in a four month period in late 1996 and
the Compass Acquisition in the third quarter of 1997, that has placed and
continues to place a significant strain upon its management systems and
resources. Avant! currently plans to continue to expand its staff. To
accommodate this recent growth, Avant! will be required to implement a variety
of new and upgraded operational and financial systems, procedures and controls,
some of which currently require substantial management effort. There can be no
assurance that Avant! will be able to do so successfully. The increase in the
number of Avant!'s employees and Avant!'s market diversification and product
development activities have resulted in increased responsibility for Avant!'s
management. Avant! anticipates that continued growth, if any, will require it to
recruit and hire a substantial number of new engineering, managerial, finance,
sales and marketing and support personnel; however, there can be no assurance
that Avant! will be successful at hiring or retaining these personnel. Avant!'s
ability to compete effectively and to manage future growth, if any, will require
Avant! to continue to implement and improve operational, financial and
management information systems on a timely basis and to expand, train, motivate
and manage its work force. There can be no assurance that Avant!'s personnel,
systems, procedures and controls will be adequate to support Avant!'s
operations. Any failure to implement and improve Avant!'s operational, financial
and management systems or to expand, train, motivate or manage employees, could
have a material adverse effect on Avant!'s business, operating results or
financial condition.

Avant!'s future operating results depend in significant part upon the
continued service of its key technical and senior management personnel,
including in particular, Gerald C. Hsu, Avant!'s President and Chief Executive
Officer. None of Avant!'s employees is bound by an employment agreement.
Avant!'s business, operating results and financial condition also depend on its
continuing ability to attract and retain highly qualified technical and
managerial personnel. Competition for such personnel is intense, and there can
be no assurance that Avant! will retain its key technical and managerial
personnel or attract such personnel in the future.

26
<PAGE>
PROPERTIES

In February 1997, Avant! signed four leases for its new headquarters in
Fremont, California. The leases cover four buildings with an aggregate of
approximately 281,000 square feet of space with an aggregate annual base rent
amount of approximately $4.8 million. The leases for three of the buildings
expire on September 1, 2010 and the lease for the fourth building expires on
August 31, 2012. Avant! also occupies a facility near Research Triangle Park in
Durham, North Carolina with an annual base rent of approximately $666,000. The
lease expires on November 30, 2005. Avant! also leases sales and support offices
in the United States, Europe, Japan and Taiwan. Avant! believes that its
existing facilities are adequate for its current needs.

LITIGATION

Avant! is subject to a number of related litigation matters, including a
civil action brought by Cadence, a criminal complaint filed by the Santa Clara
County District Attorney's office against Avant! and certain of its employees
and securities class action claims resulting from these lawsuits. In addition,
default judgments in the aggregate amount of $31.4 million will be entered
against Meta, which Avant! acquired in October 1996 and which is now a wholly
owned subsidiary of Avant!.

CADENCE LITIGATION.

In addition to actual and punitive damages, which were not quantified by
Cadence, Cadence seeks to enjoin the sale of Avant!'s place and route products
pending trial of the action. On March 18, 1997, the District Court denied
Cadence's motion for a preliminary injunction. Cadence appealed the order
denying a preliminary injunction. On September 23, 1997, the United States Court
of Appeals for the Ninth Circuit overruled the District Court's denial of
Cadence's motion with respect to Avant!'s ArcCell product, a product that Avant!
no longer sells, and held that a preliminary injunction should be granted
against the further sale of the ArcCell product. The Court of Appeals did not
enjoin Avant!'s Aquarius place and route products, but rather remanded this
aspect of Cadence's motion to the District Court for further consideration. The
Court of Appeals stated that, if Avant!'s Aquarius products are determined to
infringe Cadence products, the sale of the Aquarius products should be enjoined.
Avant! requested a rehearing on the issue, but on November 21, 1997 the Ninth
Circuit denied this request. On December 19, 1997, the District Court stated its
intention to enjoin Avant! from directly or indirectly marketing, selling,
licensing, copying or transferring any work copied or derived from Cadence's
Design Framework II, specifically including, but not limited to, Avant!'s
ArcCell, ArcCellBV and ArcCellXO products. The District Court also stated that
it would direct Avant! to deliver a copy of its order to all present or former
customers that have received copies of any such infringing products and, to the
extent it has a legal right to do so, request that such customers return or
destroy any such products. Avant! also will be directed to furnish to Cadence a
list of any customers that still maintain a functioning copy of such products.
At the December 19, 1997 hearing, the District Court did not rule on Cadence's
request to enjoin the sale, license or support of

27
<PAGE>
Avant!'s Aquarius place and route products from which Avant! derives a
significant portion of its total revenue. The District Court will hold future
hearings regarding the Aquarius products. There can be no assurance that the
District Court will not, upon further consideration, grant a preliminary
injunction with respect to the sale of the Aquarius products, which would have a
material adverse effect on Avant!'s business, financial position and results of
operations.

On January 16, 1996, Avant! filed a counterclaim against Cadence alleging
antitrust violations, racketeering, false advertising, defamation, trade libel,
unfair competition, unfair trade practices, negligent and intentional
interference with prospective economic advantage and intentional interference
with contractual relations.

CRIMINAL COMPLAINT.

SILVACO LITIGATION.

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<PAGE>
July 1996, Silvaco filed a first amended cross-complaint, adding Shawn Hailey,
then the President, Chief Executive Officer and a major shareholder of Meta,
and, until July 1997, the Senior Vice President of Avant!'s Silicon Division, as
a personal defendant, and further alleging defamation, interference with
economic advantage, unfair competition and abuse of process by acts or
statements made by Meta or its agents.

In August 1997, the Superior Court entered a default judgment against Mr.
Hailey as to the defamation and interference with economic advantage claims for
failure to answer the complaint. In October 1997, Mr. Hailey's application for
relief from the default judgment was denied. In August 1997, the Superior Court
entered a default judgment against Meta as to the defamation and interference
with economic advantage claims. On October 31, 1997, Meta's application for
relief from the default judgment was denied. On October 28, 1997, Silvaco first
presented its theory of damages and a trial began on November 3, 1997. On
November 4, 1997, the Superior Court dismissed Meta's remaining affirmative
claims. On November 5, 1997, the Superior Court awarded Silvaco $20.0 million in
damages against Mr. Hailey and Meta related to the defamation and interference
with economic advantage claims, and, on November 6, 1997, the Superior Court
awarded Silvaco $11.4 million in damages related to the unfair competition claim
and claims related to the product development and marketing program. On November
12, 1997, the Superior Court awarded nominal damages to Silvaco related to the
August 1995 cross-complaint.

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

SECURITIES CLASS ACTION CLAIMS.

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<PAGE>
or range of loss. In the event Avant!'s defenses are unsuccessful, Avant! may be
required to pay damages to the securities class action plaintiffs, and such a
judgment could have a material adverse effect on Avant!'s business, consolidated
financial condition and consolidated results of operations.

LITIGATION COSTS.

The pending litigation and any future litigation against Avant! or its
employees, regardless of the outcome, is expected to result in substantial costs
and expenses to Avant!. For example, during 1996 Avant! incurred and charged to
operations approximately $6.8 million in litigation expenses and expects to
incur approximately $7.5 million in litigation expenses in 1997. While
litigation is inherently unpredictable, Avant! currently expects that its
litigation expenses during 1998 will be at least as much as those incurred in
1997. Accordingly, any such litigation could have a material adverse effect on
Avant!'s business, operating results or financial condition. Furthermore, if
Avant! is required to satisfy the default judgments in full in the Silvaco
litigation, Avant! could be required to pay up to $31.4 million in damages,
which would have a material adverse effect on Avant!'s business, consolidated
financial condition and consolidated results of operations.

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<PAGE>
MANAGEMENT

The executive officers and directors of Avant!, and their ages as of
December 1, 1997, are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------------------- --- --------------------------------------------------------------------------
<S> <C> <C>
Gerald C. Hsu................... 50 President, Chief Executive Officer and Chairman of the Board of Directors

John P. Huyett.................. 44 Vice President of Finance, Treasurer and Principal Accounting Officer

Y. Eric Cho..................... 50 Director

Tench Coxe...................... 39 Director

Eric A. Brill................... 47 Director and Secretary

Charles L. St. Clair............ 67 Director
</TABLE>

MR. HSU joined Avant! in March 1994 as President, Chief Executive Officer
and a director, and has been Chairman of the Avant! Board of Directors since
November 1995. From July 1991 to March 1994, Mr. Hsu was employed by Cadence,
where his last position was President and General Manager of the IC Design
Group. From June 1988 to July 1991, Mr. Hsu was employed by Sun Microsystems,
Inc., an engineering workstation company, where his last position was Director
of Strategic Business Development. Mr. Hsu holds an S.M. in Ocean Engineering
from the Massachusetts Institute of Technology, an M.S. in Mechanics and
Hydraulics from the University of Iowa and a B.S. in Applied Mathematics from
the National Chung-Hsing University.

MR. HUYETT has served as Vice President of Finance, Treasurer and Principal
Accounting Officer since he joined Avant! in connection with the merger of
Integrated Silicon Solutions, Inc. ("ISS") with and into Avant! in November
1995. From July 1993 to November 1995, Mr. Huyett served as Vice President of
Finance and Chief Financial Officer of ISS. Mr. Huyett also served as Treasurer
and Secretary of ISS from October 1994 to November 1995. Prior to July 1993, Mr.
Huyett was a partner with KPMG Peat Marwick LLP, independent auditors to Avant!.

DR. CHO co-founded Avant! in February 1991 and has been a director of Avant!
since such date. From January 1996 until his resignation in October 1997, Dr.
Cho served as the Senior Vice President of Corporate Operations. From October
1993 until January 1996, he served as the Vice President of Asian Operations.
From the inception of Avant! until October 1993, Dr. Cho served as Vice
President of Sales and Marketing. From September 1986 to February 1991, Dr. Cho
was employed by Cadence where his last position was a Marketing Director of the
IC Division. Dr. Cho holds an M.B.A. from New York University, an M.S. and a
Ph.D. in Electrical Engineering and Computer Science from the University of
California, Berkeley and a B.S. in Electrical Engineering from the National
Chiao-Tung University, Taiwan.

MR. COXE has been a director of Avant! since February 1992. Mr. Coxe is a
general partner of the general partner of Sutter Hill Ventures, a venture
capital investment firm, and has been associated with Sutter Hill Ventures since
1987. Mr. Coxe holds a B.A. in Economics from Dartmouth College and an M.B.A.
from the Harvard Business School.

MR. BRILL has been a director and the Secretary of Avant! since November
1996. Mr. Brill is a corporate and securities attorney whose practice focuses
principally on technology companies and private investment partnerships. He has
been in private practice since 1993, and previously practiced with the San
Francisco law firm of Farella, Braun & Martel. Mr. Brill holds a B.S. in History
from Cleveland State University and a J.D. from the Harvard Law School.

MR. ST. CLAIR has served as a consultant to Avant! since April 1996 and has
been a director of Avant! since September 1997. From September 1987 to March
1996, Mr. St. Clair was employed as an Advisor for

31
<PAGE>
Industrial Development to the Government of Botswana's Development Corporation.
From September 1981 to August 1987, Mr. St. Clair served as President of St.
Clair International, an international management consulting firm. Mr. St. Clair
holds a B.S. in Management and Economics from Arizona State University and a
B.F.T., Latin America from the American Graduate School for International
Management (Thunderbird).

There are no family relationships amongst any executive officers or
directors of Avant!.

A criminal complaint has been filed by the Santa Clara County District
Attorney's office against Gerald C. Hsu and Y. Eric Cho for alleged
misappropriation of trade secrets as set forth in the Cadence lawsuit. See "Risk
Factors--Litigation Risk."

32
<PAGE>
SELLING STOCKHOLDER

The following table sets forth certain information, as of December 19, 1997,
with respect to the number of shares of Common Stock owned by the Selling
Stockholder and as adjusted to give effect to the sale of the Shares offered
hereby. The Shares are being registered to permit public secondary trading of
the Shares, and the Selling Stockholder may offer the Shares for resale from
time to time. See "Plan of Distribution."

The Shares being offered by the Selling Stockholder were acquired from the
Company in the Company's acquisition of Compass, pursuant to the Agreement and
Plan of Reorganization dated July 31, 1997, and as amended on August 27, 1997,
whereby GB Acquisition Corporation, a Delaware corporation and a wholly-owned
subsidiary of the Company, was merged with and into Compass, and all outstanding
shares of capital stock of Compass were converted into cash and/or shares of
Common Stock of the Company. Prior to the Company's acquisition of Compass,
Compass was a subsidiary of the Selling Stockholder, VLSI Technology, Inc. The
Common Stock was issued pursuant to the exemption from the registration
requirements of the Securities Act provided by Section 4(2) thereof.

The Company has filed with the Commission, under the Securities Act, a
Registration Statement on Form S-3, of which this Prospectus forms a part, with
respect to the resale of the Shares from time to time on the Nasdaq National
Market or in privately-negotiated transactions. The Company has agreed to use
its best efforts to keep such Registration Statement effective for the lesser of
one (1) year from the date of effectiveness of this Prospectus or until all
Shares have been sold.

The Shares offered by this Prospectus may be offered from time to time by
the Selling Stockholder named below:`

<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED SHARES BENEFICIALLY OWNED AFTER
PRIOR TO OFFERING THE OFFERING
-------------------------- --------------------------------
NUMBER OF NUMBER OF SHARES NUMBER OF
NAME AND ADDRESS OF SELLING STOCKHOLDER SHARES PERCENT(1) BEING OFFERED SHARES PERCENT(1)
- ----------------------------------------------- ----------- ------------- ----------------- ----------------- -------------
<S> <C> <C> <C> <C> <C>
VLSI Technology, Inc. ......................... 522,192 1.94% 522,192 0 *
1109 McKay Drive, MS-45
San Jose, California 95131
----------- --- ------- - ---
Total...................................... 522,192 1.94% 522,192 0 *
----------- --- ------- - ---
----------- --- ------- - ---
</TABLE>

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

* Less than 1%

(1) Based upon 26,886,862 shares of Common Stock outstanding on December 19,
1997. This Registration Statement shall also cover any additional shares of
Common Stock which become issuable in connection with the shares registered
for sale hereby by reason of any stock dividend, stock split,
recapitalization or other similar transaction effected without the receipt
of consideration which results in an increase in the number of the Company's
outstanding shares of Common Stock.

PLAN OF DISTRIBUTION

The Company will receive no proceeds from this offering. The Shares offered
hereby may be sold by the Selling Stockholder from time to time in transactions
in the over-the-counter market, on the Nasdaq National Market, in privately
negotiated transactions, or by a combination of such methods of sale, at fixed
prices which may be changed, at market prices prevailing at the time of sale, at
prices related to prevailing market prices or at negotiated prices. The Selling
Stockholder may effect such transactions by selling the Shares to or through
broker-dealers, and such broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the Selling Stockholder and/or the
purchasers of the Shares

33
<PAGE>
for whom such broker-dealers may act as agents or to whom they sell as
principals, or both (which compensation as to a particular broker-dealer might
be in excess of customary commissions).

In order to comply with the securities laws of certain states, if
applicable, the Shares will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
Shares may not be sold unless they have been registered or qualified for sale in
the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.

The Selling Stockholder and any broker-dealers or agents that participate
with the Selling Stockholder in the distribution of the Shares may under certain
circumstances be deemed to be "underwriters" within the meaning of the
Securities Act, and any commissions received by them and any profit realized on
the resale of the Shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. The Selling Stockholder may
agree to indemnify such broker-dealers against certain liabilities, including
liabilities under Securities Act.

In connection with the distribution of the Shares, the Selling Stockholder
may enter into hedging transactions with broker-dealers. In connection with such
transactions, broker-dealers may engage in short sales of the Shares in the
course of hedging the positions they assume with the Selling Stockholder. The
Selling Stockholder also may sell the Shares short and redeliver the Shares to
close out the short positions. The Selling Stockholder also may enter into
option or other transactions with broker-dealers which require the delivery to
the broker-dealer of the Shares, which the broker-dealers may resell or
otherwise transfer pursuant to this prospectus. The Selling Stockholder also may
loan or pledge the Shares to a broker-dealer and the broker-dealer may sell such
shares so loaned or upon a default the broker-dealer may affect sales of the
pledged shares pursuant to this Prospectus.

Any broker-dealer participating in such transactions as agent may receive
commissions from the Selling Stockholder (and, if it acts as agent for the
purchase of such Shares, from such purchaser). Broker-dealers may agree with the
Selling Stockholder to sell a specified number of Shares at a stipulated price
per share, and, to the extent such a broker-dealer is unable to do so acting as
agent for the Selling Stockholder, to purchase as principal any unsold Shares.
Brokers-dealers who acquire Shares as principal may thereafter resell such
Shares from time to time in transactions (which may involve crosses and block
transactions and which may involve sales to and through other broker-dealers,
including transactions of the nature described above) in the over-the-counter
market, on the Nasdaq National Market, in privately negotiated transactions, or
by a combination of such methods of sale, at fixed prices that may be changed,
at market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices, and in connection with such
resales may pay to or receive from the purchasers of such Shares commissions
computed as described above.

Under applicable rules and regulations under the 1934 Act, any person
engaged in the distribution of the Shares may not simultaneously engage in
market making activities with respect to the Common Stock of the Company for a
period of two business days prior to the commencement of such distribution. In
addition and without limiting the foregoing, the Selling Stockholder will be
subject to applicable provisions of the 1934 Act and the rules and regulations
thereunder, including, without limitation, Rules 10b-6 and 10b-7, which
provisions may limit the timing of purchases and sales of shares of the
Company's Common Stock by the Selling Stockholder.

The Selling Stockholder will pay all commissions and other expenses
associated with the sale of Shares by it. The Shares offered hereby are being
registered pursuant to contractual obligations of the Company, and the Company
has agreed to bear certain expenses in connection with the registration and sale
of the Shares being offered by the Selling Stockholder. The Company has not made
any underwriting arrangements with respect to the sale of Shares offered hereby.

34
<PAGE>
LEGAL MATTERS

The legality of the securities offered hereby will be passed upon for the
Company by Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP, Menlo
Park, California.

EXPERTS

The consolidated balance sheets of Avant! Corporation and its subsidiaries
as of December 31, 1994, 1995 and 1996 and the consolidated statements of
income, stockholders' equity, and cash flows for each of the years in the three
year period ended December 31, 1996 incorporated in this Prospectus by reference
from the Company's Annual Report on Form 10-K for the year ended December 31,
1996 have been audited by KPMG Peat Marwick LLP, independent certified public
accountants, as stated in their report and are incorporated herein by reference
in reliance upon such firm as experts in accounting and auditing.

The consolidated balance sheet of Compass Design Automation, Inc. and
subsidiaries as of December 31, 1996 and the consolidated statements of
operations, shareholders' deficit and cash flows as of and for the year ended
December 31, 1996 incorporated in this Prospectus by reference from the
Company's Current Report on Form 8-K/A dated November 25, 1997 have been audited
by KPMG Peat Marwick LLP, independent certified public accountants, as stated in
their report and are incorporated herein by reference in reliance upon such firm
as experts in accounting and auditing.

35
<PAGE>
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NO DEALER, SALESPERSON, SELLING STOCKHOLDER OR ANY OTHER PERSON HAS BEEN
AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION
WITH THIS OFFERING 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, THE SELLING STOCKHOLDER OR ANY OTHER PERSON.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY
OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION
IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON
MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE OF THE PROSPECTUS.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information..................................................... 2

Information Incorporated by Reference..................................... 2

Forward-Looking Statements................................................ 3

The Company............................................................... 4

Recent Developments....................................................... 4

Risk Factors.............................................................. 7

Business.................................................................. 17

Management................................................................ 31

Selling Stockholder....................................................... 33

Plan of Distribution...................................................... 33

Legal Matters............................................................. 35

Experts................................................................... 35
</TABLE>

522,192 SHARES

AVANT! CORPORATION

COMMON STOCK

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

JANUARY 13, 1998

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

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