UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-K

(Mark one)


þ		Annual report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934

for the fiscal year ended April 30, 2008


o		Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934

for the transition period from _________________ to _________________

Commission file number 000-27874

ANSOFT CORPORATION

(Exact name of registrant as specified in its charter)


Delaware		72-1001909

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


225 West Station Square, Suite 200 Pittsburgh, Pennsylvania		15219-1119

(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (412) 261-3200

Securities registered pursuant to Section 12(b) of the Act: Common stock, par value $.01 per share

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

Indicate by check mark if the registrant is well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes o No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.
Yes o No þ

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o

Accelerated filer þ

Non-accelerated filer o
(Do not check if a smaller reporting company)

Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No þ

As of October 31, 2007, the aggregate market value of voting common stock held by non-affiliates of the registrant, based upon the last reported sale price for the registrant’s common stock on the NASDAQ National Market on such date, as reported in The Wall Street Journal, was $572,982,730.

The number of shares of the registrant’s common stock outstanding as of the close of business on June 20, 2008 was 23,539,163.

DOCUMENTS INCORPORATED BY REFERENCE

Selected portions of the registrant’s definitive proxy statement for its 2008 Annual Meeting of Stockholders (the “2008 Proxy Statement”), which Proxy Statement will be filed no later than 120 days after the close of the registrant’s fiscal year ended April 30, 2008, are incorporated by reference in Part III of this Annual Report on Form 10-K. Information required by paragraphs (d)(1)-(3) and (e)(5) of Item 407 of Regulation S-K is not incorporated by reference in this Form 10-K or in any other filing of the registrant. Such information shall not be deemed “soliciting material” or to be filed with the Commission as permitted by Item 407 of Regulation S-K.

TABLE OF CONTENTS


Item of Form 10-K			Page

Part I
	1.	Business	3
	1A.	Risk Factors	8
	1B.	Unresolved Staff Comments	12
	2.	Properties	12
	3.	Legal Proceedings	13
	4.	Submission of Matters to a Vote of Security Holders	13
Part II
	5.	Market for Registrant’s Common Equity, Related
		Stockholder Matters and Issuer Purchases of Equity
		Securities	13
	6.	Selected Financial Data	16
	7.	Management’s Discussion and Analysis of Financial
		Condition and Results of Operations	17
	7A.	Quantitative and Qualitative Disclosure about Market Risk	25
	8.	Financial Statements and Supplementary Data	26
	9.	Changes in and Disagreements with Accountants on
		Accounting and Financial Disclosures	45
	9A.	Controls and Procedures	45
	9B.	Other Information	47
Part III
	10.	Directors and Executive Officers of the Registrant	47
	11.	Executive Compensation	47
	12.	Security Ownership of Certain Beneficial Owners and
		Management and Related Stockholder Matters	47
	13.	Certain Relationships and Related Transactions	47
	14.	Principal Accounting Fees and Services	47
Part IV
	15.	Exhibits and Financial Statement Schedules	48
		Exhibit Index	49
		Signatures	50
EX-23.1
EX-31.1
EX-31.2
EX-32.1

PART I

From time to time Ansoft Corporation, incorporated in Delaware in March of 1989 (we, “Ansoft” or the “Company”) has made and may continue to make written or oral “forward-looking statements” including those contained in this Annual Report on Form 10-K. These forward-looking statements represent the Company’s present expectations or beliefs concerning future events. The Company cautions that such statements are qualified by important factors that could cause actual results to differ materially from those in the forward-looking statements including those factors identified in “Item 1A Risk Factors.” The following discussion and analysis also should be read in conjunction with “Item 6. Selected Financial Data” and our Consolidated Financial Statements and Notes thereto included elsewhere in this report. Results actually achieved may differ materially from expected results included in these statements.


ITEM 1.		BUSINESS

Overview

Ansoft is a leading developer of high-performance electronic design automation (“EDA”) software. Ansoft products are used by electrical engineers worldwide to design state-of-the-art technology products, such as cellular phones, internet networking, satellite communications systems, integrated circuits and circuit boards, and electronic sensors and motors. Engineers use our software to maximize product performance, eliminate physical prototypes, and to reduce time-to-market.

Recent Developments

On March 31, 2008, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with ANSYS, Inc., a Delaware corporation, (“ANSYS”), Evgeni, Inc., a wholly owned subsidiary of ANSYS (“Merger Sub”), and Sidney LLC, a single member Delaware limited liability company and a wholly owned subsidiary of ANSYS (“Merger LLC”). Subject to the terms of the Merger Agreement, Merger Sub will merge with and into Ansoft, and then Ansoft, as the surviving corporation, will merge with and into Merger LLC, with Merger LLC being the ultimate surviving entity and continuing as a wholly owned subsidiary of ANSYS (the “Merger”). The Merger is intended to qualify as a reorganization for U.S. federal income tax purposes.

The completion of the Merger is subject to various customary closing conditions, including, among other things, obtaining the approval of Ansoft’s stockholders. The U.S. Federal Trade Commission has granted early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

Ansoft and ANSYS will continue to operate separately until the transaction closes. ANSYS has filed a registration statement on Form S-4 with the Securities and Exchange Commission (the “SEC”) in connection with the proposed Merger, which includes additional information related to the proposed Merger and Ansoft’s proxy statement and ANSYS’ prospectus for the proposed transaction.

The foregoing description of the Merger Agreement and other references to the Merger Agreement in this Form 10-K do not purport to be complete and are qualified in their entirety by reference to the full text of the Merger Agreement, a copy of which is filed with the SEC, and the terms of which are incorporated herein by reference.

Industry Background

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

Modern electronic and communication systems operate at Gigahertz frequencies and transmit/receive data at Gigabit speeds. As demands for operating performance get ever higher, component level details for the passive interconnects as well as transistor level detail for the active circuits must be modeled accurately. Furthermore, the integration of ever greater functionality on a single chip, system-on-chip, or system-in-package combined with continuing miniaturization leads to dramatic increases in the complexity of electronic components and circuits. This dual requirement of greater accuracy/detail and greater complexity/problem-size drives the demand for a new class of EDA tools to simulate the real life behavior of high-performance electronic and communication devices.

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

The Ansoft Solution

We offer electromagnetic and circuit simulation technologies that meet the dual demands of accuracy/detail and complexity/size. Ansoft simulation technologies are based on fundamental research breakthroughs in modeling electromagnetic and circuit details at very high operating device performance and are especially tailored to meet the exacting demands of Gigahertz and Gigabit designs. Customers use our products to define the architecture of their device, create specifications for functional blocks, design the circuits and components, evaluate component level interactions, and optimize circuit or system performance under actual operating conditions. Ansoft’s software products may be used as an independent design platform or integrated with complementary EDA tools within a customer’s existing design environment.

Ansoft Strategy

Ansoft’s objective has been to become the leading worldwide supplier of high performance EDA software. Using our proprietary electromagnetic and circuit simulation technologies as a primary competitive advantage, we have pursued our objective through the following strategies: leveraging our technology leadership to solve emerging design challenges at the cutting-edge of device performance; capitalizing on the growing need for simulation technologies to provide GHz/Gigabit accurate analysis and validation of high-performance electronics; and expanding our broad range of product applications to address emerging customer design requirements. On March 31, 2008, Ansoft entered into a definitive merger agreement with ANSYS whereby ANSYS will acquire Ansoft. The combination is expected to increase operational efficiency and lower design and engineering costs for customers, and accelerate development and delivery of new innovative products to the marketplace. The ANSYS merger is subject to Ansoft stockholder approval.

Products

Ansoft provides several products that address our customers’ component and system level design needs. Customers encounter different combinations of challenges in their designs and often purchase multiple products. The products are listed below and organized by their market application.

Ansoft High Performance Electronics Software

HFSS™ is Ansoft’s flagship 3D electromagnetic field simulation software for high frequency, radio frequency (RF) and wireless design. Ansoft HFSS™ brings the power of the finite element method (FEM) to the engineer’s desktop by leveraging advanced techniques such as automatic adaptive mesh generation and refinement, and automatically computes multiple adaptive solutions until a user-defined convergence criterion is met.

Nexxim® is Ansoft’s advanced circuit simulator that addresses the increasingly complex, nonlinear and full-wave circuit behavior of RFCMOS, GaAs/SiGe RF ICs, and Gigabit communication backplane design. Nexxim® guarantees consistency of results across time and frequency domains by using the same circuit netlist and library models for transient and harmonic balance analyses.

SIwave™ provides advanced analysis of printed circuit boards (PCBs), components, and packages. SIwave™ generates both frequency- and time-domain results, allowing engineers to model not only individual components, but also entire PCBs and package structures.

Q3D Extractor® is a physics-based EDA tool for the electromagnetic-field simulation of two-dimensional (2D) and arbitrary three-dimensional (3D) structures. Q3D Extractor™ provides engineers with RLGC parameters and SPICE models which are used extensively to analyze high-speed electronic designs.

Ansoft Designer® provides a design environment to dynamically link electromagnetic analysis with circuit and system-level simulation. The key to this integration is a unique capability called Solver-on-Demand™ that orchestrates the use of multiple solvers — while still giving the users complete control. Users can perform System/Circuit/EM co-simulation in Ansoft Designer and optimize product performance under actual operating conditions.

Turbo Package Analyzer™ (TPA) is a software tool that automates the analysis of all complex semiconductor packages. TPA can analyze flip-chip, chip-scale package, and multiple-die system-in-package designs common in the networking and broadband communications markets.

Ansoft’s Electromechanical (EM) Software

Maxwell 3D® and 2D are comprehensive, easy-to-use software tools for design problems requiring an accurate, two-dimensional or three-dimensional representation of the electric or magnetic field behavior. Maxwell includes AC/DC magnetic, electrostatic, and transient electromagnetic fields. Additionally, Maxwell® produces highly accurate equivalent circuits for inclusion within SIMPLORER™ and other circuit tools.

SIMPLORER® is a multi domain simulation package for the design of complex power electronic and drive systems. SIMPLORER™ is based on a unique simulator coupling technology and supports fast and easy model generation using three modeling languages — electrical circuits, block diagrams and state machines. Simulation results may be displayed with oscilloscopes or digital displays using Active Elements Technology.

RMxprt™ helps electric-machine manufacturers make sizing decisions and estimate performance during the initial stage of the design process. RMxprt™ is an ideal tool for calculating critical design parameters, such as torque vs. speed, power loss, flux in the air gap, and efficiency.

PExprt™ helps engineers design, analyze and optimize transformers and inductors found in power electronic equipment. PExprt determines the appropriate core size and shape, air gaps, and winding strategy of the component for optimum reliability and performance or other user specified criterion.

Productivity Options for High-Performance Electronics and Electromechanical Products

AnsoftLinks™ provides bidirectional links for streamlining data import/export between Ansoft’s products and popular electronic design automation (EDA) packages from companies such as Cadence®, Synopsys®, Zuken®, and Mentor®. MCAD links include IGES and STEP formats common to ProEngineer, Catia and Unigraphics.

Distributed Analysis allows users to distribute multiple pre-defined parametric design variations and/or frequency points across a computer network; solve each simulation instance on a separate computer and then reassemble the data

ePhysics™ provides the ability to couple thermal and stress simulation to Maxwell^® 3D and HFSS™. Users can use the resulting multidisciplinary analysis framework to solve coupled physics problems and consider thermal, deformation and mechanical stress consequences of respective electromagnetic field simulations in devices, such as RF components, electromechanical devices, MEMS and biomedical applications.

Full-Wave Spice™ provides high-bandwidth SPICE models at the touch of a button. This capability enables engineers to design electronic and communication components while taking Gigahertz-frequency effects into account.

Optimetrics™ is a smart parametric analysis and optimization module that allows users to perform parametric analysis, optimization, sensitivity analysis, and other design studies from an easy to use interface.

ParICs^{^®} automatically generates models of leaded IC packages in minutes and use them for design, electrical characterization, and product documentation.

Research and Development

We continually seek to design and develop new technologies, products and interfaces based on our core electromagnetic expertise. This effort includes releasing improved versions of our products on a regular basis as well as developing new products. Ansoft assigns an interdisciplinary team of personnel from research and development, software development, documentation, quality assurance, customer support and marketing to each product development project. Ansoft develops cooperative relationships with major customers with respect to beta-testing its new products or enhancements and implementing suggestions for new product features.

As of April 30, 2008, Ansoft’s research and development group consisted of 112 employees. During fiscal 2008, 2007, and 2006, total research and development expenses were $19.5 million, $19.7 million, and $17 million, respectively.

Sales and Marketing

Ansoft markets and sells its products worldwide through its direct sales force and a select number of distributors. The Company hires application engineers with significant industry experience who can analyze the

needs of its customers and gain technical insight into the development of future products and enhancements to existing products. The Company’s application engineers work with the direct sales force to provide on-site support during critical stages of the user’s benchmark, evaluation and implementation processes. The Company generates sales leads through customer referrals, advertising in trade publications and on the internet. In addition, the Company participates in industry trade shows and organizes seminars to promote and expand the adoption of its products.

In North America, the Company maintains sales and support offices in Arizona, California, Florida, Georgia, Illinois, Indiana, Massachusetts, Michigan, New Jersey, Oregon, South Carolina, Texas, Wisconsin, Pennsylvania and Ontario, Canada. In Asia-Pacific, the Company maintains sales and support offices in Japan, Korea, Singapore, Taiwan, and China. In Europe, the Company maintains sales and support offices in England, Germany, France, Italy and Sweden. As of April 30, 2008, the Company had a direct sales force of 48 representatives, supported by 129 employees in application engineering, marketing and sales administration.

Customers

The Company has significant breadth in its installed base with over 2,000 customers in the communications, semiconductor, automotive/industrial, computer, consumer electronics and defense/aerospace industries. No single customer in the Company’s installed base accounted for more than 10% of total revenue within any of the past three fiscal years, and the loss of any one customer or small group of customers would not have a material adverse effect on the Company.

Customer Service and Support

Ansoft offers customers annual maintenance contracts that may generally be purchased for 15% of the list price of the respective software product. Customer support services include on-line and telephone support for design engineers and on-site and in-house training on all products. Customers with maintenance agreements receive product enhancement releases, typically identified by a subsequent whole number version of the same product name (e.g., HFSS™ V10). Product upgrades that add significant new functionality are typically separately identified as an add-on module and have a stand-alone list price (e.g., Optimetrics) and are not covered by the annual maintenance agreement.

We offer a variety of training programs for customers ranging from introductory level courses to advanced training for an additional fee.

Competition

The electronic design automation software market in which Ansoft competes is intensely competitive and subject to rapid change. Ansoft competes directly with certain software offerings from various public EDA companies, in-house analysis tools or test and measurement methodologies and certain smaller privately-held companies. In addition, the EDA industry has become increasingly concentrated in recent years as a result of acquisitions, and further concentration within the EDA industry could result in increased competition for Ansoft. Increased competition could result in price reductions, reduced margins or loss of market share, any of which could seriously harm Ansoft’s business, operating results or financial condition. Ansoft may be unable to compete successfully against current and future competitors, and competitive pressures faced by Ansoft could seriously harm Ansoft’s business, operating results and financial condition.

We believe that the principal competitive factors in our market include:

•

High performance (problem complexity) and accuracy;

	•		Short run time;

	•		Ease of use;

	•		Depth and breadth of product features;

	•		High quality user support;

	•		Interoperability; and

	•		Price.

Proprietary Rights

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

Seasonal Effects

Traditionally, sales in the first quarter will decrease from the fourth quarter of the prior fiscal year. Traditionally, revenues will sequentially increase over the next three quarters of the fiscal year. The fourth quarter is typically the highest revenue quarter for the fiscal year.

Employees

As of April 30, 2008, Ansoft had a total of 314 employees, including 112 in research and development, 177 in sales, marketing, and customer support services and 25 in administration. None of the Company’s employees is represented by a collective bargaining agreement, nor has the Company experienced any work stoppage. The Company considers its relations with its employees to be good. Many of the Company’s employees are highly skilled, and there is no assurance that the Company will be able to attract and retain sufficient technical personnel in the future.

Other Information

Ansoft maintains investor relations pages on its internet website at http://www.ansoft.com. On these pages, Ansoft makes available its annual, quarterly and other current reports filed or furnished with the SEC as soon as practicable. These reports may be reviewed or downloaded free of charge. Alternatively, if you would like a paper copy of any such SEC report (without exhibits) or document, write to Investor Relations, Ansoft Corporation, 225 West Station Square Drive, Suite 200, Pittsburgh, PA 15219, and a copy of such requested document will be provided to you, free of charge.


ITEM 1A.		RISK FACTORS

Our proposed Merger with ANSYS may not be consummated or may be delayed, which may adversely affect our anticipated results of operations and financial condition, or both.

On March 31, 2008, we announced that we had signed a Merger Agreement with ANSYS pursuant to which ANSYS would acquire Ansoft. The completion of the Merger is subject to various customary closing conditions, including, among other things, obtaining the approval of Ansoft’s stockholders. There can be no assurance that all of these conditions will be satisfied. If these conditions are not satisfied or waived, we may be unable to complete the Merger.

Subject to the terms of the Merger Agreement, at the effective time of the Merger, each issued and outstanding share of Ansoft common stock will be converted into the right to receive (i) cash, without interest, in an amount equal to $16.25 per share, and (ii) 0.431882 of a share of ANSYS common stock. The value of ANSYS common stock might decline prior to the completion of the merger or at any time thereafter. Accordingly, if the price of ANSYS common stock declines prior to the completion of the merger, the value of the ANSYS common stock to be received by Ansoft stockholders in the merger will decrease.

Moreover, as is typical with change of control transactions, management must address many challenges resulting from uncertainty regarding the completion of the Merger because stated conditions, many of which are outside of our control, must be met, including approval of the Merger by Ansoft’s stockholders. This uncertainty may cause customers and suppliers to delay or defer decisions concerning Ansoft, which could negatively affect our business. Customers and suppliers may also seek to change existing agreements with Ansoft as a result of the Merger. Any delay or deferral of those decisions or changes in existing agreements could have a material adverse effect on our business, regardless of whether the Merger is ultimately completed. Additionally, Ansoft employees may experience uncertainty about their future role with the combined company. These employees may leave Ansoft prior to or after the closing of the Merger. This may adversely affect our performance and customer relationships. This uncertainty also may adversely affect the Company’s ability to attract and retain key management, sales, marketing, technical and other personnel, pending the closing of the Merger. If we do not succeed in addressing these challenges or any other problems encountered in connection with the Merger, our operating results and financial condition could be adversely affected.

If the proposed Merger with ANSYS is not completed, the resulting public announcement of the termination of the Merger Agreement could have a significant negative adverse effect on the market price of our common stock. The market price could be affected by many factors, including:

	•		the reason or reasons for which the Merger Agreement was terminated and whether such termination resulted from factors adversely affecting us;

	•		the possibility that, as a result of the termination of the Merger Agreement, the marketplace would consider us to be an unattractive acquisition candidate;

	•		the possible sale of shares of our common stock by short-term investors following an announcement of termination of the Merger Agreement; and

	•		the fact that the current market price of our common stock may reflect a market assumption as to whether the Merger will occur.

Additionally, the management team would have been distracted from running the business and the Company will incur significant costs related to the Merger, such as legal, accounting and some of the fees and expenses of their financial advisors, some of which costs must be paid even if the Merger is not completed.

Although the Company and ANSYS intend that the Merger will result in benefits to the combined company, those benefits may not be realized. The integration of the companies will be a complex, time consuming and expensive process and may disrupt the companies’ businesses. Failure to realize the expected benefits and/or disruption to the Company’s business could materially harm the business and operating results of the combined company.

Our Future Operating Results Are Uncertain.

There can be no assurance that Ansoft’s revenue and net income will grow or be sustained in future periods or that Ansoft will be profitable in any future period. Future operating results will depend on many factors, including the degree and the rate of growth of the markets in which Ansoft competes and the accompanying demand for Ansoft’s products, the level of product and price competition, the ability of Ansoft to develop and market new or enhanced products and to control costs, the ability of Ansoft to expand its direct sales force and the ability of Ansoft to attract and retain key personnel.

Our Quarterly Operating Results Are Difficult To Predict.

We are unable to accurately forecast our future revenues primarily because of the emerging nature of the market in which we compete. Our revenues and operating results generally depend on the size, timing and structure of license agreements. These factors have historically been, and are likely to continue to be, difficult to forecast. In addition, our current and future expense levels are based largely on our operating plans and estimates of future revenues and are, to an extent, fixed. We may be unable to adjust spending sufficiently or quickly enough to compensate for any unexpected revenue shortfall. Accordingly, any significant shortfall in revenues in relation to our planned expenditures would seriously harm our business, financial condition and results of operations.

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

Our quarterly operating results have varied, and it is anticipated that our quarterly operating results will vary substantially from period to period depending on various factors, many of which are outside our control. Due to the foregoing factors, we cannot predict with any significant degree of certainty our quarterly revenue and operating results. Further, we believe that period-to-period comparisons of our operating results are not necessarily a meaningful indication of future performance.

Our Stock Price Is Volatile.

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

	•		Actual or anticipated fluctuations in our operating results;

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

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

	•		Proposed acquisitions by us or our competitors; and

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

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

We May Lose Competitive Advantages If Our Proprietary Rights Are Inadequately Protected.

Ansoft’s success depends, in part, upon its proprietary technology. We rely on a combination of trade secrets, copyrights, trademarks and contractual commitments to protect our proprietary rights in our software products. We generally enter into confidentiality or license agreements with our employees, distributors and customers, and limit access to and distribution of our software, documentation and other proprietary information. Despite these precautions, a third party may still copy or otherwise obtain and use our products or technology without authorization, or develop similar technology independently. In addition, effective patent, copyright and trade secret protection may be unavailable or limited in certain foreign countries. It is possible that we may fail to adequately protect our proprietary rights. This would seriously harm Ansoft’s business, operating results and financial condition.

We May Be Unable To Attract And Retain The Key Management And Technical Personnel That We Need To Succeed.

Ansoft’s future operating results depend in large part upon the continued services of its key technical and management personnel. Ansoft does not have employment contracts with any executive officer. Ansoft’s future success will also depend in large part on its ability to continue to attract and retain highly skilled technical, marketing and management personnel. The competition for such personnel, as well as for qualified EDA engineers, is intense. If Ansoft is unable to attract, hire and retain qualified personnel in the future, the development of new or enhanced products and the management of Ansoft’s increasingly complex business would be impaired. This could seriously harm Ansoft’s business, operating results and financial condition.

We Depend On International Sales for a Significant Percentage Of Our Revenue.

International revenue, principally from Asian customers, accounted for approximately 64% and 61% of our total revenue in the years ended April 30, 2008 and 2007, respectively. We expect that international license and service revenue will continue to account for a significant portion of our total revenue for the foreseeable future. Our international business activities are subject to a variety of potential risks, including:

	•		The impact of recessionary environments in foreign economies;

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

	•		Difficulties in staffing and managing foreign operations;

	•		Political and economic instability;

	•		Unexpected changes in regulatory requirements;

	•		Reduced protection of intellectual property rights in some countries; and

	•		Tariffs and other trade barriers and import/export regulations.

Currency exchange fluctuations in countries in which we license our products could also seriously harm our business, financial condition and results of operations. In addition, the laws of certain countries do not protect our products and intellectual property rights to the same extent, as do the laws of the United States. Moreover, it is possible that we may fail to sustain or increase revenue derived from international licensing and service or that the foregoing factors will seriously harm our future international license and service revenue, and, consequently, seriously harm our business, financial condition and results of operations.

We Need To Successfully Manage Our Expanding Operations.

Revenues have grown from $8.7 million in fiscal 1996 to $103.4 million in fiscal year 2008, and the number of employees has grown from 69 in April 1996 to 314 as of April 30, 2008. Ansoft’s ability to manage growth effectively will require it to continue to improve its operational and financial systems, hire and train new employees and add additional space, both domestically and internationally. Ansoft may not be successful in addressing such risks, and the failure to do so would seriously harm Ansoft’s business, financial condition and results of operations.

We Depend On The Growth Of The Communications, Semiconductor And Electronics Industries.

Ansoft is dependent upon the communications and semiconductor industry and, more generally, the electronics industry. These industries are characterized by rapid technological change, short product life cycles, fluctuations in manufacturing capacity and pricing and gross margin pressures. Segments of these industries have from time to time experienced significant economic downturns characterized by decreased product demand, production over-capacity, price erosion, work slowdowns and layoffs. Any significant downturn could be especially severe on Ansoft. During such downturns, the number of new integrated circuit design projects often decreases. Since acquisitions of new licenses from Ansoft are largely dependent upon the commencement of new design projects, any slowdown in these industries could seriously harm Ansoft’s business, financial condition and results of operations.

We Are Controlled By Our Principal Stockholders And Management Which May Limit Your Ability To Influence Stockholder Matters.

Our executive officers, who are also principal stockholders, own approximately 13% of the outstanding shares of Ansoft common stock. As a result, they have the ability to effectively control us and direct our affairs, including the election of directors and approval of significant corporate transactions. This concentration of ownership also may have the effect of delaying, deferring or preventing a change in control of our company and may make some transactions more difficult or impossible without the support of these stockholders. The interests of these stockholders may conflict with those of other stockholders.

Anti-Takeover Provisions in Ansoft’s Certificate Of Incorporation, Bylaws, And Under Delaware Law Could Prevent An Acquisition.

We have adopted a number of provisions that could have anti-takeover effects. The Board of Directors has the authority to issue up to 1,000,000 shares of Preferred Stock without any further vote or action by Ansoft’s stockholders. This and other provisions of Ansoft’s Certificate of Incorporation, Bylaws and Delaware Law may have the effect of deterring hostile takeovers or delaying or preventing changes in control or management, including transactions in which the stockholders of Ansoft might otherwise receive a premium for their shares over then current market prices.


ITEM 1B.		UNRESOLVED STAFF COMMENTS

None.


ITEM 2.		PROPERTIES

Ansoft occupies approximately 28,000 square feet of space at its headquarters in Pittsburgh, Pennsylvania under a lease expiring in 2011. The Company also leases sales and support offices in North America, Europe and Asia. Our current aggregate annual rental expense for these facilities is approximately $3.1 million. Ansoft believes that its existing facilities are adequate for its current needs and that suitable additional space will be available when needed.


ITEM 3.		LEGAL PROCEEDINGS

From time to time, we become involved in various lawsuits, claims and proceedings related to the conduct of our business. Based on information currently available and advice of counsel, Ansoft believes that the eventual outcome of all claims against the Company will not, individually or in the aggregate, have a material adverse effect on Ansoft’s business, consolidated operating results or financial condition.


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

Not applicable.

PART II


ITEM 5.		MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information.

The following table sets forth, for the periods indicated, the range of high and low last reported sale prices for the Company’s common stock as reported on the NASDAQ National Market. We are traded under the symbol ANST.


	High		Low

Fiscal year ended April 30, 2007
1st Quarter	$	23.20	$	17.77
2nd Quarter		28.10		19.72
3rd Quarter		28.99		23.65
4th Quarter		33.49		27.75

Fiscal year ended April 30, 2008
1st Quarter	$	35.05	$	25.08
2nd Quarter		34.39		23.94
3rd Quarter		30.63		21.24
4th Quarter		33.26		21.68

Fiscal year ended April 30, 2009
1st Quarter (through June 20, 2008)	$	37.43	$	33.95

The following graph shows the cumulative five year total stockholder return on the Company’s common stock, as compared to the returns of the Nasdaq Composite Index and the Nasdaq Computer Index. The graph assumes that $100 was invested in the common Stock of the Company and in the Nasdaq Composite Index and the Nasdaq Computer Index as of April 30, 2003, and assumes reinvestment of dividends, as applicable.

Comparison of Cumulative Five Year Total Return


Measurement Period
(Fiscal Year covered)	Ansoft Corporation	Nasdaq Composite Index	Nasdaq Computer Index

4/30/03	100	100	100
4/30/04	164	131	126
4/30/05	272	131	128
4/30/06	519	159	147
4/30/07	758	172	162
4/30/08	778	165	165

Dividends.

The Company has never paid any cash dividends on its common stock. We currently intend to retain the earnings from operations for use in the business and do not anticipate paying cash dividends with respect to our common stock in the foreseeable future. The payment of any future dividends will be determined by the Board of Directors in light of the then current conditions, including but not limited to the Company’s earnings and financial condition.

Holders.

On June 20, 2008, the Company had 167 stockholders of record, of which certain of the record holders were registered clearing agencies holding common stock on behalf of participants of such clearing agencies.

Securities Authorized for Issuance Under Equity Compensation Plans.

The following table sets forth, for the period indicated, Equity Compensation Plan Information for the Company.

Equity Compensation Plan Information
As of April 30, 2008

Number of

securities to be

issued upon

Weighted-average

Number of securities

exercise of

exercise price of

remaining available

Outstanding

outstanding

for future issuance

options, warrants

under equity

Plan Category

and rights

compensation plans

Equity compensation plans approved by security holders

2,798,761

7.76

972,000

Total

2,798,761

7.76

972,000

Issuer Purchases of Equity Securities.

In the fourth quarter of fiscal year ended April 30, 2008, we purchased 100,447 shares of common stock at an average price of $22.94. For the fiscal year ended April 30, 2008, we purchased 1,448,906 shares of common stock at an average price of $26.93. The following table sets forth the common stock purchased by month for the quarter ended April 30, 2008.


					Total number of		Maximum
					shares		number of
					repurchased as		shares that may
	Total				part of publicly		yet be
	number of		Average		announced		repurchased
	shares		price paid		plans or		under the plans
Period	repurchased		per share		programs		or programs (1)
Feb. 1, 2008 — Feb. 28, 2008		100,447	$	22.94		7,640,726		1,359,274
March 1, 2008 — March 31, 2008		—	$	—		7,640,726		1,359,274
April 1, 2008 — April 30, 2008		—	$	—		7,640,726		1,359,274

Total		100,447	$	22.94


(1)		All repurchases were made pursuant to a share repurchase program publicly announced in 1998 and amended in 2002, 2004, 2006 and 2007. On September 6, 2007, the Company announced that the Board of Directors voted to amend its existing common stock repurchase program to permit the Company to acquire an additional 1,000,000 shares of its common stock. Unless terminated earlier by resolution of our Board of Directors, the share repurchase program will expire when we have repurchased all shares authorized for repurchase thereunder. Under the plan the Company is authorized to repurchase 9,000,000 shares.


ITEM 6.		SELECTED FINANCIAL DATA

The selected condensed consolidated financial data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Consolidated Financial Statements and related Notes thereto appearing elsewhere herein.


	Fiscal Year Ended April 30,
	2008		2007		2006		2005		2004
	(in thousands, except per share data)
Consolidated Statement of Operations Data

Revenue:
License	$	59,744	$	51,026	$	42,849	$	39,322	$	32,301
Service and other		43,610		38,113		34,362		28,348		22,352

Total revenue		103,354		89,139		77,211		67,670		54,653


Cost of revenue:
License		681		607		535		505		702
Service and other		1,913		1,590		1,420		1,349		1,155

Total cost of revenue		2,594		2,197		1,955		1,854		1,857

Gross profit		100,760		86,942		75,256		65,816		52,796


Operating expenses:
Sales and marketing		37,795		33,792		31,506		31,108		26,930
Research and development		19,453		19,662		17,016		16,901		15,690
General and administrative		5,336		5,672		5,060		4,861		4,488
Merger-related expenses		1,728		—		—		—		—
Amortization		1,170		1,272		1,467		1,552		3,182

Total operating expenses		65,482		60,398		55,049		54,422		50,290

Income from operations		35,278		26,544		20,207		11,394		2,506
Other income, net (1)		3,820		2,636		1,395		2,206		904

Income before income taxes		39,098		29,180		21,602		13,600		3,410
Income tax expense		14,983		8,936		3,805		4,159		854

Net income	$	24,115	$	20,244	$	17,797	$	9,441	$	2,556

Basic net income per share (2)	$	1.03	$	0.86	$	0.75	$	0.41	$	0.11

Diluted net income per share (2)	$	0.95	$	0.77	$	0.69	$	0.36	$	0.10


Weighted average shares outstanding — basic (2)		23,415		23,650		23,694		23,242		23,344
Weighted average shares outstanding — diluted (2)		25,346		26,182		25,851		25,892		26,496


1		Other income consists primarily of interest income and foreign currency transaction gains and losses. Included in other income is a net realized gain (loss) on the sale of marketable securities of ($504), ($87 ), ($2), $732, and ($7) and other than temporary declines on marketable securities of $0, $0, $0, $27, and $0 for the fiscal years ended April 30, 2008, 2007, 2006, 2005,and 2004, respectively.

2		All share and per share information have been adjusted to reflect the two-for-one stock split effected in the form of a 100% stock dividend that was declared on March 7, 2006 and distributed on May 9, 2006.


	April 30,
	2008		2007		2006		2005		2004
	(in thousands)
Consolidated Balance Sheet Data
Cash and cash equivalents	$	46,012	$	49,356	$	16,456	$	11,910	$	15,218
Working capital		38,170		43,374		11,091		7,578		10,707
Total assets		121,876		111,170		85,080		73,421		67,636
Long term liabilities		4,232		1,404		1,088		1,039		10,242
Total stockholders’ equity		71,402		74,783		56,261		49,285		41,686


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

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains certain forward-looking statements that involve substantial risks and uncertainties. When used in this Form 10-K, the words “anticipate,” “plan,” “believe,” “estimate,” “expect” and similar expressions as they relate to Ansoft or its management are intended to identify such forward-looking statements. Ansoft’s actual results, performance or achievements could differ materially from the results expressed in, or implied by, these forward-looking statements. Factors that could cause or contribute to such differences include (1) the degree and rate of growth of the markets in which Ansoft competes and the accompanying demand for Ansoft’s products, (2) the level of product and price competition, (3) the ability of Ansoft to develop and market new products and to control costs, (4) the ability to expand its direct sales force, and (5) the ability to attract and retain key personnel. Ansoft does not undertake to publicly update or revise its forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized.

On March 31, 2008, Ansoft entered into a definitive merger agreement with ANSYS whereby ANSYS will acquire Ansoft. The combination is expected to increase operational efficiency and lower design and engineering costs for customers, and accelerate development and delivery of new innovative products to the marketplace. The completion of the Merger is subject to various customary closing conditions, including, among other things, obtaining the approval of Ansoft’s stockholders.

Overview

Ansoft is a developer of electronic design automation (“EDA”) software used in designing high performance technology products and industries. Ansoft’s software is used by electrical engineers in the design of state of the art technology products, such as cellular phones, internet networking, satellite communications systems. integrated circuits and circuit boards, and electronic sensors and motors. Engineers use our software to maximize product performance, eliminate physical prototypes, and reduce time-to-market.

Our overall sales increased this past year. We had an increase in revenues of 16% for the fiscal year ended April 30, 2008 as compared to the prior year. The Company experienced growth in both its domestic and international markets and in both product categories for the fiscal year ended April 30, 2008 when compared to the previous fiscal year. We expect that international license and service revenue will continue to account for a significant portion of our total revenue for the foreseeable future. The Company has significant breadth in its installed base with over 2,000 customers and no single customer in the Company’s installed base accounted for more than 5% of total revenue within any of the past three fiscal years, and the loss of any one customer or small group of customers would not have a material adverse effect on the Company. Furthermore we note that while communications and semiconductor industries have historically been cyclical our products are used in the design of these customers end products and the cycles are not necessarily in sync.

Ansoft’s products are classified into two categories, high performance electronics and electromechanical (EM). The following table presents product sales by market application as a percentage of total sales:


	2008			2007			2006
High Performance Electronics		82	%		82	%		82	%
Electromechanical		18	%		18	%		18	%

Critical Accounting Policies

Ansoft’s critical accounting policies are as follows:

	•		Revenue Recognition

	•		Valuation of Accounts Receivable

	•		Impairment of Long-Lived Assets

	•		Impairment of Marketable Securities Available for Sale

	•		Deferred Tax Asset Valuation Allowance

	•		Uncertain Tax Positions

Revenue Recognition

Revenue consists of fees for licenses of software products and service and other revenue. Ansoft recognizes revenue in accordance with SOP 97-2, “Software Revenue Recognition,” and related interpretations. Accordingly, revenue is recognized when all of the following criteria are met: persuasive evidence of an arrangement exists, delivery has occurred, the vendor’s fee is fixed or determinable, and collectability is probable.

License revenue — Ansoft licenses its software generally on a perpetual basis with no right to return or exchange the licensed software. License revenue is recognized based on the residual method.

Postcontract customer support (“PCS”) for an initial three month period is bundled with the perpetual license fee. Revenue related to the three-month PCS is deferred and recognized ratably over the three-month term. Ansoft’s vendor-specific objective evidence of fair value, or VSOE, for the three-month PCS is based upon the pricing for comparable transactions when the element is sold separately. Ansoft’s VSOE for the three-month PCS is based upon one fourth of the customer’s annual maintenance contract renewal rates.

Service and other revenue consists primarily of PCS revenue. Following the initial three month PCS period, Ansoft offers customers one-year maintenance contracts generally at 15% of the list price of the respective software products. Ansoft recognizes all maintenance revenue ratably over the respective maintenance period. Customers typically renew maintenance agreements annually.

Revenue from customer training, support and other services is recognized as the service is performed.

Valuation of Accounts Receivable

Management reviews accounts receivable to determine which are doubtful of collection. In making the determination of the appropriate allowance for doubtful accounts, management considers Ansoft’s history of write-offs, relationships with its customers, and the overall credit worthiness of its customers. The allowance for doubtful accounts as of April 30, 2008 and 2007 was $1,331,000 and $973,000, respectively. The increase in allowance in fiscal 2008 was primarily due to an increase in customer accounts believed to be uncollectible throughout the year of $485,000 offset by write-offs of $127,000. We had no significant changes in our collection policies or payment terms during the fiscal year ended April 30, 2008.

Impairment of Long-Lived Assets

The Company reviews assets with definite lives for impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. A determination of impairment is made

based on estimates of future gross undiscounted cash flows. If such assets are considered to be impaired the amount of the impairment is based on the excess of the carrying value over the fair value of the assets.

Goodwill and purchased intangibles with indefinite lives are reviewed annually for impairment. A determination of impairment is based on the estimated fair value of the reporting unit.

Impairment of Marketable Securities Available for Sale

An impairment charge is recorded if a decline in the market value of any available for sale security below cost is deemed to be other than temporary. The impairment is charged to earnings and a new cost basis for the security is established.

Deferred Tax Asset Valuation Allowance

Deferred tax assets are recognized for deductible temporary differences, net operating loss carryforwards, and credit carryforwards. To the extent that it is more likely than not that some portion or all of the deferred tax asset will not be realized, a valuation allowance is established.

Uncertain Tax Positions

The Company accounts for uncertain tax positions in accordance with FIN 48. The application of income tax law is inherently complex. Laws and regulations in this area are voluminous and are often ambiguous. As such, the Company is required to make many subjective assumptions and judgments regarding its income tax exposures. Interpretations of and guidance surrounding income tax laws and regulations change over time. As such, changes in its subjective assumptions and judgments can materially affect amounts recognized in the consolidated balance sheets and statements of operations.

The judgments used in applying the above policies are based on management’s evaluation of the relevant facts and circumstances as of the date of the financial statements. Actual results may differ from those estimates. See also “ Item 1A Risk Factors.”

Results of Operations


	Fiscal Year Ended							Fiscal Year Ended
	April 30							April 30
					Percent							Percent
(in thousands)	2008		2007		Change			2007		2006		Change
Revenue	$	103,354	$	89,139		15.9	%	$	89,139	$	77,211		15.4	%
Cost of revenue		2,594		2,197		18.1	%		2,197		1,955		12.4	%

Gross profit		100,760		86,942		15.9	%		86,942		75,256		15.5	%

Sales and marketing		37,795		33,792		11.8	%		33,792		31,506		7.3	%
Research and development		19,453		19,662		(1.1	%)		19,662		17,016		15.6	%
General and administrative		5,336		5,672		(5.9	%)		5,672		5,060		12.1	%
Merger-related expenses		1,728		—		—			—		—		—
Amortization		1,170		1,272		(8.0	%)		1,272		1,467		(13.3	%)

Total operating expenses		65,482		60,398		8.4	%		60,398		55,049		9.7	%

Income from operations		35,278		26,544		32.9	%		26,544		20,207		31.4	%
Other income and interest expense, net		3,820		2,636		44.9	%		2,636		1,395		89.0	%

Income before income taxes		39,098		29,180		34.0	%		29,180		21,602		35.1	%
Income tax expense		14,983		8,936		67.7	%		8,936		3,805		134.8	%

Net income	$	24,115	$	20,244		19.1	%	$	20,244	$	17,797		13.7	%

Year Ended April 30, 2008 compared with Year Ended April 30, 2007

Revenue. Total revenue for the fiscal year ended April 30, 2008 increased 15.9% to $103.4 million. License revenue for the fiscal year ended April 30, 2008 increased 17.1% to $59.7 million from $51.0 million The increases are due to continued advancements in electronic products resulting in an increased demand for our software products worldwide. Growth occurred in both our high performance electronics and EM product lines during the year. Service and other revenue for the fiscal year ended April 30, 2008 increased 14.4% to $43.6 million due to the continued growth of the installed base of customers under annual maintenance agreements. Deferred revenue as of April 30, 2008 increased $7.3 million from prior year end primarily due to increased maintenance sales in the current fiscal year when compared to the prior fiscal year.

International revenue accounted for 64% and 61% of the Company’s total revenue in the years ended April 30, 2008 and 2007, respectively. Revenue in Asia accounted for 45% and 44% and revenue in Europe accounted for 19% and 17% in the years ended April 30, 2008 and 2007, respectively. Generally, the Company believes international sales are subject to additional risks associated with international operations, including currency exchange fluctuations, tariff regulations and requirements for export.

Exchange rates will fluctuate throughout the fiscal year. When comparing the percentage of international revenues to total revenues for the fiscal year, using current year exchange rates for the prior year revenues, the international revenue as a percentage of total revenue would increase by 1% to 62% of total revenue for the fiscal year ended April 30, 2007.

Cost of revenue. Cost of revenue consists primarily of software materials, personnel and other expenses related to providing maintenance, post-contract customer support, licenses and upgrades to customers. Cost of revenue for the fiscal years ended April 30, 2008 and 2007 was $2.6 million and $2.2 million, respectively.

Sales and marketing expenses. Sales and marketing expenses consist of salaries, commissions paid to internal sales and marketing personnel, promotional costs and related operating expenses. Sales and marketing expenses increased 11.8% to $37.8 million in the year ended April 30, 2008, as compared to $33.8 million in the previous fiscal year. Stock-based compensation of $0.5 and $0.7 million was included in sales and marketing expense for the fiscal year ended April 30, 2008 and 2007, respectively. Sales and marketing expenses represented 37% and 38% of total revenue for the fiscal years ended April 30, 2008 and 2007, respectively. This decrease is a result of the Company continuing to gain leverage from its sales force.

Research and development expenses. Research and development expenses include all costs associated with the development of new products and enhancements to existing products. Total research and development expenses decreased 1.1% to $19.5 million in the year ended April 30, 2008, as compared to $19.7 million in the previous fiscal year. Stock-based compensation of $0.5 and $1.3 million was included in research and development expense for the fiscal year ended April 30, 2008 and 2007, respectively. Research and development expenses remained relatively flat as a result of a $0.8 million decrease in stock-based compensation for the fiscal year ended April 30, 2008 as compared to fiscal 2007, offset by increases in expenses for expanding research and development efforts during the current fiscal year. Research and development expenses represented 19% and 22% of total revenue in the years ended April 30, 2008 and 2007, respectively.

General and administrative expenses. General and administrative expenses decreased 5.9% to $5.3 million in the year ended April 30, 2008, as compared to $5.7 million in the previous fiscal year. Stock-based compensation of $0.2 and $0.6 million was included in general and administrative expense for the fiscal year ended April 30, 2008 and 2007, respectively. General and administrative expenses for the fiscal year ended April 30, 2008 were down compared to the prior fiscal year primarily due to the $0.4 million decrease in stock-based compensation. General and administrative expenses represented 5% and 6% of total revenue in both the years ended April 30, 2008 and 2007.

Merger-related expenses. Merger-related expenses include costs incurred by the Company during current fiscal year for professional fees related to the pending merger with ANSYS, Inc. Merger-related expenses incurred were $1.7 million in the fiscal year ended April 30, 2008. There were no merger-related expenses incurred in the fiscal year ended April 30, 2007. No tax benefit for merger-related expenses was recorded in the statement of operations for the fiscal year ended April 30, 2008 since these costs are generally not deductible for tax.

Amortization expense. Amortization expense in the fiscal year ended April 30, 2008 was $1.2 million, as compared to $1.3 million in the previous fiscal year. The decrease is due to certain intangible assets being fully amortized in the prior fiscal year. Intangible assets other than goodwill were fully amortized as of April 30, 2008.

Other income and interest expense, net. Other income for the fiscal year ended April 30, 2008 was $3.8 million, an increase from the $2.6 million reported in the previous fiscal year. The increase is primarily due to foreign currency transaction gains realized during the current fiscal year as well as income from a larger portfolio of marketable securities held during the current fiscal year.

Included in other income is a net realized loss on sale of securities of $0.5 million and $0.1 million for the fiscal years ended April 30, 2008 and 2007, respectively.

Income tax expense. In the fiscal year ended April 30, 2008, the Company recorded tax expense of $15.0 million, an increase from the $8.9 million reported in the previous fiscal year. The Company’s effective tax rate increased 7% to 38% in the fiscal year ended April 30, 2008. The increase in the effective tax rate was primarily the result of $1.7 million in merger-related expenses assumed to be non-deductible for tax purposes as well as $0.5 million in capital loss carryforwards generated in the current year for which no tax benefit was recorded as the capital losses are not expected to be utilized for tax purposes before they expire.

Year Ended April 30, 2007 compared with Year Ended April 30, 2006

Revenue. Total revenue for the fiscal year ended April 30, 2007 increased 15.4% to $89.1 million. License revenue for the fiscal year ended April 30, 2007 increased 19.1% to $51.0 million from $42.8 million. The increases are due to continued advancements in electronic products resulting in an increased demand for our software products worldwide. Growth occurred in both our high performance electronics and EM product lines during the year. Service and other revenue for the fiscal year ended April 30, 2007 increased 10.9% to $38.1 million due to the continued growth of the installed base of customers under annual maintenance agreements. Deferred revenue as of April 30, 2007 increased $6.7 million from prior year end.

International revenue accounted for 61% and 62% of the Company’s total revenue in the years ended April 30, 2007 and 2006, respectively. Revenue in Asia accounted for 44% and 45% and revenue in Europe accounted for 17% in the years ended April 30, 2007 and 2006, respectively. Generally, the Company believes international sales are subject to additional risks associated with international operations, including currency exchange fluctuations, tariff regulations and requirements for export.

Exchange rates will fluctuate throughout the fiscal year. When comparing the percentage of international revenues to total revenues for the fiscal year, using current year exchange rates for the prior year revenues, the international revenue as a percentage of total revenue would remain flat at 62% of total revenue for the fiscal year ended April 30, 2006.

Cost of revenue. Cost of revenue consists primarily of software materials, personnel and other expenses related to providing maintenance, post-contract customer support, licenses and upgrades to customers. Cost of revenue for the fiscal years ended April 30, 2007 and 2006 was $2.2 million and $2.0 million, respectively.

Sales and marketing expenses. Sales and marketing expenses consist of salaries; commissions paid to internal sales and marketing personnel, promotional costs and related operating expenses. Sales and marketing expenses increased 7.3% to $33.8 million in the year ended April 30, 2007, as compared to $31.5 million in the previous fiscal year. Stock-based compensation of $0.7 million was included in sales and marketing expense for the fiscal year ended April 30, 2007. The fiscal year ended April 30, 2006 did not include stock-based compensation. Sales and marketing expenses represented 38% and 41% of total revenue for the fiscal years ended April 30, 2007 and 2006, respectively. This decrease is a result of the Company continuing to gain leverage from its sales force.

Research and development expenses. Research and development expenses include all costs associated with the development of new products and enhancements to existing products. Total research and development expenses increased 15.6% to $19.7 million in the year ended April 30, 2007, as compared to $17.0 million in the previous fiscal year. The increase in research and development costs can be attributed primarily to $1.3 million in stock-based compensation for the fiscal year ended April 30, 2007. The fiscal year ended April 30, 2006 did not include stock-based compensation. Research and development expenses represented 22% of total revenue in the years ended April 30, 2007 and 2006, respectively.

General and administrative expenses. General and administrative expenses increased 12.1% to $5.7 million in the year ended April 30, 2007, as compared to $5.1 million in the previous fiscal year. General and administrative expenses for the fiscal year ended April 30, 2007 increased primarily due to $0.6 million in stock-based compensation. The previous fiscal year did not include stock-based compensation expense. General and administrative expenses represented 6% and 7% of total revenue in both the years ended April 30, 2007 and 2006.

Amortization expense. Amortization expense in the fiscal year ended April 30, 2007 was $1.3 million, as compared to $1.5 million in the previous fiscal year. The decrease is due to certain intangible assets being fully amortized in the prior fiscal year.

Other income and interest expense, net. Other income for the fiscal year ended April 30, 2007 was $2.7 million, an increase from the $1.4 million reported in the previous fiscal year. The increase is primarily due to income from a larger portfolio of marketable securities held during the current fiscal year as well as foreign currency transaction gains realized during the current fiscal year.

Net realized loss for the fiscal year ended April 30, 2007 was $0.1 million compared to a net realized loss of $2,000 for the previous fiscal year.

Income tax expense. In the fiscal year ended April 30, 2007, the Company recorded tax expense of $8.9 million, an increase from the $3.8 million reported in the previous fiscal year. The Company’s effective tax rate increased to 31% in the fiscal year ended April 30, 2007. The increase in the effective tax rate was primarily the result of $2.4 million of income tax benefit for a federal tax credit claim and refund related to foreign taxes previously paid and $1.0 million of income tax benefit associated with the reversal of the Company’s remaining valuation allowance for certain U.S. Federal net deferred tax assets recorded in the fiscal year ended April 30, 2006.

Quarterly Results of Operations

The following table presents unaudited quarterly results for each quarter of fiscal 2008 and fiscal 2007. The information has been prepared on a basis consistent with the Company’s annual consolidated financial statements and, in the opinion of management, contains all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the information for such periods. The Company’s quarterly

results have been in the past, and may be in the future, subject to fluctuations due to increased competition, the timing of new product announcements, changes in pricing policies by the Company or its competitors, market acceptance of new and enhanced versions of the Company’s products and the size and timing of significant license transactions. The Company believes that results of operations for the interim periods are not necessarily indicative of the results to be expected for any future period. Traditionally, sales in the first quarter will decrease from the fourth quarter of the prior fiscal year. Traditionally, revenues will sequentially increase over the next three quarters of the fiscal year. The fourth quarter is typically the highest revenue quarter for the fiscal year.


	Fiscal 2008								Fiscal 2007
	April 30,		Jan. 31,		Oct. 31,		July 31,		April 30,		Jan. 31,		Oct. 31,		July 31,
	2008		2008		2007		2007		2007		2007		2006		2006
	(in thousands, except per share data)
Total revenue	$	33,919	$	26,138	$	23,386	$	19,911	$	28,579	$	22,731	$	20,506	$	17,323
Income from operations	$	12,607	$	10,036	$	7,416	$	5,219	$	10,780	$	7,377	$	5,551	$	2,836
Net income(*)	$	8,504	$	6,509	$	5,231	$	3,871	$	7,934	$	6,311	$	3,710	$	2,289
Basic net income per share	$	0.36	$	0.28	$	0.22	$	0.16	$	0.33	$	0.27	$	0.16	$	0.10
Diluted net income per share	$	0.34	$	0.26	$	0.21	$	0.15	$	0.30	$	0.24	$	0.14	$	0.09

Weighted average number of shares outstanding
— basic		23,307		23,329		23,298		23,725		23,804		23,599		23,609		23,609
— diluted		25,037		25,182		25,301		25,859		26,233		26,138		26,151		26,174


*		Includes merger-related expenses, net of tax, of $1,728 for the three month period ending April 30, 2008.

Liquidity and Capital Resources

As of April 30, 2008, Ansoft had $46.0 million in cash and cash equivalents, $29.2 million of marketable securities and working capital of $38.2 million. Net cash provided by operating activities in the fiscal year ended April 30, 2008 and 2007 was $33.6 million and $27.3 million, respectively.

Net cash (used in) provided by investing activities in the fiscal year ended April 30, 2008 and 2007 was ($8.6) million and $11.0 million, respectively. Capital expenditures were $0.8 million and $0.9 million in the fiscal year ended April 30, 2008 and 2007, respectively. Proceeds from the sale of marketable securities were $18.6 million and $17.0 million in the fiscal year ended April 30, 2008 and 2007, respectively. Purchases of marketable securities were $26.4 million and $5.0 million in the fiscal year ended April 30, 2008 and 2007, respectively.

Net cash used in financing activities was $29.7 million and $4.9 million in the fiscal year ended April 30, 2008 and 2007, respectively. Proceeds from the issuance of common stock were $3.4 million and $2.5 million in the fiscal year ended April 30, 2008 and 2007, respectively. Funds used for the repurchase of common stock were $39.0 million and $11.3 million in the fiscal year ended April 30, 2008 and 2007, respectively. Pursuant to SFAS 123R, excess tax benefits received from stock-based compensation of $5.9 million and $3.9 million were recorded as financing inflows in the fiscal year ended April 30, 2008 and 2007.

A summary of Ansoft’s significant contractual obligations and commitments as of April 30, 2008 is as follows (in thousands):


Contractual Obligations	Total		Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years
Operating Lease Obligations	$	7,293	$	2,684	$	3,543	$	1,050	$	16
Unrecognized Tax Benefits (*)	$	—	$	—	$	—	$	—	$	—


*		Gross unrecognized tax benefits of approximately $3.5 million have been recorded as liabilities in accordance with Financial Standards Accounting Board Interpretation No. 48, and the Company is uncertain as to if or when such amounts may be settled and as a result such amounts are excluded from the table above. Related to the unrecognized tax benefits not included in the table above, the Company has also recorded a liability for potential penalties and interest of approximately $0.2 million.

Stock Repurchase Program. The Company has consistently repurchased its common stock in public market transactions over the past several years. During the fiscal year ended April 30, 2008, the Company purchased a total of 1,448,906 shares of common stock at an average price of $26.93. The Company utilized $39.0 million in cash to effect these common stock purchases.

On September 6, 2007, the Company announced that the Board of Directors voted to amend its existing common stock repurchase program to permit the Company to acquire an additional 1,000,000 shares of its common stock. Unless terminated earlier by resolution of our Board of Directors, the share repurchase program will expire when we have repurchased all shares authorized for repurchase thereunder. Under the plan the Company is authorized to repurchase 9,000,000 shares. The Merger Agreement entered into on March 31, 2008, precludes the Company from repurchasing additional shares under the plan.

Foreign Currency Fluctuations. Foreign currency exchange rates positively (negatively) affected revenue by approximately $3.5 million, ($0.7) million and ($2.4) million in fiscal 2008, 2007 and 2006, respectively. Foreign currency fluctuations are primarily due to the strengthening or weakening of the Japanese yen and Euro in relation to the U.S. dollar.

Effect of Recent Accounting Pronouncements

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS No. 157). SFAS No. 157 defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles and expands disclosures about fair value measurements. SFAS 157 is effective for the Company in the beginning of the Company’s 2009 fiscal year. The FASB amended SFAS No. 157 to exclude leases accounted for pursuant to SFAS No. 13, Accounting for Leases. The Company is currently evaluating the impact, if any, SFAS No. 157 will have on the Company’s consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities—Including an amendment of FASB Statement No. 115,” (SFAS 159) which provides entities with an option to report selected financial assets and liabilities at fair value. SFAS 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. SFAS 159 will be effective for the Company beginning in the Company’s 2009 fiscal year. The Company is currently evaluating the impact that SFAS No. 159 will have on its consolidated financial statements.

The Company adopted the provisions of Financial Standards Accounting Board Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”), an interpretation of FASB Statement No. 109 (“SFAS 109”), on May 1, 2007. As a result of the implementation of FIN 48, the Company was not required to record a cumulative effect of adoption of FIN 48 to beginning retained earnings.

Seasonal Effects

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Interest Rate Risk. The Company’s exposure to market risk for changes in interest rates relates primarily to its investment portfolio. The Company mitigates its risk by diversifying its investments among securities and limits the amount of credit exposure to any one issuer. The Company does not hedge any interest rate exposures. The portfolio includes only marketable securities with active secondary or resale markets to ensure portfolio liquidity.

Foreign Currency Risk. The majority of our foreign currency transactions are denominated in the yen or the euro, which are the functional currencies of Japan and Europe, respectively. As a result of transactions being denominated and settled in such functional currencies, the risks associated with currency fluctuations are primarily associated with foreign currency translation adjustments. We do not currently hedge against foreign currency translation risks and do not currently believe that foreign currency exchange risk is significant to our operations due to the short term nature of assets and liabilities denominated in foreign currencies although our reported revenues and expenses can be impacted by changes in foreign currencies.

The average foreign exchange rates used to translate the 2008, 2007 and 2006 statements of operations were as follows:


	Fiscal year ended		Fiscal year ended		Fiscal year ended
Foreign Currency	April 30, 2008		April 30, 2007		April 30, 2006
Yen		113.00		117.70		113.78
Euro		1.44		1.29		1.22

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO FINANCIAL STATEMENTS


	Page

Report of Independent Registered Public Accounting Firm		27
Consolidated Balance Sheets as of April 30, 2008 and 2007		28
Consolidated Statements of Operations for the fiscal years ended April 30, 2008, 2007 and 2006		29
Consolidated Statements of Stockholders’ Equity and Comprehensive Income for the fiscal years ended April 30, 2008, 2007 and 2006		30
Consolidated Statements of Cash Flows for the fiscal years ended April 30, 2008, 2007 and 2006		31
Notes to Consolidated Financial Statements		32
Financial Statement Schedule: Schedule II — Valuation and Qualifying Accounts and Reserves		48

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
Ansoft Corporation:

We have audited the accompanying consolidated balance sheets of Ansoft Corporation and subsidiaries as of April 30, 2008 and 2007, and the related consolidated statements of operations, stockholders’ equity and comprehensive income, and cash flows for each of the years in the three-year period ended April 30, 2008. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedule as listed in the accompanying index. These consolidated financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Ansoft Corporation and subsidiaries as of April 30, 2008 and 2007, and the results of their operations and their cash flows for each of the years in the three-year period ended April 30, 2008, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

As discussed in note 10 to the consolidated financial statements, in 2008 the Company adopted the provisions of Financial Standards Accounting Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109. As discussed in Note 1 to the consolidated financial statements, in 2007 the Company adopted the provisions of Statement of Financial Accounting Standards No. 123R, Share-Based Payment.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Ansoft Corporation’s internal control over financial reporting as of April 30, 2008, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated June 6, 2008, expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

/s/ KPMG LLP

Pittsburgh, Pennsylvania
June 6, 2008

ANSOFT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)


	April 30,			April 30,
	2008			2007
Assets
Current assets
Cash and cash equivalents	$	46,012		$	49,356
Accounts receivable, net of allowance for doubtful accounts of $1,331 and $973, respectively		34,690			24,994
Deferred income taxes		1,292			1,441
Prepaid expenses and other assets		2,418			2,566

Total current assets		84,412			78,357

Equipment and furniture, net		2,366			2,514
Marketable securities		29,210			22,383
Other assets		197			155
Deferred income taxes		4,452			5,352
Goodwill		1,239			1,239
Other intangible assets, net		—			1,170

Total assets	$	121,876		$	111,170


Liabilities and stockholders’ equity
Current liabilities
Accounts payable	$	787		$	626
Accrued payroll		4,360			3,380
Accrued income taxes		890			603
Other accrued expenses		6,466			4,130
Current portion of deferred revenue		33,739			26,244

Total current liabilities		46,242			34,983

Long-term liabilities
Accrued income taxes		3,007			—
Long-term portion of deferred revenue		1,225			1,404


Total liabilities		50,474			36,387

Stockholders’ equity
Preferred stock, par value $0.01 per share; 1,000 shares authorized, no shares outstanding		—			—
Common stock, par value $0.01 per share; 50,000 shares authorized; issued 30,240 and 29,258 shares, respectively and outstanding 23,489 and 23,956, respectively		302			293
Additional paid-in capital		96,217			85,754
Treasury stock, 6,751 and 5,302 shares, respectively		(88,188	)		(49,176	)
Accumulated other comprehensive income (loss)		80			(964	)
Retained earnings		62,991			38,876

Total stockholders’ equity		71,402			74,783


Total liabilities and stockholders’ equity	$	121,876		$	111,170

See accompanying notes to consolidated financial statements.

ANSOFT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)


Fiscal Year Ended April 30,	2008		2007		2006
Revenue
License	$	59,744	$	51,026	$	42,849
Service and other		43,610		38,113		34,362

Total revenue		103,354		89,139		77,211


Cost of revenue
License revenue		681		607		535
Service and other		1,913		1,590		1,420

Total cost of revenue		2,594		2,197		1,955

Gross profit		100,760		86,942		75,256

Operating Expenses
Sales and marketing		37,795		33,792		31,506
Research and development		19,453		19,662		17,016
General and administrative		5,336		5,672		5,060
Merger-related expenses		1,728		—		—
Amortization		1,170		1,272		1,467

Total operating expenses		65,482		60,398		55,049

Income from operations		35,278		26,544		20,207
Other income, net		3,820		2,636		1,395

Income before income taxes		39,098		29,180		21,602
Income taxes expense		14,983		8,936		3,805

Net income	$	24,115	$	20,244	$	17,797

Basic net income per share	$	1.03	$	0.86	$	0.75

Diluted net income per share	$	0.95	$	0.77	$	0.69


Weighted average shares outstanding — basic		23,415		23,650		23,694
Weighted average shares outstanding — diluted		25,346		26,182		25,851

See accompanying notes to consolidated financial statements.

ANSOFT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME
(in thousands)


																Accumulated
				Common				Additional		Treasury						Other
	Comprehensive			Stock				Paid-in		Stock						Comprehensive
	Income (Loss)			Shares		Amount		Capital		Shares			Amount			Income (Loss)			Retained Earnings
Balance, April 30, 2005					27,802	$	280	$	70,270		(3,636	)	$	(21,762	)	$	(338	)	$	835
Purchase of treasury stock					—		—		—		(1,176	)		(16,151	)		—			—
Issuance of common stock					774		6		2,754		—			—			—			—
Tax effect of stock option exercises					—		—		3,771		—			—			—			—
Net income	$	17,797			—		—		—		—			—			—			17,797
Foreign currency translation		(240	)		—		—		—		—			—			(240	)		—
Reclassification adjustment		2			—		—		—		—			—			2			—
Change in unrealized gain on marketable securities		(963	)		—		—		—		—			—			(963	)		—

Comprehensive income	$	16,596			—		—		—		—			—			—			—


Balance, April 30, 2006					28,576	$	286	$	76,795		(4,812	)	$	(37,913	)	$	(1,539	)	$	18,632
Purchase of treasury stock					—		—		—		(490	)		(11,263	)		—			—
Issuance of common stock					682		7		2,456		—			—			—			—
Tax effect of stock option exercises					—		—		3,923		—			—			—			—
Stock-based compensation					—		—		2,580		—			—			—			—
Net income	$	20,244			—		—		—		—			—			—			20,244
Foreign currency translation		(708	)		—		—		—		—			—			(708	)		—
Reclassification adjustment		87			—		—		—		—			—			87			—
Change in unrealized loss on marketable securities		1,196			—		—		—		—			—			1,196			—

Comprehensive income	$	20,819			—		—		—		—			—			—			—


Balance, April 30, 2007					29,258	$	293	$	85,754		(5,302	)	$	(49,176	)	$	(964	)	$	38,876
Purchase of treasury stock					—		—		—		(1,449	)		(39,012	)		—			—
Issuance of common stock					982		9		3,425		—			—			—			—
Tax effect of stock option exercises					—		—		5,860		—			—			—			—
Stock-based compensation					—		—		1,178		—			—			—			—
Net income	$	24,115			—		—		—		—			—			—			24,115
Foreign currency translation		1,050			—		—		—		—			—			1,050			—
Reclassification adjustment		504			—		—		—		—			—			504			—
Change in unrealized gain on marketable securities		(510	)		—		—		—		—			—			(510	)		—

Comprehensive income	$	25,159			—		—		—		—			—			—			—


Balance, April 30, 2008					30,240	$	302	$	96,217		(6,751	)	$	(88,188	)	$	80		$	62,991

See accompanying notes to consolidated financial statements.

ANSOFT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)


	Fiscal year ended April 30,
	2008			2007			2006
Cash flows from operating activities
Net income	$	24,115		$	20,244		$	17,797

Adjustments to reconcile net income to net cash provided by operating activities
Depreciation		970			1,019			1,326
Amortization		1,655			1,725			1,875
Stock-based compensation		1,178			2,580			—
Excess tax benefit from stock-based compensation		(5,860	)		(3,923	)		—
Deferred taxes		1,049			(403	)		16
Loss on sale of marketable securities		504			87			2

Changes in assets and liabilities
Accounts receivable		(7,461	)		(4,624	)		(3,125	)
Prepaid expenses and other assets		224			(633	)		(815	)
Other long-term assets and liabilities, net		(42	)		(24	)		(14	)
Accounts payable and accrued expenses		12,069			4,768			6,029
Deferred revenue		5,234			6,440			2,879

Net cash provided by operating activities		33,635			27,256			25,970


Cash flows from investing activities
Purchases of equipment and furniture		(812	)		(936	)		(1,134	)
Proceeds from the sale of marketable securities		18,565			17,000			3,177
Purchase of marketable securities		(26,387	)		(5,017	)		(9,676	)

Net cash provided by (used in) investing activities		(8,634	)		11,047			(7,633	)

Purchase of treasury stock		(39,012	)		(11,263	)		(16,151	)
Proceeds from the issuance of common stock		3,434			2,463			2,760
Excess tax benefit from stock-based compensation		5,860			3,923			—

Net cash used in financing activities		(29,718	)		(4,877	)		(13,391	)
Effect of exchange rate changes		1,373			(526	)		(400	)
Cash and cash equivalents at beginning of year		49,356			16,456			11,910

Cash and cash equivalents at end of year	$	46,012		$	49,356		$	16,456


Supplemental disclosures of cash flow information
Cash paid (received) for income taxes	$	4,898		$	4,904		$	(695	)

See accompanying notes to consolidated financial statements.

ANSOFT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

1. Nature of Business and Summary of Significant Accounting Policies

Nature of Business

Ansoft Corporation (“Ansoft” or the “Company”) is a developer of electronic design automation (“EDA”) software used in high performance technology products and industries. Ansoft’s software is used by electrical engineers in the design of state of the art technology products, such as cellular phones, internet networking, satellite communications systems, computer chips and circuit boards, and electronic sensors and motors.

Merger Agreement with ANSYS, Inc.

The Company incurred professional fees related to the pending merger with ANSYS and separately classified these amounts in the statement of operations as merger-related expenses. Merger-related expenses incurred were $1.7 million in the fiscal year ended April 30, 2008. There were no merger-related expenses incurred in the fiscal years ended April 30, 2007 and 2006.

Principles of Consolidation and Basis of Presentation

The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany transactions have been eliminated.

On March 7, 2006, the Company’s Board of Directors declared a two-for-one stock split of the Company’s common stock, payable in the form of a 100% stock dividend. On May 9, 2006, one additional share of common stock was distributed for each share held of record as of the close of business on May 2, 2006. An amount equal to the par value of the shares issued was transferred from the additional paid-in capital account to the common stock account. All references to number of shares and to per share information, except shares authorized, in the consolidated financial statements have been adjusted to reflect the stock split on a retroactive basis.

On April 20, 2006, stockholders approved an amendment to the Company’s Amended Certificate of Incorporation increasing the number of authorized shares of common stock from 25,000 shares to 50,000 shares.

Use of Estimates

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

Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.

Allowance for Doubtful Accounts

The Company makes judgments as to its ability to collect outstanding receivables and provides allowances for the portion of a receivable when collection becomes doubtful. In making the determination of the appropriate allowance, the Company considers its history of write-offs, relationships with its customers, and the overall credit worthiness of its customers.

Marketable Securities

Marketable securities consist of corporate bonds, bond and government agency funds that are classified as available for sale as of April 30, 2008 and 2007. Marketable securities available for sale are recorded at fair market value based on quoted market prices and any unrealized gains or losses are recorded as a separate component of stockholders’ equity. Costs of investments sold/held are determined on the average cost method and are classified as non-current. An impairment charge is recorded if a decline in the market value of any available for sale security below cost is deemed to be other than temporary. The impairment is charged to earnings and a new cost basis for the security is established. Dividend and interest income are recognized when earned.

Equipment and Furniture

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

Goodwill and Other Intangible Assets

Goodwill and other intangible assets, which include customer lists, a non-compete agreement, and purchased technology, are stated at cost less accumulated amortization and are reviewed at least annually for impairment.

The Company reviews the realizability of acquired technology, goodwill and other intangibles on an ongoing basis, and if there is an indication of impairment, the Company performs procedures under the applicable accounting pronouncements to quantify any impairment that exists. Determining the amount of impairment of these assets requires the Company to estimate future cash flows and make judgments regarding discount rates and other variables that impact the net realizable value or fair value of those assets, as applicable. Actual future cash flows and other assumed variables could differ from these estimates.

Impairment of Long-Lived Assets

In accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, long-lived assets, such as property, plant and equipment, and purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of an asset exceeds the fair value of the asset.

Revenue Recognition

License revenue — Ansoft licenses its software generally on a perpetual basis with no right to return or exchange the licensed software. License revenue is recognized based on the residual method.

Revenue from customer training, support and other services is recognized as the service is performed.

Deferred revenue

Ansoft’s deferred revenue consists of unearned revenue on annual maintenance contracts and the deferred component of bundled PCS.

Software Development Costs

The Company accounts for software development costs in accordance with SFAS No. 86, “Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise Marketed.” Software development costs are capitalized beginning when a product’s technological feasibility has been established by completion of a working model of the product and ending when a product is available for general release to customers. Completion of a working model of the Company’s products and general release have generally coincided. As a result, the Company has not capitalized any software development costs for any periods presented since the amounts have not been material.

Income Taxes

The Company accounts for income taxes using the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets are recognized for deductible temporary differences, net operating loss and credit carryforwards if it is more likely than not that the tax benefits will be realized. To the extent a deferred tax asset cannot be recognized under the preceding criteria, a valuation allowance is established.

Net Income Per Share

Basic net income per share is calculated using the weighted-average number of common shares outstanding during the period. Diluted net income per share is computed using the weighted-average number of common shares and potentially dilutive common shares outstanding during the period. Potentially dilutive common shares consist of the incremental common shares issuable upon the exercise of employee stock options, and are computed using the treasury stock method. Potentially dilutive common shares are excluded from the calculation if their effect is antidilutive. Unexercised stock options of 13, 62 and 24 shares for the fiscal years ended April 30, 2008, 2007 and 2006, respectively, are not included in the computation of diluted earnings per share because the option exercise price was greater than the average market price, and therefore their inclusion would have been anti-dilutive.

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


	Income		Shares		Per share amount
Fiscal year ended April 30, 2008
Basic net income per share	$	24,115		23,415	$	1.03
Effect of dilutive securities:
Stock options		—		1,931		(0.08	)

Diluted net income per share	$	24,115		25,346	$	0.95


Fiscal year ended April 30, 2007
Basic net income per share	$	20,244		23,650	$	0.86
Effect of dilutive securities:
Stock options		—		2,532		(0.09	)

Diluted net income per share	$	20,244		26,182	$	0.77


Fiscal year ended April 30, 2006
Basic net income per share	$	17,797		23,694	$	0.75
Effect of dilutive securities:
Stock options		—		2,157		(0.06	)

Diluted net income per share	$	17,797		25,851	$	0.69

Stock-Based Compensation

Prior to May 1, 2006, the Company accounted for stock-based compensation in accordance with the Financial Accounting Standards Board’s (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 123 “Accounting for Stock-Based Compensation.” This statement permitted a company to choose either a fair value based method of accounting for its stock-based compensation arrangements or to comply with the Accounting Principles Board (“APB”) Opinion No. 25 intrinsic value based method, adding pro forma disclosures of net income and earnings per share computed as if the fair value based method had been applied in the financial statements. The Company had adopted SFAS No. 123 by retaining the APB Opinion No. 25 method of accounting for stock-based compensation with pro forma disclosures of net income and earnings per share. Pursuant to APB Opinion No. 25 the Company did not recognize compensation expense in its statements of operations for the fiscal year ended April 30, 2006.

Effective May 1, 2006, the Company adopted the fair value recognition provisions of FASB SFAS No. 123 (revised 2004), “Share-Based Payment” (SFAS 123R), using the modified-prospective transition method. Under this method, compensation cost is recognized beginning with the effective date for (a) any stock-based awards granted through, but not yet vested as of April 30, 2006 based on the grant-date fair value estimated in accordance with the provisions of SFAS 123R and (b) any stock-based awards granted subsequent to April 30, 2006, based on the grant-date fair value estimated in accordance with the provisions of SFAS 123R. The estimated fair value of the Company’s stock-based awards, less expected forfeitures, is amortized over the awards’ vesting period on a straight-line basis. The results for prior periods have not been retroactively adjusted.

The Company’s income from operations and income before income taxes includes stock-based compensation of $1.2 million and $2.6 million for the fiscal years ended April 30, 2008 and 2007, respectively, and net income was reduced by $1.0 million, or $0.04 per diluted share and $2.0 million, or $0.08 per diluted share for the fiscal years ended April 30, 2008 and 2007, respectively, due to the inclusion of stock-based compensation. The stock-based compensation was recorded in sales and marketing, research and development, and general and administrative expenses. In addition, for the years ended April 30, 2008 and 2007, as a result of the 2007 adoption of SFAS 123R a classification change resulted and reduced net cash provided by operating activities and increased net cash provided by financing activities by $5.9 million and $3.9 million, respectively, related to the incremental tax benefits from stock options exercised each respective year.

The following table illustrates the effect on net income and net income per share if the Company had applied the fair value recognition provisions of SFAS 123R to stock option awards for the fiscal year ended April 30, 2006.


	Fiscal Year ended
	April 30,
	2006
Net income as reported	$	17,797
Deduct: Total stock-based compensation expense determined under fair value based method, net of tax		(2,037	)

Pro forma net income	$	15,760

Net income per basic common share, as reported	$	0.75

Pro forma net income per basic common share	$	0.67

Net income per diluted common share, as reported	$	0.69

Pro forma net income per diluted common share	$	0.61

The fair value of each option grant is estimated on the date of the grant using the Black-Scholes option-pricing model, which includes the assumptions noted in the following table. The expected life of the options represents the period of time the options granted are expected to be outstanding based on historical experience with similar grants. The risk-free rate for the expected life of the option is based on the U.S Treasury zero-coupon yield in effect at the time of the grant with an equivalent remaining term equal to the expected life of the option. Expected volatility is based on the historical volatility of the Company’s stock. The dividend yield is based on the historical dividend yield of the Company. The weighted average grant date fair value of options granted during the fiscal years ended April 30, 2008, 2007 and 2006 were $12.19, $13.66, and $8.17 respectively.

The weighted average assumptions used in the model for the fiscal years ended April 30, 2008, 2007 and 2006 were as follows (not in thousands):


	Fiscal Year ended		Fiscal Year ended		Fiscal Year ended
	April 30,		April 30,		April 30,
	2008		2007		2006

Risk-free rate (%)		4.01		4.64		4.23
Volatility (%)		42.66		47.25		67.35
Expected life (in years)		5.5		5.3		6.0
Dividend yield (%)		0.00		0.00		0.00

On November 10, 2005, the FASB issued FASB Staff Position No. FAS 123(R)-3, “Transition Election Related to Accounting for Tax Effects of Share-Based Payment Awards” (FSP 123R-3). The Company has elected to adopt the alternative transition method provided in FSP 123R-3 for calculating the tax effects of stock-based compensation under SFAS 123R. The alternative transition method includes a simplified method to establish the beginning balance of the additional paid-in capital pool (APIC pool) related to the tax effects of employee stock-based compensation, which is available to absorb tax deficiencies recognized subsequent to the adoption of SFAS 123R.

Comprehensive Income

Comprehensive income includes foreign currency translation gains and losses and other unrealized gains and losses related to marketable securities that have been previously excluded from net income and reflected instead in equity. The Company has reported the components of comprehensive income, net of tax of $0 in 2008, 2007, and 2006 in its consolidated statements of stockholders’ equity and comprehensive income.

The components of accumulated other comprehensive income (loss) are as follows:


	April 30,
	2008			2007
Foreign currency translation gain (loss)	$	378		$	(672	)
Unrealized loss on available for sale securities		(298	)		(292	)

Accumulated other comprehensive income (loss)	$	80		$	(964	)

Foreign Currency Translation

The functional currency of the Company’s foreign subsidiaries is the respective local currency. Accordingly, assets and liabilities are translated to United States dollars at the exchange rates in effect as of the balance sheet date, and results of operations are translated using the average rates in effect for the period presented. Foreign currency transaction gains (losses) included in other income in the accompanying consolidated statements of operations during the fiscal years ended April 30, 2008, 2007 and 2006 were $2.0 million, $0.5 million, and ($0.4) million, respectively.

Fair Value of Financial Instruments

The carrying value and fair value of the Company’s receivables and payables are estimated to be substantially the same at both April 30, 2008 and 2007.

Reclassification

Certain amounts have been reclassified in prior years to conform to current year presentation.

2. Recent Accounting Pronouncements

Company in the beginning of the Company’s 2009 fiscal year. The FASB amended SFAS No. 157 to exclude leases accounted for pursuant to SFAS No. 13, Accounting for Leases. The Company is currently evaluating the impact, if any, SFAS No. 157 will have on the Company’s consolidated financial statements.

3. Equipment and Furniture

Equipment and furniture consist of the following:


	April 30,
	2008		2007
Computers and equipment	$	8,128	$	7,459
Furniture and fixtures		1,250		1,138
Leasehold improvements		1,003		936

		10,381		9,533
Less allowances for depreciation and amortization		8,015		7,019

	$	2,366	$	2,514

4. Other Intangible Assets

Other intangible assets consist of the following:


	April 30,
	2008		2007
Customer list	$	18,488	$	18,488
Non-compete		2,500		2,500
Purchased technology		2,230		2,230
Trademark		212		212

		23,430		23,430
Less allowances for amortization		23,430		22,260

	$	—	$	1,170

These intangible assets were amortized over their estimated useful lives, ranging between three and seven years and are fully amortized as of April 30, 2008.

5. Marketable Securities

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


	Amortized		Unrealized		Unrealized			Fair
	Cost		Gain		(Loss)			Value
April 30, 2008
Bond Funds	$	—	$	—	$	—		$	—
Corporate Bonds		29,508		146		(444	)		29,210

Total marketable securities	$	29,508	$	146	$	(444	)	$	29,210


	Amortized		Unrealized		Unrealized			Fair
	Cost		Gain		(Loss)			Value
April 30, 2007
Bond Funds	$	2,696	$	10	$	(6	)	$	2,700
Corporate Bonds		19,979		38		(334	)		19,683

Total marketable securities	$	22,675	$	48	$	(340	)	$	22,383

The portfolio includes only marketable securities with active secondary or resale markets to ensure portfolio liquidity.

Other income consists of dividend and interest income and other than temporary declines in fair value of marketable securities. Dividend and interest income was $2,768, $2,806 and $2,191 in fiscal year 2008, 2007, and 2006, respectively.

Gross realized gains on the sale of marketable securities were $0, $16 and $0 in fiscal year 2008, 2007, and 2006, respectively. Gross realized losses on the sale of marketable securities were $504, $103 and $2 in fiscal year 2008, 2007, and 2006, respectively.

The following table sets forth certain information relating to the estimated fair value and unrealized losses on marketable securities available-for-sale as of April 30, 2008. Unrealized losses have been segregated into those existing for less than twelve months and those existing for twelve months or longer.


	Less than 12 Months				12 Months or Longer				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Description of Securities	Value		Losses		Value		Losses		Value		Losses
Corporate Bonds	$	16,115	$	321	$	2,250	$	123	$	18,365	$	444

At April 30, 2008, the contractual maturities of the debt securities available for sale are:


	Amortized Cost		Fair Value
Due in one year or less	$	760	$	755
Due after one year through five years	$	19,041	$	18,884
Due after five years through ten years	$	8,772	$	8,664
Due after ten years	$	935	$	907

Total	$	29,508	$	29,210

It is the Company’s policy to review the fair value of these marketable securities on a regular basis to determine whether its investments are other-than-temporarily impaired. If the Company believes the carrying value of an investment is in excess of its fair value, and this difference is other-than-temporary, it is the Company’s policy to write down the investment to reduce its carrying value to fair value. Unrealized losses from the Company’s marketable securities are primarily attributable to changes in interest rates. Management does not believe any unrealized losses represent an other-than-temporary impairment based on our evaluation of available evidence as of April 30, 2008.

6. Line of Credit

On October 22, 2007, the Company renewed for an additional year its secured credit facility, with an aggregate commitment of up to $30,000, with a domestic financial institution (the “Bank”). At the Company’s option, borrowings under the credit facility bear interest at the Bank’s prime lending rate or the LIBOR rate plus a margin of .050 basis points. The facility is secured by the Company’s marketable securities.

The ability of the Company to borrow under the credit facility is subject to its ongoing compliance with certain financial and other covenants, including a tangible net worth covenant. As of April 30, 2008, the Company was in compliance with its covenants under the credit facility.

As of April 30, 2008, the Company had no borrowings under the credit facility.

7. Leases

The Company leases its corporate headquarters in Pittsburgh, Pennsylvania, and other facilities under operating lease agreements that expire over the next five years. Rental expense incurred by the Company under operating lease agreements totaled $3,140, $2,786 and $2,615 for the years ended April 30, 2008, 2007, and 2006, respectively. The future minimum lease payments for such operating leases as of April 30, 2008, are:


Year ending April 30,
2009			2,684
2010			1,933
2011			1,610
2012			827
2013			223

8. Common Stock Options

The Company currently has stock options outstanding under the 1995 Stock Option Plan and 2006 Stock Incentive Plan (collectively the “Plans”). Stock options generally vest over five years in 20% increments from the date of grant and expire 10 years from the date of grant. The 2006 Stock Incentive Plan (2006 Plan) authorizes the issuance of 1,340 shares of common stock for the grant of incentive or nonstatutory stock options or restricted stock to employees and directors. As of April 30, 2008, there were 972 shares of common stock available for issuance under the 2006 Plan. There were no shares of restricted stock issued under the 2006 Plan as of April 30, 2008. The Company issues new shares of common stock upon exercise of stock options.

A summary of the changes in stock options outstanding and exercisable under the Plans during the fiscal year ended April 30, 2008 is as follows:


						Weighted-Average
						Remaining
				Weighted-Average		Contractual Life		Aggregate Intrinsic
	Number of Shares			Exercise Price		(Years)		Value

Outstanding, April 30, 2007		3,552		$	5.18
Granted		265		$	27.05
Exercised		(982	)	$	3.50
Cancelled		(36	)	$	11.06

Outstanding, April 30, 2008		2,799		$	7.76		4.27	$	71,100

Exercisable, April 30, 2008		2,326		$	4.89		3.42	$	65,776

The aggregate intrinsic value in the table above is based on the Company’s closing stock price of $33.16 as of the last trading day of the period ended April 30, 2008.

The Company recorded cash proceeds from the exercise of stock options of $3.4 million and $2.5 million and related tax benefits of $5.9 million and $3.9 million during the fiscal year ended April 30, 2008 and 2007, respectively. Nearly all of the tax benefits for the fiscal years ended April 30, 2008 and 2007 were classified as excess tax benefits and accordingly were recorded in additional paid-in capital. The total intrinsic value for stock options exercised during the fiscal years ended April 30, 2008, 2007 and 2006 was $26.1 million, $16.8 million and $9.8 million, respectively.

During the fiscal years ended April 30, 2008, 2007 and 2006, the total fair value of options vested was $1.1 million, $2.6 million and $2.4 million, respectively. At April 30, 2008, total unrecognized estimated compensation cost related to non-vested stock options granted prior to that date was $4.4 million, which is expected to be recognized over a weighted average period of 3.9 years. At April 30, 2008, 473 unvested options with an aggregate intrinsic value of $5.3 million are expected to vest over a weighted average period of

3.9 years, have a weighted average exercise price of $21.89 and a weighted average remaining contractual term of 8.5 years.

The nonvested stock option activity during the fiscal year ended April 30, 2008 is presented in the following table:


				Weighted-Average
	Number of Shares			Fair Value

Nonvested, April 30, 2007		513		$	6.05
Granted		265		$	12.19
Vested		(269	)	$	3.96
Forfeited		(36	)	$	6.27

Nonvested, April 30, 2008		473		$	9.28

The following table summarizes additional information about stock options outstanding as of April 30, 2008:


	Options Outstanding						Options Exercisable
			Weighted-
			Average		Weighted-				Weighted-
			Remaining		Average				Average
			Contractual		Exercise				Exercise
Range Of Exercise Prices	Shares		Life (Years)		Price		Shares		Price
$2.37-$3.47		569		2.69		2.59		569		2.59
$3.65-$5.48		1,119		3.31		4.51		1,110		4.51
$5.50-$8.18		654		4.19		6.60		581		6.55
$8.65-$12.34		72		6.75		10.61		32		10.40
$13.10-$19.58		31		7.07		15.12		12		14.79
$20.43-$30.99		285		9.24		25.98		14		23.70
$31.00-$34.57		69		9.19		32.48		8		32.27

9. Segment Reporting, Export Sales and Credit Risk

The Company has adopted the provisions of SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information”, which requires the reporting of segment information using the “management approach”. Under this approach, operating segments are identified in substantially the same manner as they are reported internally and used by the Company’s chief operating decision maker (“CODM”) for purposes of evaluating performance and allocating resources. Ansoft’s chief operating decision maker is its President and Chief Executive Officer, or CEO. Based on this approach, the Company has one reportable segment as the CODM reviews financial information on a basis consistent with that presented in the consolidated financial statements.

Ansoft’s products are classified into two categories, high performance electronics and electromechanical (EM). Ansoft’s CEO reviews sales by product category. The following table presents product sales by market application as a percentage of total sales:


	2008			2007			2006
High Performance Electronics		82	%		82	%		82	%
Electromechanical		18	%		18	%		18	%

Profitability information by product category is not available as operating expenses and other income and expense items are managed on a functional basis.

Export sales, principally to Asia, accounted for 64%, 61%, and 62% of total product revenue in 2008, 2007, and 2006, respectively. Included in export sales to Asia were sales to Japan, which accounted for approximately 22%, 22%, and 24% of total revenue in fiscal 2008, 2007, and 2006, respectively. No other foreign country accounted for more than 10% of total revenue during these periods. As of April 30, 2008 and 2007, there were assets of $31,944 and $32,930 in Asia and $11,117 and $6,649 in Europe.

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

10. Income Tax

Income before taxes includes domestic and foreign income as follows:


	April 30,
	2008		2007		2006
Domestic	$	38,068	$	28,079	$	20,848
Foreign		1,030		1,101		754

Total	$	39,098	$	29,180	$	21,602

The provision for income taxes consists of the following:


	April 30,
	2008		2007			2006
Current:
Federal	$	11,341	$	7,142		$	2,554
State		2,216		1,781			953
Foreign		377		416			282

Total		13,934		9,339			3,789
Deferred:
Federal		708		112			87
State		280		(81	)		(29	)
Foreign		61		(434	)		(42	)

Total		1,049		(403	)		16

Total expense for income tax	$	14,983	$	8,936		$	3,805

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


	April 30,
	2008			2007			2006
Income tax expense at statutory rate	$	13,684		$	10,213		$	7,561
State income tax, net of federal benefit		1,518			1,086			634
Research and development credit		(1,163	)		(2,176	)		(1,056	)
Rate differential between U.S and foreign taxes		74			81			54
Change in valuation allowance		196			(404	)		(1,131	)
Merger related expenses		605			—			—
Foreign tax credit		—			—			(2,365	)
Stock-based compensation		335			406			—
Other, net		(266	)		(270	)		108

Actual income tax expense	$	14,983		$	8,936		$	3,805

For the year ended April 30, 2006, the Company recognized $2.4 million of income tax benefit for a federal tax credit claim and refund related to foreign taxes previously paid.

In addition to amounts applicable to income before taxes, the following income tax benefit amounts were recorded in stockholders’ equity.


	Fiscal year ending April 30,
	2008			2007			2006
Tax effect of stock option exercises	$	(5,860	)	$	(3,923	)	$	(3,771	)

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


	April 30,
	2008			2007
Deferred tax assets:
Net operating loss carryforward	$	338		$	393
Capital loss carryovers		885			804
Allowance for doubtful accounts		500			370
Research and development tax credit carryforward		435			1,570
Intangible assets		3,445			3,530
Stock-based compensation		420			323
Accrued expenses		120			325
Deferred revenue		220			—
Furniture and equipment		266			282
Net unrealized losses on available for sale securities		116			111

Total gross deferred tax assets		6,745			7,708
Less valuation allowance		(1,001	)		(915	)

Net deferred taxes	$	5,744		$	6,793

The net change in the total valuation allowance for the years ended April 30, 2008 and April 30, 2007 was an increase of $86 and a decrease of $892, respectively. An increase of $5 and a decrease of $488 in the valuation allowance was recorded in accumulated other comprehensive income relating to marketable securities for the years ended April 30, 2008 and 2007, respectively. Additionally, capital loss carryovers of $115 expired during the current fiscal year and were written off against the valuation allowance. Management evaluates the recoverability of the deferred tax assets and the level of the valuation allowance on a quarterly basis. In assessing the realizability of the deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers projected future taxable income in making this assessment. Management believes that it is more likely than not that the results of future operations will generate sufficient taxable income to realize the net deferred tax asset as of April 30, 2008.

As of April 30, 2008, the Company had foreign operating loss carryforwards of $1,025 which are available to offset future foreign taxable income over an indefinite period. The Company has research and development credit carryforwards of $435 as of April 30, 2008. These credits will be available to reduce future federal income taxes, if any, through April 30, 2022 (earliest expiration date). The Company also has capital loss carryovers of $2,529 that are available to offset capital gains through April 30, 2009 (earliest expiration date).
As of April 30, 2008, the Company had undistributed earnings of foreign subsidiaries, amounting to $3,044 on which deferred income taxes have not been provided because such earnings are intended to be reinvested indefinitely outside of the U.S.

The Company adopted the provisions of FIN 48. As a result of the implementation of FIN 48, the Company was not required to record a cumulative effect of adoption of FIN 48 to beginning retained earnings.

A reconciliation of the total amounts of unrecognized tax benefits for the year ended April 30, 2008 is as follows:


Gross balance at May 1, 2007	$	3,860
Prior period tax positions
Increases		—
Decreases		(808	)
Current period tax positions
Increases		450
Decreases		—
Settlements		—
Expiration of statutes		(36	)

Gross balance at April 30, 2008	$	3,466

Amount that would affect the effective tax rate if recognized	$	3,108

The Company includes interest and penalties related to uncertain tax positions in income tax expense. At May 1, 2007, the Company accrued interest and penalties of $105 and $129, respectively, related to uncertain tax positions. Due to the changes in unrecognized tax benefits identified above, the Company has accrued additional interest and penalties related to uncertain tax positions during the year ended April 30, 2008. The total interest and penalties accrued as of April 30, 2008 was $65 and $104, respectively. A net benefit of $42 for interest and penalties was recognized for the year ended April 30, 2008 primarily as a result of statute expiration.

At this time, the Company believes that there are no significant positions as of April 30, 2008 for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase or decrease within the next 12 months.

United States federal income tax returns for tax years 2004 and prior have been effectively settled or are closed to examination. Tax benefits claimed in 2004 and prior remain open to adjustment to the extent of general business credit carryforwards utilized on the fiscal year 2006 federal tax return. The principal state jurisdictions that remain open to examination for 2004 forward are California, Massachusetts and Pennsylvania. The principal foreign jurisdictions remaining open to examination are Japan and France from 2005 forward and 2007 forward respectively.

11. Employee Benefit Plan

The Company has a 401(k) savings and retirement plan which covers its full-time employees who have attained the age of 21. Eligible employees make voluntary contributions to the plan. The Company is not required to contribute, nor has it contributed, to the 401(k) plan.

12. Commitments And Contingencies

The Company sells software licenses and services to its customers under proprietary software license agreements. Each license agreement contains the relevant terms of the contractual arrangement with the customer, and generally includes certain provisions for indemnifying the customer against losses, expense and liabilities from damages that may be incurred by or awarded against the customer in the event the Company’s software or services are found to infringe upon a patent, copyright, or other proprietary right of a third party.

To date, the Company has not had to reimburse any of its customers for any losses related to these indemnification provisions and no material claims asserted under these indemnification provisions are outstanding as of April 30, 2008. For several reasons, including the lack of prior indemnification claims, the Company cannot determine the maximum amount of potential future payments, if any, related to such indemnification provisions.


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

None.

ITEM 9A. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

We are responsible for the preparation of the financial statements included in this Annual Report. The financial statements were prepared in accordance with accounting principles generally accepted in the United States of America and include amounts that are based on the best estimates and judgments of management. The other financial information contained in this Annual Report is consistent with the financial statements.

Our internal control system is designed to provide reasonable assurance concerning the reliability of the financial data used in the preparation of Ansoft’s financial statements, as well as to safeguard Ansoft’s assets from unauthorized use or disposition.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement presentation.

(b) Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting and for performing an assessment of the effectiveness of internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Because of inherent limitations, internal control over financial reporting cannot provide absolute assurance that financial reporting objectives will be achieved. In addition, projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions and that the degree of compliance with the policies or procedures may deteriorate.

Management performed an assessment of the effectiveness of the Company’s internal control over financial reporting as of April 30, 2008 based upon the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on such assessment, management determined that the Company’s internal control over financial reporting was effective as of April 30, 2008 based on those criteria.

KPMG LLP, a registered public accounting firm, has issued an audit report on the effectiveness of the Company’s internal control over financial reporting. The KPMG report is included in (c) Evaluation of Changes in Internal Control over Financial Reporting.

Under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, the Company evaluated the effectiveness of the design and operation of its disclosure controls and procedures as of the end of the fiscal year ended April 30, 2008, and, based on their evaluation, the Chief Executive Officer and Chief Financial Officer concluded that these disclosure controls and procedures are effective. There was no change in the Company’s internal control over financial reporting that occurred during fiscal year 2008 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
Ansoft Corporation:

We have audited Ansoft Corporation’s internal control over financial reporting as of April 30, 2008, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Ansoft Corporation’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Ansoft Corporation maintained, in all material respects, effective internal control over financial reporting as of April 30, 2008, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Ansoft Corporation and subsidiaries as of April 30, 2008 and 2007, and the related consolidated statements of operations, stockholders’ equity and comprehensive income, and cash flows for each of the years in the three-year period ended April 30, 2008, and our report dated June 6, 2008 expressed an unqualified opinion on those consolidated financial statements.

/s/ KPMG LLP

Pittsburgh, Pennsylvania
June 6, 2008


ITEM 9B.		OTHER INFORMATION

None.


ITEM 10.		DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information relating to this item is provided in the Company’s 2008 Proxy Statement to be filed with the SEC in connection with its 2008 Annual Meeting of Stockholders of the Company is incorporated herein by reference.


ITEM 11.		EXECUTIVE COMPENSATION

The information set forth under the captions “Employment Contracts and Change of Control Agreements” and “Executive Compensation” in the Company’s 2008 Proxy Statement to be filed with the SEC in connection with its 2008 Annual Meeting of Stockholders of the Company is incorporated herein by reference.


ITEM 12.		SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, MANAGEMENT AND RELATED STOCKHOLDER MATTERS

In addition to the information set forth under the caption “Equity Compensation Plans” beginning at page 11 in Part II of this Report, information relating to this item is provided in the Company’s 2008 Proxy Statement to be filed with the SEC in connection with its 2008 Annual Meeting of Stockholders of the Company is incorporated herein by reference.


ITEM 13.		CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information relating to this item is provided in the Company’s 2008 Proxy Statement to be filed with the SEC in connection with its 2008 Annual Meeting of Stockholders of the Company is incorporated herein by reference.


ITEM 14.		PRINCIPAL ACCOUNTING FEES AND SERVICES

PART IV


ITEM 15.		EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Financial statements. The following consolidated financial statements are filed as part of this Annual Report on Form 10-K.


	Page
Report of Independent Registered Public Accounting Firm		27
Consolidated Balance Sheets as of April 30, 2008 and 2007		28
Consolidated Statements of Operations for the years ended April 30, 2008, 2007 and 2006		29
Consolidated Statements of Stockholders’ Equity and Comprehensive Income for the years ended April 30, 2008, 2007 and 2006		30
Consolidated Statements of Cash Flows for the years ended April 30, 2008, 2007 and 2006		31
Notes to Consolidated Financial Statements		32


(b)		Exhibits. The exhibits filed or incorporated by reference as a part of this report are listed in the Index to Exhibits which appears on the following page and are incorporated by reference.

(c)		Schedules.

Schedule II—Valuation and Qualifying Accounts and Reserves for each of the years in the three-year period ended April 30, 2008.

Financial statement schedules not listed above have been omitted because they are inapplicable, are not required under applicable provisions of Regulation S-X, or the information that would otherwise be included in such schedules is contained in the registrant’s financial statements or accompanying notes.

Ansoft Corporation
Schedule II-Valuation and Qualifying Accounts and Reserves
For the three years ended April 30, 2008
(in thousands)


			Additions
	Balance as of		(Deductions)					Balance as of
	the Beginning		Charged to Costs					the End of
	of the Period		and Expenses		Deductions			the Period
Year ended April 30, 2008 Allowance for doubtful accounts		973		485		(127	)		1,331
Year ended April 30, 2007 Allowance for doubtful accounts		545		564		(136	)		973
Year ended April 30, 2006 Allowance for doubtful accounts		425		143		(23	)		545

EXHIBIT INDEX

The Exhibits listed below are filed or incorporated by reference as part of this Annual Report on Form 10-K.


Exhibit
Number		Description

2.1		Agreement and Plan of Merger by and among ANSYS, Inc., Evgeni, Inc., Sidney LLC, and the Company (incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed March 31, 2008, file number 000-27874)

3.1		Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Registrant’s Annual Report on Form 10-K for the year ended April 30, 2006, file number 000-27874)

3.3		Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed May 2, 2008, file number 000-27874)

10.1		1988 Stock Option Plan of the Company (incorporated by reference from Registration Statement No. 333-1398)**

10.2		1995 Stock Option Plan of the Company (incorporated by reference from Registration Statement No. 333-1398)**

10.3		Zoltan Cendes Stock Option Agreement, dated April 30, 1995 (incorporated by reference from Registration Statement No. 333-1398)

10.4		Loan Agreement by and between Ansoft Corporation and PNC Bank, National Association dated October 21, 2004 (incorporated by reference to Exhibit 99.1 to the Registrant’s Current Report on Form 8-K filed October 21, 2004, file number 000-27874)

10.5		Jacob K. White Stock Option Agreement dated February 1, 1996, as amended (incorporated by reference from Registration Statement No. 333-40189)

10.6		John N. Whelihan Stock Option Agreement dated February 1, 1996, as amended (incorporated by reference from Registration Statement No. 333-40189)

10.7		Agilent HFSS™ Technology and License Transfer Agreement dated May 1, 2001 (incorporated by reference to Exhibit 10.12 to the Registrant’s Annual Report on Form 10-K for the year ended April 30, 2003, file number 000-27874)

10.8		Letter dated October 28, 2005 amending the Loan Agreement by and between Ansoft Corporation and PNC Bank, National Association dated October 21, 2004 (incorporated by reference to Exhibit 10.13 to the Registrant’s Form 10-Q for the period ended October 31, 2005, file number 000-27874).

10.9		2006 Stock Incentive Plan of the Company (incorporated by reference to Exhibit 10.9 to the Registrant’s Annual Report on Form 10-K for the for the year ended April 30, 2006, file number 000-27874) **

10.10		Letter dated September 27, 2007 amending the Loan Agreement by and between Ansoft Corporation and PNC Bank, National Association dated October 21, 2004 Company (incorporated by reference to Exhibit 10.15 to the Registrant’s Form 10-Q for the period ended October 31, 2007, file number 000-27874).

14		Code of Business Conduct — this code of ethics may be accessed at the Company’s website: www.ansoft.com

21.1		Subsidiaries of the registrant (incorporated by reference from the Company’s Annual Report on Form 10-K for the fiscal year ended April 30, 1997, file number 000-27874)

23.1		Consent of Independent Registered Public Accounting Firm (filed herewith)

31.1		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)


Exhibit
Number		Description
31.2		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)

32.1		Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)


**		Incentive or stock compensation plan of the Company

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on June 24, 2008.


	ANSOFT CORPORATION
	By	/s/ Nicholas Csendes
		Nicholas Csendes
		President

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on June 24, 2008.


Signature		Title

/s/ Nicholas Csendes Nicholas Csendes		Director, President and Chief Executive Officer (Principal Executive Officer)

/s/ Shane Emswiler Shane Emswiler		Chief Financial Officer (Principal Financial and Accounting Officer)

/s/ Zoltan J. Cendes Zoltan J. Cendes		Director, Chief Technology Officer and Chairman of the Board of Directors

/s/ Peter Robbins Peter Robbins		Director

/s/ Paul Quast Paul Quast		Director

/s/ John N. Whelihan John N. Whelihan		Director

ANSOFT CORP 10-K