<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 March 31, 2001

                                       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)

<TABLE>
<S>                                              <C>
       Delaware                                                    94-3193197
(State of incorporation)                               (I.R.S. Employer Identification No.)
</TABLE>

                             701 Gateway Boulevard
                     South San Francisco, California 94080
                                 (650) 837-2000
              (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 March 31, 2001
          --------------                   ---------------------------------
  Common Stock, par value $.001 per share           58,586,197
<PAGE>

                              ACTUATE CORPORATION

                               Table of Contents



PART 1 - FINANCIAL INFORMATION

  Item 1.  Financial Statements:
<TABLE>
<CAPTION>


<S>                                                                                              <C>
     Condensed Consolidated Balance Sheets as of March 31, 2001 and
      December 31, 2000......................................................................       3

     Condensed Consolidated Statements of Operations for the three months
      ended March 31, 2001 and 2000 .........................................................       4

     Condensed Consolidated Statements of Cash Flows for the three months
      ended March 31, 2001 and 2000 .........................................................       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 ................................................................      23

  Item 6.  Exhibits and Reports on Form 8-K .................................................      23

  Signature .................................................................................      24

</TABLE>

                                       2
<PAGE>

                         Part I.  Financial Information
Item 1.  Financial Statements

                              ACTUATE CORPORATION
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (in thousands)
<TABLE>
<CAPTION>
                                                         March 31,             December 31,
                                                           2001                  2000 (1)
                                                       (unaudited)
                                                    -----------------       -----------------
<S>                                              <C>                    <C>
                  ASSETS
Current assets:
  Cash and cash equivalents .....................     $      33,032             $     26,928
  Accounts receivable, net ......................            34,874                   32,991
  Other current assets ..........................             2,954                    2,630
                                                    ----------------        -----------------
Total current assets ............................            70,860                   62,549
Property and equipment, net .....................             9,970                   10,190
Goodwill and other purchased intangible
    assets, net..................................            22,132                   24,193
Other assets.....................................             1,548                    1,390
                                                    ----------------        -----------------
                                                      $     104,510             $     98,322
                                                    ================        =================
         LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable ..............................     $       5,621             $      4,254
  Accrued compensation ..........................             4,166                    5,941
  Other accrued liabilities .....................             7,310                    6,584
  Deferred revenue ..............................            23,132                   22,108
  Income tax payable ............................             1,171                      425
                                                    ----------------        -----------------
Total current liabilities .......................            41,400                   39,312
                                                    ----------------        -----------------
Long-term obligations ...........................                 -                    2,033
                                                    ----------------        -----------------
Stockholders' equity:
  Common stock ..................................                58                       58
  Additional paid-in capital ....................            72,187                   67,623
  Deferred stock compensation ...................               (67)                     (81)
  Accumulated other comprehensive income ........               123                      231
  Accumulated deficit ...........................            (9,191)                 (10,854)
                                                    -----------------       -----------------
     Total stockholders' equity .................            63,110                   56,977
                                                    =================       =================
                                                      $     104,510             $     98,322
</TABLE>

(1)   The condensed consolidated balance sheet at December 31, 2000 has been
      derived from the audited consolidated 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)


                                                        Three Months Ended
                                                             March 31,
                                                        ------------------
                                                          2001      2000
                                                        --------  --------
Revenues:
  License fees......................................... $ 23,759  $ 13,487
  Services.............................................   11,749     5,328
                                                        --------  --------
Total revenues.........................................   35,508    18,815
                                                        --------  --------

Costs and expenses:
  Cost of license fees.................................      619       421
  Cost of services.....................................    7,741     2,966
  Sales and marketing..................................   16,258     8,707
  Research and development.............................    4,420     3,225
  General and administrative...........................    2,087     1,380
  Amortization of goodwill and other purchased
   intangibles ........................................    2,061       966
                                                        --------  --------
   Total costs and expenses............................   33,186    17,665
                                                        --------  --------
Income from operations ................................    2,322     1,150
Interest and other income, net.........................      339       249
                                                        --------  --------
Income before income taxes ............................    2,661     1,399
Provision for income taxes ............................      998       259
                                                        --------  --------
Net income ............................................ $  1,663  $  1,140
                                                        ========  ========
Basic income per share. ............................... $   0.03  $   0.02
                                                        ========  ========
Shares used in basic per share calculation ............   58,094    55,262
                                                        ========  ========
Diluted income per share .............................. $   0.03  $   0.02
                                                        ========  ========
Shares used in diluted per share calculation...........   63,553    64,584
                                                        ========  ========





             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>

                                                                                   Three Months Ended March 31,
                                                                                   ----------------------------
                                                                                        2001         2000
                                                                                   -------------   ------------
<S>                                                                                <C>             <C>
Operating activities
Net income ..................................................................        $     1,663      $   1,140
Adjustment to reconcile net income to net cash provided by
 operating activities:
    Amortization of deferred compensation ...................................                 14             19
    Amortization of goodwill and other purchased intangibles ................              2,061            966
    Depreciation ............................................................                803            381
    Changes in operating assets and liabilities:
        Accounts receivable .................................................             (1,883)           710
        Other current assets ................................................               (324)          (662)
        Accounts payable ....................................................              1,367          2,615
        Accrued compensation ................................................             (1,775)        (1,967)
        Other accrued liabilities ...........................................             (1,307)          (689)
        Income taxes payable ................................................                746            (61)
        Deferred revenue ....................................................              1,024          3,113
                                                                                   -------------   ------------
Net cash provided by operating activities ...................................              2,389          6,943
                                                                                   -------------   ------------
Investing activities
Purchases of property and equipment .........................................               (583)        (5,047)
Proceeds from maturity of short-term investments ............................                  -         10,099
Acquisition of Open Software Technology, LLC, net of
 cash assumed ...............................................................                  -         (7,300)
Acquisition of EnterpriseSoft business ......................................                  -         (2,450)
Net change in other assets ..................................................               (158)        (1,110)
                                                                                   -------------   ------------
Net cash used in investing activities .......................................               (741)        (5,808)
                                                                                   -------------   ------------
Financing activities
Proceeds from issuance of common stock.......................................              4,564          1,297
                                                                                   -------------   ------------
Net cash provided by financing activities ...................................              4,564          1,297
                                                                                   -------------   ------------
Net increase in cash and cash equivalents ...................................              6,212          2,432
Effect of foreign exchange rate changes on cash .............................               (108)            15
Cash and cash equivalents at the beginning of the period ....................             26,928          6,604
                                                                                   -------------   ------------
Cash and cash equivalents at the end of the period ..........................        $    33,032      $   9,051
                                                                                   =============   ============

Non cash financing activities:
Common stock issued in connection with the acquisitions .....................        $         -      $   9,553
                                                                                   =============   ============
Consideration payable in future in connection with the
 acquisition of Open Software Technology, LLC ...............................        $         -      $   2,033
                                                                                   =============   ============




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

</TABLE>

                                       5
<PAGE>

                              ACTUATE CORPORATION
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)




1.  Summary of Significant Accounting Policies

Basis of Presentation

     The accompanying interim condensed consolidated financial statements of
Actuate Corporation are unaudited, but include all normal recurring adjustments
which we believe 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 us 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 our best effort to establish good
faith estimates and assumptions, actual results may differ.

     The interim condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and related notes
included in our Annual Report on Form 10-K for the year ended December 31, 2000
as filed with the Securities and Exchange Commission on March 12, 2001. 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 months ended
March 31, 2001 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 vendor obligations remain, there are no
uncertainties surrounding product acceptance, the license fees are fixed or
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
generally upon shipment of product, assuming that all other revenue recognition
criteria are met. 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. If the
license agreement contains extended payment terms that would indicate that the
fee is not fixed or determinable, revenue is recognized as the payments become
due, assuming that all other revenue recognition criteria are met.

     License arrangements with enterprise 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, (b) arrangements
pursuant to which a license fee is paid to us, which we recognize as revenue
when no further obligations remain, provided the fees are fixed or determinable

                                       6
<PAGE>

and collection of the resulting receivables is deemed probable or (c)
arrangements in which we recognize revenue based on the e.Business application
vendor's sell-through.

     Service revenues are primarily comprised of revenue from maintenance
agreements, consulting and training 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 consulting and training are recognized upon completion of the work to be
performed. When we provide a software license and the related maintenance for
one bundled price, the fair value of the maintenance, based on the price charged
for that element separately, is deferred and recognized ratably over the term of
the respective agreement.

     Based upon our interpretation of current available guidance, we believe our
revenue recognition policies are in accordance with Statement of Position
No. 97-2 "Software Revenue Recognition", as amended.

Net Income Per Share

     Basic net income per share has been computed using the weighted-average
number of shares of common stock outstanding during the period. Diluted net
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).

     A reconciliation of shares used in the calculation of basic and diluted net
income per share follows (in thousands, except per share data):
<TABLE>
<CAPTION>
                                                             Three Months Ended
                                                                  March 31,
                                                             --------------------
                                                               2001        2000
                                                             -------      -------
<S>                                                          <C>          <C>
Numerator:
 Net income...........................................       $ 1,663      $ 1,140
                                                             -------      -------
Denominator:
 Weighted-average common shares outstanding............       58,297       55,816
 Weighted-average shares subject to repurchase.........         (203)        (554)
                                                             -------      -------
 Denominator for basic income per share................       58,094       55,262
 Weighted-average shares subject to repurchase.........          203          554
 Weighted-average employee stock options outstanding...        5,256        8,768
                                                             -------      -------
Denominator for diluted income per share...............       63,553       64,584
                                                             =======      =======
Basic net income per share.............................      $  0.03      $  0.02
                                                             =======      =======
Diluted net income per share...........................      $  0.03      $  0.02
                                                             =======      =======
</TABLE>

                                       7
<PAGE>

Comprehensive Income

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

                                                      Three Months Ended
                                                           March 31,
                                                      ------------------
                                                       2001        2000
                                                      ------      ------
  Net income .................................        $1,663      $1,140
  Unrealized gain on short-term investments ..             -           1
  Foreign currency translation adjustment.....          (108)         15
                                                      ------      ------
  Comprehensive income........................        $1,555      $1,156
                                                      ======      ======
Recent Accounting Pronouncement

     In June 1998, the FASB issued SFAS 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). This statement establishes
accounting and reporting standards requiring that every derivative instrument,
including certain derivative instruments embedded in other contracts, be
recorded in the balance sheet as either an asset or liability measured at its
fair value. The statement also requires that changes in the derivative's fair
value be recognized in earnings unless specific hedge accounting criteria are
met. Our adoption of SFAS 133 on January 1, 2001 had no material effect on the
financial statements as we currently do not utilize derivative instruments.

2.  Income Taxes

     The tax provision was calculated using the estimated annual effective tax
rate that takes into account utilization of unbenefited net operating losses
generated in prior years and the effect of nondeductible charges relating to the
amortization of goodwill.

3.  Subsequent Events

     On April 7, 2001, our board of directors approved a voluntary stock option
exchange program whereby employees will be given the opportunity, if they so
choose, to cancel outstanding stock options previously granted to them that are
priced at $15 and above in exchange for an equal number of new options.
Employees choosing to participate in this exchange will also have to cancel all
options granted in the past six months, even if such options were granted at
below $15 per share. The new options will be granted six months and one day
following the date of cancellation of the original options with the exercise
price equaling the fair market value at the date of the new grant. The new
options will have the same vesting schedule as the cancelled options. The
exchange program has been organized to comply with Financial Accounting Standard
Board Interpretation No. 44 "Accounting for Certain Transactions Involving Stock
Compensation" and is not expected to result in any additional compensation
charges or variable plan accounting. Members of our board of directors and
officers are not eligible to participate in this program.

     On April 16, 2001, we announced that we are undergoing a review of our cost
structure and that a restructuring charge will be recorded in the second quarter
of 2001.

                                       8
<PAGE>

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, 2000 as filed with the Securities and Exchange
Commission on March 12, 2001.

     The statements contained in this Form 10-Q that are not purely historical
are forward looking statements within the meaning of Section 21E of the
Securities Exchange Act of 1934, including statements regarding Actuate's
expectations, beliefs, hopes, intentions, plans or strategies regarding the
future. All forward-looking statements in this Form 10-Q are based upon
information available to Actuate as of the date hereof, and Actuate assumes no
obligation to update any such forward-looking statements. Actual results could
differ materially from Actuate's current expectations. Factors that could cause
or contribute to such differences include, but are not limited to, the risks
discussed in the section titled "Risk Factors That May Affect Future Results" in
this Form 10-Q.

Overview

     We are a leading provider of Information Delivery software products and
services for e.Business. Our e.Reporting software products enable organizations
to deliver high-value business information to the Internet for use by customers,
employees and partners.

     We sell software products through two primary means: (i) directly to end
user customers through our direct sales force and (ii) 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 provide hosting services or resell them with their
products. Our other indirect channel partners resell our software products to
end user customers. 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, consulting and training.
In June 1999, we acquired all of the outstanding shares of Actuate Holding, B.V.
("BV"), the parent company of our distributors based in France, Germany and the
United Kingdom. In February 2000, we acquired all of the outstanding shares of
OST, a software consulting firm. In March 2000, we acquired all the assets of
EnterpriseSoft, a developer of Java software products. In April 2000, we
purchased additional shares of Actuate Japan from existing shareholders raising
our equity ownership of Actuate Japan to 67%. The results of operations of BV,
OST, EnterpriseSoft and Actuate Japan, and the fair value of assets acquired and
liabilities assumed are included in the consolidated financial statements from
the date of acquisition or the date of majority ownership, as applicable.

     We were incorporated in California in November 1993 and reincorporated in
Delaware in July 1998. Our corporate headquarters are located at 701 Gateway
Boulevard, South San Francisco, California 94080 and our telephone number is
650-837-2000.

     We announced on April 16, 2001 that we expect our revenues for the second
quarter of 2001 to decline by approximately $3.0 million from our revenues for
the first quarter of 2001. In response to the forecasted decrease in revenues,
we are undergoing a review of our cost structure and we expect to record
restructuring charges in the second quarter of 2001.

                                       9
<PAGE>

Results of Operations

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

<TABLE>
<CAPTION>
                                                             Three Months Ended
                                                                 March 31,
                                                             ------------------
                                                              2001        2000
                                                             ------      ------
<S>                                                          <C>         <C>
Revenues:
   License fees.......................................           67%         72%
   Services...........................................           33          28
                                                             ------      ------
        Total revenues................................          100         100
                                                             ------      ------
Cost of revenues:
   License fees.......................................            2           2
   Services...........................................           22          16
                                                             ------      ------
        Total cost of revenues........................           24          18
                                                             ------      ------
Gross profit..........................................           76          82
                                                             ------      ------
Operating expenses:
   Sales and marketing................................           46          46
   Research and development...........................           12          17
   General and administrative.........................            6           7
   Amortization of goodwill and other purchased
    intangibles.......................................            5           6
                                                             ------      ------
        Total operating expenses......................           69          76
                                                             ------      ------
Income from operations................................            7           6
Interest and other income, net .......................            1           1
Provision for income taxes ...........................            3           1
                                                             ------      ------
Net income............................................            5%          6%
</TABLE>

Revenues

Total revenues increased 89% from the quarter ended March 31, 2000 to $35.5
million for the quarter ended March 31, 2001. Towards the end of the first
quarter of 2001, we experienced a slowdown in our customers' IT spending level
due to weakening economic conditions. We currently expect the slowdown to
continue into the second quarter of 2001 and the remainder of fiscal 2001. We
currently anticipate that the slowdown will lower our total revenues for our
second quarter by approximately $3.0 million from our first quarter of 2001.
Sales outside of the United States were $8.6 million, or 24% of total revenues
for the first quarter of 2001, compared to $2.0 million, or 11% of total
revenues for the first quarter of 2000.

  License fees.  Revenues from license fees increased 76% from $13.5 million for
the first quarter of 2000 to $23.8 million for the first quarter of 2001. The
increase in license fees in absolute dollars was primarily due to increased
sales to new customers and follow-on sales to existing customers resulting from
the expansion of our direct sales organization and increased acceptance of our
Information Delivery software products.

                                       10
<PAGE>

  Services.  Service revenues increased 121% from $5.3 million for the first
quarter of 2000 to $11.7 million for the first quarter of 2001. The increase in
service revenues was due to the increase in professional services revenues
related to increase in demand for our professional services and to a lesser
extent, an increase in the installed base of customers receiving ongoing
maintenance and support. As a percentage of total revenues, service revenues
increased from 28% in the first quarter of 2000 to 33% in the first quarter of
2001.

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 increased from $421,000, or 3% of revenues from license fees,
for the first quarter of 2000 to $619,000, or 3% of revenues from license fees,
for the first quarter of 2001. The increase in absolute dollars was primarily
due to fulfilling more orders during the quarter. We expect our cost of license
revenues as a percentage of revenues from license fees to be in the same range
for the remainder of fiscal 2001.

  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 $3.0
million, or 56% of service revenues, for the first quarter of 2000 to $7.7
million, or 66% of service revenues, for the first quarter of 2001. The increase
in absolute dollars was due primarily to the continued expansion of our customer
support and professional service organizations and to increased contracting with
third-party consultants to support our customers' professional service needs.
The increase in the cost of service as a percent of service revenues was a
result of increased reliance on third-party consultants to provide professional
services on our behalf, which has a higher cost and lower margin than if we
perform the services with our personnel. We expect our cost of service as a
percentage of service revenues will be impacted by the planned reduction of our
workforce as we respond to the current slowdown in the economy.

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 $8.7 million, or 46% of total
revenues for the first quarter of 2000 to $16.3 million, or 46% of total
revenues for the first quarter of 2001. The increase in absolute dollars was
primarily due to hiring additional sales and marketing personnel, higher sales
commissions associated with increased revenues and increased marketing program
expenses. We expect our sales and marketing expenses will decline in absolute
dollars in the second quarter of 2001 due to planned reduction of our sales and
marketing personnel in response to declining IT spending from our customers.

  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 $3.2
million, or 17% of total revenues for the first quarter of 2000 to $4.4 million,
or 12% of total revenues for the first quarter of 2001. The increase in research
and development expenses in absolute dollars was primarily due to the hiring of
additional engineering personnel and consultants. The decrease as a percentage
of total revenues was due to revenues increasing at a faster rate than research
and development expenses. We anticipate that we will continue to devote
resources to research and development and that these expenses will increase in
absolute dollars in future periods.

                                       11
<PAGE>

  General and administrative.  General and administrative expenses consist
primarily of personnel and related costs for finance, staffing, legal, human
resources, information systems and general management as well as amortization of
deferred compensation related to certain stock option grants. General and
administrative expenses increased from $1.4 million, or 7% of total revenues for
the first quarter of 2000 to $2.1 million, or 6% of total revenues for the first
quarter of 2001. We expect our general and administrative expenses will decline
in absolute dollars in the second quarter of 2001 as we plan to reduce our cost
structure in response to the current slowdown in the economy.

  Amortization of goodwill and other purchased intangibles.  In June 1999, we
acquired all of the outstanding stock of BV for cash. This acquisition was
accounted for as a purchase and we recognized $9.6 million of goodwill and other
intangible assets. In February 2000, we acquired all of the outstanding stock of
OST for cash and stock. This acquisition was also accounted for as a purchase
and we recognized $13.1 million of goodwill and other intangible assets. In
March 2000, we acquired all the assets of EnterpriseSoft for cash and stock and
recognized $8.7 million of goodwill and other intangible assets. In April 2000,
we purchased additional shares of Actuate Japan from existing shareholders
raising our equity ownership to 67%. We recognized $1.5 million of goodwill and
other intangibles as a result of consolidating Actuate Japan financial
statements as prescribed by generally accepted accounting principles. In the
three months period ended March 31, 2001, we recorded a charge of $2.1 million
for the amortization of goodwill and other purchased intangibles relating to
these acquisitions, as compared to $966,000 for the same period in 2000.
Goodwill and other purchased intangibles arising from these acquisitions are
being amortized on a straight-line basis over periods not exceeding four years.

Interest and Other Income, Net

     Interest and other income, net, are comprised primarily of interest income
earned by us on cash and short-term investments. Interest and other income, net,
for the three months ended March 31, 2001 were $339,000 compared with interest
and other income, net of $249,000 for the three months ended March 31, 2000. The
increase was due primarily to higher cash and investment balances from which
interest is earned.

Provision for Income Taxes

     We recorded an income tax provision of $259,000 in the three months ended
March 31, 2000 and $998,000 in the three months ended March 31, 2001. The
effective tax rate for the three-month period ended March 31, 2001 was
approximately 37.5% on pretax income as compared to 18.5% for the three-month
period ended March 31, 2000. The effective rate for March 31, 2001 is greater
than the March 31, 2000 period primarily due to the impact of non-deductible
acquisition costs. Unanticipated events may occur during the remaining periods
of this fiscal year that may cause the effective tax rate to be revised.

Liquidity and Capital Resources

     As of March 31, 2001, we had cash and cash equivalents of $33.0 million, an
increase of $6.1 million over the December 31, 2000 balance. Net cash provided
by operating activities was $2.4 million in the three months ended March 31,
2001, compared to net cash provided in operating activities of $6.9 million in
the three months ended March 31, 2000. For the three months ended March 31,
2001, cash provided by operating activities was primarily due to increases in
net income as adjusted for amortization and depreciation that were offset by
decreases in accounts receivable, accrued compensation and other accrued
liabilities. Net cash provided from operating activities in the three

                                       12
<PAGE>

months ended March 31, 2000 was due primarily to increases in deferred revenue,
accounts payable and accrued compensation.

     Net cash used in investing activities was $741,000 in the three months
ended March 31, 2001, compared to net cash used in investing activities of $5.8
million in the three months ended March 31, 2000. For the three months ended
March 31, 2001, net cash used in investing activities was primarily due to
purchases of fixed assets. The significant decrease in net cash used during the
first quarter as compared to the same period last year was due primarily to the
acquisitions of OST and Enterprise Soft and purchases of fixed assets, offset by
proceeds from maturity of short-term investments that occurred in the first
quarter of 2000.

     Net cash provided by financing activities was $4.6 million and $1.3 million
in the three months ended March 31, 2001 and 2000, respectively. During both
periods, net cash provided by financing activities was primarily from the
proceeds from issuance of common stock under the employee stock purchase plan.

     We believe that current cash balances and any cash generated from
operations 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 purchase of the remaining interest of our subsidiary
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>

RISK FACTORS THAT MAY AFFECT FUTURE RESULTS

     Investors should carefully consider the following risk factors and warnings
before making an investment decision.  The risks described below are not the
only ones facing Actuate.  Additional risks that we do not yet know of or that
we currently think are immaterial may also impair our business operations.  If
any of the following risks actually occur, our business, operating results or
financial condition could be materially adversely affected.  In such case, the
trading price of our common stock could decline and you may lose all or part of
your investment.  Investors should also refer to the other information set forth
in this Report on Form 10-K, including 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.

     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;
     .  a slow down or a decrease in spending on information technology by our
        current and/or prospective customers
     .  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;
     .  failure to successfully manage acquisitions made by us;
     .  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; and
     .  general domestic and international economic and political conditions.

     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 accounting principles generally accepted in
the United States, to defer recognition of license fee revenue for a significant
period of time after entering into a license agreement, including:

                                       14
<PAGE>

     .  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 or partly to then
        currently undeliverable software products;
     .  whether the license agreement requires the performance of services that
        may preclude revenue recognition until successful completion of such
        services; and
     .  whether the license agreement includes acceptance criteria that may
        preclude revenue recognition prior to customer acceptance.

     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, changes in the mix of our direct sales and indirect sales and changes
in the mix of license revenues and service revenues, 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.

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 were approximately 40% in
the first quarter of 2001, 45% in fiscal 2000 and 39% in fiscal 1999.  Our
ability to achieve significant revenue growth in the future will depend in large
part on the success of 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
or as a hosted application to such vendors' customers and end users.  We intend
to seek additional distribution arrangements with other e.Business application
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.

                                       15
<PAGE>

     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 these 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 INFORMATION DELIVERY SOFTWARE DOES NOT GROW AS WE EXPECT OUR
BUSINESS WOULD BE SERIOUSLY HARMED.

     The market for Information Delivery 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 Information
Delivery software 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 e.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 Information Delivery 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.

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 the 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 may involve convincing the vendor's
entire organization that our products are the appropriate Information Delivery
software for the vendor's application. This time period does not include the
sales and implementation cycles of such vendor's 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.

                                       16
<PAGE>

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

     During the first quarter of 2001, 2000 and 1999, we derived 24%, 11% and
14% 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 North America 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.

WE MAY MAKE FUTURE ACQUISITIONS AND ACQUISITIONS INVOLVE NUMEROUS RISKS

     The Information Delivery software business is highly competitive, and as
such, our growth is dependent upon market growth and our ability to enhance our
existing products, introduce new products on a timely basis and expand our
distribution channels and professional services organization. One of the ways we
have addressed and will continue to address these issues is through acquisitions
of other companies. Acquisitions involve numerous risks, including the
following:

     .  difficulties in integration of the operations, technologies, and
        products of the acquired companies;
     .  the risk of diverting management's attention from normal daily
        operations of the business;
     .  negative impact to our financial condition and results of operations
        resulting from combining the acquired company's financial condition and
        results of operations with our financial statements;
     .  risks of entering markets in which we have no or limited direct prior
        experience; and
     .  the potential loss of key employees of the acquired company.

     Mergers and acquisitions of high-technology companies are inherently risky,
and we cannot assure you that any acquisition will be successful and will not
materially adversely affect our business, operating results or financial
condition. Failure to successfully integrate acquired companies and technologies
with us could harm our business and operating results.

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

     Our market 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 Information
        Delivery solutions such as Crystal Decisions (a division of Seagate
        Technology, LLC.), and Brio Technology, Inc.;
     .  indirect competition from vendors of Business Intelligence tools such as
        Business Objects S.A., Cognos, Inc., MicroStrategy Incorporated and
        Microsoft that integrate reporting functionality with such tools;
     .  indirect competition from e.Business software vendors such as SAP and
        Oracle, to the extent they include Information Delivery functionality in
        their applications;

                                       17
<PAGE>

     .  competition from other e.Business software vendors and Internet
        development tool vendors; and
     .  competition from the information technology departments of current or
        potential customers that may develop Information Delivery solutions
        internally which may be cheaper and more customized than our products.

     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 we may.  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 Information Delivery
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 Information Delivery 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 Information Delivery needs of
our prospective customers. Also our current or future indirect channel partners
may have established 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 new or 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
changes, 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 and computer programming languages, 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 Information Delivery,
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.

                                       18
<PAGE>

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.

     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 of any new products or enhancements, the products 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.

THERE ARE MANAGEMENT AND OPERATIONAL RISKS ASSOCIATED WITH OUR INTERNATIONAL
OPERATIONS THAT COULD SERIOUSLY HARM OUR BUSINESS.

     We have subsidiaries in Australia, France, Germany, Japan and the United
Kingdom whose sole business purpose is the marketing, sale and distribution of
our software products.  We have very limited experience in the management of
international operations.  We also have a number of distributors located
worldwide. International operations are subject to a number of risks, any of
which could harm our business, operating results and financial conditions.
These risks include the following:

     .  costs of localizing products for foreign countries;
     .  difficulty in hiring employees in 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; and
     .  political and economic instability.

     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.  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.

                                       19
<PAGE>

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. Any acquisitions made by us will also put a
significant strain on our management, information systems and resources.  In
addition, we expect that an expansion of our international operations will lead
to increased financial and administrative demands associated with managing our
international operations 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 1, 2000 through March 31, 2001, we increased our headcount
from 287 to 670 full-time employees.  Even though we are reducing our workforce
in the second quarter of 2001, we expect to increase the number of employees
during the second half of 2001.  In particular, we currently plan to expand the
number of employees in our international operations.  Our success depends to a
significant degree upon the efforts of certain key management, sales, marketing,
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 and retaining qualified
personnel.  This is particularly true in the San Francisco Bay Area, where the
employment market for qualified sales, marketing, customer support and research
and development personnel continues to be competitive in spite of recently
announced workforce reduction in the region.

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 customer support
personnel. 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 key 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 slowdown of
the purchase of Internet based software products.  If this occurs, our business,

                                       20
<PAGE>

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.

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 are found in current versions,
new versions or enhancements of our products after commencement of commercial
shipment, this could result in the loss of revenues or a delay in market
acceptance.  The occurrence of any of these events could seriously harm 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 seriously harm
our business, operating results and financial condition.

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

     We have two issued and two pending 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 competitors
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 Information Delivery software product developers will

                                       21
<PAGE>

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.


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
as 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;
     .  price and volume fluctuations in the stock market
     .  conditions and trends in the software and other technology industries;
     .  changes in corporate purchasing of e.Business application software;
     .  the announcement of mergers or acquisitions;
     .  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; and
     .  the purchase or sale of our common stock by "day traders".

     In addition, 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.

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 stock option plans 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.

                                       22
<PAGE>

                          Part II.  Other Information

Item 1.  Legal Proceedings

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


Item 6.   Exhibits and Reports on Form 8-K

(a)  Exhibits:

     None.

(b)  Reports on Form 8-K:

     None.

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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 May 1, 2001.

                                         Actuate Corporation
                                         (Registrant)



                                         By:   /s/  DANIEL A. GAUDREAU


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

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

                                       24