~~Table~~ ofUNITED ~~Contents~~STATES SECURITIES AND EXCHANGE COMMISSION

~~UNITED~~Washington, ~~STATES~~D.C. 20549

~~SECURITIES~~Form ~~AND EXCHANGE COMMISSION~~10-K

Washington, D.C. 20549


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

		For the Fiscal Year Ended June 27, 2003

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

		For the transition period from: to

~~FORM 10~~Commission File Number 000-K31859

x		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended June 28, 2002
or
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from: to

CRYSTAL DECISIONS, INC.

~~Commission~~(Exact ~~File~~name ~~Number~~of ~~000-31859~~registrant as specified in its charter)

CRYSTAL DECISIONS, INC.


Delaware		77-0537234
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

895 Emerson St., Palo Alto, California (Address of principal executive offices)		94301 (Zip Code)

~~(Exact~~Telephone: ~~name of registrant as specified in its charter~~(650) 838-7410

Delaware (State or other jurisdiction of incorporation or organization)		77-0537234 (I.R.S. Employer Identification Number)
895 Emerson St., Palo Alto, California (Address of principal executive offices)		94301 (Zip Code)

(Registrant’s telephone number, including area code)

Telephone: (650) 838-7410


Securities registered pursuant to Section 12(b) of the Act:		None
Securities registered pursuant to Section 12(g) of the Act:		Common stock, par value of $0.001

Indicate by check mark whether the registrant (~~Registrant’s~~1) has ~~telephone~~filed ~~number,~~all ~~including~~reports required to be filed by ~~area~~Section 13 ~~code~~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

~~Securities~~Indicate ~~registered~~by check mark if disclosure of delinquent filers pursuant to Item 405 of ~~Section~~Regulation ~~12(b)~~S-K is not contained herein, and will not be contained, to the best of the ~~Act:~~Registrant’s ~~None~~knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment of this Form 10-K. þ

~~Securities~~Indicate ~~registered~~by ~~pursuant~~check ~~to Section 12(g)~~mark ofwhether the ~~Act:~~registrant ~~Common~~is an ~~stock,~~accelerated ~~par~~filer ~~value~~(as defined in Rule 12b-2 of $0the Act.~~001~~) Yes No þ

~~Indicate~~There byis ~~check~~no ~~mark~~public ~~whether~~market ~~the~~for ~~registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of~~ the ~~Securities Exchange Act of 1934~~ ~~during~~registrant’s ~~the~~securities ~~preceding~~and, ~~12 months~~therefore, ~~(or for such shorter period that~~ the registrant ~~was required to file such reports), and~~had ~~(2) has~~no ~~been~~aggregate ~~subject~~market tovalue ~~such~~of ~~filing~~securities ~~requirements~~held ~~for~~by ~~the~~non-affiliates ~~past~~as 90of December ~~days~~27, 2002.

~~Yes~~On June ~~x No o~~27, 2003, 76,091,581 shares of the registrant’s common stock, $0.001 par value per share, were issued and outstanding.

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

OnANNUAL ~~August 30,~~REPORT ~~2002,~~ON ~~75,908,555~~FORM ~~shares of the~~10-K ~~registrant’s common stock, $0.001 par value per share, were~~ ~~issued and outstanding.~~

~~TABLE~~ For OFthe ~~CONTENTS~~Fiscal Year Ended June 27, 2003

PART 1
	Item 1. Business
	Item 2. Properties
	Item 3. Legal Proceedings
	Item 4. Submission of Matters to a Vote of Security Holders
PART II
	Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters
	Item 6. Selected Financial Data
	Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 7A. Quantitative and Qualitative Disclosures About Market Risk
	Item 8. Financial Statements
	Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
PART III
	Item 10. Directors and Executive Officers of the Registrant
	Item 11. Executive Compensation
	Item 12. Security Ownership of Certain Beneficial Owners and Management
	Item 13. Certain Relationships and Related Transactions
	Item 14. Controls and Procedures
PART IV
	Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K
SIGNATURES
INDEX TO EXHIBITS
Exhibit 10.1.4
Exhibit 10.10.2
Exhibit 21.1
Exhibit 23.1
Exhibit 99.1

TABLE OF CONTENTS


		Page

PART I
Item 1.	Business		2
Item 2.	Properties		14
Item 3.	Legal Proceedings		14
Item 4.	Submission of Matters to a Vote of Security Holders		14
PART II
Item 5.	Market for Registrant’s Common Equity and Related Stockholder Matters		15
Item 6.	Selected Financial Data		16
Item 7.	Managements Discussion and Analysis of Financial Condition and Results of Operations		17
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		51
Item 8.	Financial Statements and Supplementary Data		52
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		52
Item 9A.	Controls and Procedures		52
PART III
Item 10.	Directors and Executive Officers of the Registrant		53
Item 11.	Executive Compensation		56
Item 12.	Security Ownership of Certain Beneficial Owners and Management		66
Item 13.	Certain Relationships and Related Transactions		70
Item 14.	Principal Accountant Fees and Services		76
PART IV
Item 15.	Exhibits, Financial Statement Schedules, and Reports on Form 8-K		77
SIGNATURES			83
Index to Consolidated Financial Statements			F-1

-1- ~~CRYSTAL DECISIONS, INC.~~

~~ANNUAL~~PART ~~REPORT ON FORM 10-K~~I

For the Fiscal Year Ended June 28, 2002

TABLE OF CONTENTS

		Page
PART I
Item 1.	Business		3
Item 2.	Properties		8
Item 3.	Legal Proceedings		9
Item 4.	Submission of Matters to a Vote of Security Holders		9
PART II
Item 5.	Market for Registrant’s Common Equity and Related Stockholder Matters		10
Item 6.	Selected Financial Data		11
Item 7.	Managements Discussion and Analysis of Financial Condition and Results of Operations		12
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		47
Item 8.	Financial Statements and Supplementary Data		49
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		50
PART III
Item 10.	Directors and Executive Officers of the Registrant		51
Item 11.	Executive Compensation		53
Item 12.	Security Ownership of Certain Beneficial Owners and Management		58
Item 13.	Certain Relationships and Related Transactions		60
Item 14.	Controls and Procedures		62
PART IV
Item 15.	Exhibits, Financial Statement Schedules, and Reports on Form 8-K		63
SIGNATURES			65

PART 1

Item 1. Business

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 about Crystal Decisions, Inc. (“Crystal Decisions”, “we”, “us” or “our company”). The ~~Company~~words “may”, “will”, “should”, “expects”, “intends”, “plan”, “anticipate”, “believes”, “estimates”, “predicts”, “potential”, “continue” or the negative of these terms or other comparable terminology generally identify forward-looking statements.

~~Crystal~~Investors ~~Decisions,~~in ~~Inc.~~our iscommon anstock ~~information~~are cautioned ~~management~~not ~~company~~to ~~that~~place ~~creates~~undue ~~software~~reliance ~~products~~on ~~and~~forward-looking ~~provides~~statements. ~~services~~Forward-looking ~~for~~statements ~~reporting,~~are ~~analysis~~not ~~and~~guarantees ~~information~~of ~~delivery~~future performance. WeThe forward-looking statements are subject to ~~develop,~~substantial ~~market~~risks and ~~support~~uncertainties anthat ~~integrated~~could cause our future business, ~~scalable~~financial ~~suite~~condition or results of operations to differ ~~enterprise~~materially ~~software~~from ~~products~~our ~~and~~historical ~~solutions~~results ~~that~~or ~~enable~~currently anticipated ~~businesses~~results. toInvestors ~~access~~should ~~disparate~~carefully ~~data~~review ~~sources~~the ~~and~~information contained ~~distribute~~under the caption “Factors Affecting Our Future ~~secure,~~Operating ~~interactive~~Results” ~~reports~~contained in “Management’s Discussion and ~~analyses~~Analysis ~~across~~of Financial Condition and ~~beyond~~Results ~~these~~of ~~organizations~~Operations” and elsewhere in, or incorporated by reference into, this document. WeAll ~~believe~~forward-looking ~~our~~statements ~~products~~are ~~provide~~based ~~direct~~on information available to us on the date hereof, and we assume no ~~rapidly~~obligation ~~achieved~~to ~~benefits~~update ~~including~~forward-looking ~~improved~~statements. ~~decision~~These forward-~~making,~~looking statements are made in reliance upon the safe ~~lower~~harbor ~~overall~~provision ~~information~~of ~~technology~~The ~~costs~~Private ~~and~~Securities ~~better~~Litigation ~~business~~Reform Act ~~performance~~of 1995.

~~Through~~Crystal ~~our company and its predecessors, we have~~Decisions ~~been providing reporting, analysis and information delivery~~ technologies and services for over 15 years. As of June 28, 2002, we shipped (directly, and bundled with our original equipment manufacturer (“OEM”) partners) over 12 million licenses of our products. We have a diverse customer base, including many Fortune 1000 companies. While our primary market is North America, we have over 25 offices and operations in 10 countries, through which we market and distribute our products. To facilitate international use, we have translated many of our products into other languages such as French, German, Japanese and Spanish.

We ~~changed~~provide ~~our~~business ~~name~~intelligence tosoftware ~~Crystal~~and services ~~Decisions,~~that ~~Inc. (“Crystal~~enable ~~Decisions”)~~the ~~from~~effective ~~Seagate~~use ~~Software~~and management of ~~Information~~information ~~Management~~within ~~Group~~and ~~Holdings,~~among ~~Inc~~organizations. inWe ~~March~~develop, ~~2001.~~market and Wesupport products that allow organizations of all sizes to ~~were~~access ~~incorporated~~data infrom ~~Delaware~~disparate insystems, ~~August~~create ~~1999~~useful, interactive information from that data through analysis and ~~are~~reporting and ~~headquartered~~reliably indeliver ~~Palo~~that ~~Alto,~~information ~~California~~to the users that need it. Our products ~~majority~~are ~~shareholder is~~designed ~~Seagate~~to ~~Software~~meet ~~(Cayman)~~the ~~Holdings~~needs of a wide range of end users, ~~which~~from isnon-technical ausers ~~wholly~~to ~~owned~~sophisticated analysts and ~~subsidiary~~application ofdevelopers. ~~New~~In ~~SAC~~addition, aour ~~Cayman~~products ~~Islands~~can ~~limited~~be ~~corporation~~used to ~~(“New~~deliver ~~SAC”).~~reports ~~Silver~~to ~~Lake~~customers ~~Partners L~~and suppliers of the organizations that use our products.P. ~~and~~Our ~~Texas~~products can serve as an information ~~Pacific~~infrastructure ~~Group~~that ~~control~~empowers ~~New~~users ~~SAC~~to extract more value from data that has already been captured by existing information technology systems in order to improve decision-making, lower overall information technology costs and enhance competitiveness.

WeOur ~~became~~products aare ~~majority~~used ~~owned~~by ~~subsidiary~~organizations of ~~New SAC~~all onsizes ~~November 22,~~across ~~2000~~almost ~~when~~all ~~Seagate~~segments ~~Software~~of ~~(Cayman) Holdings~~the ~~acquired~~economy. 75As of June 27,~~001,000~~ ~~shares~~2003, orwe ~~99.7%,~~had ofdelivered ~~our~~more ~~common~~than 15 million ~~stock~~product ~~then~~licenses ~~outstanding~~and ~~under~~had ~~the~~registered ~~terms~~users ofin amore ~~stock purchase~~than ~~agreement~~170 countries. ~~Prior~~As toa ~~November 22~~result, ~~2000,~~ we ~~were~~have a ~~majority owned~~diverse ~~subsidiary~~customer ofbase that ~~Seagate~~includes ~~Software~~software ~~Holdings~~developers, ~~Inc.,~~approximately a350 ~~Delaware~~independent ~~corporation,~~software vendors and anumerous ~~wholly~~well ~~owned~~established ~~subsidiary~~companies, ~~of Seagate~~such ~~Technology~~as Aetna, ~~Inc~~ADP, Citigroup, Coca-Cola, JP Morgan Chase Bank, Kraft Foods and Northrop Grumman.

In 1984, Crystal Computer Services incorporated and began providing software and services. Crystal Computer Services was acquired by Seagate Software Holdings, Inc. in 1994. Seagate Software Holdings was a subsidiary of Seagate Technology, Inc., or Old Seagate, throughout these transactions. In June 1999, Seagate Software Holdings sold the shares of certain of its subsidiaries and the assets of its network storage and management group business to VERITAS Software Corporation for approximately 128 million shares of VERITAS’ common stock. In November 1999, Seagate Software Holdings contributed to us the stock of its subsidiaries and a substantial majority of its assets, other than the shares of VERITAS common stock. We are the successor to Seagate Software Holdings’ business intelligence software business.

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In a series of transactions that took place in November 2000, New SAC purchased the operating business of Old Seagate, including the business intelligence software business that we now operate. New SAC was formed for the purpose of completing these transactions and its principal stockholders include affiliates of Silver Lake Partners, Texas Pacific Group, August Capital, J.P. Morgan Partners, LLC, investment partnerships of which the general partner, managing general partner or investment manager is affiliated with Goldman, Sachs & Co. and the former officers and employees of Old Seagate. Old Seagate’s disc drive business was continued by Seagate Technology, of which New SAC is the majority shareholder, and other direct and indirect subsidiaries of New SAC acquired Old Seagate’s removable tape storage, investment and other businesses. The November 2000 transaction is described more fully under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Change in Control of Crystal Decisions”.

As part of the November 2000 transaction, Seagate Software (Cayman) Holdings Corporation acquired 75,001,000 shares, or 99.7% of our common stock outstanding on that date, under the terms of a stock purchase agreement with Old Seagate and Seagate Software Holdings. Seagate Software (Cayman) Holdings is a wholly owned subsidiary of New SAC.

In the November 2000 transaction, New SAC purchased all of the operating assets of Old Seagate for cash and borrowings of $1.84 billion, including transaction costs of $25 million. Based on the purchase price accounting for the November 2000 transaction, $41.5 million was allocated to the shares of our common stock on November 22, 2000, for an implicit allocated per share purchase price of $0.55. The purchase price and the implicit allocated per share purchase price does not include a subsequent $9.1 million reduction in the allocated purchase price on June 28, 2002, resulting from the release of a tax valuation allowance pushed down to our financial statements from New SAC.

On July 18, 2003, we entered into an agreement and plan of merger with Business Objects, S.A., several wholly owned subsidiaries of Business Objects and Seagate Software (Cayman) Holdings pursuant to which we agreed to be acquired by Business Objects for aggregate consideration, subject to certain adjustments, of $300 million of cash and approximately 26.5 million Business Objects American Depository Shares (“ADSs”) or ordinary shares. Subject to approval by Business Objects shareholders and receipt of various regulatory approvals, we and Business Objects expect the proposed acquisition to close by the end of calendar 2003.

We changed our name to Crystal Decisions, Inc. in March 2001. Our principal executive offices are located at 895 Emerson Street, Palo Alto, California 94301. Our telephone number is (650) 838-7410. You can access our web site at www.crystaldecisions.com. Information contained on our web site is not a part of this document.

We currently have several registered trademarks or applications pending for registration, including Crystal Decisions, Crystal Enterprise, Crystal Reports and Crystal Analysis. Our unregistered trademarks include our logo, Crystal Applications and Crystal Care. Other service marks, trademarks and trade names referred to in this document are the property of their respective owners.

Where You Can Find Additional Information

The reports and other information we file with the SEC can be read and copied at the SEC’s Public Reference Room at 450 Fifth Street, N.W., Washington D.C. 20549. Copies of these materials can be obtained at prescribed rates from the Public Reference Section of the SEC at the principal offices of the SEC, 450 Fifth Street, N.W., Washington D.C. 20549. You may obtain information regarding the operation of the public reference room by calling 1(800) SEC-0330. The SEC also maintains a web site (http://www.sec.gov) that contains reports, proxy and

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information statements and other information regarding issuers that file electronically with the SEC.

We are subject to the information and periodic reporting requirements of the Securities Exchange Act and, in accordance therewith, file periodic reports, proxy statements and other information with the SEC. These periodic reports, proxy statements and other information are available for inspection and copying at the SEC’s public reference rooms and the web site of the SEC referred to above. Our Internet address is http://www.crystaldecisions.com.

We provide our stockholders with annual reports containing, among other information, financial statements audited by an independent public accounting firm and we make available to our stockholders quarterly reports containing unaudited financial data for the first three quarters of each fiscal year.

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Industry Background

~~Over~~Organizations ~~the~~of ~~last~~every ~~decade,~~size ~~many~~need ~~organizations~~to ~~have~~analyze and ~~invested~~assess intheir aperformance ~~wide~~quickly ~~range~~and ofeffectively. ~~data~~As ~~collection~~a ~~systems~~result, every toorganization ~~help improve~~has ~~operational~~a ~~efficiencies~~fundamental and ~~more~~widespread ~~effectively~~need ~~manage~~for ~~their~~useful ~~businesses~~information. ~~Businesses,~~The ~~governments~~burden ~~and~~on ~~other~~organizations ~~entities have~~to ~~spent~~make ~~billions~~more effective use of ~~dollars~~information ~~implementing~~is ~~enterprise~~increasing ~~resource~~rapidly in ~~planning~~today’s environment, ~~data~~which ~~warehousing~~is ~~and~~characterized ~~traditional~~by ~~database~~increasing data ~~systems~~volume, ~~as well~~uncertain aseconomic ~~customer~~trends, ~~relationship~~increasing ~~management~~competition and heightened legislative and ~~supply~~regulatory ~~chain~~requirements for data ~~management~~collection, ~~systems~~reporting and disclosure.

Organizations ~~justify~~have ~~the~~spent ~~disruption~~billions ~~and~~of ~~expense~~dollars ofimplementing ~~the~~software ~~purchase of these data~~ systems ~~because~~to ~~they~~efficiently ~~need~~capture, toorganize, ~~improve~~store ~~their~~and ~~transactional~~protect ~~efficiency.~~data ~~They~~that ~~also~~measures ~~need~~their toperformance, ~~capture~~including customer sales, ~~organize~~expenses, ~~store~~inventory management and employee ~~protect~~data. ~~critical~~However, ~~information~~these ~~about~~transactional software systems ~~specific~~were ~~aspects~~not ofprimarily ~~corporate~~designed ~~performance,~~to ~~such~~facilitate aseasy ~~customer information~~access, ~~financial performance~~viewing, manipulation ~~inventory~~and ~~management~~broad dissemination of data. Employees and ~~employee~~customers ~~information.~~often ~~They~~do ~~would~~not ~~like~~have access to ~~utilize~~the ~~that~~information ~~captured~~within ~~information~~these ~~for~~systems. ~~faster,~~If ~~more~~they ~~effective~~do, ~~planning~~employees and ~~execution~~customers ofdo not ~~business~~typically ~~strategies.~~have ~~These~~the ~~system~~ability ~~investments~~to ~~have~~customize ~~been~~the ~~very~~information or ~~successful~~analyze init ~~addressing~~from ~~the~~multiple ~~first objective~~perspectives. ~~Today~~As a result, ~~large~~there is a ~~volumes~~basic ofneed ~~corporate~~to ~~data~~access, ~~are~~analyze, ~~captured~~understand and ~~processed~~deliver information more effectively within and among organizations.

WeA ~~believe~~broad ~~that~~category ~~the~~of ~~ability~~software ofknown ~~the~~as ~~average~~business ~~company~~intelligence tohas ~~utilize~~been ~~this~~developed ~~data~~ to ~~improve~~help ~~the~~organizations ~~planning and~~address ~~execution of~~ the ~~company’s~~need ~~activities~~to ~~can~~transform ~~present a challenge. The data collection systems may not provide robust technologies for analyzing and reporting on~~ the ~~information therein.~~organizations’ ~~The~~growing ~~increasing~~ amount of data ~~creates~~into anuseful ~~opportunity for businesses to make more informed decisions~~information. ~~Extracting~~In ~~data from different systems~~2003, ~~converting~~IDC itestimated ~~into~~that ~~a standard format,~~the ~~performing~~market ~~calculations~~for orbusiness ~~comparisons~~intelligence onsoftware itwould ~~and then delivering~~be ~~the results to the right person is a complex undertaking~~$4.5 billion ~~We believe large and small companies struggle to efficiently extract information from these diverse systems and present it to decision makers at all levels~~ in ~~a manner that is intuitive, interactive and efficient~~2007. ~~The data is there, but the ability to~~ ~~access and present the~~

Organizations 3have typically deployed business intelligence products that are custom developed or purchased as stand-alone products in a specific department or for an individual project. This approach has resulted in a proliferation of products and systems that are often not integrated with each other or existing enterprise systems and, as a result, only provide a fragmented view of the overall business. Many of these products and systems are costly and complex to maintain and support. In addition, many business intelligence products are designed primarily for sophisticated analytical users and are difficult for the non-technical user to master. Most non-technical users require intuitive and seamless access to data as part of their regular work tasks, regardless of where the data is stored in an organization.

~~Table~~ To allow broad user access to data within and among organizations and to maximize the organizations’ return on investment, a business intelligence product should meet a range of ~~Contents~~complex needs. A business intelligence product should integrate data from disparate systems and applications, scale to support large numbers of users and offer flexible reporting that is easy to use and provides a full range of presentation, formatting and interactivity. We believe there is a significant opportunity to provide organizations with a different approach to business intelligence software by focusing on the most common information and reporting needs. In order to accomplish this objective, we believe business intelligence products should serve as an underlying information infrastructure that allows every user to access information in a form appropriate for the user.

~~right~~The ~~information~~Crystal ~~from~~Decisions ~~all corporate data systems~~Solution ~~in a way that improves the quality and speed of corporate~~ ~~decision making often is not.~~

~~Recently~~We develop, ~~organizations~~market ~~have~~and ~~begun~~support products that enable users to ~~invest~~access indata, add value to it through analysis anand ~~additional~~reporting ~~layer~~and ofreliably ~~technologies~~manage toand ~~address~~deliver the ~~information~~results within ~~challenge~~business applications or processes. ~~These~~Our ~~technologies~~business ~~offer~~is driven by a primary ~~range~~guiding ofprinciple: ~~functionality~~to ~~and are~~help ~~known~~organizations bybring ~~many~~together their ~~labels,~~people ~~but~~and ~~tend~~information to beimprove ~~commonly~~decision-making ~~grouped under~~and ~~the~~performance. ~~umbrella~~Our ~~label~~products ~~“enterprise~~focus first on solving the most common business intelligence”. need, which is for information reporting ~~The~~and ~~most~~delivery. ~~common~~To ~~requirement~~achieve ofour ~~enterprise~~goals, ~~business~~we ~~intelligence~~designed our products as ~~projects~~a iscore reporting — ~~accessing~~ and ~~presenting~~analysis infrastructure for an ~~relevant~~organization’s ~~information~~data insystems aand ~~meaningful~~applications. ~~way~~Our products allow organizations to ~~users.~~maximize the value of the data they have

-5- ~~Enterprise business intelligence solutions enable~~ ~~business users at many different levels in an organization to~~ ~~access and manipulate data stored in various business~~ applications or systems, extract the required information and present it using easy to understand reports, complete with interactive charts, graphs and tables to aid the user. These reports can then be shared in a secure environment with business users across the organization, providing users with the tools to make better, more informed business decisions.

~~Enterprise~~without ~~business~~requiring ~~intelligence~~extensive ~~solutions~~re-engineering ~~have~~or ~~evolved~~creation ~~considerably~~of ~~over~~additional ~~the~~systems ~~last decade, so~~ that ~~today~~cannot ~~they typically~~work ~~comprise~~with ~~a common set of technologies for reporting,~~the adexisting ~~hoc~~transactional ~~query,~~software ~~multi-dimensional on-line analytical programming reporting and analysis, data mining and statistics~~systems.

~~The~~Our ~~Crystal~~products ~~Decisions~~offer ~~Solution~~the following benefits to our customers:

WeLower ~~are~~overall ainformation ~~software~~technology ~~and~~costs through ~~services~~standardization. ~~company~~Our ~~that is~~products ~~focused~~have onbeen ~~one~~designed ~~objective:~~ to ~~help~~access ~~companies~~data ~~bring~~from, ~~together~~and ~~their~~integrate with, a ~~people~~wide ~~and~~range ~~information~~of toexisting ~~improve~~transactional ~~business~~software, ~~performance.~~database Weand ~~believe~~custom-built ~~that~~systems. ~~every~~Our ~~organization~~products facilitate data access, analysis and ~~every~~reporting ~~decision~~in ~~maker~~a ~~can~~consistent, standardized manner. ~~benefit~~This ~~from~~standardization ~~the~~empowers ~~ability~~more users to access more information in a ~~wide~~more ~~variety~~usable ofform ~~corporate~~and allows organizations to ~~data~~integrate ~~sources,~~functions and toapplications ~~analyze~~more easily. As a result, organizations ~~report~~can better use and ~~distribute~~increase the return on their existing information technology investments. We also believe that our products are able to lower the overall information technology purchase, maintenance and ~~resultant~~training ~~business~~costs ~~insights~~for organizations ~~contained~~by ~~therein~~consolidating those data analysis and reporting systems into our single platform.

WeMeet ~~believe~~essential ~~our~~information ~~products meet an extensive range~~management ofdemands. ~~data~~We ~~centric~~believe ~~business~~that ~~and organizational needs commonly referred to under a number of different labels, including~~ information ~~delivery, enterprise reporting, enterprise business~~ ~~intelligence, enterprise information portals, developer~~ reporting, adanalysis ~~hoc query~~ and ~~reporting,~~delivery ~~business~~are ~~analytics, on-line~~essential ~~analytical~~parts ~~processing~~of ~~reporting,~~almost every ~~analytic~~ application ~~development~~ ~~and~~in ~~packaged~~every ~~analytic applications~~organization. ~~Our~~As ~~products are~~organizations ~~designed~~increasingly todepend ~~help~~on ~~organizations~~using ~~derive~~their ~~higher~~information ~~business~~for ~~value from~~most ~~their~~processes, ~~range~~the ofbusiness ~~electronic~~intelligence ~~data~~infrastructure ~~sources~~upon ~~and their enterprise~~which ~~information~~they ~~sources~~rely ~~(including,~~is ~~but~~subject ~~not limited~~ to, ~~enterprise resource~~increased ~~planning,~~technological ~~customer~~demands. ~~relationship~~We ~~management, supply~~have ~~chain~~developed ~~management,~~our ~~e-commerce~~products ~~and~~to ~~business~~meet ~~intelligence~~these ~~systems, as~~demands ~~well as data warehouses~~ and ~~data~~to ~~marts).~~be:

We• ~~believe~~scalable wein ~~are~~terms ~~positioned~~of toconcurrent ~~take~~user ~~advantage~~volume, ~~of any~~capacities, ~~acceleration~~processing, inthroughput ~~demand~~and ~~for~~use ~~enterprise~~of ~~business~~hardware ~~intelligence across~~assets; ~~all~~• ~~industries.~~reliable Weby ~~believe~~providing ~~our~~high ~~solutions~~levels ~~are~~of ~~both~~uptime, ~~easy~~high ~~to use~~fault ~~and~~tolerance, ~~deploy~~disaster inrecovery ~~smaller projects~~ and ~~powerful~~redundancy ~~enough~~capability; ~~for~~• ~~the most~~high ~~complex~~performance ~~and~~in ~~large-scale~~terms ~~applications.~~of Weresponse ~~provide~~and aprocessing ~~secure, web-based~~times ~~information~~for ~~infrastructure~~users ~~that incorporates reporting, analysis, query~~ and ~~information~~requests; ~~delivery.~~• ~~We developed~~manageable ~~our~~in ~~solutions~~terms toof ~~meet~~ease ~~the~~of ~~increasing~~deployment ~~demands~~and cost of ~~global organizations~~maintenance and ~~provide~~ownership; an• ~~infrastructure~~flexible ~~enabling~~enough ~~business users,~~to ~~both~~be ~~inside~~used ~~and~~in ~~outside~~any ~~the~~size ~~organization,~~deployment; toand ~~access interactive~~• ~~content,~~extensible oras ~~reports,~~organizational ~~through~~needs achange ~~personalized web-based~~over ~~interface~~time.

~~Products~~Address the information requirements of all users and organizations. Our products can be used by technical and non-technical staff to improve decision-making and enhance competitiveness. Our products are flexible enough to provide users with an appropriate level of interactivity and sophistication. We believe that our products create a complete and integrated reporting, analysis, query and information delivery infrastructure to satisfy the requirements of sophisticated analysts and technical users while also providing the ease of use necessary to appeal to non-technical users. To address the specific requirements of customers of all sizes and their projects, our products are available individually or together as an integrated suite.

WeEase ~~provide a complete range~~ of ~~products~~integration ~~designed to extend the value of our industry acclaimed reporting~~ with existing ~~robust~~systems. ~~analytics~~Our ~~and~~products ~~the~~are ~~underlying~~designed ~~infrastructure required~~ to ~~manage~~be ~~and~~easy ~~deliver~~to ~~corporate~~deploy, ~~data.~~customize ~~With~~and aintegrate ~~common~~into ~~enterprise~~a ~~architecture~~customer’s asexisting ~~its~~information ~~foundation,~~technology ~~our~~environment ~~product suite provides~~and ~~scalable~~processes. ~~and~~As ~~secure~~the ~~infrastructure~~needs ~~and~~of ~~tools~~each ~~that~~customer are ~~built~~unique, toour ~~withstand demanding business environments. Our~~ products ~~provide an~~are ~~integrated,~~open ~~web-enabled platform to provide access, analysis, interpretation~~ and ~~distribution~~flexible ofenough ~~data designed~~ to ~~improve business~~provide ~~performance~~developers ~~through ad hoc query~~ and ~~reporting to~~ ~~complex~~systems ~~analysis.~~integrators ~~Customers~~with ~~use~~the ~~our~~means ~~products~~ to ~~create, implement~~complete ~~and~~deployments ~~deploy~~on ~~enterprise information solutions in~~ an ~~application,~~organizational ~~on a desktop, across an organization~~ or ~~between organizations~~departmental basis. ~~Our~~As ~~products~~a ~~extend~~result, ~~e-business~~our ~~technology~~customers ~~architectures~~can ~~for~~use ~~flexible~~our ~~deployment~~products ~~using~~in the ~~world~~manner ~~wide~~that ~~web. Our~~best ~~products~~suits ~~support a variety of data sources, including~~their ~~operational~~requirements orand ~~legacy~~generates ~~data~~value ~~stores,~~from ~~data~~their ~~marts, data warehouses, e-commerce~~ systems, ~~enterprise~~and ~~resource~~software investments.

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~~Table of Contents~~ Products

~~planning,~~We ~~customer~~offer ~~relationship~~an ~~management, supply~~integrated ~~chain~~suite ~~management~~of ~~and~~ business intelligence ~~systems~~products ~~and other~~that ~~data centric computer software applications.~~include:

~~Our products include:~~ Crystal Reports

~~Enterprise~~ Crystal ~~Suite~~Reports is an integrated software package for query, report design, application development and report publishing functions. Crystal Reports is used to generate data driven, highly formatted, interactive reports which are stored in a proprietary file format. Crystal Reports is designed in a range of versions to meet the needs of report authors, analysts and application developers. Crystal Reports allows these users to:

~~Crystal~~• ~~Enterprise — Crystal~~access ~~Enterprise~~most ~~provides~~types ~~an information~~of ~~delivery~~structured ~~and~~data; ~~business~~• ~~intelligence suite which is an integrated~~format, ~~web-based~~design ~~solution for reporting, analysis~~ and ~~delivery.~~ ~~Crystal~~process ~~Enterprise~~a ~~integrates~~variety ~~and delivers all~~ of ~~our component~~reports; ~~products on one extensible suite. The software offers a customizable infrastructure for providing highly secure access to interactive, actionable information to employees, customers~~ and ~~suppliers.~~• Itintegrate isthese ~~designed to help companies improve decision making by organizing, categorizing and delivering~~ reports~~, analytic~~ ~~applications and strategic business information~~ into ~~web~~ ~~or enterprise applications~~.NET, ~~Crystal~~Java, ~~Enterprise~~COM ~~provides a scalable~~ and ~~reliable~~other ~~infrastructure~~development ~~to securely deliver information to a high volume of users, and a multi-tier architecture for proven fault tolerance designed to ensure maximum up time~~environments. ~~The Crystal Enterprise product is the new generation of the Seagate Info family of products.~~

~~Enterprise~~Reports ~~Partner~~can ~~Kits — We~~be ~~provide~~published in a ~~series~~variety of ~~software~~formats ~~toolkits~~including ~~and~~DHTML, ~~packages~~RTF, ~~that~~Microsoft ~~enable~~Excel, ~~closer~~PDF ~~integration~~and ~~with~~XML. ~~our~~Crystal ~~partners’~~Reports ~~products.~~is ~~Most~~deployed ~~kits~~on ~~include~~the ~~data~~Windows ~~access~~operating ~~drivers, sample~~system ~~reports~~ and ~~data~~is available ~~structures~~in ~~and~~Simplified ~~may~~Chinese, ~~include~~English, ~~special documentation~~French, ~~support and services. We currently offer packages~~German, ~~for SAP R/3~~Italian, ~~SAP BW 3.0~~Japanese, ~~Siebel 7.0~~Korean ~~CRM~~ and ~~Baan 2~~ Spanish.~~0 ERP.~~

~~Reporting~~ To build a common business report, such as a sales report, a technical report author could use Crystal Reports to access relevant sales and customer databases, organize and format the appropriate information, such as customer name, sales amount, product selection and shipping dates. The report could include tables of information, graphs, maps and/or images, conditional formatting, advanced business logic and summarized calculations. The finished report could be viewed and used by any end user, who could navigate the report by page or by clicking on charts or summaries for more detail and could also print or e-mail the report. An application developer could use one of the reporting components embedded within Crystal Reports to include this sales report as a seamless part of another application, such as a sales management system.

Crystal ~~Reports —~~ ~~Crystal Reports is an integrated~~Analysis ~~software package for query, report design, application~~ development and web report publishing functions. Provided in a range of versions for both developers and users, Crystal Reports allows users to access most types of structured data, format, design and process a variety of reports, integrate these reports into .NET, Java and COM applications and other popular environments and distribute reports to users. The report design capabilities of Crystal Reports produce interactive documents that can be published in a variety of formats including DHTML, RTF, Microsoft Excel, PDF and XML for increased flexibility.

~~Analytics~~ Crystal Analysis consists of software that includes functions for user ad hoc analysis, analytic reporting, analytic application development and online analytical processing for multi-dimensional data. We provide Crystal Analysis products in a range of client and server versions for a variety of users including non-technical users, analysts and developers. Our client-based analysis product provides powerful and guided data navigation and enables the creation of interactive report applications. Our analytic server product can be used to consolidate large amounts of data with complex business logic to facilitate sophisticated analysis by the end user.

All Crystal Analysis ~~— Based~~ oncomponents ~~our~~can ~~experience~~ integrate with ~~both reporting~~Crystal ~~and~~Enterprise ~~advanced on-line analytical processing~~ and ~~analytics,~~ Crystal ~~Analysis~~Reports. ~~combines~~Our ~~user ad hoc query, analytic reporting and on~~client-~~line analytical processing as well as Microsoft~~based ~~Excel~~analysis ~~integration~~product incan abe ~~single~~deployed ~~user~~on ~~focused interface~~Windows. ~~Crystal Analysis~~Our isanalytic ~~provided~~server product incan abe ~~range~~deployed ofon ~~versions~~servers ~~for~~using ~~business~~the ~~users~~Windows, ~~analysts~~ ~~and developers. It is a client design tool that~~Solaris, ~~provides~~AIX, ~~powerful~~HP-UX and ~~guided~~Linux ~~analysis~~operating ~~that~~systems. ~~can~~Crystal beAnalysis ~~used as an~~is ~~extension~~available toin ~~any~~English, ~~of our other products and integrates seamlessly with Crystal Reports~~French, ~~Crystal~~German ~~Enterprise~~ and ~~Holos~~Japanese.

~~Holos — Holos,~~A anbusiness ~~advanced~~analyst ~~analytic application~~could ~~development~~use ~~and~~the ~~deployment environment, represents~~client-based ~~the~~Crystal ~~high~~Analysis ~~end~~product ofto ~~our~~access ~~analytics~~a ~~family~~large ofmultidimensional ~~products.~~data warehouse Itand istrack ~~designed to~~key ~~handle~~information, ~~large~~such ~~amounts~~as ofproduct ~~relational~~sales ~~and~~by region ~~multidimensional~~over ~~data~~time. ~~Holos~~ ~~enables~~The ~~the~~business ~~modeling~~analyst ofcould ~~large~~simultaneously integrate ~~amounts~~key ofvariables, ~~data~~such ~~with~~as ~~complex business~~margin ~~logic~~and pipeline, and interactively ~~then~~explore ~~provides~~sales ~~multiple~~results using different views of the data to ~~enable~~ ~~analysis,~~identify ~~expose~~ trends ~~and~~in ~~accelerate~~the ~~decision~~information ~~making.~~and forecast the ~~Holos~~impact ~~integrates~~of ~~with~~changes ~~our~~on ~~enterprise~~the ~~and~~sales ~~user~~model ~~products~~or product mix.

~~Applications~~ Crystal Enterprise

~~Analytic~~Crystal ~~Application~~Enterprise ~~Templates — We~~is ~~provide~~infrastructure ~~a collection of solution~~software ~~templates~~that ~~built~~integrates ~~for use with~~ our ~~enterprise~~ products. ~~These solutions help accelerate customer adoption~~ and ~~success~~fosters ofefficient ~~our~~management ~~products. Designed to address common enterprise needs~~ and ~~current~~ ~~market~~delivery ~~demand,~~of ~~the~~report ~~current templates include applications for customer profiling, balanced scorecard, budgeting, e-commerce analysis and telecommunications billing analysis~~information. ~~These~~It ~~packages~~offers ~~include~~a ~~reports, on-line analytical~~customizable ~~processing~~solution ~~data~~for ~~structures and a framework of business logic to~~providing ~~begin implementations.~~

-7- 5

~~Table~~ interactive information to employees, customers and suppliers. Crystal Enterprise addresses a range of information ~~Contents~~management needs including the need for:

~~Sales~~• a scalable, reliable platform to manage, process, store and ~~Marketing~~ deliver information to a large number of internal and external users; and • standardized reporting, analysis and information delivery across multiple business applications.

~~Our~~Crystal ~~sales~~Enterprise ~~and~~can ~~marketing~~be ~~programs~~deployed ~~are~~on ~~organized by~~servers ~~geographical~~using ~~regions,~~the ~~including North America~~Windows, ~~EMEA~~Solaris and ~~the~~AIX ~~Asia Pacific~~operating ~~region~~systems. WeAlmost ~~adapt~~any web-browser ~~certain~~or ~~products~~standards-based ~~for~~application ~~foreign~~can ~~markets,~~serve as the ~~including~~Crystal ~~translation~~Enterprise ofuser ~~documentation~~interface. ~~and~~Crystal ~~local~~Enterprise ~~language~~is ~~versions,~~available ~~and~~in ~~localize~~English, ~~our~~French, ~~marketing~~German and ~~sales support programs accordingly~~Japanese.

WeA ~~utilize~~customer acould ~~direct~~use ~~sales~~Crystal ~~force~~Enterprise ~~and~~to ~~indirect~~build, ~~sales~~deploy ~~channels, such as OEM relationships~~ and maintain a ~~network~~web-based ~~of distributors~~sales ~~and~~information ~~resellers,~~application or to ~~reach~~deliver ~~our~~specific ~~customers.~~sales ~~These distributors~~reports ~~and~~as ~~OEMs~~part ~~may~~of ~~also~~a ~~sell~~packaged ~~other products that are~~customer ~~complementary~~relationship ~~to,~~management ~~or compete with, ours~~system. WeCrystal ~~provide~~Enterprise ~~sales~~would ~~and~~store ~~marketing~~report ~~programs~~content tofrom ~~encourage~~Crystal ~~the~~Reports ~~sale~~or ofCrystal ~~our products~~Analysis, ~~but~~ ~~there~~integrate ~~can~~with bethe nocustomer’s ~~assurance~~existing ~~that~~user ~~distributors~~security protocols and ~~OEMs~~process ~~will~~reports ~~not place~~on ademand ~~higher~~for ~~priority~~any ~~on competing products~~user. ~~Our~~The ~~agreements~~user ~~with~~interface ~~distributors~~could ~~are generally non-exclusive and may~~ be ~~terminated~~ bypresented ~~either~~as ~~party~~a ~~without~~user-customized ~~cause.~~summary ~~Our sales channels are~~page ~~supported~~with bynavigation, ~~our~~scheduling ~~organization~~and ofviewing ~~pre~~capabilities ~~sales~~to ~~and technical~~enable ~~specialists.~~easy ~~Customers~~use ~~can~~by ~~also~~any ~~purchase~~type ~~some~~ of ~~our products by downloading them over the internet~~user.

~~Our marketing efforts are designed to increase~~ Crystal ~~brand awareness and acceptance of our products. We have an~~Applications ~~international marketing strategy that consists of several key~~ ~~components:~~

• Crystal ~~targeted~~Applications ~~print~~are ~~advertising~~software intemplates ~~trade~~that provide reports, ~~technical~~user ~~and~~interface ~~business~~components ~~publications;~~and •data ~~on-line~~models ~~advertising~~to support oncommon ~~our~~processes, ~~website;~~such •as ~~cooperative~~performance ~~marketing~~management, ~~programs~~sales force ~~with~~management, ~~distributors~~e-commerce and ~~resellers;~~telecommunications •billing analyses. ~~participation~~These intemplates ~~seminars~~are ~~and~~built ~~tradeshows;~~using •our ~~direct~~Crystal ~~mailings~~Enterprise platform toand ~~both~~are ~~prospective~~functional ~~and~~examples ~~existing~~of ~~customers;~~how ~~and~~our •products ~~extensive~~can ~~public~~be combined ~~relations~~to ~~activities~~address ~~and~~specific ~~programs~~issues. toWe ~~build~~believe ~~relationships~~that ~~with~~these templates ~~key~~help ~~analysts,~~accelerate ~~journalists~~customer adoption and ~~influential~~deployment ~~third~~of our ~~parties~~products.

~~Our~~A ~~international~~customer ~~marketing~~could ~~groups produce~~customize, orcomplete and deploy ~~oversee~~our ~~the~~performance ~~production~~management ~~of,~~application ~~substantially~~template ~~all~~with ofCrystal Enterprise ~~the~~to ~~on-line~~provide ~~and~~a management scorecard to help track ~~print~~corporate ~~product~~performance ~~literature~~against key metrics, ~~brochures~~such as number of new orders booked by month, ~~advertising~~days’ ~~and~~sales ~~similar~~outstanding, customer ~~marketing~~shipments and ~~promotional~~sales ~~material~~representative turnover.

We Crystal ~~derived a substantial portion of our revenues~~Enterprise ~~from~~Partner ~~one distributor customer, Ingram Micro, Inc.~~Kits ~~(“Ingram”) during the last three fiscal years. As a~~ percent of our total revenues, Ingram accounted for 10%, 16% and 20% for fiscal years ended June 28, 2002 (“fiscal 2002”), June 29, 2001 (“fiscal 2001”) and June 30, 2000 (“fiscal 2000”), respectively. Our relationship with Ingram is subject to a number of agreements, each of which may be terminated upon the expiration of a required notice period. We cannot be certain that our relationship with Ingram will continue at all or the extent to which it will continue. No other customer accounted for 10% of more of our total revenues in fiscal 2002, 2001 or 2000. Our indirect revenues include sales to distributors and OEMs and as a percent of total revenues were 33% in fiscal 2002, 37% in fiscal 2001 and 40% in fiscal 2000. Our revenues from sales outside of the United States as a percent of total revenues were 32% in fiscal 2002, 32% in fiscal 2001 and 34% in fiscal 2000.

~~Professional~~Our ~~Services~~Crystal Enterprise partner kits are a series of software toolkits and packages that enable customers to integrate our products with those of other independent software vendors by providing an interface to the transactional software system’s data structures and security regimes. Most kits include data access drivers, ~~Technical~~sample ~~Support~~reports and data structures ~~Maintenance~~and may include special documentation, support and services. We currently offer packages for many transactional software systems including SAP R/3, SAP BW, Siebel CRM, PeopleSoft and Baan ERP.

~~We believe that high quality, real time customer~~Services ~~support is important to the successful marketing and sale of our~~ products. We provide a broad range of support services such as consultation, training and technical support to ensure the optimal use of our products. These services (including professional services, technical support and maintenance) are designed to ensure ongoing customer satisfaction and influence customers’ future purchasing decisions.

~~Our~~We ~~professional~~believe ~~services~~that ~~organization~~high ~~provides consultation~~quality, ~~and~~real ~~training~~time tocustomer support ~~plan~~is ~~and~~important ~~execute~~to the ~~deployment~~successful ~~of our~~marketing, ~~products~~sales and implementation ~~speed~~of ~~end-user~~our ~~adoption~~products. ~~We provide a dedicated~~Accordingly, ~~international~~in ~~team~~addition to offering ~~meet~~our ~~this~~software ~~need~~products, ~~and~~we ~~help~~offer ~~ensure that~~ our customers ~~gain~~ a ~~rapid~~broad range ~~return~~of onpost-sale ~~their~~support ~~investments~~services ~~in our~~such ~~technology.~~as Wetechnical ~~also~~support, training ~~have~~and ~~organized~~consulting. aThese ~~network~~services ofare ~~certified partner~~designed ~~organizations~~to help us to ~~provide~~optimize ~~extensions~~customer tosatisfaction ~~our~~and ~~service~~influence customers’ ~~offerings~~future inpurchasing andecisions. ~~effort~~We are committed to ~~ensure~~developing ~~that~~and sustaining long-term relationships with our customers ~~fully~~and ~~understand~~have ~~the~~dedicated ~~value~~substantial ofresources ~~our~~to ~~product~~customer ~~offering~~service and ~~have~~support, including a476 ~~positive~~dedicated ~~experience with~~staff ~~our~~members ~~products~~as of June 27, 2003.

-8- 6

~~Table of Contents~~ Maintenance

~~Our technical support efforts are designed to ensure that our customers are able to use our products to perform to their potential.~~ We ~~believe~~offer ~~effective~~maintenance ~~technical support~~programs ~~during~~for ~~product~~most ~~evaluation accrues to the benefit~~ of our ~~customers and that post sale support has been and will continue to be a substantial factor in maintaining customer satisfaction. We provide a range of technical support~~ products, towhich ~~match~~generally ~~the needs~~consist of ~~different~~product ~~organizations.~~enhancements ~~We operate technical support~~and ~~groups~~upgrades ~~that~~when ~~are located at various sites around the world, including North America~~ and ~~Europe.~~as ~~Certain~~we ~~technical~~make ~~support groups~~them ~~also offer 24-hour, seven-day toll-free telephone services~~available. We ~~offer~~generally ~~pre sale services and post sale support to~~sell ~~current~~maintenance ~~users~~in ~~and~~12-month ~~potential customers evaluating our products~~increments.

~~We also offer maintenance programs for certain of~~ Professional ~~our products, which generally consist of unspecified product~~Services ~~enhancements and upgrades. We generally sell maintenance and~~ ~~technical support services in 12-month increments.~~

~~Strategic~~To ~~Relationships~~speed end user adoption of our products, our professional services organization provides consulting and training to plan and execute their deployment. We have a dedicated team in North America and England who perform these services for us alone or in combination with other consultants, system integrators or value added resellers.

~~We have a strategic relationship with Microsoft,~~ Technical ~~under which Microsoft bundles our range of access and analysis~~Support ~~products with selected Microsoft products. For example, Crystal~~ Reports is bundled with several Microsoft products, including developer tools, such as Microsoft Visual Basic. We supply the integrated reporting tool for Microsoft’s new Visual Studio .NET product suite.

WeOur ~~also~~technical ~~have~~support ~~strategic~~services ~~partnerships~~are ~~with~~designed ~~other~~to ~~technology~~assist ~~vendors.~~our Wecustomers ~~have~~to ~~developed~~use ~~OEM~~our ~~and~~products ~~other~~to ~~strategic~~their full ~~relationships~~potential. ~~with~~We ~~over~~believe ~~300~~effective ~~application~~technical ~~independent~~support ~~software~~during product ~~vendors,~~evaluations ~~application~~and ~~service~~implementations ~~providers~~benefits ~~and~~our ~~computer~~customers ~~hardware~~and that ~~manufacturers.~~post-sales ~~These~~support ~~strategic~~has ~~partners~~been ~~sell~~ and ~~support~~will ~~our products,~~continue asto ~~well~~be asa ~~integrate~~means ~~our~~to achieve ~~products~~greater ascustomer ~~components~~satisfaction. We provide a range of ~~their~~technical ~~applications.~~support Asservices ato ~~result~~match the needs of ~~these~~different organizations ~~strategic~~including ~~partnerships,~~fee-for-service offerings. We operate wetechnical ~~believe~~support ~~our~~groups ~~customers~~that are ~~able~~located toat ~~maximize~~various ~~their investments~~sites inaround ~~enterprise~~the ~~applications~~world, ~~such~~including asNorth ~~enterprise~~America ~~resource~~and ~~planning,~~Europe. We also ~~supply~~offer ~~chain~~24 ~~management~~hour, ~~and~~seven-day ~~customer~~toll-free ~~relationship~~telephone ~~management through~~services ~~integrated~~with ~~reporting~~some types ~~and~~of ~~analysis~~technical ~~solutions~~support packages.

~~Research~~Strategic ~~and Development~~Relationships

We ~~incurred~~have ~~research~~developed ~~and~~relationships ~~development~~with ~~expenses~~a ofwide range ~~$30.5 million~~of intechnology ~~fiscal~~vendors ~~2002,~~and ~~$29.2 million~~service inproviders ~~fiscal~~including industry ~~2001~~leaders and ~~$27.4 million~~influencers insuch ~~fiscal~~as ~~2000.~~Microsoft ~~Our~~and ~~customers~~SAP. ~~did~~In many ~~not~~cases, ~~fund~~we ~~our~~have ~~research~~integrated ~~and~~our ~~development~~products ~~expenses~~with inthose ~~fiscal~~of ~~2002,~~the other ~~fiscal~~party ~~2001~~and orour ~~fiscal~~products ~~2000.~~are Wedelivered ~~are~~with ~~pursuing~~theirs. ~~our~~We ~~product~~believe ~~development~~these ~~objectives~~relationships bygenerate ~~developing~~ new ~~software~~sales ~~products~~opportunities, ~~and~~increase ~~product~~our ~~enhancements~~deployment ~~internally,~~capacity ~~acquiring products, technologies~~ and ~~businesses~~enhance ~~complementary to~~ our ~~existing~~ products’ ~~and forming alliances with other technology companies~~features.

~~Patents and Intellectual Property~~ Microsoft ~~Rights~~

~~Due~~We tobegan ~~the~~our ~~rapidly~~relationship ~~changing~~with ~~nature~~Microsoft ofin ~~applicable~~1993. ~~technologies,~~Microsoft wecurrently ~~believe~~integrates ~~that~~our ~~the~~products ~~improvement~~into ofits ~~existing~~developer ~~products~~product suite, ~~reliance~~Visual ~~upon~~Studio.NET ~~trade secrets~~ and ~~unpatented~~Business ~~proprietary~~Solutions ~~know-how and development of new~~ products ~~are generally more important than patent protection~~. We ~~have~~receive ~~one~~advance ~~United~~notice ~~States issued~~of ~~patent~~planned upgrades and improvements ~~one~~to ~~United~~Microsoft’s ~~States~~products ~~allowed~~so ~~patent,~~that ~~which~~ we can ~~expect~~integrate toour beproducts ~~issued~~before ~~during calendar 2002~~shipment. We have ~~four~~a ~~patent~~full time ~~applications~~staff ~~pending~~at inMicrosoft’s ~~the~~Redmond, ~~United~~Washington ~~States and one foreign patent application pending~~facilities. We ~~believe that effective protection of~~ ~~intellectual~~also ~~property~~coordinate ~~rights~~sales isand ~~unavailable~~marketing orefforts ~~limited~~where inpossible. ~~certain~~Through ~~foreign~~its ~~countries.~~Business InSolutions ~~addition,~~value-added ~~the~~reseller ~~laws of many~~channel, ~~countries~~Microsoft doresells ~~not protect~~ our ~~proprietary~~products ~~rights~~with toits ascustomer ~~great an~~relationship ~~extent~~management asand ~~the~~enterprise ~~laws~~resource ofplanning ~~the United States~~products.

~~Our license agreements include restrictions~~SAP ~~intended to protect and defend our intellectual property. We~~ realize that, although we have incorporated these restrictions, there is a possibility for unauthorized use of our software. In addition to relying on these contractual rights, we have an ongoing trademark registration program pursuant to which we register certain of our product names, slogans and logos in the United States and in some foreign countries.

We 7have an original equipment manufacturer and reseller arrangement with SAP whereby SAP incorporates our Crystal Enterprise and Crystal Reports products into SAP’s BW 3.0 product, its data warehouse product. We receive advance notice of planned upgrades and improvements to SAP’s products so that we can integrate our products before shipment. We have full time staff at a site adjacent to SAP’s Walldorf, Germany facility.

~~Table~~ Other ofStrategic ~~Contents~~Relationships

~~Competition~~We also have original equipment manufacturer relationships with approximately 350 independent software vendors. These companies sell and support our products and/or integrate our products into their applications. As a result of these relationships, we believe our customers may derive incremental value from the other applications by using our integrated reporting and

-9- ~~The segment of the software market in which we~~ ~~compete is comprised of numerous competitors, and we expect~~ ~~competition to increase. Many of our current and prospective~~ competitors may have significantly greater financial, technical and marketing resources than we do. In addition, many of our prospective customers may have the internal capability to implement software solutions that assist users to analyze and interpret data to make business decisions.

~~The~~analysis ~~competitive~~products ~~factors~~without ~~affecting~~a ~~the~~separate ~~market for~~deployment or integration cycle. We consider our relationships with these companies to be of strategic importance to us because they are generally industry leaders and influence adoption of products and ~~include:~~technologies by customers.

• product functionality; • performance and reliability; • demonstrable cost-effective benefits for users; • price; • quality of customer support and user documentation; • ease of use and installation; • vendor reputation; • experience; and • financial stability of the software provider. Customers

WeAs ~~believe~~of ~~that~~June 27, 2003, we ~~currently~~had ~~compete~~delivered ~~effectively~~more ~~with~~than ~~respect~~15 million toproduct ~~these~~licenses ~~factors.~~and ~~Our~~had ~~ability~~registered ~~to remain competitive~~users ~~will~~in ~~depend~~more tothan a170 ~~great~~countries. ~~extent~~Our ~~upon~~products ~~our~~are ~~ongoing~~used ~~performance in~~by ~~the~~organizations ~~areas~~ of ~~product~~all ~~development~~sizes ~~and~~in ~~customer~~almost ~~support.~~every Tosegment beof the ~~successful~~economy. inAs ~~the~~a ~~future~~result, we ~~believe~~have ~~that~~a wediverse ~~must~~customer ~~respond~~base that ~~promptly~~includes ~~and~~a ~~effectively~~broad tocommunity ~~the challenges~~ of ~~technological change~~software developers and ~~our~~a ~~competitors’ innovations by continually~~number ~~enhancing~~of ~~our~~well ~~product~~established ~~offerings~~companies. ~~Performance~~The infollowing ~~these~~table ~~areas~~lists ~~will~~some of inour ~~turn~~top ~~depend~~50 ~~upon~~end ~~our~~user ~~ability~~customers towho ~~attract~~purchased ~~and~~products ~~retain highly~~and ~~qualified~~services ~~technical~~directly ~~personnel~~from inus aby ~~competitive~~revenues ~~market~~we ~~for~~recognized from ~~experienced~~July 3, ~~and~~1999 ~~talented~~to ~~software~~June 27, ~~developers~~2003.

~~Employees~~ Consumer/Retail The Coca-Cola Company Kraft Foods, Inc. Pepsi-Cola Company Safeway, Inc. Financial Services/Insurance Aetna Life Insurance Company Automatic Data Processing, Inc. Bank of America Citigroup, Inc. Insurance Corporation of British Columbia J.P. Morgan Chase Bank Morgan Stanley & Co. Inc. R+V Allegemeine Versicherung AG Suntrust Banks, Inc. Healthcare/Pharmaceuticals Genentech, Inc. Johnson & Johnson Pfizer Inc. Information and Other Technology Microsoft Corporation Seagate Technology Manufacturing/Industrials Air Products & Chemicals Inc. The Boeing Company Ford Motor Company International Paper Company Northrop Grumman Corporation Toyota Motor Manufacturing North America, Inc. Trans-Canada Pipelines Limited Professional Services KPMG International Telecommunications AT&T Corp. AT&T Wireless Services, Inc. SBC Operations, Inc. Verizon Wireless

AsWe derived a substantial portion of ~~June 28~~our revenues from one distributor, ~~2002~~Ingram Micro, weduring ~~had~~the ~~1,600~~last ~~employees~~three fiscal years. As a percentage of our total revenues, Ingram Micro ~~including~~accounted ~~547~~for 16% in ~~sales~~fiscal ~~and marketing~~2001, ~~417~~10% in ~~services~~fiscal 2002 and less ~~support~~than 10% in fiscal 2003. No other customer or distributor accounted for 10% or more of our total revenues in fiscal 2001, fiscal ~~447~~2002 or fiscal 2003. In fiscal 2001, our revenues were $123.5 million, or 74% of total revenues, from customers in North ~~research~~America, ~~and~~$31.8 million, ~~development~~or ~~and~~19% ~~189~~of total revenues, from customers in ~~general~~Europe, the Middle East and ~~administrative~~ ~~functions~~Africa and $12.5 million, ~~None~~or 7% of total revenues, from customers the Asia Pacific region. In fiscal 2002, our ~~employees~~revenues ~~are~~were $159.8 million, ~~represented~~or 74% of total revenues, from customers in byNorth aAmerica, ~~labor~~$41.8 million, ~~union~~or 19% of total revenues, from customers in Europe, the Middle East and Africa and $15.6 million, or ~~are~~7% of total revenues, from customers in the ~~subject~~Asia Pacific region. In fiscal 2003, our revenues were $212.0 million, or 74% of atotal ~~collective~~revenues, ~~bargaining~~from customers in ~~agreement~~North America, $54.6 million, Weor ~~have~~19% ~~never~~of ~~experienced~~total arevenues, from ~~work~~customers ~~stoppage~~in Europe, the Middle East and ~~believe~~Africa and ~~that~~$20.9 million, or 7% of total revenues, from customers in the Asia Pacific region. See our ~~employee~~note 16 ~~relations~~to ~~are~~our consolidated ~~good~~financial statements in this document for more information.

WeOur ~~believe~~customers ~~our~~often ~~future~~purchase ~~success~~licenses ~~will~~for ~~depend in~~a ~~large~~single ~~part~~location, ~~upon~~department ~~our~~or ~~ability~~division ~~to attract~~ and ~~retain~~may ~~highly~~later ~~skilled~~expand ~~managerial,~~their ~~product~~use ~~development, sales and marketing personnel. The loss~~ of ~~the services of any of~~ our ~~key~~products ~~personnel, the inability~~ to ~~attract~~other orparts ~~retain~~of ~~qualified~~their ~~personnel in the future~~organizations. orWe ~~delays~~believe inwe ~~either~~can ~~hiring~~sell ~~required~~additional ~~personnel~~licenses orof ~~the~~our ~~rate at~~existing ~~which~~products ~~new~~to ~~people~~our ~~become~~existing ~~productive,~~customer ~~particularly~~base ~~sales personnel~~ and ~~product~~also ~~developers,~~sell ~~could~~those customers ~~have~~new aproducts ~~material~~as ~~adverse~~we ~~effect~~expand on our ~~business,~~product ~~operating results and financial condition~~line. ~~Competition for qualified employees is intense in the software~~ ~~industry.~~

-10-

Customer Case Study

The following case study illustrates how one of our customers, Aetna, a health insurance and benefits provider, adopted our products to solve a business problem. Aetna’s management needed to pull financial and operational data from disparate systems throughout the company, analyze that data quickly and present the resulting information in a form that would assist management in making effective business decisions. Aetna integrated our Crystal Enterprise 8.5 and Crystal Reports 8.5 products into its existing information systems, allowing Aetna to extract and present a unified view of financial and operational data from 50 different data sources that feed into its Microsoft SQL Server and IBM DB2 databases. Previously, in order for Aetna to tabulate monthly financial information from dozens of geographically dispersed offices, a full month was required using a combination of Microsoft Excel spreadsheets and Microsoft Word documents. With our products in place, Aetna was able to cut the time it takes to generate such monthly financial data from a full month to only 12 to 14 days. The reports created with our products present the information to Aetna’s management in a unified, flexible view that can break down financial and operational information based on business units, geography or customer segments. Additionally, by providing Aetna’s management with a one-company view of the organization, our software provides Aetna with a better view of the performance and profitability of its various products.

Sales and Marketing

We organize our sales and marketing programs by geographic regions, including North America, Japan, the Asia Pacific region and the European region, which includes the Middle East and Africa. In most cases, we sell our English language products. In some cases, we adapt certain products for foreign markets, including translation of documentation and user interfaces to local languages.

To reach our customers, we utilize a direct sales force and indirect sales channels, such as our original equipment manufacturer relationships and a network of resellers and distributors. Our sales channels are supported by our pre-sales and technical specialists. Customers can also purchase some of our products by downloading them over the Internet.


	*Direct Sales*

We sell our products primarily through a direct sales force that is comprised of field sales personnel, inside sales personnel, telesales personnel and our eStore staff. Our field sales force, consisting of customer account managers, professional service account coordinators and support managers, focus on mid-sized and large enterprises. Our inside sales force, consisting of customer account managers, professional services account coordinators and support managers, focus their efforts on small and mid-sized enterprises, with most selling conducted over the telephone. Our inside sales force most often contacts sales prospects who already use our Crystal Reports product. Our telesales group serves as a direct telephone link to customers who call our offices, affording us the opportunity to address customer issues and make additional sales. Our eStore provides us with an opportunity to test pricing and promotional strategies and conduct low-cost sales via the world wide web. Our direct sales force for North America is managed from our Vancouver, Canada offices. We also have a direct sales presence throughout the world managed from our offices in England, Japan and Singapore.


	*Indirect Sales*

Our indirect revenues include sales to distributors, other resellers and original equipment manufacturers and as a percentage of total revenues were 37% in fiscal 2001, 33% in fiscal 2002 and 34% in fiscal 2003. We have established indirect sales channels through distributors and resellers, who primarily focus their sales efforts on small and mid-sized organizations. We sell

-11-

our products through original equipment manufacturers that bundle our products with theirs. We have a sales team targeted at developing and maintaining our relationships with original equipment manufacturers.


	*Marketing*

Our marketing activities consist of several key components:


	•	targeted print advertising in trade, technical and business publications;

	•	online advertising on our web site;

	•	cooperative marketing programs with original equipment manufacturers, distributors and other resellers;

	•	participation in seminars and tradeshows;

	•	direct mailings to both prospective and existing customers; and

	•	extensive public relations activities and programs to build relationships with key information technology community analysts and influencers.

Our marketing groups produce, or oversee the production of, substantially all of our online and print product literature, brochures, advertising and similar marketing and promotional material.

Research and Development

Since our inception, we have devoted significant resources to the development of our products and technology. We believe that our future success depends in large part on continued innovation and rapid product development. We conduct a majority of our research and development operations in Vancouver, Canada and Ipswich, England. As of June 27, 2003, our research and development team consisted of 450 persons.

We had research and development expenses of $29.2 million in fiscal 2001, $30.5 million in fiscal 2002 and $41.9 million in fiscal 2003. Our customers did not fund any of our research and development expenses in fiscal 2001, fiscal 2002 or fiscal 2003. We pursue our product development objectives by developing new software products and product enhancements internally, but may from time to time acquire products, technologies and businesses complementary to ours or form alliances with other companies. We recently began to outsource some of the final quality assurance testing for our products and anticipate that we may outsource other development functions in the future.

Patents and Intellectual Property Rights

Our success and ability to compete is dependent in part on our ability to develop and maintain the proprietary aspects of our technology and operate without infringing upon the proprietary rights of others. We rely primarily on a combination of copyright, trade secret and trademark laws, confidentiality procedures, contractual provisions and other similar measures to protect our proprietary information. Due to the rapidly changing nature of applicable technologies, we believe that the improvement of existing products, reliance upon trade secrets and unpatented proprietary know-how and development of new products are generally more important than patent protection. As of June 27, 2003, we had two United States issued patents, eight patent applications pending in the United States and one foreign patent application pending. We also have an ongoing trademark registration program pursuant to which we register some of our product names, slogans and logos in the United States and in some foreign countries.

We also use contractual provisions to protect our intellectual property rights. We license our software to be integrated or sold with the products of numerous independent software vendors,

-12-

as well as licensing directly to end users. These license agreements, which address our technology, documentation and other proprietary information, include restrictions intended to protect and defend our intellectual property. These licenses are generally non-transferable and are typically perpetual. We also require all of our employees, contractors and many of those with whom we have business relationships to sign non-disclosure and confidentiality agreements.

Our products also include third party software that we obtain the rights to use through license agreements. We use this software primarily to add features that we do not choose to develop internally.

Competition

The market for our products is highly competitive, rapidly evolving and subject to changing technology, customer needs and new product introductions. We compete principally with vendors of integrated query, reporting, analysis and information delivery software, such as Actuate, Brio Software, Business Objects, Cognos, Hummingbird, Information Builders and MicroStrategy. We also face or expect to face some competition from the SAS Institute and Informatica and expect increased competition from additional market entrants, including companies that specialize in the development, marketing and support of software products that assist users to access, analyze and interpret data to make business decisions. We also face competition from database and application vendors, such as Microsoft, Oracle, SAP and IBM, who offer reporting and analysis tools with their products.

The competitive factors affecting the market for our products include:


	•	product functionality;

	•	performance and reliability;

	•	quality of customer support;

	•	ease of use and installation;

	•	availability and quality of consulting and implementation services;

	•	vendor reputation;

	•	demonstrable cost-effective benefits for users;

	•	price;

	•	sales and marketing capabilities; and

	•	financial stability of the software provider.

We believe that we currently compete effectively with our competitors on the basis of these factors. Our ability to remain competitive will depend to a great extent upon our ongoing performance in the areas of product development and customer support. To be successful in the future, we believe that we must respond promptly and effectively to the challenges of technological change and our competitors’ innovations by continually enhancing our product offerings. Performance in these areas will in turn depend upon our ability to attract and retain highly qualified technical personnel in a competitive market for experienced and talented software developers.

Employees

As of June 27, 2003, we had 1,769 full-time employees, including 618 in sales and marketing, 476 in services and support, 450 in research and development and 225 in general and administrative functions. None of our employees are represented by a labor union or are the subject of a collective bargaining agreement. We have never experienced a work stoppage and believe that our employee relations are good. We believe our future success will depend in large part upon our ability to attract and retain highly skilled managerial, product development, sales and marketing personnel.

-13-

Item 2. Properties

Our principal executive offices are located in Palo Alto, California. Our ~~other~~properties ~~principal~~consist ~~facilities~~of ~~are~~leased ~~located~~facilities infor ~~Canada~~sales and ~~the~~marketing, ~~United~~research ~~Kingdom~~and development, services and support and administrative personnel. The majority of our facilities are occupied under leases that expire at ~~various~~ various times through fiscal 2015. At June 2827, ~~2002~~2003, our leased space approximated ~~311~~362,000 square feet with ~~approximately~~ ~~185~~approximately 220,000 square feet located in Canada, 58 61,000 square feet located in the United States, 49 60,000 square feet located in Europe and 1921,000 square feet located in the Asia Pacific region. These figures exclude approximately 87105,000 square feet of unoccupied space in Canada and approximately 3,000 square feet leased to others in the United States. We have continued to lease additional space in our Vancouver, Canada location and are currently in the process of building out unoccupied space in this location.

We 8believe that our facilities are adequate for our current needs and that suitable additional or substitute space will be available as needed to accommodate expansion of our operations.

We believe that our facilities are adequate for our current needs and that suitable additional or substitute space will be available as needed to accommodate expansion of our operations.

Item 3. Legal Proceedings

~~The~~In ~~following~~November ~~discussion~~1997, ~~contains~~Vedatech ~~forward-looking statements~~commenced ~~within~~an action in the ~~meaning~~Chancery Division of ~~Section 27A~~the High Court of Justice in the United ~~Securities~~Kingdom ~~Act~~against ofCrystal ~~1933,~~Decisions as(UK) ~~amended~~Limited, ~~(the~~our ~~“Securities~~wholly owned ~~Act”)~~subsidiary. ~~and~~The ~~Section 21E~~liability phase of the ~~Securities~~trial ~~Exchange~~was ~~Act~~completed in ofMarch ~~1934~~2002, asand ~~amended~~we ~~(the~~prevailed ~~“Exchange~~on ~~Act”)~~all claims except for a quantum meruit claim. WeThe ~~are~~court ordered the parties to mediate the ~~subject~~amount of that claim and we came to ~~litigation~~a ~~arising~~mediated settlement with Vedatech in ~~the~~August ~~ordinary~~2002. ~~course~~The ofmediated settlement was not material to our operations and contained no continuing ~~business~~obligations. ~~While~~In September 2002, however, we ~~believe~~received notice that Vedatech is seeking to set aside the ~~ultimate~~settlement. ~~outcome~~In ofApril ~~these~~2003, ~~actions~~we ~~will~~filed ~~not~~an ~~have~~action ain ~~material~~the ~~adverse~~High ~~effect~~Court onof ~~us,~~Justice ~~the~~seeking a ~~outcome~~declaration ofthat ~~these~~the ~~actions~~mediated issettlement ~~not~~agreement ~~determinable~~is valid and binding. ~~negative~~Although we believe that Vedatech’s basis for ~~outcomes~~seeking ~~may~~to ~~adversely~~set ~~effect~~aside our ~~financial~~mediated ~~position,~~settlement ~~liquidity~~is meritless, the oroutcome ~~results~~cannot ofbe ~~operations~~determined at this time. ~~Accordingly~~If our mediated settlement were to be set aside, ~~actual~~a ~~results~~negative outcome could ~~differ~~adversely ~~materially~~affect ~~from~~our ~~those~~business, ~~projected~~results inof ~~the~~operations ~~forward-looking~~and ~~statements~~financial condition.

In ~~November~~addition ~~1997,~~to ~~Vedatech~~the ~~Corporation (“Vedatech”)~~foregoing, ~~commenced~~we anare ~~action~~subject ~~in the Chancery~~to ~~Division~~other oflitigation ~~the High Court of Justice~~ in the ~~United~~ordinary ~~Kingdom against~~course ~~Crystal Decisions (UK) Limited, a wholly owned subsidiary~~ of ~~Crystal Decisions. The action alleged a breach of an oral agreement and infringement of Vedatech’s U.K. copyright in one of~~ our ~~products and sought monetary and injunctive relief~~business. ~~In August 2000, Vedatech obtained permission~~While towe ~~amend~~believe ~~its~~that ~~action to include claims for unjust enrichment, unlawful interference and quantum meruit. In May 2001, Vedatech sought to enjoin Crystal Decisions (UK) Limited from infringing on~~ the ~~U.K.~~ultimate ~~copyright~~outcome ~~and~~of ~~sought~~these ~~forfeiture~~matters towill ~~Vedatech of all~~not ~~infringing~~have ~~software copies. Of the relief sought, only~~ a ~~claim for~~material ~~JPY~~adverse ~~26,624,181~~effect ~~(approximately~~on ~~U.S. $240~~us,~~000)~~ ~~for~~the ~~unpaid invoices~~outcome ~~initially was settled. The liability phase~~ of ~~the trial~~these ~~was~~matters ~~completed~~is innot ~~March~~determinable ~~2002,~~ and wenegative ~~prevailed~~outcomes onmay ~~all claims~~adversely ~~except~~affect ~~for~~business, ~~the~~results ~~quantum meruit. The court ordered the parties to mediate the quantum~~ of ~~that~~operations ~~claim~~ and, ~~in August 2002, we came to a mediated settlement with Vedatech. The mediated settlement is not material to~~ our ~~operations and contains no continuing~~financial ~~obligations~~condition. ~~On September 24, 2002, however, we received~~ ~~documents indicating Vedatech is seeking to set aside the~~ ~~settlement.~~

In addition to the foregoing, we are subject to other litigation in the ordinary course of business. While we believe that the ultimate outcome of these matters will not have a material adverse effect on us, the outcome of these matters is not determinable and negative outcomes may adversely effect our financial position, liquidity or results of operations.

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

~~None~~On July 18, 2003, Seagate Software (Cayman) Holdings Corporation, which owned 98.6% of our common stock at such date, executed an action by written consent of stockholders approving the proposed acquisition of our company by Business Objects S.A. and the Agreement and Plan of Merger by and among Business Objects S.A., Borg Merger Sub I, Inc., Borg Merger Sub II, Inc., Borg Merger Sub III, Inc., Seagate Software (Cayman) Holdings Corporation and Crystal Decisions, Inc. We cannot complete the acquisition by Business Objects until 20 days after we mail an Information Statement describing the written consent and complying with the requirements of Schedule 14C promulgated by the Securities and Exchange Commission to our stockholders.

-14- 9

~~Table~~ PART ~~of Contents~~II

~~Item~~ As 5of June 27, 2003, 76,091,581 shares of our common stock were outstanding, which were held by 264 stockholders of record. ~~Market~~There ~~for~~is ~~Registrant’s~~no ~~Common~~established ~~Equity~~public ~~and~~trading market ~~Related~~for ~~Stockholder~~any ~~Matters~~class of our securities.

AsWe ofhave ~~August 30,~~never ~~2002,~~declared ~~75,908,555~~or ~~shares~~paid ofany dividends on our ~~common~~capital stock. ~~were~~We ~~outstanding~~currently expect to retain any future earnings for use in the operation and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future. Subject to limited exceptions, ~~which~~we ~~were~~are restricted ~~held~~in our ability to pay dividends by the covenants ~~198~~contained in our revolving loan agreement with Comerica. We are permitted to repurchase stock and/or pay cash dividends in an aggregate amount not to exceed $2.0 ~~stockholders~~million during the term of ~~record.~~the ~~There~~agreement, isprovided nothat ~~established~~we ~~public~~are not in default under the ~~trading~~agreement ~~market~~and ~~for~~that ~~any~~a ~~class~~default would not occur immediately after payment of ~~our~~the ~~securities~~dividend.

-15- ~~We have never declared nor paid cash dividends on~~ ~~any of our capital stock and do not anticipate that any cash~~ ~~dividends will be declared in the foreseeable future. We~~ ~~currently intend to retain all available funds and any future earnings to use in the operation of our business.~~

Item 6. Selected Financial Data

The selected financial data set forth below should be read intogether ~~conjunction~~ with ~~Item 7,~~ “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” ~~our Audited Consolidated~~ and ~~Combined~~our ~~Financial~~financial ~~Statements~~statements and ~~the~~related ~~Notes thereto, and the other information contained elsewhere in this Form 10-K~~notes. We have derived ~~our~~the ~~selected~~statement ~~statements~~ of operations data for the fiscal years ended June 2829, ~~2002~~2001, June 2928, ~~2001~~2002 and June 3027, ~~2000~~2003 and the ~~selected~~ balance sheet data as of June 28, 2002 and June 2927, ~~2001~~ 2003 from the ~~Audited Consolidated and Combined Financial~~audited ~~Statements~~financial ~~that~~statements ~~are~~ included ~~under~~elsewhere ~~Item 8~~ in this Annual Report on Form 10-K. The ~~selected~~statement ~~statements~~ of operations data for the fiscal years ended July 2, 1999 and ~~July~~June 330, ~~1998~~ 2000 and the ~~selected~~ balance sheet data as of July 2, 1999, June 30, 2000 ~~and~~ ~~July~~and June 229, ~~1999~~2001 were derived from ~~our~~the ~~Audited~~audited ~~Consolidated and~~financial ~~Combined~~statements ~~Financial Statements~~ that are not included in this ~~Form 10-K.~~ ~~The~~Annual ~~selected~~Report ~~balance sheet data as of~~on ~~July 3, 1998 was derived from our Unaudited Consolidated and Combined Financial Statements that are not included in this~~ Form 10-K. ~~The consolidated and combined statements of operations data reflect certain comparative period figure reclassifications to conform to the basis of presentation adopted in fiscal 2002.~~ Historical results are not necessarily indicative of results ~~of operations~~ to be expected for future periods.

		For the fiscal years ended
				Fiscal Years Ended
		June 28,				June 29,				June 30,				July 2,				July 3,
				July 2,				June 30,				June 29,				June 28,				June 27,
		2002				2001				2000				1999				1998
				1999				2000				2001				2002				2003
		~~(in thousands, except per share data)~~		(in thousands, except per share data)
Consolidated and Combined Statements of Operations Data:
Statement of Operations Data:
Revenues		$	217,170			$	167,722			$	126,909			$	142,565			$	116,429
Revenues:
Gross profit			160,722				117,172				81,459				92,008				79,710
	Licensing			$	92,013			$	74,182			$	107,028			$	140,009			$	185,532
Income (loss) from operations			14,936				(12,937	)			(276,237	)			(98,957	)			(4,993	)
	Maintenance, support and services				50,552				52,727				60,694				77,161				101,976
Net income (loss)			12,955				(11,469	)			(221,162	)			(96,375	)			(13,259	)
		Total revenues			142,565				126,909				167,722				217,170				287,508
Net income (loss) per share — basic		$	0.17			$	(0.15	)		$	(2.95	)		$	(1.28	)		$	(0.18	)
Cost of revenues:
Net income (loss) per share — diluted		$	0.17			$	(0.15	)		$	(2.95	)		$	(1.28	)		$	(0.18	)
	Licensing				3,938				3,906				5,504				4,993				5,617
Weighted average number of shares used in basic net income (loss) per share			75,601				75,253				75,001				75,001				75,001
	Maintenance, support and services				37,374				41,346				41,996				46,377				56,313
Weighted average number of shares used in diluted net income (loss) per share			76,806				75,253				75,001				75,001				75,001
	Amortization of developed technologies				4,545				198				3,050				5,078				—
	Write-off of developed technologies				4,700				—				—				—				—
		Total cost of revenues			50,557				45,450				50,550				56,448				61,930
Gross profit					92,008				81,459				117,172				160,722				225,578
Operating expenses:
	Sales and marketing				65,488				65,752				73,888				94,449				108,470
	Research and development				23,657				27,377				29,236				30,515				41,924
	General and administrative				10,334				17,659				15,465				18,464				29,434
	Amortization of goodwill and other intangible assets				4,772				3,038				2,023				2,358				—
	Write-off of in-process research and development				—				—				7,073				—				—
	Unusual items				86,714				242,569				1,851				—				—
	Restructuring costs				—				1,301				573				—				—
		Total operating expenses			190,965				357,696				130,109				145,786				179,828
Income (loss) from operations					(98,957	)			(276,237	)			(12,937	)			14,936				45,750
Interest and other income (expense), net					56				20				2,651				1,319				896
Income (loss) before income taxes					(98,901	)			(276,217	)			(10,286	)			16,255				46,646
Provision for (benefit from) income taxes					(2,526	)			(55,055	)			1,183				3,300				13,191
Net income (loss)				$	(96,375	)		$	(221,162	)		$	(11,469	)		$	12,955			$	33,455
Basic net income (loss) per share				$	(1.28	)		$	(2.95	)		$	(0.15	)		$	0.17			$	0.44
Diluted net income (loss) per share				$	(1.28	)		$	(2.95	)		$	(0.15	)		$	0.17			$	0.42
Weighted average number of shares used in basic net income (loss) per share					75,001				75,001				75,253				75,601				75,978
Weighted average number of shares used in diluted net income (loss) per share					75,001				75,001				75,253				76,806				80,317

	As of
	June 28,			June 29,		June 30,		July 2,			July 3,
	July 2,			June 30,		June 29,		June 28,			June 27,
	2002			2001		2000		1999			1998
	1999			2000		2001		2002			2003
	(in thousands)
Consolidated and Combined Balance Sheet Data:
Balance Sheet Data:
Cash and cash equivalents	$	71,451		$	34,379	$	3,621	$	7,419		$	10,223
Cash, cash equivalents and short-term investments	$	7,419		$	3,621	$	34,379	$	71,451		$	104,703
Working capital (deficit)		24,434			10,750		8,860		(11,163	)		(4,732	)
Restricted cash		—			—		—		—			2,019
Total assets		136,846			105,126		72,545		79,820			63,568
Working capital (deficit)		(11,163	)		8,860		10,750		26,426			49,762
Long-term liabilities		583			3,600		381		459			—
Total assets		79,820			72,545		105,126		136,846			208,698
Total stockholders’ equity		41,452			35,609		23,113		2,883			16,641
Long-term liabilities		459			381		3,600		2,575			3,090
Total stockholders’ equity		2,883			23,113		35,609		41,452			75,756

~~The net loss for fiscal 2001 included unusual items of $8.9 million, comprising $1.9 million of non~~-~~cash compensation expense and $7.1 million of in~~16-~~process research and development write-offs related to the~~ ~~Stock Purchase Agreement and the acquisition of Seagate~~ ~~Technology, Inc. by VERITAS Software Corporation.~~

~~The~~Item ~~net~~7. ~~loss~~Management’s ~~for~~Discussion ~~fiscal~~and ~~2000~~Analysis ~~included~~of ~~unusual items~~Financial Condition and Results of ~~$242.6 million.~~ Operations

The ~~net~~following ~~loss~~information ~~for~~should ~~fiscal~~be ~~1999~~read together with the audited consolidated financial statements and the notes thereto and other information included ~~unusual~~elsewhere in this Annual ~~items~~Report ofon ~~$86.7~~Form ~~million~~10-K.

This 11Annual Report on Form 10-K, including the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business”, contains forward-looking statements. These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by the forward-looking statements. These risks and other factors include those listed under “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Factors Affecting Future Operating Results” and elsewhere in this Annual Report on Form 10-K. In some cases, you can identify forward-looking statements by terminology such as “may”, “will”, “should”, “expects”, “intends”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential”, “continue” or the negative of these terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially. In evaluating these statements, you should specifically consider various factors, including the risks outlined under “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Factors Affecting Future Operating Results”. These factors may cause our actual results to differ materially from any forward-looking statement.

~~Table~~ Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of ~~Contents~~activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of these forward-looking statements. We are under no duty to update any of the forward-looking statements after the date of this Annual Report on Form 10-K to conform our prior statements to actual results.

~~Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations~~ Overview

~~The following discussion and analysis should~~ General ~~be read in conjunction with our audited consolidated and~~ combined financial statements and the notes thereto and other information included elsewhere in this Form 10-K. Certain statements in this Management’s Discussion and Analysis of Financial Condition and Results of Operations and information contained elsewhere in this Form 10-K are forward-looking statements within the meaning of Section 27A of the Securities Act, Section 21E of the Exchange Act and the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve risks and uncertainties. Our actual results could differ materially from those anticipated in such forward-looking statements as a result of certain factors, as more fully described in the “Factors Affecting Future Operating Results” section of this Item and elsewhere in this Form 10-K. We do not undertake any obligation to publicly update any forward-looking statement to reflect events or circumstances after the date on which any such statement is made or to reflect the occurrence of unanticipated events.

~~Overview~~We provide business intelligence software and services that enable the effective use and management of information within and among organizations. Our revenues are derived primarily from licensing fees for software products and, to a lesser extent, fees for services relating to these products, including maintenance, technical support, training and consulting. We sell our software products through two channels: directly to end user customers through our sales force and indirectly through resellers, original equipment manufacturers, systems integrators and distributors, including independent software vendors. Original equipment manufacturers, which are independent software vendors and hardware vendors, generally integrate our products with theirs or resell them with their products. Our other indirect vendors resell our software products to end user customers.

~~General~~ We operate and report financial results on a fiscal year of 52 or 53 weeks ending on the Friday closest to June 30. Accordingly, fiscal 2001 ended on June 29, 2001, fiscal 2002 ended on June 28, 2002 and fiscal 2003 ended on June 27, 2003. Fiscal 2001, 2002 and 2003 were each comprised of 52 weeks.

~~Crystal~~ Sources Decisions, Inc. is an information management company that creates software products and provides services for reporting, analysis and information delivery. We develop, market and support an integrated, scalable suite of ~~enterprise software products that enable businesses to access~~Revenues ~~disparate data sources and distribute secure, interactive~~ reports and analyses across and beyond these organizations. We believe that our products provide direct and rapidly achieved benefits including improved decision-making, lower overall information technology costs and better business performance.

Licensing revenues. We ~~operate~~generate inlicensing arevenues ~~broad~~from ~~industry~~the ~~segment~~sale ~~that~~of ~~is commonly~~licenses ~~referred~~ to asuse our ~~“business~~software ~~intelligence~~products.” We ~~believe~~ ~~that~~price our products ~~meet~~on ~~an extensive range of data-centric business and organizational needs commonly referred to under~~ a ~~number~~per ~~of different labels~~user, ~~including information~~ ~~delivery,~~processor ~~enterprise~~or ~~reporting,~~concurrent ~~enterprise~~user ~~business intelligence,~~basis. ~~enterprise~~We ~~information~~generally ~~portals,~~do ~~developer reporting,~~not ~~ad hoc query and reporting, business analytics,~~sell ~~on-line~~licenses ~~analytical~~for ~~processing (“OLAP”) reporting, analytic application development and packaged analytic applications. We sell~~ our products ~~through~~on ~~our~~a ~~direct~~time ~~sales force~~or ~~and~~subscription ~~certain indirect sales channels such as distributors and original equipment manufacturers (“OEMs”)~~basis.

-17- ~~Through our company and its predecessors, we have~~ ~~been providing reporting, analysis and information delivery~~ ~~technologies and services for over 15 years. As of~~ June 28, 2002, we shipped (directly, and bundled with our OEM partners) over 12 million licenses of our products, and our current customer base is diverse, including many Fortune 1000 companies. While our primary market is North America, we have over 25 offices and operations in 10 countries, through which we market and distribute our products. To facilitate international use, we have translated many of our products into other languages such as French, German, Japanese and Spanish.

We ~~were~~currently ~~incorporated~~operate inwith ~~Delaware~~virtually inno ~~August~~order backlog ~~1999.~~because our software products are typically delivered ~~Our~~shortly ~~headquarters~~after orders are ~~located~~received. atLicensing ~~895 Emerson~~revenues Stin any quarter are substantially dependent on orders booked and delivered in that quarter. Historically, ~~Palo~~we ~~Alto,~~have recognized a ~~California~~substantial ~~94301~~portion of our revenues in the last month of a quarter. ~~Our~~As ~~telephone~~we ~~number~~sell ismore ~~(650) 838~~large-~~7410~~scale deployments of our products, orders may become larger and the impact of the longer sales cycle of these deployments may make our revenues harder to predict.

WeMaintenance, ~~operate~~support and ~~report~~services revenues. ~~financial~~Our ~~results~~maintenance onrevenues aare ~~fiscal~~derived ~~year~~from ofselling 52rights orto ~~53 weeks~~existing ~~ending~~customers ~~on the Friday closest~~ to ~~June 30. Accordingly, fiscal 2002 ended on June 28,~~receive ~~2002~~product ~~(“fiscal 2002”)~~upgrades, ~~fiscal~~when ~~2001 ended on June 29, 2001 (“fiscal 2001”)~~ and ~~fiscal~~if ~~2000 ended~~we onmake ~~June 30,~~them ~~2000 (“fiscal 2000”)~~available. ~~Fiscal~~Our ~~2003~~maintenance ~~will~~agreements ~~end~~generally onhave ~~June 27,~~a ~~2003~~term ~~and will be comprised~~ of ~~52 weeks.~~ ~~Fiscal~~one ~~2002, 2001 and 2000 were each comprised of 52 weeks~~year. ~~We have reclassified certain comparative period~~ ~~figures~~Customers tomay ~~conform~~renew totheir ~~the~~maintenance ~~basis~~agreements offor ~~presentation adopted in~~additional ~~fiscal~~consecutive ~~2002~~periods.

InOur ~~view~~technical ofsupport ~~our~~revenues ~~significant~~are ~~growth~~derived ~~in recent~~from ~~years,~~fees wecharged ~~believe~~to ~~that~~customers ~~fiscal~~for ~~year~~post-~~to-year~~sales ~~comparisons~~efforts. ofWe ~~our~~sell ~~financial~~technical ~~results~~support ~~are~~services ~~not~~under ~~necessarily~~several ~~meaningful~~different ~~and~~programs generally ~~you~~on ~~should not~~a ~~rely~~12-month ~~upon~~basis, ~~them~~on asa anfee ~~indication~~for ofuse, ~~future~~fixed ~~performance~~price or a per incident basis.

Our 12professional services organization generates revenues for training and consulting to plan and execute the deployment of our products and accelerate end user adoption. In addition, we provide training to our customers’ employees to enhance their ability to utilize fully the features and functionality of the product purchased. We provide training and consulting services related to the use of our products and receive project- or time-based fees as a result.

~~Table~~ Costs of ~~Contents~~ Revenues

~~Critical~~Our ~~Accounting~~cost ~~Policies~~of licensing revenues consists primarily of materials, product packaging, distribution costs, related fulfillment personnel and third-party royalties. Our cost of ~~Estimates~~maintenance, support and services revenues consists primarily of personnel and related overhead costs for technical support, training, consulting and the cost of materials delivered with product upgrades and enhancements. Prior to the end of fiscal 2002, our total cost of revenues also included the amortization of the fair value of developed technologies on our balance sheet that arose as the result of certain transactions described further under “Change in Control of Crystal Decisions.”

Operating ~~Our consolidated and combined financial~~Expenses ~~statements have been prepared in accordance with accounting~~ principles generally accepted in the United States and form the basis for the following discussion and analysis on critical accounting policies and estimates. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On a regular basis we evaluate our estimates and assumptions. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

WeSales ~~believe~~and ~~the~~marketing ~~following~~expenses ~~critical~~include ~~accounting~~salaries, ~~policies~~benefits, ~~reflect~~commissions ~~our~~and ~~more~~bonuses ~~significant~~earned ~~estimates~~by sales and ~~assumptions~~marketing ~~used~~personnel, inadvertising, product promotional campaigns, promotional materials, travel, facilities and other overhead costs. Research and development expenses are expensed as incurred and consist primarily of personnel and related costs associated with development of new products, the ~~preparation~~enhancement and localization of ~~our~~existing ~~consolidated~~products, quality assurance and testing, ~~combined~~as well as facilities and other overhead costs. General ~~financial~~and ~~statements:~~administrative expenses consist primarily of personnel costs for finance, legal and human resources, as well as other administrative costs.

~~Revenue~~In ~~Recognition. We~~May ~~derive~~2003, ~~revenues~~we ~~from~~pledged ~~the~~$1.0 million ~~sale~~to ofthe ~~licenses~~Community ~~for~~Foundation ~~our~~of ~~software~~Silicon ~~products~~Valley, ~~and~~which ~~from~~we ~~services~~accrued ~~such as~~and ~~maintenance,~~expensed ~~consulting,~~in ~~training~~fiscal 2003 and ~~technical~~paid ~~support~~on June 30, 2003. We also ~~recognize~~agreed ~~revenue~~to inmatch ~~accordance~~employee ~~with~~contributions ~~Statement~~to the Community Foundation of ~~Position~~Silicon Valley up to 1% of our income before ~~(SOP) 972~~interest, ~~“Software~~taxes ~~Revenue~~and ~~Recognition” as~~amortization ~~amended~~for bythe ~~SOP 98-9~~prior ~~“Modification~~fiscal year. The maximum amount of our matching contribution in fiscal 2003 was ~~SOP 97-2~~approximately $220,000, ~~Software~~which ~~Revenue~~we ~~Recognition~~accrued ~~with~~and ~~Respect~~expensed toin fiscal ~~Certain~~2003 ~~Transactions~~and paid in July 2003.” WeThe ~~generally~~maximum ~~recognize~~amount ~~licensing~~that we could pay ~~revenues,~~under ~~whether~~this ~~sold~~matching ~~direct~~plan orfor ~~through~~fiscal ~~distributors~~2004 orwould be approximately ~~resellers~~$453,000. ~~upon~~The ~~product~~Community ~~delivery~~Foundation of Silicon Valley is an independent, ~~provided~~public ~~persuasive~~benefit ~~evidence~~organization that provides grants to ofcharitable angroups ~~arrangement~~in ~~exists~~areas such as education, ~~fees~~arts ~~are~~and ~~fixed~~cultural participation orand ~~determinable~~neighborhoods and ~~we deem~~civic ~~the~~engagement. ~~resulting~~The Community ~~receivable~~Foundation toof beSilicon ~~collectible.~~Valley Inalso ~~instances~~works with ~~where~~independent, ~~payments~~public ~~are~~benefit ~~subject~~organizations to ~~extended~~provide ~~terms,~~grants wethat are doused ~~not recognize~~in ~~revenues~~communities ~~until~~outside of the ~~payments~~San ~~become~~Francisco ~~due~~bay area. The Community Foundation of Silicon Valley awards grants equal to at least 5% of its endowment annually.

~~SOP 97~~-2 requires that the total arrangement fee from software arrangements that include rights to multiple software products, post contract customer support and/or other services, be allocated to each element of the arrangement based on their relative fair values. Under SOP 9718-~~2, the~~ ~~determination of fair value is based on vendor specific~~ ~~objective evidence (“VSOE”). We apply the residual~~ ~~method of accounting as specified in SOP 98-9 such that the~~ total fair value of the undelivered elements as indicated by VSOE, is deferred and subsequently recognized in accordance with SOP 97-2 and the difference between the total arrangement fee and the amount deferred for the undelivered elements is accounted for as revenue related to the delivered elements.

Foreign ~~Some OEM arrangements contain end-user~~Exchange ~~maintenance elements for which VSOE has not been established, as~~ sufficient evidence of consistent pricing and renewal rates are not present. In such arrangements, we recognize the arrangement fee ratably over the maintenance period in accordance with the provisions set forth in SOP 97-2.

~~Our~~We ~~policy~~conduct isthe tomajority ~~recognize~~of noour ~~revenues~~business ~~on sales~~and tocollect ~~distributors~~the ormajority ~~resellers~~of ifour ~~any~~revenues ~~resale~~in ~~contingencies exist~~U.S. dollars, which ~~Some~~is of the ~~factors~~currency ~~that~~in which we ~~consider~~report inour ~~determining~~financial ~~the~~results. We ~~existence~~also ofearn ~~such~~approximately 20% ~~contingencies~~of ~~include~~our ~~payment~~revenues ~~terms,~~in currencies ~~collectability~~other ~~and~~than ~~history~~the ~~with~~U.S. dollar including the ~~distributor~~Euro, orthe ~~reseller. We~~British ~~recognize~~pound ~~revenues~~and ~~when~~the ~~any~~Canadian ~~contingencies~~dollar. ~~have~~Our ~~been~~total ~~resolved~~revenues ~~and~~are affected by changes in the ~~criteria~~exchange rates for ~~revenue~~these ~~recognition~~currencies ~~under~~relative to ~~SOP 97-2~~the ~~are met~~U.S. dollar.

We ~~recognize~~incur ~~revenues~~a ~~for~~significant ~~sales~~portion of our expenses in Canadian dollars. Our total expenses fluctuate according to ~~distributors~~the orchanges ~~resellers~~in ~~with~~the ~~rights~~exchange rate of ~~returns~~the ~~when~~Canadian ~~the~~dollar ~~criteria~~relative ~~for~~to ~~recognizing~~the ~~revenues~~U.S. dollar. With the exception of our Canadian dollar expenses, asthe ~~outlined~~impact of fluctuations in ~~Statement~~foreign ofexchange ~~Financial~~rates ~~Accounting~~on ~~Standards~~our ~~(“SFAS”)~~net Nooperating income is nominal as our foreign denominated expenses are substantially offset by our foreign denominated revenues. For fiscal 2003, a 10% 48increase in ~~“Revenue~~the ~~Recognition~~exchange ~~When~~rate ~~Right~~for ofthe ~~Return~~Canadian ~~Exists”~~dollar would have increased ~~(“SFAS~~our revenues by less than 1% but would have increased our expenses by approximately ~~48”),~~4%. ~~are~~We ~~met~~recently implemented a partial hedging strategy for these exposures. We ~~make~~may ~~estimates~~experience substantial offoreign exchange gains or losses due to the ~~future~~volatility ~~returns~~of ~~and~~the ~~reduce~~Canadian dollar, to the extent our ~~revenues~~hedging activities ~~and~~are ~~related~~ineffective, ~~receivables~~or other currencies compared to the ~~accordingly~~U.S. dollar.

~~Where~~Critical ~~rights~~Accounting ofPolicies ~~return exist~~ and ~~the criteria of~~ ~~SFAS 48 are not met, we do not recognize revenues until~~Estimates ~~such time that all of the criteria are met. We consider factors~~ including historical experience, nature of the product, fixed or determinable fees, arms length contract terms, the level of inventory in the distribution channels and our ability to reasonably estimate returns.

Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States and form the basis for the following discussion and analysis of critical accounting policies and estimates. We make ~~recognize~~estimates and assumptions that affect the reported amounts of assets, liabilities, revenues ~~from~~and ~~technical~~expenses ~~support~~and related disclosure of contingent assets and liabilities during the ~~maintenance~~course of preparing these financial statements. On a regular basis, ~~which~~we ~~consist~~evaluate our estimates and assumptions including those related to the recognition of ~~fees~~revenues, allowance for ~~ongoing~~doubtful accounts, ~~support~~contingent liabilities and income taxes. We base our ~~product~~estimates ~~updates,~~on ~~ratably~~historical ~~over~~experience and on various other assumptions that we believe to be reasonable. These estimates form the ~~term~~basis of our judgments about the ~~contract,~~carrying ~~which~~values isof ~~generally~~assets ~~one~~and ~~year.~~liabilities Wethat ~~generally~~are ~~recognize~~not ~~revenues~~readily apparent from other ~~training~~sources. ~~and~~Our ~~consulting~~actual asresults ~~the~~may ~~services~~differ ~~are~~from ~~performed~~these estimates.

The 13following critical accounting policies reflect the more significant estimates and assumptions we have used in the preparation of our financial statements:

~~Table~~ Recognition of ~~Contents~~Revenues

We ~~record~~follow ~~out-of-pocket~~specific ~~expense~~and ~~reimbursements~~detailed guidelines in ~~maintenance~~measuring revenues; however, ~~support~~certain judgments and ~~services~~estimates affect ~~revenues~~the application of the policy. Revenues in ~~accordance~~any ~~with~~given ~~Emerging~~period ~~Issues~~are ~~Task~~difficult ~~Force~~to ~~(“EITF”)~~predict ~~Issue~~and any shortfall in revenues or ~~No. 01-14,~~delay ~~“Income~~in ~~Statement~~recognizing ~~Characterization~~revenues could cause our results of ~~Reimbursements~~operations ~~Received~~to ~~for~~vary ~~‘Out-of-Pocket’~~significantly ~~Expense Incurred”~~from ~~(“EITF 01-14”)~~quarter to quarter.

~~Where~~We wesell ~~provide~~licenses ~~consulting services~~ for ~~significant~~ ~~production,~~software ~~modification,~~products separately or ~~customization~~with ofservices ~~our software,~~as orpart ~~where~~of ~~these~~a ~~services~~bundled ~~are~~arrangement. ~~essential~~We ~~to the~~sell ~~functionality~~maintenance ofand ~~our~~technical ~~software,~~support wecontracts ~~recognize~~with ~~revenues~~licenses in ~~accordance~~ ~~with the provisions of SOP 81-1,~~a ~~“Accounting~~bundled ~~for~~arrangement ~~Performance~~or ofseparately ~~Construction-Type~~as ~~and Certain~~a ~~Production-Type~~contract ~~Contracts~~renewal.” ~~In these~~We ~~arrangements,~~provide wetraining ~~recognize both the licensing revenues~~ and consulting services ~~revenues~~as ~~using~~part ~~the percentage~~ of ~~completion~~a bundled ~~method~~arrangement or separately based on ~~the~~a ~~cost~~project ofor ~~labor~~time ~~inputs~~and materials basis.

~~Allowance~~For ~~for~~each ~~Doubtful~~sales ~~Accounts. We~~transaction, ~~record~~we andetermine ~~allowance for doubtful~~whether ~~accounts~~evidence inof ~~general~~an ~~and~~arrangement ~~administrative expenses. The allowance~~exists, ~~which~~ isdelivery ~~netted~~has ~~against our accounts receivable balance on our consolidated balance sheets~~occurred, ~~totaled $2.1 million and~~the ~~$1.8 million~~fee asis offixed ~~June 28,~~or ~~2002~~determinable and ~~June 29, 2001,~~collection ~~respectively~~is probable. ~~The~~If ~~amounts represent estimated losses~~any ~~resulting from the inability~~ of ~~our~~these ~~customers~~criteria ~~to make required payments. The estimates~~ are ~~based~~not ~~on historical bad debt write-offs~~met, ~~specific~~we ~~identification~~defer ofrecognition ~~probable bad debts based on collection efforts, aging~~ of ~~accounts receivable and other~~revenues ~~known~~until ~~factors.~~such Iftime ~~the~~as ~~financial~~all ~~condition~~ of ~~our~~the ~~customers~~criteria ~~were to~~are ~~deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required~~met.

~~Income Taxes.~~ In ~~preparing~~ ~~our~~bundled ~~consolidated~~software ~~and~~arrangements ~~combined~~that ~~financial statements, we~~include ~~are~~rights ~~required~~ to ~~estimate~~multiple ~~our~~software ~~income~~products ~~taxes~~and/or inservices, ~~each of the jurisdictions in which~~ we ~~operate. This process involves~~ ~~estimating~~recognize ~~actual~~revenues ~~current~~using ~~tax~~the ~~liabilities~~residual ~~together~~method ~~with assessing~~as ~~temporary~~prescribed ~~differences resulting from differing~~by ~~treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities which are included within~~ the ~~consolidated~~Statement ~~balance~~of ~~sheet,~~Position ~~as applicable.~~98-9 ~~Our~~“Modification ~~deferred tax assets consist primarily~~ of ~~net~~SOP ~~operating losses carried forward~~No. 97-2 WeSoftware ~~then~~Revenue ~~assess~~Recognition ~~the~~with ~~likelihood that~~Respect ~~deferred tax assets will be recovered from future taxable~~to ~~income,~~Certain ~~and,~~Transactions”. toUnder the ~~extent~~residual ~~that we believe that recovery is not more likely than not~~method, ~~we establish a valuation allowance. We~~ ~~have~~revenues ~~provided~~are aallocated ~~valuation~~to ~~allowance against all of our deferred tax assets at June 28, 2002 and June 29, 2001. To~~ the ~~extent~~ weundelivered ~~establish~~elements abased ~~valuation allowance against our deferred~~on ~~tax~~vendor ~~assets~~specific orobjective ~~change~~evidence ~~this~~of ~~valuation~~fair ~~allowance~~value inof ~~a period, we reflect~~ the ~~impact in the tax provision for (benefit from)~~ ~~income~~undelivered ~~taxes~~elements ~~in the consolidated~~ and ~~combined statements of~~the ~~operations.~~

-19- ~~Significant Transactions Affecting Our~~ ~~Financial Reporting~~

~~Sale~~ residual amount of ~~Seagate~~revenues ~~Technology~~are allocated to the delivered elements. Vendor specific objective evidence of the fair value of maintenance and technical support contracts is based on renewal rates as determined by the prices paid by our customers when maintenance is sold separately. Vendor specific objective evidence of fair value of training and consulting services is based upon daily rates as determined by the prices paid by our customers when these services are sold separately.

OnFor ~~November 22,~~all ~~2000,~~bundled ~~Seagate Technology Inc. (“Seagate Technology”)~~arrangements, ~~Seagate~~we ~~Software Holdings,~~assess ~~Inc. (“Seagate Software Holdings”), and Suez~~whether ~~Acquisition~~the ~~Company~~service ~~(Cayman)~~elements ~~Limited~~of ~~(“Suez~~the ~~Acquisition Company”),~~arrangement anare ~~entity~~essential ~~affiliated~~to ~~with, among others, Silver Lake Partners L.P. and Texas Pacific Group, completed~~ the ~~transactions~~functionality ~~under~~of the ~~stock~~other ~~purchase~~elements ~~agreement,~~of ~~and Seagate Technology and VERITAS Software Corporation (“VERITAS”) completed~~ the ~~transactions under the agreement and plan of merger and reorganization~~arrangement. ~~Suez~~When ~~Acquisition~~services ~~Company~~are ~~was~~considered aessential ~~limited~~or ~~liability~~the ~~company~~arrangement ~~organized~~involves ~~under~~customization ~~the~~or ~~laws~~modification of the ~~Cayman~~software, ~~Islands~~both ~~and formed solely for~~ the license ~~purpose~~and ofservice ~~entering~~revenues ~~into~~under the ~~stock~~arrangement ~~purchase~~are ~~agreement~~recognized ~~and~~under ~~related acquisitions. At~~ the ~~closing~~percentage of ~~the~~completion ~~transactions~~method ~~under the~~of ~~stock~~contract ~~purchase agreement~~accounting, based ~~Suez~~on ~~Acquisition~~cost ~~Company assigned all~~ of ~~its~~labor ~~rights~~inputs. ~~under~~We ~~the~~accrue ~~stock~~expected ~~purchase~~losses, ~~agreement to New SAC~~if ~~(“New SAC”)~~any, awith ~~Cayman~~respect ~~islands limited corporation. This transaction is referred~~ to ~~hereafter~~consulting asservices ~~the~~once ~~New~~they ~~SAC Transaction~~become known.

~~Upon~~For ~~closing~~those ofarrangements ~~the~~for ~~transactions~~which ~~under~~we ~~the stock~~have ~~purchase~~concluded ~~agreement,~~that ~~New~~the ~~SAC,~~service ~~through~~elements ~~Suez~~are ~~Acquisition~~not ~~Company, purchased~~essential ~~substantially~~to ~~all of~~ the other ~~operating~~elements ~~assets~~ of ~~Seagate Technology~~the ~~and~~arrangement, ~~its~~we ~~consolidated~~use ~~subsidiaries~~vendor ~~for~~specific ~~$1.84 billion~~objective ~~cash,~~evidence ~~including transaction costs~~ of ~~$25 million.~~fair ~~This~~value ~~included~~for ~~Seagate~~the ~~Technology’s~~service ~~rigid~~elements ~~disc~~to ~~drive,~~account ~~storage~~for ~~area~~the ~~network,~~arrangement ~~removable~~using ~~tape~~the ~~storage~~residual ~~solutions~~method, ~~businesses~~regardless ~~and~~of ~~operations,~~any ~~our~~separate ~~common~~prices ~~stock,~~stated ~~and~~within ~~certain cash balances, but excluding~~ the ~~approximately~~contract ~~128 million~~for ~~shares~~each ofelement. ~~VERITAS~~We ~~common~~recognize ~~stock~~revenues ~~then~~allocable ~~held~~to bymaintenance ~~Seagate Software~~and ~~Holdings~~technical ~~and~~support ~~certain~~contracts ofratably ~~Seagate~~over ~~Technology’s equity investments. In addition,~~ the ~~wholly~~term ~~owned subsidiaries~~ of ~~New~~the ~~SAC~~respective ~~assumed~~contracts, ~~substantially~~which ~~all~~is oftypically ~~the~~one ~~operating~~year. ~~liabilities of~~Maintenance ~~Seagate~~contracts ~~Technology,~~include ~~Seagate~~rights ~~Software~~to ~~Holdings~~unspecified ~~and~~software ~~their~~product ~~consolidated~~enhancements ~~subsidiaries.~~and ~~New~~upgrades ~~SAC~~when ~~also~~and ~~acquired~~as ~~Seagate Technology~~we ~~Investments,~~make ~~Inc~~them available., aWe recognize ~~subsidiary~~revenues ofallocable ~~Seagate Technology,~~to ~~which~~training ~~held~~and ~~certain~~consulting ~~strategic~~services as ~~equity~~the ~~investments~~services ~~in various~~are ~~companies~~performed.

For 14sales to distributors and resellers, we recognize revenues upon the delivery of our products to these parties. We reserve an amount equal to our estimate of all products held by such parties which are subject to rights of return and resale contingencies. We consider several factors in determining these estimates including historical experience, level of inventory in the distribution channels, nature of the product, fixed or determinable fees and payment terms. We reduce our revenues and the related receivables by this estimate.

~~Table~~ For sales to original equipment manufacturers, we recognize revenues when the original equipment manufacturer reports sales that have occurred to an end user customer, provided that collection is probable. Some original equipment manufacturer arrangements include the payment of ~~Contents~~an upfront arrangement fee which is deferred and recognized either ratably over the contractual period or when the original equipment manufacturer reports sales that have occurred to an end user customer, in accordance with the contractual terms. If we determine, through royalty audits or other means, that an original equipment manufacturer did not report revenues accurately, we attempt to reconcile the discrepancies and, if appropriate, record additional revenues upon resolution.

~~Immediately~~Deferred ~~following~~revenues ~~the~~represent ~~closing~~amounts ofunder ~~the~~license ~~transactions~~and ~~under~~service ~~the~~arrangements ~~stock~~for ~~purchase~~which ~~agreement and under~~ the ~~terms~~ ofearnings ~~the~~process ~~agreement~~has ~~and~~not been ~~plan~~completed. ofThese ~~merger~~amounts ~~and~~relate ~~reorganization, VERITAS~~primarily ~~acquired~~to ~~the~~provision ~~remainder~~ of maintenance ~~Seagate Technology~~ and ~~a wholly~~technical ~~owned~~support ~~subsidiary~~services ~~of VERITAS merged~~ with ~~and into Seagate~~future ~~Technology,~~deliverables ~~with~~and ~~Seagate~~arrangements ~~Technology~~where ~~becoming~~specified acustomer acceptance ~~wholly~~has ~~owned subsidiary~~not ofyet ~~VERITAS~~occurred. ~~VERITAS~~Deferred ~~did~~revenues ~~not~~classified ~~acquire Seagate~~as ~~Technology’s~~long-term ~~disc~~in ~~drive~~nature ~~business~~represent orrevenues ~~any~~that ~~other~~will ~~Seagate Technology~~not ~~operating~~be ~~business,~~realized for ~~including~~more ~~ours.~~than In12 months ~~the~~after ~~VERITAS merger,~~ the ~~Seagate~~date ~~Technology stockholders received merger consideration consisting~~ of ~~VERITAS~~the ~~stock~~balance ~~and cash~~sheet.

In Allowance ~~connection with the transactions effected under the stock purchase agreement, New SAC and Seagate Technology agreed to assume and indemnify VERITAS~~ for ~~substantially~~ ~~all liabilities arising in connection with Seagate~~Doubtful ~~Technology’s and our operating assets. On March 29,~~Accounts ~~2000, Seagate Technology, VERITAS and New SAC entered into an~~ indemnification agreement. Pursuant to this agreement these entities and certain other subsidiaries of Seagate Technology, including us, were required to indemnify VERITAS and its affiliates for any liability for taxes of Seagate Technology, and the subsidiaries of Seagate Technology, including us, acquired by New SAC, in excess of an amount deposited into an escrow account by VERITAS. VERITAS deposited $150 million in an escrow account. This amount may be withdrawn by New SAC to satisfy these tax liabilities, including those of Crystal Decisions and its subsidiaries.

~~Change~~ The inallowance ~~Control~~for doubtful accounts, which is netted against our accounts receivable on our balance sheets, totaled $2.1 million as of ~~Crystal~~June 28, ~~Decisions~~2002 and $2.6 million as of June 27, 2003. The allowance for doubtful accounts represents estimated losses resulting from the inability of our customers to make required payments. We base our estimates on specific identification of probable bad debts based on collection efforts, aging of accounts receivable, our historical experience including bad write-offs and other factors. If the financial condition of our customers

-20- ~~As of November 22, 2000, as a result of the~~ ~~completion of the transactions under a stock purchase agreement,~~ ~~we became a majority owned subsidiary of Seagate Software~~ (Cayman) Holdings (“Suez Software”), which is a wholly owned subsidiary of New SAC, whose predecessor was Seagate Technology. Prior to November 22, 2000, we were a majority owned subsidiary of Seagate Software Holdings, a Delaware corporation, and a wholly owned subsidiary of Seagate Technology.

~~Silver~~were ~~Lake~~to ~~Partners~~deteriorate, ~~L.P.~~resulting ~~and~~in ~~Texas~~an ~~Pacific Group~~impairment ~~control~~of ~~New~~their ~~SAC.~~ability ~~New~~to ~~SAC~~make ~~acquired 75~~payments,~~001,000~~ ~~shares,~~we ormay ~~99.7%, of~~be ~~our~~required ~~outstanding~~to ~~common stock on November 22, 2000, with~~record ~~our~~additional ~~remaining~~allowances. ~~outstanding~~If ~~common~~the ~~stock~~data atwe ~~that~~use ~~date~~to ~~being~~calculate ~~held~~the byallowance ~~our~~does ~~current~~not ~~and~~reflect ~~former~~the ~~employees~~future ~~and~~ability ~~non-employee~~to ~~directors.~~collect ~~The~~outstanding ~~minority~~receivables, ~~interests~~we inmay ~~our~~be ~~common~~required ~~stock amounted~~ to ~~approximately~~ ~~16.1%,~~record ~~13.0% and 10.5% on a fully converted basis~~additional asallowances ~~of June 28, 2002, June 29, 2001~~ and ~~June 30, 2000,~~the ~~respectively.~~future ~~These~~results ~~minority interests were comprised~~ of ~~our~~ ~~outstanding common stock held by~~ our ~~current~~operations ~~and~~could ~~former~~be ~~employees~~materially ~~and~~impacted. ~~non-employee~~Our ~~directors,~~bad asdebt ~~well~~expenses asare ~~the~~reflected ~~outstanding~~in ~~options~~general ~~to purchase our common stock held by our employees~~ and ~~non-employee~~ ~~directors~~administrative expenses.

~~This~~ Contingencies ~~transaction resulted in a change in control of our company. Under rules~~ and ~~regulations promulgated by the~~ ~~Securities and Exchange Commission, because more than 95% of our~~Litigation ~~company was acquired and a change of ownership occurred, we~~ ~~restated all our assets and liabilities in the financial statements as of November 22, 2000 on a “push down” accounting basis.~~

We 15evaluate contingent liabilities including threatened or pending litigation in accordance with Statement of Financial Accounting Standards No. 5, “Accounting for Contingencies”. We assess the likelihood of any adverse judgments or outcomes to a potential claim or legal proceeding, as well as potential ranges of probable losses, when the outcome of the claims or proceedings are probable and reasonably estimable. A determination of the amount of accrued liabilities required, if any, for these contingencies is made after analysis of each matter. Because of uncertainties related to these matters, we base our estimates on the information available at the time. As additional information becomes available, we reassess the potential liability related to our pending claims and litigation and may revise our estimates. Any revisions in the estimates of potential liabilities could have a material impact on our results of operations and financial position.

~~Table of Contents~~ Income Taxes

~~The~~We ~~table~~are ~~below~~subject ~~lists~~to income taxes in both the ~~net~~United States ~~purchase~~and ~~price~~numerous foreign jurisdictions and we use estimates ~~allocation~~in todetermining our ~~company~~worldwide provision for income taxes. This process involves estimating actual current tax liabilities together with assessing temporary differences resulting from differing treatment of ~~the~~items ~~tangible~~for tax and ~~intangible~~accounting purposes. These differences result in deferred tax assets and liabilities ~~acquired~~which byare ~~New~~recorded ~~SAC~~on the balance sheet. ~~The~~Our ~~purchase~~deferred ~~price~~tax ~~allocated~~assets consist toprimarily usof asnet operating losses carried forward. We assess the likelihood that deferred tax assets will be recovered from future taxable income, and, a valuation allowance is ~~result~~recognized ofif it is more likely than not that some portion of the ~~November~~deferred tax assets will not be recognized. We provided a full valuation allowance against all of our deferred tax assets as of June 2229, ~~2000~~2001 ~~sale~~and ofJune 28, ~~Seagate~~2002. ~~Technology~~During fiscal is2003, ~~not~~we ~~necessarily~~released ~~indicative~~a portion of ~~what~~our valuation allowance against our deferred tax assets and have recorded current and long-term deferred tax assets at June 27, 2003. To the ~~purchase~~extent ~~price~~we establish ~~would~~any valuation allowance against our deferred tax ~~have~~assets ~~been~~or ~~for~~change usthis onvaluation allowance in a ~~stand~~period, ~~alone~~we reflect ~~basis~~the impact in the provision for (benefit from) income taxes in our statements of operations. Although we believe that our tax estimates are reasonable, the ultimate tax determination involves significant judgment that could become subject to audit by tax authorities in the ordinary course of business.

		Net Purchase
Purchase Price Allocation		Price Allocation
		(in thousands)
Net current assets acquired		$	9,138
Tangible long-lived assets acquired			5,130
Intangible assets acquired:
	Developed technology		15,234
	Assembled work force		7,073
	In-process research and development		7,073
	Deferred tax liability		(2,126	)
Total		$	41,522

Stock-Based Compensation

~~The~~We ~~net~~measure ~~purchase~~compensation ~~price~~expense ~~was~~for ~~allocated~~the tomajority of our stock option plans using the ~~assets~~ ~~and~~intrinsic ~~liabilities~~value ofmethod prescribed ~~Seagate~~by ~~Technology~~Accounting ~~and~~Principles ~~its~~Board Opinion No. 25 ~~subsidiaries,~~“Accounting ~~including~~for ~~our~~Stock ~~company,~~Issued ~~based~~to onEmployees” ~~their~~and related interpretations. The fair ~~values~~market value of our common atstock on the date of ~~the~~grant ~~transaction.~~is ~~The~~determined ~~fair~~by ~~values~~the compensation committee of ~~the identifiable~~our ~~tangible~~board ~~and~~of ~~intangible~~directors. ~~assets~~Because ~~and~~there ~~liabilities~~has ofbeen no ~~Seagate~~public ~~Technology~~market ~~and~~for ~~its~~our ~~subsidiaries~~stock, at the ~~date~~compensation ofcommittee determined the ~~transaction~~ ~~exceeded~~fair ~~the~~value ~~net~~of ~~purchase~~our ~~price~~common stock by ~~approximately~~considering a ~~$909 million.~~number ~~Accordingly~~of factors, ~~the~~including, ~~resultant~~but ~~negative~~not ~~goodwill was~~limited ~~allocated~~ to, contemporaneous ~~the~~valuations, ~~long-lived~~our ~~tangible~~current financial performance and ~~intangible~~prospects ~~assets~~for future growth and profitability, the status of ~~including~~product ~~our~~releases ~~assets,~~and onproduct integration, the ~~basis~~absence of ~~relative~~a resale ~~fair~~market ~~values.~~for ~~This allocation~~our ~~reduced~~common stock, the ~~recorded~~control ~~amounts~~position held by New ~~approximately~~SAC ~~46%. The~~and ~~fair~~comparisons ~~values~~to certain of ~~tangible~~our ~~and~~key ~~intangible~~valuation ~~assets, including~~metrics ~~in-process~~with ~~research~~similar ~~and~~metrics ~~development~~for comparable publicly traded companies, including ~~were~~measures ~~determined~~of market capitalization based ~~upon~~on revenue ~~independent~~multiples, ~~appraisals~~price-to-earnings ~~provided~~ratios byand ~~New~~operating ~~SAC~~margins.

-21- ~~Application~~ ~~of SFAS No. 109, “Accounting for Income Taxes”~~ ~~(“SFAS 109”) to Deferred~~ ~~Tax Assets as part of Purchase Price Allocation~~

~~The~~We ~~purchase price under the stock purchase agreement was fixed and no contingencies were identified that would~~ have ~~resulted~~elected innot ato ~~change~~apply infair ~~the overall purchase price.~~value-based ~~However,~~accounting inprovided ~~allocating~~under ~~the purchase price New SAC recorded a valuation allowance against deferred tax assets in accordance with~~ SFAS ~~109~~No. 123 ~~The deferred tax assets subject to the valuation~~“Accounting ~~allowance~~for ~~were~~Stock-Based ~~based~~Compensation” onbecause ~~the~~it ~~excess~~requires ~~of tax bases over~~ the ~~fair~~ ~~values~~use of ~~acquired~~option ~~property,~~valuation ~~plant and equipment and liabilities assumed~~models, ~~for~~ which ~~New~~in ~~SAC~~our ~~expected~~opinion, todo ~~receive~~not provide ~~tax~~a ~~deductions~~reliable ~~in U.S. federal~~measure ~~and~~of ~~state~~the ~~returns~~fair invalue ~~future~~of ~~periods~~our ~~based on~~employee ~~its~~stock ~~ability to generate taxable income in the U~~options.S.

~~During~~As ~~the~~required ~~fourth~~by ~~quarter~~SFAS 123, ofas ~~fiscal~~modified ~~2002,~~by ~~New SAC~~SFAS ~~evaluated~~No. 148 ~~and~~“Accounting ~~updated~~for ~~forecasts~~Stock ofBased Compensation — ~~projected~~Transition ~~U.S.~~and Disclosure ~~taxable~~— ~~income~~an toAmendment ~~determine~~of ifFASB ~~there~~Statement ~~was~~No. 123,” ~~any~~we provide ~~amount~~pro forma disclosure of the ~~deferred~~effect ~~tax assets~~of ~~related~~using to the ~~New~~fair value-based ~~SAC~~method ~~Transaction~~of ~~that~~measuring ~~New~~compensation ~~SAC’s~~expense. For ~~management~~purposes ~~believed~~of ~~would~~the bepro ~~more~~forma ~~likely~~disclosure, ~~realizable~~we ~~than~~estimate ~~not.~~the Infair value ~~accordance~~of ~~with~~stock ~~SFAS 109,~~options ~~this~~issued ~~evaluation~~to ~~resulted~~employees inusing the Black-Scholes ~~elimination~~option ofvaluation ~~the~~model. ~~valuation~~This ~~allowances~~model ~~that~~was ~~had~~developed ~~been~~for ~~recorded~~use in ~~against~~estimating athe ~~portion~~fair value of ~~the~~traded ~~deferred~~options ~~tax~~that ~~assets~~have ~~associated~~no ~~with the~~vesting ~~New~~restrictions ~~SAC~~and ~~Transaction~~are fully transferable. In ~~order~~addition, tooption valuation ~~reflect~~models ~~tax~~require ~~benefits~~the ~~recognized by~~input ~~New~~of ~~SAC,~~highly ~~that~~subjective assumptions ~~were~~including ~~attributable~~the toexpected ~~acquired~~life ~~deferred~~of ~~tax assets,~~options ~~the~~and ~~net~~our expected ~~carrying~~stock ~~values~~price ofvolatility. Therefore, the ~~intangible~~estimated ~~assets that~~fair ~~were~~value ~~pushed~~of ~~down to~~ our ~~consolidated~~employee ~~and~~stock ~~combined~~options ~~financial statements~~could ~~were~~vary ~~reduced~~significantly toas a ~~zero~~result onof ~~June 28,~~changes ~~2002~~in asthe ~~follows (in~~assumptions ~~thousands):~~used.

		Allocated to
		Crystal Decisions
		at June 28, 2002
Reduction in the net carrying values of developed technologies		$	7,194
Reduction in the net carrying values of assembled workforce			3,340
	Total reduction in intangible assets	$	10,534

Change in Control of Crystal Decisions

We 16became an indirect subsidiary of New SAC on November 22, 2000 when New SAC indirectly acquired 75,001,000 shares, or 99.7% of our common stock outstanding on that date, under the terms of a stock purchase agreement with Old Seagate and Seagate Software Holdings. In the acquisition, New SAC purchased all of the operating assets of Old Seagate and its consolidated subsidiaries for cash and borrowings of $1.84 billion, including transaction costs of $25 million. This included Old Seagate’s rigid disc drive, storage area network, removable tape storage solutions businesses and operations, our common stock, and certain cash balances, but excluded the approximately 128 million shares of VERITAS common stock then held by Seagate Software Holdings and certain of Old Seagate’s equity investments.

~~Table~~ The November 2000 transaction resulted in a change in control of ~~Contents~~our company. Under rules and regulations of the Securities and Exchange Commission, because more than 95% of our company was acquired and a change of control occurred, we restated all our assets and liabilities in our financial statements as of November 22, 2000 on a push down accounting basis, which involved the application of the purchase method of accounting to the financial statements of our company in the business combination. Push down accounting had a significant impact on our financial statements because the long-lived tangible and intangible assets and liabilities were measured at allocated fair values at the date of the transaction.

AsThe atable ~~result~~below oflists the ~~push~~net ~~down~~purchase ~~of intangible assets~~price allocation to our ~~consolidated~~company and combined financial statements on November 22, 2000, we recorded a deferred tax liability related to these intangible assets. We calculated this deferred tax liability as the tax-effected temporary differences related to the excess of ~~book over tax bases related to~~ the ~~intangible assets.~~tangible ~~Pursuant~~and ~~to SFAS 109, the elimination of the remaining book bases of~~ intangible assets ~~requires that the~~ ~~associated~~acquired ~~deferred~~by ~~tax~~New ~~liability be reduced to zero~~SAC. We ~~eliminated the net carrying values of our intangible assets at~~ ~~June 28, 2002 and recorded this amount as a charge against~~ ~~additional paid-in capital on our statement of stockholders’ equity for fiscal 2002 as follows (in thousands):~~

Total reduction in intangible assets		$	10,534
		Net Purchase Price
Deferred tax liability			(1,403	)
		Allocation
	Elimination of intangible assets, net of deferred tax liability	$	9,131
Purchase Price Allocation		at November 22, 2000
		(in thousands)
Net current assets acquired		$	9,138
Tangible long-lived assets acquired			5,130
Intangible assets acquired:
	Developed technologies		15,234
	Assembled work force		7,073
	In-process research and development		7,073
	Deferred tax liability		(2,126	)
Total		$	41,522

~~Allocation~~The purchase price paid by New SAC under the ofstock ~~Purchase~~purchase ~~Price~~agreement towas ~~our~~fixed ~~Company~~and ~~Pursuant~~no tocontingencies were identified that would have resulted in a change in the ~~Application~~overall purchase ofprice. However, in allocating the purchase price, New ~~Push~~SAC ~~Down~~recorded ~~Accounting~~a full valuation allowance

~~As a result of revaluation of our assets and liabilities from the historical figures at November~~ -22,- ~~2000 in connection with the New SAC Transaction, our results of~~ ~~operations after November 22, 2000, particularly the~~ ~~depreciation and amortization charges, are not necessarily~~ ~~comparable to the results of operations prior to that date.~~

against deferred tax assets in accordance with Statement of Financial Accounting Standards No. 109 “Accounting for Income Taxes”, or SFAS 109. The ~~following~~deferred ~~summarizes~~tax assets subject to this valuation allowance were based on the ~~impact~~excess of ~~push~~tax ~~down~~bases over the fair ~~accounting~~values of acquired property, plant and equipment and liabilities assumed, for which New SAC expected to receive tax deductions in U.S. federal and state returns in future periods based on their ~~our~~ability ~~results:~~to generate taxable income in the United States.

• As ~~Revenues.~~of ~~We revalued deferred revenues at November 22~~June 28, ~~2000. These were reduced by $1.3 million on a declining basis during the twelve months following the New SAC Transaction. Consequently, revenues were lower by $128,000 and $1.2 million for fiscal~~ 2002 ~~and for fiscal 2001~~, ~~respectively,~~we ~~than~~reduced ~~they~~to ~~would~~zero ~~have been had~~ the net ~~push~~carrying ~~down~~values ~~adjustments not occurred. • Depreciation and amortization. As a result~~ of the ~~allocation~~intangible ofassets ~~negative~~pushed ~~goodwill~~down to our financial ~~long-lived~~statements ~~tangible~~in ~~assets,~~connection ~~our~~with ~~capital~~the ~~assets~~November ~~were reduced by $4~~2000 transaction.3 ~~million.~~The ~~Consequently,~~reduction wein our recorded ~~approximately~~intangible ~~$1.5~~assets resulted ~~million~~from ~~less~~an ~~depreciation~~allocation ~~expense for each~~ of ~~fiscal 2002 and fiscal 2001 than we would have recorded had~~ the ~~push~~tax ~~down~~benefits ~~adjustments~~recognized ~~not~~by Old ~~been~~Seagate ~~made.~~in Inits ~~addition, we recorded additional amortization expense of approximately $5~~U.~~6 million and $3~~S.3 income ~~million~~tax ~~for~~returns ~~fiscal~~attributable ~~2002~~to acquisition ~~and~~related ~~for~~deferred ~~fiscal~~tax ~~2001, respectively, resulting from the recording of the incremental fair value of intangible~~ assets in ~~the~~accordance ~~push down adjustments~~with SFAS 109. •There ~~In-process~~was ~~research~~no ~~and~~impact ~~development.~~on Weour ~~wrote~~valuation ~~off~~allowance. Our ~~in-process~~share ~~research and development~~ of ~~$7.1~~the ~~million~~reduction ~~as an expense~~ in ~~fiscal~~intangibles ~~2001.~~was Weallocated ~~did not have any similar expenses in fiscal 2002.~~as follows:

As described previously under the heading, Application of SFAS No. 109, the net carrying values of the intangible assets pushed down to our consolidated and combined financial statements were reduced to zero. Therefore, commencing in the first quarter of fiscal 2003, we will no longer provide for amortization related to these intangible assets. Furthermore, while we will adopt SFAS No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”), at the beginning of fiscal 2003, the non-amortization provisions and the impairment tests will not be applicable until such time as we have recorded goodwill and other intangible assets on our balance sheet.


		Allocated to
		Crystal Decisions
		at June 28, 2002

		(in thousands)
Reduction in the net carrying values of developed technologies		$	7,194
Reduction in the net carrying values of assembled workforce			3,340

	Total reduction in intangible assets		10,534

Less deferred tax liability related to intangible assets			(1,403	)

	Total reduction in intangible assets, net of deferred tax liability	$	9,131

~~Other~~ The ~~Significant~~following ~~Transactions~~summarizes ~~Impacting~~the ~~Our~~impact ~~Financial~~of ~~Reporting~~push down accounting on our results:

In• ~~August~~Revenues. ~~1999,~~Deferred werevenues were ~~formed~~reduced toby ~~acquire~~$1.3 ~~Seagate Software~~million ~~Holdings’~~and ~~business~~revenues ~~intelligence~~were ~~software~~reduced ~~business. On~~on ~~November 16,~~a ~~1999,~~declining ~~Seagate~~basis ~~Software~~during ~~Holdings~~the ~~contributed~~ 12 months following the ~~business~~November ~~intelligence~~2000 ~~software~~transaction. ~~business~~Consequently, torevenues uswere inlower ~~exchange~~ by $1.2 million for 75fiscal 2001 and $128,000~~,000 shares~~ offor ~~common~~fiscal ~~stock~~2002 than they would have been had the push down adjustments not occurred. InThere ~~October~~was ~~1999, Seagate~~no ~~Software~~impact ~~Holdings~~during ~~entered~~fiscal ~~into~~2003. a• ~~share~~Depreciation. ~~exchange transaction~~Our ~~with~~long-lived ~~Seagate~~tangible ~~Technology~~assets were reduced by $4.3 Asmillion aon ~~result~~November of22, ~~a reorganization~~2000. Consequently, we recorded $1.5 million less depreciation expense for each of ~~Seagate~~fiscal ~~Software~~2001 ~~Holdings~~and fiscal 2002 and $775,000 ~~Seagate~~less ~~Software Holdings~~for ~~became~~fiscal a2003 ~~wholly~~than ~~owned~~we ~~subsidiary~~would have recorded had the push down adjustments not been made. • Amortization. We recorded additional amortization expense of ~~Seagate~~$3.3 ~~Technology~~ million for fiscal 2001 and $5.6 million for fiscal 2002 from recording the ~~minority~~incremental ~~stockholders~~fair value of ~~Seagate~~intangible ~~Software~~assets ~~Holdings received~~pushed ~~Seagate~~down ~~Technology~~to ~~common~~our ~~stock~~financial ~~for~~statements ~~their~~on ~~Seagate Software~~November ~~Holdings~~22, ~~common~~2000. ~~stock~~• In-process research and ~~options~~development. ~~The~~We ~~October~~wrote ~~1999 exchange~~off ~~resulted~~ in-process ~~Seagate~~research ~~Software~~and ~~Holdings~~development ~~recording compensation~~of $7.1 million as an expense ~~for~~in ~~stock~~fiscal ~~options~~2001. ~~and~~We ~~shares~~did ~~held~~not ~~less~~have ~~than six~~any ~~months~~similar ~~and~~expenses ~~purchase~~in ~~accounting~~fiscal ~~where~~2002 ~~shares~~or ~~were~~fiscal ~~held~~2003. • Elimination of intangible assets, net of deferred tax liability. We reduced intangible assets, net of deferred tax liability, by ~~minority~~ ~~shareholders~~$9.1 ~~longer~~million ~~than~~to ~~six~~ zero at June 28, 2002.

While 17we have adopted SFAS No. 142 “Goodwill and Other Intangible Assets” at the beginning of fiscal 2003, the non-amortization provisions and the impairment tests will not be applicable until such time as we have recorded goodwill and other intangible assets on our balance sheet.

~~Table of Contents~~-23-

~~months.~~Results ~~A portion~~ of ~~the amount of excess~~Operations ~~purchase price and compensation expense was allocated to us, as~~ ~~explained below.~~

OnThe ~~October 20,~~following ~~1999,~~table ~~the~~sets ~~stockholders~~forth ~~of Seagate~~certain ~~Software Holdings approved the merger~~ statements of ~~Seagate Daylight~~operations ~~Merger~~data ~~Corp.,~~expressed as a ~~wholly~~percentage ~~owned subsidiary~~ of ~~Seagate Technology,~~total ~~with and into Seagate Software Holdings. The merger~~revenues ~~was~~for ~~effected~~the onperiods ~~October 20, 1999~~indicated. ~~Seagate~~In ~~Software Holdings’~~view ~~assets consisted~~ of ~~the~~our ~~assets~~significant ofgrowth ~~the business~~in ~~intelligence~~recent ~~software~~years ~~business~~ and ~~its~~as ~~investment~~a inresult ~~the common stock~~ of ~~VERITAS. Upon~~ the ~~closing~~application of ~~the merger, Seagate~~pushdown ~~Software~~accounting ~~Holdings became a wholly owned subsidiary of Seagate Technology. All outstanding options~~ to ~~purchase~~our ~~Seagate~~financial ~~Software Holdings common stock were accelerated immediately prior to the merger. In connection with the merger~~statements, ~~Seagate~~we ~~Software Holdings’~~believe ~~minority~~that ~~stockholders and optionees received~~fiscal ~~payment~~year-to-year incomparisons ~~the form~~ of ~~3.23 shares~~our offinancial ~~Seagate Technology’s~~results ~~common~~are ~~stock per share of Seagate Software~~not ~~Holdings~~necessarily ~~common~~meaningful ~~stock,~~and ~~less~~you ~~any~~should ~~amounts~~not ~~due~~rely ~~for~~upon ~~the~~them ~~payment~~as ofan ~~the~~indication ~~exercise price~~ of ~~unexercised~~future ~~options~~performance. ~~Seagate Technology~~ ~~issued 9,124,046 shares of its common stock to minority~~ ~~stockholders and optionees of Seagate Software Holdings in~~ ~~connection with the merger.~~

Seagate Technology accounted for the exchange of shares of its common stock as the acquisition of a minority interest for Seagate Software Holdings’ common stock outstanding and vested more than six months held by employees and all stock held by former employees and consultants. The fair value of the shares of Seagate Technology issued was $19.4 million and was recorded as the purchase price of this minority interest and was allocated to all the identifiable tangible and intangible assets and liabilities of Seagate Software Holdings. Seagate Technology accounted for the exchange of shares of its common stock for stock options in Seagate Software Holdings held by employees and stock held and vested by employees less than six months as the settlement of an earlier stock award. During fiscal 2000, Seagate Technology recorded compensation expense of $283.6 million, plus $2.1 million of employer portion of payroll taxes related to the purchase of the minority interest in Seagate Software Holdings.



			Fiscal Years Ended

			June 29,			June 28,			June 27,
			2001			2002			2003

Revenues:
	Licensing			64	%		64	%		65	%
	Maintenance, support and services			36			36			35

		Total revenues		100			100			100

Cost of revenues:
	Licensing			3			3			2
	Maintenance, support and services			25			21			20
	Amortization of developed technologies			2			2			—

		Total cost of revenues		30			26			22

Gross profit				70			74			78
Operating expenses:
	Sales and marketing			44			43			38
	Research and development			17			14			15
	General and administrative			9			9			10
	Amortization of goodwill and other intangible assets			1			1			—
	Write-off of in-process research and development			4			—			—
	Unusual items			1			—			—
	Restructuring costs			—			—			—

		Total operating expenses		78			67			63

Income (loss) from operations				(8	)		7			16
Interest and other income, net				2			1			—

Income (loss) before income taxes				(6	)		8			16
Provision for income taxes				1			2			4

Net income (loss)				(7	)%		6	%		12	%

~~Our~~Fiscal ~~consolidated~~Years ~~and~~Ended ~~combined statement of operations for fiscal 2000 included an allocation of compensation expense arising from the October 1999 Seagate Technology exchange of shares of $239.6~~June ~~million~~28, of2002 ~~the total compensation expense of $283.6 million. Compensation expense was allocated to us on the basis of employees specifically identified with our business~~ and ~~for those~~ employees that performed services for us, on the basis of time estimates. We recorded the offsetting entry as a capital contribution from Seagate Technology on the statement of stockholders’ equity. The $2.1June ~~million of employer portion of payroll taxes paid related to our employees and~~27, ~~therefore,~~ ~~we recorded that amount as an expense for fiscal~~2003 ~~2000. In addition, we incurred $877,000 of legal and accounting~~ ~~costs in fiscal 2000 in connection with our recapitalization and reorganization.~~

Our consolidated and combined financial statements for fiscal 2000 also included an allocation of $1.2 million of the $19.4 million purchase price allocation previously described. The allocation was based on the fair value of our assets relative to the fair value of Seagate Software Holdings. We considered a number of factors in determining our estimated fair value including historical and projected revenues, earnings and cash flows, as well as other factors and our consultations with financial advisors. The allocation of the purchase price to our intangible assets as at October 20, 1999 was as follows (in thousands): Revenues

Developed technology		$	156
Trademark			36
Assembled work force			47
In-process research and development			25
Goodwill			1,071
Deferred tax liability			(93	)
	Total purchase price allocated	$	1,242

The following table sets forth information regarding the composition of our revenues and fiscal period-to-period changes (dollars in thousands):



		Fiscal Year Ended

		June 28,			Percent			June 27,
		2002			Change			2003

Licensing revenues		$	140,009			33	%	$	185,532
	Percentage of total revenues		64	%					65	%
Maintenance, support and services revenues		$	77,161			32	%	$	101,976
	Percentage of total revenues		36	%					35	%
Total revenues		$	217,170			32	%	$	287,508

~~Table~~ The majority of ~~Contents~~our revenues were derived from licensing fees for our products and we anticipate that licensing fees will continue to represent the majority of our revenues for the foreseeable future. Our revenues have increased as a result of the continued delivery of new products, better sales training, the increased size and productivity of our sales force and our targeted marketing campaigns. Additionally, we continued to add new customers with our Crystal 8 and 9 product offerings, which included the release of Crystal Enterprise 8.5 in May 2002, Crystal Analysis 8.5 in June 2002, Crystal Reports 9.0 in August 2002 and Crystal Enterprise 9 in January 2003.

-24- ~~Results of Operations~~

~~The~~During ~~following~~fiscal ~~table~~2002, ~~sets~~revenues ~~forth~~from ~~certain~~a distributor, ~~consolidated~~Ingram ~~and~~Micro, ~~combined~~accounted ~~statements~~for of$21.0 million, ~~operations~~or ~~data~~approximately ~~expressed~~10% asof atotal ~~percentage~~revenues. Revenues from Ingram Micro represented less than 10% of total revenues during fiscal 2003. No other customer or distributor accounted for ~~the~~10% or more of our total revenues during these periods. ~~indicated:~~

			For the fiscal years ended
			June 28, 2002			June 29, 2001			June 30, 2000
Revenues:
	Licensing			64	%		64	%		58	%
	Maintenance, support and services			36			36			42
		Total revenues		100			100			100
Cost of revenues:
	Licensing			3			3			3
	Maintenance, support and services			21			25			33
	Amortization of developed technologies			2			2			—
		Total cost of revenues		26			30			36
Gross profit				74			70			64
Operating expenses:
	Sales and marketing			43			44			52
	Research and development			14			17			22
	General and administrative			9			9			14
	Amortization of goodwill and other intangible assets			1			1			2
	Write-off of in-process research and development			—			4			—
	Unusual items			—			1			191
	Restructuring costs			—			—			1
		Total operating expenses		67			78			282
Income (loss) from operations				7			(8	)		(218	)
Interest income and other income, net				1			2			—
Income (loss) before income taxes				8			(6	)		(218	)
Benefit from (provision for) income taxes				(2	)		(1	)		44
Net income (loss)				6	%		(7	)%		(174	)%
Gross profit %:
	Licensing			96	%		95	%		94	%
	Maintenance, support and services			40	%		31	%		22	%

In fiscal 2002, our revenues were $159.8 million, or 74% of total revenues, from customers in North America, $41.8 million, or 19% of total revenues, from customers in Europe, the Middle East and Africa and $15.6 million, or 7% of total revenues, from customers in the Asia Pacific region. In fiscal 2003, our revenues were $212.0 million, or 74% of total revenues, from customers in North America, $54.6 million, or 19% of total revenues, from customers in Europe, the Middle East and Africa and $20.9 million, or 7% of total revenues, from customers in the Asia Pacific region.

Licensing 19revenues. The increase in licensing revenues occurred across most sales channels and all regions, and was primarily the result of the increased size and productivity of our sales force and the addition of new customers purchasing through our direct channel.

~~Table~~ Maintenance, support and services revenues. The increase in maintenance, support and services revenues was primarily attributable to increased maintenance fees associated with sales of ~~Contents~~new licenses of our products and to increased technical support revenues. Because many of our customers renew maintenance agreements each year, increased maintenance revenues are generated from the cumulative growth in our customer base.

~~Fiscal~~Cost ~~Years~~of ~~Ended June 28, 2002 and June 29, 2001~~ Revenues

~~Revenues~~ The following table sets forth information regarding the composition of our cost of revenues and fiscal period-to-period changes (dollars in thousands):

The following table sets forth information regarding the composition of our revenues and fiscal year-to-year changes:



		Fiscal Year Ended

		June 28,			Percent			June 27,
		2002			Change			2003

Cost of licensing revenues		$	4,993			12	%	$	5,617
	Percentage of licensing revenues		4	%					3	%
Cost of maintenance, support and services revenues		$	46,377			21	%	$	56,313
	Percentage of maintenance, support and services revenues		60	%					55	%
Amortization of developed technologies		$	5,078			(100	)%	$	—
	Percentage of total revenues		2	%					—
Total cost of revenues		$	56,448			10	%	$	61,930
	Percentage of total revenues		26	%					22	%

					Percent
		June 28, 2002			Change			June 29, 2001
		(dollars in thousands)
Licensing revenues		$	140,009			31	%	$	107,028
	Percentage of total revenues		64	%					64	%
Maintenance, support and services revenues		$	77,161			27	%	$	60,694
	Percentage of total revenues		36	%					36	%
Total revenues		$	217,170			29	%	$	167,722

The absolute dollar increase in cost of licensing revenues was equally due to increased license volume and cost associated with new product releases. Cost of licensing revenues vary depending on the volume, distribution method and mix of software licenses shipped. Cost of maintenance, support and services revenues increased as we continued to expand our customer support and professional services organizations to meet the demands of our growing customer base. These costs included increases in salary and benefit costs of $7.4 million, additional overhead cost allocations associated with increased headcount of $4.0 million, a decrease in outside service costs of $933,000 and cost savings of $857,000 associated with travel and entertainment. Our overheads, which increased as the result of additional facilities and information technology costs, are generally allocated across departments based on headcount. Amortization of developed technologies for fiscal 2002 related to the fair value of developed technologies of $15.2 million pushed down to our financial statements as a result of the November 2000 transaction. There was no amortization during fiscal 2003 as a result of the reduction in June 2002 in the net carrying values of the developed technologies that were pushed down to our financial statements.

-25- ~~Total revenues increased 29% to~~ ~~$217.2 million for fiscal 2002 from $167.7 million for~~ ~~fiscal 2001. In each year presented, 64% of our revenues were~~ ~~derived from license fees for our products. We anticipate that license fees will continue to represent the majority of our total revenues for the foreseeable future.~~

~~The~~Gross increase in total revenues was primarily attributable to increases in revenues from our direct sales channels. In addition, we increased revenues from our indirect sales channels, mainly through revenues earned through new and existing strategic partnerships. Both of these channels benefited from the release of our Crystal 8 suite of products including Crystal Enterprise 8.0 and 8.5 and Crystal Reports 8.5. While we expect our revenues will continue to grow and we believe that the current demand for our products is strong, the current economic environment and the slowing global economy have resulted in a decline in information technology spending. We believe that this decline may cause our customers and prospective customers to significantly decrease or delay spending on information technology. As a result, we may not be able to maintain the revenue growth rates we have previously achieved. Margin

~~The~~Our ~~adoption~~gross profit as a percentage of ~~Emerging~~total revenues, ~~Issues~~or ~~Task~~gross ~~Force~~margin, increased from 74% for fiscal 2002 to ~~(“EITF”)~~78% ~~Issue~~for Nofiscal 2003. ~~01-14 (“EITF 01-14”),~~ ~~“Income~~The ~~Statement~~increase was primarily attributable to ~~Characterization~~the elimination of ~~Reimbursements~~amortization ~~Received~~of developed technologies in fiscal 2003. Our gross margin from licensing revenues increased from 96% for fiscal 2002 to 97% for fiscal 2003. Our gross ~~‘Out-of-Pocket’~~margin ~~Expenses~~from ~~Incurred”~~maintenance, ~~resulted~~support and services revenues increased infrom 40% for fiscal 2002 to 45% for fiscal 2003. The increase was primarily the ~~reclassification~~result of ~~out-of-pocket~~improved ~~reimbursable~~margins ~~expenses~~ in maintenance and technical ansupport, ~~increase~~which was partially offset by decreased margins in ~~both~~our professional services organization. Our maintenance, support and services margins are impacted by the ~~revenues~~rate ~~and~~of ~~cost~~utilization of ~~maintenance,~~our ~~support~~personnel and ~~services~~personnel ~~revenues~~costs inrelating to the ~~amounts~~use of ~~$872,000~~our ~~and~~employees ~~$861~~versus outside contractors,~~000~~ who ~~for~~are ~~fiscal~~generally ~~2002~~more ~~and fiscal~~expensive ~~2001,~~than ~~respectively~~our personnel.

~~Revenues~~Operating from a third-party customer, Ingram Micro, Inc. (“Ingram”), accounted for $21.0 million for fiscal 2002 and $27.7 million for fiscal 2001. The primary reason for the decrease during fiscal 2002 was the realignment of one of our products from this channel to a direct sales channel. No other customer accounted for 10% or more of our total revenues during these periods. Expenses

~~Licensing revenues. Licensing revenues consist of license fees for our products. Licensing revenues increased 31% to $140.0 million for fiscal 2002 from $107.0 million for fiscal 2001.~~ The ~~increase~~ infollowing ~~licensing~~table ~~revenues~~sets ~~was~~forth ~~primarily attributable to an~~information ~~increase~~regarding in the ~~size~~composition ~~and productivity~~ of our ~~direct~~operating ~~sales~~expenses ~~force. In~~and ~~addition, the release of our Crystal 8 suite of products has~~fiscal ~~continued~~ period-to-period ~~result~~changes in(dollars ~~increased revenues~~ in ~~fiscal 2002. Our~~thousands): ~~direct sales force continued to add new customers, while~~ ~~continuing to make additional sales to our existing customers.~~ ~~In addition, the continued development of our strategic and OEM partnerships has increased licensing revenues.~~

Maintenance, support and services revenues. Our maintenance, support and services revenues consist of revenues from maintenance related to our products, consulting services, training activities and technical support. Maintenance, support and services revenues increased 27% to $77.2 million for fiscal 2002 from $60.7 million for fiscal 2001. The year-over-year absolute dollar increase in maintenance, support and services revenues was attributable to a higher cumulative installed customer base receiving maintenance. In addition, both consulting and technical support revenues increased as a result of new and existing agreements with our customers, and the initiation of new pricing arrangements for these services.



		Fiscal Year Ended

		June 28,			Percent			June 27,
		2002			Change			2003

Sales and marketing		$	94,449			15	%	$	108,470
	Percentage of total revenues		43	%					38	%
Research and development		$	30,515			37	%	$	41,924
	Percentage of total revenues		14	%					15	%
General and administrative		$	18,464			59	%	$	29,434
	Percentage of total revenues		9	%					10	%
Amortization of other intangible assets		$	2,358			(100	)%	$	—
	Percentage of total revenues		1	%					—
Total operating expenses		$	145,786			23	%	$	179,828
	Percentage of total revenues		67	%					63	%

Sales 20and marketing. The increase in sales expenses in absolute dollars was primarily associated with increased salary and benefits expense of $8.7 million related to an overall increase in our sales force of approximately 60 people and the resultant higher total commissions. In addition, ancillary costs such as travel and entertainment increased by $2.1 million. Marketing expenses increased in absolute dollars of $1.1 million as the result of additional headcount in the department and the related costs associated with increased marketing campaigns and promotional material associated with major releases. The decrease in our sales and marketing expenses as a percentage of total revenues resulted primarily from increased productivity in our direct sales force in addition to a higher total percentage of sales through our indirect channels.

~~Table~~ Research and development. The increase in research and development expenses in absolute dollars primarily resulted from increased salary and benefits costs of ~~Contents~~$5.6 million associated with increased headcount. Expenses also increased by $945,000 as a result of incremental outsourcing costs for research and development related to final quality assurance testing for our products. In addition, as research and development headcount comprises approximately 25% of our headcount, allocations for increases in facilities and overhead costs accounted for $5.0 million of the increase. We expect research and development costs to increase in absolute dollars in future periods as we invest in new products and improvements to our existing products.

~~Concentration~~General ofand ~~Customers~~administrative. The ~~following~~increase ~~table~~in general ~~sets~~and administrative expenses in absolute dollars and as a ~~forth~~percentage ~~information~~of ~~regarding~~total revenues bywere ~~the~~primarily ~~geographic~~due ~~location~~to increases in salary and benefits expense of $5.4 million relating to increased staffing to support our ~~customers:~~growth and our enterprise resource planning system implementation. Expenses also increased by $2.8 million as

					Percent
		June 28, 2002			Change			June 29, 2001
		(dollars in thousands)
United States		$	147,547			29	%	$	113,993
	Percentage of total revenues		68	%					68	%
Europe (1)		$	41,770			31	%	$	31,812
	Percentage of total revenues		19	%					19	%
Other (2)		$	27,853			27	%	$	21,917
	Percentage of total revenues		13	%					13	%

-26-

(1)	Europe includes South Africa and the Middle East.
(2)	Other includes Canada and the Asia Pacific region.

a result of increased professional service fees, a non-recurring termination fee of $625,000 paid to Seagate Technology for the benefit of New SAC related to a previous consulting and advisory contract and recruiting fees and relocation fees of $781,000 associated with the hiring of several strategic positions. In addition, we accrued and expensed a charitable contribution to the Community Foundation of Silicon Valley of $1.2 million.

~~Geographically,~~Amortization weof ~~experienced~~other ~~strong revenue~~intangible ~~growth in the U~~assets.S. ~~with~~Amortization ~~revenues~~of ~~increasing 29% to~~other ~~$147.6 million~~intangible assets for fiscal 2002 ~~from~~related ~~$114.0 million~~to ~~for fiscal~~the ~~2001.~~fair Wevalue ~~also experienced continued growth in revenues~~of ~~outside~~assembled ~~the~~workforce ~~U.S.~~of ~~with revenues increasing 30% to~~ $697.61 million ~~for~~pushed ~~fiscal~~down ~~2002~~to ~~from $53.7 million for~~our ~~fiscal~~financial ~~2001.~~statements ~~The~~as ~~absolute~~a ~~dollar~~result ~~increase~~of inthe ~~revenues~~November ~~was~~2000 ~~primarily~~transaction. ~~attributable~~There towas ~~the~~no ~~increase~~amortization induring ~~the~~fiscal ~~size~~2003 ~~and~~as a ~~productivity~~result of ~~our~~the ~~direct~~reduction ~~sales~~in ~~force,~~June ~~which~~2002 ~~has resulted~~ in ~~increased~~ ~~license~~the ~~revenues~~net ~~and~~carrying values of the ~~expansion~~intangible ofassets ~~our~~that ~~customer base~~were inpushed ~~all~~down ~~regions~~to our financial statements.

~~Cost~~ Interest ofand ~~Revenues~~Other Income (Expense), Net

~~The~~Interest ~~following~~and ~~table~~other ~~sets~~income ~~forth~~(expense), ~~information~~net was ~~regarding~~comprised ~~the composition~~ of ~~our~~the ~~cost~~following of(dollars ~~revenues~~in ~~and fiscal year-to-year changes~~thousands):

					Percent
		Fiscal Year Ended
		June 28, 2002			Change			June 29, 2001
		June 28,			Percent			June 27,
		(dollars in thousands)
		2002			Change			2003
Cost of licensing revenues		$	5,230			(9	)%	$	5,740
Net interest income		$	1,723			(21	)%	$	1,354
	Percentage of licensing revenues		4	%					5	%
Other income (expense)			(404	)		13	%		(458	)
Cost of maintenance, support and services		$	46,140			10	%	$	41,760
	Interest and other income, net	$	1,319			(32	)%	$	896
	Percentage of maintenance, support and services revenues		60	%					69	%
Amortization of developed technologies		$	5,078			66	%	$	3,050
	Percentage of total revenues		2	%					2	%
Total cost of revenues		$	56,448			12	%	$	50,550
	Percentage of total revenues		26	%					30	%

~~Cost~~Net ofinterest ~~revenues~~income ~~increased~~for ~~12%~~fiscal to2002 included $~~56.4 million~~301,000 ~~for~~of ~~fiscal~~interest ~~2002~~received on the net receivable balance from Seagate Technology and $~~50.6 million~~450,000 ~~for~~of non-recurring interest ~~fiscal~~received ~~2001~~on tax refunds. ~~Cost~~Since ofOctober ~~revenues~~2001, aswe ahave ~~percentage~~earned the majority of ~~total~~our ~~revenues~~net interest income from our cash and cash equivalents at interest rates that were ~~26%~~generally ~~for~~lower ~~fiscal~~than those ~~2002~~earned ~~and~~from ~~30%~~Seagate ~~for~~Technology, ~~fiscal~~which managed our cash prior to October 2001. ~~The~~Net ~~absolute dollar~~interest ~~increase~~income ~~for~~fluctuates ~~fiscal~~depending on ~~2002~~movements in ~~cost~~the general level of ~~revenues~~interest ~~was~~rates, our average ~~primarily~~cash ~~attributable~~and toavailable-for-sale ~~increased~~securities ~~maintenance~~balances, ~~support~~ and, ~~services~~previously, ~~costs~~our ~~associated~~net ~~with~~position ~~increased~~under ~~revenues~~the ~~and~~revolving aloan agreement ~~$2.0 million~~we ~~increase~~had inwith ~~amortization~~Seagate ofTechnology ~~developed~~and the interest rates applied ~~technologies~~thereon.

~~Cost~~Other ofincome ~~licensing revenues.~~(expense) was ~~Cost~~largely comprised of ~~licensing~~net ~~revenues consists~~foreign ~~primarily~~exchange ofgains ~~materials~~and losses, ~~product~~which ~~packaging,~~represent ~~distribution~~the ~~costs,~~impact ~~related~~of ~~fulfillment~~foreign ~~personnel~~exchange ~~and~~rate ~~third~~fluctuations ~~party~~on ~~royalties. Cost~~the translation of ~~licensing~~foreign ~~revenues~~exchange ~~decreased~~transactions 9%and tobalances $5into U.2S. ~~million~~dollars ~~for fiscal~~and ~~2002~~varies ~~from~~depending ~~$5.7 million~~upon ~~for~~movements ~~fiscal~~in currency ~~2001~~exchange rates. AsDuring ~~a percentage~~fiscal ~~of licensing revenues~~2003, ~~cost~~we ofincurred ~~licensing~~a ~~revenues~~net ~~decreased~~foreign toexchange 4%loss ~~for~~of ~~fiscal~~$503,000, ~~2002~~which ~~from~~was 5%the ~~for~~result ~~fiscal~~of ~~2001~~an $1.2 million Weloss ~~have continued~~primarily toas ~~realize~~the ~~cost~~result ~~savings~~of ~~relative to~~ the ~~increase in~~ ~~licensing~~translation ~~revenues~~of ~~due~~Canadian todollar ~~initiatives~~payables toat ~~reduce~~quarter ~~our production~~end, offset ~~fulfillment~~by ~~and~~a ~~shipping~~$660,000 ~~costs~~gain as a ~~percentage~~result of ~~revenue.~~the ~~The~~change in functional ~~cost~~currency of ~~licensing~~certain ~~revenues~~foreign ~~may~~subsidiaries ~~vary~~from ~~depending~~their onrespective local currency to the ~~volume,~~U.S. dollar. We recently implemented ~~distribution~~a ~~method~~partial ~~and~~hedging ~~mix~~strategy offor ~~software~~the ~~licenses~~Canadian ~~shipped~~exposures.

~~Cost of maintenance, support and services~~ Income ~~revenues. Cost of maintenance, support~~Taxes ~~and services revenues consists of personnel and related overhead~~ ~~costs for maintenance services, consulting, training and technical~~



		Fiscal Year Ended

		June 28,			June 27,
		2002			2003


		(dollars in thousands)
Provision for income taxes		$	3,300		$	13,191
	Effective tax rate		20	%		28	%

~~Table~~ The change in effective tax rate was due primarily to the effect of ~~Contents~~continuing growth in profitability, a decrease in available foreign research and development tax credits and utilization of U.S. net operating losses in fiscal 2002 that had previously been subject to a valuation allowance.

-27- ~~support. Cost of maintenance, support and~~ ~~services revenues increased 10% to $46.1 million for fiscal~~ ~~2002 from $41.8 million for fiscal 2001. The absolute~~ dollar increase was the result of costs associated with increased revenues. As a percentage of maintenance, support and services revenues, cost of maintenance, support and services revenues decreased to 60% for fiscal 2002 from 69% for fiscal 2001. The decline in cost of maintenance, support and services revenues as a percentage of maintenance, support and services revenues was primarily the result of the growth of maintenance and technical support revenue without a corresponding increase in the associated costs of these services. In addition, our pricing for such services was slightly higher in fiscal 2002. Cost of maintenance, support and services revenues may vary between periods because of the mix of services and the margins we obtain on those services. We expect the cost of maintenance, support and services revenue to continue to grow in absolute dollars in the future as we continue to expand our customer support and professional services organizations to meet our customers’ demand for our services.

~~Amortization~~Fiscal ofYears ~~developed technologies.~~Ended ~~Amortization of developed technologies increased 66% to $5.1~~June ~~million~~29, ~~for fiscal 2002 from $3.1 million for fiscal~~ 2001 and ~~remained~~ constant at 2% of total revenues. At November 22, 2000, existing developed technologies were revalued as part of the New SAC Transaction and effective November 23, 2000, we began amortizing the $15.2 million of developed technologies pushed down to our consolidated and combined statements of operations over 36 months. At June 28, 2002~~, the net carrying~~ ~~value of the $15.2 million of developed technologies was~~ reduced to zero as a result of the application of SFAS 109. Therefore, commencing in the first quarter of fiscal 2003, we will no longer provide for amortization related to this intangible asset acquired as the result of the New SAC Transaction. The absolute dollar increase for fiscal 2002 is the result of amortization for fiscal 2001 being charged on a different and smaller intangible asset base up to and including the five months ended November 22, 2000.

~~Gross Profit. Our~~ Revenues ~~gross profit as a percentage of total revenues increased to 74%~~ for fiscal 2002 from 70% for fiscal 2001. We continued to have growth in our gross profit as the result of the low total dollar cost of licensing revenues relative to the total dollar amount of licensing revenues, resulting in improved gross profit margins of 1% over fiscal 2001. In addition, our maintenance, support and services revenues have been growing at a greater rate than the cost of maintenance, support and services revenues, resulting in increased margins of 9% over fiscal 2001.

The 22following table sets forth information regarding the composition of our revenues and fiscal year-to-year changes (dollars in thousands):



		Fiscal Year Ended

		June 29,			Percent			June 28,
		2001			Change			2002

Licensing revenues		$	107,028			31	%	$	140,009
	Percentage of total revenues		64	%					64	%
Maintenance, support and services revenues		$	60,694			27	%	$	77,161
	Percentage of total revenues		36	%					36	%
Total revenues		$	167,722			29	%	$	217,170

~~Operating~~ Revenues ~~Expenses~~from Ingram Micro accounted for $27.7 million, or 16% of total revenues, for fiscal 2001 and $21.0 million, or 10% of total revenues, for fiscal 2002. The primary reason for the decrease during fiscal 2002 was the transition of one of our products from the distributor channel to direct sales. No other customer accounted for 10% or more of our total revenues during fiscal 2001 or fiscal 2002.

~~The~~In ~~following~~fiscal ~~table~~2001, ~~sets~~our ~~forth~~revenues ~~information~~were ~~regarding~~$123.5 million, or 74% of total revenues, from customers in North America, $31.8 million, or 19% of total revenues, from customers in Europe, the ~~composition~~Middle East and Africa and $12.5 million, or 7% of total revenues, from customers in the Asia Pacific region. In fiscal 2002, our ~~operating~~revenues ~~expenses~~were $159.8 million, or 74% of total revenues, from customers in North America, $41.8 million, or 19% of total revenues, from customers in Europe, the Middle East and ~~fiscal~~Africa and ~~year-to-year~~$15.6 million, ~~changes:~~or 7% of total revenues, from customers in the Asia Pacific region.

					Percent
		June 28, 2002			Change			June 29, 2001
		(dollars in thousands)
Sales and marketing		$	94,449			28	%	$	73,888
	Percentage of total revenues		43	%					44	%
Research and development		$	30,515			4	%	$	29,236
	Percentage of total revenues		14	%					17	%
General and administrative		$	18,464			19	%	$	15,465
	Percentage of total revenues		9	%					9	%
Amortization of goodwill and other intangible assets		$	2,358			17	%	$	2,023
	Percentage of total revenues		1	%					1	%
Write-off of in-process research and development		$	—			(100	)%	$	7,073
	Percentage of total revenues		—						4	%
Unusual items		$	—			(100	)%	$	1,851
	Percentage of total revenues		—						1	%
Restructuring costs		$	—			(100	)%	$	573
	Percentage of total revenues		—						—
Total operating expenses		$	145,786			12	%	$	130,109
	Percentage of total revenues		67	%					78	%

Licensing revenues. The increase in licensing revenues was primarily attributable to an increase in the size and productivity of our direct sales force. Our direct sales force continued to add new customers, while continuing to make additional sales to our existing customers. In addition, we increased revenues from indirect sales, primarily from original equipment manufacturers. All of our channels benefited from the releases of our Crystal 8 product suite throughout fiscal 2001 and fiscal 2002.

~~Sales~~Maintenance, ~~and~~support ~~Marketing. Sales~~ and ~~marketing~~services ~~expenses include salaries, commissions and~~revenues. ~~bonuses~~The ~~earned~~absolute bydollar ~~sales~~increase ~~and marketing personnel, advertising and~~in ~~product promotional activities~~maintenance, ~~travel,~~support ~~facilities, information systems~~ and ~~other~~services ~~related~~revenues ~~costs.~~was ~~Sales~~attributable ~~and marketing expenses increased 28%~~ to ~~$94.4 million for fiscal 2002 from $73.9 million for fiscal 2001. As~~ a ~~percentage of total~~ ~~revenues,~~higher ~~sales~~cumulative ~~and~~installed ~~marketing~~customer ~~expenses~~base ~~decreased~~receiving ~~to 43% for fiscal 2002 from 44% for fiscal 2001~~maintenance. ~~The absolute dollar~~ ~~increase~~In inaddition, ~~sales~~both consulting and ~~marketing~~technical ~~expenses~~support ~~was primarily~~revenues ~~associated with~~ increased ~~personnel costs,~~ as a result of ~~increased~~ ~~headcount~~new ~~in our sales force,~~ and ~~higher~~existing ~~commissions associated~~agreements with ~~increased revenues. The decrease as a percentage of revenues results from increased productivity of~~ our ~~sales~~ ~~force.~~customers ~~From June 29, 2001 to June 28, 2002, our sales~~ and ~~marketing~~the ~~headcount~~initiation ~~increased by 25%. We expect sales and marketing expenses to increase in absolute dollars and to vary as a percentage~~ of ~~total~~new ~~revenues~~pricing asarrangements ~~we continue to increase our~~for ~~sales~~these ~~force headcount, increase sales productivity and promote our products and~~ services.

~~Research~~Cost ~~and Development. Research and development expenses are expensed as incurred and consist primarily~~ of ~~personnel~~ and related costs associated with the development of new products, the enhancement and localization of existing products, quality assurance and testing and information systems costs. Research and development expenses increased 4% to $30.5 million for fiscal 2002 from $29.2 million for fiscal 2001. The absolute dollar increase was primarily associated with personnel costs related to development of future and existing products. Research and development costs decreased to 14% of total revenues for fiscal 2002 from 17% of total revenues for fiscal 2001. The decrease in research and development costs as a percentage of total revenues was the result of revenues increasing at a greater rate than research and development costs. While we have continued to add research and development headcount and continue to release new products, we have also been able to control costs. We expect research and development expenses to continue to vary as a percentage of total revenues in the future as we continue to invest in our products. Revenues

~~General~~The ~~and Administrative.~~following ~~General~~table ~~and administrative~~sets ~~expenses~~forth ~~consist primarily of personnel costs for~~information ~~finance,~~regarding ~~legal,~~the ~~human~~composition ~~resources~~of ~~and~~our ~~other~~cost ~~administrative~~of ~~costs, including~~revenues ~~bad debt expense. General~~ and ~~administrative expenses~~fiscal ~~increased 19%~~ year-to-year ~~$18.5 million~~changes ~~for~~(dollars ~~fiscal~~in ~~2002 from~~thousands): ~~$15.5 million for fiscal 2001. As a percentage of total~~ ~~revenues, general and administrative expenses remained at 9% for~~ ~~fiscal 2002 and fiscal~~



		Fiscal Year Ended

		June 29,			Percent			June 28,
		2001			Change			2002

Cost of licensing revenues		$	5,504			(9	)%	$	4,993
	Percentage of licensing revenues		5	%					4	%
Cost of maintenance, support and services		$	41,996			10	%	$	46,377
	Percentage of maintenance, support and services revenues		69	%					60	%
Amortization of developed technologies		$	3,050			66	%	$	5,078
	Percentage of total revenues		2	%					2	%
Total cost of revenues		$	50,550			12	%	$	56,448
	Percentage of total revenues		30	%					26	%

~~Table of Contents~~-28-

~~2001.~~We ~~During~~realized ~~the~~cost ~~three~~savings ~~months~~in ~~ended~~cost ~~June 28~~of licensing revenues due to initiatives to reduce our production, ~~2002~~fulfillment and ~~for~~shipping ~~all~~costs ~~comparative~~as ~~periods,~~a wepercentage ~~reclassified~~of revenues. The ~~information~~absolute ~~system~~dollar ~~costs~~increase ~~previously~~in ~~including~~cost ~~within~~of ~~general~~maintenance, support and ~~administrative~~services ~~expenses~~revenues ~~and~~was ~~allocated~~the ~~these~~result of costs ~~across~~associated with increased headcount of $2.8 million and an increase in the ~~other~~use ~~functional~~of ~~groups~~external ~~consistent~~services ~~with~~to ~~other~~support ~~overhead~~our professional services ~~allocations~~organization of $2.1 million. The ~~increase~~decline in ~~absolute~~cost ~~dollars~~of maintenance, ~~for~~support ~~fiscal~~and ~~2002~~services as a percentage of maintenance, support and services revenues was primarily attributable to ~~higher~~the ~~salary~~continued ~~expense~~increase ~~associated~~in maintenance revenues ~~with~~which ~~our~~had ~~headcount~~nominal ~~growth~~associated ~~and~~costs, increased ~~outside~~pricing ~~service~~for ~~costs~~our ~~offset~~technical bysupport ~~continued~~and cost ~~management~~control initiatives. WeAt November 22, ~~expect~~2000, existing developed technologies were ~~general~~revalued and ~~administrative~~effective ~~expenses~~November 23, 2000, we began amortizing over 36 months the $15.2 million of developed technologies pushed down to ~~vary~~our infinancial statements. The absolute ~~dollars and~~dollar asincrease afor ~~percentage~~fiscal 2002 was the result of amortization ~~total~~for ~~revenues~~fiscal as2001 webeing ~~continue~~charged on a different and smaller intangible asset base up to ~~grow~~and including the five months ended November 22, 2000.

~~Amortization~~Gross of Goodwill and Other Intangible Assets. Amortization of goodwill and other intangible assets increased 17% to $2.4 million for fiscal 2002 from $2.0 million for fiscal 2001. As a percentage of total revenues, amortization of goodwill and other intangible assets remained constant at 1% of total revenues for both fiscal 2002 and fiscal 2001. At November 22, 2000, existing goodwill and other intangible assets were revalued as part of the New SAC Transaction and effective November 23, 2000, we began amortizing the $7.1 million of assembled workforce pushed down to our consolidated and combined statements of operations over 36 months. At June 28, 2002, the net carrying value of the $7.1 million of assembled workforce was reduced to zero as a result of application of SFAS 109. Therefore, commencing in the first fiscal quarter of 2003, we will no longer provide for amortization related to this intangible asset acquired as a result of the New SAC Transaction. The absolute dollar increase was the result of amortization for fiscal 2001 being charged on a different and smaller intangible asset base up to and including the five months ended November 22, 2000. Margin

~~Write-off~~Our ofgross ~~In-Process~~margin ~~Research~~increased ~~and Development.~~from We70% ~~had~~for ~~no write-off of~~fiscal ~~in-process~~2001 ~~research~~to ~~and~~74% ~~development~~ for fiscal 2002. AsThe ~~part~~increase ~~of the~~in ~~push~~our ~~down~~gross ofmargin was ~~the~~primarily ~~purchase~~attributable ~~price~~to ~~allocation~~an ofincrease in the ~~New~~margins ~~SAC~~for ~~Transaction~~maintenance, ~~$7.1 million~~services ~~of in-process research~~ and ~~development~~ ~~was~~support ~~recorded~~from ~~at November 22, 2000. This amount, which was 4~~31% ofin ~~total revenues for~~ fiscal 2001, ~~was~~to ~~written off~~40% in ~~its entirety in~~ fiscal ~~2001 as the acquired technologies had not yet reached technological feasibility and there were no future alternative uses~~2002.

~~Unusual Items. We~~ Operating ~~had no unusual items for fiscal 2002. We recorded~~Expenses ~~$1.9 million of compensation expense, representing 1% of~~ total revenues, during fiscal 2001 that was comprised of non-cash compensation expense attributable to our employees arising from the acceleration and net exercise of Seagate Technology options to purchase 51,500 shares of Seagate Technology common stock held by our employees on November 22, 2000. The options were accelerated and each share was net exercised for merger consideration of 0.4465 shares of VERITAS and $8.55 cash per share of Seagate Technology common stock held. The accelerated vesting and net exercise of these options resulted in this compensation expense.

~~Restructuring~~The ~~Costs. We~~following ~~had~~table nosets ~~restructuring~~forth ~~charges during fiscal 2002.~~information ~~Restructuring~~regarding ~~charges were $573,000 for fiscal 2001 and represented less than 1% of total revenues. The charges for fiscal 2001 related to~~ the ~~closure~~composition of ~~eight offices in Europe and were part of a restructuring plan announced in September 2000 to consolidate~~ our ~~European~~operating ~~sales~~expenses ~~organization. The charges were primarily comprised of costs related to the termination of office leases~~ and ~~other related office closure costs, as well as~~fiscal ~~severance and benefits due~~ year-to-year ~~nine~~changes ~~sales~~(dollars ~~and marketing employees who were terminated~~ in ~~September 2000. As at June 28, 2002,~~thousands): ~~no amounts remained outstanding.~~

Interest Income and Other Income, Net



		Fiscal Year Ended

		June 29,			Percent			June 28,
		2001			Change			2002

Sales and marketing		$	73,888			28	%	$	94,449
	Percentage of total revenues		44	%					43	%
Research and development		$	29,236			4	%	$	30,515
	Percentage of total revenues		17	%					14	%
General and administrative		$	15,465			19	%	$	18,464
	Percentage of total revenues		9	%					9	%
Amortization of goodwill and other intangible assets		$	2,023			17	%	$	2,358
	Percentage of total revenues		1	%					1	%
Write-off of in-process research and development		$	7,073			(100	)%	$	—
	Percentage of total revenues		4	%					—
Unusual items		$	1,851			(100	)%	$	—
	Percentage of total revenues		1	%					—
Restructuring costs		$	573			(100	)%	$	—
	Percentage of total revenues		—						—
Total operating expenses		$	130,109			12	%	$	145,786
	Percentage of total revenues		78	%					67	%

~~Interest~~Sales ~~income~~and marketing. The absolute dollar increase in sales and ~~other~~marketing ~~income~~expenses was primarily associated with increased salary and benefits expense of $11.3 million related to an overall increase in our sales force headcount and $7.1 million related to higher total commissions associated with increased revenues. In support of our sales efforts, ~~net~~travel ~~was~~and entertainment costs increased ~~comprised~~by $1.1 million. The decrease as a percentage of ~~the~~revenues resulted ~~following:~~from increased productivity of our sales force.

					Percent
		June 28, 2002			Change			June 29, 2001
		(dollars in thousands)
Interest income		$	1,780			(10	)%	$	1,970
Interest expense			(57	)		185	%		(20	)
Net foreign currency exchange gain (loss)			(404	)		(158	)%		701
	Total interest income and other income, net	$	1,319					$	2,651

Research and development. The absolute dollar increase was primarily associated with costs associated with increased headcount of $1.4 million, offset by targeted reductions in discretionary spending of $355,000. The decrease in research and development costs as a percentage of total revenues was the result of revenues increasing at a greater rate than research and development costs due to cost control measures.

-29- 24

~~Table~~ General and administrative. The increase in absolute dollars was primarily attributable to higher salary expense associated with our headcount growth of ~~Contents~~$755,000 and increased outside service costs of $1.9 million, which was offset in part by cost management initiatives.

~~Net~~Amortization ~~interest~~of ~~income~~goodwill ~~fluctuates~~and ~~depending~~other onintangible ~~movements~~assets. inAt ~~the~~November 22, ~~general level of interest rates in the U.S.~~2000, ~~our~~existing ~~average~~goodwill ~~cash~~ and ~~cash~~other ~~equivalents,~~intangible ~~and~~assets ~~our~~were ~~net~~revalued ~~position~~and ~~under~~effective ~~the~~November 23, ~~revolving~~2000, ~~loan agreement~~ we ~~had~~began ~~with~~amortizing ~~Seagate~~over ~~Technology~~36 months ~~LLC and~~ the interest rates applied thereon. Historically, net interest income was primarily attributable to interest earned on balances receivable under the revolving loan agreement. Interest income earned on the net receivable balance under this agreement was approximately $~~301,000 and $1~~7.81 million ~~for fiscal 2002 and fiscal 2001, respectively. Commencing in October 2001, we earned the majority~~ of ~~our~~assembled ~~net~~workforce ~~interest~~pushed ~~income~~down ~~from~~to our ~~cash~~financial ~~and cash equivalent balances~~statements. AsThe aabsolute dollar ~~percentage~~increase ofwas ~~total~~the ~~revenues,~~result ~~net~~of ~~interest~~amortization ~~income decreased from 1%~~ for fiscal 2001 tobeing charged ~~less~~on ~~than~~a 1%different ~~for fiscal 2002. While our cash~~ and ~~cash~~smaller ~~equivalents~~intangible ~~balances~~asset ~~increased~~base ~~relative~~up to ~~the~~ ~~prior~~and ~~period’s~~including ~~interest earning balances,~~ the ~~average interest~~five months ~~rate~~ended ~~was lower~~November 22, ~~resulting in a decrease in net interest income for fiscal 2002~~2000.

~~Net~~Write-off ~~foreign~~of ~~currency~~in-process ~~exchange~~research ~~gains~~ and ~~losses,~~ ~~which~~development. ~~represent~~As part of the ~~impact~~push down of ~~foreign~~the ~~currency~~purchase ~~fluctuations~~price on allocation of the ~~translation~~November 2000 transaction, $7.1 million of ~~foreign~~in-process ~~currency~~research ~~transactions~~and development ~~into~~was Urecorded.S. This amount, which was 4% of total ~~dollars~~revenues for fiscal 2001, ~~varies~~was ~~depending~~written ~~upon~~off ~~movements~~in its entirety in fiscal ~~currency~~2001 ~~exchange~~because the acquired technologies had not yet ~~rates~~reached technological feasibility and there were no future alternative uses. We had no write-off of in-process research and development for fiscal 2002.

~~Income~~ Unusual ~~Taxes~~items. Unusual items were comprised of non-cash compensation expense arising from the acceleration and net exercise of Old Seagate options to purchase 51,500 shares of Old Seagate common stock held by our employees on November 22, 2000. We had no unusual items for fiscal 2002.

					Percent
		June 28, 2002			Change			June 29, 2001
		(dollars in thousands)
Provision for (benefit from) income taxes		$	3,300			180	%	$	1,183
	Effective tax rate		20	%					(12	)%

Restructuring costs. The restructuring costs for fiscal 2001 related to the closure of eight offices in Europe and were part of a restructuring plan announced in September 2000 to consolidate our European sales organization. The restructuring costs were primarily comprised of costs related to the termination of office leases and other related office closure costs, as well as severance and benefits for nine sales and marketing employees who were terminated in September 2000. As of June 28, 2002, no material amount remained outstanding. We had no restructuring charges during fiscal 2002.

We Interest recorded an income tax provision of $3.3 million at an effective rate of 20% for fiscal 2002 compared with a $1.2 million income tax provision at an effective rate of negative 12% for fiscal 2001. The change in the effective tax rate from a negative rate for fiscal 2001 to a positive rate in 2002 is due primarily to the effect of our becoming profitable and asOther ~~a result of the absence of certain~~Income ~~non-cash charges associated with the New SAC Transaction. In addition~~(Expense), ~~the income tax provision for fiscal 2001 included~~Net ~~benefits recorded during the period from July 1, 2000 to~~ November 22, 2000 under the tax allocation agreement we had with Seagate Technology. A valuation allowance has been provided for fiscal 2002 and for fiscal 2001 against the deferred tax assets arising primarily from temporary differences and net operating losses carried forward due to the uncertainty of their realizability.

~~The~~Interest ~~effective~~and ~~rate~~other ~~used to record the~~ income ~~tax provision differed from the 35% U.S. federal statutory rate in fiscal 2002 due primarily to the benefits of operating in various foreign jurisdictions~~(expense), ~~including the availability of research and development investment tax credits in Canada, an increase in the valuation allowance and the inclusion of a reconstituted~~ net ~~operating loss. The increase in the valuation~~was ~~allowance~~comprised ~~and the inclusion~~ of ~~a reconstituted net operating loss are~~ the ~~results~~following of(dollars ~~filing~~in ~~the U.S. federal and state income~~thousands): ~~tax returns for the year ended June 29, 2001 and reflecting~~ ~~a final revised purchase price allocation schedule regarding the~~ November 22, 2000 New SAC Transaction. Other significant items impacted by the above were the recognition of previously deferred revenue and an adjustment to the acquisition related intangible assets.

The effective rate used to record the income tax provision differed from the 35% U.S. federal statutory rate in fiscal 2001 due primarily to the benefits of operating in various foreign jurisdictions, as well as an increase in the valuation allowance for U.S. deferred tax assets arising subsequent to the termination of the tax allocation agreement on November 22, 2000 and non-deductible charges arising from push down accounting.



		Fiscal Year Ended

		June 29,		Percent			June 28,
		2001		Change			2002

Net interest income		$	1,950		(12	)%	$	1,723
Other income (expense)			701		(158	)%		(404	)
	Interest and other income (expense), net	$	2,651		(50	)%	$	1,319

Interest 25income earned on the net receivable balance under our agreements with Old Seagate and its successor, Seagate Technology, was approximately $1.8 million for fiscal 2001 and $301,000 for fiscal 2002. Since October 2001, we have earned the majority of our net interest income from our cash and cash equivalent balances. While our cash and cash equivalents balances increased, the average interest rate was lower, which resulted in a decrease in net interest income for fiscal 2002.

~~Table~~ Other income (expense) was largely comprised of net ~~Contents~~foreign exchange gains and losses, which represented the impact of foreign exchange rate fluctuations on the translation of foreign exchange transactions into U.S. dollars and varied depending upon movements in currency exchange rates. During fiscal 2002, we had a net foreign exchange loss of $434,000 primarily as the result of the strengthening of the Canadian dollar relative to the U.S. dollar.

-30- ~~Fiscal Years Ended June 29, 2001 and~~ ~~June 30, 2000~~

~~Revenues~~ Income Taxes

The following table sets forth information regarding the composition of our revenues and fiscal year-to-year changes:



		Fiscal Year Ended

		June 29,		June 28,
		2001		2002


		(dollars in thousands)
Provision for income taxes		$	1,183	$	3,300
	Effective tax rate		—		20	%

					Percent
		June 29, 2001			Change		June 30, 2000
		(dollars in thousands)
Licensing revenues		$	107,028			44%	$	74,182
	Percentage of total revenues		64	%				58	%
Maintenance, support and services revenues		$	60,694			15%	$	52,727
	Percentage of total revenues		36	%				42	%
Total revenues		$	167,722			32%	$	126,909

The change in the effective tax rate was due primarily to our achievement of profitability and the absence of certain non-cash charges associated with the November 2000 transaction. In addition, the income tax provision for fiscal 2001 included benefits recorded during the period from July 1, 2000 to November 22, 2000 under the tax allocation agreement we had with Old Seagate. We provided a valuation allowance for fiscal 2001 and fiscal 2002 against the deferred tax assets arising primarily from temporary differences and net operating losses carried forward due to the uncertainty of their realizability.

~~Total~~The ~~revenues~~effective ~~increased~~rate ~~32%~~used to ~~$167.7 million~~ ~~for~~record ~~fiscal~~the ~~2001~~income tax provision differed from ~~$126~~the 35% U.9S. federal ~~million~~statutory ~~for~~rate in fiscal ~~2000.~~2001 ~~The~~due ~~increase~~primarily into ~~total~~the ~~revenues~~fact ~~for~~that ~~fiscal~~we ~~2001~~operate ~~was~~in ~~primarily~~various ~~attributable~~foreign tojurisdictions, as well as an increase in the valuation ~~size~~allowance offor ~~our~~U.S. deferred ~~sales force~~tax assets arising subsequent to athe ~~turnover~~termination of the ~~sales~~tax ~~force~~allocation ~~and~~agreement ~~certain~~on ~~management positions in October 1999~~November 22, 2000 and annon-deductible ~~increase~~charges inarising from ~~productivity~~push ofdown ~~our~~accounting. ~~sales~~Other ~~force~~significant ~~since~~items ~~that~~impacted ~~time.~~by ~~In addition,~~the above were the ~~release~~recognition of ~~Crystal~~previously ~~Enterprise~~deferred ~~8.0~~revenues ~~in March 2001~~ and ~~other~~ ~~product~~an ~~releases~~adjustment ~~in the second half of fiscal 2001 contributed~~ to the ~~overall~~acquisition ~~growth~~related ofintangible ~~revenues~~assets.

The ~~adoption~~effective ofrate ~~EITF~~used ~~01-14,~~to ~~resulted~~record inthe income tax provision differed from the 35% U.S. federal statutory rate ~~reclassification~~in offiscal ~~out-~~2002 due primarily to the benefits of~~-pocket~~ ~~reimbursable~~operating ~~expenses~~in various foreign jurisdictions, including the availability of research and development investment tax credits in Canada, an increase in ~~both~~the ~~maintenance,~~valuation ~~support~~allowance and ~~services~~the ~~revenues~~inclusion ~~and cost~~ of ~~maintenance,~~a reconstituted ~~support~~net ~~and~~operating ~~services~~loss. ~~revenues~~The increase in the valuation ~~amounts~~allowance and the inclusion of ~~$861,000~~a reconstituted net operating loss are the results of filing the U.S. federal and ~~$391,000~~state income tax returns for ~~fiscal~~the year ended June 29, 2001 and reflecting ~~fiscal~~a final revised purchase price allocation schedule regarding the November 2000, ~~respectively~~transaction.

~~Revenues~~Selected ~~from~~Quarterly ~~Ingram~~Financial ~~accounted for~~Data ~~$27.7 million for fiscal 2001 and $25.3 million for~~ ~~fiscal 2000, and represented more than 10% of the total revenues in each year. No other customers accounted for 10% or more of our total revenues for fiscal 2001 or fiscal 2000.~~

~~Licensing~~The ~~revenues. Licensing~~table ~~revenues~~below ~~increased~~shows ~~44%~~our tounaudited ~~$107.0 million for~~quarterly ~~fiscal~~statements ~~2001~~of ~~from~~operations ~~$74.2 million~~data for ~~fiscal~~each ~~2000. In fiscal 2000 we experienced significant voluntary and involuntary turnover~~ of ~~our~~the ~~direct~~eight ~~sales~~quarters ~~force~~ in the ~~first~~period ~~half~~ended ofJune 27, ~~the fiscal year~~2003. WeThis ~~added~~information ~~new~~has ~~members~~been derived tofrom our ~~sales~~unaudited ~~force~~financial ~~throughout fiscal~~statements, ~~2000~~which, ~~and continued to invest~~ in our ~~sales force in fiscal~~ ~~2001~~opinion, ~~resulting~~have inbeen anprepared ~~increase~~on in the ~~percentage~~same ofbasis ~~total revenues~~as ~~represented~~our ~~by licensing revenues. The increase in~~audited ~~licensing~~financial ~~revenues~~statements ~~in fiscal 2001 was primarily attributable to an increase in the size~~ and ~~productivity~~include ofall ~~our~~adjustments, ~~direct sales~~consisting ~~force~~only ~~compared to fiscal 2000, resulting in an expansion~~ of ~~our customer~~normal ~~base.~~recurring ~~In addition~~adjustments, ~~new~~necessary ~~product~~for ~~releases~~the ~~during fiscal~~fair ~~2001~~presentation ~~and~~of the ~~latter~~information ~~half~~for ofthe ~~fiscal~~quarters ~~2000,~~presented. ~~such as Crystal Reports~~The ~~8.0~~results inof ~~February~~operations ~~2000,~~for ~~Crystal~~any ~~Reports~~quarter ~~8.5~~are ~~and~~not ~~Crystal Enterprise~~necessarily ~~8.0~~indicative inof ~~March~~the ~~2001,~~results ~~contributed~~of tooperations ~~increases~~for inany ~~revenues~~future period.

Maintenance, support and services revenues. Maintenance, support and service revenues increased 15% to $60.7 million for fiscal 2001 from $52.7 million for fiscal 2000. As a percentage of total revenues, maintenance, support and services revenues decreased to 36% of total revenues for fiscal 2001 from 42% of total revenues for fiscal 2000. The year-~~over~~31-~~year absolute~~ ~~dollar increases in maintenance, support and services revenues~~ ~~were attributable to the higher cumulative installed customer~~ ~~base, from new and existing customers, which resulted in~~ increased sales of maintenance agreements and consulting services. The decline in maintenance, support and services revenue as a percentage of total revenues resulted from the accelerated growth in our license revenues for fiscal 2001.



			Quarters Ended

			Sept. 28,		Dec. 28,		March 29,		June 28,		Sept. 27,		Dec. 27,		March 28,			June 27,
			2001		2001		2002		2002		2002		2002		2003			2003


			(in thousands, except per share data)
Revenues:
	Licensing		$	30,855	$	32,916	$	36,737	$	39,501	$	41,787	$	46,966	$	46,309		$	50,470
	Maintenance, support and services			17,196		18,654		19,438		21,873		23,261		24,206		26,737			27,772

		Total revenues		48,051		51,570		56,175		61,374		65,048		71,172		73,046			78,242
Cost of revenues:
	Licensing			1,469		1,063		1,296		1,165		1,732		1,379		1,334			1,172
	Maintenance, support and services			10,153		11,092		11,903		13,229		13,907		13,249		14,196			14,961
	Amortization of developed technologies			1,269		1,270		1,270		1,269		—		—		—			—

		Total cost of revenues		12,891		13,425		14,469		15,663		15,639		14,628		15,530			16,133

Gross profit				35,160		38,145		41,706		45,711		49,409		56,544		57,516			62,109
Operating expenses:
	Sales and marketing			21,373		23,101		23,996		25,979		23,900		27,501		29,007			28,062
	Research and development			6,945		7,217		7,527		8,826		9,403		10,095		10,360			12,066
	General and administrative			4,059		4,213		5,270		4,922		6,580		7,589		6,564			8,701
	Amortization of goodwill and other intangible assets			589		589		589		591		—		—		—			—

		Total operating expenses		32,966		35,120		37,382		40,318		39,883		45,185		45,931			48,829

Income from operations				2,194		3,025		4,324		5,393		9,526		11,359		11,585			13,280
Interest and other income (expense), net				729		116		359		115		452		252		(518	)		710

Income before income taxes				2,923		3,141		4,683		5,508		9,978		11,611		11,067			13,990
Provision for income taxes				502		501		660		1,637		2,895		3,273		2,942			4,081

Net income			$	2,421	$	2,640	$	4,023	$	3,871	$	7,083	$	8,338	$	8,125		$	9,909

Basic net income per share			$	0.03	$	0.03	$	0.05	$	0.05	$	0.09	$	0.11	$	0.11		$	0.13

Diluted net income per share			$	0.03	$	0.03	$	0.05	$	0.05	$	0.09	$	0.11	$	0.10		$	0.12

Weighted average number of shares used in basic net income per share				75,445		75,490		75,620		75,848		75,895		75,950		76,008			76,061
Weighted average number of shares used in diluted net income per share				75,445		75,817		76,739		78,947		79,677		79,194		79,823			82,258

~~Table of Contents~~-32-

~~Concentration~~Our total revenues and gross profit increased in each of the eight quarters ended June 27, 2003, ~~Customers~~reflecting the growth of our business and increased customer base. ~~The~~Sales and marketing expenses generally increased each quarter as we steadily invested in our sales and marketing personnel and resources to address market opportunities. Sales and marketing expenses decreased in the quarter ended September 27, 2002 due to reduced marketing expenses in the quarters, following ~~table~~the ~~sets~~release of products in the prior two ~~forth~~quarters, ~~information~~a ~~regarding~~reduction ~~revenues~~in sales and marketing systems development expenses and reduced sales expenses. Sales expense decreased in the three months ended June 27, 2003, due to reduced commission expense in the quarter. Research and development expenses have increased in each of the quarters ending June 27, 2003, reflecting our commitment to continuing investment in product development and technology advancement. The quarterly fluctuation in general and administrative expenses was due to a variety of factors. In the three months ended March 29, 2002, general and administrative expenses increased due primarily to increased salary expenses, legal fees and other outside services expenses. In the three months ended September 27, 2002, general and administrative expenses increased due primarily to recruiting and relocation expenses for our senior executives, an additional bonus awarded by our board of directors to a senior executive officer and increased outside services costs, including consulting and legal fees. In the ~~geographic~~three ~~location~~months ended December 27, 2002, general and administrative expenses increased due primarily to increased personnel costs and consulting fees related to the implementation of our ~~customers:~~new enterprise resource planning system, a one-time payment of $625,000 to Seagate Technology for the benefit of New SAC relating to the termination of a consulting and advisory arrangement and increased outside services expenses, including legal fees. In the three months ended March 28, 2003, we had $801,000 of foreign exchange expense due to the strengthening of the Canadian dollar relative to the U.S. dollar. In the three months ended June 27, 2003, $1.2 million of donation expense was accrued which was related to our donation commitment to the Community Foundation of Silicon Valley.

					Percent
		June 29, 2001			Change			June 30, 2000
		(dollars in thousands)
United States		$	113,993			36	%	$	83,552
	Percentage of total revenues		68	%					66	%
Europe (1)		$	31,812			12	%	$	28,453
	Percentage of total revenues		19	%					22	%
Other (2)		$	21,917			47	%	$	14,904
	Percentage of total revenues		13	%					12	%

Liquidity and Capital Resources

(1)	Europe includes South Africa and the Middle East.
		As of
(2)	Other includes Canada and the Asia Pacific region.
		June 29,		June 28,		June 27,
		2001		2002		2003
		(in thousands)
Cash and available-for-sale securities*		$	34,379	$	71,451	$	107,918
Working capital			10,750		26,426		49,762

~~Geographically,~~* weIncludes ~~experienced~~cash ~~strong~~equivalents ~~revenue growth~~and inshort ~~the~~and ~~U.S.~~long-term ~~with~~investments, ~~revenues~~and ~~increasing 36% to $114.0 million~~ for ~~fiscal~~June ~~2001~~27, ~~from~~2003 ~~$83.6 million~~excludes ~~for fiscal~~restricted ~~2000.~~cash Weof ~~also~~approximately ~~experienced continued growth in revenues outside the U.S. with revenues increasing 24% to~~ $532.~~7 million~~0 ~~for fiscal 2001 from $43.3~~ million ~~for fiscal 2000~~. The absolute dollar increase in revenues was primarily attributable to the increase in the size and productivity of our direct sales force, which has resulted in increased license sales and the expansion of our customer base in all regions.

~~Cost~~ The majority of ~~Revenues~~our cash and available-for-sale securities are held in U.S. dollar denominated bank deposits or highly liquid investments in accordance with our investment policy. The remaining portion of our cash balances is denominated in the local currencies of our foreign operations, including Canadian dollars, British pounds, Japanese yen, Euros and other currencies. All of our cash is maintained in accounts with high credit quality financial institutions and our available-for-sale securities are maintained in highly rated instruments.

The following table sets forth information regarding the composition of our cost of revenues and fiscal year-to-year changes:



	Fiscal Years Ended

	June 29,			June 28,			June 27,
	2001			2002			2003


	(in thousands)
Net cash provided by operating activities	$	13,037		$	41,069		$	57,028
Net cash (used) in investing activities		(9,594	)		(9,877	)		(27,538	)
Net cash provided by (used in) financing activities		27,810			5,294			(1,103	)

					Percent
		June 29, 2001			Change			June 30, 2000
		(dollars in thousands)
Cost of licensing revenues		$	5,740			40	%	$	4,096
	Percentage of licensing revenues		5	%					6	%
Cost of maintenance, support and services		$	41,760			1	%	$	41,156
	Percentage of maintenance, support and services revenues		69	%					78	%
Amortization of developed technologies		$	3,050			1431	%	$	198
	Percentage of total revenues		2	%					—
Total cost of revenues		$	50,550			11	%	$	45,450
	Percentage of total revenues		30	%					36	%

-33-

~~Cost~~Operating of revenues increased 11% to $50.6 million for fiscal 2001 from $45.5 million for fiscal 2000. As a percentage of total revenues, cost of revenues decreased to 30% for fiscal 2001 from 36% for fiscal 2000. The absolute dollar increase in cost of revenues for fiscal 2001 is primarily attributable to a $2.9 million increase in amortization of developed technologies that we recorded as a result of the push down accounting in fiscal 2001 related to the New SAC Transaction. Excluding the effect of the increase in amortization of developed technologies, the cost of revenues increased nominally and not in direct proportion to our growth in total revenues. This was largely attributable to a corporate-wide initiative to manage costs, while supporting revenue growth. Activities

~~Cost~~Our principal source of ~~licensing revenues.~~liquidity ~~Cost~~is ofour ~~licensing~~cash ~~revenues~~and ~~increased~~available-for-sale ~~40%~~securities, toas ~~$5.7 million~~well ~~for~~as ~~fiscal~~the ~~2001~~cash ~~from~~we generate $4from operations.~~1 million~~ ~~for~~For fiscal ~~2000.~~2001, Asfiscal a2002 ~~percentage~~and offiscal ~~licensing revenues~~2003, we ~~cost~~have ofgenerated ~~licensing~~more ~~revenues~~cash ~~decreased~~from toour 5%operating ~~for~~activities ~~fiscal~~than ~~2001~~we ~~from~~used. 6%We ~~for~~earned ~~fiscal~~more ~~2000.~~revenues ~~The~~year-over-year, ~~higher~~including deferred ~~cost~~revenues, ofand ~~licensing revenues~~improved ascash acollections ~~percentage~~to 65 average ofdays ~~licensing~~sales ~~revenues~~outstanding for fiscal ~~2000~~2003 from ~~was~~68 days ~~due~~for infiscal ~~part~~2002. toIn aaddition, ~~write-down~~we ofincreased ~~obsolete~~our gross ~~product~~margins ~~materials~~ and ~~also~~reduced ~~due to initiatives to reduce~~ our ~~production, fulfillment~~overall ~~and~~operating ~~shipping~~ costs as a percentage of ~~revenue.~~total ~~The~~revenues. ~~increase in~~

In 27fiscal 2003, we began a extensive implementation of an enterprise resource planning system for our North America and Asia Pacific regions. The system included modules for use by our financial and administrative functional departments including human resources, payroll, project management, budgeting, order management, accounts receivable, accounts payable, general ledger and other financial functions. To date, we have incurred approximately $6.6 million of expenditures in connection with the implementation of our enterprise resource planning system. The implementation of the enterprise resource planning system and the adjustment of our procedures to adapt to the new system has been slower and more costly than we anticipated. We expect to implement the system in Europe in the first half of fiscal 2004 and expect to have the entire implementation completed by the end of calendar 2003.

~~Table~~Investing ~~of Contents~~Activities

~~cost~~Prior to fiscal 2003, our investing activities consisted solely of ~~licensing~~the ~~revenues~~purchase inof ~~absolute~~property ~~dollars~~and equipment to ~~was~~support ~~due~~the growth of our business. In fiscal 2001, investing activities were primarily for the purchase of leaseholds improvements, computers, furniture and office equipment. During fiscal 2002, investing activities were primarily for the purchase of computer equipment and costs related to the ~~increased~~purchase and ~~volume~~implementation of ~~shipments~~a ~~during~~global enterprise resource planning system. Our investing activities in fiscal ~~2001~~2003 included costs related to implementation of new systems, including our enterprise resource planning system, leasehold improvements and furniture related to the expansion of existing leased space and other computer purchases.

~~Cost~~We ofanticipate ~~maintenance,~~that ~~support~~our ~~and~~capital ~~services revenues.~~expenditures ~~Cost of maintenance, support~~will ~~and~~be ~~services~~approximately ~~revenues increased 1% to~~ $~~41.8~~22 million for ~~fiscal~~ ~~2001 from $41.2 million for~~ fiscal ~~2000~~2004. AsThe amajority ~~percentage~~ of ~~maintenance,~~our ~~support~~capital ~~and~~expenditures ~~services~~are ~~revenues,~~denominated ~~cost of~~in ~~maintenance,~~Canadian ~~support and services revenues decreased to 69%~~dollars. ~~for~~The ~~fiscal~~amount ~~2001~~we ~~from~~spend ~~78%~~on ~~for~~capital ~~fiscal~~expenditures ~~2000.~~will ~~The decline in cost of~~vary ~~maintenance,~~significantly ~~support~~depending ~~and~~on ~~services revenues as~~ a ~~percentage~~number of ~~maintenance,~~ ~~support~~factors ~~and~~including ~~services revenues was primarily~~the ~~attributable~~timing toof anour ~~increased~~facilities ~~use~~expansion, ofour ~~company~~information ~~personnel rather~~technology ~~than~~and ~~sub-contracted~~telecommunications ~~consultants~~systems toupgrades ~~perform~~and ~~customer~~build ~~services~~outs and our ~~more~~completion ~~efficient delivery~~ of ~~some~~our ofenterprise ~~our~~resource ~~support~~planning ~~services~~system implementation.

~~Amortization~~Prior ~~of developed technologies. Amortization of developed technologies increased~~ to ~~$3.1 million for~~ fiscal ~~2001~~ ~~from $198~~2003,~~000~~ ~~for~~we ~~fiscal~~did ~~2000.~~not Atinvest ~~November 22, 2000,~~in ~~existing~~securities ~~developed~~with ~~technologies~~maturities ~~were~~of ~~revalued~~90 days asor ~~part~~more. ofIn ~~the New~~addition, ~~SAC~~prior ~~Transaction~~to ~~and effective November~~October 232001, ~~2000, we began amortizing~~ the ~~$15.2 million~~majority of ~~developed~~our ~~technologies~~cash balances ~~pushed~~were ~~down~~managed tofor ~~our~~us ~~consolidated~~by Old Seagate and ~~combined~~Seagate ~~statements~~Technology, ofand ~~operations~~represented ~~over~~a ~~36 months.~~net ~~The~~receivable ~~absolute~~balance ~~dollar~~on ~~increase~~the ~~was~~consolidated ~~the~~financial ~~result~~statements, ofon ~~amortization~~which ~~for~~we ~~fiscal~~earned ~~2000~~interest. ~~being~~During ~~charged on a~~fiscal ~~different~~2003, ~~and~~we ~~smaller~~purchased ~~intangible~~$14.2 million ~~asset~~of ~~base~~short-term ~~up to~~ investments and ~~including the~~received ~~five~~$9.3 million ~~months~~on ~~ended~~maturity ~~November 22,~~of ~~2000.~~some ~~Amortization~~of ~~for~~these ~~fiscal~~investments. ~~2000~~In ~~related~~addition, towe ~~the~~purchased ~~amortization~~$3.3 million of ~~previous allocations~~ oflong-term ~~intangible~~investments, ~~assets~~which tohad usnot ~~created~~matured byas ~~the recapitalization~~ of ~~our~~ ~~business~~June 27, 2003.

~~Gross~~Financing Profit. Our gross profit as a percentage of total revenues increased to 70% for fiscal 2001 from 64% for fiscal 2000. We continued to have growth in our gross profit as the result of the low total dollar cost of licensing revenues relative to the total dollar amount of licensing revenues resulting in improved margins of 1% over fiscal 2000. In addition, our maintenance, support and services revenues have been growing at a greater rate than the cost of maintenance, support and services revenues, resulting in increased margins of 9% over fiscal 2000. Activities

~~Operating~~ Prior ~~Expenses~~to fiscal 2001, some of our working capital requirements were financed by borrowings from Old Seagate available under a revolving loan agreement that was subsequently amended on July 4, 2001 and renewed with Seagate Technology. The revolving loan agreement originally provided for maximum outstanding borrowings of up to $60.0 million, with the amount being reduced to $15.0 million on renewal. The revolving loan agreement expired on July 4, 2002 and was not renewed. There was no outstanding receivable or payable balance under this agreement upon its expiration.

~~The following table sets forth information regarding the composition of our operating expenses and fiscal year~~-to34-~~year changes:~~

					Percent
		June 29, 2001			Change			June 30, 2000
		(dollars in thousands)
Sales and marketing		$	73,888			12	%	$	65,752
	Percentage of total revenues		44	%					52	%
Research and development		$	29,236			7	%	$	27,377
	Percentage of total revenues		17	%					22	%
General and administrative		$	15,465			(12	)%	$	17,659
	Percentage of total revenues		9	%					14	%
Amortization of goodwill and other intangible assets		$	2,023			(33	)%	$	3,038
	Percentage of total revenues		1	%					2	%
Write-off of in-process research and development		$	7,073			100	%	$	—
	Percentage of total revenues		4	%					—
Unusual items		$	1,851			n/m		$	242,569
	Percentage of total revenues		1	%					191	%
Restructuring costs		$	573			(56	)%	$	1,301
	Percentage of total revenues		—						1	%
Total operating expenses		$	130,109			(64	)%	$	357,696
	Percentage of total revenues		78	%					282	%

We borrowed $24.0 million from Old Seagate in fiscal 2000 under the revolving loan agreement to fund our operations. During fiscal 2001, we repaid $4.8 million to Old Seagate under the revolving loan agreement. As a result of the receivable that arose in conjunction with the tax allocation agreement with Old Seagate, we received $31.0 million. During fiscal 2002, in conjunction with the expiration of the revolving loan agreement, Old Seagate repaid the remaining balance of $4.3 million on the receivable balance, which was offset by nominal borrowing of $871,000 during fiscal 2002.

~~n/m~~ We =receive ~~not~~cash ~~meaningful~~payments on the issuance of common stock on the exercise of stock options by our employees and directors. Cash received from this source was $1.6 million in fiscal 2001, $1.9 million in fiscal 2002 and $916,000 in fiscal 2003. We cannot predict when our employees or directors will exercise their stock options and as such this source of cash is expected to vary.

During 28fiscal 2003, our Canadian subsidiary deposited $2.0 million into a guaranteed investment certificate to secure an overdraft credit facility and foreign exchange forward trading line. The balance and interest earned thereon is classified as restricted cash.

~~Table~~ The following table summarizes our facilities operating lease commitments as of ~~Contents~~June 27, 2003 (in thousands):

Sales and Marketing. Sales and marketing expenses increased 12% to $73.9 million for fiscal 2001 from $65.8 million for fiscal 2000. As a percentage of total revenues, sales and marketing expenses decreased to 44% for fiscal 2001 from 52% for fiscal 2000. The absolute dollar increase in sales and marketing expenses for fiscal 2001 was due primarily to the rebuilding and expansion of our sales force. The decrease as a percentage of total revenues for fiscal 2001 was primarily attributable to the increase in productivity of our sales force and the resultant increase in revenues, the absence of costs associated with the turnover in fiscal 2000, as well as to a decline in marketing expenses.



		Fiscal Years

	Total	2004		2005-2006		2007-2008		2009-2015

Operating leases	$48,009	$	8,361	$	11,275	$	8,141	$	20,232

~~Research~~In ~~and Development.~~May ~~Research~~2003, ~~and~~we ~~development expenses~~agreed ~~increased 7%~~ to pledge $291.20 million ~~for~~to ~~fiscal~~the ~~2001~~Community ~~from~~Foundation of Silicon Valley, ~~$27.4 million~~which ~~for~~we ~~fiscal~~accrued ~~2000.~~and Asexpensed ain ~~percentage~~fiscal of2003 ~~total~~and paid on ~~revenues~~June 30, ~~research~~2003. ~~and~~We ~~development~~also ~~expenses~~agreed ~~decreased~~ to ~~17%~~match ~~for~~employee ~~fiscal~~contributions ~~2001~~to ~~from~~the ~~22%~~Community ~~for~~Foundation ~~fiscal~~of ~~2000.~~Silicon ~~The~~Valley ~~increase~~up to in1% ~~research and~~of ~~development~~our ~~expenses~~income inbefore ~~absolute~~interest, ~~dollars~~taxes ~~was~~and ~~due~~amortization ~~primarily~~for tothe ~~increases~~prior infiscal ~~personnel~~year. ~~and~~The ~~related~~amount ~~expenses~~accrued ~~related~~for toour matching ~~development~~contribution ofin ~~future~~fiscal ~~and~~2003 ~~existing~~was ~~products~~approximately $220,000. ~~The decrease in~~We ~~research~~accrued and ~~development~~expensed ~~costs~~in asfiscal a2003 ~~percentage~~and ofpaid ~~total~~this ~~revenues resulted~~amount ~~from~~in ~~revenues~~July 2003. ~~increasing~~The atmaximum aamount ~~greater~~that ~~rate~~we ~~than research~~could ~~and~~pay ~~development~~under ~~costs~~this ~~and~~matching plan ~~the~~for ~~more~~fiscal ~~efficient~~2004 ~~use~~would ofbe ~~our research~~approximately ~~and development resources~~$453,000.

~~General~~Certain ~~and Administrative.~~shares ~~General~~issued and option grants made ~~administrative~~under ~~expenses~~our ~~decreased~~1999 ~~12%~~stock option plan to ~~$15.5 million~~residents ~~for~~of California, ~~fiscal~~Maryland ~~2001~~and ~~from~~New ~~$17.7 million~~York ~~for~~may ~~fiscal~~not ~~2000.~~have Ascomplied awith all applicable ~~percentage~~securities laws of ~~total~~those ~~revenues~~states. Accordingly, ~~general~~we are planning to make a rescission offer to these stockholders and ~~administrative~~optionees ~~expenses~~which ~~decreased~~will allow the holders to 9%elect, during a limited period of time, to return their shares or options to us in return for ~~fiscal~~a payment ~~2001~~equal ~~from~~to 14their purchase price or 20% ~~for~~of ~~fiscal~~their aggregate ~~2000.~~exercise ~~The~~price, ~~decrease~~plus inany ~~absolute~~applicable ~~dollars~~interest. ~~for~~As ~~fiscal~~of June 27, ~~2001~~2003 ~~was~~approximately 291,010 outstanding shares of ~~primarily~~our ~~attributable~~common stock and approximately 1,361,928 shares subject to aoutstanding ~~decline~~options inwill ~~outside~~be ~~services~~subject ~~expense~~to the rescission offer. ~~including~~The ~~accounting~~shares and ~~other~~options ~~costs~~had ~~related~~purchase toand ~~meeting~~exercise ~~initial~~prices ranging ~~regulatory~~from ~~reporting~~$4.00 ~~requirements~~to ~~during~~$8.00 ~~fiscal~~per ~~2000~~share. ~~The decline~~We ~~was~~do ~~also~~not ~~due~~believe tothat ~~more~~the holders ~~efficient~~of ~~management~~these shares of ~~general~~our common stock and options to ~~administrative~~purchase ~~expenses,~~our ~~including~~common ~~bad~~stock ~~debt~~will ~~expenses,~~accept ~~which~~our offer because the ~~declined~~prices byat ~~approximately~~which ~~70%~~we ~~compared~~will offer to ~~fiscal~~repurchase ~~2000.~~them ~~This~~are less than ~~decline~~the ~~was~~estimated ~~partially~~fair ~~offset~~market byvalue ~~increases~~of inthe ~~salaries~~Business Objects ADSs and ~~benefit~~cash ~~costs~~that ~~related~~our stockholders will receive and estimated fair market value of the options to anacquire ~~increase~~Business Objects ADSs our optionees will receive if Business Objects’ proposed acquisition of our company is completed. However, in ~~personnel~~the unlikely event that all of these persons accepted our offer, we would make total payments of approximately $2.9 million, which we would fund from our existing cash balances.

~~Amortization of Goodwill and Other Intangible~~ Financing ~~Assets. Amortization of goodwill and~~Agreements ~~other intangible assets decreased 33% to $2.0 million for~~ fiscal 2001 from $3.0 million for fiscal 2000. At November 22, 2000, existing goodwill and other intangible assets were revalued and reduced to zero as part of the New SAC Transaction and effective November 23, 2000, we began amortizing the $7.1 million of assembled workforce pushed down to our consolidated and combined statements of operations over 36 months. The absolute dollar decrease was the result of amortization for fiscal 2000 being charged on a different and larger intangible asset base up to and including the five months ended November 22, 2000. As a percentage of revenue, amortization of goodwill and other intangible assets decreased from 2% for fiscal 2000 to 1% for fiscal 2001 for reasons consistent with the absolute dollar decrease.

~~Write-off of~~ In~~-process~~ ~~Research~~October ~~and Development.~~2002, Aswe ~~part~~executed ofan ~~the~~agreement ~~push down~~with ofComerica ~~the~~for ~~purchase~~a ~~price allocation of the New SAC Transaction,~~ $715.10 million ofrevolving ~~in-process~~line ~~research~~of ~~and~~credit. ~~development was~~The ~~recorded~~revolving atline ~~November 22,~~provides ~~2000.~~for ~~This~~interest ~~amount,~~to ~~which~~be ~~was~~calculated ~~4% of~~at ~~total~~U.S. prime ~~revenues~~rate ~~for~~or ~~fiscal~~LIBOR ~~2001,~~plus ~~was~~2.5% ~~written~~per ~~off~~annum. ~~in its entirety~~Borrowings inunder ~~fiscal 2001 as~~ the ~~acquired~~revolving ~~technologies~~line ~~had~~are ~~not~~limited ~~yet~~to ~~reached technological~~80% ~~feasibility and there were no future alternative uses. We had no write-offs~~ of ~~in-process~~eligible ~~research and~~accounts ~~development for fiscal 2000.~~

~~Unusual Items. Unusual items in fiscal 2001 of $1.9 million, or 1% of total revenues, comprised the push down of non~~-~~cash compensation expense attributable to our~~35- ~~employees arising from the acceleration and net exercise of~~ ~~Seagate Technology options to purchase 51,500 shares of Seagate~~ ~~Technology common stock held by our employees on~~ November 22, 2000. The options were accelerated and each share was net exercised for merger consideration of 0.4465 shares of VERITAS and $8.55 cash per share of Seagate Technology common stock held. The accelerated vesting and net exercise of these options resulted in this compensation expense.

~~Unusual~~receivable, ~~items~~with ~~expense~~an ~~for~~additional ~~fiscal~~$2.0 million available ~~2000~~in of any month in which we maintain $~~242~~15.60 million, in our investment accounts with Comerica or ~~191%~~some of ~~total~~its affiliates. ~~revenues~~On September 30, ~~comprised~~2004, any outstanding principal and interest under the line of credit will be ~~compensation~~immediately ~~expense~~due and ~~associated~~payable. ~~expenses~~Upon ~~attributable~~notice to ~~our~~Comerica and without ~~employees~~penalty, ~~related~~Crystal toDecisions ~~the~~may ~~October~~terminate ~~1999~~the ~~Seagate~~agreement ~~Technology~~at any ~~exchange~~time ofprovided ~~shares~~that asall ~~described~~obligations ~~previously~~have been paid in ~~this~~full. ~~discussion~~The ~~and~~revolving ~~analysis~~line ~~under~~is ~~the~~collateralized ~~title~~by ~~— Other~~substantially ~~Significant~~all of our ~~Transactions~~personal ~~Impacting~~property, ~~Our~~excluding ~~Financing~~our ~~Reporting~~intellectual property. The ~~$242.6 million~~agreement ofalso ~~unusual~~required ~~expense~~our weU.S. ~~recorded~~and ~~was~~Canadian ~~comprised~~subsidiaries to ofpledge ~~$239.6 million~~all of ~~compensation~~their ~~expense, $2.1 million~~assets ofin ~~employer~~support ~~portion~~of ~~payroll~~our ~~taxes~~obligations ~~thereon and~~under ~~$877,000~~the ofagreement. ~~legal~~We ~~and~~pledged ~~accounting~~shares ~~costs~~of ~~related~~most toof ~~this transaction~~our subsidiaries.

The 29terms of the revolving line require us, among other things, to maintain the following quarterly financial covenants on a consolidated basis:

~~Table~~• a ratio of ~~Contents~~unrestricted cash and cash equivalents plus 80% of eligible accounts receivable to current liabilities less deferred revenue of at least 1.25 to 1.0; • a tangible net worth of at least $28.0 million plus 50% of the net income for each quarter ending after October 1, 2002 plus 75% of the gross proceeds received by us from the sale of our equity securities; and • positive free cash flow for the four quarter period then ended and positive free cash flow for at least two of the four quarters in such period.

~~Restructuring~~We ~~Costs. Restructuring~~are ~~costs~~restricted ~~were~~from ~~$573~~selling,~~000,~~ ~~representing~~leasing ~~less~~or otherwise ~~than~~disposing 1%of any part of ~~total~~ ~~revenues,~~our ~~for~~business ~~fiscal~~or ~~2001.~~property under ~~These~~most ~~charges~~circumstances. ~~were~~In ~~related~~addition, to the ~~closure~~agreement ofplaces restrictions ~~eight~~on ~~offices~~entering ininto ~~Europe~~arrangements ~~and~~that ~~were~~will ~~part~~result ofin a ~~restructuring~~change ~~plan~~of ~~announced~~control, inplaces ~~September~~restrictions ~~2000~~on our ability to ~~consolidate~~pay ~~the~~dividends ~~European~~and ~~sales~~restricts ~~organization.~~our ~~The~~ability ~~charges~~to ~~were~~incur ~~primarily comprised~~other forms of indebtedness. ~~costs~~We ~~related~~are toalso ~~the~~restricted ~~termination~~from making some types of distributions ~~office~~or ~~leases~~investments. We are also required to maintain ~~and~~at ~~other~~least ~~related~~an ~~office~~aggregate ~~closure~~of ~~costs,~~$10 million asin ~~well~~investment asaccounts with ~~severance~~Comerica and some of its affiliates. No amounts were ~~benefits~~outstanding ~~due~~under tothe ~~nine~~revolving ~~sales~~line ~~and~~at ~~marketing~~June 27, ~~employees~~2003 ~~who~~or ~~were~~as ~~terminated~~of inthe ~~September~~date ~~2000~~of this document. AtAs of June 2927, ~~2001~~2003, ~~amounts~~we ~~remaining~~maintained ~~accrued~~$57.1 million ~~but~~of ~~unpaid~~our ~~were~~cash ~~not~~equivalents ~~considered~~balance with ~~significant~~Comerica.

~~Restructuring~~Our ~~charges~~Canadian ~~were~~subsidiary ~~$1.3 million,~~entered into a overdraft ~~representing~~credit 1%facility with The Bank of ~~total~~Nova ~~revenues,~~Scotia ~~for~~during fiscal ~~2000.~~2002 whereby The ~~charges resulted~~Bank ~~from~~of aNova Scotia ~~company-wide~~will ~~restructuring~~provide ~~plan~~up ~~announced~~to inCanadian ~~October~~$2.0 million ~~1999~~credit tofor ~~realign~~certain ~~resources~~overdrafts toplus ~~better~~a ~~manage~~foreign exchange ~~and~~forward ~~control our~~trading ~~business.~~line ~~The~~generally ~~charges~~supporting ~~comprised~~notional contracts ~~severance~~in ~~and~~the ~~benefits~~range ~~paid to~~of ~~approximately~~$4.0 million ~~125~~to $6.0 million. ~~employees~~Any ~~from~~overdraft ~~various~~balances ~~locations~~are ~~and~~subject to ~~departments,~~interest ~~including~~computed ~~direct~~at ~~sales~~the ~~force~~bank’s ~~personnel,~~prime ~~who~~lending ~~were~~rate payable ~~terminated~~monthly. onDuring ~~October 23~~fiscal 2003, ~~1999.~~there ~~The restructuring charges~~ were ~~paid~~no ~~during~~balances ~~fiscal~~outstanding under ~~2000~~this ~~and~~agreement. noOn ~~amounts~~September 26, or2002, ~~further~~our Canadian ~~restructuring~~subsidiary ~~liabilities~~placed ~~related~~$2.0 million toon ~~this~~deposit ~~plan~~with ~~were~~The ~~outstanding as~~Bank of Nova ~~June 30,~~Scotia ~~2000.~~as ~~Any~~a ~~benefits~~general inhypothecation to the ~~form~~overdraft ~~of cost~~credit ~~reductions~~facility ~~because~~and ofthe ~~reduced~~foreign ~~salaries~~exchange ~~were~~line. ~~realized~~The byfunds ~~the~~held ~~end~~and the ofinterest ~~fiscal~~earned ~~2000~~thereon ~~and~~are ~~were~~classified ~~not~~as ~~expected~~restricted tocash ~~continue~~on our balance sheet.

~~Interest~~ Our ~~Income~~future liquidity and ~~Other~~capital ~~Income~~requirements will ~~(Expense)~~depend on numerous factors, ~~Net~~including:

~~Interest~~• ~~income~~the amount and ~~other~~timing ~~income,~~of ~~net~~our ~~was comprised~~revenues; of• the ~~following:~~ extent to which our existing and new products gain market acceptance; • the extent to which customers continue to renew maintenance agreements; • the extent of required and planned capital expenditures required to support our current operations and growth; and • available borrowings under future credit arrangements, if any.

					Percent
		June 29, 2001			Change			June 30, 2000
		(dollars in thousands)
Interest income		$	1,970			101	%	$	982
Interest expense			(20	)		(99	)%		(1,481	)
Net foreign currency exchange gain (loss)			701			35	%		519
	Total interest income and other income, net	$	2,651					$	20

We believe that our current cash, cash equivalents, short-term investments and the cash generated from our operations, the overdraft agreement with The Bank of Nova Scotia, and the available borrowings under the line of credit with Comerica will be sufficient to meet our operating and capital requirements for at least the next 12 months. We anticipate that our capital

-36- ~~Net interest income fluctuates depending on~~ ~~movements in the general level of interest rates in the U.S.,~~ ~~our average cash and cash equivalents, and our net position~~ under the revolving loan agreement we had with Seagate Technology LLC and the interest rates applied thereon. The increase in interest income during fiscal 2001 was primarily attributable to interest earned on balances receivable under the revolving loan agreement during the year on excess cash managed by Seagate Technology LLC on our behalf. During fiscal 2001, we had a net receivable balance from Seagate Technology mainly as the result of cash payments we received for our net operating losses under the tax allocation agreement and we earned $1.8 million on the net receivable balance under the revolving loan agreement. During fiscal 2000, before the realization of this benefit, we had a net payable position due to Seagate Technology followed by a net receivable position later in the fiscal year. We recorded interest expense related to the monthly net payable balance and interest income related to the monthly net receivable balance resulting in $583,000 of net interest expense directly related to the revolving loan agreement with Seagate Technology. The residual interest income or expense in either fiscal year was the result of interest income or expense on our cash balances.

~~Net~~expenditures ~~foreign~~will ~~currency~~be ~~exchange~~approximately $22.0 million ~~gains~~in fiscal 2004. We have no current plans, and we ~~losses~~are not currently negotiating, to obtain additional ~~which~~financing. ~~represent~~The factors described above will affect our future capital requirements and the ~~impact~~adequacy of ~~foreign~~our ~~currency~~available ~~fluctuations~~funds. onIf we need to raise funds in the ~~translation~~future, ofwe ~~foreign~~may ~~currency~~be ~~transactions~~required ~~into~~to raise Uthose funds through public or private financings, strategic relationships or other arrangements.S. We cannot assure ~~dollars~~you that the funding, ~~varied~~if ~~depending~~needed, ~~upon~~will ~~movements~~be inavailable ~~currency~~on ~~exchange~~terms ~~rates~~attractive to us, or at all. Furthermore, any additional equity financing may be dilutive to stockholders and debt financing, if available, may involve restrictive covenants. Our failure to raise capital as and when needed could have a negative impact on our ability to pursue our business strategy and maintain profitability.

~~Income~~ Factors ~~Taxes~~Affecting our Future Operating Results

					Percent
		June 29, 2001			Change		June 30, 2000
		(dollars in thousands)
Provision for (benefit from) income taxes		$	1,183			n/m	$	(55,055	)
	Effective tax rate		(12	)%				20	%


	Risks Related to the Proposed Acquisition

The 30fair market value of the consideration will fluctuate and is not subject to adjustment.

~~Table~~ Upon completion of ~~Contents~~the acquisition, each share of our common stock, other than those held by persons who exercise appraisal rights, will receive a combination of cash and Business Objects ADSs or ordinary shares. The market price of Business Objects’ ADSs may fluctuate substantially both prior to and following completion of the acquisition, which could impact the aggregate value of the proposed acquisition. For example, on July 18, 2003, the date of announcement of the agreement, the value of the proposed acquisition was approximately $820 million. As of August 18, 2003, the value of the proposed acquisition was approximately $968.0 million, due to the change in the price of Business Objects ADSs. The terms of the merger agreement do not provide for any adjustment in the number of Business Objects shares to be issued in the acquisition as a result of such fluctuations. In addition, we are not permitted to withdraw from the acquisition or resolicit the vote of our stockholders solely because of changes in the market price of Business Objects ADSs. The price of Business Objects ADSs is subject to general price fluctuations in the market for publicly traded equity securities, and the price of Business Objects ADSs has experienced significant volatility in the past. We cannot predict or give any assurances as to the respective market prices of Business Objects ADSs at any time before or after the closing of the acquisition.

WeThe ~~recorded~~announcement ~~an income tax provision~~ of ~~$1.2 million~~ ~~at an effective rate of negative 12% for fiscal 2001 compared with a $55.1 million income tax benefit at an effective rate of 20% for fiscal 2000. The change in~~ the ~~effective~~acquisition ~~tax~~may ~~rate~~have ~~from~~ a ~~positive rate in fiscal 2000 to~~ a negative ~~rate~~impact inon ~~2001 is due the absence of certain non-deductible compensation expenses recorded in connection with~~ our ~~October~~relationships 1999 recapitalization and reorganization. In addition, the income tax provision for fiscal 2001 included benefits recorded during the period from July 1, 2000 to November 22, 2000 under the tax allocation agreement we had with ~~Seagate~~customers ~~Technology. A valuation allowance for fiscal 2001~~ and ~~fiscal 2000 has been provided against the deferred tax~~our ~~assets primarily arising from temporary differences and net operating losses carried forward due to the uncertainty of their realizability~~earnings.

The ~~effective~~public ~~rate~~announcement ~~used~~of ~~to record~~ the ~~income~~acquisition ~~tax~~may ~~provision~~have ~~differed~~a ~~from~~material ~~the~~and ~~35%~~adverse ~~U.S.~~effect ~~federal~~on ~~statutory~~our ~~rate~~revenues inand ~~fiscal~~profitability ~~2001~~in ~~due~~the ~~primarily~~short toterm. ~~the~~In ~~benefits~~particular, ofprospective customers ~~operating~~could ~~in various~~be ~~foreign~~reluctant ~~jurisdictions~~to ~~which~~purchase ~~have~~licenses ~~differing~~for ~~tax~~our ~~treatments~~products asor ~~compared~~our toservices ~~the~~if ~~U.S.,~~they asare ~~well~~uncertain asabout ~~due to an~~the ~~increase~~strategic indirection of the ~~valuation~~combined ~~allowance~~company, ~~for~~the ~~U.S.~~continuation ~~deferred tax assets~~of ~~arising~~our ~~subsequent~~product toofferings or the ~~termination~~willingness of the ~~tax~~combined ~~allocation~~company ~~agreement~~to onsupport ~~November 22,~~and ~~2000~~maintain ~~and~~existing ~~non-deductible~~products. ~~charges~~Uncertainty created ~~arising~~by ~~from~~the ~~push~~announcement ~~down~~of ~~accounting.~~the ~~The~~acquisition ~~effective~~may ~~rate~~cause ~~used~~one tolarge ~~record~~customer, ~~the~~or ~~income~~a ~~tax~~large ~~benefit~~number inof ~~fiscal~~smaller ~~2000~~customers, ~~was~~to ~~less~~delay ~~than~~their purchase decisions until the ~~35%~~ ~~U.S.~~completion ~~federal~~of ~~statutory~~the ~~tax~~acquisition, which ~~rate~~could ~~due~~cause ~~primarily~~our quarterly financial results to be ~~non-deductible~~significantly ~~expenses~~below ~~incurred~~the inexpectations ~~foreign~~of ~~jurisdictions~~market inanalysts, which ~~connection~~could ~~with~~cause ~~the~~a ~~October~~reduction ~~1999~~in ~~recapitalization~~their ~~and reorganization~~expectations of ~~our~~the ~~Company,~~results ~~including~~of operations of the ~~October~~combined ~~1999 Seagate~~company ~~Technology~~and ~~exchange~~the market price of Business Objects shares.

~~Selected~~The ~~Quarterly~~announcement ~~Financial~~of ~~Data~~the acquisition may cause ~~(Unaudited)~~other relationships to be impaired.

~~The~~Some ~~table~~of ~~below shows selected data from~~ our ~~unaudited~~ ~~quarterly~~customers, ~~consolidated~~original ~~statements of operations for~~equipment ~~each~~manufacturers, ofdistributors ~~the~~and ~~four~~other ~~three~~strategic ~~month~~partners ~~periods in fiscal 2002 and fiscal~~could ~~2001.~~decide Weto ~~derived~~terminate ~~this~~or ~~selected~~cancel ~~financial~~their ~~data~~existing ~~from our unaudited consolidated financial statements~~arrangements, ~~which, in our opinion, have~~or ~~been~~fail ~~prepared~~to onrenew ~~the~~those ~~same~~arrangements ~~basis~~ as ~~our~~a ~~audited~~result ~~consolidated financial statements and include all adjustments, consisting only~~ of ~~normal recurring adjustments, necessary for~~ the ~~fair~~pending ~~presentation~~acquisition. ofIn ~~the~~addition, ~~information~~key ~~for~~employees ~~the~~may ~~quarters~~decide ~~presented.~~to ~~The~~terminate ~~operating~~their ~~results~~employment ~~for~~due ~~any~~to ~~quarter~~the ~~are~~pending ~~not~~acquisition ~~necessarily~~or ~~indicative~~other ofemployees ~~the~~may ~~operating results for any future period.~~experience

	For the three month periods ended
	June 28,		Mar. 29,		Dec. 28,		Sept. 28,		June 29,		Mar. 30,			Dec. 29,			Sept. 29,
	2002		2002		2001		2001		2001		2001			2000			2000
	(in thousands, except per share data)
Total revenues		61,374		56,175		51,570		48,051		46,521		43,785			40,395			37,021
Gross profit		45,711		41,706		38,145		35,160		32,706		30,653			28,251			25,562
Income (loss) from operations		5,393		4,324		3,025		2,194		1,610		(435	)		(10,985	)		(3,127	)
Net income (loss)	$	3,871	$	4,023	$	2,640	$	2,421	$	564	$	(1,546	)	$	(8,308	)	$	(2,179	)
Net income (loss) per share — basic	$	0.05	$	0.05	$	0.03	$	0.03	$	0.01	$	(0.02	)	$	(0.11	)	$	(0.03	)
Net income (loss) per share — diluted	$	0.05	$	0.05	$	0.03	$	0.03	$	0.01	$	(0.02	)	$	(0.11	)	$	(0.03	)

-37-

~~During~~uncertainty ~~the~~about ~~three~~their ~~months~~future ~~ended~~role ~~March 29, 2002,~~with the ~~adoption of EITF 01-14 resulted in the~~ ~~reclassification~~combined ~~of out-of-pocket reimbursable expenses and an increase in maintenance~~company, ~~support~~which ~~and~~could ~~services~~adversely ~~revenues~~affect ~~and related~~our ~~costs~~ability ~~of revenues. During the three months ended~~to ~~June 28,~~retain ~~2002~~key ~~and for all comparative periods~~management, ~~we reclassified our information systems costs~~marketing, ~~which~~sales ~~were previously included in general~~ and ~~administrative~~technical ~~operating expenses, across the other functional groups consistent with other overhead allocations~~personnel. ~~This retroactive reclassification~~ ~~resulted in changes to gross margins and total operating~~ ~~expenses. Neither of these reclassifications impacted income (loss) from operations or net income (loss) during any of the periods presented.~~

~~For~~Regardless the three months ended December 29, 2000, the net income (loss) presented includes non-cash charges totaling $8.9 million arising in connection with the New SAC Transaction. Operating expenses included a $7.1 million write-off of ~~in-process~~whether ~~research and development and~~ the ~~push down~~acquisition ~~of $1.9 million of non-cash compensation expense. We~~occurs, ~~did~~we ~~not~~will incur ~~such~~costs ~~non-cash~~that ~~charges~~affect inour ~~any other quarterly period presented~~profitability.

We 31will incur direct transaction costs in connection with the proposed acquisition, which will be expensed in the quarters in which they are incurred, and which will reduce our earnings for that period. A substantial amount of these costs will be incurred whether or not the acquisition is completed. In addition, because we have elected to proceed with the proposed acquisition in lieu of our previously announced initial public offering, we will be required to expense approximately $2.8 million of legal, accounting and investment banking fees associated with the previously proposed initial public offering that would not have otherwise been recorded as current expenses.

~~Table~~ In the quarter in which the acquisition is completed or in the following quarters, we believe that the combined company may incur charges to operations, such as costs associated with combining the businesses of ~~Contents~~the two companies, which currently cannot be estimated reasonably to reflect costs associated with integrating our company with Business Objects. We cannot assure you that the combined company will not incur additional material charges in subsequent quarters to reflect additional costs associated with the acquisition. In addition, a portion of the acquisition related costs may be included in the purchase price and capitalized as an element of goodwill. Goodwill is required to be tested for impairment at least annually and the combined company will be required to record a charge to earnings in any period that impairment of goodwill is determined.

~~Our~~Business ~~total~~Objects’ ~~revenues~~business ~~have~~is ~~continued to increase~~different ~~quarter~~than ~~over~~ours ~~quarter during the periods presented~~and, ~~however, there~~as ~~can be no assurance that these increases will continue. Quarterly fluctuations are caused by~~ a ~~number of factors~~result, ~~including~~ demand for our products and services, size and timing of specific sales, product and price competition, timing and market acceptance of new product introductions and product enhancements by us and our competitors, the ~~length of our sales cycle, personnel changes, budgeting cycles of our customers, changes in technology and changes caused by the rapidly evolving~~ market ~~for~~prices ~~business intelligence products. Many~~ of ~~these factors~~Business ~~are~~Objects ~~beyond~~ADSs ~~our~~may ~~control.~~fluctuate ~~Therefore, we believe that results of operations for interim periods should not be relied upon as any indication of the results to be expected or achieved~~ in ~~any future~~unexpected ~~period~~ways.

~~Liquidity~~When the acquisition is completed, our stockholders will become holders of Business Objects ADSs. Business Objects’ business differs from ours and ~~Capital~~Business Objects’ ~~Resources~~results of operations, as well as the price of Business Objects ADSs, may be affected by factors different from those affecting our results of operations.

				Percent						Percent
	June 28, 2002			Change			June 29, 2001			Change			June 30, 2000
	(dollars in thousands)
Working capital	$	24,434			127	%	$	10,750			21	%	$	8,860
Cash and cash equivalents		71,451			108	%		34,379			849	%		3,621
Net cash provided by (used in) operating activities		41,069			215	%		13,037			160	%		(21,649	)
Net cash used in investing activities		(9,877	)		3	%		(9,594	)		51	%		(6,356	)
Net cash provided by financing activities		5,294			(81	)%		27,810			16	%		24,052

We and Business Objects must obtain regulatory and other approvals to close the acquisition.

~~Revolving~~As ~~Loan~~a condition to the obligations of our company ~~Agreement~~and Business Objects to complete the acquisition, the Securities and ~~Cash~~Exchange ~~Management~~Commission ~~Arrangement~~must have declared effective a registration statement relating to the proposed issuance of shares by Business Objects, Business Objects’ shareholders must approve the proposed acquisition and we must provide an information statement to our stockholders describing the action by written consent to approve the proposed transaction delivered by Seagate Software (Cayman) Holdings. In addition, Business Objects must file a prospectus with the Commission des Opérations de Bourse, an agency which regulates the French stock market, Euronext Paris S.A. We cannot provide any assurance that the Securities and Exchange Commission will declare Business Objects’ registration statement effective in a timely manner or that Business Objects will obtain the required approvals from the Commission des Opérations de Bourse. In addition, we and Business Objects must make certain filings with the U.S. Department of Justice and Federal Trade Commission regarding the proposed acquisition. Even if regulatory approvals are obtained, any federal, state or foreign governmental entity or any private person may challenge the acquisition at any time before or after its completion.

-38- ~~Prior to the New SAC Transaction, as part of a~~ ~~general services agreement, Seagate Technology provided cash~~ management services for us. After the closing of the New SAC Transaction, during a transition period, Seagate Technology LLC continued to provide these services for us. We began performing these cash management functions internally during the first quarter of fiscal 2002.

~~Prior~~We tomay ~~fiscal~~face ~~2001,~~negative ~~some~~consequences ofif our working capital requirements were financed by borrowings from Seagate Technology available to us under a revolving loan agreement. These borrowings were available to us under a revolving loan agreement with Seagate Technology that was subsequently amended on July 4, 2001 and renewed with Seagate Technology LLC. The revolving loan agreement originally provided for maximum outstanding borrowings of up to $60 million, however, on renewal at July 4, 2001 the ~~amount provided was reduced to~~ ~~$15 million.~~acquisition ~~The~~is ~~revolving loan agreement expired on July 4, 2002 and was~~ not ~~renewed~~completed. ~~There was no outstanding~~ ~~receivable or payable balance under this agreement at~~ ~~June 28, 2002 or upon its expiration.~~

~~Cash~~If the proposed acquisition is not completed, we ~~Flows~~may be subject to the following material risks, among others:

~~Our~~• ~~cash~~upon ~~and~~the ~~cash~~occurrence ~~equivalents~~of ~~totaled $71.5 million~~certain ~~at June 28~~events, ~~2002,~~we ~~representing~~may ~~53%~~be ~~of our~~required ~~net~~to ~~tangible~~pay ~~assets,~~Business anObjects ~~increase~~a oftermination ~~$37.1 million,~~fee ~~or 108%,~~equal ~~from~~to $~~34.4~~ 21 million; at• ~~June 29,~~we ~~2001.~~may ~~At June 28,~~not ~~2002,~~be ~~$66.6 million~~able ofto undertake our ~~cash~~proposed initial public offering in the short-term and ~~cash equivalents~~our ~~was~~stockholders ~~held~~and inholders ~~U.S. dollar~~of ~~denominated~~options ~~bank deposits~~to oracquire ~~highly~~our ~~liquid~~common ~~investments~~stock ~~which~~may ~~include~~not ~~marketable securities~~have a public trading market in which ~~are~~to ~~principally~~sell ~~money~~our common stock; • market ~~funds~~analysts’ estimates of our valuation may decline due to uncertainty regarding our stand-alone prospects; • some costs related to the proposed acquisition, ~~commercial paper~~such as legal, ~~market~~accounting, ~~action~~financial ~~preferreds~~printing and ~~term~~a ~~deposits.~~portion ~~The~~of ~~remaining portion~~the fees of our ~~cash~~financial ~~balances~~advisor, must be paid even if the acquisition is ~~denominated~~not incompleted; and • the ~~local currencies~~diversion of management’s attention from our ~~foreign~~day ~~operations,~~to ~~including~~day ~~Canadian Dollars~~business, ~~British~~the ~~Pounds~~uncertainty ~~Sterling~~for employees and the unavoidable disruption to relationships with current and potential customers, ~~Japanese~~original ~~Yen~~equipment manufacturers, ~~Euros~~distributors and other ~~currencies.~~ ~~All~~strategic partners during the period before the closing of ~~our~~the ~~cash~~proposed isacquisition ~~maintained~~may inmake ~~accounts~~it ~~with~~difficult ~~high credit~~for ~~quality~~us ~~financial~~to ~~institutions~~regain our financial and ~~our~~competitive ~~cash~~position ~~equivalents are~~if ~~maintained~~the inacquisition ~~highly~~does ~~rated~~not ~~instruments~~occur.

~~Operating activities. Operating activities provided cash of $41.1 million in fiscal 2002~~Further, ~~primarily from~~if ~~income~~the ~~after~~acquisition ~~adjustments~~agreement ~~to exclude non-cash charges~~is ~~including~~terminated ~~depreciation~~ and ~~amortization~~our ofboard ~~$12.7 million, and the net receipt~~ of ~~approximately~~directors ~~$5.4 million~~determines ofto ~~income~~seek another ~~tax~~acquisition ~~refunds,~~or anbusiness ~~increase in deferred revenue~~combination, ~~partially~~we ~~offset by~~may annot ~~increase~~be inable ~~accounts~~to ~~receivable. Operating activities~~find ~~provided~~a ~~cash~~partner ofwilling ~~$13.0 million~~to inpay ~~fiscal~~an ~~2001,~~equivalent ~~primarily from~~or ~~income~~more ~~after~~attractive ~~adjustments to exclude non-cash charges~~price ~~including~~than ~~$1.9 million~~that ofwhich ~~non-cash~~would ~~compensation~~be ~~expense,~~paid ~~a $7.1 million write-off of~~ in~~-process~~ ~~research~~the ~~and development~~proposed ~~and~~acquisition ~~$9.4 million of depreciation and~~by ~~amortization.~~Business ~~The net favorable change in operating assets and liabilities was comprised mainly of a $4~~Objects.~~0 million~~ ~~receivable from Seagate Technology under the tax~~

In 32addition, while the acquisition agreement is in effect and subject to certain limited exceptions, we are generally prohibited from initiating, soliciting, knowingly encouraging or knowingly inducing or participating in any discussions regarding a proposal to enter into any business combination with any party other than Business Objects.

~~Table~~Risks ofRelated ~~Contents~~to Our Business

~~allocation~~We ~~agreement,~~experience anquarterly ~~increase~~fluctuations in ~~accounts~~our ~~receivable~~results ~~and increased deferred revenue. Operating activities used cash~~ of ~~$21.6 million~~operations indue ~~fiscal 2000, primarily from income after adjustments~~ to ~~exclude~~a ~~non-cash~~number ~~charges including $239.6~~ of ~~non-cash compensation expense~~factors, ~~a $66.2 million~~including ~~increase~~changes in ~~income~~demand ~~tax~~for ~~benefits~~our ~~received~~products ~~from~~and ~~Seagate~~changes ~~Technology under~~in the ~~tax~~mix ~~allocation agreement and $7.5 million~~ of ~~depreciation~~ ~~and amortization. Other changes included an~~our ~~increase of $13.3 million in accrued employee compensation~~revenues, ~~offset~~ bywhich acould ~~$24.2 million~~decrease ~~decline~~our ~~in accounts receivable~~profitability.

~~Investing~~Our ~~activities. Investing~~revenues ~~activities~~have ~~used~~been ~~cash of $9.9 million in fiscal 2002, consisting of purchases of property~~ and equipment, due primarily to the purchase of computer equipment and costs related to the purchase and implementation of a global enterprise resource planning system. Investing activities used cash of $9.6 million in ~~fiscal 2001, due primarily to leasehold improvements,~~ the ~~purchase~~future ofmay ~~computers,~~continue ~~furniture and office equipment. Investing activities used $6.4 million in fiscal 2000 for the purchase of equipment. Purchases of property and equipment are expected~~ to be ~~higher~~subject ~~in fiscal 2003 than fiscal 2002 due~~ to ~~continued improvements~~significant toquarterly ~~our~~fluctuations ~~information systems infrastructure and costs~~as ~~related~~a toresult ~~the completion~~ of ~~purchase~~a ~~and~~number ~~implementation~~ of ~~our global~~factors ~~enterprise resource planning system.~~including:

~~Financing~~• ~~activities. Financing~~the ~~activities~~size ~~provided~~and ~~cash~~timing of ~~$5.3 million~~ inorders ~~fiscal~~from ~~2002,~~and ~~due~~delivery ~~primarily~~of products to ~~the~~major ~~repayment by~~customers; ~~Seagate~~• ~~Technology~~the ~~LLC~~mix of ~~the~~products ~~remainder~~and services of, and the ~~receivable balance~~amount ~~under~~of ~~the~~customization ~~revolving~~required ~~loan~~for, ~~agreement~~our ~~which~~customer ~~was $4.3 million~~orders, (which ~~was~~may ~~offset~~delay bythe ~~net~~timing ~~operating borrowings~~ of ~~$871,000)~~our ~~and~~recognition ~~cash received~~ of ~~$1.9 million~~revenues; ~~from~~• ~~the issuance~~delay ofin ~~common~~customer ~~stock~~purchasing ~~upon~~decisions ~~the~~due ~~exercise~~to ofanticipated ~~stock~~product ~~options. Financing~~upgrades ~~activities~~or ~~provided~~new ~~cash~~products; of• ~~$27.8 million~~smaller ~~in fiscal~~than ~~2001,~~anticipated ~~due~~increases ~~primarily~~in torevenues from the ~~repayment~~introduction byof ~~Seagate Technology~~new ~~LLC~~products; of• ~~$31 million~~general weakening of the ~~receivable~~economy ~~balance under~~resulting ~~the~~in ~~revolving~~a ~~loan~~decrease ~~agreement~~in ~~(which~~the ~~was~~overall ~~offset~~demand byfor ~~net operating~~computer ~~borrowings~~software ~~of $4.8 million)~~ and ~~cash~~services; ~~received~~• ~~of $1.6 million~~effect ~~from the issuance~~ of ~~common~~competitors ~~stock~~on ~~upon~~our ~~the exercise~~market, ofincluding ~~stock~~Microsoft ~~options.~~Corporation’s ~~Financing~~recent ~~activities~~announcement ~~provided~~that ~~cash~~it ~~of $24.0 million~~intends ~~in fiscal 2000, due primarily~~ to ~~borrowings from~~release ~~Seagate~~a ~~Technology~~competing ~~under~~reporting ~~the revolving loan agreement.~~ product;

-39- ~~The following table summarizes our facilities~~ ~~operating lease commitments as of June 28, 2002:~~

	Fiscal Years
	Total		2003		2004-2005		2006-2007		After 2007
Contractual Obligations
Operating leases	$	50,804	$	7,159	$	12,351	$	7,442	$	23,852


	•	seasonal factors, potentially resulting in slower sales in our first and third fiscal quarters; and

	•	disruption and delay of business due to man-made or natural disasters, including health concerns such as Severe Acute Respiratory Syndrome, or SARS.

OnIn ~~June 27~~addition, ~~2002,~~our weexpenses ~~signed~~have abeen ~~non-binding term sheet~~ and ~~at September 26~~, ~~2002~~in ~~we were negotiating an~~the ~~agreement~~future, ~~for~~may ancontinue ~~accounts~~to ~~receivable~~be ~~based~~subject ~~bank~~to ~~line~~significant ~~of credit~~quarterly ~~with~~fluctuations ~~Comerica~~as ~~Bank~~a ~~providing~~result ~~for~~of ~~up to~~ a ~~maximum~~number of ~~$15 million~~ infactors ~~borrowings for general working capital~~including: ~~purposes.~~

We• ~~entered~~the ~~into~~impact aof ~~overdraft~~changes ~~credit~~in ~~facility~~foreign ~~with The~~exchange ~~Bank~~rates ofon ~~Nova~~our ~~Scotia~~expenses (and the ~~“Bank”)~~cost ~~during~~of ~~fiscal 2002~~our ~~whereby~~products; • the ~~bank~~degree ~~will~~of ~~provide~~utilization upof ~~to Cdn. $4 million~~our ~~dollars~~consulting ~~credit~~personnel ~~for~~and ~~certain~~third ~~overdrafts. The~~party ~~overdraft~~consulting ~~balances,~~services; if• ~~any,~~the ~~attract~~timing ~~interest~~and ~~computed~~amount atof ~~the bank’s~~our ~~prime~~capital ~~lending~~expenditures; ~~rate~~• ~~payable~~the ~~monthly.~~cost ~~The~~of ~~facility~~improving ~~is collaterized~~or bymaintaining aour ~~guarantee~~systems; of• the ~~present~~use of outside professional services, such as for internal improvement initiatives, litigation and ~~future indebtedness~~expansion into new foreign markets; • timing of product development and ~~liability~~new ~~incurred~~product byinitiatives; us• toaccruals ~~the~~for ~~Bank.~~any ~~Seagate Technology~~litigation ~~International,~~settlement anamounts; ~~indirect~~and ~~subsidiary~~• the timing of ~~New~~recruiting ~~SAC~~and relocation costs, ~~has provided~~especially ~~this~~those ~~guarantee~~for senior officers.

~~During~~Fluctuations ~~fiscal 2002 and fiscal 2001, our principal source of liquidity has been our operating cash flow. There is a risk that a decrease~~ in ~~demand for~~ our ~~products~~revenues ~~could reduce the availability of operating cash flow. However, we believe that cash from operations together with existing cash~~ and ~~cash equivalents,~~expenses ~~the overdraft agreement with The Bank of Nova~~may ~~Scotia,~~cause ~~and~~our ~~anticipated~~quarterly ~~borrowings~~results ~~from~~to ~~Comerica Bank being negotiated currently will~~ be ~~sufficient to meet our anticipated cash needs for working capital~~unpredictable, ~~capital~~which ~~expenditures~~may ~~and lease~~cause ~~commitments~~our ~~for~~stock atprice ~~least~~to ~~the next 12 months~~decline.

~~Recent~~We ~~Accounting~~cannot ~~Pronouncements~~assure you that we will sustain or increase our profitability.

InWhile ~~July~~we ~~2001~~achieved profitability in fiscal 2002, we ~~the~~cannot ~~Financial~~assure ~~Accounting~~you ~~Standards~~that we will be able to sustain or increase ~~Board~~profitability ~~approved~~on ~~the~~a ~~issuance~~quarterly ofor ~~Statements~~annual ofbasis. ~~Financial~~We incurred a net ~~Accounting~~loss ~~Standards~~of No$11.5 ~~141~~million ~~(“SFAS 141”)~~for fiscal 2001. However, we achieved ~~“Business~~net ~~Combinations”,~~income ~~and~~of No$13.0 ~~142 (“SFAS 142”),~~million ~~“Goodwill~~for fiscal 2002 and ~~Other~~net income ~~Intangible~~of ~~Assets~~$33.~~” SFAS~~5 ~~141~~million ~~requires~~for ~~all~~fiscal ~~business combinations~~2003. ~~initiated~~We ~~after~~expect ~~June 30,~~our ~~2001~~operating expenses to beincrease ~~accounted for~~as ~~using~~our ~~the~~business ~~purchase~~grows ~~method~~and ofwe ~~accounting~~anticipate that ~~for~~we ~~business combinations~~will ~~and~~continue ~~includes~~to ~~new~~make ~~criteria~~investments ~~for~~in ~~recognizing~~our business. ~~intangible~~Therefore, ~~assets~~our ~~separately~~results ~~from~~of ~~goodwill.~~operations ~~The~~will ~~adoption~~be ofharmed if our ~~SFAS 141~~revenues ~~has~~do not ~~had~~increase at a ~~material~~rate ~~effect~~equal onto ~~our~~or ~~consolidated~~greater than ~~financial~~increases ~~position~~in our expenses or ~~results~~are ofinsufficient for us to sustain profitability.

Our 33sales forecasts are only estimates and if we overestimate revenues, we may be unable to reduce our expenses to avoid or minimize a negative impact on our quarterly results of operations.

~~Table~~ Our revenues, particularly our licensing revenues which represent a majority of ~~Contents~~our revenues, are difficult to forecast and may fluctuate significantly from quarter to quarter. Our licensing revenues represented 64% of our total revenues in fiscal 2001, 64% of our total revenues in fiscal 2002 and 65% of our total revenues in fiscal 2003. While analysis of anticipated sales trends provides us with guidance in business planning and budgeting, our estimates may not correlate with actual revenues in a particular quarter or over a longer period of time. Variations in the rate and timing of conversion of our sales prospects into actual licensing revenues could cause us to plan or budget inaccurately and those variations could adversely affect our financial results. In particular, delays, reductions in amount or cancellation of customers’ purchases would adversely affect the overall level and timing of our revenues, and our business, results of operations and financial condition could be harmed.

~~operations.~~In ~~Under SFAS 142~~addition, ~~which~~because ~~is effective~~our ~~for~~costs ~~all fiscal years beginning after December 15, 2001, goodwill and other intangible assets with indefinite lives~~ are ~~no longer amortized but are reviewed at least annually for~~relatively ~~impairment.~~fixed ~~Separate~~in ~~intangible~~the ~~assets~~short ~~that~~term, ~~are~~we ~~deemed~~may tobe ~~have~~unable ~~a definite life will continue~~ to bereduce ~~amortized~~our ~~over their estimated~~expenses ~~useful~~to ~~life.~~avoid ~~The~~or ~~standard~~minimize ~~also~~the ~~establishes~~negative ~~guidance~~impact ~~for~~on ~~testing for~~our ~~impairment of goodwill and other intangible assets with~~quarterly ~~indefinite~~results ~~useful lives. The provisions~~ of ~~SFAS~~operations ~~142~~if ~~will~~anticipated ~~apply to~~revenues usare ~~beginning in fiscal 2003. We do~~ not ~~expect that the~~realized. ~~adoption~~As ~~of SFAS 142 will have~~ a ~~material~~result, ~~impact on~~ our ~~consolidated~~ ~~financial~~quarterly ~~position or~~ results of operations, ~~as there~~could ~~are~~be ~~no remaining intangible assets on the consolidated~~worse ~~balance~~than ~~sheet as at June 28, 2002~~anticipated.

~~In October 2001, the FASB approved the issuance of SFAS No. 144 (“SFAS 144”), “Accounting for the Impairment or Disposal of Long~~-~~Lived Assets.” SFAS 144 supercedes SFAS No. 121 (“SFAS 121”), “Accounting for the Impairment of Long~~40-~~Lived Assets and for Long-Lived Assets to be~~ ~~Disposed of.” SFAS 144 retains the requirements of~~ ~~SFAS 121 to (a) recognize an impairment loss if the~~ ~~carrying amount of a long-lived asset is not recoverable from~~ its undiscounted cash flows, and (b) measure an impairment loss as the difference between the carrying amount and the fair value of the asset. SFAS 144 removes goodwill from its scope. The provisions of SFAS 144 will apply to us beginning in fiscal 2003. We do not expect that the adoption of SFAS 144 will have a material impact on our consolidated financial position or results of operations.

We 34have a long sales cycle for large-scale deployments of our products, which could make it difficult for us to plan our expenses and forecast our revenues.

~~Table~~ Although we are not currently dependent on large-scale deployments of ~~Contents~~our products for a substantial portion of our revenues, we expect large-scale deployments to increase in number in the future. To date, potential customers who are contemplating significant deployments of our products have typically invested substantial time, money and other resources and involved many people in the decision to license our software products. As a result, we may experience a six to 12 month delay between the first contact with a potential customer and the placement of an order while the potential customer completes a product evaluation and seeks internal approval for the purchase. During this long sales cycle, events may occur that could affect the size, timing or completion of the order. For example, the potential customer’s budget and purchasing priorities may change, the economy may experience a further downturn or new competing technology may enter the marketplace. We may lose significant sales or experience reduced sales as the result of our long sales cycle, which would reduce our revenues.

~~FACTORS~~We ~~AFFECTING~~use ~~FUTURE~~our ~~OPERATING~~distributors and other resellers to ~~RESULTS~~market and distribute our products and, if we fail to maintain and expand these sales channels, we may not be able to maintain or increase our revenues.

~~You~~Sales ~~should~~to bea ~~alerted~~small ~~that~~number ~~the~~of ~~following~~distributors ~~risks~~ and ~~uncertainties~~other resellers ~~could~~generate ~~affect~~a ~~and~~significant inamount ~~some~~of ~~instances~~our revenues. Our indirect sales accounted for 37% of our total revenues in ~~the~~fiscal ~~past~~2001, ~~have~~33% ~~affected~~of our ~~actual~~total ~~results~~revenues in fiscal 2002 and ~~could~~34% ~~cause~~of our ~~results~~total ~~for~~revenues ~~future~~in ~~periods~~fiscal 2003. Our sales to ~~differ~~Ingram ~~materially.~~Micro, ~~Additional~~Inc., ~~risks~~a ~~and~~distributor, ~~uncertainties~~accounted offor ~~which~~16% weof ~~are~~our ~~unaware~~total orrevenues ~~that~~in wefiscal ~~currently~~2001, ~~deem~~10% ~~immaterial~~of ~~also~~our ~~may~~total ~~become~~revenues ~~important~~in ~~factors~~fiscal 2002 and less than 10% ~~may~~of ~~adversely~~our ~~affect~~total revenues in fiscal 2003. If Ingram Micro or our other ~~results~~distributors ofwere ~~operations~~to materially reduce their purchases from us, our business, financial condition and results of operations would suffer unless we substantially increase sales to other distributors or ~~business~~other resellers or through other sales channels.

~~Risks~~Our ~~Relating~~distributors and other resellers decide whether to ~~Our~~include ~~Business~~our products among those that they sell and generally carry and sell product lines that are competitive with ours. Because distributors and other resellers are generally not required to make a specified level of purchases from us, we cannot be sure that they will prioritize selling our products. Thus, our relationships with these distributors and other resellers depend upon our continued cooperation. We rely on our distributors and other resellers to sell our products, report the results of these sales to us and to provide services to certain of the end user customers of our products. If the distributors and other resellers do not sell our products, report sales accurately and in a timely manner and adequately service those end user customers, our revenues and the adoption rates of our products could be harmed.

WeSubstantially ~~cannot~~all ~~assure you~~of ~~that~~our werevenues ~~will~~are ~~remain~~derived ~~profitable~~from ~~because~~two weof ~~have operated~~ our ~~business~~ onproducts and a ~~stand~~decline ~~alone~~in ~~basis~~sales for athose ~~relatively~~products ~~short~~could ~~period~~substantially ~~of time~~reduce our revenues and affect our profitability.

We ~~have~~derive ~~incurred~~substantially ~~significant~~all ~~losses~~of ~~since~~ our ~~inception~~ torevenues ~~and including June 29, 2001. While we achieved~~from ~~profitability~~our inCrystal ~~fiscal~~Reports ~~2002,~~and ~~there~~Crystal isEnterprise noproducts ~~assurance that we will be able to sustain~~ and ~~increase profitability on a quarterly or~~related ~~annual basis~~services. WeRevenues ~~incurred~~from ~~net~~these ~~losses~~product oflines ~~$221.2 million~~account for ~~fiscal 2000~~, ~~$11.5 million for fiscal 2001,~~ and ~~net income~~are ofexpected ~~$13.0 million~~to ~~for~~continue ~~fiscal~~to ~~2002.~~account Wefor, ~~expect~~substantially ~~to significantly~~all ~~increase~~of our revenues ~~expenses~~for in the ~~near~~foreseeable ~~term,~~future. ~~especially research~~We ~~and~~may ~~development~~not ~~and~~be ~~sales~~able ~~and marketing expenses.~~to ~~Therefore,~~replace ~~our~~revenues ~~operating~~from ~~results~~these ~~will~~products beand ~~harmed~~services if ~~our~~they ~~revenues~~were doto ~~not~~decline. ~~keep~~Accordingly, ~~pace with~~ our ~~expected~~future ~~increase~~results inof ~~expenses~~operations ~~or are~~will ~~not~~depend ~~sufficient~~on ~~for~~maintaining usand toincreasing ~~achieve~~customer ~~profitability.~~purchases Ifof ~~we do achieve~~these ~~profitability~~products inand ~~any~~services ~~period,~~and wemaintaining ~~cannot~~or beincreasing ~~certain~~the ~~that we will~~average ~~sustain~~selling orprices ~~increase~~of ~~profitability~~these ~~on a quarterly or annual basis~~products.

-41- ~~We are subject~~ ~~to significant quarterly fluctuations in our operating results~~ ~~due to a number of varying factors, including changes in demand~~ ~~for our products and changes in the mix of our revenues, and the unpredictability of our quarterly results may cause our stock price to decline.~~

We ~~often~~face ~~experience~~significant aexposure ~~high~~to ~~volume of sales at the~~foreign ~~end~~exchange ofrate ~~our~~fluctuations ~~quarter.~~and ~~Therefore,~~if ~~it may be late in the quarter before~~ we ~~are able to determine that our costs are disproportionate to our actual sales. If this~~ were to ~~happen, we would not be able to reduce these costs in a timely manner and, consequently, we may~~ experience a ~~net loss or our net income may~~ besubstantial ~~reduced. In addition~~fluctuation, our ~~operating~~profitability ~~results~~may ~~have~~change ~~been and,~~ in ~~the~~unpredictable ~~future,~~ways ~~may~~outside ~~continue to be subject to significant quarterly fluctuations as a result~~ of aour ~~number of other factors including:~~control.

• Because ~~general~~we ~~weakening~~have ofsubstantial ~~the~~research ~~economy~~and development, ~~resulting~~sales inoperations aand ~~decrease~~administration in Canada and the ~~overall~~United ~~demand~~Kingdom, ~~for~~we ~~computer~~pay ~~software~~a ~~and~~substantial ~~services;~~portion ~~• disruption and delay~~ of ~~business~~our ~~processes~~expenses in ~~generally~~the ~~due~~Canadian todollar ~~man-made~~and orthe ~~natural~~British ~~disasters;~~pound •but ~~the~~receive ~~size~~a substantial ~~and~~majority ~~timing~~ of ~~orders~~our ~~from~~revenues ~~and~~in ~~shipment~~U.S. dollars. Approximately 80% of ~~products~~our torevenues ~~major~~were ~~customers;~~denominated •in U.S. dollars, ~~our~~6% ~~ability~~in toBritish ~~develop,~~pounds ~~introduce~~ and ~~market~~less ~~new~~than ~~products~~5% ~~and~~in Canadian ~~product~~dollars ~~enhancements~~for infiscal a2003. ~~timely~~Approximately ~~fashion;~~34% •of ~~market~~our ~~acceptance~~total expenses ofwere ~~and~~denominated ~~demand~~in ~~for~~U.S. dollars, ~~business~~15% ~~intelligence~~in British pounds and ~~enterprise~~40% ~~reporting~~in ~~software,~~Canadian ~~generally,~~dollars ~~and~~in ~~our~~fiscal ~~products~~2003. inThese percentages ~~particular;~~fluctuate •with ~~the~~exchange ~~length~~rates, ofbusiness ~~our~~operating changes ~~sales~~and ~~cycles;~~cash •flow ~~changes~~versus inexpense ~~the~~patterns. ~~prices~~Even ofa ~~our~~relatively minor ~~products~~change ~~and~~in ~~our~~exchange ~~competitors’~~rates ~~products;~~could •have ~~the~~a ~~mix~~material ofimpact ~~products~~on our expenses and ~~services~~results of ~~our~~operations. ~~customer~~For ~~orders~~fiscal 2003, ~~which~~a 10% increase ~~can~~in ~~affect~~ the ~~timing~~exchange rate of ~~our~~the ~~recognition~~Canadian ofdollar relative ~~revenues;~~to • the ~~amount~~U.S. dollar ofwould ~~customization~~have ~~required~~increased ~~for~~ our revenues ~~customer~~by ~~orders,~~less ~~which~~than ~~can~~1% ~~affect~~but ~~the~~would ~~timing~~have ofincreased our ~~recognition~~expenses by ofapproximately 4%. ~~revenues;~~We •recently ~~our~~implemented ~~ability~~a ~~accurately~~partial hedging tostrategy ~~predict~~for ~~the~~these ~~rate~~exposures. ~~and~~Although ~~timing~~we ofrecently ~~conversion~~began hedging, ofwe ~~our~~cannot ~~sales~~be ~~prospects~~certain ~~into~~that ~~actual~~our ~~revenues;~~efforts •to ~~the~~minimize ~~impact~~this risk ofwill ~~changes~~be ineffective. ~~foreign~~We ~~currency~~may ~~exchange~~also ~~rates~~experience onsubstantial foreign ~~the~~exchange ~~cost~~gains ofor ~~our~~losses ~~products~~due ~~and~~to the ~~effective~~volatility ~~price~~ of ~~such~~other currencies ~~products~~compared to ~~foreign~~the ~~consumers;~~U.S. dollar.

We 35may have difficulties providing and managing the increased technical performance and support requirements for large-scale deployments, which could cause a decline in or delay in recognition of our revenues and an increase of our expenses.

~~Table~~ Large, enterprise-wide deployments of ~~Contents~~our products require greater technical stability, performance and support than we have typically had to provide in the past. We may have difficulty managing the timeliness of these deployments and our internal allocation of personnel and resources. Any difficulty could cause us to lose existing customers, face potential customer disputes or limit the number of new customers who purchase our products, which could cause a decline in or delay in recognition of revenues or rate of growth, and could cause us to increase our research and development and technical support costs, either of which could impact our profitability.

• If ~~changes in~~ our ~~operating~~products ~~expenses;~~are •not ~~competition~~compatible ~~and~~with various ~~consolidation~~operating ~~in our industry; • the timing of new product releases; and • seasonal factors~~systems, ~~such~~we asmay ~~our~~not ~~typically~~be ~~lower~~able ~~pace~~to ofsell ~~sales~~products to inpotential ~~our first fiscal quarter~~customers.

Our ~~forecasts~~ products are ~~only~~used ~~estimates~~in ~~and~~combination ifwith wevarious operating ~~overestimate~~systems. ~~revenues,~~Our future success depends on our ability to continue to support widely-used operating ~~results~~systems. ~~may~~Our applications berun ~~harmed~~primarily ifon the Microsoft operating systems. Therefore, our ability to increase sales currently depends on the continued acceptance of Microsoft’s operating system products. In addition, we ~~cannot~~have ~~adjust~~increased our ~~costs~~product indevelopment efforts for the Unix platform. We also expect to develop additional versions of our products for HP-UX, Linux and other non-Microsoft-based operating systems. If we are unable to develop and market products that support non-Microsoft platforms on a timely ~~manner~~and cost-effective basis, our sales will decrease and our results of operations will be harmed.

Our management and sales force use a pipeline system to estimate sales and identify trends in our business. Our sales personnel monitor the status of all proposals, estimate the date on which a customer is expected to make a purchasing decision and the potential dollar amount of the sale. We ~~aggregate~~have ~~these~~strategic ~~estimates~~relationships ~~periodically in order to generate an analysis of our sales pipeline. While this pipeline analysis provides us~~ with ~~some guidance in business planning and~~Microsoft ~~budgeting, our estimates are necessarily speculative~~ and ~~may~~SAP ~~not consistently~~AG correlate to revenues in a particular quarter or over a longer period of time. Variations in the rate and timing of conversion of our pipeline into actual revenues could cause us inaccurately to plan or budget and those variations could adversely affect our business. In particularwhich, aif ~~slowdown in the economy may cause purchasing decisions to be delayed~~terminated, ~~reduced in amount or cancelled, which~~ would ~~adversely~~reduce ~~affect the overall rate and timing of conversion of~~ our ~~pipeline into actual~~ revenues, and ~~our business,~~ operating results ~~and financial condition could be materially adversely affected~~.

~~Our~~We have strategic relationships with Microsoft and SAP that enable us to bundle our products with those of Microsoft and SAP, and we are also developing certain utilities and products to be a part of Microsoft’s and SAP’s products. We have ~~long~~limited ~~sales~~control, ~~cycles~~if any, ~~which~~as ~~make~~to itwhether ~~difficult~~these companies will devote adequate resources to ~~plan~~promoting and selling our products. If either Microsoft or SAP reduces its ~~expenses~~efforts on our behalf or discontinues its relationship with us and ~~forecast~~instead develops a relationship with one of our competitors or designs its own competing business intelligence software, our revenues and operating results may be reduced.

-42- ~~To date, our customers have typically invested~~ ~~substantial time, money and other resources and involved many~~ ~~people in the decision to license our software products. As a~~ result, we may wait six to 12 months after the first contact with a potential customer for that potential customer to place an order while the potential customer seeks internal approval for the purchase of our products. During this long sales cycle, events may occur that affect the size, timing or even completion of the order. For example, the potential customer’s budget and purchasing priorities may change, or new competing technology may enter the marketplace. We may lose sales or experience reduced sales as the result of this long sales cycle, which would reduce our revenues.

IfWe ~~the~~will ~~recent economic~~not ~~slowdown~~be ~~continues~~able ~~and~~to maintain our ~~customers~~sales growth ~~delay~~if orwe ~~cancel purchases~~do ofnot ~~our software~~attract, ~~then~~retain ~~our~~and ~~results~~motivate ofqualified ~~operations may be~~sales ~~harmed~~personnel.

~~The~~We ~~growth~~depend ~~and~~on ~~profitability~~our direct sales force for a majority of our ~~business~~sales and have made significant expenditures in recent years to expand our sales force. Our future success will depend onin part upon the ~~overall~~expansion ~~demand~~and ~~for~~productivity ~~computer~~of ~~software~~our sales personnel. We continue to experience voluntary and ~~services,~~involuntary ~~particularly~~attrition in ~~the~~our ~~business~~direct ~~intelligence~~sales force and ~~information management~~need ~~segments~~to hire replacements. IfAs a result, our ~~customers~~ability to continue to ~~experience~~attract, ~~recession~~integrate, ortrain, ~~other~~motivate ~~economic~~and ~~conditions~~retain ~~which~~new ~~impact~~sales ~~their~~personnel will ~~operating~~also ~~budgets,~~affect ~~they~~our ~~may~~success. ~~delay~~We orface ~~cancel~~intense ~~purchases~~competition offor ~~our~~sales personnel in the software industry, ~~which~~and ~~would~~we ~~reduce~~cannot ~~our~~be ~~revenues~~sure that we will be successful in hiring and ~~cause~~retaining these personnel in accordance with our ~~business~~plans. We cannot assure you that sales force turnover will not be significant in the future. Even if we hire and train a sufficient number of sales personnel, we cannot be sure that we will generate enough additional revenues to ~~suffer~~exceed the cost of the new personnel.

WeUndetected ~~cannot~~product ~~predict~~errors ~~what~~or ~~impact~~defects ~~the~~could ~~recent~~result ~~economic slowdown~~ in the ~~United~~loss ~~States~~of ~~and~~revenues, ~~other~~delayed ~~countries will have on the business intelligence software~~ market oracceptance ~~our business in particular, but it may result in fewer purchases~~ of ~~licenses of~~ our ~~software~~products or ~~substitution~~claims toagainst ~~our lower priced configurations by our customers who previously licensed our higher priced configurations~~us. ~~If the current economic slowdown continues, our business, operating results and financial condition could be materially and adversely affected.~~

~~Our~~Software ~~growth~~products ~~may~~as complex as those we offer ~~not~~frequently ~~continue~~contain atundetected ~~historical~~errors, ~~growth~~defects, ~~rates~~failures or viruses especially when first introduced or when new versions or enhancements are released or are configured to individual customer systems. Despite product testing, our products, or third party products that we incorporate into ours, may contain undetected errors, defects or viruses that could:

~~Although~~• werequire ~~have~~us ~~experienced~~to ~~significant~~make ~~revenue growth~~extensive ~~over~~changes ~~the~~to ~~past~~our ~~two~~products ~~fiscal~~which ~~years,~~could weincrease ~~cannot~~our ~~assure~~research ~~you~~and ~~that we~~development ~~will~~expenses; ~~continue~~• expose us to ~~grow.~~claims Iffor wedamages; do• ~~grow,~~require weus ~~cannot~~to ~~assure~~incur ~~you~~ additional technical support costs; • cause a negative customer reaction that wecould ~~will~~reduce befuture ~~able~~sales; to• ~~maintain~~generate ~~the~~negative ~~historical~~publicity ~~rate~~regarding orus ~~extent of~~and ~~such~~our ~~growth~~products; or • result in customers’ delaying their purchase until the ~~future~~errors or defects have been remedied.

Any 36of these occurrences could have a material adverse effect upon our business, results of operations or financial condition.

~~Table~~Risks ofRelated ~~Contents~~to Our Industry and Competition

WeIf ~~have~~the ~~grown quickly~~market ~~and~~in ifwhich we ~~fail~~sell tobusiness ~~manage~~intelligence ~~our~~software ~~growth,~~does ~~our~~not ~~ability~~grow ~~to generate~~as ~~new~~we ~~revenues~~anticipate, ~~and~~our ~~achieve~~revenues ~~profitability~~ may ~~be harmed~~not grow.

Our ~~future~~market ~~operating~~is ~~results~~still ~~will depend on our ability to manage growth~~emerging, ~~continuously hire~~ and ~~retain significant numbers of qualified employees, and accurately forecast revenues and control expenses. To manage~~ our ~~growth and~~success ~~expansion,~~depends weupon ~~need~~its ~~continuously to improve and implement our internal systems, processes and controls~~growth. ~~For~~Our ~~example,~~potential wecustomers ~~began to implement an enterprise resource planning system in May 2002. If we do not successfully install, test and adopt this system as scheduled, our business~~ may ~~be harmed by the management~~: ~~distraction, lack of availability of desired information and~~ ~~expense of the unsuccessful implementation. If we are unable successfully to do so then our business, operating results and financial condition could be materially adversely affected.~~

~~Our~~• ~~revenues depend~~not ~~upon~~fully avalue ~~large~~the ~~number~~benefits of ~~small~~using ~~orders~~business ~~from~~intelligence ~~our~~products; ~~large distributors~~• ~~and~~not ifachieve ~~any~~favorable ofresults ~~those~~using ~~distributors~~business ~~were~~intelligence toproducts; ~~limit~~• experience technical difficulty in implementing business intelligence products; or ~~terminate~~ ~~its~~• ~~orders,~~use ~~then~~alternative ~~our~~methods ~~revenues~~to ~~would~~solve bethe ~~reduced significantly~~problems addressed by business intelligence software.

~~Sales~~These tofactors amay ~~small~~cause ~~number~~the ofmarket ~~distributors~~for generate a disproportionate amount of our revenues. For example, we derived 10% in fiscal 2002 and 16% in fiscal 2001 of our total revenues from sales to Ingram. If Ingram materially reduces its purchases from us, our business~~, financial condition and results~~ ofintelligence ~~operations~~software ~~would~~not ~~be materially adversely affected unless we substantially increase sales~~ to ~~other~~grow ~~customers.~~as ~~Because~~quickly ~~our contracts with Ingram and other distributors~~ or ~~OEMs~~become doas ~~not~~large ~~require~~as ~~them~~we ~~to purchase any specified number of software licenses from us~~anticipate, wewhich ~~cannot~~may bereduce ~~sure~~the ~~that~~growth ~~our~~of ~~more significant distributors or OEMs will continue to purchase~~ our ~~products at their historical or current levels~~revenues.

-43- ~~We rely on our~~ ~~distributors and OEMs to market and distribute our products and~~ ~~if we fail to maintain and expand these sales channels, our~~ ~~ability to increase our revenues could be harmed.~~

WeIf ~~generate~~we ado ~~substantial portion of our revenues by selling our products to distributors and OEMs. Our distributors and OEMs decide whether or~~ not tocompete ~~include~~effectively ~~our products~~ with ~~those~~companies they sell and generally can carry and sell product lines that are competitive with ours. Because distributors and OEMs carry other product lines and are not required to make a specified level of purchases from us, we cannot be sure that they will prioritize selling ~~our~~business ~~products. These~~intelligence distributors and OEMs are also generally entitled to terminate their relationship with us at any time. Thus, although certain aspects of some of these relationships are contractual in nature, many important aspects of these relationships depend upon the continued cooperation of each party with us. Divergence in strategy, change in forms, competitive product offerings or contract defaults by any of these companies may interfere with our ability to develop, market, sell or support our products, ~~which~~ ~~in turn could harm~~ our ~~business.~~revenues ~~In addition, one or more of these companies~~ may ~~use~~not ~~the~~grow ~~information~~and ~~they~~could ~~gain from their relationship with us to develop or market competing products~~decline.

We have experienced, and expect to continue to experience, intense competition from a number of business ~~strategic~~intelligence ~~relationship~~software companies. We compete principally with vendors ~~Microsoft~~of ~~Corporation~~integrated query, reporting, analysis and ifinformation delivery wesoftware ~~are~~such as Actuate Corporation, Brio Software, noInc., ~~longer~~Business ~~able~~Objects, toCognos ~~sell~~Incorporated, ~~our~~Hummingbird Ltd., Information Builders, Inc. and MicroStrategy Incorporated. Our competitors may announce new products, ~~bundled~~services ~~with~~or enhancements ~~Microsoft’s~~that better meet the needs of customers or changing industry standards. Increased competition may cause price reductions and reduce gross margins and loss of market share, any of which could have a material adverse effect on our ~~revenues~~business, results of operations and financial condition ~~would be harmed~~.

WeAdditionally, ~~have~~we aface ~~strategic~~competition ~~relationship~~from many companies with whom we have strategic relationships, including Baan Company N.V., Hyperion Solutions Corporation, International Business Machines Corporation, Lawson Software, Inc., Microsoft, ~~that~~PeopleSoft, ~~enables~~Inc. usand toSAP, ~~bundle~~all ~~our~~of whom offer business intelligence products that compete with ~~Microsoft’s~~ours. For example, in ~~and~~February we2003, ~~have~~Microsoft ~~developed~~announced ~~and~~that ~~are~~it ~~developing~~intends ~~certain~~to ~~utilities~~extend ~~and~~its ~~products~~SQL Server business intelligence platform to beinclude areporting capabilities ~~part~~which ofmay ~~Microsoft’s~~compete with both our Crystal Reports and Crystal Enterprise products. If Microsoft has announced that it ~~reduces~~anticipates ~~the~~releasing ~~nature~~a ~~and~~beta ~~extent~~test version of ~~its~~this ~~relationship~~software in the first half of calendar 2003. These companies could bundle their business intelligence software with ustheir ~~and~~other products ~~instead~~at ~~develops~~little or no cost, giving them a ~~relationship~~potential ~~with~~competitive advantage ~~one~~over us. Some of the companies that bundle our products ~~competitors~~with theirs could elect not to do so in the future, which could have a material adverse effect on our business, results ~~operating~~of ~~results~~operations and financial condition. ~~may~~These beother ~~impacted~~companies could also invest additional resources in ~~the~~existing products ~~long~~or ~~term~~develop and market additional business intelligence products that compete directly with ours, which could harm our business, results of operations and financial condition.

WeMergers ~~will~~of ~~not~~or ~~be able~~other tostrategic ~~maintain~~transactions by our ~~sales~~competitors ~~growth~~could ifweaken weour docompetitive ~~not~~position ~~attract~~or ~~and~~reduce ~~motivate~~our ~~qualified sales and marketing personnel~~revenues.

WeIf ~~have~~one ~~made~~or ~~significant~~more ~~expenditures~~of ~~in recent years to expand~~ our ~~sales~~competitors ~~force~~were ~~and~~to ~~marketing staff. Our future~~merge ~~success~~or ~~will~~partner ~~depend~~with inanother ~~part~~of ~~upon~~our competitors, the ~~productivity~~change ofin ~~our sales~~the ~~force~~competitive ~~and~~landscape ~~marketing~~could ~~staff.~~adversely Weaffect ~~believe that~~ our ability to ~~continue~~compete toeffectively. ~~attract,~~Our ~~integrate,~~competitors ~~train,~~may ~~motivate~~also ~~and~~establish ~~retain new~~or ~~sales~~strengthen ~~and~~cooperative ~~marketing~~relationships ~~personnel~~with ~~will also affect~~ our ~~success.~~current Weor future ~~face~~distributors, ~~intense~~resellers, ~~competition~~original ~~for~~equipment ~~sales~~manufacturers ~~and marketing personnel in~~or ~~the~~other ~~software~~parties ~~industry,~~with ~~and~~whom we ~~cannot~~have berelationships, ~~sure~~thereby ~~that we will be~~limiting ~~successful~~our inability ~~hiring~~to ~~and~~sell ~~retaining~~through ~~such~~these ~~personnel~~channels inand ~~accordance~~reducing ~~with~~promotion of our ~~plans~~products. ~~Even~~Disruptions ifin weour ~~hire~~business ~~and~~caused ~~train sufficient numbers of~~by ~~sales~~these ~~and~~events ~~marketing~~could ~~personnel,~~reduce weour ~~cannot be~~revenues.

Because 37some of our competitors have significantly greater financial, technical, sales and marketing resources than we have and pre-existing relationships with many of our potential customers, we might not be able to sustain profitability or gain additional market share.

~~Table~~ Some of ~~Contents~~our competitors have significantly greater financial, technical, sales and marketing resources and greater name recognition than we do. These competitors may be able to respond more quickly to new or emerging technologies and changes in customer requirements or devote greater resources to the development, promotion, sale and support of their products. In addition, some of our competitors may be more successful than we are in attracting and retaining customers. This competition could harm our ability to sell products and services, which may lead to lower prices for our products, reduced revenues and reduced gross margins.

-44- ~~sure that our recent and other planned expenses~~ ~~will generate enough additional revenues to exceed these costs.~~

WeIf ~~may~~the ~~have difficulties~~current ~~providing~~economic ~~and~~slowdown ~~managing~~continues ~~the~~and our ~~increased~~customers ~~technical stability~~reduce, ~~performance~~delay ~~and~~or ~~support~~cancel ~~requirements~~purchases of anour ~~evolving~~products ~~market~~and services, ~~which could cause a decline in~~ our ~~revenues~~results ~~and~~of ~~an increase~~operations inwill ~~our expenses~~be harmed.

We ~~are~~cannot ~~increasingly~~predict ~~focusing~~what ~~our~~impact ~~selling~~the ~~efforts~~current oneconomic ~~larger,~~slowdown ~~enterprise-wide~~will ~~deployments~~have ofon ~~our~~the ~~products.~~business ~~Many of~~intelligence ~~these~~software ~~deployments~~market ~~are~~or onour abusiness, ~~Unix~~but ~~platform,~~it ~~and~~may ~~require~~result ~~greater~~in fewer ~~technical~~purchases ~~stability,~~of ~~performance~~licenses ~~and~~of ~~support~~our ~~than~~software, weextended ~~have~~sales cycles, ~~typically~~downward ~~had~~pricing topressures ~~provide~~or inlengthening ~~the~~of ~~past~~payment terms. WeOur customers may ~~have~~also ~~difficulty providing~~discontinue ~~and~~their ~~managing~~annual ~~these~~renewals ~~increased~~of ~~technical requirements.~~our ~~Any~~maintenance ~~such~~and ~~difficulty~~technical ~~could~~support ~~cause~~services usdue to ~~lose existing customers,~~shrinking ~~limit~~budgets. usIf toour ~~smaller~~customers ~~deployments~~reduce, ~~and~~delay ~~cause~~or uscancel topurchases ~~expand our~~of ~~research~~our ~~and~~products ~~development~~ and ~~technical~~services, ~~support costs which could cause a decline in~~ our ~~revenues~~results ~~and~~of anoperations ~~increase~~will ~~in our expenses~~be harmed.

~~Risks~~Technological ~~Related~~advances and evolving industry standards could reduce our future product sales, which could cause our revenues to ~~Our~~grow ~~Industry~~more ~~and~~slowly or decline. ~~Competition~~

IfThe ~~the~~markets ~~market~~for our products are characterized by rapidly changing technology, changing customer needs, evolving industry standards and frequent new product introductions and enhancements. The emergence of new industry standards in related ~~which~~fields wemay ~~sell~~adversely affect the demand for our ~~business~~products. ~~intelligence~~This could ~~software~~happen, ~~does~~for ~~not~~example, ~~grow~~if new standards and technologies asemerged that were incompatible with customer deployments of our applications. We cannot assure you that we ~~anticipate~~will succeed in developing and marketing product enhancements or new products that respond to technological change, ~~our~~new ~~revenues~~industry standards, changed customer requirements or competitive products on a timely and cost-effective basis. Additionally, even if we are able to develop new products and product enhancements, we cannot assure you that they will ~~not~~achieve ~~grow~~market acceptance.

IfDue to the ~~market~~length ~~for~~of our ~~business~~product ~~intelligence~~development ~~software~~cycle, ~~does not grow as quickly or become as large as~~ we ~~anticipate,~~ ~~our~~may ~~revenues~~fail ~~will~~to ~~not~~react ~~grow.~~rapidly ~~Our~~to market isforces, ~~still~~which ~~emerging,~~would ~~and~~hinder our ~~success~~ability ~~depends~~to ~~upon~~meet ~~its~~market ~~growth~~demands. ~~Our potential~~ ~~customers may:~~

• Business ~~not~~intelligence ~~understand~~software oris ~~see~~inherently complex, ~~the~~and ~~benefits~~it ofgenerally ~~using~~takes ~~our~~a long time to develop and test major new products; •and ~~not~~product ~~achieve~~enhancements. ~~favorable~~Our ~~results~~future ~~using~~success will depend on our ability to design, develop, test and support new software products; •and ~~experience~~enhancements ~~technical~~on ~~difficulty~~a timely and cost-effective basis. If we are unable to identify a shift in market ~~implementing~~demand ~~our~~quickly enough, we may not be able to develop products; to meet the new demand in a timely manner, or •at ~~use~~all. Our ~~alternative~~failure ~~methods~~to respond successfully to ~~solve~~changing ~~the~~market conditions ~~same~~could have a negative effect on our business, ~~problems~~results of operations and financial condition.

IfRisks ~~our~~Related ~~products are~~to ~~not~~Our ~~compatible~~Intellectual ~~with various operating systems, we may lose revenues.~~ Property

~~Our~~If ~~products~~we ~~are~~fail ~~used~~to inprotect ~~combination with various operating systems. Our future success depends on~~ our ~~ability to~~intellectual ~~continue~~property ~~to support popular operating systems and databases. Our applications run primarily on the Microsoft operating systems. Therefore~~rights, our ~~ability~~customers toor ~~increase~~competitors ~~sales~~might currently depends on the continued acceptance of Microsoft’s operating system products. In May 2002, we made Crystal Enterprise 8.5 generally available, which runs on both UNIX and Microsoft platforms. Although we intend to continue to invest substantial resources to develop a complete UNIX product line, we cannot be ~~certain that we will be~~ able to ~~introduce other product lines on a~~ ~~timely~~use ~~or cost-effective basis or at all or that these UNIX products will be accepted by~~ our ~~customers.~~technologies ~~If we are unable~~ to develop ~~and~~their ~~market,~~own ~~on a timely and cost-effective basis~~products, ~~product~~ ~~enhancements~~which ~~or new products that respond to changes in~~could ~~these~~weaken ~~currently~~our ~~popular~~competitive ~~operating~~position ~~systems~~or ~~and~~reduce ~~databases,~~ our ~~sales will decrease and our results of operations will be harmed~~revenues.

IfOur success is heavily dependent on our proprietary ~~present~~technology, primarily software. It is difficult to protect and ~~potential~~enforce ~~strategic~~our ~~partners~~intellectual ~~begin~~property ~~selling~~rights ~~business~~and protect ~~intelligence~~third ~~products,~~parties from infringing on our ~~operating~~products ~~results~~for ~~may~~a number of ~~suffer.~~reasons, including:

We• ~~face~~applicable ~~indirect~~laws ~~competition~~and ~~from~~our ~~present~~contracts and ~~potential~~ ~~strategic~~procedures ~~partners~~provide ~~that~~only ~~could~~limited ~~decide~~protection to our intellectual property rights; • third parties may develop ~~business~~ ~~intelligence~~similar ~~products.~~technology Ifindependently; ~~Microsoft~~• policing unauthorized copying or ~~our~~use ~~other strategic~~of ~~partners~~our ~~were~~products tois ~~develop~~difficult and ~~market~~expensive; ~~business intelligence~~• ~~products,~~software itpiracy ~~would~~is ~~have~~ a ~~material~~persistent ~~adverse~~problem ~~effect on~~in the software industry and for us; • our ~~business,~~patents ~~results~~may ofbe ~~operations~~challenged, ~~and~~invalidated ~~financial~~or ~~condition. If~~circumvented, weand, ~~fail~~therefore, tothe ~~compete~~rights ~~successfully~~granted ~~against~~under these ~~new~~patents ~~market entrants,~~might ~~our~~not ~~business,~~provide ~~operating~~us ~~results~~with competitive advantages; and ~~financial condition~~• our shrink-wrap licenses may be ~~materially~~unenforceable ~~adversely~~under ~~affected~~the laws of certain jurisdictions.

-45- 38

~~Table~~ In addition, the laws of ~~Contents~~many countries do not protect our proprietary rights to as great an extent as those of the United States. We believe that effective protection of intellectual property rights is unavailable or limited in certain foreign countries, creating an increased risk of potential loss of proprietary information due to piracy and misappropriation. For example, we recently began to conduct business in the People’s Republic of China and intend to outsource some of our operations to India where we believe there is an increased risk that we may not be able to enforce our contractual and intellectual property rights. If we fail to protect our intellectual property rights, our business may be harmed.

Our ~~revenue could~~results beof ~~reduced~~operations ifmay ~~current~~decline orif ~~future competitors make~~we ~~acquisitions~~were insubject ~~order~~to ~~make~~a ~~their~~protracted ~~products~~infringement ~~more~~claim ~~attractive~~or toone ~~our~~that ~~mutual~~results ~~customer~~in ~~base~~a significant damage award.

WeFrom ~~expect~~time ~~additional~~to ~~competition~~time, ~~from~~companies ~~other~~in our industry ~~established~~receive ~~and/or~~claims ~~emerging~~that ~~companies~~their asproducts aor ~~result~~business ofinfringe ~~future~~the ~~software~~intellectual ~~industry~~property ~~consolidations.~~of ~~Current~~third orparties. ~~future~~Our competitors or other third parties may ~~make~~challenge ~~strategic~~the ~~acquisitions~~validity or ~~establish~~scope ~~strategic~~of our ~~partnerships~~patents, ~~increasing~~copyrights ~~the~~and ~~ability~~trademarks. ofWe ~~their~~believe ~~products~~that software product developers will be increasingly subject to claims of ~~address~~infringement as the ~~needs~~functionality of products in our ~~customers~~market overlaps. ~~Our~~A ~~competitors~~claim may also ~~establish~~ orbe ~~strengthen~~made ~~cooperative~~relating ~~relationships~~to ~~with~~technology ~~our~~that ~~current~~we oracquired ~~future~~from ~~distributors~~our predecessors or ~~other~~third parties. ~~with~~If ~~whom~~ we were ~~have~~subject ~~relationships,~~to ~~thereby~~a ~~limiting~~claim ~~our~~of ~~ability~~infringement, toregardless ~~sell~~of ~~through~~the merit of ~~these~~the ~~channels~~claim ~~and~~or ~~reducing~~our ~~promotion~~defenses, ofthe ~~our~~claim ~~products.~~could:

~~New~~• ~~product introductions~~require ~~and~~costly ~~pricing~~litigation ~~strategies~~to byresolve; ~~our~~• ~~competitors~~absorb ~~could adversely~~significant ~~affect~~management ~~our~~time; ~~ability~~• cause us to enter into unfavorable royalty or license agreements; • cause us to cease selling our products; ~~and~~• ~~could result~~require inus ~~pressure~~ to ~~price~~indemnify our ~~licenses~~customers, indistributors, aoriginal ~~manner~~equipment ~~that reduces~~manufacturers or other resellers; or • require us to expend additional development resources to redesign our ~~margins~~products.

We ~~compete~~may ~~principally~~also ~~with~~be ~~vendors~~required to indemnify customers, distributors, original equipment manufacturers and other resellers for third-party products that are incorporated in our products and that infringe the intellectual property rights of: others. Although many of these third parties are obligated to indemnify us if their products infringe the rights of others, the indemnification may not be adequate.

• In ~~integrated reporting~~addition, ~~analysis~~from ~~and~~time ~~delivery~~to time there have been claims challenging the ownership of open source software; against companies that incorporate open source software into their products. We use a limited amount of open source software in our products and •may aduse ~~hoc~~more ~~analysis~~open source software in the future. As a result, we could be subject to suits by parties claiming ownership of what we believe to be open source software. Any of this litigation could be costly for us to defend, have a negative effect on our results of operations and financial condition or require us to devote additional research and development resources to change our products.

WeThe ~~expect~~inability ~~that~~to ~~our~~obtain ~~competitors~~third-party ~~will~~licenses required ~~offer~~to ~~new~~develop ~~and existing~~our products atcould ~~lower~~require ~~prices,~~us ~~if necessary,~~ to ~~gain or~~obtain ~~retain~~substitute ~~market~~technology ~~share~~of ~~and~~inferior ~~customers.~~quality ~~Our competitors may announce new products services,~~ or ~~enhancements that better meet the~~performance ~~needs~~standards ~~of customer requirements~~ or ~~changing~~at ~~industry standards. We have experienced and expect to continue to experience intense competition from~~ a ~~number~~greater ofcost, ~~domestic~~which ~~and~~could ~~foreign companies. Increased competition can be expected to cause price reductions and~~ reduce ~~gross~~our ~~margins and loss of market share, any of which~~revenues ~~could~~or ~~have~~increase ~~a material adverse effect on~~ our ~~business,~~cost ~~operating results~~of ~~or financial condition~~revenues.

~~Because~~We ~~some~~license ofcertain technologies from third parties to be used in our ~~current~~products, ~~competitors~~generally on a nonexclusive basis. For example, we have ~~been~~obtained inrights ~~business~~from ~~longer~~third ~~than~~parties that allow us ~~and~~to market software tool kits that are designed ~~have~~specifically ~~pre-existing~~to ~~relationships~~assist our products to be compatible with products ~~our~~made ~~potential~~by ~~customers,~~the wethird parties. If these agreements are ~~might~~terminated or are not berenewed, ~~able~~then towe ~~achieve~~may ~~sufficient~~lose ~~market~~the ~~penetration~~right to ~~sustain~~distribute ~~profitability~~the ortool ~~gain~~kits ~~additional~~or ~~market~~otherwise ~~share~~use them. In addition, the termination of third party licenses or the failure of third party licensors adequately to maintain or update their products could delay our ability to deliver some of our products while we seek to

-46- ~~Rapid technological advances, changing customer~~ ~~requirements and frequent new product and service introductions~~ ~~and enhancements and evolving industry needs characterize the~~ market for business intelligence software and services. Some of our competitors have been in business longer than we have and have significantly greater financial, technical, sales and marketing resources and greater name recognition than we do. These competitors may be able to respond more quickly to new or emerging technologies and changes in customer requirements, or to devote greater resources to the development, promotion, sale and support of their products than we are able to do. In addition, some of our competitors may be more successful than we are in attracting and retaining customers. This competition could harm our ability to sell products and services, which may lead to lower prices for our products, reduced gross margins and reduced revenues.

~~Technological~~implement alternative technology. Alternative ~~advances~~technology ~~and~~may ~~evolving~~be ~~industry~~of inferior quality or performance standards or may not be available on commercially reasonable terms or at all. If we are unable to obtain necessary or desirable third party technology licenses, our revenues could ~~adversely~~be ~~impact~~reduced, our cost of revenues could increase and our ~~future~~business ~~product~~could ~~sales~~suffer.

~~The~~Other ~~markets~~Risks ~~for~~Related our products are characterized by rapidly changing technology, changing customer needs, evolving industry standards and frequent new product introductions and enhancements. The emergence of new industry standards in related fields may adversely affect the demand for our existing products. This could happen, for example, if new web standards and technologies emerged that were incompatible with customer deployments of our applications. We cannot assure you that we will succeed in developing and marketing, on a timely and cost-effective basis, product enhancements or new products that respond to ~~technological~~Our change, new industry standards, changed customer requirements or competitive products. Additionally, even if we are able to generate new products and product enhancements in a timely and cost-effective manner, we cannot assure you that our new products and product enhancements will achieve market acceptance. Business

We 39are in the process of implementing an enterprise resource planning system, which may result in a short-term increase in our operating expenses and capital expenditures, particularly if the implementation takes longer than we expect.

~~Table~~ In May 2002, we began to implement a global enterprise resource planning system in North America and the Asia Pacific region. The implementation of ~~Contents~~an enterprise resource planning system is a complex and labor-intensive process that requires the investment of a substantial amount of time, money and other resources. We have experienced significant difficulties in this implementation. The implementation process to date has involved greater than anticipated expenditures of technical, financial and management resources. While we initially anticipated that the remaining regional implementation would be completed by the end of fiscal 2003, we now believe that implementation may not be completed until the end of calendar 2003. Further difficulties may delay completion of the implementation even longer. We also anticipate that we will need to expend greater time, money and resources than we originally expected. If we continue to experience further difficulties in the implementation, this could:

~~Due~~• result in significant and unexpected increases in our operating expenses; • complicate and prolong our internal data gathering and analysis processes; • require us to restructure or develop our internal processes to adapt to the ~~length~~ ofnew system; • result in extended work hours for our ~~product~~employees ~~development~~and ~~cycle~~the temporary use of outside resources, ifwith wea ~~fail~~resulting increase in expenses, to ~~rapidly react~~resolve any software configuration issues or to ~~market~~process ~~forces,~~transactions wemanually ~~may~~until beissues ~~unable~~are resolved; • result in the loss of management focus as attention paid to ~~develop~~implementation ~~new~~is ~~products or~~diverted ~~improve~~from other issues; and • cause disruption of our ~~existing~~operations ~~products~~if tothe ~~meet~~transition to the new ~~market demands~~enterprise resource planning system creates new or unexpected difficulties or if this system does not perform as expected.

~~Business~~We ~~intelligence~~may ~~software~~not isbe ~~inherently complex,~~able ~~and it can take a long time~~ to ~~develop~~operate ~~and test major new products and product enhancements. In addition, customers may delay purchasing decisions because they anticipate that new or enhanced versions of~~ our ~~products will soon become available.~~business ~~Our~~successfully ~~future~~as ~~success~~it ~~will depend on our ability to design~~grows, ~~develop,~~ test and support new software products and enhancements on a timely and cost-effective basis. In particular, we cannot assure you that we have developed the appropriate products to respond effectively to the growing market interest in web-based software, or if ~~so, whether~~ we can continue to bring those products to market in a timely and cost-effective basis and distribute those products in the face of competition from similar products developed by existing or new competitors. We cannot assure you that market interest in web-based software will continue at the same rate, or that alternative methods of deploying software will not become more popular. If we are unable to ~~identify~~improve ~~a shift in the market demand quickly enough,~~our weinternal ~~may not be able to develop products to meet those new demands~~systems, orprocesses ~~bring~~and ~~them to market in a timely way~~controls. ~~Such failure~~ ~~to respond to changing market conditions could materially~~ ~~adversely affect our business, operating results or financial condition.~~

~~Risks~~In ~~Related~~order to ~~Our~~operate ~~Intellectual~~our business successfully as ~~Property~~it grows, we need to improve our internal systems, processes and controls. In order to achieve this, we are increasingly relying on technical systems such as sales prospects management systems, technical support systems, scheduling systems and order entry systems. If we have difficulty providing and managing our internal systems, processes and controls, these difficulties could disrupt existing customer relationships, causing us to lose customers, limit us to smaller deployments of our products or increase our technical support costs.

IfWe wederive ~~fail~~a ~~to protect~~material ~~our~~portion ~~intellectual~~of ~~property rights,~~ our ~~end~~revenues from customers ~~or potential~~outside ~~competitors~~of ~~might~~North beAmerica, ~~able~~and ~~to use~~ our ~~technologies~~failure to ~~develop~~address ~~their~~the ~~own~~difficulties ~~solutions,~~associated ~~which~~with ~~could~~marketing, ~~weaken~~selling and supporting our ~~competitive position~~products oroutside ~~reduce~~North America could cause our sales ~~revenues~~to decline.

~~Our~~We ~~success~~have issignificant ~~heavily~~international ~~dependent~~operations including ondevelopment ~~our~~facilities, sales personnel and customer ~~proprietary~~support ~~technology~~operations. WeOur ~~rely~~primary ~~primarily~~product ondevelopment ~~the~~facilities are ~~following~~located toin Vancouver, Canada and Ipswich, England. We ~~protect~~derived 26% of our ~~proprietary~~total ~~rights:~~revenues in fiscal 2001,

• patents; • copyrights; • trademarks and trade secret rights; • state and common law trade secret laws; • confidentiality procedures; • employee and third party nondisclosure agreements; and • licensing restrictions.-47-

~~These~~2002 ~~efforts~~and ~~provide~~2003 ~~only~~from ~~limited~~sales ~~protection.~~outside Weof North ~~also~~America. ~~rely~~Our ininternational ~~part~~operations ~~on shrink-wrap licenses that~~ are ~~not~~subject ~~signed~~to bycertain ~~end~~inherent ~~users~~risks ~~and, therefore, may be unenforceable under the laws of~~including: ~~certain jurisdictions.~~

~~Even~~• ~~though~~exchange werate ~~take~~fluctuations ~~these~~and ~~steps,~~the weimpact ~~have~~on ~~only limited~~pricing ~~protection~~of ~~for~~our products and our ~~proprietary~~expenses; ~~rights~~• increases in ~~our~~tariffs, ~~software~~duties, ~~which~~ ~~makes~~price itcontrols, ~~difficult~~restrictions toon ~~prevent~~foreign ~~third~~currencies ~~parties~~or ~~from infringing~~trade ~~upon~~barriers ~~our~~imposed ~~rights.~~by ~~Someone~~foreign ~~may~~countries besuch ~~able~~as toimport ~~copy~~and ~~or otherwise~~export ~~obtain~~restrictions; ~~and~~• ~~use~~technical ~~our~~difficulties ~~products~~associated ~~and~~with ~~technology~~product ~~without authorization.~~localization; ~~Policing~~• ~~unauthorized~~lack ~~use~~ of ~~our~~experience ~~products~~in ~~is difficult.~~certain ~~Although~~geographic wemarkets; ~~cannot~~• ~~determine~~longer payment cycles for sales in certain foreign countries; • seasonal reductions in business activity in the ~~extent~~summer months in Europe and certain other countries; • the significant presence of ~~existing piracy~~some of our ~~products~~competitors in some international markets; • potentially adverse tax consequences; • management, westaffing, ~~expect~~legal ~~that~~and ~~software~~other ~~piracy~~costs ~~will~~of beoperating ~~a persistent~~an ~~problem.~~enterprise ~~Third~~spread ~~parties~~over ~~may~~various ~~also~~countries; ~~develop~~• ~~similar technology~~political ~~independently.~~instability Wein ~~believe~~the ~~that~~countries ~~effective~~where ~~protection of~~we ~~intellectual~~are ~~property~~doing ~~rights~~business; isand ~~unavailable~~• fears concerning SARS or ~~limited~~other ~~in certain~~travel ~~foreign~~or ~~countries.~~health Inrisks ~~addition,~~that ~~the~~may ~~laws~~adversely ofaffect ~~many countries~~our doability ~~not~~to ~~protect~~sell our ~~proprietary~~products ~~rights~~and toservices asin ~~great~~any ~~an extent~~country asin which the ~~United~~business ~~States~~sales culture encourages face-to-face interactions.

WeThese ~~have~~factors ~~invested substantial~~could ~~resources~~have inan ~~developing~~adverse ~~our~~effect ~~products~~on ~~and~~ our ~~brand,~~ ~~and~~business, ~~our operating~~ results ~~would~~of ~~suffer~~operations ifand wefinancial ~~were subject to a protracted infringement claim or one with a significant damage award~~condition.

~~Our~~In ~~competitors~~addition, ~~may~~we ~~successfully~~intend ~~challenge~~to ~~the validity~~continue orto ~~scope~~invest resources ofto expand our ~~patents,~~sales ~~copyrights~~ and ~~trademarks~~support operations into strategic international locations such as the People’s Republic of China. WeIf the revenues generated by these operations ~~cannot~~are benot ~~sure~~adequate ~~that~~to offset the expense of establishing these foreign operations, our ~~patents~~business, ~~copyrights~~results ~~and~~of ~~trademarks~~operations ~~will~~and ~~provide~~financial uscondition ~~with~~could abe ~~competitive~~materially harmed.

Our 40ability to pay dividends and engage in other transactions may be limited if we do not receive Comerica Bank — California’s consent because we are subject to limitations under our revolving line of credit.

~~Table~~ In October 2002, we executed an agreement with Comerica Bank — California for a $15.0 million revolving line of ~~Contents~~credit. As of June 27, 2003 and the date of this document, we did not have any outstanding borrowings under the revolving line. Subject to limited exceptions, we are restricted in our ability to pay dividends by the covenants contained in our revolving loan agreement with Comerica. We are permitted to repurchase stock and/or pay cash dividends in an aggregate amount not to exceed $2.0 million during the term of the agreement, provided that we are not in default under the agreement and that a default would not occur immediately after payment of the dividend. We may be unable to repurchase stock or pay dividends in excess of those amounts if Comerica does not agree.

~~advantage~~The orterms ~~that~~of ~~our~~the ~~competitors~~revolving ~~will~~line ~~not~~also ~~design~~require us, ~~around~~among ~~any~~other ~~patents~~things, ~~issued~~ to ~~us.~~maintain Wequarterly ~~are~~financial ~~not aware that any of~~covenants ~~our~~related ~~products~~to ~~infringe~~liquidity, ~~upon~~minimum ~~the~~tangible ~~proprietary~~net ~~rights~~worth ofand ~~third~~quarterly ~~parties,~~free ~~but,~~cash inflow. ~~the~~We ~~future,~~are ~~third~~restricted ~~parties~~from ~~may~~selling, ~~claim~~leasing ~~that our~~or ~~current~~otherwise ordisposing ~~future~~of ~~products~~any ~~infringe~~part ~~that~~of ~~party’s~~our ~~rights.~~business ~~We believe~~or ~~that software product developers will be increasingly~~property ~~subject~~under tomost ~~claims~~circumstances. ofIn ~~infringement~~addition, as the ~~functionality~~agreement ofplaces ~~products~~restrictions inon ~~our~~entering ~~industry~~into ~~segment~~arrangements ~~overlaps.~~that Ifwill weresult ~~were~~in ~~subject to~~ a change ~~claim~~ of ~~infringement,~~control ~~regardless~~and ofrestricts ~~the~~our ~~merit~~ability ofto ~~our~~incur ~~defense,~~specified ~~such~~forms ~~claim~~of ~~would~~indebtedness. ~~have~~We ~~the~~are ~~following~~also ~~impacts~~restricted onfrom usmaking ~~that could~~some ~~have~~types aof ~~material~~distributions ~~adverse~~or ~~effect~~investments. onWe ~~our~~are ~~business,~~also ~~operating~~required to ~~results~~maintain orat ~~financial~~least ~~condition~~an inaggregate ~~the~~of ~~following~~$10 million ~~ways:~~in investment

• require costly litigation to resolve; • absorb significant management time; • require us to enter into unfavorable royalty or license agreements; • require us to cease selling our products; • require us to indemnify our customers; or • require us to expend additional development resources to redesign our products.-48-

~~The~~accounts ~~inability~~with Comerica and some of its affiliates. We may not be able to engage in these types of transactions, such as the sale of debt securities, unless we obtain ~~third-~~Comerica’s consent. A potential acquirer, lender or other strategic party ~~licenses~~may ~~required~~be reluctant to ~~manufacture~~enter orinto ~~develop~~an ~~our~~arrangement ~~products~~with ~~could~~us ~~require~~that uscontemplates toany of these transactions unless we obtain ~~substitute~~Comerica’s ~~technology~~consent. ofIf we are unable to ~~inferior~~obtain ~~quality~~consent or ~~performance~~cannot ~~standards~~obtain orconsent atin a ~~greater~~timely ~~cost~~manner, the ~~which~~other ~~could~~party ~~harm~~may ~~our~~not ~~business,~~elect ~~financial~~to ~~condition~~proceed ~~and~~with ~~results~~a transaction that we ofbelieve ~~operations~~to be in our stockholders best interests.

We ~~occasionally~~may ~~license~~be ~~certain~~obligated ~~technologies from third parties~~ to beindemnify ~~used in~~ our ~~products, generally on a~~customers ~~non-exclusive~~if ~~basis.~~they ~~The~~are ~~termination~~subject ofto ~~these licenses, or the failure of the~~ third- party ~~licensors~~claims ~~adequately~~and ~~to maintain or~~any ~~update~~indemnification ~~their~~obligation ~~products,~~ could ~~delay~~hurt our ~~ability~~results ~~to ship certain~~ of ~~our products while we seek to implement alternative~~operations ~~technology~~and ~~offered~~harm ~~by other sources. In addition, alternate technology may not be available on commercially reasonable terms or at all. If we are unable to obtain necessary or desirable third-party technology licenses,~~ our ~~business, operating results and financial condition could be materially adversely affected~~reputation.

~~Undetected~~Our license agreements with our customers typically contain provisions designed to limit our exposure to potential product ~~errors~~liability orclaims. ~~defects~~Existing ~~could~~or ~~result~~future inUnited States ~~loss~~federal ofor ~~revenues~~state laws, foreign laws or unfavorable ~~delayed~~judicial ~~market~~decisions ~~acceptance~~may make these provisions ineffective. Because our products are used with enterprise software systems and ~~claims~~databases, our liability could be substantial if we receive an unfavorable judgment. In addition, our insurance against product usliability may not be adequate to cover a potential claim.

~~Software~~We ~~products~~are asa ~~complex~~party asto ~~those~~litigation, weincluding ~~offer~~an ~~frequently~~action ~~contain~~commenced ~~undetected~~by ~~errors,~~Vedatech ~~defects,~~Corporation ~~failures~~in ~~or viruses~~the ~~especially~~United ~~when~~Kingdom, which ~~first~~could ~~introduced~~cause orus ~~when~~to ~~new~~incur ~~versions~~expenses ~~or enhancements~~to ~~are~~defend ~~released~~ourselves, orand in ~~are~~the ~~configured~~event toof ~~individual customer~~an ~~systems.~~adverse ~~Despite~~judgment ~~product~~against ~~testing,~~us ~~our~~in ~~products may~~any ~~contain undetected defects~~litigation, ~~errors~~we ormay ~~viruses.~~have Ifto ~~our~~pay ~~products have errors~~damages, ~~they~~which could: affect our liquidity.

• In ~~cause~~November a1997, ~~negative~~Vedatech ~~customer~~commenced ~~reaction~~an ~~that~~action ~~could~~in the ~~reduce~~Chancery ~~future~~Division ~~sales;~~of •the ~~generate~~High ~~negative~~Court ~~publicity~~of ~~regarding~~Justice usin ~~and~~the ~~our~~United Kingdom ~~products;~~against •Crystal ~~harm~~Decisions ~~our~~(UK) ~~reputation;~~Limited, •our ~~reduce~~wholly orowned subsidiary. ~~limit~~The ~~customers’~~liability ~~adoption~~phase of ~~our~~the ~~products;~~trial •was ~~require~~completed usin March 2002, and we prevailed on all claims except for a quantum meruit claim. The court ordered the parties to ~~incur~~mediate the ~~additional~~amount ~~service~~of that claim and ~~warranty~~we ~~costs;~~came •to ~~require~~a usmediated tosettlement with ~~make~~Vedatech ~~extensive~~in ~~changes~~August 2002. The mediated settlement was not material to ~~the~~our ~~product;~~operations •and ~~require~~contained usno continuing obligations. In September 2002, however, we received notice that Vedatech is seeking to ~~divert~~set ~~additional~~aside ~~development~~the ~~resources;~~settlement. orIn April 2003, •we ~~result~~filed an action in ~~customers’~~the ~~delaying~~High ~~their~~Court ~~purchase~~of ~~until~~Justice seeking a declaration that the ~~errors~~mediated orsettlement ~~defects~~agreement ~~have~~is valid ~~been~~and ~~remedied~~binding. Although we believe that Vedatech’s basis for seeking to set aside our mediated settlement is meritless, ~~which~~the ~~would~~outcome ~~cause~~cannot be determined at this time. If our mediated ~~revenues~~settlement were to be ~~reduced~~set oraside, ~~delayed~~a negative outcome could adversely affect our business, results of operations and financial condition.

~~Any~~In addition to the foregoing, we are subject to other litigation in the ordinary course of our business. While we believe that the ultimate outcome of these ~~occurrences~~matters ~~could~~will not have a material adverse effect ~~upon~~on us, the outcome of these matters is not determinable and negative outcomes may adversely affect our business, ~~operating~~ results orof operations and financial condition.

~~Our~~Risks ~~license~~Related ~~agreements with our customers typically contain provisions designed~~ to ~~limit~~ our ~~exposure~~Relationship ~~to potential~~with ~~product~~New ~~liability~~SAC ~~claims.~~and ~~Existing~~Seagate ~~or future U.S. federal, state or foreign laws or ordinances or~~ Technology

If 41we are compelled to pay any indemnity claims by VERITAS, our assets could be depleted substantially.

~~Table~~ In a series of ~~Contents~~transactions that took place in November 2000, New SAC purchased the operating business of Old Seagate, including the business intelligence software business that we now operate. In a concurrent transaction, Old Seagate and Seagate Software Holdings, our former parent, were sold to VERITAS.

~~unfavorable~~In ~~judicial~~connection ~~decisions~~with ~~may~~these ~~make~~transactions, ~~these~~New SAC ~~provisions~~and ~~ineffective.~~certain ~~Because~~of ~~our~~its ~~products~~affiliates, ~~are~~including ~~used~~us, inagreed ~~system~~to indemnify ~~management~~VERITAS, ~~resource~~Old ~~optimization~~Seagate and ~~business~~some ~~intelligence~~of their affiliates for ~~applications,~~substantially ~~our~~all ~~liability~~liabilities ~~could~~arising bein ~~substantial~~connection ifwith our operating assets. Although we ~~receive~~have agreed with Seagate anTechnology ~~unfavorable~~and ~~judgment.~~several Inof ~~addition,~~its ~~our~~affiliates ~~insurance~~on ~~against~~a methodology to ~~product~~allocate liability, ~~risks~~our ~~may~~liability, like Seagate Technology’s, is not becapped. ~~adequate~~As a result, we continue to face ~~cover~~possible aliability ~~potential~~for ~~claim.~~

-49- ~~Government~~ ~~regulations, particularly regarding the import and export of~~ ~~products, could negatively affect our revenues.~~

~~Due~~actions, toevents ~~increasing~~or ~~use~~circumstances ofarising ~~the Internet and the~~or ~~dramatically~~occurring ~~increased~~both ~~access~~before ~~to personal information, the U.S. federal~~ and ~~various~~after ~~state and foreign governments have proposed increased limitations on~~ the ~~collection~~November ~~and~~2000 ~~use of personal~~transactions. ~~information~~Some ofareas ~~users~~ of ~~the~~potential ~~Internet~~liability ~~and other public data~~include: ~~networks.~~

~~Although~~• wetax ~~attempt~~liabilities; to• ~~obtain~~obligations ~~permission~~under ~~from users prior to collecting or processing their personal data~~federal, ~~new laws~~state ~~or regulations governing personal privacy may change the ways in which we~~ and ~~our~~foreign ~~customers~~pension and ~~affiliates~~retirement ~~may~~benefit ~~gather this~~laws; ~~personal information. In addition, in Europe, the European Union Directive on Data Protection, a comprehensive administrative~~ and ~~regulatory~~• ~~program,~~existing ~~currently limits the ability of companies to collect, store~~ and ~~exchange~~future ~~personal data with other entities~~litigation.

~~Our~~In growing business, e-business and our marketing strategy depend upon our receiving personal information about subscribers. Privacy concerns may cause some potential subscribers to forego subscribing to our service. If new laws or regulations prohibit us from using information in the ~~ways~~event that weour ~~currently~~indemnity ~~do,~~obligations ~~or if users opt out of making~~are ~~their personal preferences and information available to us and our affiliates~~triggered, ~~this~~we could ~~have~~experience a material adverse effect on our business, ~~operating results~~ and financial condition. ~~If personal~~ ~~information is misused by us, our legal liability may be~~ ~~increased and our growth may be limited.~~

Our ~~success~~directors ~~depends~~may onhave ~~increased~~conflicts ~~use~~ of ~~the Internet~~interest ~~for~~because ~~e-commerce~~of ~~and~~their ~~other~~ownership ~~commercial~~of ~~and~~capital ~~personal activities.~~stock ~~Consumers~~of, and ~~businesses~~their ~~may~~board ~~choose~~membership ~~not~~or toemployment ~~use~~with, ~~the Internet~~New ~~for~~SAC aand ~~number~~its ofother ~~reasons, including:~~ affiliates.

• Many ~~internet~~of ~~access~~our ~~costs;~~directors •own ~~inconsistent~~interests ~~service~~in ~~quality;~~our majority •stockholder, ~~unavailability~~New SAC, and some of ~~cost-effective,~~them ~~high-speed~~hold ~~service;~~shares •and options ~~perceived~~to ~~security~~purchase ~~risks~~the capital stock of Seagate Technology. Ownership of New SAC or Seagate Technology could create, ~~such~~or appear asto acreate, ~~lack~~potential conflicts of ~~confidence~~interest inwhen ~~encryption~~our directors ~~technology;~~are faced with decisions that could have different implications for us and •for ~~privacy~~New ~~concerns~~SAC or its other affiliates.

InSome ~~addition,~~of ~~governmental~~our ~~agencies~~directors ~~and~~also serve on the boards of ~~legislators~~directors ~~may~~of ~~generate~~New ~~new~~SAC, ~~laws~~Certance ~~and~~Holdings, ~~regulations~~a ~~covering~~removable tape ~~issues~~storage ~~such~~company asand ~~export,~~an ~~obscenity~~affiliate of New SAC, ~~freedom~~and Seagate Technology. Several of ~~expression,~~our directors also serve as officers of ~~pricing~~those entities, ~~content~~as ~~and~~well ~~quality~~as other affiliates of ~~products~~New ~~and~~SAC. ~~services,~~We expect ~~copyright~~that some of our directors will continue to spend a ~~and~~substantial ~~other~~portion ~~intellectual~~of ~~property~~their ~~issues~~time on the affairs of New SAC and Seagate ~~taxation.~~Technology, ~~Such~~for which those entities may pay our ~~legislation~~directors director fees or ~~rule~~other ~~making~~compensation. ~~could~~In ~~dampen~~view ~~the~~of ~~growth~~these overlapping inrelationships, ~~Internet~~conflicts of interest may exist or ~~use~~arise ~~generally~~with respect to existing and ~~decrease~~future business dealings, including the ~~acceptance~~relative commitment of ~~the~~time ~~Internet~~and asenergy aby our ~~commercial~~directors ~~medium.~~to Ifus ~~use~~and New SAC and Seagate Technology, potential acquisitions of ~~the~~businesses ~~Internet~~or ~~decreases~~properties and other business opportunities, ~~some~~the issuance of ~~our~~additional capital stock, the ~~customers~~election ~~may~~of ~~purchase~~new ~~fewer~~or ~~licenses~~additional ~~for~~directors ~~our~~or ~~software~~the ~~products~~payment of ~~and~~dividends ~~our~~by ~~operating~~us. ~~results~~We ~~would~~cannot assure you that any conflicts of interest will be ~~harmed~~resolved in our favor.

~~Other~~Because ~~Risks~~New ~~Related~~SAC controls our board of directors and owned 98.6% of our outstanding stock as of June 27, 2003, your ability to ~~Our~~influence ~~Business~~ corporate matters is greatly limited.

WeNew ~~derive~~SAC ~~a substantial~~owned ~~portion~~approximately 98.6% of our outstanding ~~revenues~~common ~~from~~stock ~~customers~~as ~~outside~~of June 27, 2003, and we expect New SAC to continue to own a substantial number of shares of the combined company after the ~~United~~acquisition. ~~States~~In addition, ~~and~~the shareholders ~~our~~of ~~failure~~New SAC are parties to ~~address~~a shareholders agreement governing the ~~difficulties~~ownership of New SAC’s stock. These ~~associated~~arrangements result in New SAC and the New SAC shareholders acting together with ~~marketing~~respect to matters submitted to our stockholders. Through its influence on our board of directors and as a majority stockholder, ~~selling~~New SAC has the ability to determine the direction of our business, our operating budget, whether to pursue possible acquisitions, whether to pursue a sale of our company and ~~supporting~~other matters, including all matters submitted to our ~~products~~stockholders. For example, New SAC and its ~~outside~~wholly owned subsidiary, Seagate Software (Cayman) Holdings, have delivered actions by written consent to Business Objects for the ~~United~~purpose ~~States~~of effecting the proposed acquisition, and the number of shares represented by those consents are sufficient to approve the proposed acquisition. Stockholders who are opposed to the merger would have appraisal rights as their remedy. New SAC and the shareholders of New SAC may be the largest single stockholder of the combined company after the acquisition is completed and for the foreseeable future and may decide not to enter into a transaction in ~~addition~~which you would receive consideration for your Business Objects shares that is much higher than the cost to you or the ~~attendant~~then-current ~~risks~~market price of ~~operating~~those ~~internationally~~shares. In addition, ~~could~~New ~~cause~~SAC ~~our~~and ~~sales~~New SAC’s shareholders could elect to sell a controlling interest in us ~~decline~~and you may not have a right to participate in the sale. Any decision regarding their

-50- ~~We have significant international operations~~ ~~including development facilities, sales personnel and customer~~ ~~support operations. For example, we derived 32% in fiscal 2002~~ and fiscal 2001 of our total revenues from sales outside of the United States. As part of our business strategy, we plan to continue to expand into additional international markets. Our international operations are subject to certain inherent risks including:

• ownership ~~fluctuations~~of inus ~~currency~~or ~~exchange~~Business ~~rates;~~Objects •that ~~import~~New SAC and ~~export~~its ~~restrictions,~~shareholders asmay ~~well~~make asat ~~tariffs;~~some future time will be in their absolute discretion.

Item 42 7A. Quantitative and Qualitative Disclosures About Market Risk

~~Table~~ Market risk represents the risk of ~~Contents~~loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of fluctuations in interest rates and foreign exchange rates. We do not hold or issue financial instruments for trading purposes.

•Interest ~~technical~~Rate difficulties associated with product localization; • lack of acceptance of localized products; • longer payment cycles for sales in certain foreign countries; • difficulties in staffing and managing international operations; • higher operating costs; • seasonal reductions in business activity in the summer months in Europe and certain other countries; • increases in tariffs, duties, price controls, other restrictions on foreign currencies or trade barriers imposed by foreign countries; • potentially adverse tax consequences; • management of an enterprise spread over various countries; • exposure to different legal standards or risk; and • the burden of complying with a wide variety of foreign laws.Risk

~~These~~Our ~~factors~~exposure ~~could~~to ~~have~~market arate ~~material~~risk ~~adverse~~for changes in ~~effect~~interest onrates relates primarily to our ~~business,~~investment ~~operating~~portfolio. The ~~results~~investment ~~and~~of ~~financial~~cash is regulated by our investment policy of ~~condition~~which inthe primary objective is the ~~future~~safety and preservation of our invested funds by limiting default risk, market risk and reinvestment risk. InAmong ~~addition~~other selection criteria, weour ~~intend~~current investment topolicy ~~continue~~states tothat all investments, with the ~~invest~~exception ~~resources~~of up to ~~expand~~20% ~~our~~of ~~sales~~cash and ~~support~~cash ~~operations~~equivalents, ~~into~~must be ~~strategic~~maintained ~~international~~in ~~locations~~U.S. dollar Ifdenominated ~~the~~investment ~~international revenues~~grade ~~generated~~securities, bywith ~~these~~no ~~expanded~~maturities ~~operations~~exceeding ~~are~~two ~~not~~years. ~~adequate~~We tomay hold ~~offset~~up ~~the~~to ~~expense~~20% of ~~establishing~~cash ~~these~~and ~~foreign~~cash ~~operations~~equivalents ~~then~~in investment grade ~~our~~non-U.S. denominated ~~business~~securities. In addition, ~~operating~~our investment ~~results~~policy ~~and~~does ~~financial~~not ~~condition~~allow ~~could~~for ~~be materially~~investment ~~harmed~~in technology companies.

~~Our~~We ~~products~~mitigate ~~are~~the ~~generally~~effect ~~priced~~of indefault ~~U.S.~~risk ~~dollars~~by ~~even~~investing ~~when~~in ~~sold~~only tohigh ~~customers~~credit ~~who~~quality ~~are~~securities ~~located~~and ~~outside~~by ofusing ~~the~~a ~~United~~portfolio ~~States.~~manager ~~Currency~~to ~~instability~~respond inappropriately ~~foreign~~to ~~financial~~a ~~markets~~significant ~~may~~reduction ~~make~~in ~~our~~credit ~~products~~rating ~~more~~of ~~expensive~~any ~~than~~investment ~~products~~issuer, ~~sold by other~~guarantor ~~manufacturers~~or ~~that~~depository. ~~are~~The ~~priced~~portfolio inincludes ~~one~~only ofdiversified marketable ~~the~~securities ~~effected~~with ~~currencies. Therefore,~~active ~~foreign~~secondary ~~customers~~or ~~may~~resale ~~reduce~~markets ~~purchases~~to ensure ofportfolio ~~our products~~liquidity.

~~The~~Our ~~loss~~investments ofin ~~key~~debt securities include money ~~personnel~~market orfunds, ~~any~~investment ~~inability~~grade tocommercial ~~attract~~paper, corporate bonds, government agency securities and ~~retain~~other ~~additional~~debt securities. ~~personnel~~The ~~could~~diversity ~~affect~~of our ~~ability~~portfolio helps us to ~~successfully~~achieve ~~grow~~our investment objective. As of June 27, 2003, all of our cash, ~~business~~cash equivalents, short-term and long-term investments were classified as available-for-sale.

~~Our~~While ~~future~~we ~~performance~~are ~~depends~~exposed to ainterest ~~significant~~rate ~~degree~~fluctuations ~~upon~~in ~~the~~many ~~continued~~countries, ~~service of~~ our ~~key~~interest ~~members~~income ofis most ~~management,~~sensitive asto ~~well~~fluctuations asin ~~our~~the ~~marketing,~~general ~~sales~~level ~~and product~~of ~~development~~U.S. interest ~~personnel~~rates. WeDeclines doin ~~not~~interest ~~maintain~~rates ~~key~~over ~~man insurance on~~time ~~any~~will ofreduce our ~~officers~~interest orincome ~~key~~and ~~employees.~~we ~~None~~do ofnot ~~our~~attempt ~~officers~~to orreduce ~~key~~or ~~employees~~eliminate isour ~~bound~~exposure ~~by an employment agreement for any specific term. We may experience vacancies in key roles from time~~ to ~~time~~interest ~~that~~rate ~~may~~risk ~~impact~~through ~~our~~the ~~future performance. Replacement~~use of ~~any~~derivative ~~officer~~financial orinstruments ~~key~~due ~~employee is subject~~ to the ~~inherent~~short-term ~~risk~~nature of ~~integration~~the investments. ~~The~~For ~~loss~~fiscal of2002 ~~one~~and orfiscal ~~more~~2003, fluctuations ofin ~~our~~the ~~key~~U.S. interest ~~personnel~~rate ~~may~~ did not have a material ~~adverse~~impact ~~effect~~ on our ~~business,~~net ~~operating results~~interest ~~and financial condition~~income.

WeForeign ~~believe~~Exchange our future growth and success depends upon our ability to attract, train and retain highly skilled management, marketing, sales and product development personnel. We have experienced intense competition for such personnel and there can be no assurance that we will be able to retain our key employees or that we will be successful in attracting, assimilating and retaining them in the future. If we cannot successfully hire and retain qualified employees, our business, operating results and financial condition would be materially adversely affected. Risk

We ~~are~~conduct business on a global basis in international ~~the~~currencies. As such, we are exposed to adverse or ~~process~~beneficial ofmovements ~~adopting~~in anforeign ~~enterprise~~exchange ~~resource~~rates. ~~planning~~The ~~system,~~majority of ~~which~~our ~~may~~sales ~~result~~are denominated in aU.S. dollars, ~~short-term~~the ~~negative~~currency ~~impact~~in which onwe report our financial statements; however, we do conduct ~~operating~~a ~~expenses~~portion ~~and~~of ~~capital~~our ~~expenditures,~~sales ~~particularly~~in ifcurrencies other than the ~~implementation~~U.S. dollar, ~~takes~~including ~~longer~~the ~~than~~British wepound, ~~expect~~Euro, Canadian dollar and Japanese yen.

InWe ~~May~~are ~~2002,~~also weexposed ~~began~~ to ~~implement~~foreign aexchange ~~global~~rate ~~enterprise~~fluctuations ~~resource~~as ~~planning~~the ~~system.~~financial Weresults ~~anticipate~~of ~~that~~our ~~the~~foreign ~~implementation~~subsidiaries ~~may~~are ~~not~~translated beinto ~~completed~~U.S. dollars ~~until~~on consolidation. ~~the~~Commencing ~~end~~on ofMarch 29, ~~fiscal~~ 2003., Weall translation ~~anticipate~~gains ~~that~~and losses will be included in the determination ~~system~~of net income and will ~~increase~~no ~~our~~longer ~~internal~~be recorded as an ~~operational~~adjustment ~~and~~to ~~financial~~accumulated ~~efficiencies~~other ~~and~~comprehensive ~~increase~~income ~~information~~in ~~analysis~~stockholders’ equity. ~~However~~As exchange rates vary, wethese results, ~~expect~~when ~~that~~translated, ~~the~~may ~~implementation~~vary ~~will~~from beexpectations aand ~~complex~~adversely ~~and~~or ~~labor-intensive~~beneficially ~~process~~impact ~~that~~overall ~~will~~expected ~~require~~profitability. We usalso have exposure to foreign exchange rate fluctuations when ~~invest~~we atranslate cash from one currency into another to fund operational requirements. In addition, we have exposure to the change in rates

-51- 43

~~Table~~ as the result of ~~Contents~~timing differences between expenses being incurred and paid. As exchange rates vary, we may experience a negative impact on financial results.

~~substantial~~We ~~amount~~incur the majority of ~~time~~our research and development, ~~money~~customer support costs and ~~resources.~~administrative expenses ~~Because~~in ~~the~~Canadian ~~enterprise~~dollars ~~resource~~and ~~planning~~British ~~software~~pounds. ~~will~~For beexample, ~~configured~~approximately 80% ~~for~~of our ~~operations~~revenues were denominated in U.S. dollars, we6% ~~expect~~in ~~that~~British wepounds ~~may~~and ~~have~~less than 5% in ~~difficulties~~Canadian ~~with~~dollars ~~the~~for ~~configuration~~fiscal ~~that~~2003. ~~will~~Approximately 34% ~~need~~of toour total beexpenses were denominated in U.S. dollars, 15% in ~~resolved~~British pounds and 40% in anCanadian ~~expeditious~~dollars ~~manner~~in fiscal 2003. These percentages fluctuate with exchange rates, business operating changes and cash flow versus expense patterns. We ~~believe~~have evaluated our exposure to these risks and have determined that ~~the~~our ~~failure~~only significant operating exposure to ~~implement~~foreign currencies at this time ~~system~~is into athe ~~timely~~Canadian ~~fashion~~dollar. ~~could~~The ~~have~~strengthening aof the ~~material~~Canadian ~~impact~~dollar onhas negatively affected and may continue to negatively affect our operating expenses and ~~internal~~net ~~data gathering~~income and ~~analysis.~~we continue ~~The~~to ~~most~~have ~~likely~~foreign ~~negative~~currency ~~effects~~risk wefrom ~~may~~this source. For ~~experience~~fiscal 2003, a 10% increase in ~~connection~~the ~~with~~Canadian dollar relative to the ~~implementation~~U.S. dollar ofwould ~~this~~have ~~system~~increased our revenues by less than 1% but would ~~be:~~have increased our expenses by approximately 4%.

• We ~~overtime~~cannot ~~work~~predict ~~of our employees and~~ the ~~temporary~~effect ~~use~~ of ~~outside~~exchange ~~resources~~rate fluctuations ~~may~~upon beour ~~required~~future toresults. ~~resolve~~We ~~any~~recently ~~software~~implemented ~~configuration~~a partial ~~issues~~hedging ~~and/or~~strategy tofor ~~process~~exposure ~~transactions~~to ~~manually~~fluctuations ~~until~~in ~~necessary~~the exchange ~~issues~~rate ~~are~~of ~~resolved;~~the •Canadian ~~disruption~~dollar torelative ~~our operations if the transition~~ to the U.S. dollar. ~~new~~Although ~~enterprise~~we ~~resource~~recently ~~planning~~have ~~system~~begun ishedging, ~~not~~we cannot ~~effected~~be ~~smoothly~~sure orthat ifany ~~this~~hedging ~~system~~techniques ~~does~~we ~~not~~may ~~perform~~implement aswill be ~~expected;~~successful ~~and~~or •that ~~increased~~our ~~demands~~business, onresults ~~the time~~ of ~~our~~operations, financial ~~employees~~condition toand ~~resolve~~cash ~~software~~flows ~~configuration~~will ~~issues~~not ~~unique~~be toadversely affected ~~our~~by ~~own~~exchange ~~applications~~rate fluctuations.

~~Future~~Item ~~changes in~~8. ~~accounting~~Financial ~~standards~~Statements ~~could~~and ~~cause~~Supplementary ~~adverse unexpected revenue fluctuations or impact on our results of operations.~~ Data

~~Future~~Our ~~changes~~consolidated infinancial ~~accounting~~statements ~~standards~~and ~~including~~the ~~those~~related ~~affecting~~independent ~~recognition~~auditors ofreport ~~revenues~~appear oron ~~accounting for stock~~page F-1 ~~options,~~through ~~could~~F-43 ~~require us to change our accounting policies. If a change in accounting standards caused us to defer revenues recognized in current periods to subsequent periods, accelerate recognition~~ of ~~deferred~~this ~~revenues~~Annual toReport ~~current~~on ~~periods or incur expenses related to the grant of stock options to employees, we may experience charges that negatively impact our operating results~~Form 10-K.

IfOur weunaudited ~~acquire any~~quarterly ~~companies~~data orappears ~~technologies~~ in ~~the future, they could prove~~ ~~difficult~~Item 7 toof ~~integrate,~~this ~~disruptive~~Annual toReport ~~our~~on ~~business, dilute stockholder value and/or adversely affect our operating results~~Form 10-K.

WeItem ~~intend to expand through internal growth, as well as to pursue strategic acquisitions, as part of our business strategy~~9. WeChanges ~~may~~in ~~not~~and beDisagreements ~~able~~with toAccountants ~~identify~~and ~~suitable candidates~~Accounting ~~for~~and ~~acquisition~~Financial ~~or investment strategy~~Disclosure. If we are able to identify suitable candidates, we may not be able to make such acquisitions or investments on commercially acceptable terms. However, if we were to complete an acquisition, the acquisition could involve numerous risks including:

• difficulty integrating the operations and products of the acquired business; • potential disruption of our ongoing business and the distraction of management; • unanticipated expenses related to technology integration; • risk of entering a market where we have limited or no prior experience; and • the potential loss of key employees or customers of the acquired company None.

IfItem we9A. ~~make~~Controls ~~acquisitions in the future, acquisition related accounting charges may impact our balance sheet~~ and ~~operating results. We may not be successful in addressing these risks or any other problems encountered in connection with such acquisitions.~~ Procedures

~~There~~Evaluation isof nodisclosure controls and ~~established~~procedures. ~~trading~~Our ~~market~~management, ~~for~~with the participation of our ~~common~~Chief ~~stock~~Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and ~~there~~procedures ~~may~~(as defined in Rule 13a-15(e) of the ~~never~~Exchange Act) as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective in ensuring that information required to be ~~any~~disclosed ~~trading~~by ~~market~~us ~~established~~in reports that we file or submit under the Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

~~Our~~Changes ~~common~~in ~~stock~~internal iscontrol ~~not listed on any stock exchange,~~ over~~-the-counter~~ ~~market or other quotation system~~financial reporting. ~~We have~~There ~~not~~was ~~registered~~no ~~shares~~change ofin our ~~common stock for sale to the~~ ~~public~~internal orcontrol ~~registered~~over ~~for~~financial ~~resale~~reporting ~~shares~~(as ~~held~~defined ~~by our stockholders~~in orRule 13a-15(f) ~~that~~of ~~may~~the beExchange ~~acquired~~Act) bythat ~~our~~occurred ~~optionees. We may never register~~during ~~our common stock for sale to~~ the ~~public~~period orcovered ~~apply~~by ~~for~~this ~~quotation of~~report ~~our~~that ~~shares~~has onmaterially ~~any exchange~~affected, ~~over-the-counter market or~~ ~~quotation~~or ~~system.~~is Ifreasonably nolikely ~~such~~to ~~registration~~materially ~~occurs~~affect, ~~a purchaser of~~ our ~~common stock will not be able to dispose of the shares the~~internal ~~purchaser~~control ~~acquires~~over ~~from~~financial ~~us unless the purchaser can rely on a applicable exemption from registration, such as Rule 144 under the Securities Act of 1933~~reporting. ~~We may not comply with the~~ ~~criteria required for a holder of our common stock to utilize a~~ ~~given exemption.~~

-52- 44

~~Table~~ PART ~~of Contents~~III

In the event that a trading market for our common stock develops, the market prices of our common stock will likely be subject to substantial price and volume fluctuations due to a number of factors, many of which will be beyond our control, which may prevent our shareholders from reselling our common stock at a profit.

Risks Related to our Relationship with New SAC and Seagate Technology

As a result of the sale of Seagate Technology and our former parent, Seagate Software Holdings, to VERITAS, we may face indemnity claims and if we are compelled to pay any indemnity claims, our business may be significantly harmed.

In November 2000, an investor group purchased the operating businesses of Seagate Technology, our former indirect parent, and in connection with that transaction Seagate Technology and our former direct parent, Seagate Software Holdings were sold to VERITAS. In a concurrent transaction, Seagate Technology sold all of its operating assets (including our company) to New SAC, a company controlled by a group of investors including Silver Lake Partners, Texas Pacific Group and some of the former officers of Seagate Technology. We and New SAC have agreed to assume and indemnify VERITAS for substantially all liabilities arising in connection with our operating assets. As a result, we continue to face possible liability for actions, events or circumstances arising or occurring both before and after the sale of Seagate Technology and Seagate Software Holdings to VERITAS. Some areas of potential liability include:

• tax liabilities; • obligations under federal, state and foreign pension and retirement benefit laws; and • existing and future litigation.

As a result of our obligations to indemnify VERITAS, we could experience a material adverse effect on our business and financial performance.

Because New SAC controls our Board of Directors, your ability to influence corporate matters will be greatly limited.

Upon the closing of the New SAC Transaction in November 2000, our company became a majority owned subsidiary of Seagate Software (Cayman) Holdings, a wholly owned subsidiary of New SAC. As a result of the change in ownership, New SAC controls more than 80% of our common stock on a fully diluted basis and five of the seven members of our board of directors were appointed by or are officers of New SAC. Through its influence on our board of directors and as a majority stockholder, New SAC has the ability to change the direction of our business, our operating budget, possible acquisitions or sale of our company.

Risks of Litigation

From time to time, we have to defend lawsuits and may have to pay damages in connection with alleged failures of our products or services, or, in the context of patent litigations, we may lose significant intellectual property rights.

In November 1997, Vedatech commenced an action in the Chancery Division of the High Court of Justice in the United Kingdom against Crystal Decisions (UK) Limited, a wholly owned subsidiary of Crystal Decisions, Inc. The original pleading alleged a breach of an oral agreement and infringement of a Vedatech U.K. copyright in one of our products and sought monetary and injunctive relief. In August 2000, Vedatech obtained permission to amend its action to include claims for unjust enrichment, unlawful interference and quantum meruit. In May 2001, Vedatech sought to enjoin Crystal Decisions (UK) Limited from infringing the U.K. copyright and sought forfeiture to Vedatech of all infringing software copies. Of the relief sought, only a claim for JPY 26,624,181 (approximately U.S. $240,000) for unpaid invoices initially was settled. The liability phase of the trial was completed in March 2002, and we prevailed on all claims except for the quantum meruit. The court ordered the parties to mediate that quantum of that claim and, in August 2002, we

came to a mediated settlement with Vedatech. The mediated settlement is not material to our operations and contains no continuing obligations. On September 24, 2002, however, we received documents indicating Vedatech is seeking to set aside the settlement.

We are subject to litigation in the ordinary course of our business. While we believe that the ultimate outcome of these matters will not have a material adverse effect on us, the outcome of these matters is not determinable and negative outcomes may adversely affect our financial position, liquidity, or results of operations.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

Our exposure to market rate risk for changes in interest rates relates to our cash and cash equivalents and to our revolving loan agreement as described in Item 7 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.” At June 28, 2002, $66.6 million of the $71.5 million balance of our cash and cash equivalents was held in U.S. dollar denominated bank deposits and short-term money market investments. The remainder of our cash and cash equivalents was denominated in the local currencies of our foreign operations.

Our interest income and expense will fluctuate depending on the general level of interest rates in the U.S. and our average cash and cash equivalents. Our interest income and expense fluctuated based on our net outstanding loan balance receivable from or payable to Seagate Technology LLC, LIBOR and Seagate Technology LLC’s in-house portfolio rate during fiscal 2002, fiscal 2001 and fiscal 2000. The principal portion of our cash and cash equivalents are not subject to interest rate risk; however, declines in interest rates over time will reduce our interest income. For fiscal 2002 and fiscal 2001, a hypothetical 100-basis point move in interest rates would have resulted in approximately a 3% and 2% variance, respectively, in our net income (loss).

Equity Price Risk

We do not have any investments in equity or debt securities traded in the public markets, nor do we currently use derivative financial instruments. Therefore, we do not currently have any direct equity price risk.

Foreign Currency Risk

We conduct business on a global basis in international currencies. As such, fluctuations in foreign currency exchange rates relative to the U.S. dollar may have an adverse or beneficial impact on our financial condition and results of operations. The majority of our sales are denominated in U.S. dollars, the currency in which we report our financial statements. During fiscal 2002, 2001 and 2000, we derived 32%, 32% and 34% of our total revenues, respectively, from sales outside the U.S. These revenues are largely denominated in local currencies. To date, the foreign exchange gains and losses on transactions reported by our foreign subsidiaries have not been significant. We conduct a portion of our business in currencies other than the U.S. dollar. The functional currency of most of our foreign operations is the applicable local currency.

We are also exposed to foreign exchange rate fluctuations as the financial results of our foreign subsidiaries are translated into U.S. dollars on consolidation. As exchange rates vary, these results, when translated, may vary from expectations and adversely or beneficially impact overall expected profitability. Assets and liabilities of the majority of our subsidiaries are translated into U.S. dollars at exchange rates in effect as of the applicable balance sheet date, and any resulting translation adjustments are included as an adjustment to stockholders’ equity, within comprehensive income (loss). While the majority of our foreign operations fund their operations from local denominated revenues, the conversion of U.S. dollars to other currencies such as Canadian dollars and British pounds may result in foreign exchange gains and losses.

We incur a large portion of our expenses in Canadian dollars and we may incur foreign exchanges gains or losses, which are recorded in our statement of operations, as the functional currency of our Canadian subsidiary is the U.S. dollar. As such, we may experience significant foreign exchange gains or losses as the result of timing differences between expenses being incurred and paid. During fiscal 2002, the Canadian dollar weakened relative to the U.S. dollar, which contributed to a net foreign exchange loss on our statement of operations. In addition, we may be subject to increased U.S. dollar costs as the result of a strengthening Canadian dollar.

For fiscal 2002, a hypothetical combined variation of 10% in the exchange rates of our main currencies in which we conduct business would have generated a combined 2.5% variation in our revenues, offset by a 2.1% combined variation in our expenses. We cannot predict the effect of exchange rate fluctuations upon our future operating results. To date, we have not engaged in hedging the risks associated with foreign exchange exposure. Although we may do so in the future, we cannot be sure that any hedging techniques we may implement will be successful of that our business, results of operations, financial condition and cash flows will not be materially adversely affected by exchange rate fluctuations

Item 8. Financial Statements

The Consolidated and Combined Financial Statements and related Notes and the report of the independent auditors, are set forth on pages indicated in Item 15.

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

None.

PART III

Item 10. Directors and Executive Officers of the Registrant

Our directors and executive officers and certain information about them as of ~~August~~June 3027, ~~2002~~2003 are as follows:

				Director or
				Executive Officer
				Executive
				Officer
Name	Age		Position	Since
Gregory B. Kerfoot		42	President, Chief Executive Officer and Chairman of the Board of Directors		1999
Jonathan J. Judge		49	President, Chief Executive Officer and Director		2002
William Gibson		53	Chief Operating Officer		2000
William G. Gibson		54	Chief Operating Officer		2000
Eric Patel		4546	Chief Financial Officer		1999
Anthony L. Wind		4041	Chief ~~Technical~~Technology Officer		~~2002~~2001
Andrew L. Handford		36	Vice ~~Presidents,~~President of Products and Research and Development		~~2002~~2001
Stephen J. Luczo		45	Director		1999
Gregory B. Kerfoot		43	Chairman of the Board of Directors		1999
Donald L. Waite		69	Director		1999
Fred D. Anderson		59	Director		2002
David J. Roux		45	Director		2001
Robert L. Bailey		46	Director		2003
John W. Thompson		53

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