<PAGE>

                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                   FORM 10-Q

(Mark One)
  [ X ]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
          EXCHANGE ACT OF 1934

               For the quarterly period ended September 30, 1999

                                      OR

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

  For the transition period from __________ to ___________

                         Commission File No.  0-24607

                              Actuate Corporation
            (Exact name of Registrant as specified in its charter)

       Delaware                                           94-3193197
(State of incorporation)                    (I.R.S. Employer Identification No.)


                           999 Baker Way, Suite 200
                          San Mateo, California 94404
                                (650) 425-2300
              (Address, including zip code, and telephone number,
       including area code, of Registrant's principal executive offices)
                                ______________
Former name, former address and former fiscal year, if changed since last
report:   None


Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                                     Yes    X       No
                                         -------       -------

Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.

           Title of Class                  Outstanding as of September 30, 1999
           --------------                  -------------------------------------
Common Stock, par value $.001 per share                 13,855,962
<PAGE>

                              Actuate Corporation

                               Table of Contents
<TABLE>
<CAPTION>

PART 1 - FINANCIAL INFORMATION
<S>                                                                                             <C>
  Item 1.  Financial Statements:
     Condensed Consolidated Balance Sheets as of September 30, 1999 and
       December 31, 1998.....................................................................   3

     Condensed Consolidated Statements of Operations for the three months
       and nine months ended September 30, 1999 and 1998.....................................   4

     Condensed Consolidated Statements of Cash Flows for the nine months ended
       September 30, 1999 and 1998...........................................................   5

     Notes to Condensed Consolidated Financial Statements....................................   6

  Item 2.  Management's Discussion and Analysis of Financial Condition
            and Results of Operations........................................................   9

PART II - OTHER INFORMATION

  Item 1.  Legal Proceedings.................................................................   25

  Item 6.  Exhibits and Reports on Form 8-K .................................................   25

  Signature .................................................................................   26

</TABLE>

                                       2
<PAGE>

                         Part I.  Financial Information
                         ------------------------------
Item 1.  Financial Statements

                              ACTUATE CORPORATION
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (in thousands)
<TABLE>
<CAPTION>
                                                                               September 30,
                                                                                   1999            December 31,
                                                                                (unaudited)         1998   (1)
                                                                              --------------      ------------
<S>                                                                           <C>                 <C>
                                ASSETS
Current assets:
  Cash and cash equivalents ...............................................       $ 16,099         $  21,808
  Short-term investments  .................................................          7,601            10,922
  Accounts receivable, net  ...............................................         14,186             5,050
  Other current assets  ...................................................            959               400
                                                                                  ---------        ---------
Total current assets  .....................................................         38,845            38,180
Property and equipment, net  ..............................................          2,034             1,405
Goodwill and other purchased intangible assets, net  ......................          8,962                 -
Other assets  .............................................................            396               213
                                                                                  ---------        ---------
                                                                                  $ 50,237          $ 39,798
                                                                                  =========         ========

                     LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable  .......................................................       $  2,709        $    1,210
  Accrued compensation  ...................................................          1,974             1,293
  Other accrued liabilities  ..............................................          4,266             3,393
  Deferred revenue  .......................................................         11,193             7,868
                                                                                  ---------        ---------
Total current liabilities  ................................................          20,142           13,764
                                                                                  ---------        ---------
Stockholders' equity:
  Common stock  ...........................................................             14                14
  Additional paid-in capital ..............................................         47,672            46,592
  Note receivable from officer ............................................            -                 (40)
  Deferred stock compensation .............................................           (157)             (393)
  Cumulative translation adjustment  ......................................             45                 -
  Accumulated deficit .....................................................        (17,479)          (20,139)
                                                                                  ---------        ---------
Total stockholders' equity  ...............................................         30,095            26,034
                                                                                  ---------        ---------
                                                                                  $ 50,237         $  39,798
                                                                                  =========        ==========
</TABLE>

(1)  The balance sheet at December 31, 1998 has been derived from the audited
     financial statements at that date, but does not include all the information
     and footnotes required by generally accepted accounting principles for
     complete financial statements.


  The accompanying notes are an integral part of these condensed consolidated
                             financial statements.

                                       3
<PAGE>

                              ACTUATE CORPORATION
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                     (in thousands, except per share data)
                                  (unaudited)


<TABLE>
<CAPTION>
                                                                Three Months Ended             Nine Months Ended
                                                                   September 30,                  September 30,
                                                             -----------------------        -----------------------
                                                               1999           1998            1999           1998
                                                             --------       --------        --------       --------
<S>                                                          <C>            <C>             <C>            <C>
Revenues:
  License fees..........................................     $  9,047       $  4,978        $ 23,135       $ 11,987
  Services..............................................        3,460          1,023           7,498          2,777
                                                             --------       --------        --------       --------

     Total revenues.....................................       12,507          6,001          30,633         14,764
                                                             --------       --------        --------       --------
Operating expenses:
  Cost of license fees..................................          252            288             704            819
  Cost of services......................................        1,723            787           3,927          2,316
  Sales and marketing...................................        5,749          2,968          13,784          8,435
  Research and development..............................        2,475          1,900           6,811          5,474
  General and administrative............................          958            626           2,450          1,826
  Amortization of goodwill and other purchased
   intangibles and merger related costs.................          619              -             987              -
                                                             --------       --------        --------       --------
     Total operating expenses...........................       11,776          6,569          28,663         18,870
                                                             --------       --------        --------       --------
Income (loss) from operations...........................          731           (568)          1,970         (4,106)
Interest and other income, net..........................          317            304           1,027            340
                                                             --------       --------        --------       --------
Income (loss) before income taxes.......................        1,048           (264)          2,997         (3,766)
Provision for income taxes..............................          112              -             337              -
                                                             --------       --------        --------       --------
Net income (loss).......................................     $    936       $   (264)       $  2,660       $ (3,766)
                                                             ========       ========        ========       ========
Basic income (loss) per share...........................     $   0.07       $  (0.02)       $   0.20       $  (0.64)
                                                             ========       ========        ========       ========
Shares used in basic per share calculation..............       13,485         11,043          13,495          5,920
                                                             ========       ========        ========       ========
Diluted income (loss) per share.........................     $   0.06       $  (0.02)       $   0.18       $  (0.64)
                                                             ========       ========        ========       ========
Shares used in diluted per share calculation............       14,959         11,043          14,825          5,920
                                                             ========       ========        ========       ========

</TABLE>

  The accompanying notes are an integral part of these condensed consolidated
                             financial statements.

                                       4
<PAGE>

                              ACTUATE CORPORATION
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (in thousands)
                                  (unaudited)

<TABLE>
<CAPTION>
                                                                                   Nine Months Ended September 30,
                                                                                  --------------------------------
                                                                                    1999                    1998
                                                                                  --------                --------
<S>                                                                               <C>                     <C>
Operating activities
Net income (loss).........................................................        $  2,660                $ (3,766)
Adjustment to reconcile net income (loss) to net cash
 provided by (used in) operating activities:
    Amortization of deferred compensation.................................              76                     236
    Amortization of goodwill and other purchased
     intangibles..........................................................             683                       -
    Depreciation..........................................................             715                     169
    Loss on disposal of fixed assets......................................               -                      70
    Changes in operating assets and liabilities:
       Accounts receivable................................................          (9,136)                 (1,764)
       Other current assets...............................................            (559)                   (372)
       Accounts payable...................................................           1,499                      93
       Accrued compensation...............................................             681                      81
       Other accrued liabilities..........................................             873                   2,052
       Deferred revenue...................................................           3,325                   1,287
                                                                                  --------                --------
Net cash provided by (used in) operating activities.......................             817                  (1,914)
                                                                                  --------                --------
Investing activities
Purchases of property and equipment.......................................          (1,344)                   (482)
Purchases of short-term investments.......................................          (2,601)                 (3,000)
Proceeds from maturity of short-term investments..........................           5,922                     290
Acquisition of Actuate Holding, B.V., net of cash assumed.................          (9,645)                      -
Net change in other assets................................................            (183)                   (312)
                                                                                  --------                --------
Net cash used in investing activities.....................................          (7,851)                 (3,504)
                                                                                  --------                --------
Financing activities
Proceeds from issuance of common stock....................................           1,280                  31,061
Payments on capital lease obligations.....................................               -                    (249)
                                                                                  --------                --------
Net cash provided by financing activities.................................           1,280                  30,812
                                                                                  --------                --------
Net increase (decrease) in cash and cash equivalents......................          (5,754)                 25,394
Effect of foreign exchange rate changes on cash...........................              45                       -
Cash and cash equivalents at the beginning of the period..................          21,808                   2,901
                                                                                  --------                --------
Cash and cash equivalents at the end of the period........................        $ 16,099                $ 28,295
                                                                                  ========                ========
Supplemental disclosure of cash flow information
Interest paid.............................................................        $     56                $     22
                                                                                  ========                ========
</TABLE>

  The accompanying notes are an integral part of these condensed consolidated
                             financial statements.

                                       5
<PAGE>

                              ACTUATE CORPORATION
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)


1.  Summary of Significant Accounting Policies

Basis of Presentation
     On June 18, 1999, Actuate Corporation completed the acquisition of Actuate
Holding, B.V. ("BV").  The acquisition was accounted for under the purchase
method of accounting.  In accordance with the purchase method of accounting, the
Condensed Consolidated Statements of Operations include BV's operating results
from the date of acquisition.

     The accompanying interim condensed consolidated financial statements of
Actuate Corporation are unaudited, but include all normal recurring adjustments
which our management believes to be necessary for the fair presentation of the
financial position, results of operations, and changes in cash flows for the
periods presented.  The preparation of the financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reported period.  Despite management's best
effort to establish good faith estimates and assumptions, and to manage the
achievement of the same, actual results may differ.

     The interim financial statements should be read in conjunction with the
financial statements and related notes included in our Annual Report on Form 10-
K for the year ended December 31, 1998 as filed with the Securities and Exchange
Commission on March 12, 1999.  Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to the
rules and regulations of the Securities and Exchange Commission.  Interim
results of operations for the three and nine months ended September 30, 1999 are
not necessarily indicative of operating results for the full fiscal year.

Revenue Recognition
  Revenue from license fees from sales of software products directly to end-user
customers or indirect channel partners is recognized as revenue after execution
of a license agreement or receipt of a definitive purchase order, and shipment
of the product, if no significant vendor obligations remain, there are no
uncertainties surrounding product acceptance, the license fees are fixed and
determinable, and collection of the license fee is considered probable.  Our
products do not require significant customization.  The majority of end user
license revenues are derived from end user customer orders for specific
individual products. These types of transactions are recognized as revenue upon
shipment of product. Advance payments from end-users, in arrangements in which
the end user customer has the right to future unspecified products, are deferred
and recognized as revenue ratably over the estimated term of the period,
typically one year, during which the end-user is entitled to receive the
products.

  License arrangements with e.Business application vendors, resellers and
distributors generally take the form of either (a) fixed price arrangements in
which the contracting entity has the right to the unlimited usage, unspecified
future products, and sublicensing of the licensed software for a specified term
and pursuant to which license fee revenue is deferred and recognized on a
straight-line basis over the term of the license agreement or (b) arrangements
pursuant to which a royalty is paid to us and is recognized as revenue based on
the sell-through of our software.

  Service revenues are primarily comprised of revenue from maintenance
agreements, training and

                                       6
<PAGE>

consulting fees. Revenue from maintenance agreements is deferred and recognized
on a straight-line basis as service revenue over the life of the related
agreement, which is typically one year. Service revenues from training and
consulting are recognized upon completion of the work to be performed.

Net Income (Loss) Per Share
     Net income (loss) per share is presented under Financial Accounting
Standards Board's ("FASB") Statement of Financial Accounting Standards No. 128
"Earnings Per Share" ("SFAS 128").  SFAS 128 requires the presentation of basic
earnings (loss) per share and diluted earnings (loss) per share, if more
dilutive, for all periods presented.

     In accordance with SFAS 128, basic net income (loss) per share has been
computed using the weighted-average number of shares of common stock outstanding
during the period.  Diluted income per share is computed using the weighted-
average number of common and dilutive common equivalent shares outstanding
during the period.  Common equivalent shares consist of the shares issuable upon
the exercise of stock options (using the treasury stock method).

     Potential common shares of 655,879 and 563,771, using the treasury stock
method, were not included in the computation of diluted loss per share for the
three and nine-month periods ended September 30, 1998, respectively, because we
incurred a loss in these periods and, therefore, its effect would be
antidilutive.

     A reconciliation of shares used in the calculation of basic and diluted net
income (loss) per share follows (in thousands, except per share data):

<TABLE>
<CAPTION>
                                                              Three Months Ended              Nine Months Ended
                                                                 September 30,                  September 30,
                                                            -----------------------        ------------------------
                                                              1999           1998            1999            1998
                                                            --------       --------        --------        --------
<S>                                                         <C>            <C>             <C>             <C>
Numerator:
  Net income (loss) ..................................      $    936       $   (264)       $  2,660        $ (3,766)
                                                            --------       --------        --------        --------
Denominator:
  Weighted-average common shares outstanding..........        13,836         11,609          13,818           6,546
  Weighted-average shares subject to repurchase.......          (351)          (566)           (323)           (626)
                                                            --------       --------        --------        --------
  Denominator for basic income (loss) per share -
   weighted-average common shares.....................        13,485         11,043          13,495           5,920
  Weighted-average shares subject to repurchase.......           351              -             323               -
  Employee stock options .............................         1,123              -           1,007               -
                                                            --------       --------        --------        --------
Denominator for dilutive income (loss) per share -
 weighted-average common shares and assumed
 conversions .........................................        14,959         11,043          14,825           5,920
                                                            ========       ========        ========        ========
Basic income (loss) per share.........................      $   0.07       $  (0.02)       $   0.20        $  (0.64)
                                                            ========       ========        ========        ========
Diluted income (loss) per share.......................      $   0.06       $  (0.02)       $   0.18        $  (0.64)
                                                            ========       ========        ========        ========
</TABLE>

Comprehensive Income
     During 1998, we adopted FASB's Statement of Financial Accounting Standards
No. 130 ("SFAS 130"), "Reporting Comprehensive Income."  SFAS 130 establishes
new rules for the reporting and

                                       7
<PAGE>

display of comprehensive income and its components. Comprehensive income
includes foreign currency translation gains and losses and other unrealized
gains and losses that have been previously excluded from net income (loss) and
reflected instead in equity. A summary of comprehensive income (loss) follows
(in thousands):

<TABLE>
<CAPTION>
                                                                Three Months Ended            Nine Months Ended
                                                                  September 30,                 September 30,
                                                              ----------------------       -----------------------
                                                               1999            1998          1999          1998
                                                              ------          ------       -------       --------
<S>                                                           <C>             <C>          <C>           <C>
  Net income (loss)...................................        $  936          $ (264)      $ 2,660       $ (3,766)
  Unrealized gain on short-term investments...........             3               -             2              -
  Foreign currency translation adjustment.............            42               -            45              -
                                                              ------          ------       -------       --------
  Comprehensive income (loss).........................        $  981          $ (264)      $ 2,707       $ (3,766)
                                                              ======          ======       =======       ========
</TABLE>

Recent Pronouncement
     In December 1998, AICPA issued Statement of Position 98-9, "Modification of
SOP 97-2 With Respect to Certain Transactions", which amends SOP 98-4, to extend
the deferral of application of certain passages of SOP 97-2 provided by SOP 98-4
through fiscal years beginning on or before March 15, 1999.  All other
provisions of SOP 98-9 are effective for transactions entered into in fiscal
years beginning after March 15, 1999.  We have not yet determined the effect of
the final adoption of SOP 98-9 or its effect on how we will account for future
revenues.

2.  Acquisition
     In June 1999, we acquired all of the outstanding stock of Actuate Holding,
B.V. ("BV") for cash.  The total purchase price was $9.6 million, representing a
payment of $6.0 million in cash and the assumption of net liabilities and direct
merger costs of $3.6 million.  The acquisition was accounted for as a purchase.
The results of operations of BV and the estimated fair value of assets acquired
and liabilities assumed are included in our financial statements from the date
of acquisition.  Goodwill and other intangibles arising from the acquisition are
being amortized on a straight-line basis over periods not exceeding four years.

     The following unaudited pro forma financial information assumes the
acquisition occurred at the beginning of the periods in which the acquisition
took place and, for comparative purposes, at the beginning of the immediately
preceding year.  These results have been prepared for information purposes only
and are not necessarily indicative of the operating results that would have
occurred had the acquisition been made as discussed above.  In addition, they
are not intended to be a projection of future results (in thousands):

<TABLE>
<CAPTION>
                                                                                    Nine Months Ended
                                                                                      September 30,
                                                                                 ----------------------
                                                                                   1999          1998
                                                                                 --------      --------
<S>                                                                              <C>           <C>
Revenues ......................................................................  $ 32,219      $ 15,658
Net income (loss) .............................................................  $    328      $ (7,217)
Net income (loss) per share ...................................................  $   0.02      $  (1.22)
</TABLE>

Commitments and Contingencies
     In August 1999, we entered into an office building lease agreement, as
amended, for approximately 64,000 square feet of office space located in South
San Francisco, California.  We plan to sublease our existing leased facilities
and move our corporate headquarters to the South San Francisco facilities in
February 2000.  In conjunction with the signing of the office building lease, we
provided the

                                       8
<PAGE>

landlord with a letter of credit in the amount of $2.7 million as security
deposit. Minimum lease commitment under the new lease during fiscal 2000, 2001,
2002, 2003, 2004, and thereafter is $1.5 million, $1.8 million, $1,8 million,
$1.8 million, $1.9 million $6.1 million, respectively.




Item 2.  Management's Discussion and Analysis of Financial Condition and Results
of Operations

     The following information should be read in conjunction with the historical
financial information and the notes thereto included in Item 1 of this Quarterly
Report on Form 10-Q and Management's Discussion and Analysis of Financial
Condition and Results of Operations contained in our Annual Report on Form 10-K
for the year ended December 31, 1998 as filed with the Securities and Exchange
Commission on March 12, 1999.

     Except for historical information, the discussion in this Form 10-Q
contains forward-looking statements that involve risks and uncertainties.  These
statements refer to our future plans, objectives, expectations and intentions.
These statements may be identified by the use of words such as "expect",
"anticipate", "believe", "intend", "plan" and similar expressions.  Our actual
results could differ materially from those anticipated in such forward-looking
statements.  Factors that could contribute to these differences include, but are
not limited to, the risks discussed in the section titled "Risk Factors" in this
Form 10-Q.

Overview

     Actuate Corporation is a leading provider of e.Reporting solutions that
automate the creation and delivery of structured, personalized content,
providing tens of thousands of users with instant access to high-resolution,
customized business information that is seamlessly integrated into a company's
e.Business website.

     We sell our software products directly to end user customers through our
direct sales force and through indirect channel partners such as e.Business
application vendors, resellers and distributors.  e.Business application vendors
generally integrate our products with their applications and either embed them
into their products or resell them with their products.  Our other indirect
channel partners resell our software products to end user customers.  We sell
our products outside the United States primarily through our European
subsidiaries and other distributors.  Our revenues are derived primarily from
license fees for software products and, to a lesser extent, fees for services
relating to such products, including software maintenance and support, training
and consulting.  We were incorporated in California in November 1993 and
reincorporated in Delaware in July 1998.  Our principal executive offices are
located at 999 Baker Way, Suite 200, San Mateo, California 94404 and our
telephone number is 650-425-2300.

Results of Operations

     The following table sets forth certain statement of operations data as a
percentage of total revenues for the periods indicated.

                                       9
<PAGE>


<TABLE>
<CAPTION>
                                                                 Three Months Ended               Nine Months Ended
                                                                     September 30,                   September 30,
                                                                -----------------------          ----------------------
                                                                  1999           1998              1999          1998
                                                                --------       --------          --------      --------
<S>                                                             <C>            <C>               <C>           <C>
Revenues:
  License fees...........................................             72%            83%               76%             81%
  Services...............................................             28             17                24              19
                                                                --------       --------          --------        --------
     Total revenues......................................            100            100               100             100
                                                                --------       --------          --------        --------
Cost of revenues:
  License fees...........................................              2              5                 2               5
  Services...............................................             14             13                13              16
                                                                --------       --------          --------        --------
     Total cost of revenues..............................             16             18                15              21
                                                                --------       --------          --------        --------
Gross profit.............................................             84             82                85              79
                                                                --------       --------          --------        --------
Operating expenses:
  Sales and marketing....................................             46             49                45              57
  Research and development...............................             20             32                23              37
  General and administrative.............................              7             10                 8              13
  Amortization of goodwill and other purchased
   intangibles and merger related costs..................              5              -                 3               -
                                                                --------       --------          --------        --------
     Total operating expenses............................             78             91                79             107
                                                                --------       --------          --------        --------
Income (loss) from operations............................              6             (9)                6             (28)

Interest and other income, net...........................              2              5                 4               2
Provision for income taxes...............................              1              -                 1               -
                                                                --------       --------          --------        --------
Net income (loss)........................................              7%            (4)%               9%            (26)%
                                                                ========       ========          ========        ========
</TABLE>

Revenues

Total revenues increased 108% from $6.0 million for the quarter ended September
30, 1998 to $12.5 million for the quarter ended September 30, 1999.  Total
revenues increased 107% from $14.8 million for the nine months ended September
30, 1998 to $30.6 million for the nine months ended September 30, 1999.  Sales
outside the United States accounted for 10% and 18% of total revenues for the
third quarter of 1998 and 1999, respectively, and 6% and 15% of total revenues
for the nine months ended September 30, 1998 and 1999, respectively.  We expect
that revenues from license fees as a percentage of total revenues will remain
the same or decrease as our service revenues continue to grow due to increases
in the installed base of customers receiving maintenance and our planned
expansion of our professional services organization to meet anticipated customer
demands for our professional services.

  License fees.   Revenues from license fees increased 82% from $5.0 million for
the third quarter of 1998 to $9.0 million for the third quarter of 1999.
Revenues from license fees increased 93% from $12.0 million for the nine months
ended September 30, 1998 to $23.1 million for the nine months ended September
30, 1999.  The increase in license fees in absolute dollars was primarily due to
increased sales to new customers and to a lesser extent increased follow-on
sales to existing customers resulting from the expansion of our direct sales
organization and increased acceptance of the Actuate e.Reporting System.

                                       10
<PAGE>

  Services.   Service revenues increased 238% from $1.0 million for the third
quarter of 1998 to $3.5 million for the third quarter of 1999.  Service revenues
increased 170% from $2.8 million in the nine months ended September 30, 1998 to
$7.5 million for the nine months ended September 30, 1999.  The increase in
service revenues was primarily due to the increases in installed base of
customers receiving ongoing maintenance and support and, to a lesser extent,
increases in professional services revenues related to increases in demand for
our professional services.

Cost of revenues

  License fees.  Cost of license revenues consists primarily of production and
packaging costs, personnel and related costs, and facility costs.  Cost of
license revenues decreased from $288,000, or 6% of revenues from license fees,
for the third quarter of 1998 to $252,000, or 3% of revenues from license fees,
for the third quarter of 1999.  Cost of license revenues decreased from
$819,000, or 7% of revenues from license fees, for the nine months ended
September 30, 1998 to $704,000, or 3% of revenues from license fees, for the
nine months ended September 30, 1999.  The decreases in absolute dollars and as
a percentage of revenues were primarily due to lower packaging costs as there
were no major releases during the quarter.   We expect cost of license revenues
to increase in absolute dollars and as a percentage of revenues from license
fees in future periods due to new product releases, localization costs, new
packaging of our products and printing costs associated with revised
documentation materials.

  Services.  Cost of service consists primarily of personnel and related costs,
facilities costs incurred in providing software maintenance and support,
training and consulting services, as well as third-party costs incurred in
providing training and consulting services.  Cost of service increased from
$787,000, or 77% of revenues from service fees, for the third quarter of 1998 to
$1.7 million, or 50% of revenues from service fees, for the third quarter of
1999.  Cost of service also increased from $2.3 million, or 83% of revenues from
service fees, for the nine months ended September 30, 1998 to $3.9 million, or
52% of revenues from service fees, for the nine months ended September 30, 1999.
The increase in absolute dollars was due primarily to the increase in the number
of customer support personnel resulting from continued expansion of our support
services organization.  The decline as a percentage of service revenues was due
to service revenues increasing at a faster rate than cost of services. We expect
that cost of services will continue to increase in absolute dollars in the
future as we continue to expand both our customer support and professional
services organizations to meet customer demands for our professional services.
We expect that cost of services as a percent of revenues from service fees will
increase in future periods.

Operating Expenses

  Sales and marketing.  Sales and marketing expenses consist primarily of
compensation, promotional expenses, travel and entertainment, and facility
costs.   Sales and marketing expenses increased from $3.0 million, or 49% of
total revenues for the third quarter of 1998 to $5.7 million, or 46% of total
revenues for the third quarter of 1999.  Sales and marketing expenses increased
from $8.4 million, or 57% of total revenues for the nine months ended September
30, 1998 to $13.8 million, or 45% of total revenues for the nine months ended
September 30, 1999.  The increase in absolute dollars was primarily due to the
hiring of additional sales and marketing personnel, higher sales commissions
associated with increased revenues and increased marketing program expenses.
The decrease as a percentage of total revenues was due primarily to revenues
increasing at a faster rate than sales and marketing expenses.  We expect that
sales and marketing expenses will continue to increase in absolute dollars in
future periods as we continue to hire additional sales and marketing personnel,
establish additional sales offices and expand international distribution
channels and increase promotional activities.

                                       11
<PAGE>

  Research and development. Research and development expenses are expensed as
incurred and consist primarily of personnel and related costs associated with
product development.  Research and development expenses increased from $1.9
million, or 32% of total revenues for the third quarter of 1998 to $2.5 million,
or 20% of total revenues for the third quarter of 1999.  Research and
development expenses increased from $5.5 million, or 37% or total revenues for
the nine months ended September 30, 1998 to $6.8 million, or 23% of total
revenues for the nine months ended September 30, 1999.  The increase in research
and development expenses in absolute dollars was primarily due to the hiring of
additional engineering personnel.  The decrease as a percentage of total
revenues was due to revenues increasing at a faster rate than research and
development expenses.  We believe that a significant level of investment for
research and development is essential to maintain product and technical
leadership and we anticipate that we will continue to devote substantial
resources to research and development and that these expenses will increase in
absolute dollars in future periods.

  General and administrative.   General and administrative expenses consist
primarily of personnel and related costs for finance, human resources,
information systems and general management, as well as legal and accounting
expenses and amortization of deferred compensation related to certain stock
option grants.  General and administrative expenses increased from $626,000, or
10% of total revenues for the third quarter of 1998 to $958,000, or 7% of total
revenues for the third quarter of 1999.  General and administrative expenses
increased from $1.8 million, or 13% of total revenues for the nine months ended
September 30, 1998 to $2.5 million, or 8% of total revenues for the nine months
ended September 30, 1999.  The increase in general and administrative expenses
in absolute dollars was due primarily to increased personnel and related costs
and professional fees necessary to manage and support our growth.   We believe
that general and administrative expenses will increase in absolute dollars in
future periods as we continue to expand our facilities and personnel staff to
meet our growing operations.

  Amortization of goodwill and other purchased intangibles and merger related
costs.  In June 1999, we acquired all of the outstanding stock of BV for cash.
The total purchase price was $9.6 million, representing a payment of $6.0
million in cash and the assumption of net liabilities and direct merger cots of
$3.6 million.  The acquisition was accounted for as a purchase.  In the third
quarter of 1999, we recorded a charge of $619,000 for amortization of goodwill
and other purchased intangibles.  Goodwill and other purchased intangibles
arising from the acquisition are being amortized on a straight-line basis over
periods not exceeding four years.

Interest and Other Income, Net

     Interest and other income, net, is comprised primarily of interest income
earned by us on cash and short-term investments.  Interest and other income,
net, for the three and nine months ended September 30, 1998 was $304,000 and
$340,000, respectively, as compared with interest and other income, net of
$317,000 and $1 million for the three and nine months ended September 30, 1999.
The increase was due primarily to the interest earned on the investment of the
proceeds from our initial public offering that was consummated on July 17, 1998.

Provision for Income Taxes

     In the three and nine months ended September 30, 1999, we recorded an
income tax provision of $112,000 and $337,000, respectively.  The effective tax
rate used is based on our current estimates and forecasts of our taxable income
in multiple domestic and foreign jurisdictions.  The estimated annual effective
tax rate is relatively sensitive to the results of operations in various
jurisdictions, and because actual results may differ from such projections in
future periods, the actual effective tax rate could differ materially from this
estimate.

                                       12
<PAGE>

Liquidity and Capital Resources

     Since inception, we have funded operations primarily through cash from
operations and approximately $14.3 million in net proceeds from the private
sales of preferred stock.  In July 1998, we completed our initial public
offering whereby we sold 3,140,000 shares of common stock.  The net proceeds to
us, after deducting expenses relating to the offering, were $30.9 million.

     As of September 30, 1999, we had cash and cash equivalents of $16.1 million
and short-term investments of $7.6 million in highly liquid, high quality debt
securities and a certificate of deposit classified as available-for-sale.   We
do not maintain any bank lines of credit.  In August 1999, we obtained a letter
of credit through our bank in the amount of $2.7 million as security deposit to
lease our new facilities in South San Francisco.

     Net cash provided by operating activities was $817,000 in the nine months
ended September 30, 1999, compared to net cash used in operating activities of
$1.9 million in the nine months ended September 30, 1998.  For the nine months
ended September 30, 1999, cash provided by operating activities was primarily
due to earnings plus non-cash expenses, increases in deferred revenues, accounts
payable and other accrued liabilities that were offset by increases in accounts
receivable.  Net cash used in operating activities in the nine months ended
September 30, 1998 was due primarily to losses for the period.

     From December 31, 1998 to September 30, 1999, deferred revenue increased by
approximately $3.3 million to $11.2 million.  The increase in deferred revenue
was due to expanding customer base under maintenance in addition to signing of
several agreements with contractual obligations to deliver future specified
products.  SOP 97-2 requires us to defer the revenue from these agreements until
product delivery.  We expect that deferred revenue will decline in future
periods in which we deliver the specified products.

     Net cash used in investing activities was $3.5 million and $7.9 million in
the nine months ended September 30, 1998 and 1999, respectively.  For the nine
months ended September 30, 1999, net cash used in investing activities was
primarily due to the acquisition of BV, and to a lesser extent, the purchase of
property and equipment that was partially offset by the maturity of short-term
investments.  For the 1998 period, net cash was used primarily for the purchase
of property and equipment.

     Net cash provided by financing activities was $30.8 million and $1.3
million in the nine months ended September 30, 1998 and 1999, respectively.  For
the nine months ended September 30, 1998, net cash provided by financing
activities was primarily from the proceeds of our initial public offering that
was completed in July 1998.  For the nine months ended September 30, 1999, net
cash provided by financing activities was primarily from the proceeds from stock
purchased under the employee stock purchase plan.

     We believe that current cash balances and any cash generated from
operations and from available debt financing, will be sufficient to meet our
cash needs for working capital and capital expenditures for at least the next
twelve months.  Thereafter, if cash generated from operations is insufficient to
satisfy our liquidity requirements, we may seek to sell additional equity or
obtain credit facilities.  The sale of additional equity could result in
additional dilution to our stockholders.  A portion of our cash may be used to
acquire or invest in complementary businesses, including the acquisition of our
distributor in Japan, or products or to obtain the right to use complementary
technologies.  From time to time, in the ordinary course of business, we
evaluate potential acquisitions of such businesses, products or technologies.

                                       13
<PAGE>

Year 2000 Compliance

     Many existing computer systems and computer programs use only two digits to
identify a year. These systems and programs were designed and developed without
addressing the impact of the upcoming change in the century. If not corrected,
many computer systems and software applications could fail or create erroneous
results before, at or beyond the year 2000. We are currently taking steps to
address Year 2000 readiness in three areas, (i) our products; (ii) our internal
systems (including information technology systems such as financial systems and
non-information technology systems such as the phone system) and (iii) third
party vendors with whom we have a business relationship.

     Our Year 2000 readiness plan consists of four phases. Phase One (inventory)
consists of identifying all of our systems, products and relationships that may
be impacted by Year 2000. Phase Two (assessment) involves determining our
current state of Year 2000 readiness for those areas identified in the inventory
phase and prioritizing the areas that need to be fixed based on the importance
to our operations. Phase Three (remediation) will consist of developing a plan
to make those areas identified in the assessment phase Year 2000 ready and
implementing such plan. Phase Four (testing) will consist of testing and
validation of Year 2000 readiness for certain mission critical areas as
determined by us. We are currently in the testing phase with respect to our
products and will continue Year 2000 testing of our products during the
remainder of 1999. We are currently in the remediation phase with respect to our
internal systems and do not anticipate any material costs associated with such
remediation. We plan on completing remediation for any material weaknesses
discovered in our internal systems by November 30, 1999. We have completed the
assessment of the vendors who provide material services to our business and do
not anticipate undergoing any remediation efforts in this area.  At this time,
we have not yet developed a contingency plan to address situations that may
result if our products, our internal systems or our vendors are unable to
achieve year 2000 readiness. The cost of developing and implementing such a
plan, if necessary, could be material.

     We have expensed costs as incurred in connection with year 2000 readiness
and such costs incurred to date have not been material.  We believe that we will
continue to incur costs related to Year 2000 readiness, but at this time we are
unable to determine whether or not future costs associated with achieving Year
2000 readiness will be material.  Additional costs incurred may include but are
not limited to, the cost of manufacturing and distributing free upgrades to
products that are not Year 2000 ready, the administrative costs in completing
the Year 2000 project and the cost of fixing or replacing any of our internal
systems.

     Although we are dedicating resources toward attaining Year 2000 readiness
there can be no assurance that we will be successful in our effort to achieve
Year 2000 readiness.  For example, through ongoing testing of our products to
validate Year 2000 readiness, we have discovered Year 2000 related errors in
certain products, which have not compromised the usability or basic
functionality of the products, and there can be no assurance that additional
Year 2000 errors or defects will not be discovered in our current and future
products.  Any failure by us to make our products Year 2000 ready could result
in a decrease in sales of our products, an increase in the allocation of
resources to address Year 2000 problems of our customers without additional
revenue commensurate with such dedication of resources, or an increase in
litigation costs relating to losses suffered by our customers due to such Year
2000 problems. In addition, the failure of our internal systems or our third
party vendors to be Year 2000 ready could prevent us from manufacturing or
shipping products, providing customer support and completing transactions, all
of which could have a material adverse effect on us.

                                       14
<PAGE>

RISK FACTORS

  Actuate operates in a rapidly changing environment that involves numerous
risks and uncertainties. You should carefully consider the following risk
factors before making an investment decision.  The risks described below are not
the only ones facing us.  Additional risks that we do not yet know of or that we
currently think are immaterial may also harm our business operations.  If any of
the following risks actually occur, our business, operating results or financial
condition would be harmed and the trading price of our common stock could
decline.  You should also refer to the other information set forth in this
Report on Form 10-Q, including management's discussion and analysis of
financial condition and results of operations and the financial statements and
the notes thereto.

OUR OPERATING RESULTS MAY BE VOLATILE AND DIFFICULT TO PREDICT.  IF WE FAIL TO
MEET THE EXPECTATIONS OF PUBLIC MARKET ANALYSTS AND INVESTORS, THE MARKET PRICE
OF OUR STOCK MAY DECREASE SIGNIFICANTLY.

     Our limited operating history and the susceptibility of our operating
results to significant fluctuations makes any prediction of future operating
results unreliable.  In addition, we believe that period-to-period comparisons
of our operating results are not necessarily meaningful and you should not rely
on them as indications of our future performance.  Our operating results have in
the past, and may in the future, vary significantly due to factors such as the
following:



     -   demand for our products
     -   the size and timing of significant orders for our products
     -   sales cycles of our indirect channel partners
     -   changes in pricing policies by us or our competitors
     -   changes in our level of operating expenses and our ability to control
         costs budgeting cycles of our customers
     -   ability to make new products commercially available in a timely manner
     -   defects in our products and other product quality problems
     -   failure to meet hiring needs and unexpected personnel changes
     -   the management and expansion of our international operations
     -   changes in our sales incentive plans
     -   continued successful relationships and the establishment of new
         relationships with e.Business application vendors
     -   the impact of consolidation by competitors and indirect channel
         partners
     -   general domestic and international economic and political conditions
     -   the Year 2000 problem

     Because our software products are typically shipped shortly after orders
are received, total revenues in any quarter are substantially dependent on
orders booked and shipped throughout that quarter.  Furthermore, several factors
may require us, in accordance with GAAP, to defer recognition of license fee
revenue for a significant period of time after entering into a license
agreement, including:



     -   whether the license agreement includes both software products that are
         then currently available and software products or other enhancements
         that are still under development

     -   whether the license agreement relates entirely to then currently
         undeliverable software products

     -   whether the license agreement includes non-standard acceptance criteria
         that may preclude revenue recognition prior to customer acceptance

                                       15
<PAGE>

     In addition, we may in the future experience fluctuations in our gross and
operating margins due to changes in the mix of our domestic and international
revenues and changes in the mix of our direct sales and indirect sales, as well
as changes in the mix among the indirect channels through which our products are
offered.

     A significant portion of our total revenues in any given quarter is derived
from existing customers.  Our ability to achieve future revenue growth, if any,
will be substantially dependent upon our ability to increase revenues from
license fees and services from existing customers, to expand our sales force and
to increase the average size of our orders.  To the extent that such increases
do not occur in a timely manner, our business, operating results and financial
condition would be harmed.  Our expense levels and plans for expansion,
including plans to significantly increase our sales and marketing and research
and development efforts, are based in significant part on our expectations of
future revenues and are relatively fixed in the short-term.  If revenues fall
below our expectations and we are unable to quickly reduce our spending in
response, our business, operating results and financial condition are likely to
be harmed.

     Based upon all of the factors described above, we have a limited ability to
forecast future revenues and expenses, and it is likely that in some future
quarter our operating results will be below the expectations of public market
analysts and investors.  In the event that operating results are below
expectations, the price of our common stock could decline.

OUR LIMITED OPERATING HISTORY AND LACK OF PROFITABILITY IN PRIOR YEARS MAKES
FUTURE FORECASTING DIFFICULT.

     Actuate was founded in November 1993 and we began shipping the Actuate
Reporting System in January 1996.  We have a limited operating history on which
to base an evaluation of our business and prospects.

     We incurred net losses of $3.2 million, $7.2 million and $6.1 million in
fiscal 1998, 1997 and 1996, respectively. As of September 30, 1999, we had an
accumulated deficit of approximately $17.5 million. Given our history of losses,
we may not have revenue growth or profitability on a quarterly or annual basis
in the future. While we achieved significant quarter-to-quarter revenue growth
in fiscal 1997 and 1998 and during the first nine months of 1999, our revenues
may not increase in future periods. If we do achieve profitability in any
period, we cannot be certain that we will sustain or increase such profitability
on a quarterly or annual basis.  We intend to increase our operating expenses
significantly in future periods.  As a result, we will need to generate
significant additional revenues to achieve and maintain profitability.

IF WE DO NOT SUCCESSFULLY EXPAND OUR DISTRIBUTION CHANNELS AND DEVELOP AND
MAINTAIN RELATIONSHIPS WITH E.BUSINESS APPLICATION VENDORS OUR BUSINESS WOULD BE
SERIOUSLY HARMED.

     To date, we have sold our products principally through our direct sales
force, as well as through indirect sales channels, such as e.Business
application vendors, resellers and distributors.  Our revenues from license fees
resulting from sales through indirect channel partners in the first nine months
of 1999 and in fiscal 1998 and 1997 were approximately 44%, 41% and 38%,
respectively.  Our ability to achieve significant revenue growth in the future
will depend in large part on our success in expanding our sales force and in
further establishing and maintaining relationships with e.Business application
vendors, resellers and distributors. In particular, a significant element of our
strategy is to embed our technology in products offered by e.Business
application vendors for resale to such vendors' customers and end users. We
intend to seek additional distribution arrangements with other e.Business
application

                                       16
<PAGE>

vendors to embed our technology in their products and expect that these
arrangements will continue to account for a significant portion of our revenues
in future periods. Our future success will depend on the ability of our indirect
channel partners to sell and support our products. If the sales and
implementation cycles of our indirect channel partners are lengthy or variable
or our e.Business application vendors experience difficulties embedding our
technology into their products or we fail to train the sales and customer
support personnel of such indirect channel partners in a timely fashion, our
business, operating results and financial condition would be harmed.

     Although we are currently investing, and plan to continue to invest,
significant resources to expand and develop relationships with e.Business
application vendors, we have at times experienced and continue to experience
difficulty in establishing and maintaining these relationships.  If we are
unable to successfully expand this distribution channels and secure license
agreements with additional e.Business application vendors on commercially
reasonable terms and extend existing license agreements with existing e.Business
and application vendors on commercially reasonable terms our operating results
would be harmed.  Any inability by us to maintain existing or establish new
relationships with indirect channel partners or, if such efforts are successful,
a failure of our revenues to increase correspondingly with expenses incurred in
pursuing such relationships, would harm our business, operating results and
financial condition.

IF THE MARKET FOR WEB BASED REPORTING SOFTWARE DOES NOT GROW AS WE EXPECT OUR
BUSINESS WOULD BE SERIOUSLY HARMED.

     The market for web based reporting software products is still emerging and
we cannot be certain that it will continue to grow or that, even if the market
does grow, businesses will adopt our products. If the market for web based
reporting products fails to grow or grows more slowly than we expect, our
business, operating results and financial condition would be harmed.  To date,
all of our revenues have been derived from licenses for our reporting software
and related products and services, and we expect this to continue for the
foreseeable future.  We have spent, and intend to continue to spend,
considerable resources educating potential customers and indirect channel
partners about web based reporting and our products.  However, if such
expenditures do not enable our products to achieve any significant degree of
market acceptance our business, operating results and financial condition would
be harmed.

WE MAY NOT BE ABLE TO COMPETE SUCCESSFULLY AGAINST CURRENT AND FUTURE
COMPETITORS.

     The market in which we compete is intensely competitive and characterized
by rapidly changing technology and evolving standards.  Our competition comes in
five principal forms:

     - direct competition from current or future vendors of reporting solutions
       such as Seagate Software, Inc. (a division of Seagate Technology,
       Inc.),MicroStrategy Incorporated and Brio Technology, Inc.

     - indirect competition from vendors of OLAP and query tools such as
       Hyperion Solutions Corp., Business Objects S.A., Cognos, Inc. and
       Microsoft that integrate reporting functionality with such tools

     - indirect competition from enterprise application vendors such as SAP and
       Oracle, to the extent they include reporting functionality in their
       applications

     - competition from e.Business software vendors and Web development tool
       vendors

     - competition from the information systems departments of current or
       potential customers that may develop reporting solutions internally which
       may be cheaper and more customized than our products

                                       17
<PAGE>

     Many of our current and potential competitors have significantly greater
financial, technical, marketing and other resources than us.  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 and sales of their products than us.  Also, most current and potential
competitors, including companies such as Oracle and Microsoft, have greater name
recognition and the ability to leverage significant installed customer bases.
These companies could integrate competing enterprise reporting software with
their products, resulting in a loss of market share for us.  We expect
additional competition as other established and emerging companies enter the web
based reporting software market and new products and technologies are
introduced. Increased competition could result in price reductions, fewer
customer orders, reduced gross margins, longer sales cycles and loss of market
share, any of which would harm our business, operating results and financial
condition.

     Current and potential competitors may make strategic acquisitions or
establish cooperative relationships among themselves or with third parties,
thereby increasing their ability to address the reporting needs of our
prospective customers.  For example in February 1999 Brio Technology, Inc.
announced its intention to acquire our competitor SQRIBE Technologies, Inc. Also
current or future indirect channel partners have in the past, or may in the
future, establish cooperative relationships with our current or potential
competitors, thereby limiting our ability to sell our products through
particular distribution channels.  It is possible that new competitors or
alliances among current and new competitors may emerge and rapidly gain
significant market share.  Such competition could harm our ability to obtain
revenues from license fees from new or existing customers and service revenues
from existing customers on terms favorable to us.  If we are unable to compete
successfully against current and future competitors our business, operating
results and financial condition would be harmed.

IF WE DO NOT RESPOND TO RAPID TECHNOLOGICAL CHANGES, OUR PRODUCTS COULD BECOME
OBSOLETE AND OUR BUSINESS COULD BE SERIOUSLY HARMED.

     The market for our products is characterized by rapid technological change,
frequent new product introductions and enhancements, changing customer demands
and evolving industry standards.  Any of these factors can render existing
products obsolete and unmarketable.  We believe that our future success will
depend in large part on our ability to support current and future releases of
popular operating systems, databases and e.Business software applications, to
timely develop new products that achieve market acceptance, and to meet an
expanding range of customer requirements.  If the announcement or introduction
of new products by us or our competitors or any change in industry standards
causes customers to defer or cancel purchases of existing products our business,
operating results and financial condition would be harmed.  As a result of the
complexities inherent in web based reporting, major new products and product
enhancements can require long development and testing periods.  In addition,
customers may delay their purchasing decisions in anticipation of the general
availability of new or enhanced versions of our products.  As a result,
significant delays in the general availability of such new releases or
significant problems in the installation or implementation of such new releases
could harm our business, operating results and financial condition.  If we fail
to successfully develop, on a timely and cost effective basis, product
enhancements or new products that respond to technological change, evolving
industry standards or customer requirements or such new products and product
enhancements fail to achieve market acceptance, our business, operating results
and financial condition may be harmed.

IF WE DO NOT RELEASE NEW PRODUCTS AND ENHANCEMENTS TO EXISTING PRODUCTS IN A
TIMELY MANNER OR IF SUCH NEW PRODUCTS AND ENHANCEMENTS FAIL TO ACHIEVE MARKET
ACCEPTANCE OUR BUSINESS COULD BE SERIOUSLY HARMED.

                                       18
<PAGE>

     We believe that our future success will depend in large part on the success
of new products and enhancements that we make generally available.  Prior to the
release any new products or enhancements, the software must undergo a long
development and testing period.  To date, the development and testing of new
products and enhancements have taken longer than expected.  In the event the
development and testing of new products and enhancements continue to take longer
than expected, the release of new products and enhancements will be delayed. If
we fail to release new products and enhancements in a timely manner, our
business, operating results and financial condition may be harmed. In addition,
if such new products and enhancements do not achieve market acceptance our
business, operating results and financial condition may be harmed.

BECAUSE THE SALES CYCLES OF OUR PRODUCTS ARE LENGTHY AND VARIABLE, OUR QUARTERLY
RESULTS MAY FLUCTUATE.

     The purchase of our products by our end user customers for deployment
within a customer's organization typically involves a significant commitment of
capital and other resources, and is therefore subject to delays that are beyond
our control.  These delays can arise from a customer's internal procedures to
approve large capital expenditures, budgetary constraints and the testing and
acceptance of new technologies that affect key operations.  The sales cycle for
an initial order of our products is typically 3 to 6 months and the sales cycle
associated with a follow-on large scale deployment of our products typically
extends for another 6 to 9 months or longer.  We may experience longer sales
cycles in the future.  Additionally, sales cycles for sales of our products to
e.Business application vendors tend to be longer, ranging from 6 to 24 months or
more and involve convincing the vendor's entire organization that our products
are the appropriate reporting solution for the vendor's application. This time
period does not include the sales and implementation cycles of such vendors' own
products, which are typically significantly longer than our sales and
implementation cycles. Certain of our customers have in the past, or may in the
future, experience difficulty completing the initial implementation of our
products.  Any difficulties or delays in the initial implementation by our end
user customers or our indirect channel partners could cause such customers to
reject our software or lead to the delay or non-receipt of future orders for the
large-scale deployment of our products.

IF WE FAIL TO EXPAND OUR INTERNATIONAL OPERATIONS OUR BUSINESS WOULD BE HARMED.

     During the first nine months of 1999 and during fiscal 1998 and 1997, we
derived 15%, 6% and 2% of our total revenues, respectively, from sales outside
the United States.  Our ability to achieve revenue growth in the future will
depend in large part on our success in increasing revenues from international
sales.  We intend to continue to invest significant resources to expand our
sales and support operations outside the United States and to enter additional
international markets.  In order to expand international sales, we must
establish additional foreign operations, expand our international channel
management and support organizations, hire additional personnel, recruit
additional international distributors and increase the productivity of existing
international distributors.  If we are not successful in expanding international
operations in a timely and cost-effective manner, our business, operating
results and financial condition could be harmed.

THERE ARE RISKS ASSOCIATED WITH OUR INTERNATIONAL OPERATIONS THAT COULD HARM OUR
BUSINESS.

     In June 1999, we acquired Actuate Holding BV (Actuate BV). Actuate BV has
three operating subsidiaries located in the United Kingdom, France and Germany
whose sole business purpose is the marketing, sale and distribution of our
software products.  We have very limited experience in the

                                       19
<PAGE>

management of international operations. We also have a number of other
distributors located worldwide. International operations are subject to a number
of risks including the following:

     - costs of localizing products for foreign countries
     - trade laws and business practices favoring local competition
     - dependence on local vendors
     - compliance with multiple, conflicting and changing government laws and
       regulations
     - longer sales and payment cycles
     - import and export restrictions and tariffs
     - difficulties in staffing and managing foreign operations
     - greater difficulty or delay in accounts receivable collection
     - foreign currency exchange rate fluctuations
     - multiple and conflicting tax laws and regulations
     - political and economic instability, including recent economic conditions
       in Asia.

     Because substantially all of our international revenues and costs to date,
with the exception of sales in Japan, have been denominated to date in U.S.
dollars, increases in the value of the United States dollar could increase the
price of our products so that they become relatively more expensive to customers
in the local currency of a particular country, and result in a reduction in
sales and profitability in that country.  We believe that an increasing portion
of our revenues and costs will be denominated in foreign currencies.  To the
extent such denomination in foreign currencies does occur, gains and losses on
the conversion to U.S. dollars of accounts receivable, accounts payable and
other monetary assets and liabilities arising from international operations may
contribute to fluctuations in our results of operations.  Any of the foregoing
factors could harm our business, operating results and financial condition.
Although we may from time to time undertake foreign exchange hedging
transactions to cover a portion of our foreign currency transaction exposure, we
currently do not attempt to cover any foreign currency exposure.  If we are not
successful in any future foreign exchange hedging transactions that we engage
in, our business, operating results and financial condition could be harmed.

TO MANAGE OUR GROWTH AND EXPANSION, WE NEED TO IMPROVE AND IMPLEMENT OUR
INTERNAL SYSTEMS, PROCEDURES AND CONTROLS.  IF WE ARE UNABLE TO DO SO
SUCCESSFULLY, OUR BUSINESS WOULD BE SERIOUSLY HARMED.

     Our rapid expansion in the number of employees and the scope of operations
has placed and will continue to place a significant strain on our management,
information systems and resources. For example, we will be relocating our
corporate headquarters to South San Francisco, California, in February 2000.  In
addition, we expect that an expansion of our international operations will lead
to increased financial and administrative demands associated with managing our
operations in Europe and managing an increasing number of relationships with
foreign partners and customers and expanded treasury functions to manage foreign
currency risks. Our future operating results will also depend on our ability to
further develop indirect channels and expand our support organization to
accommodate growth in our installed base.  If we fail to manage our expansion
effectively our business, operating results and financial condition would be
harmed.

OUR INABILITY TO ATTRACT AND RETAIN HIGHLY QUALIFIED PERSONNEL IN THE FUTURE
WOULD SERIOUSLY HARM OUR BUSINESS.

     From January 1997 through September 1999, we increased our headcount from
38 to 255 full-time employees.  Furthermore, significant increases in the number
of employees are anticipated during the remainder of 1999 and 2000.  In
particular, we currently plan to significantly expand the number of employees in
sales, customer support and marketing.  Our success depends to a significant
degree upon

                                       20
<PAGE>

the efforts of certain key management, sales, customer support and research and
development personnel. We believe that our future success will depend in large
part upon our continuing ability to attract and retain highly skilled
managerial, sales, marketing, customer support and research and development
personnel. Like other software companies, we face intense competition for such
personnel, and we have experienced and will continue to experience difficulty in
recruiting qualified personnel, particularly in the San Francisco Bay Area,
where the employment market for qualified sales, marketing and engineering
personnel is extremely competitive.

OUR EXECUTIVE OFFICERS AND CERTAIN KEY PERSONNEL ARE CRITICAL TO OUR BUSINESS
AND THESE OFFICERS AND KEY PERSONNEL MAY NOT REMAIN WITH US IN THE FUTURE.

     Our future success depends upon the continued service of our executive
officers and other key engineering, sales, marketing and support personnel and
none of our officers or key employees is bound by an employment agreement for
any specific term.  If we lose the service of one or more of our key employees,
or if one or more of our executive officers or employees decide to join a
competitor or otherwise compete directly or indirectly with us, this could have
a significant adverse effect on our business.

THERE ARE RISKS ASSOCIATED WITH THE SOFTWARE INDUSTRY

     The software industry has historically experienced significant periodic
downturns, often in connection with, or in anticipation of, declines in general
economic conditions during which management information systems budgets often
decrease.  Such a change in economic conditions could result in a slow down of
the purchase of web based reporting products.  If this occurs, our business,
operating results and financial condition may in the future reflect substantial
fluctuations from period to period as a consequence of buying patterns and
general economic conditions in the software industry.

THERE ARE RISKS ASSOCIATED WITH THE POTENTIAL ACQUISITION OF OUR JAPANESE
DISTRIBUTOR

     In June 1999 we acquired approximately 8% of the outstanding shares in our
Japanese distributor from one of the distributor's shareholders for
approximately $168,000 in cash. We currently own 17% of our Japanese distributor
and are a party to an agreement with our Japanese distributor and its other
shareholders under which we are likely to (and under certain circumstances,
would bear substantial financial penalties if we did not) acquire all the
outstanding shares of such distributor at some point in the future.  Such an
acquisition could be triggered by the shareholders of the Japanese distributor
at their discretion.  The purchase price for such acquisition would be based on
a contractual formula in effect on the date of such acquisition. The purchase
price could be paid in shares of our common stock, which may have the effect of
diluting existing stockholders and adversely affecting the price of our common
stock or in cash, reducing the available cash for working capital and other
purposes. We believe that any such acquisition will be accounted for by us as a
"purchase" transaction (as opposed to a pooling of interests).  This accounting
treatment could cause us to recognize substantial goodwill and other intangible
asset amortization charges in the quarters and fiscal years immediately
following the date on which such an acquisition is effected.  If the acquisition
is accounted for as a "purchase" transaction, it could harm our reported
earnings per share during the periods in which we record the amortization of
intangible assets acquired. Finally, any such acquisition would require
substantial management attention, impose costs on us associated with integrating
the acquired entities, require us to coordinate sales and marketing efforts with
the acquired companies and subject us to additional, and potentially
substantial,

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<PAGE>

regulation as an owner of foreign subsidiaries. Any of these factors could harm
our business, operating results and financial condition.

WE MAY BE ADVERSELY IMPACTED IF OUR PRODUCTS, INTERNAL SYSTEMS AND VENDORS OR
THE PRODUCTS OF OUR INDIRECT CHANNEL PARTNERS ARE NOT YEAR 2000 READY.

     Any failure of our products, internal systems or third party vendors'
systems to be Year 2000 ready would harm our business.  Many currently installed
computer systems and software products are coded to accept only two digit
entries in the date code field.  Beginning in the year 2000, these code fields
will need to accept four digit entries to distinguish 21/st/ century dates for
20/th/ century dates.  As a result, computer systems and/or software products
used by many companies may need to be upgraded to solve this problem.  Although
we are dedicating resources toward attaining Year 2000 readiness for our
products, internal systems and third party vendors, our efforts may not be
successful. For example, during ongoing testing of our products to validate Year
2000 readiness, we have discovered Year 2000 related errors in certain products,
which have not compromised the usability or basic functionality of the products,
and we cannot be certain that we will not discover additional Year 2000 errors
or defects.  Our failure to make our products Year 2000 ready could result in a
decrease in sales of our products, an increase in the allocation of resources to
address Year 2000 problems of our customers without additional revenue
commensurate with such dedication of resources, or an increase in litigation
costs relating to losses suffered by our customers due to such Year 2000
problems.

     To the extent our products are embedded or bundled with other companies'
products that are not Year 2000 ready, we could be exposed to litigation from
such companies' customers, and our reputation in the marketplace and indirect
sales of our products by our indirect channel partners could be harmed.  In
addition, the failure of our internal systems or third party vendors' systems to
be Year 2000 ready could prevent the us from manufacturing or shipping products,
providing customer support and completing transactions, all of which could harm
our business, operating results and financial condition.  We currently do not
have a Year 2000 contingency plan for any area and the cost of implementing a
contingency plan could be material.

IF PURCHASING PATTERNS OF OUR CUSTOMERS ARE AFFECTED BY THE YEAR 2000, OUR
BUSINESS COULD BE SERIOUSLY HARMED.

     We believe that the purchasing patterns of customers and potential
customers may be impacted by Year 2000 issues.  Many companies are expending
significant resources to correct or patch their current software systems to make
such systems Year 2000 ready.  These expenditures may result in reduced funds
available to purchase software products such as those offered by us and our
indirect channel partners.  Although we have not experienced these effects to
date, if customers defer purchases of business software because of such
expenditures, it would harm our business, operating results and financial
condition.

IF OUR PRODUCT CONTAINS MATERIAL DEFECTS, OUR BUSINESS COULD BE SERIOUSLY
HARMED.

     Software products as complex as those offered by us often contain errors or
defects, particularly when first introduced, when new versions or enhancements
are released and when configured to individual customer computing systems.  We
currently have known errors and defects in our products.  Despite testing
conducted by us, if additional defects and errors, including Year 2000 errors,
are found in current versions, new versions or enhancements of our products
after commencement of commercial

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<PAGE>

shipment this could result in the loss of revenues or a delay in market
acceptance. The occurrence of any of these events would harm on our business,
operating results and financial condition.

IF A SUCCESSFUL PRODUCT LIABILITY CLAIM IS MADE AGAINST US, OUR BUSINESS WOULD
BE SERIOUSLY HARMED.

     Although license agreements with our customers typically contain provisions
designed to limit our exposure to potential product liability claims, it is
possible that such limitation of liability provisions may not be effective as a
result of existing or future laws or unfavorable judicial decisions.  We have
not experienced any product liability claims to date.  However, the sale and
support of our products may entail the risk of such claims, which are likely to
be substantial in light of the use of our products in business-critical
applications.  A product liability claim brought against us could harm our
business, operating results and financial condition.

IF THE PROTECTION OF OUR PROPRIETARY RIGHTS IS INADEQUATE, OUR BUSINESS WILL BE
SERIOUSLY HARMED.

     We have two issued U.S. patents and we rely primarily on a combination of
copyright and trademark laws, trade secrets, confidentiality procedures and
contractual provisions to protect our proprietary technology.  For example, we
license our software pursuant to shrink-wrap or signed license agreements, which
impose certain restrictions on licensees' ability to utilize the software.  In
addition, we seek to avoid disclosure of our intellectual property, including
requiring those persons with access to our proprietary information to execute
confidentiality agreements with us and restricting access to our source code.
We seek to protect our software, documentation and other written materials under
trade secret and copyright laws, which afford only limited protection.

     Despite our efforts to protect our proprietary rights, unauthorized parties
may attempt to copy aspects of our products or to obtain and use information
that we regard as proprietary.  Policing unauthorized use of our products is
difficult, and while we are unable to determine the extent to which piracy of
our software products exists, software piracy can be expected to be a persistent
problem.  In addition, the laws of many countries do not protect our proprietary
rights to as great an extent as do the laws of the United States.  If our means
of protecting our proprietary rights is not adequate or our independently
develop similar technology, our business could be seriously harmed.

INTELLECTUAL PROPERTY CLAIMS AGAINST US CAN BE COSTLY AND COULD RESULT IN THE
LOSS OF SIGNIFICANT RIGHTS.

     To date, we have not been notified that our products infringe the
proprietary rights of third parties, but we cannot be certain that third parties
will not claim infringement by us with respect to current or future products.
We expect web based reporting software product developers will increasingly be
subject to infringement claims as the number of products and competitors in our
industry segment grows and the functionality of products in different industry
segments overlaps.  Any such claims, with or without merit, could be time-
consuming to defend, result in costly litigation, divert management's attention
and resources, cause product shipment delays or require us to enter into royalty
or licensing agreements.  Such royalty or licensing agreements, if required, may
not be available on terms acceptable to us or at all.  A successful claim of
product infringement against us and our failure or inability to license the
infringed or similar technology could harm our business, operating results and
financial condition.

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<PAGE>

OUR COMMON STOCK PRICE MAY BE VOLATILE, WHICH COULD RESULT IN SUBSTANTIAL LOSSES
FOR STOCKHOLDERS.

     The market price of shares of our common stock has been and is likely to
continue to be highly volatile and may be significantly affected by factors such
the following:

     - actual or anticipated fluctuations in our operating results
     - announcements of technological innovations
     - new products or new contracts announced by us or our competitors
     - developments with respect to copyrights or proprietary rights
     - conditions and trends in the software and other technology industries
     - changes in corporate purchasing of enterprise application software
     - the Year 2000 issue
     - adoption of new accounting standards affecting the software industry
     - changes in financial estimates by securities analysts
     - changes in the economic conditions in the United States and abroad
     - the purchase or sale of our common stock by "day traders"

     In addition, the stock market has from time to time experienced significant
price and volume fluctuations that have particularly affected the market prices
for the securities of technology companies.  In the past, following periods of
volatility in the market price of a particular company's securities, securities
class action litigation has often been brought against such company.  If we are
involved in such litigation, it could result in substantial costs and a
diversion of management's attention and resources and could harm our business,
operating results and financial condition.

EXISTING STOCKHOLDERS CAN EXERCISE SIGNIFICANT CONTROL OVER ACTUATE.

     As of September 30, 1999, our executive officers and directors and their
affiliates in the aggregate beneficially owned approximately 34% of our
outstanding common stock, assuming no exercise of outstanding stock options.  As
a result, these stockholders will be able to exercise control over all matters
requiring stockholder approval, including the election of directors and approval
of significant corporate transactions.  Such concentration of ownership may have
the effect of delaying or preventing a change in control of Actuate.

CERTAIN OF OUR CHARTER PROVISIONS AND DELAWARE LAW, MAY PREVENT OR DETER A
CHANGE IN CONTROL OF ACTUATE.

     Actuate's Certificate of Incorporation, as amended and restated (the
"Certificate of Incorporation"), and Bylaws, as amended and restated ("Bylaws"),
contain certain provisions that may have the effect of discouraging, delaying or
preventing a change in control of Actuate or unsolicited acquisition proposals
that a stockholder might consider favorable, including provisions authorizing
the issuance of "blank check" preferred stock and eliminating the ability of
stockholders to act by written consent.  In addition, certain provisions of
Delaware law and our 1998 Equity Incentive Plan may also have the effect of
discouraging, delaying or preventing a change in control of Actuate or
unsolicited acquisition proposals.  The anti-takeover effect of these provisions
may also have an adverse effect on the public trading price of our common stock.

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                          Part II.  Other Information

Item 1.  Legal Proceedings

     We are not involved in any legal proceedings that are material to our
business or fi nancial condition.

Item 6.  Exhibits and Reports on Form 8-K

 (a) Exhibits:

     10.17  Office Building Lease between the Actuate and HMS Gateway Office,
            L.P. dated August 18, 1999

     10.18  First Amendment to Office Building Lease between the Actuate and HMS
            Gateway Office, L.P. dated September 30, 1999

     27.1   Financial Data Schedule

 (b) Reports on Form 8-K:

     On July 2, 1999, the Company filed a report on Form 8-K relating to the
     acquisition of Actuate Holdings, B.V.

     On August 30, 1999, the Company filed an amendment of a current report on
     Form 8-K previously filed on July 2, 1999, to add financial statements and
     exhibits.

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<PAGE>

                                   Signature

     Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, on November 3, 1999.


                              Actuate Corporation
                              (Registrant)



                              By:   /s/  DANIEL A. GAUDREAU

                              --------------------------------------
                              Daniel A. Gaudreau

                              Chief Financial Officer, Senior Vice
                              President of Finance (Principal
                              Financial and  Accounting Officer)

                                       26
<PAGE>

ACTUATE CORPORATION

                               INDEX OF EXHIBITS

EXHIBIT #      EXHIBIT TITLE
---------      -------------

    10.17      Office Building Lease between the Company and HMS Gateway Office,
               L.P. dated August 18, 1999

    10.18      First Amendment to Office Building Lease between the Actuate and
               HMS Gateway Office, L.P. dated September 30, 1999

    27.1       Financial Data Schedule - September 30, 1999

                                       27